[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
          HEARING TO REVIEW LOW CARBON FUEL STANDARD PROPOSALS

=======================================================================

                                HEARING

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 21, 2009

                               __________

                           Serial No. 111-15


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov


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                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin               DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon                BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois       GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER,              BILL CASSIDY, Louisiana
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Boswell, Hon. Leonard L., a Representative in Congress from Iowa, 
  opening statement..............................................     4
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, 
  opening statement..............................................     2
    Prepared statement...........................................     3
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     1
    Prepared statement...........................................     2

                               Witnesses

Jennings, Brian, Executive Vice President, American Coalition for 
  Ethanol, Sioux Falls, SD.......................................     5
    Prepared statement...........................................     7
Buis, Tom, CEO, Growth Energy, Washington, D.C...................    16
    Prepared statement...........................................    18
Dinneen, Bob, President and CEO, Renewable Fuels Association, 
  Washington, D.C................................................    29
    Prepared statement...........................................    32
Riva, Carlos A., President and CEO, Verenium Corporation, 
  Cambridge, MA..................................................    58
    Prepared statement...........................................    60

                           Submitted Material

Feraci, Manning, Vice President of Federal Affairs, National 
  Biodiesel Board, submitted statement...........................    85


          HEARING TO REVIEW LOW CARBON FUEL STANDARD PROPOSALS

                              ----------                              


                         THURSDAY, MAY 21, 2009

                          House of Representatives,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 10:33 a.m., in Room 
1300, Longworth House Office Building, Hon. Collin C. Peterson 
[Chairman of the Committee] presiding.
    Members present: Representatives Peterson, Holden, Boswell, 
Baca, Scott, Herseth Sandlin, Cuellar, Costa, Ellsworth, Kagen, 
Schrader, Halvorson, Dahlkemper, Massa, Bright, Kratovil, 
Schauer, Kissell, Boccieri, Murphy, Pomeroy, Minnick, Lucas, 
Goodlatte, Moran, Johnson, Rogers, King, Neugebauer, Smith, 
Roe, Luetkemeyer, and Lummis.
    Staff present: Claiborn Crain, Nona Darrell, Adam Durand, 
Tyler Jameson, John Konya, John Riley, Anne Simmons, April 
Slayton, Rebekah Solem, Patricia Barr, Tamara Hinton, Josh 
Mathis, Josh Maxwell, Nicole Scott, and Jamie Mitchell.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    The Chairman. The Committee will come to order.
    Good morning, and welcome to today's hearing of the 
Committee. I think that maybe I got some people's attention 
last Committee hearing that we held talking about renewable 
fuels. These issues and how we address them, or don't address 
them, will shape the future of our nation's energy options.
    I feel very strongly that right now we don't have the right 
policies to be sure that we can produce a cost-effective 
domestic supply of clean renewable fuels. Establishing a low 
carbon fuel standard is one method that can be used to reduce 
greenhouse gas emissions and to encourage the development of 
less carbon-intense fuels.
    California has recently proposed a low carbon fuel 
standard, and other states, including Minnesota, have 
considered this idea, but rejected it. However, as with so many 
things in Washington, the devil is often found in the details.
    The 2007 Energy Bill required EPA to look at indirect land 
use and utilize it at the EPA Administrator's discretion. 
However, how the international component came into the picture 
is not known, but it is a bad idea because scientists cannot 
agree on an accurate method to measure such indirect land use 
practices.
    Despite serious concerns from scientists and the industry 
experts, the CARB Board has included this requirement in their 
low carbon fuel standard. And we invited the California Board 
to testify at today's hearing, but they declined our request to 
be here in person.
    Beyond addressing the problem of indirect land use, I am 
also concerned about proposals that include unnecessary and 
restrictive limits on renewable biomass that can be used, and 
we are trying to work through that.
    So I welcome the witnesses to the hearing. I will make the 
rest of my statement part of the record and yield to Mr. Lucas, 
the Ranking Member.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota

    Good morning and welcome to today's hearing of the House 
Agriculture Committee. I think that maybe I got some people's attention 
at the last Committee hearing we held to talk about renewable fuels. 
These issues and how we address them, or don't address them, will shape 
the future of our nation's energy options. I feel very strongly that 
right now, we don't have the right policies to be sure that we can 
produce a cost-effective domestic supply of clean, renewable fuels.
    Establishing a low carbon fuel standard is one method that can be 
used to reduce greenhouse gas emissions and to encourage the 
development of less carbon intense fuels. California has recently 
proposed a low carbon fuel standard, and other states, including 
Minnesota, have considered this idea.
    However, as with so many things in Washington, the devil is often 
found in the details. The 2007 Energy Bill required EPA to look at 
indirect land use and utilize it at the EPA Administrator's discretion. 
How the international component came into the picture is not known, but 
it is a bad idea because scientists cannot agree on an accurate method 
to measure such indirect land use. Despite serious concerns from 
scientists and industry experts, the California Air Resources Board has 
included this requirement in their low carbon fuel standard. We invited 
the California Board to testify at today's hearing, but they declined 
our request to be here in person.
    Beyond addressing the problem of indirect land use, I am also 
concerned about proposals that include unnecessary and restrictive 
limits on renewable biomass that can be used. The 2007 Energy Bill 
passed by Congress contains a very limited definition of renewable 
biomass. We need to ensure that a diverse supply of potential biofuel 
feedstocks is available so that the industry doesn't get wrapped up in 
figuring out if their biomass is legal when they should be focused on 
helping us reach our energy independence goals.
    The United States needs to have Federal energy policies that are 
flexible, practical, and innovative. That is why Ranking Member Lucas 
and most Members of the Agriculture Committee joined me to introduce a 
bill last week to address some of these problems that will limit the 
biofuel industry.
    I hope that today's hearing will provide us with a chance to ask 
important questions about low carbon fuel standard proposals. Are low 
carbon fuel standards an effective alternative to renewable fuels 
standards? How will low carbon fuel standards impact the petroleum 
industry? These are important policy questions that have serious 
implications for the future of our nation's energy options.
    I look forward to hearing from our witnesses today, and the 
Agriculture Committee will continue to address these important issues 
as Congress moves forward with energy and climate change legislation 
this year.

 OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN 
                     CONGRESS FROM OKLAHOMA

    Mr. Lucas. Thank you, Mr. Chairman.
    I would like to thank you for holding today's hearing to 
review the low carbon fuel standard proposals.
    While many are focusing on the debate surrounding the 
Waxman-Markey cap-and-tax legislation, we cannot shift our 
attention away from other important environmental proposals. 
The Waxman-Markey bill currently being marked up by the Energy 
and Commerce Committee no longer contains a low carbon fuel 
standard. However, the original draft did.
    California is currently implementing its own LCFS, and 
other states and regions may follow. These proposals tend to 
mandate the reduction of greenhouse gas emissions in the fuel 
supply.
    Protecting the environment is a worthwhile effort, and I am 
for all of it. However, we must make sure our energy policies 
are not held hostage by those who are not friends to production 
agriculture. I believe we must focus on incentives, innovation, 
and research to address environmental issues, not mandates. I 
helped craft the greenest farm bill ever in 2002. It increased 
funding to incentive voluntary conservation programs by 80 
percent. In 2008, I worked to improve and expand those 
conservation programs, and I helped draft a new energy title to 
encourage agriculture to produce second-generation biofuels.
    Today, we will hear testimony on policies that continue to 
incorporate indirect land use change in determining a fuel 
lifecycle analysis. By using a very new method that 
incorporates many models together, both domestic and 
international, to determine a fuel's impact on the environment, 
we are arbitrarily limiting our fuel supply, driving up costs 
for consumers, including our farmers and ranchers.
    This is another example of leadership and the 
Administration's environmental mandates that will increase fuel 
costs and input costs for production agriculture, which leads 
to higher food costs. That is why I cosponsored the legislation 
with Chairman Peterson to remove indirect land use from the RFS 
lifecycle analysis and create a new biomass definition, which 
expands the amount of eligible feedstocks that can be used to 
meet the RFS mandate.
    We must continue to pave the way for second-generation 
biofuels to create energy diversity and not limit our home-
grown feedstocks. We must make sure that the EPA is only 
administering policy as Congress intended, not developing its 
own environmental policy.
    And let me repeat that: We must make sure that the EPA only 
administers policies intended by Congress, not developing its 
own environmental policy.
    Again, if we want a real solution to climate change, then 
we should focus on incentives, not mandates. We must remember 
that farmers and ranchers are natural stewards, literally the 
original stewards, of the Earth, and they find new and 
innovative ways to reduce carbon or energy usage, reduce 
emissions, sequester carbon, while still providing America with 
an abundant and affordable food and fiber supply.
    I look forward to hearing from our witnesses today, and I 
thank, once again, the Chairman for calling this hearing.
    [The prepared statement of Mr. Lucas follows:]

Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress 
                             from Oklahoma

    Mr. Chairman, I would like to thank you for holding today's hearing 
to review the low carbon fuel standard proposals.
    While many are focusing on the debate surrounding the Waxman-Markey 
cap and tax legislation, we cannot shift our attention away from other 
important environmental proposals. The Waxman-Markey bill currently 
being marked up by Energy and Commerce no longer contains a Low Carbon 
Fuel Standard (LCFS), however, the original draft did. California is 
currently implementing its own LCFS and other states and regions may 
follow. These proposals intend to mandate the reduction of greenhouse 
gas emissions in the fuel supply.
    Protecting the environment is a worthwhile effort and I am all for 
it. However, we must make sure our energy policies are not held hostage 
by those who are not friends to production agriculture. I believe we 
must focus on incentives, innovation, and research to address 
environmental issues, not mandates. I helped craft the greenest farm 
bill ever in 2002. It increased funding to incentivize voluntary 
conservation programs by 80 percent. In 2008, I worked to improve and 
expand those conservation programs. And, I helped draft a new energy 
title to encourage agriculture to produce second generation biofuels.
    Today, we will hear testimony on policies that continue to 
incorporate indirect land use change in determining a fuels lifecycle 
analysis. By using a very new method that incorporates many models 
together--both domestic and international--to determine a fuels impact 
on the environment, we are arbitrarily limiting our fuel supply and 
driving up costs for consumers--including our farmers and ranchers.
    This is another example of how Speaker Pelosi and the 
Administration's environmental mandates increase fuel and other input 
costs for production agriculture, which leads to higher food costs. 
This is why I cosponsored legislation with Chairman Peterson to remove 
indirect land use from the RFS lifecycle analysis, and creates a new 
biomass definition which expands the amount of eligible feedstocks that 
can be used to meet the RFS mandate. We must continue to pave the way 
for second generation biofuels, to create energy diversity, and not 
limit our home grown feedstocks. We must make sure that the EPA is only 
administering policy as Congress intended, not developing its own 
environmental policy.
    Again, if we want a real solution to climate change then we should 
focus on incentives, not mandates. We must remember that farmers and 
ranchers are natural stewards of the Earth and they find new and 
innovative ways to reduce energy usage, reduce emissions, and sequester 
carbon while still providing America with an abundant and affordable 
food and fiber supply.
    I look forward to hearing from our witnesses on this issue.

    The Chairman. I thank the gentleman.
    I didn't take my full 5 minutes, so with the Committee's 
permission, I would like to yield the rest of my time to Mr. 
Boswell, who has been fighting these ethanol wars as long as I 
have.

OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE 
                     IN CONGRESS FROM IOWA

    Mr. Boswell. We have been fighting a long time.
    And thank you, Mr. Chairman. I will be brief, if I can, and 
I guess you have a gavel, so that will take care of that.
    I certainly associate myself with things that you said, and 
you, too, Mr. Lucas.
    In fact, as I look around the table at who is here, I see 
different Members, I have been to your districts; we are 
environmentalists.
    Randy, you are an environmentalist, I know you are because 
I have been down to your community.
    Frank, I know you are.
    Tim, Collin, you are.
    And I am, too. And I have often said, come and see the land 
that I have stewardship over and what I have done with it. And 
if you are not convinced, you can't be convinced.
    Mr. Lucas said it exactly right, farmers and ranchers are 
naturally environmentalists. We are. And yet, we have to think 
about how we get into this next generation, this second effort. 
And we don't want to stall that. And some of us have said for 
years--and I have no quarrel, a lot of my friends are from what 
we call the ``oil patch.'' And our friends and our states and 
our country, in the sense of producing oil, can't do it. If we 
just said, okay, you do it all, you can't do it. And so it is 
not a threat to that business.
    It is a threat to our future if we stay in bondage to OPEC. 
That is a threat, and we need to move away from that. And you 
can tell, as you go across the country, that is what our people 
in the United States expect us to do.
    And so we have just got to deal with this straight up and 
in daylight, and be really, really straightforward about it. 
And I think we can. I think we can make big steps forward in 
improving the environment and the emissions and all those 
things, and still reduce our dependence on foreign oil.
    And we certainly don't want to shift from that dependence 
there over to another dependence for products coming out of 
Brazil. I have nothing against Brazil. We have been down there, 
a lot of us have. But what is the point of shifting that 
dependence when we have a chance to work together and develop 
this next generation and keep moving?
    Now, it is no small issue. I have heard the Chairman make 
the comment, and I agree, got caught under myself. It takes 
venture capital to make this move forward. And the farmers, 
ranchers and producers out there have been trying pretty hard, 
but they have taken a licking again.
    Who is going to put the money up for this next generation 
if we don't get our arms around this and walk forward with some 
plain old--what my old dad used to say, how about a little 
horse sense, a little down-home common sense on this. And we 
can work it out. We can do it.
    So, Mr. Chairman, I appreciate you having this hearing, and 
your courage to step on up and call it like it is. I know in 
your heart, because I have known you for many, many years, you 
are committed to the country. You are a patriot, and you 
believe in what we are trying to do.
    But let's just do it right and not do harm. Harm is not 
necessary. We can do that. And we can work together as 
environmentalists--we are environmentalists, and we can get 
this done.
    So I thank you for the time. And I look forward to what we 
can accomplish together at, in my opinion, a critical time. 
Thank you.
    The Chairman. I thank the gentleman.
    And the other Members' statements will be made part of the 
record, without objection.
    I welcome the panel. Mr. Jennings from ACE; Mr. Buis from 
Growth Energy; Mr. Dinneen from Renewable Fuels Association; 
Mr. Riva from Verenium Corporation.
    Welcome to the Committee.
    And Mr. Jennings, you can begin. You are limited to 5 
minutes. Your testimony will be made part of the record.

          STATEMENT OF BRIAN JENNINGS, EXECUTIVE VICE
   PRESIDENT, AMERICAN COALITION FOR ETHANOL, SIOUX FALLS, SD

    Mr. Jennings. Well, thank you very much, Chairman Peterson, 
Ranking Member Lucas, and Members of the Committee, for this 
timely and pivotal hearing.
    My name is Brian Jennings, the Executive Vice President for 
the American Coalition for Ethanol. ACE believes that properly 
designed and implemented low carbon policies can help biofuels 
reduce greenhouse gases. And we would like to support a low 
carbon fuel standard.
    However, as has been stated, because the California Air 
Resources Board and EPA are selectively enforcing the untested 
theory of international indirect land use change, we cannot 
support these policies as they stand.
    I think it is instructive to distinguish between direct 
effects and so-called ``international indirect effects'' which 
contribute to this debate today. Direct effects are time-
tested, peer-reviewed, verifiable models which enjoy scientific 
consensus. Indirect effects, and particularly international 
indirect effects, are new, unreliable, and controversial 
computer models which have not yet earned scientific acclaim.
    Now, some might assume the inventor, the architect of 
international land use change is an agronomist or a scientist 
or an economist who has taken the time to study this issue for 
years and years. Well, that is not the case. The inventor of 
this theory is Mr. Tim Searchinger. He is an attorney, who has 
worked for years, much of his career, for an environmental 
organization attacking U.S. farmers, ranchers, and foreign 
policies. And the international indirect land use change theory 
predicts that using corn ethanol in the United States somehow 
causes ripple effects in food and feed systems that trigger 
farmers, literally halfway around the world, to make a land use 
decision to put virgin land into production, to replace feed, 
and then the carbon emissions resulting from this should be 
ascribed to corn ethanol.
    Now, the predictions that he uses in his model depend upon 
the assumptions and the variables that he plugs into a computer 
program. And the only meaningful test of whether the computer 
model is sound is whether its predictions can be substantiated 
by on-the-ground measurements. And without these real-world 
substantiations, the model is simply theory; it is not science.
    In the case of international land use change from biofuels, 
the fact is the real-world measurements do not corroborate the 
theory. I will give you one example. We all know that the 
Amazon Rainforest is the poster child, is Exhibit A for those 
who somehow accuse corn ethanol of causing deforestation. But 
if you look at the data, the real-world measurements would 
indicate, from 2004 to 2007, deforestation in the Amazon 
declined at the very same time the U.S. ethanol industry 
experienced its most aggressive compounded average growth rate. 
And this is illustrated on page four of my testimony if you 
would like to look at a graphic illustration.
    The fact that the international land use change predictions 
are not validated by on-the-ground measurements should be 
persuasive enough to justify more scientific scrutiny before 
moving ahead in a policy context. But nevertheless, both CARB 
and EPA are embarking on these new policies, relying upon 
international land use change.
    And to add another dimension of controversy to this debate, 
for some bizarre reason CARB and EPA are applying indirect 
effects to biofuels only. Yet, remarkably, both CARB and EPA 
are making extreme assumptions about the international 
emissions from corn ethanol, adding an international land use 
change penalty to the carbon score, or the carbon intensity of 
corn ethanol, and amazingly assuming there are zero indirect 
effects from petroleum.
    Now, my testimony discusses several remedies that we think 
need to be attacked in order to address this problem. I will 
focus on just three right now.
    Number one, insist upon widespread scientific agreement on 
the real world data, or lack thereof, regarding international 
indirect effects before moving forward on policy. The science 
should drive the politics on this issue, not the other way 
around.
    Number two, if comparing indirect effects, compare indirect 
effects for all fuels. Singling out biofuels for selective 
enforcement is simply bad public policy while you are holding 
petroleum harmless, as EPA and CARB are.
    And finally, EPA needs to much more carefully examine the 
role that an ethanol co-product, distillers grain, plays in 
this entire debate. Distillers grain replaces both corn and 
soybean meal in livestock rations. And this mitigates the need, 
if proper credit is given to distillers grain, it mitigates the 
need to expand the global crop base in addition to looking at 
increased corn yields. This could be a graceful exit strategy 
for EPA if they choose to use it.
    By arbitrarily ascribing greenhouse gas emissions from 
international indirect effects to biofuels, effects that 
cannot, in fact, be validated, which depend upon tortured use 
of computer models and that lack the confidence of scientists, 
CARB and EPA only invite cynicism about their motives and about 
the basic veracity of their work. And as we undertake this 
enormously important mission to literally reinvent the way 
humans both produce and consume energy, this is an unworkable 
and dangerous precedent to set.
    In the final analysis, any low carbon policy that precludes 
corn ethanol from a fair shake in the market is also likely to 
unnecessarily jeopardize the future for advanced biofuels 
because, indeed, advanced biofuel technology innovations are 
going to depend upon corn ethanol to build the bridge to their 
successful commercialization.
    So I thank you for your comments and this very timely 
hearing. I look forward to any questions that you might have.
    [The prepared statement of Mr. Jennings follows:]

    Prepared Statement of Brian Jennings, Executive Vice President, 
            American Coalition for Ethanol, Sioux Falls, SD

    Thank: you Chairman Peterson, Ranking Member Lucas, and Members of 
the Committee. My name is Brian Jennings and I am the Executive Vice 
President of the American Coalition for Ethanol (ACE), the largest 
grassroots biofuels advocacy organization in the U.S. uniting 
businesses and individuals that support ethanol production and use. 
Nearly 1,600 ethanol producers, prospective ethanol producers, 
commodity and farm organizations, farmers and ranchers, investors, and 
businesses that supply goods and services to the U.S. ethanol industry 
comprise the grassroots membership of ACE.
    I am honored with the opportunity to discuss the timely and 
controversial issue of ``indirect land use change'' (ILUC) and how the 
indirect effects ideology is getting policy ahead of science with 
regard to many low carbon fuels initiatives, including the California 
Air Resources Board's (CARB) Low Carbon Fuels Standard (LCFS), the 
Renewable Fuels Standard 2 (RFS2) rule recently proposed by the U.S. 
Environmental Protection Agency (EPA) pursuant to the Energy 
Independence and Security Act of 2007 (EISA), and historic climate 
change legislation working its way through the U.S. House of 
Representatives this week.
    Today agriculture plays an integral role in providing income 
opportunities and energy security for all Americans. ACE is grateful 
for the leadership of Congressmen Peterson and Lucas and others on the 
Committee to explore how agricultural biofuels can play a role in 
America's clean energy future as well. We thank you for holding this 
hearing to examine the ramifications of a LCFS for the American 
biofuels industry and agricultural producers.
    We believe climate change is a real and significant threat that 
needs to be addressed through efforts to reduce greenhouse gas (GHG) 
emissions and sequester carbon. ACE members are committed to making 
certain that biofuels from all feedstocks make meaningful contributions 
to our nation's clean energy economy and understand a LCFS will likely 
be part of the policy shift that leads to that clean energy future. ACE 
supports the concept of a LCFS and we believe that an appropriately 
designed and implemented LCFS can complement a national cap and trade 
policy to help reduce emissions from the transportation sector. The 
American biofuels industry looks forward to playing a central role in 
the development of low carbon fuels to meet a LCFS.
    However, because of the selective enforcement of the controversial 
and untested theory of ILUC against biofuels by CARB and EPA, we cannot 
express our support for these policies as they stand today.
    On behalf of ACE, I want to highlight specific issues related to 
the lifecycle assessment aspect of a LCFS that need to be addressed if 
such a policy is to be implemented in a fair and scientifically 
defensible manner:

   Get the science right then move forward on the policy. In 
        other words, insist upon scientific consensus and real-world 
        data of so-called indirect effects before moving forward on low 
        carbon fuels policy;

   If comparing indirect effects, compare indirect effects for 
        all fuels. Undertake a complete lifecycle assessment of the 
        indirect emissions associated with petroleum;

   Ensure that the scope of lifecycle GHG assessments are 
        consistent among all regulated activities under any greenhouse 
        gas emission control regime.

Direct Effects Are Widely Accepted While Indirect Effects Lack 
        Scientific Consensus
    It is instructive to take a step back and contemplate that there 
are direct effects and indirect effects that contribute to today's 
debate about how truly low carbon a source of transportation fuel may 
be. Direct effects are time-tested, peer-reviewed, reliable and 
verifiable scientific determinations about the lifecycle carbon 
footprint of fuels or sources of energy that enjoy broad scientific 
consensus. Various models, including those developed by scientists at 
the U.S. Department of Energy, are widely accepted to do a verifiable 
job of calculating the carbon intensity of various forms of energy, 
including biofuels and petroleum.
    So-called ``indirect effects,'' such as ILUCs attributable to 
biofuels, are new, untested, unreliable, and controversial computer-
generated predictions that are being selectively applied to corn 
ethanol only at this time. According to scientists, there are no peer-
reviewed or published scientific models that accurately calculate the 
potential indirect carbon intensity of forms of biofuels today.
    The architect of the ILUC theory, as it applies to biofuels, is not 
a scientist or economist who has studied the complicated causes of land 
clearing in the tropics throughout his career to develop a more 
complete understanding of this concept. The architect of the ILUC 
theory is Mr. Tim Searchinger. Mr. Searchinger is not a scientist or an 
economist. He is an attorney, who for most of his career worked at the 
environmental organization Environmental Defense, consistently 
attacking American farmers and ranchers and the public policies that 
ensure our stable supply of food, fiber, and fuel. During the last farm 
bill, Mr. Searchinger worked with the infamous Left-Right Coalition on 
behalf of Environmental Defense to convince Congress to eliminate key 
commodity programs. After failing to convince Congress to axe these 
programs during the farm bill debate, he left Environmental Defense to 
invent and promote his theory of ILUC, which is now being applied by 
some regulatory bodies in order to stop the growth in America's use of 
biofuels.
    Simply put, as Mr. Searchinger devised it, ILUC is a market-induced 
change, or ripple effect, that is predicted to occur from using 
increasing volumes of corn ethanol. The theory is that if more corn is 
used for ethanol in the U.S., somehow less corn is available for 
livestock feed rations, causing land owners literally halfway around 
the world to plow virgin grasslands or slash pristine rainforests to 
plant soybeans to replace the ``lost'' opportunity to feed the corn 
used for ethanol.
    (In reality, ethanol is distilled from just \1/3\ of a bushel of 
corn, the starch, and that another \1/3\ of that corn bushel, the fat, 
fiber, and protein, is processed into a high-protein source of feed, a 
co-product of the ethanol production process called distillers grains. 
This distillers animal feed product has proven to successfully replace 
corn and soybean meal in livestock feed rations, therefore mitigating 
the need to expand the global crop base as Mr. Searchinger would 
suggest).
    Mr. Searchinger surmises that the resulting carbon emissions from 
the cultivation of these virgin lands should be ascribed to the carbon 
intensity of U.S. ethanol production. ACE is concerned that regulators 
are using rather arbitrary and naive assumptions that biofuels are the 
cause of indirect land use changes without a sophisticated appreciation 
for the fact that socioeconomic, political, trade, and other factors 
may also result in land use changes. Today, agricultural markets are 
affected by global factors, and land use changes continue as a result 
of a wide variety of reasons, including but not limited to global 
economic growth, developing nations acquiring wealth and desiring the 
lifestyle of Americans, population growth, internal land use and land 
tenure policies, and weather factors.
    Nevertheless, in order to make these computer-generated 
predictions, ILUC models assume that biofuels are the driving factor 
causing a land use change. There is no effort to determine the 
proportional charges or effects of other variables or factors that 
might be responsible for land use changes. ILUC models provide for 
interesting discussions, but they are not reliable enough to be used 
for determining policies with national and consequential ramifications.
Models for Estimating Indirect Land Use Impact Are Unreliable
    In theory, computer models can be used to help understand and 
predict phenomena, whether it is focused on human behavior or the 
reaction of natural systems to the manipulation of independent 
variables like the concentration of GHGs in the atmosphere. For 
example, the International Panel on Climate Change (IPCC) has marshaled 
the efforts of hundreds of scientists over a long period of time to 
develop what most consider good, albeit imperfect models of how the 
world climate will change over time as GHG concentrations increase. 
Once a relatively high degree of confidence in these models was 
achieved, national governments appropriately began to act and establish 
policies to reduce emissions of those gases. That is how modeling and 
public policy should interact; first you get the science right and then 
you apply it in a policy context.
    Computer models are entirely dependent on the assumptions that are 
employed by those who develop them. You or I could write a computer 
model that demonstrated that the Earth was flat or that gravity does 
not exist. We would be wrong, but we certainly could develop computer 
models to demonstrate those results. It all depends on what assumptions 
we want to use. Ultimately the only meaningful test of whether a 
computer model is sound is whether its predictions can be corroborated 
by actual on-the-ground measurements. Without these real-world 
substantiations, models are more theory than science. That is where we 
stand today.
    In the case of ILUCs from biofuels, the measurements of on-the-
ground land clearing do not corroborate the predictions of existing 
models. To wit, according to testimony before the House Agriculture 
Subcommittee on Conservation, Credit, Energy, and Research recently, 
Mr. Brooke Coleman noted that in an analysis of the impact of biofuels 
on U.S. land use patterns, researchers at Purdue using the GTAP model 
(EPA relied upon the GTAP model for some of their RFS2 analyses) 
concluded the harvested area for coarse grains such as corn would 
increase 8.3 percent from 2001 to 2006, harvested area for oilseeds 
such as soybeans would decline 5.8 percent, and forested area would 
decline 1.5 percent during the same period. In reality, coarse grain 
harvested area declined by just two percent, oilseed area increased by 
.5 percent, and forested area increased by .6 percent from 2001 to 
2006. Simply put, the model predicted changes in land use between 2001 
and 2006 that were actually the opposite of the real-world changes 
observed over time.
    Yet, this model and those like it are being used by CARB and EPA to 
ascribe to biofuels enormous amounts of GHG emissions that will in many 
respects determine how and to a degree whether biofuels will be used in 
America's transportation system. In no case should computer models be 
used to ascribe GHG emissions to biofuels or any other energy source 
until those models have been shown through years of corroborative data 
to accurately predict real-world changes in emission rates.
    To reinforce that ILUC models predict an outcome that in fact does 
not occur, it is instructive to review deforestation rates in Brazil. 
Real-world data shows that deforestation of the Amazon Rainforest 
actually declined from 2004-2008, the same period of time in which U.S. 
ethanol production enjoyed its most aggressive compounded average 
growth rate. Figure 1 illustrates that Brazilian deforestation has 
declined at the same time ethanol production has expanded.
Figure 1.



         (FAO, NISR).Ethanol Production Sources: American Coalition for 
        Ethanol and Renewable Fuels Association.
Study Indicates ILUC Requires More Analysis and Gets Policy Ahead of 
        Science
    Last year, in an effort to better understand lifecycle analysis and 
indirect effects, ACE commissioned a study by Global Insight entitled 
``Lifecycle Analysis of Greenhouse Gas Emissions Associated with 
Starch-based Ethanol.'' Key findings from that report include:

   Changes in land use have always occurred and are not new, 
        nor are biofuels the primary driver of them. Global population 
        growth cannot be ignored as a factor.

   The scientific literature available to date shows a huge 
        variation in estimates of carbon release from land clearing in 
        general, on the order of 50 percent plus or minus--a huge 
        margin of error that should not be relied upon to make policy.

   If some land use change is due to increased biofuels 
        production, the overriding challenge is to quantify which 
        changes can indeed be directly attributed to biofuels.

   If the indirect GHG emissions of biofuels are counted toward 
        the carbon footprint, so should be the indirect emissions 
        associated with petroleum production.

    The Global Insight report determines that computer-generated 
lifecycle predictions about indirect land use changes require 
considerably more analysis. According to the report, it is virtually 
impossible to accurately ascribe greenhouse gas impacts to biofuels 
based on indirect land use change. The report also discusses how 
technology innovations are making both corn and ethanol production more 
efficient and carbon-friendly, developments that have clearly not been 
captured not quantified adequately by CARB in its analysis and modeling 
for the proposed LCFS nor by EPA in measuring the carbon intensity of 
future sources of biofuels against future sources of petroleum.
The California Low Carbon Fuel Standard
    The California Air Resources Board (CARB) is moving forward with an 
initiative which seeks to reduce emissions from the transportation 
sector by ten percent by 2020. In formulating its estimates to 
determine which fuels can qualify for the LCFS, CARB calculated the 
direct GHG carbon intensity of gasoline and corn ethanol, and converted 
their findings to grams of carbon dioxide (CO2) emitted per 
mega joule of energy (1 mega joule equals about 950 British Thermal 
Units of energy).
    CARB determined that gasoline results in nearly 96 grams of 
CO2 per mega joule of energy while average corn ethanol 
results in just 69 grams of CO2 per mega joule. Indeed, 
comparing direct GHG emissions from gasoline and ethanol, CARB found 
that ethanol is a lower-carbon source of transportation fuel.
    However, because CARB subscribed the controversial ILUC theory to 
their LCFS policy, the board added a penalty of 30 grams of 
CO2 per mega joule to the carbon intensity of corn ethanol 
to derive a total carbon ``score'' of just over 99 grams of 
CO2 per mega joule. Inexplicably, CARB made extreme 
assumptions about the indirect effects of corn ethanol, assumed there 
are zero indirect effects from petroleum, and remarkably concluded 
overall that corn ethanol is a more carbon-intensive source of fuel 
than gasoline. Figure 2 below illustrates that CARB will penalize 
biofuels, particularly corn ethanol, for ILUCs, while petroleum will be 
held harmless, as CARB has chosen to largely ignore indirect emissions 
from those fuels. This selective enforcement will place biofuels at an 
unfair competitive disadvantage in the California fuels market, the 
largest in the U.S.
    We encourage Congress to learn from the mistakes that CARB is 
making and establish a fair, workable and scientifically defensible 
framework for comparing the lifecycle emissions of biofuels and 
petroleum in any LCFS that it may chose to enact in the future.
Figure 2. CARB makes corn ethanol appear more carbon intensive than 
        gasoline by assuming there are extreme indirect emission 
        impacts from ethanol but zero indirect emission impacts from 
        petroleum. Carbon intensity of fuels is expressed in grams of 
        CO2 per Mega joule of energy (1 Mega joule equals 
        948 BTUs).
        
        

    A group of more than 100 scientists and academics wrote a letter to 
Governor Schwarzenegger in March concerned by CARB' s proposal. Their 
letter warns that ``indirect effects have never been enforced against 
any other product in the world. California should not be setting a 
wide-reaching carbon regulation based on one set of assumptions with 
clear omissions relevant to the real world.''
RFS2 Rule
    The RFS2 schedule also bases program eligibility with GHG reduction 
targets, and sets forth various categories for renewable fuels based on 
their ability to reduce lifecycle GHG emissions. Conventional biofuel 
is ethanol from corn starch which must achieve a 20 percent reduction 
in lifecycle GHG emissions compared to gasoline.
    Consistent with the law, we believe it is appropriate that EPA's 
proposed rule determines that ethanol plants that commenced 
construction before the EISA enactment date are grandfathered into the 
GHG reduction provisions, and that for calendar years 2008 and 2009, 
any ethanol plant that is fired with natural gas, biomass, or any 
combination thereof is deemed to be in compliance with the 20 percent 
threshold. As a result, there is a strong likelihood that the 15 
billion gallons of corn ethanol per year called for under the RFS2 
program will be deemed to comply with the GHG reduction requirement.
    However, by breathing life into the controversial ILUC theory, EPA, 
like CARB, is setting a dangerous precedent for future sources of 
biofuels. For example, under EISA, ``advanced biofuel,'' from biomass 
(non-corn starch) must reduce GHGs by 50 percent compared to gasoline 
and ``cellulosic biofuel'' derived from cellulose, hemicellulose, and 
lignin must achieve a 60 percent reduction in GHG emissions compared to 
gasoline. If indirect effects are calculated to cause these ``next 
generation'' sources of fuel to fall short of the thresholds, these 
promising technologies will not be commercialized.
    On Table VI.C.1-1 of the RFS2 rule, EPA breaks out the emissions 
estimates for corn ethanol and gasoline by lifecycle stage, including 
domestic and international agricultural production, domestic land use 
changes, international land use changes, fuel production, fuel and 
feedstock transport, and tailpipe emissions stages. It is instructive 
to note that if the ILUC penalty ascribed to corn ethanol is subtracted 
out, but all other direct lifecycle emissions and stages are 
calculated, the carbon intensity of corn ethanol is 61 percent better 
than that of petroleum. In other words, when comparing the direct 
lifecycle emissions of corn ethanol and gasoline, EPA determined that 
corn ethanol reduced GHG emissions compared to gasoline by 61 percent. 
When the ILUC penalty is added to the carbon intensity calculation for 
corn ethanol, it still is found to reduce GHGs compared to gasoline by 
16 percent--better than gasoline, but failing to meet the arbitrary 20 
percent threshold prescribed in EISA.
    What has been largely overlooked is that EISA does not direct EPA 
to estimate the impact of international land use changes in its 
calculation of the greenhouse gas impact of biofuels. The law 
specifically compels EPA to examine significant direct and indirect 
land use changes, but EPA alone, with the strong backing of groups who 
do not want to see biofuels succeed, has loosely interpreted the law 
and unfortunately given credence to this controversial and untested 
theory of international ILUC.
Some steps that should be taken to remedy these problems:

1. Undertake a Complete Lifecycle Assessment of the Indirect Emissions 
        Associated with Petroleum
    CARB and EPA have put forth estimates of the GHG emissions of 
biofuels that purport to reflect both direct and indirect emissions. 
Those agencies compare these estimates of GHGs from biofuels with 
estimates of only the direct lifecycle GHG emissions of petroleum. Both 
agencies have chosen to ignore entirely the substantial indirect GHG 
emissions associated with protecting oil supplies and oil 
transportation routes around the world, when such data exists.
    Clearly a significant percentage of the oil used in the U.S. is 
imported from nations such as Saudi Arabia, Iraq, and Columbia. These 
sources of oil have both direct and indirect effects. It has been 
pointed out that the direct effects include pumping seawater into the 
oil wells of Saudi Arabia to increase pressure and powering shipping 
vessels during transport of Middle East oil to the U.S. According to 
Tom Waterman, publisher of ``The Ethanol Monitor,'' a weekly oil and 
biofuels newsletter, the distance from the Persian Gulf to California 
is about 9,000 miles by sea. Even with the most efficient turbo-charged 
engines to power sea-going vessels, shipping cargoes carrying Persian 
Gulf oil to the U.S. will consume about 1,660 gallons of heavy oil per 
hour. At maximum fuel economy (which is just 50 percent thermal 
efficiency for the most efficient engines) a single cargo vessel will 
burn about 625,000 gallons of heavy fuel oil en route to California. 
Even this direct effect seems to be too difficult for CARB to include 
in its carbon intensity calculus for petroleum. Further, indirect 
activities, such as military operations to protect oil supplies and 
shipping lanes with ships, aircraft, tanks, jeeps, and trucks powered 
by oil are not accounted for by CARB or EPA in their analysis on the 
carbon intensity of petroleum.

2. Ensure that the Scope of Lifecycle GHG Assessments are Consistent 
        Among all Regulated Activities under any GHG Emission Control 
        Regime
    Furthermore, ascribing GHG emissions from land clearing in 
developing countries to biofuels production in the U.S. would hold the 
domestic ethanol industry to a uniquely punitive standard, one that no 
other U.S. industry would face under any existing or proposed GHG 
control program. Under existing cap and trade proposals pending in 
Congress, including the one recently negotiated by Congressman Waxman, 
and those introduced in the House and Senate last year, certain U.S. 
industries such as oil companies and electric utilities will be 
responsible for obtaining permits for the fossil fuels that they 
introduce into commerce. Users of fossil fuels and products derived 
from the use of fossil fuels will be indirectly affected by such 
regulation as costs for those fossil fuels increases in response to 
annual rationing of carbon credits under the cap. In no case would a 
U.S. industry be responsible for indirect effects of its activities on 
GHG emissions in other nations.
    In a global economy, virtually all economic activity in the U.S. 
will have direct and indirect economic and environmental impacts around 
the world. Thus, to consistently apply the principle that U.S. entities 
should be accountable for GHGs emitted in foreign countries, one would 
need to hold U.S. businesses and individual consumers responsible for 
all direct and indirect GHG emissions from foreign factories used to 
produce the goods consumed in the U.S., because those businesses or 
individuals create the market demand that leads to the foreign economic 
activity. Similarly, we would need to demand that foreign nations that 
import grain from the U.S. be responsible for our domestic emissions 
generated in the cultivation or manufacture of those goods. This makes 
no sense, yet, if this ill-conceived theory is allowed to apply to 
biofuels, it could set a dangerous precedent that could be applied to 
other industries and sources of energy, such as new public transport on 
rail, wind, solar, and new factories that will product electric 
vehicles and their parts.

3. The President's Interagency Biofuels Working Group should be 
        encouraged to insist that EPA get the science right before 
        applying it in a rule.
    President Obama should be thanked for creating the Interagency 
Biofuels Working Group on May 5, which, among other key priorities, 
will peer review the assumptions made by EPA in the RFS2 rule regarding 
the lifecycle carbon footprint of ethanol. We encourage Members of 
Congress to urge the Biofuels Working Group to insist that fossil fuels 
undergo rigorous and regularly updated lifecycle analyses as well. We 
believe if fossil fuels are held to the same standards as biofuels in 
this peer review, it will be demonstrated that future sources of 
petroleum are going to be more expensive to extract and more harmful 
for the environment, while future sources of biofuels will be more 
cleaner, more sustainable, more efficient, and less expensive.

4. The RFS2 comment period should be extended.
    EPA should extend the comment period for the RFS2 rule, which is 
over 1,000 pages long and contains many complicated assumptions from 
various models, some of which have not been made public or available 
yet to peer-review, from the current 60 days to something that gives 
stakeholders a realistic opportunity to analyze the rule and provide 
meaningful and helpful comments to the agency.

5. EPA needs to more carefully consider the value of ethanol co-
        products (distillers grains) that are returned to the feed 
        supply and the fact that corn yields are not fixed but are 
        constantly improving thanks to improved farming methods and 
        biotechnology.
    ACE believes that if proper credit is provided to distillers grains 
co-products, which replace the need for corn and soybean meal in 
livestock feed, and if increased corn yields are considered, the 15 
billion gallons of corn ethanol called for under RFS2 can be produced 
without any land use penalties.
    On April 30, 2009, five leading university professors with 
expertise in agronomy, animal nutrition, agricultural economics and 
engineering wrote a letter to EPA Administrator Jackson, USDA Secretary 
Vilsack, DoE Secretary Chu, and White House Energy and Environment 
Advisor Browner, to point out that corn is a highly efficient feedstock 
for the simultaneous production of feed, food, and fuel. They stated 
that the recent accusations about ethanol ethanol's carbon footprint 
and alleged food versus food tradeoffs have been unfairly exaggerated.
    This letter, sent by Dr. Ken Cassman and Dr. Terry Klopfenstein of 
the University of Nebraska-Lincoln, Dr. Robert Kratochvil of the 
University of Maryland, Dr. Kevin Kephart of South Dakota State 
University, and Dr. Robert Brown of Iowa State University states ``Only 
the starch portion of the kernel [corn] is converted to ethanol, with 
the remaining protein, oils, and minerals concentrated into a valuable 
animal feed. Leading animal nutritionists confirm that for every 2 
bushels of corn processed in an ethanol facility approximately 1 bushel 
of corn equivalent is used to displace bulk corn as livestock feed. Far 
too many of the recent studies and media reports on corn ethanol's land 
use effect either ignore, or incorrectly downplay, the importance of 
this co-product's value and the role in the feed and food chain.''
    The professors also point out that more bushels of corn can be 
grown on the same or less land, mitigating the need to expand the 
global crop base. ``The number of acres planted to corn in the U.S. has 
declined by approximately 30 percent since its peak in 1932, when more 
than 110 million acres were planted to corn and mostly used to feed 
draft animals (in other words, as transportation fuel). While acres 
dedicated to corn have declined significantly, U.S. farmers' 
productivity has soared, achieving nearly a 400 percent increase in 
yields since World War II. Today, more than 80 percent of the 84-85 
million acres planted to corn in the U.S. are used to feed animals.''
    Dr. Jerry Shurson, professor of Animal Science at the University of 
Minnesota, has also pointed out the lack of attention and understanding 
given to the use of distillers grains in animal feeds, explaining that 
in its LCFS policy, CARB assumes distillers grains replaces corn on a 
pound-for-pound basis, not the 1.24 pounds of base livestock feed he 
calculates. This miscalculation could reduce CARB's calculated ILUC for 
corn ethanol by around 50 percent.
    In reality, net corn use for ethanol is dramatically lower than 
current USDA reports indicate. We believe USDA should consider methods 
to more accurately report on corn usage by sharing data about the 
percentage of U.S. corn bushels do not ``disappear'' into ethanol but 
instead are used to replace corn and soybean meal in livestock feed 
rations, and that the availability of these distillers grains co-
products from corn ethanol production eliminate the need to expand the 
crop base here and abroad to supply feed for livestock. If USDA helps 
ensure more accurate reporting of these facts, ethanol will no longer 
be unfairly and habitually criticized for somehow removing ``food'' 
from the food supply and for ILUCs.

Recently-Introduced Legislation to Address These Problems
    I would like once again to express my profound thanks to Chairman 
Peterson and Ranking Member Lucas and your staffs for holding this 
hearing and for developing legislation to address the application of 
ILUC by EPA in the RFS2 rulemaking. ACE supports your legislation and 
looks forward to working with you to enact it. ACE also appreciates the 
fact that the low carbon fuel standard provisions have been stripped 
from the House energy bill, since this will allow more time to design a 
program and associated lifecycle analysis protocols that are fair, 
scientific and thus more universally accepted.
    I think you would agree that we shouldn't need legislation to fix 
this problem. Rather, EPA and other regulatory bodies should instead 
subject their assumptions to greater scrutiny, peer-review, and more 
carefully examine the scientific evidence or lack thereof before 
embarking on the use of ILUC. As you know, there are efforts underway 
to ensure greater peer review and scientific scrutiny through the 
establishment of the President's Interagency Biofuels Working Group, 
co-led by USDA Secretary Tom Vilsack. The establishment of this working 
group demonstrates that key officials within the Obama Administration 
understand ILUC is getting politics ahead of science, and the working 
group and peer review will be the perfect place to address this 
problem. However, legislation from Congress is also helpful because it 
empowers Secretary Vilsack and others to make a more compelling 
argument that ILUC needs to be remedied during the peer review. ACE 
believes the provision in the Chairman's legislation that ensures all 
Federal agencies, particularly USDA and DoE, are allowed to exercise 
authority in the regulatory process of determining the carbon intensity 
of biofuels and other energy sources would be helpful in returning 
rational thought to this policy.
    We are especially supportive of provisions in Chairman Peterson's 
legislation to require the petroleum baseline which biofuels are 
compared to from a GHG reduction standpoint to be updated every 3 
years. Currently, EISA freezes in time, based on 2005, the GHG impact 
of petroleum, and it is this baseline upon which biofuels must reduce 
GHG emissions by various percentages. But the law does not consider the 
practical reality that future sources of oil, such as Tar Sands and oil 
shale, are going to be much more carbon and emission intensive than 
2005 oil. Requiring the oil baseline to be updated is good public 
policy and ensures a more fair comparison for GHG calculations.

The E10 Blend Wall and the E15 Waiver
    While it is not a topic of this hearing, I want to highlight that 
the top priority for the U.S. biofuels industry today is to scale the 
E10 blend wall and gain EPA approval of our waiver for up to E15.
    For nearly 30 years the Clean Air Act has imposed an arbitrary 
regulatory cap on the volume of ethanol permitted in a gallon of 
gasoline to just ten percent, commonly referred to as an E10 blend. 
Motor vehicles have been approved to use E10 for decades and E10 
comprises more than 75 percent of the gasoline used by American 
motorists today. According to our estimates, this year, biofuel use 
will collide with the ``E10 blend wall,'' a mathematical and practical 
limit on the use of ethanol in gasoline.
    In other words, every gallon of gasoline that can contain ten 
percent ethanol will contain ten percent ethanol this year. If the EPA 
does not authorize up to E15 pursuant to the waiver request, demand for 
biofuels will come to a standstill in the near-term. In the long-term, 
failure to overcome the blend wall will put the future of cellulosic 
biofuel in grave jeopardy. While there are many reasons why this waiver 
should be approved by EPA, ACE endorsed the E15 waiver application for 
two basic reasons.
    First, ACE has reviewed the scientific literature and evidence 
available on higher ethanol blends and believes that the testing that 
has occurred on ethanol blends above E10 justifies this waiver. 
Specifically, Section 211(f)(4) of the Clean Air Act provides authority 
to the Administrator to waive the prohibitions of that section if it is 
determined that such a fuel will not cause or contribute to a failure 
of any emission control device or system to achieve compliance by the 
vehicle or engine with the emission standards to which it has been 
certified pursuant to sections 206 and 213(a) of the Act. We believe 
that the testing demonstrates that these criteria can be met with 
blends up to E15 and indeed by ethanol blends considerably higher than 
E15.
    Second, ACE endorsed the waiver application because it has become 
clear that such a step is necessary if the nation is to meet the 
schedule for biofuels use set forth in the Energy Independence and 
Security Act of 2007 (EISA). The existing E85 and the E10 markets are 
not able to absorb the volumes of biofuels sufficient to allow 
regulated entities to meet the annual biofuels blending levels 
established in EISA. Moreover, the E85 fuel dispensing infrastructure, 
while growing, is not sufficient to allow that market to expand at a 
rate that will allow the EISA biofuels targets to be met in the coming 
years. As a result, to meet these legislated targets, mid-level ethanol 
blends clearly are needed. We are grateful to the many Members of this 
Committee who have expressed support for the E15 waiver.
    ACE also applauds the President's vision in making biofuels market 
development a new national priority. The Presidential Directive on 
Biofuels issued May 5 contains an historic retail marketing effort 
which can best and most immediately be served through the use of 
ethanol blender pumps, which allow petroleum marketers the flexibility 
to offer unleaded gasoline plus a variety of ethanol blends from just 
one pump. The blender pumps provide more clean-fuel choices and 
therefore more meaningful choice to motorists.

Conclusion
    In closing, ACE is genuinely concerned about the impact of global 
warming and the effects of climate change and wants to see low carbon 
energy policies implemented successfully throughout the U.S. and indeed 
the world.
    At the same time, the politicization of lifecycle analysis--in this 
case to attack biofuels--undermines confidence in this emerging tool, 
which will become an increasingly important aspect of all state and 
national efforts to reduce GHG emissions. By insisting on arbitrarily 
ascribing GHG emissions to biofuels that cannot in fact be shown 
empirically, and which depend upon tortured use of computer models that 
lack the confidence of so many reputable scientists, CARB and EPA 
invite cynicism about their motives, about the basic veracity of their 
work, and about the potential use of this tool as a political weapon 
against other energy sources or products in future GHG control 
programs. As society embarks on this enormously important mission to 
reinvent the way humans produce and consume energy, this is a very 
dangerous precedent to set. Further, any low carbon policy that would 
preclude conventional biofuels from a fair shake in fuels marketplace 
may unnecessarily and irreversibly jeopardize promising advanced 
biofuel technology innovations that will depend upon entrepreneurial 
investment to be realized.
    I appreciate the chance to offer our views today, and, on behalf of 
the members of ACE, I commend your leadership on ethanol issues. 
Biofuels have the potential to revolutionize American agriculture by 
ensuring rural communities can be a source of income generation, jobs, 
and energy security for all Americans for years to come. Importantly, 
agriculturally-derived biofuels will also continue to reduce our 
dependence on foreign oil and dramatically reduce emissions of GHGs 
from the transportation sector. But we must strive carefully to put in 
place biofuels policies that are scientifically defensible. I look 
forward to your questions. Thank you.

    The Chairman. Thank you very much, Mr. Jennings, for your 
testimony.
    Mr. Buis, welcome to the Committee.

  STATEMENT OF TOM BUIS, CEO, GROWTH ENERGY, WASHINGTON, D.C.

    Mr. Buis. Thank you, Mr. Chairman, Ranking Member Lucas, 
and Members of the Committee. It is an honor to have the 
opportunity to testify today on the low carbon fuel standard 
proposals.
    A national low carbon fuel standard is a worthy cause, and 
one in which the Growth Energy members could support if done 
correctly. It hasn't been so far, and that is part of the 
problem.
    First, it should apply equally to all transportation fuels. 
No one should be singled out, as in the case of the CARB 
decision and EPA.
    Second, it should be based on universally accepted science 
and economic modeling.
    And third, the international land use requirements should 
be eliminated.
    The proposals at both the state and Federal level that we 
have reviewed do not meet these requirements, and we have 
spoken out aggressively to address the shortcomings of these 
proposals.
    California adopted a standard, as Brian mentioned, that 
singles out one fuel source, renewable fuels. And the indirect 
international land use component is the problem there because 
it starts renewable fuels out with a negative number, and it 
hasn't even studied the indirect effects of other 
transportation fuels.
    On the Federal level, with EPA's proposed rule and the 
RFS2, they are basically saying that biofuels in America are 
forcing land use changes in Brazil, and other foreign 
countries, to destroy rain forests so they can produce farm 
commodities to replace projected reduced exports of these 
commodities from the United States.
    You know, I have been in Washington for 21 years, and that 
is about the most bizarre concept I have ever heard. It reminds 
me of a quote by President Eisenhower, who once said, ``Farming 
is mighty easy when your plow is a pencil and you are a 
thousand miles from the nearest cornfield.''
    Indirect land use changes are not based on universally 
accepted science nor economic modeling. In the debate in 
California, over 100 scientists from around the country sent a 
letter stating that the science does not support the inclusion 
of this concept. Mr. Chairman, I have a copy of the letter. I 
would ask if you would allow it to be submitted for the record.
    The Chairman. Without objection, so ordered.
    Mr. Buis. The European Union considered indirect land use 
changes and decided that further study was warranted. They 
didn't even go down that road.
    And a few weeks ago, President Barack Obama issued a 
Presidential Directive that created an Interagency Biofuels 
Working Group that requires a peer review of the science EPA 
used to establish the indirect land use penalty before 
proceeding.
    So there is a lot of data out there. And the big question 
is, how can we possibly hold our American farmers responsible 
for farming practices in sovereign foreign countries? I think 
the more you look at it, the harder it is going to be.
    A lot of factors affect land use changes in other 
countries. Brazil has been deforesting down there for 30 plus 
years. Part of the reason--or most of the reason for this is 
macroeconomic; they need hard currency to repay their debt 
incurred back in the 1970s, and to do so, they had to export a 
commodity. They obviously had their domestic food needs. You 
have weather factors that come into play. You have currency 
valuations that come into play. And also into the equation goes 
productivity.
    If you look at what has happened in this country over the 
past couple of decades, corn yields have virtually doubled; the 
acreage to plant that corn has remained the same. That trend is 
going to continue. And I know many of you have heard 
presentations from a lot of the people in the seed business 
that project those yields to go up even faster and quicker. And 
if that is the case, then there is no way you can make that 
connection that we are going to require virgin acreage to come 
into production in order to meet the RFS standard.
    The land use change provision is probably the most 
problematic, and as many people have said, no one wants to take 
ownership for having stuck that into the 2007 bill. I don't 
think it was adequately debated. Had it been, I think everyone 
would have agreed that this is not an avenue that we want to go 
down.
    The other thing that people have to keep in mind, and Brian 
alluded to this, if EPA uses the most recent data on 
deforestation, while ethanol production has tripled in the last 
5 to 6 years in America, deforestation has been cut in half in 
Brazil. And so, not just the concept, but the manner in which 
EPA and the data that they have been using is just as much in 
question.
    But the end result will be that we will devastate our 
domestic ethanol and biodiesel production and just ensure our 
continued addiction to foreign oil.
    We have witnessed many, many foreign oil disruptions since 
the early 1970s, the OPEC embargo, most recently this past year 
with $4 gasoline, and it is all because of our dependence on 
foreign oil. How many wake-up calls, Members of Congress, do we 
need?
    Since the birth of this great nation, American agriculture 
has been the backbone of our economy. Americans enjoy the 
lowest per capita expenditure of food of any nation in the 
world. And while some well-funded campaigns tried to paint 
farmers, specifically corn ethanol, as the culprit of higher 
food prices last year, the truth is we were a minor factor of 
increased food prices.
    Ironically, the real culprit was energy, energy prices; 
unregulated, excessive speculation, Mr. Chairman, that you and 
the Committee are trying to deal with, and a weak dollar that 
led to record exports. I think the ethanol industry, the 
farmers of America, were framed in this debate.
    A better way to decrease carbon, obviously--and that is not 
the purpose of the hearing, Mr. Chairman, but I do want to 
point out, in following up on what Brian said, if we are going 
to get to that next generation of feedstock, a couple of things 
have to happen.
    Number one, we have to have a market. We are currently 
capped at ten percent of our gasoline which, turned around and 
stated properly, really means it is a Federal mandate that 90 
percent be gasoline, which 60 percent is probably imported from 
countries that don't like us. We can do better than that. We 
know higher oil prices are coming. Let's capture that 
creativity in rural America. That is what has driven this 
industry that we represent. That is what has made this country 
great for a long time. And we stand ready to work with you.
    Finally, I would just like to say, I commend you, Mr. 
Chairman, Mr. Lucas, and virtually all the Members of the 
Committee, for your introduction of legislation last week to 
correct many of these inequities and stand ready to work with 
you.
    [The prepared statement of Mr. Buis follows:]

  Prepared Statement of Tom Buis, CEO, Growth Energy, Washington, D.C.

    Mr. Chairman, Ranking Member, and Members of the Committee I 
appreciate the opportunity to testify here today on the various state 
and Federal efforts to create a low carbon fuel standard. My name is 
Tom Buis, CEO of Growth Energy.
    Growth Energy is a group committed to the promise of agriculture 
and growing America's economy through cleaner, greener energy. Growth 
Energy members recognize America needs a new ethanol approach--Through 
smart policy reform and a proactive grassroots campaign, Growth Energy 
promotes reducing greenhouse gas emissions, expanding the use of 
ethanol in gasoline, decreasing our dependence on foreign oil, and 
creating American jobs at home. Our members do more than support a low 
carbon fuel standard; they have been working to perfect and produce low 
carbon fuels for decades. All of their work has paid off. Based on a 
recent study published in Yale's Journal of Industrial Ecology, ethanol 
produced from corn in modern facilities reduces greenhouse gas 
emissions by more than 50 percent in comparison to gasoline.
    The LCFS is a worthy cause, and one that Growth Energy members 
would support if done correctly. First, it should apply equally to all 
transportation fuels. Second, it should be based on universally 
accepted science and economic modeling. Third, the international land 
use requirement should be eliminated.
    The low carbon fuel standard proposals at the state and Federal 
level that we have reviewed do not meet these two requirements. Oddly, 
science and parity have not been part of the equation--which makes us 
seriously question the motivation.
    In California, the California Air Resources Board approved a low 
carbon fuel standard that measures the direct effects of all 
transportation fuels, but singles out only ethanol for the indirect 
effects by including a penalty for indirect land use changes in other 
countries. It's a complicated scheme--that appears nothing less than a 
frontal assault on American agriculture.
    On the Federal level--while the Climate Change/Energy legislation 
under consideration by the House Energy and Commerce Committee does not 
include a low carbon fuel standard, the recently proposed rule to 
implement the RFS provisions of the Energy Independence and Security 
Act of 2007 creates a de facto low carbon fuel standard, and again it 
singles out renewable fuels.
    The RFS2 rule would assess a penalty for indirect effects to only 
ethanol and biodiesel production in the United States. Basically, the 
EPA has determined that the production of ethanol in America is forcing 
land use changes in Brazil and other foreign countries to destroy their 
valuable rain forests to produce farm commodities to make up for 
reduced exports of these commodities from the United States. Mr. 
Chairman, I have been in Washington for a long time, but I have never 
heard of a more bizarre concept.
    These so-called Indirect Land Use Changes (ILUC) are not based on 
universally accepted science nor economic modeling. In the debate in 
California over 100 scientists sent a letter stating that the science 
does not support the inclusion of this concept. In addition, the 
European Union considered ILUC and decided that further study was 
warranted. Also, President Barack Obama issued a Presidential Directive 
that created an Interagency Biofuels Working Group a few weeks ago that 
requires a peer review of the science EPA used to establish an ILUC 
penalty to biofuels before proceeding.
    It should be obvious to everyone but a few misguided advocates that 
ILUC is not ready for prime time. This is so complex--applying 
international indirect land effects can never be achieved. How can we 
possibly hold Americans responsible for farming practices in sovereign, 
foreign countries? This provision is not being advocated by scientists 
but by those who don't like ethanol and agriculture. To regulate an 
industry based on untested and unproven theory and not science or 
reality would undermine our nation's efforts to reduce carbon emissions 
in the long term, and interfere with our efforts to reduce our 
dependence on foreign oil, create green jobs in America, and revitalize 
our rural communities.
    Land use changes are dynamic. Changes occur for a variety of 
reasons. Macro-economic issues such as monetary policy, currency 
values, domestic food needs, weather, and productivity are considerably 
bigger factors than one specific use for a commodity that can be used 
for a variety of products.
    I also believe that the EPA has overlooked the productivity of 
American agriculture. In the past 2 decades yields have nearly doubled 
and are projected to increase significantly in the next twenty years. 
The net usage of corn should be factored into their modeling. If 
included, no new virgin acreage should be brought into production to 
produce the 15 billion gallon mandate required by the RFS and thus the 
indirect land use for ethanol should be zero. Deforestation in Brazil 
has been ongoing for the past 3 decades, long before the production of 
ethanol was a significant industry in the United States. EPA used data 
of deforestation in Brazil during the period of 2000 to 2004, and did 
not use the most recent 5 year time frame, during which the production 
of ethanol in the United States has nearly tripled, while deforestation 
in Brazil has been reduced by 50%.
    The end result of enacting ILUC is that it will cap domestic 
ethanol production and ensure our addiction to foreign oil. As a 
nation, we have witnessed many foreign oil disruptions, beginning in 
the early 1970's with the OPEC embargo that created shortages of 
gasoline and long lines at gas stations throughout America. Every few 
years we face a new oil shock to our economy because of our dependence 
on foreign oil, the most recent this past year when gasoline prices 
topped at over $4 per gallon. How many wake-up calls do we need? It has 
been demonstrated many times that our dependence on foreign oil 
jeopardizes our economy, our national security, jobs and our 
environment. We can do better. Brazil did! They took the first oil 
crisis seriously, and committed to making their country energy 
independent by developing a viable ethanol industry.
    Since the birth of this great nation, agriculture has been the 
backbone our economy. Our forefathers understood that for our great 
experiment as a democracy to work, the production of safe, affordable, 
abundant food and fiber was essential. This country was founded on 
agriculture and, despite the critics, Americans enjoy the lowest per 
capita expenditures on food of any nation in the world. ILUC that will 
dictate how we farm in America threatens the future of American 
agriculture and possibly whether we farm in America at all. To think 
that we can control other countries farming decisions is naive at best, 
and will ultimately lead to the downfall of the most successful 
industry in the history of the United States. We cannot afford to have 
questionable theories dictate our nation's efforts to achieve energy 
independence.
    Where do we draw the line on indirect land use changes? Is it fair 
to only penalize the production of ethanol for land use changes when 
other factors were the cause? For example, if farmland is idled in the 
United States for conservation, housing developments, strip malls, 
highways, parks, recreation, etc., these could impact land use changes 
in other countries. These are all factors that should be considered 
before blaming all land use changes in other countries on renewable 
fuels.
    How can anyone believe that continuing our dependence on foreign 
oil from Saudi Arabia, Iran, or Venezuela is better for the future of 
our nation than the production of renewable fuels in America?
    A far better way to decrease the carbon content of our fuels is to 
use more low carbon fuels. This is the reason that Growth Energy filed 
a waiver with the EPA to increase the amount of ethanol that can be 
used in our nation's fuel from 10% to up to 15%. This waiver request, 
would reduce the need for an additional 7 billion gallons of imported 
gasoline annually, create 136,000 new jobs in America, reduce carbon 
emissions and revitalize our rural communities. More science, technical 
data and legal precedent exists today than in the history of the EPA 
waiver process. We have a window of opportunity to do the right thing. 
High oil prices WILL come back. In fact gasoline prices have increased 
20% in the last few weeks during the biggest economic recession in 
modern history. The next oil shock to face our nation because of our 
reliance on foreign oil is not if, but when. Every day that America is 
held captive to a 90 percent oil mandate is a day that we continue to 
enrich foreign oil exporting countries. An incremental move to E15 is 
the equivalent to knocking out oil imports from Venezuela--something we 
should all agree is a worthwhile cause. For the sake of our economy, 
rural America, national security, and energy independence we absolutely 
need to move quickly to E15. Despite the rhetoric--the science is 
there. It is time to act. The only question is whether or not we are 
committed. I can tell you with certainty that those I represent are 
standing ready to do their part.
    In closing Mr. Chairman, I commend you, Ranking Member Lucas and 
nearly the entire House Agriculture Committee for introducing 
legislation to eliminate the international land use provision included 
in the 2007 energy legislation. As you have stated, this provision was 
included at the last minute and not debated by Congress. To proceed as 
EPA has proposed would devastate the ethanol industry which is the only 
currently viable alternative to foreign oil, creates American jobs, 
improves the environment and provides economic opportunity to rural 
America. As gasoline prices continue to rise again, our nation must not 
go to sleep again on our efforts to end our addiction to foreign oil.
    Growth Energy supports your legislation, and urges its adoption.
    Thank you for the opportunity to testify today on this important 
issue.

                               Attachment
March 2, 2009

Hon. Arnold Schwarzenegger,
Governor,
Office of the Governor,
Sacramento, CA.

RE: Opposed to Selective Enforcement of Indirect Effects in CA LCFS

    Dear Governor Schwarzenegger,

    We are writing regarding the California Air Resources Board's (ARB) 
ongoing development of the Low Carbon Fuel Standard (LCFS). With the 
rulemaking nearing its final stage, we would like to offer comments on 
the critical issue of how to address the issue of indirect, market-
mediated effects.
    As you are aware, ARB staff continues to push a regulation that 
includes an indirect land use change (iLUC) penalty for biofuels. To be 
clear, this effect is not the direct land conversion from growing crops 
for fuel. It is the alleged indirect, price-induced land conversion 
effect that could occur in the world economy as a result of any 
increase in demand for agricultural production. The ability to predict 
this alleged effect depends on using an economic model to predict 
worldwide carbon effects, and the outcomes are unusually sensitive to 
the assumptions made by the researchers conducting the model runs. In 
addition, this field of science is in its nascent stage, is 
controversial in much of the scientific community, and is only being 
enforced against biofuels in the proposed LCFS.
    The push to include iLUC in the carbon score for biofuel is driven 
at least partially by concerns about global deforestation. There is no 
question that global deforestation is a problem, and that indirect 
effects must be looked at very carefully to ensure that future fuels 
dramatically reduce GHG emissions without unintended consequences. The 
scientific community is actively seeking ways to mitigate 
deforestation, enhance efficient land use, feed the poor and 
malnourished and reduce global warming. Because of the complex and 
important issues involved, it is critical that we rely on science-based 
decision-making to properly determine and evaluate the indirect effects 
of all fuels, as well as any predicted changes in agricultural and 
forestry practices. In a general sense, it is worth noting that most 
primary forest deforestation is currently occurring in places like 
Brazil, Indonesia and Russia as a direct result of logging, cattle 
ranching and subsistence farming. Adding an iLUC penalty to biofuels 
will hold the sector accountable to decision-making far outside of its 
control (i.e., for decisions related to the supply chains of other 
products), and is unlikely to have any effect on protecting forests or 
mitigating GHG emissions as a result of land management practices. But 
because indirect effects are not enforced against any other fuel in the 
proposed LCFS, an iLUC penalty will chill investment in both 
conventional and advanced biofuel production, including advanced 
biofuels made from dedicated energy feedstocks such as switchgrass and 
miscanthus, which have the potential to make the agricultural sector 
far less resource-intensive and could provide a significant carbon 
negative source of transportation fuel.
    More than 20 scientists wrote to the ARB in June 2008 suggesting 
that more time and analysis is required to truly understand the iLUC 
effect of biofuels. In addition to iLUC, we know very little about the 
indirect effects of other fuels, and therefore cannot establish a 
proper relative value for indirect effects among the various compliance 
fuels and petroleum under the LCFS. In consideration of this and other 
rulemaking activities and research conducted since June 2008, we, the 
undersigned 111 scientists, continue to believe that the enforcement of 
any indirect effect, including iLUC, is highly premature at this time, 
based on the following two principles:

(1) The Science Is Far Too Limited and Uncertain For Regulatory 
        Enforcement
    ARB staff is proposing to enforce a penalty on all biofuels for 
indirect land use change as determined by a computable general 
equilibrium (CGE) model called GTAP. This model is set to a static 
world economic condition (e.g., 2006), then shocked with a volume of 
biofuel to create the perceived land conversion result. The modeling 
outcome is applicable to the set of assumptions used for that 
particular run, but is not particularly relevant when there is a shift 
in policy, weather, world economic conditions or other economic, social 
or political variables. For example, by definition, these models assume 
zero innovation, which means they could not have predicted the 500% 
increase in corn yields since 1940, the tripling of wheat yields since 
1960, or the 700% increase in yield that can occur if farmers in 
developing countries adopt higher yield seed varieties and more 
efficient farming practices. This inability to predict innovation is 
not limited to agriculture; similar attempts to use economic 
equilibrium models in other emerging markets like telephony or 
computing would have been equally unsuccessful. As discussed, the model 
runs are unusually sensitive to the assumptions made by the modelers, 
which is why the iLUC modeling results published thus far differ by a 
factor of at least four, and under some scenarios, are actually zero 
for today's biofuels. Even at this late stage in the LCFS process, the 
GTAP model runs still do not reflect basic on-the-ground realities, 
such as the use of marginal and idle lands. They do not reflect recent 
articles about the potential for energy crops to absorb carbon at 
higher rates than previously thought. A partial solution to this 
problem is to conduct a series of model runs with different assumptions 
and adjustments. Unfortunately, this has not occurred at ARB 
(researchers have run limited sensitivity analysis within the current 
set of primary assumptions). We are only in the very early stages of 
assessing and understanding the indirect, market-mediated effects of 
different fuels. Indirect effects have never been enforced against any 
product in the world. California should not be setting a wide-reaching 
carbon regulation based on one set of assumptions with clear omissions 
relevant to the real world.

(2) Indirect Effects Are Often Misunderstood And Should Not Be Enforced 
        Selectively
    In basic terms, there is only one type of carbon impact from a 
commercial fuel: its direct effect. Direct carbon effects are those 
directly attributable to the production of the fuel, which in the case 
of biofuel includes the land converted to produce the biofuel 
feedstock. Indirect effects, on the other hand, are those that 
allegedly happen in the marketplace as a result of shifting behaviors. 
As such, penalizing a biofuel gallon for direct and indirect land use 
change is the equivalent of ascribing the carbon impact of land 
converted to produce biofuel feedstock as well as the land needed to 
produce another, allegedly displaced supply chain (e.g., soy production 
for food). Leaving aside the issue of whether these effects can be 
predicted with precision or accuracy, or whether such a penalty is 
appropriate for the LCFS, it is clear that indirect effects should not 
be enforced against only one fuel pathway. Petroleum, for example, has 
a price-induced effect on commodities, the agricultural sector and 
other markets. Electric cars will increase pressure on the grid, 
potentially increasing the demand for marginal electricity production 
from coal, natural gas or residual oil. Yet, to date, ARB is proposing 
to enforce indirect effects against biofuel production only. This 
proposal creates an asymmetry or bias in a regulation designed to 
create a level playing field. It violates the fundamental presumption 
that all fuels in a performance-based standard should be judged the 
same way (i.e., identical LCA boundaries). Enforcing different 
compliance metrics against different fuels is the equivalent of picking 
winners and losers, which is in direct conflict with the ambition of 
the LCFS.
    Proponents of iLUC inclusion claim that all regulations are 
uncertain. This is true. However, the level of uncertainty implicated 
here far outweighs that found in other regulatory fields. For example, 
the European Parliament declared in December that the iLUC of biofuel 
``is not currently expressed in a form that is immediately usable by 
economic operators.'' \1\ They decided not to incorporate iLUC 
penalties in their biofuel programs and initiated further analysis of 
the issue. It is also not enough to suggest that iLUC is a significant 
indirect effect, while other indirect effects are likely smaller. The 
magnitude of the alleged iLUC effect ranges from zero to very large, 
depending on the assumptions utilized. This is also likely true for 
other fuels, especially with regard to the marginal gallons of 
petroleum that are coming into the marketplace, such as heavy oil, 
enhanced oil recovery, and tar sands. Either way, even small effects 
are significant under the LCFS. Just a few g/MJ separate corn ethanol 
from petroleum in the proposed regulation, and advanced biofuel is very 
close to CNG and hydrogen under certain scenarios. We agree with the 
sentiment expressed by many experts that while indirect effects are 
important to understand, enforcing them prematurely and selectively on 
only certain fuels in a performance-based standard could have major 
negative consequences, even for GHG mitigation. Put another way, no 
level of certainty justifies asymmetrical enforcement of indirect 
effects.
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    Given the limited time, a reasonable solution to the challenges 
discussed above is to submit an LCFS regulation based on direct carbon 
effects (including direct land use impacts) and support a rigorous 24 
month analysis of the indirect, market-mediated effects of petroleum 
and the entire spectrum of alternative fuels, regardless of source. The 
analysis could be conducted in collaboration with other institutions 
and governments implementing carbon-based fuel standards, and should 
include a consideration of the best way to prevent carbon effects 
outside the primary system boundary, including promoting sound land use 
practice with more direct policy solutions. This approach is consistent 
with the principle that all fuels should be judged through the same 
lens in a performance-based standard, as well as the approach taken by 
the European Parliament. It is worth noting that an LCFS policy based 
on direct effects already favors non-land intensive, advanced biofuel 
production over conventional biofuel production.
    The LCFS provides an incredible opportunity to reduce the carbon 
intensity of transportation fuel and promote a more sustainable 
transportation fuel marketplace. We commend your leadership and the ARB 
staff for their ability to process a challenging set of scientific data 
resources into a workable regulation. However, it is critical that the 
LCFS stay on course with regard to its primary mission of establishing 
a level, carbon-based playing field for all fuels.
    We are writing this letter as researchers in the field of biomass 
to bioenergy conversion, but the signatories do not represent the 
official views of the home institutions, universities, companies, the 
Department of Energy, the United States Department of Agriculture, or 
any of the National Laboratories. We look forward to working with ARB 
to ensure that the regulation reflects the best science available, and 
takes a policy approach that is balanced across all fuel pathways.
            Sincerely,

Blake A. Simmons, Ph.D.,
Vice-President, Deconstruction Division,
Joint BioEnergy Institute,
Manager, Biomass Science and Conversion Technology,
Sandia National Laboratories;

Jay D. Keasling, Ph.D.,
Director,
Physical Biosciences Division,
Lawrence Berkeley National Laboratory,
Hubbard Howe Distinguished Professor of Biochemical Engineering,
Departments of Chemical Engineering and Bioengineering,
University of California, Berkeley,
Chief Executive Officer,
Joint BioEnergy Institute;

Harvey W. Blanch, Ph.D.,
Chief Science and Technology Officer,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory
Member, National Academy of Engineering,
Merck Professor of Chemical Engineering,
University of California, Berkeley;

Robert B. Goldberg, Ph.D.,
Distinguished HHMI University Professor &
Member, National Academy of Sciences,
Department of Cell, Developmental, & Molecular Biology,
University of California, Los Angeles;

Pam Ronald, Ph.D.,
Vice-President, Feedstocks Division,
Joint BioEnergy Institute,
Department of Plant Pathology,
University of California, Davis;

Paul D. Adams, Ph.D.,
Deputy Division Director, Physical Biosciences Division,
Lawrence Berkeley National Laboratory
Adjunct Professor, Department of Bioengineering, U.C. Berkeley,
Vice President for Technology, the Joint BioEnergy Institute
Head, Berkeley Center for Structural Biology;

Bruce E. Dale, Ph.D.,
Distinguished University Professor,
Dept. of Chemical Engineering & Materials Science,
Michigan State University;

Charles E. Wyman, Ph.D.,
Ford Motor Company Chair in Environmental Engineering Center for 
Environmental Research and Technology (CE-CERT),
Professor of Chemical and Environmental Engineering Bourns College of 
Engineering,
University of California, Riverside;

Alvin J.M. Smucker, Ph.D.,
Professor of Soil Biophysics,
MSU Distinguished Faculty,
Michigan State University;

Greg Stephanopoulos, Ph.D.,
W.H. Dow Professor of Chemical Engineering and Biotechnology,
Department of Chemical Engineering,
Massachusetts Institute of Technology;

Sharon Shoemaker, Ph.D.
Director,
California Institute for Food and Agriculture Research,
University of California, Davis;

Stephen R. Kaffka, Ph.D.,
Extension Agronomist,
Department of Plant Sciences,
University of California, Davis;

Terry Hazen, Ph.D.,
Director of Microbial Communities,
Joint BioEnergy Institute,
Scientist/Department Head,
Ecology Department,
Earth Sciences Division,
Lawrence Berkeley National Laboratory;

Lonnie O. Ingram, Ph.D.,
Director, Florida Center for Renewable Chemicals and Fuels,
Dept. of Microbiology and Cell Science,
University of Florida;

George W. Huber, Ph.D.,
Armstrong Professional Development Professor,
Department of Chemical Engineering,
University of Massachusetts;

Kenneth G. Cassman, Ph.D.,
Director, Nebraska Center for Energy Science Research,
Heuermann Professor of Agronomy,
University of Nebraska, Lincoln;

Om Parkash (Dhankher), Ph.D.,
Assistant Professor,
Department of Plant, Soil and Insect Sciences,
University of Massachusetts, Amherst;

Cole Gustafson, Ph.D.,
Professor,
Department of Agribusiness and Applied Economics,
North Dakota State University;

Robert C. Brown, Ph.D.,
Anson Martson Distinguished Professor in Engineering,
Gary and Donna Hoover Chair in Mechanical Engineering Professor, 
Mechanical Engineering, Chemical and Biological Engineering, and 
Agricultural and Biosystems,
Engineering Director, Bioeconomy Institute Director, Center for 
Sustainable Environmental Technologies
Iowa State University;

John Ralph, Ph.D.,
Professor, Department of Biochemistry and Biological Systems 
Engineering,
University of Wisconsin-Madison;

Daniel G. De La Torre Ugarte, Ph.D.,
Professor, Agricultural Policy Analysis Center,
Department of Agricultural Economics,
The University of Tennessee;

Michael A. Henson, Ph.D.,
Co-Director,
Institute for Massachusetts Biofuels Research (TIMBR),
University of Massachusetts, Amherst;

Danny J. Schnell, Ph.D.,
Professor and Head,
Dept. of Biochemistry & Molecular Biology,
University of Massachusetts, Amherst;

Jeffrey L. Blanchard, Ph.D.,
Assistant Professor, Department of Microbiology,
Morrill Science Center,
University of Massachusetts, Amherst;

Y.-H. Percival Zhang, Ph.D.,
Biological Systems Engineering Department,
Virginia Tech University;

Venkatesh Balan, Ph.D.,
Assistant Professor,
Department of Chemical Engineering and Material Science,
Michigan State University;

Gemma Reguera, Ph.D.,
Assistant Professor of Microbiology and Molecular Genetics,
Michigan State University;

Wayne R. Curtis, Ph.D.,
Professor of Chemical Engineering,
Penn State University;

James C. Liao, Ph.D.,
Chancellor's Professor,
Department of Chemical and Biomolecular Engineering,
University of California, Los Angeles;

Brian G. Fox, Ph.D.,
Marvin Johnson Professor of Fermentation Biochemistry,
Department of Biochemistry,
Great Lakes Bioenergy Research Center,
University of Wisconsin;

Robert Landick, Ph.D.,
Dept. of Biochemistry,
Univ. of Wisconsin-Madison;

Prof. dr. ir. Christian V. Stevens,
Professor Chemical Modification of Renewable Resources,
Faculty of Bioscience Engineering,
Director of the Center of Renewable Resources,
Ghent University, Belgium;

Alexander J. Malkin, Ph.D.,
Scientific Capability Leader for BioNanoSciences,
Physical and Life Sciences Directorate,
Lawrence Livermore National Laboratory;

Dennis J. Miller, Ph.D.,
Department of Chemical Engineering and Materials Science,
Michigan State University;

David Keating, Ph.D.,
Great Lakes Bioenergy Research Center,
University of Wisconsin-Madison;

Susan Leschine, Ph.D.,
Professor,
University of Massachusetts, Amherst,
Qteros, Inc.;

David T. Damery, Ph.D.,
Associate Professor,
Dept. of Natural Resources Conservation,
University of Massachusetts, Amherst;

Kenneth Keegstra, Ph.D.,
University Distinguished Professor,
Department of Plant Biology,
Michigan State University;

Tobias I. Baskin, Ph.D.,
Biology Department,
University of Massachusetts;

Christopher M. Saffron, Ph.D.,
Assistant Professor,
Dept. of Biosystems and Agricultural Engineering,
Dept. of Forestry,
Michigan State University;

Emily Heaton, Ph.D.,
Asst. Prof. of Agronomy,
Iowa State University;

Kurt D. Thelen, Ph.D.,
Associate Professor,
Dept. of Crop & Soil Sciences,
Michigan State University;

Bin Yang, Ph.D.,
Associate Research Engineer,
Bourns College of Engineering,
Center for Environmental Research and Technology (CE-CERT),
University of California, Riverside;

Andrea Festuccia, Ph.D.,
Professor,
University of Rome-Italy;

Francesca del Vecchio, Ph.D.,
Professor,
Cambridge University,
St. John Biochemistry Department,
Cambridge, UK;

David Shonnard, Ph.D.,
Department of Chemical Engineering,
Michigan Technological University;

R. Mark Worden, Ph.D.,
Professor,
Dept. of Chemical Engineering and Materials Science,
Michigan State University;

Satish Joshi, Ph.D.,
Associate Professor,
Department of Agricultural Economics,
Michigan State University;

Timothy Volk, Ph.D.,
Senior Research Associate,
346 Illick Hall,
Faculty of Forest and Natural Resources Management,
SUNY-ESF;

Henrik Scheller, Ph.D.,
Director of Plant Cell Wall Biosynthesis,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Joshua L. Heazlewood, Ph.D.,
Director of Systems Biology,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Dominique Loque, Ph.D.,
Director of Cell Wall Engineering,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

David A. Grantz, Ph.D.,
Director, University of California Kearney Agricultural Center,
Plant Physiologist and Extension Air Quality Specialist Department of 
Botany and Plant,
Sciences and Air Pollution Research Center University of California at 
Riverside;

Rajat Sapra, Ph.D.,
Director of Enzyme Engineering,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Masood Hadi, Ph.D.,
Director of High-Throughput Sample Prep,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Swapnil Chhabra, Ph.D.,
Director of Host Engineering,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Seema Singh, Ph.D.,
Director of Dynamic Studies of Biomass Pretreatment,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Bradley Holmes, Ph.D.,
Director of Biomass Pretreatment and Process Engineering,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Manfred Auer, Ph.D.,
Director Physical Analysis,
Joint BioEnergy Institute,
Physical Biosciences Division,
Lawrence Berkeley National Laboratory;

Phil Hugenholtz, Ph.D.,
Senior Scientist,
Joint BioEnergy Institute,
Joint Genome Institute,
Lawrence Berkeley National Laboratory;

Chris Petzold, Ph.D.,
Scientist,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Steven Singer, Ph.D.,
Scientist,
Joint BioEnergy Institute,
Lawrence Livermore National Laboratory;

Michael Thelen, Ph.D.,
Senior Scientist,
Joint BioEnergy Institute,
Lawrence Livermore National Laboratory;

David A. Grantz, Ph.D.,
Director, University of California Kearney Agricultural Center,
Plant Physiologist and Extension Air Quality Specialist Department of 
Botany and Plant Sciences and Air Pollution Research Center University 
of California at Riverside;

David Reichmuth, Ph.D.,
Scientist, Sandia National Laboratories;

Amy J. Powell, Ph.D.,
Scientist, Department of Computational Biology,
Sandia National Laboratories;

Anthe George, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Ozgul Persil Cetinkol,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Lawrence Berkeley National Laboratory;

Supratim Datta, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Zhiwei Chen, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Joshua Park, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Chenlin Li, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Hanbin Liu, Ph.D.,
Post-doctoral Fellow,
Joint BioEnergy Institute,
Biomass Science and Conversion Technology,
Sandia National Laboratories;

Richard Hamilton, Ph.D.,
Chief Executive Officer,
Ceres, Inc.;

Richard B. Flavell, Ph.D.,
Chief Scientific Officer,
Ceres, Inc.;

Robert J. Wooley, Ph.D., P.E.,
Director, Process Engineering,
Abengoa;

Tim Eggeman, Ph.D., P.E.,
Chief Technology Officer, Founder,
ZeaChem Inc.;

Dan W. Verser, Ph.D.,
Co-Founder,
EVP R&D,
ZeaChem Inc.;

Jose Goldemberg, Ph.D.,
Professor Emeritus University of Sao Paulo,
Sao Paulo, Brazil and Former Secretary for the Environment;

Neal Gutterson, Ph.D.,
President and CEO,
Mendel Biotechnology Inc.;

James Zhang, Ph.D.,
VP of Tech Acquisition and Alliances,
Mendel Biotechnology Inc.;

Mark D. Stowers, Ph.D.,
Vice President, Research and Development,
POET;

Steen Skjold-J Contributed $65.6 billion to the nation's Gross Domestic 
---------------------------------------------------------------------------
        Product (GDP);

   Supported more than 494,000 jobs in all sectors of the 
        economy; and

   Generated an estimated $11.9 billion in tax revenue for the 
        Federal Government and nearly $9 billion of additional tax 
        revenue for state and local governments.

    Further, the report notes that the net benefit to the Federal 
Government, after ethanol related tax credits, was more than $7 billion 
in 2008, providing a return on every dollar invested of 2.5 to 1.
    Under the RFS in 2022, 35 of the 36 billion gallons of renewable 
fuels will be ethanol. Producing 35 billion gallons of ethanol will, 
according to the report:

   Add nearly $1.23 trillion (2000$) to real GDP by 2022;

   Support as many as 1.18 million jobs in all sectors of the 
        economy;

   Displace the equivalent of nearly 11 billion barrels of 
        crude oil between 2009 and 2022; and

   Increase Federal tax revenues by nearly $223 billion (2000$) 
        between 2009 and 2022 while state and local tax revenues will 
        increase $167.2 billion (2000$).

Technology and Innovation in Biofuel Production
    As it has since its beginnings in the late 1970s, the U.S. ethanol 
industry continues to evolve. There is no question that corn has been 
the cornerstone of the industry, but as we speak, dozens of our member 
companies and scores of other innovative businesses across the country 
are working to commercialize the next generation of biofuels, including 
ethanol from cellulosic and other biomass feedstocks. The RFA member 
companies are building upon the solid foundation laid by the first 
generation of biofuels.
    From coast to coast and border to border, RFA member companies are 
building upon the solid foundation laid by the first generation of 
biofuels. Pacific Ethanol, a California-based company, and Zeachem are 
developing technologies to process fast-growing poplar trees to ethanol 
in Boardman, Oregon; AE Biofuels will use switchgrass at its facility 
in Montana; Verenium will use sugarcane bagasse and specially-bred 
energy cane to produce biofuels in Louisiana and Florida; California 
Ethanol + Power, LLC, will use bagasse to power its sugar cane-to-
ethanol plant in Brawley, California; Range Fuels will use wood 
residues as feedstock for its commercial-scale plant under construction 
in Georgia; BlueFire Ethanol plans to use wood waste and cellulosic 
urban waste at two prospective sites in California; and Iogen and 
Abengoa will process agricultural residues like wheat straw at 
facilities under development in Idaho and Nebraska. These are just some 
examples of RFA member companies that are actively engaged in the rapid 
development and commercialization of the next iteration of feedstocks 
and biofuels.
    Without a doubt, the commercial success of the second generation of 
biofuels will be contingent upon the continued success of first 
generation biofuels. Over the past 30 years, the first-generation 
ethanol industry has established robust transportation and storage 
infrastructure; cultivated an investment base and created financial 
networks; advocated policies that create market certainty; and, more 
generally, raised the nation's collective experience level related to 
introducing renewable fuels into a market dominated by fossil fuels.
    It is important to understand that cellulosic ethanol and other 
advanced biofuels are no longer ``just around the corner'' or ``just 
over the horizon''--they are here today. Several pilot and 
demonstration-scale facilities are producing ethanol from cellulosic 
sources and waste products today. And nearly 30 cellulosic ethanol 
facilities--both pilot and commercial scale--are under construction or 
in various stages of development. The RFA's members have an intimate 
understanding of what is necessary to make advanced biofuel a 
commercial success.
    While second-generation biofuels producers continue to make 
significant strides toward broad commercialization, innovation also 
continues in the existing grain-based industry. Producers of first-
generation ethanol continue to make dramatic improvements in the energy 
efficiency and overall sustainability of the production process. A 
recent report by the U.S. Department of Energy's Argonne National 
Laboratory demonstrated how much more efficient today's ethanol plants 
are than even a few years ago. Since 2001, average electricity use is 
down 20 percent, average total energy use is down 15 percent, and water 
use is down 26 percent.\2\ Such improvements have led to a significant 
reduction in the greenhouse gas (GHG) intensity of producing ethanol 
from grain. In fact, a recent paper published in Yale University's 
Journal of Industrial Ecology found that, ``Direct effect GHG emissions 
were estimated to be equivalent to a 48 percent to 59 percent reduction 
compared to gasoline, a two-fold to threefold greater reduction than 
reported in previous studies.'' \3\
---------------------------------------------------------------------------
    \2\ M. Wu, Argonne National Laboratory. ``Analysis of the 
Efficiency of the U.S. Ethanol Industry 2007.'' http://
www.ethanolrfa.org/objects/documents//
2007_analysis_of_the_efficiency_of_the_us_ethanol_industry.pdf.
    \3\ A. Liska et al. ``Improvements in Life Cycle Energy Efficiency 
& Greenhouse Gas Emissions of Corn-Ethanol.'' Journal of Industrial 
Ecology Available online 22 January 2009. http://www.ethanolrfa.org/
objects/documents/2110/2009_jie_improvements_in_corn_ethanol-
liska_et_at.pdf.
---------------------------------------------------------------------------
    These improvements will continue as new technologies are introduced 
and the industry continues to evolve. A recent paper published in the 
journal Energy Policy states, ``For the future, it is estimated that 
solely due to technological learning, production costs of ethanol may 
decline 28-44 percent.'' \4\ The article further states, ``Future 
improvements in energy efficiency may lead to lower costs, but also to 
lower GHG emissions.''
---------------------------------------------------------------------------
    \4\ W. Hettinga et al. ``Understanding the reductions in U.S. corn 
ethanol production costs: An experience curve approach.'' Energy 
Policy. Available online 30 September 2008.
---------------------------------------------------------------------------
Lifecycle Analysis and Low Carbon Fuels Programs
    As the U.S. ethanol industry continues to evolve, new technologies, 
improved efficiencies, and an increasingly low carbon footprint will 
ensure ethanol takes its place as a critical component of our nation's 
strategy for a more sustainable energy future. Ethanol is readily 
available today and is a logical first step in beginning the difficult 
work of addressing global climate change. As a renewable fuel, greater 
ethanol use will help reduce carbon dioxide emissions from our nation's 
transportation fleet and start to move America away from its dependence 
on fossil fuels.
    But Americans will only enjoy the future benefits of biofuels if 
developing energy and environmental policies are based on sound 
science, defensible modeling, rigorous validation, and meaningful peer 
review. We are greatly concerned that several emerging state and 
Federal regulations aimed at reducing carbon emissions don't meet these 
criteria. Accurate and consistent quantification of the greenhouse gas 
emissions associated with the production and use of all fuels is the 
cornerstone of any policy focused on reducing carbon emissions from 
transportation fuels; this quantification process is known as lifecycle 
analysis. Unfortunately, the lifecycle analyses for several evolving 
policies selectively assess tremendously uncertain penalties against 
biofuels for secondary, indirect greenhouse gas effects, while other 
forms of energy--including petroleum--are assumed not to cause any 
similar market-mediated, indirect effects at all.
    More specifically, the U.S. Environmental Protection Agency's (EPA) 
lifecycle analysis of biofuels for the RFS2 Notice of Proposed 
Rulemaking penalizes ethanol for highly tenuous indirect greenhouse gas 
effects assumed to occur as a result of indirect land use changes in 
other countries. The Low Carbon Fuels Standard recently adopted by the 
California Air Resources Board (CARB) also includes a penalty against 
biofuels for international indirect land use change. The assessment of 
these penalties for an indirect carbon effect that is largely 
unpredictable results in the lifecycle GHG emissions of most forms of 
ethanol being comparable to emissions from gasoline. This seems totally 
unbelievable, given that a number of peer-reviewed studies over the 
past 5 years have shown that current ethanol reduces GHGs by 30-50 
percent compared to gasoline, and ethanol from cellulosic feedstocks is 
likely to reduce GHGs by 80-100 percent. In California's case, the 
indirect land use penalty is such that U.S. ethanol made from corn is 
unlikely to be used by obligated parties--the oil companies--as a 
viable compliance option under the regulation.
    My testimony today addresses three important positions held by the 
RFA related to low carbon fuels standards and the crucial lifecycle 
analysis that underlies these policies:

    1. There appears to be a general misunderstanding about the 
        difference between direct and indirect, market-mediated effects 
        and the pervasiveness of secondary impacts in energy markets.

    Every energy decision we make has secondary, market-mediated 
effects. Indirect land use change is just one of an infinite number of 
market-mediated, ripple impacts that occur as the result of a change in 
the energy marketplace.
    Here is an example to illustrate my point. Suppose for a moment 
that, as a result of higher gas prices, I decide to start bicycling to 
work rather than driving my car. The direct impact of this decision 
would be to eliminate the daily GHG emissions associated with driving 
my automobile to work. But there would also be numerous indirect 
impacts of this decision--some of which would likely be unknowable and 
immeasurable. For instance, because I am not buying nearly as much 
gasoline now, I am saving money. And I may decide to use the money I 
have saved to take a trip to Europe or to treat my family to a steak 
dinner. Does this mean the GHG emissions associated with my European 
vacation or the emissions linked to production of the steak dinner 
should be charged to my bicycle? As ridiculous as that sounds, this is 
an example of the type of logic being used to ascribe indirect 
emissions in the lifecycle analyses conducted for the RFS2 and other 
regulations aimed at reducing carbon emissions from transportation.
    Let me be clear, we are not arguing that these indirect effects do 
not occur. As I discussed earlier, we agree that every energy decision 
we make, both as a nation and as individuals, carries with it a 
multitude of secondary impacts. Rather, we are highlighting the 
difficulties associated with positively identifying the cause of a 
second- or third-tier impact and raising questions about how to 
properly assign those ripple impacts.
    The question of indirect effects takes on a new level of complexity 
when applied to global land use change. As the term implies, a direct 
land use change is a conversion of land that is directly attributable 
to the production of a biofuel feedstock. Existing lifecycle analysis 
models, such as the U.S. Department of Energy's GREET model, do indeed 
account for emissions from direct land use change along with other 
emissions directly related to the biofuel supply chain. Accounting of 
direct land use changes is straightforward and data-driven. To be 
clear, there is no debate over whether emissions from direct land use 
change should be included in biofuels lifecycle analysis.
    Indirect land use changes, on the other hand, are those that 
purportedly occur in the global marketplace as a result of shifting 
economic, social, or political behaviors. Specifically, the notion of 
indirect land use change in the context of biofuels lifecycle analysis 
suggests that if a farmer in the United States reacts to signals from 
the marketplace and plants corn on land that might have otherwise grown 
soybeans, the lost soybean production must be made up somewhere else in 
the world. But in the real world, things are not nearly that simple. 
Accurately assigning cause for land conversion and quantifying indirect 
land use changes in the real world is a virtual impossibility. Further, 
there is no empirical data or proven methodology that can positively 
link land conversions halfway around the world with a farmer's decision 
here in the United States.
Boundaries for Direct Lifecycle GHG Analysis Using Greet Model



 ``Indirect effects'' are interactions between (and among) the direct 
        supply chain & external factors.
        
    While predicting international indirect land use changes is highly 
tenuous and driven by assumptions, there are domestically occurring 
indirect greenhouse gas effects that may be easier to identify and 
quantify. For example, domestic indirect land use change may be 
estimated with a much higher degree of certainty than indirect land use 
changes occurring internationally. Increased grain demand as a result 
of the RFS2 could plausibly lead to indirect changes in the U.S. crop 
mix. These changes to the crop mix could potentially lead to GHG 
emissions from land conversion, but it is expected that these indirect 
land conversions would be minimal, if they occur at all. For example, 
if a farmer in Indiana forgoes his typical corn/soybean rotation in 
favor of a corn/corn scenario, the demand for that soybean acre may be 
shifted elsewhere in the U.S. agricultural system (provided that a 
necessary price signal is sent to a farmer in a different area). As a 
result, a farmer in Alabama, for instance, may opt to produce soybeans 
on an acre previously dedicated to a crop for which global demand has 
cooled, such as cotton, or an acre of idle cropland or pasture. If 
soybeans are introduced on ground previously dedicated to cotton, there 
are essentially no emissions from the land conversion. If, instead, the 
farmer converts idle cropland or pasture, some carbon may be released 
as a result of the land conversion. Proving with certainty that the 
Alabama farmer's decision to plant soybeans was the result of the 
Indiana farmer's decision to plant corn would still be quite difficult, 
given currently available models, but such a linkage could likely be 
determined with much more confidence than international indirect land 
conversions. Indirect changes to the U.S. crop mix can be identified 
retrospectively through data collected by the National Agricultural 
Statistics Service (NASS). Further, potential short-term indirect 
changes to the future domestic crop mix may be anticipated with a 
relatively high degree of certainty using domestic agricultural models 
and/or NASS forecasting and survey data on planting intentions.
    Indirect emissions effects can also provide ``GHG credits'' to the 
ethanol lifecycle. For instance, research by university animal 
scientists and government labs shows that feeding of distillers grains 
(the animal feed co-product associated with grain ethanol production) 
reduces lifecycle methane emissions from beef cattle due to the fact 
that beef fed distillers grains spend a shorter amount of time on feed.
    There are also positive indirect GHG effects affiliated with 
ethanol's displacement of certain petroleum sources. Ethanol is 
reducing and delaying the need for gasoline from marginal, high carbon 
sources of crude oil, such as Canadian tar sands and Venezuelan extra 
heavy crude. So, while a specific gallon of ethanol may not be directly 
replacing a gallon of gasoline derived from marginal oil, it is 
displacing the need for that high carbon gasoline at the margin of the 
fuels supply. Therefore, the indirect effect in this case is that 
additional GHG emissions from higher carbon oil sources are avoided. So 
far, this effect is being overlooked in the EPA's analysis for RFS2, in 
which a gallon of biofuels is assumed to replace a gallon of 2005 
average gasoline or diesel fuel.
    These are the types of indirect effects we were expecting the EPA 
to analyze as a result of the requirement in the EISA to consider 
indirect greenhouse gas emissions. We were not expecting the EPA to 
overreach into the realm of international indirect effects, where 
positively assigning cause to land use changes is beyond both the scope 
of the policy and the capabilities of current methodologies.
    Here is another example to illustrate the dangers of assigning one 
product's carbon footprint to another distinctly different product. 
Suppose a factory in New York exclusively produced televisions for the 
last 30 years, but because of rising labor costs and any number of 
other factors, the factory stopped producing televisions and started 
producing toaster ovens using a cost-reducing automated production 
line. Meanwhile, a new television factory is constructed in Japan, 
indirectly as a response to the reduction in television output that 
occurred when the factory in New York switched to toaster ovens. Should 
the carbon footprint of that new television factory in Japan be 
attributed in some way to the toaster oven factory in New York that 
formerly produced televisions? Common sense would tell us that the new 
factory in Japan should be accountable for its own carbon emissions. 
The same should be true for agriculture--the farmer who converts the 
land and grows the new crop should be responsible for his own carbon 
footprint.
    The issue of understanding direct and indirect effects is very 
closely related to the need for consistent boundaries for lifecycle 
analysis. That is, if indirect effects are analyzed for one type of 
fuels, they must be thoroughly analyzed for all fuels. For the RFS2 
analysis, indirect, market-mediated effects of petroleum were not 
considered in constructing the baseline against which all renewable 
fuels are compared. Similarly, the California Low Carbon Fuels Standard 
lifecycle analysis assumes dramatically increased use of electricity 
for plug-in vehicles, hydrogen for fuel cell vehicles, and natural gas 
for compressed natural gas vehicles would not cause any significant 
market-mediated impacts at all.
    It is a basic concept that because oil is deeply imbedded 
throughout our global marketplace, even a slight change in the energy 
markets can cause cascading effects throughout the world economy. As an 
example, changes in the oil market have significant direct and indirect 
impacts on the agricultural decision-making process world-wide. 
According to a 2008 paper by Purdue University economists, rising oil 
prices were the key driver of the boom in ethanol production over the 
last several years.\5\ Thus, the impact of oil prices must be strongly 
considered in any discussion of ethanol's impact on agricultural 
commodity prices and the resulting land impacts. According to the 
Purdue paper, ``Essentially, the mechanism is higher crude [price] 
leads to higher gasoline [price], which leads to higher ethanol 
[price], which leads to more ethanol production, which increases corn 
demand, which increases corn price.'' In fact, the Purdue study 
attributed 75 percent of the 2007-2008 increase in corn prices to 
rising crude oil prices.
---------------------------------------------------------------------------
    \5\ Tyner et al. ``What's Driving Food Prices?'' Farm Foundation 
Issue Report. July 2008. 
http://www.farmfoundation.org/news/articlefiles/404-
FINAL%20WDFP%20REPORT%207-28-08.pdf.

    2. We believe the EPA's lifecycle greenhouse gas analysis of 
        ethanol is inconsistent with Congress's intent as expressed in 
---------------------------------------------------------------------------
        the EISA.

    When it passed the RFS2, Congress sought to increase the use of 
renewable fuels and decrease this country's dependence on petroleum, 
while simultaneously recognizing biofuel reductions in greenhouse gases 
compared to petroleum. To promote advanced biofuels and incentivize 
carbon reducing technologies for producing biofuels (e.g., using 
natural gas versus coal at the fuel production plant), the EISA 
requires carbon reductions for these new fuels to count towards the 
renewable fuel volumes in the Act.
    These reductions were based on well-established methods for 
assessing the direct fuel lifecycle emissions. Congress also included 
in a late amendment provision for the EPA to take into account indirect 
effects not caused directly by the fuel production process, including 
in this provision ``significant indirect emissions such as significant 
emissions from land use changes.'' Congress also defined the terms 
``advanced biofuel,'' ``biomass-based diesel,'' and ``cellulosic 
biofuel,'' stating that to qualify under these categories, a fuel ``has 
lifecycle greenhouse gas emissions'' less than specified percentages 
than the baseline petroleum-based fuel has.
    Three aspects of this language are remarkable and important for the 
EPA to address in its rulemaking: (1) emissions must be related to the 
``fuel'' lifecycle; (2) indirect emissions must be significant and 
indirect land use change emissions must be significant themselves; and, 
(3) there must be a credible causal link between the biofuel and the 
effects caused as shown by the use of the term ``has lifecycle 
greenhouse gas emissions'' in the definitions of the terms ``advanced 
biofuel,'' ``biomass-based diesel,'' and ``cellulosic biofuel.''

   First: Emissions must be related to the ``fuel'' lifecycle.

    Congress specifically limited such consideration of indirect 
emissions to those ``related to the full fuel lifecycle, including all 
stages of fuel and feedstock production and distribution.'' Congress' 
limitation to the ``fuel'' lifecycle and specific reference to fuel and 
feedstock production indicate a clear limitation to ``fuel effects'' 
and no indication of including the types of speculative effects being 
considered in the models used for the RFS2 proposal, such as the 
``food'' lifecycle example given above related to pork consumed in 
China.
    This limitation makes sense, of course, because Congress was 
establishing a policy of promoting and expanding renewable fuels in a 
responsible way. It would not make sense under such an approach to 
include the types of effects that are being included in the EPA's 
lifecycle analysis at this time. The EPA's approach to the lifecycle 
analysis has lost sight of the statutory language and the policy 
underlying the program by including speculative effects that are in no 
way part of the fuel lifecycle. In addition to being inaccurate, the 
approach directly violates the terms of the EISA.
    Instead, the EPA should be using the lifecycle analysis to help 
improve the environmental performance of biofuels consistent with the 
direction the industry is already taking. Corn ethanol plants built 
since 2004 have substantially increased their efficiency, resulting in 
greater reductions of GHG emissions.\6\ The importance of these 
innovations and technological improvements (e.g., thermo-compressors 
for heat reuse, raw starch hydrolysis, collocating with animal feeding 
operations) may be lost if uncertain emissions which are also not 
attributable to the fuel lifecycle are included in the analysis. This 
is particularly true because the causal link between those emissions 
and the biofuel production is not only more attenuated, but is simply 
unproven given the numerous other factors that influence land use 
decisions. In other words, if the biofuel production has little to no 
influence over such emissions, do those emissions rise to the level of 
``significance'' or are they even ``related to the full fuel 
lifecycle'' to warrant inclusion in the analysis?
---------------------------------------------------------------------------
    \6\ Liska, Adam J., Haishun S. Yang, Virgil R. Bremer, Terry J. 
Klopfenstein, Daniel T. Walters, Galen E. Erickson, and Kenneth G. 
Cassman. ``Improvements in Life Cycle Energy Efficiency and Greenhouse 
Gas Emissions of Corn-Ethanol.'' Journal of Industrial Ecology. Vol. 
13, Issue 1 (February 2009).
---------------------------------------------------------------------------
    Fundamentally, the requirement that emissions be related to the 
fuel lifecycle means that there must be some link to the fuel 
production process. While the use of the word ``full'' is expansive, 
the limitation that the emissions be related to the ``fuel lifecycle'' 
indicates that more attenuated effects were not contemplated as within 
the fuel lifecycle. For example, the clearing of lands in other 
countries for domestic food production, is more appropriately part of 
the lifecycle of the food product, not part of the lifecycle of fuel 
production and we believe, was not intended by Congress to be swept 
into the fuel analysis and imposed as a penalty on biofuels.

   Second: Indirect emissions must be significant and indirect 
        land use change emissions must be significant themselves.

    Even without the limitation to the fuel lifecycle, a major problem 
with the EPA's lifecycle approach is that it fails to take into account 
Congress' use of the term ``significant.'' The EPA has neither defined, 
nor placed parameters around, how to determine when effects and 
emission stemming there from are ``significant'' enough to be included 
in its analysis. Rather, the EPA conducted the analysis, found that it 
changes the projected emissions reductions and therefore is 
``significant''--for corn ethanol from natural gas plants it reduces 
the amount of GHG reductions from over 60 percent to 16 percent. In 
actuality, corn production in the U.S. has not affected the ability to 
export corn. This is largely due to the continued efficiencies in 
increasing corn yields and in increasing ethanol production per bushel 
of corn. Under the EPA's analysis, these important and ongoing 
efficiencies are rendered meaningless.

   Third: There must be a credible causal link between the 
        biofuel and the effects caused as shown by the use of the term 
        ``has lifecycle greenhouse gas emissions'' in the definitions 
        of the terms ``advanced biofuel,'' ``biomass-based diesel,'' 
        and ``cellulosic biofuel.''

    While Congress directed the EPA to take into consideration 
significant indirect effects, including significant land use changes, 
nothing in the statute indicates that the EPA is to consider calculated 
effects that are not based on reliable and credible information. As the 
EPA Administrator Lisa Jackson noted in her statement during her 
confirmation hearing, the EPA must operate with ``scientific 
integrity'' and within the ``rule of law.'' Unfortunately, the EPA's 
use of models to predict international land use change lacks scientific 
integrity because the Agency compounds the error that exists in any 
model by using results of one as input for the next, and applying the 
models to situations for which they were not designed. Indeed, the 
EPA's result of a single lifecycle number for each pathway is itself an 
indication of the inaccuracy of its analysis. If anything is clear 
there is a range of potential outcomes.
    The EPA's justification for its approach is entirely circular. The 
EPA has used an uncertain methodology to ``prove'' that indirect 
international land use emissions are ``significant'' and then said that 
because the emissions are ``significant,'' this methodology must be 
used to estimate them. This type of ``Alice in Wonderland'' reasoning 
cannot be applied to validate the use of fundamentally inaccurate 
models. The EPA cannot rely on an unsystematic methodology to show 
significance and then turn around and say that because such emissions 
have now crossed that significant threshold, they must be considered--
and the very same methodology used to project them.
    The EPA's analysis of international land use changes simply does 
not comport with the statute's requirements and undermines Congress' 
intent. The RFA does not dispute that indirect emissions should be 
considered, but they must be significant and related to biofuel 
production. There is simply no evidence that biofuel production in the 
U.S. has significant influence over land use decisions in other 
countries, and we have deep concerns regarding the EPA's methodology. 
As Congress debates a broader climate change bill, it should become 
acutely aware that GHG emissions must be attributed to the appropriate 
industry so that real reductions can be made. The EPA should not 
penalize biofuels for emissions over which they have no control.

    3. The inherent uncertainty and limitations associated with current 
        methodologies used to estimate indirect international land use 
        change render the results highly questionable.

    The EPA is using no less than nine separate models and data sets to 
conduct its biofuels lifecycle analysis, including its evaluation of 
indirect international land use change. This is because, as the EPA 
states in the RFS2 Notice of Proposed Rulemaking, ``. . . no single 
model can capture all of the complex interactions associated with 
estimating lifecycle GHG emissions for biofuels, taking into account 
the `significant indirect emissions such as significant emissions from 
land use change' required by EISA.'' Many of these models were not 
initially designed to conduct this type of analysis, nor were they 
intended to work together in parallel. While each model has been peer-
reviewed individually, the EPA agglomeration of models has not peer-
reviewed as arrayed for the RFS2 analysis.
EPA Lifecycle Analysis Modeling Framework for RFS2





    \7\ T. Darlington. ``The Land Use Effects of US Corn-based 
Ethanol.'' Prepared for the RFA, 24 February 2009. http://
www.ethanolrfa.org/objects/documents/2191/land_use_effects_of_us_corn-
based_ethanol.pdf.
---------------------------------------------------------------------------
    While we have very little research to compare to the EPA's results, 
we can compare modeling outcomes to real-world data through back-
casting, calibration and validation. It is not clear if the EPA has 
conducted this type of back-casting with its amalgamated modeling 
framework. Many of the assumptions underlying the collective 
understanding and modeling of the interaction of U.S. biofuels 
expansion and global land use change--such as the idea that U.S. corn 
exports will be drastically reduced, or the idea that U.S. soybean 
production will be dramatically reduced--have not proven to be true.
    Further, it is currently impossible to replicate the EPA's indirect 
land use change analysis or clearly follow how the agency got from 
``Point A'' to ``Point B.'' In the interest of transparency, we believe 
all of the models and every input used by the EPA should be made 
available to stakeholders in the exact configuration in which they were 
used by the agency. This would allow stakeholders to experiment with 
the models, conduct their own modeling runs and sensitivity cases, and 
most important, gain a better understanding of how the EPA arrived at 
its various estimates. According to a March 2009 EPA publication from 
the Office of the Science Advisor, ``To promote the transparency with 
which decisions are made, EPA prefers using nonproprietary models when 
available.'' \8\ However, several elements of the agency's RFS2 
analysis rely on proprietary or otherwise unavailable models and data 
sets.
---------------------------------------------------------------------------
    \8\ http://www.epa.gov/crem/library/cred_guidance_0309.pdf.
---------------------------------------------------------------------------
    Further, according to the EPA's own guidance, ``When a proprietary 
model is used, its use should be accompanied by comprehensive, publicly 
available documentation. This documentation should describe:

   The conceptual model and the theoretical basis for the 
        model;

   The techniques and procedures used to verify that the 
        proprietary model is free from numerical problems or `bugs' and 
        that it truly represents the conceptual model;

   The process used to evaluate the model and the basis for 
        concluding that the model and its analytical results are of a 
        quality sufficient to serve as the basis for a decision; and

   To the extent practicable, access to input and output data 
        such that third parties can replicate the model results.''

    Unfortunately, the information currently available regarding the 
lifecycle analysis conducted for RFS2 does not meet these standards.
    We fully recognize that the statute requires the EPA to consider 
significant indirect emissions such as those believed to occur as a 
result of international indirect land use change. But the tremendous 
uncertainty and inherent lack of transparency associated with analysis 
of international indirect land use changes makes it extremely difficult 
for regulators to legitimately use these results to assign penalties 
for international indirect effects to the carbon score of various 
biofuels. Rather, these models and results should be used to inform and 
guide public policy more holistically. As articulated recently by Jan 
Rotmans, one of the founding fathers of integrated assessment and an 
expert in the field of integrated modeling and scenario analysis, 
``Models should be seen as learning tools, not truth machines.'' \9\
---------------------------------------------------------------------------
    \9\ Kaffka. ``Crop-based biofuels and the LCFS Standard.'' 
Presentation to Calif. Air Resources Board. March 26, 2009. ftp://
ftp.arb.ca.gov/carbis/board/books/2009/032609/kaffka.pdf.
---------------------------------------------------------------------------
    We think it is important to recognize that due to the highly 
uncertain nature of indirect land use change modeling and the lack of 
consensus on methodology, European institutions recently decided to 
postpone inclusion of indirect land use change as a factor in 
determining the carbon intensity of biofuels in the European Union (EU) 
Renewable Energy and Fuels Quality Directive.\10\ Rather, the EU 
institutions directed the initiation of a 2 year study aimed at gaining 
a better understanding of the land impacts of biofuels and methods for 
minimizing land effects.
---------------------------------------------------------------------------
    \10\ http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//
TEXT+TA+P6-TA-2008-0613+0+DOC+XML+V0//EN&language=EN#BKMD-27.
---------------------------------------------------------------------------
Conclusion
    The Energy Independence and Security Act of 2007 and the 2008 Farm 
Bill clearly put our nation on a new path toward greater energy 
diversity and national security. By continuing the strong foundation 
the U.S. renewable fuels industry has built for new, green American 
jobs, we can begin the hard work necessary to mitigate the impact of 
global climate change, reduce our dependence on foreign oil, and 
provide a tremendous economic stimulus across rural America. But in 
order to achieve the goals of reduced GHG emissions from transportation 
fuels, it is imperative that we allow our public policies to be guided 
by sound science and defensible modeling.
    Thank you.

                               Attachment



 Thank you, Mr. Dinneen. Your handout will be made part of the record, 
    without objection.Mr. Riva, thank you for being here. Welcome to 
the Committee.

 STATEMENT OF CARLOS A. RIVA, PRESIDENT AND CEO, VERENIUM CORPORATION, 
                             CAMBRIDGE, MA

    Mr. Riva. Thank you very much, Mr. Chairman, Mr. Ranking Member, 
and Members of the Committee. I want to thank you for inviting me here 
today.
    My name is Carlos Riva. I am President and Chief Executive Officer 
for Verenium Corporation. And I really appreciate this opportunity to 
be able to come and talk to you about our company's perspectives on how 
best to achieve reductions in carbon emissions in the fuel sector.
    I can say that I support a number of the positions that have been 
expressed by my co-panelists. Particularly, it is important to support 
the corn ethanol industry, even though we are in the advanced ethanol 
industry, because, as has been said, corn ethanol is a bridge to the 
future, and we are the future. And I would also make the point that we 
are not a distant future, but we, as a company, and a number of my co-
competitors, will be beginning construction of major-scale industrial 
commercial facilities within the next 12 months.
    Verenium is a leading developer of cellulosic ethanol process 
technology and specialty enzymes. We are positioned to be among the 
first of the companies to bring commercial cellulosic ethanol to the 
market. We have been working in this space for the last 15 years. And 
only in the last 2 years, we have raised over $300 million of capital; 
over 90 percent of it has come from private sources. We also recently 
formed a technology joint venture and a project development joint 
venture with BP. And I can also say that, although I don't speak for 
BP, in forming this joint venture, they canvassed the industry globally 
and came to the conclusion that our technology and our approach to 
project development was the one which was the front runner and best in 
the industry.
    We have used our capital to build a pilot plant in Jennings, 
Louisiana, which has tested a variety of different feedstocks, although 
we have focused on grassy feedstocks, sugarcane bagasse and energy 
cane, and the like. And we have also spent over $80 million in building 
a 1.4 million gallon per year demonstration-scale plant also in 
Jennings, Louisiana. And I would like to invite any of the Members or 
their staffs who would like to see the state-of-the-art of cellulosic 
ethanol to come and visit us in Jennings.
    Also, together with BP, we plan to build and begin construction on 
a 36 million gallon per year commercial-scale facility in Florida. And 
in short, we have made a very serious commitment to advance biofuels 
and as great a commitment as any other player in this industry.
    I am well aware of the concerns that have been triggered by EPA's 
proposed rules. And we have made our concerns noted in our written 
testimony as well as to the California regulators. And our concerns, 
again, center on imposing asymmetrical penalties on biofuels and 
speculative concerns about indirect land use change. I am also, 
frankly, aware of the issues and concerns around how poor policy in the 
past has triggered undesirable effects such as deforestation in places 
like Indonesia.
     But having said that, I believe that there are much better ways, 
less invasive ways and more effective ways to meet our goals of large-
scale biofuels development without risking land use change, not through 
over-regulation, but by encouraging the right combinations of 
feedstock, of technology, of land use, and different processes. And our 
goal should be to optimize the production of food and biomass 
feedstocks for fuel, and doing so by using the land which is most 
appropriate to the feedstock.
    This is not a zero-sum game, but rather a complex algorithm that 
has an optimal solution. I think, with the right technologies and 
feedstocks, we can actually reduce the pressures that drive the 
concerns about international land use change and generate outcomes that 
provide more food, more fuel, and lower carbon emissions.
    Mr. Chairman, I urge EPA to forebear from regulating land use 
decisions for the first several hundred million gallons of advanced 
biofuels. Let's get this industry off the ground, attract the capital, 
and then we can see where the regulation needs to lead. Even by 
definition, the impacts from the first several hundred million gallons 
would not be significant, as required under the 2007 law. And, that 
this flexible approach is much more likely to help us find pathways to 
production that are truly scaleable and sustainable.
    I would like to demonstrate what I am talking about by highlighting 
a little bit about our own strategy for development of our project in 
Florida. There, for example, we are going to use high-yield, nonfood, 
grassy biomass feedstocks. These are perennial crops that don't require 
annual replanting. They can be grown with fairly low inputs in the 
moist Gulf Coast region of the southeastern U.S. We are targeting 
previously cultivated lands that today are fallow or in pasture, 
degraded, or otherwise unsuited for food agriculture. Our facility will 
use energy cane, which is a high fiber relative to sugarcane. It can be 
produced. It yields between 18 and 20 dry tons per acre in that region. 
And ultimately this will yield between 1,800 and 2,000 gallons per acre 
of ethanol, about four to five times what is achievable using 
conventional crops in prime acreage in the grain belt.
    We are also perfecting our technology which uses the whole plant, 
the five-carbon and the six-carbon sugars, and converts those to 
ethanol, while using the residue for energy to drive the entire 
process. We also have plans to replicate this strategy at various 
locations throughout the Gulf Coast, and then ultimately throughout the 
U.S.
    It is a very complex challenge. There are no shortcuts. That is why 
we have had to take the steps of investing very heavily to prove out 
the technology at pilot and demonstration-scale levels. And, that this 
is where the role of government becomes very important to help the 
technology take the leap from demonstration to commercial-scale. And I 
would urge the government to continue to support the title IX farm 
bill, bioenergy programs that have been introduced in the 2008 Farm 
bill, the loan guarantee programs in the Department of Energy. Continue 
to support the renewable fuel standard. And also, finally, dealing with 
what has been described as the ``blend wall'' and has been noted by 
some of my co-panelists.
    Advanced biofuels offer tremendous potential to meet our nation's 
energy security and economic development needs, job creation and the 
like, and at the same time improving our environment. All three sets of 
these goals are critical, they all must be met. But I am confident that 
a flexible, technology-based approach, as I have suggested, can help 
our nation achieve these goals and the needs of more fuel, more food, 
and lower carbon emissions.
    Thank you very much, Mr. Chairman. I look forward to your 
questions.
    [The prepared statement of Mr. Riva follows:]

   Prepared Statement of Carlos A. Riva, President and CEO, Verenium 
                       Corporation, Cambridge, MA

Introduction
    Mr. Chairman, Mr. Ranking Member and Members of the Committee, 
thank you very much for inviting me here today. My name is Carlos Riva 
and I am President and CEO of Verenium Corporation. I am very honored 
to have this opportunity to speak with you about my company's vision 
for advanced biofuels, and the great promise they hold for reducing the 
carbon footprint of our automotive fuels sector. These new fuel 
technologies hold tremendous potential to enhance our nation's energy 
independence, promote economic renewal and spur job creation in rural 
areas, as well as to generate significant reductions in overall carbon 
emissions. But we are all aware of concerns that have been voiced about 
the fairness and workability of the EPA's new RFS2 proposed rule. This 
morning, I would like to offer my own thoughts on how Congress and the 
Administration can move forward, in a way that supports all of these 
goals including carbon emissions reduction, but with a regulatory 
approach that is more effective and less burdensome to this emerging 
industry at this critical stage.

Overview of Verenium
    Let me begin with a brief description of Verenium. We are a leading 
developer of cellulosic ethanol process technology and specialty 
enzymes. We have positioned ourselves to be among the first major 
producers of cellulosic ethanol in the U.S. Building on a 15 year 
history, we have pursued a methodical approach to developing and 
scaling our technology, which is based on breakthrough early research 
at Florida State University and work at several National Laboratories. 
In the 2 years since the announcement of the merger that formed our 
company as the first pure-play public cellulosic ethanol company, we 
have raised and invested nearly $300 million to develop and advance our 
biofuels process technology. Roughly 90% of this funding has been 
raised from private sources, including more than $110 million through a 
landmark technology development alliance and commercial joint venture 
with BP. We have also won nearly $30 million of cost-shared support in 
several competitive DOE funding solicitations.
    Last year, Verenium completed construction of one of the nation's 
first true demonstration-scale cellulosic ethanol production facilities 
in Jennings, Louisiana. This $80 million, 1.4 million gallon per year 
facility is now fully commissioned and undergoing process optimization. 
It serves as a centerpiece of our ongoing research and development 
efforts into new feedstocks and process innovations. Let me extend an 
invitation to any Members of the Committee who wish to visit it to see 
what I believe is the leading edge demonstration of cellulosic ethanol 
process technology at scale in the United States. More recently, in 
February, the BP/Verenium joint venture announced plans for a first 
commercial-scale facility to be constructed in Highlands County, 
Florida, with a targeted in-service date of 2012. A second commercial-
scale project in the Gulf Coast is also in advanced development.

The RFS2 Proposed Rule: Initial Observations
    Mr. Chairman, let me briefly address the new proposed rule that led 
to the convening of this hearing. Many have voiced concerns about the 
interpretation that EPA appears to have placed on Congress's direction 
in the Energy Independence and Security Act of 2007. The RFS2 rule aims 
to implement the mandate for production of 36 billion gallons of 
renewable fuel annually by 2022. We are all just becoming familiar with 
this 1,000 page rule. However, the initial industry reaction is that it 
is unduly prescriptive, and overly focused on claims of indirect land 
use impacts of biofuels while overlooking the market-mediated impacts 
of other fuel pathways. Let me be clear that our company has long been 
on record in the California Low Carbon Fuel Standard proceeding, as 
opposing the selective enforcement of penalties on biofuels based on 
such claimed indirect effects, so this is a matter of great concern to 
me.
    At the same time, I understand the genesis of concern about this 
issue. The world did in fact witness widespread clearing of land in 
Indonesian rain forests a few years ago to make way for palm 
plantations designed to meet the European biodiesel market. Clearly, we 
must take steps to ensure that similar strategies are not employed to 
meet the needs of the U.S. biofuels marketplace to meet the mandates of 
RFS2.
    But I have every confidence that there are more effective, and much 
less invasive, ways to ensure that the legitimate goal of this 
provision in EISA can be met. The best way forward, I believe, is to 
encourage the advanced biofuels industry to innovate and evolve 
solutions using the right combinations of technologies, lands, 
feedstocks and processes. Rather than extending existing methods to new 
areas, we need to look at optimizing the production of food and biomass 
feedstocks from the lands that support each most effectively, wherever 
they are found. I have every confidence that, by following this path, 
we can actually reduce the pressures that drive concern about 
international land use change. This is an algebraic problem with 
several variables, not an arithmetical zero-sum game. If we approach it 
creatively, we can achieve the highly desired outcome of more food, 
more fuel and lower carbon emissions.
    How should EPA's proposed rule be specifically modified? In my 
view, as of today, and for the immediate future, there are not, and 
will not be, any ``significant'' indirect impacts from advanced 
biofuels production--the literal test required by the terms of EISA. 
This conclusion is valid by definition, I would contend, because there 
is zero commercial-scale production of such fuels today, and there are 
only trivial quantities of advanced biofuels production in prospect in 
the immediate 3&5 year time horizon. We have the time to get this 
right, and we must get it right. Now is the time for policymakers to do 
everything possible to encourage the advanced biofuels industry to take 
root and grow, so that we may gain the experience necessary to assess 
its prospective impacts based on facts rather than speculation. It 
would be fully consistent with the test required by EISA, in my view, 
for EPA to defer adopting any calculation of land use impacts until a 
specific milestone is met, for example, the first 500 million gallons 
of advanced biofuels production capacity is actually in place. This 
approach of regulatory forbearance would give the first commercial 
producers of advanced biofuels the room needed to experiment, innovate 
and attract capital--which will be critical if this industry is to 
succeed.
    Once there is an actual base of experience, it will be possible to 
devise rules, if necessary, that are sensible, relevant and responsive 
to actual circumstances. From the outset, agencies like DOE and USDA, 
that are involved in supporting advanced biofuels commercial-scale 
deployments, should encourage project developers to use strategies 
aimed at optimizing land use and feedstock production. I would not be 
opposed to putting producers on notice that poor land use decisions in 
the first projects undertaken during this early period would likely 
increase the threat of direct regulation of future projects later on. 
But a more flexible approach of this nature would spur progress by 
putting the focus on innovation, rather than narrowing choices of 
available pathways to production. The approach I am recommending, I 
believe, is the way to figure out the pathways to advanced biofuels 
production that are truly scalable and sustainable.
Verenium's Strategy for Biofuels Production
    Having offered this regulatory perspective as background, I would 
now like to offer a fuller discussion of Verenium's experience and 
thinking on feedstock issues, and to describe how these have led us to 
frame our own approach to building a sustainable, commercial cellulosic 
ethanol industry.
    A few points about our commercialization program stand out. For 
example, we have chosen to focus on the use of high-biomass grassy 
feedstocks that do not compete with food. We have developed a 
preference for perennial crops that do not require annual tilling. 
These crops can be grown inexpensively and on a sustainable basis in 
many areas throughout the warm, moist Gulf Coast region in the 
Southeastern U.S. We are looking for opportunities to work with growers 
who can produce these crops on previously-cultivated land, including 
land that is fallow, in pasture, degraded and not suitable for food 
agriculture.
    At our Highlands Ethanol facility in Florida, our plan is to grow 
energy cane. This is a high-fiber cultivar of cane, developed at 
Louisiana State University in the 1970s, that has been shown to produce 
up to 18&20 tons per acre. At projected conversion rates, this rate of 
growth could result in per-acre ethanol yields of up to 1,500&2,000 
gallons. This level of production is several times higher, on a per-
acre basis, than is possible with conventional crops on prime acreage 
in the nation's grain belt.
    Verenium's technology is not limited to this or any other specific 
crop. In fact the Verenium process can use a wide variety of other 
feedstocks. In the Southeast, it could be applied on sugarcane bagasse, 
woody biomass or sorghum. In other regions, it could be adapted to 
biomass sources such as switchgrass or corn stover in other regions. We 
found it notable, though, that neither energy cane nor sugarcane 
bagasse was identified among the pathways identified by EPA or the 
CARB. In fact, the California Air Resources Board's draft rule 
projected that cellulosic ethanol would result in yields in the range 
of only 250 gallons per acre. The CARB estimate is only a small 
fraction of the per-acre yields that we believe are possible with the 
approach I have outlined.
    Verenium's core process technology is based on a low-energy, 
enzymatic or biochemical pathway to biomass conversion. Compared to 
proven thermochemical approaches that have been in use for decades, the 
biochemical pathway is less mature, and is still being perfected. Yet, 
as a company with expertise in enzyme screening and expression, we 
believe this approach offers the best long-term promise in several 
critical dimensions, e.g., overall energy efficiency, reduced carbon 
intensity, and the potential for achieving the lowest long-term cost of 
production. Finally, Verenium's basic technology platform is designed 
around the conversion of all available sugars--both five-carbon and 
six-carbon sugars found in cellulose and hemicellulose, further 
increasing yields and enhancing the energy and carbon balance of 
production.
    Verenium's focus on commercialization has also led our company us 
to become highly focused on feedstock logistics. There are many 
technology pathways for converting biomass to biofuel in the 
laboratory. But in the long run, the difference between profit and loss 
will be one's ability to cultivate, harvest, transport, store and 
process feedstocks in large volume, economically.
    We believe it is important not to underestimate the complexity of 
the challenge of commercializing advanced biofuels production. There 
are no shortcuts to commercial success. Rather, we have taken the time 
to verify our cellulosic ethanol technology at the bench and pilot 
scale, and are now doing so at the demonstration scale at our Jennings 
facility before embarking on a first commercial-scale facility through 
our commercial joint venture with BP. We believe this patient, 
methodical approach will enable us to be among the first companies to 
achieve full-scale, continuous production of cellulosic ethanol in the 
United States if not the world.

Advanced Biofuels Industry Requirements--Near-Term and Long-Term
    In the remaining portion of my testimony, I would like to offer a 
few further thoughts about actions the government can take to enhance 
the prospects for success of the advanced biofuels industry, both in 
the near term and in the long term. The 36 billion gallon mandate in 
the new RFS includes 21 billion gallons to be produced from cellulosic 
and advanced biofuels. Given that there is no commercial cellulosic 
biofuel production in place at present, and a target of 1 billion 
gallons by 2013 (more than all current U.S. biodiesel production), it 
is natural to ask: what are the most effective remaining steps that 
must be taken to ensure that the first generation of commercial 
cellulosic biorefineries are in operation in the next 2&3 years? 
Likewise, what do we need to do to ensure that the industry fully 
develops so that it can supply 16 billion gallons of cellulosic 
biofuels by 2022?
    Earlier this month, the Obama Administration took a critical step 
forward by establishing a new Interagency Working Group with the goal 
of clearly aligning the activities of USDA, DOE and EPA to support the 
objective of rapid commercialization of advanced biofuels. This clear 
alignment of purpose among these three agencies, I believe, will be of 
critical help in achieving the overall goals shared by Congress and the 
Administration.
    Near-term needs. To ensure success, I believe that the Federal 
Government needs to be a full financial partner in these early 
commercialization efforts. Under the best of circumstances, commercial 
lenders are leery of financing pre-commercial energy technologies. The 
current economy makes it essentially impossible to obtain commercial 
financing for advanced biofuels projects; there is essentially no 
alternative to government financing for these first-of-a-kind plants. 
While USDA's loan guarantee program framework is a good start, the 80 
percent Federal limitation has made it essentially unusable for most 
cellulosic ethanol projects. Companies like Verenium are going to 
struggle to find 20 percent private project financing.
    We would also urge USDA to expedite its implementation of the Title 
IX Farm Bill bioenergy programs written into law in the 2008 Farm Bill. 
These are important and promising new programs that could provide 
critical help on the feedstock end, by spurring grower interest in 
shifting into bioenergy crops. It is especially important to get the 
Biomass Crop Assistance Program up and running, as it will help growers 
to overcome a natural degree of resistance to shifting into non-
traditional energy crops that do not receive traditional crop 
protections.
    In addition to these recommendations, we have voiced support for a 
recommendation put forth to the Ways and Means Committee under which 
cellulosic biorefineries would have the option to monetize their 
investment tax credit in the same fashion as was put into place for 
wind and solar energy producers in the recent stimulus bill. Such a 
mechanism would offer immediate value and would be more certain to 
stimulate biorefinery development than tax credit mechanisms that only 
generate value when they offset taxable income.
    Long-term needs. It is impossible to overestimate the importance of 
stability and continuity in the RFS policy enacted into law in the 
Energy Independence and Security Act of 2007. This law serves as a 
foundation for the advanced biofuels industry. It must remain durable 
if the advanced biofuels industry is to attract the billions of dollars 
of investment capital required to prove out and scale up the 
opportunity.
    Finally, it is essential to the long-term health of the biofuels 
industry that Congress formulate an approach for addressing the 
``blendwall'' problem. While EISA is intended to drive our industry 
toward increased production capacity, the EPA 10% blending limitation 
acts effectively as a quota on ethanol use. I would note that, even the 
currently-pending waiver request for approval of blending to the level 
of E15 were granted in full, it would not begin to address the long-
term problem of market uncertainty facing the advanced biofuels 
industry. Thus, I believe it is critical for Congress to focus on steps 
to develop the infrastructure required to expand the use of ethanol 
above and beyond the blend market. Specifically, I would urge Congress 
to move promptly to adopt the Open Fuel Standard, which requires 
flexible fuel capability for a rising fraction of new vehicles sold in 
the United States. In parallel, I would urge Congress to enact rules 
and funding mechanisms aimed at further accelerating the installation 
of E85 dispensing infrastructure, especially in areas of the country 
beyond the grain belt where most E85 infrastructure is currently 
concentrated.

Conclusion
    In closing, Mr. Chairman, I would like to express my deep 
appreciation to you and to the other Members of this Committee for the 
opportunity to testify today. Recognizing the concern we share about 
the potential impact of new regulations on land use for biofuels 
production, I would reiterate my view that a more flexible approach is 
warranted for now to enable our industry to gain needed experience. All 
of us are concerned about passing along a healthy environment to our 
children. We are also concerned about achieving all of the other 
critical goals of advanced biofuels deployment--including energy 
security, economic renewal and jobs creation. All of these goals are 
important. None can be entirely subordinated to the others. I have 
every confidence that with a more flexible approach, we can work 
together to achieve a future with greater economic opportunity for our 
nation as well as more food, more fuel and lower carbon emissions.
    This concludes my testimony. Thank you and I look forward to the 
opportunity to address your questions.

    The Chairman. Thank you, Mr. Riva.
    I thank all of the panel members for excellent testimony. 
We appreciate you being with us today and taking your time.
    I recognize the gentleman from Pennsylvania for 5 minutes.
    Mr. Holden. Thank you, Mr. Chairman.
    Mr. Jennings, can you elaborate on the attorney you 
mentioned that came up with this idea or this model? What is 
his background? What environmental groups was he associated 
with, and if you care to speculate on a possible agenda that he 
might have had?
    Mr. Jennings. Thank you for the question, Mr. Holden. And I 
am happy to speculate on his agenda.
    I think that Tim Searchinger has long held a grudge against 
American agriculture. And those of you on this Committee 
recognize that there are far too many people in this nation 
that, because they don't have a relationship anymore to 
production agriculture, frankly don't understand it. And there 
are some people that don't like the way we farm. They think we 
are too intensive with chemicals. They think we are farming 
soil black. They haven't been to rural America to see what we 
are doing. And as a result, they want to dismantle some of the 
policies that have been in place to help sustain a very stable 
supply of food and feed, and now renewable fuel.
    Mr. Tim Searchinger worked for an environmental group--I 
have it in my testimony here--Environmental Defense, during the 
most recent farm bill. And some of you may be well aware of 
him, some of the things that he tried to do to oppose some of 
these farm programs.
    He then left, and he went to Princeton, where he is not a 
professor, but he is a visiting lecturer, and he invented this 
theory. And it has just taken enormous steam. TIME magazine 
wrote about it. And after that, it became very popular.
    But the motive, I speculate, is to dismantle support for 
agricultural-based biofuels because some people don't want to 
see that succeed. They want to see other alternatives succeed.
    Mr. Holden. Thank you.
    Mr. Dinneen, you mentioned an architect of this plan. Are 
you talking about the same individual?
    Mr. Dinneen. No. I was talking about someone else who had 
done modeling that created----
    Mr. Holden. Who were you talking about? And if you wouldn't 
mind elaborating on that. I think you used the words ``not 
truth machines'' in the statement.
    Mr. Dinneen. It was just someone who had consulted for the 
State of California that had worked on their models and was 
just expressing the limitations of their modeling. This is 
somebody who worked on one of the models, and I will get you 
specifically which model and the name of the individual, but 
not somebody necessarily with an agenda, but just someone 
working on modeling that recognizes himself that these models 
are being asked to do more than they were designed to do.
    Mr. Holden. Can you repeat the exact quote though? I found 
that interesting. It was something about truth machines, they 
are meant to be----
    Mr. Dinneen. The quote was, ``Models should be seen as 
learning tools, not truth machines.''
    Mr. Holden. Right. Thank you.
    And this for the entire panel. How has the uncertainty 
surrounding the science for indirect lifecycle emissions 
stifled the investment in new biofuel technologies?
    Mr. Riva. I can begin to address that from the standpoint 
of advanced biofuels.
    What it does is, it introduces additional uncertainty, not 
only in what the future regulation might be for the facility 
itself, but importantly, for the growers. Because ultimately 
our advanced biofuels industries are critically dependent on 
growers to produce large volumes of feedstock. And how this 
uncertainty may affect their decisions is problematic for the 
industry.
    Mr. Holden. Anyone else care to comment?
    Mr. Dinneen. Congressman, virtually every ethanol 
production facility has a cellulose-to-ethanol research program 
underway. And the uncertainty that is created by this modeling 
has clearly had an impact on trying to gain financing for those 
projects. Existing production is, indeed, grandfathered under 
this.
    This is a debate largely about the future. It is about 
being able to demonstrate that the technologies that are going 
to be employed will indeed achieve the greenhouse gas benefits 
that we believe that they will. And if all those benefits are 
undermined because of this unrealistic, unsubstantiated penalty 
of international land use, then the finance community is not 
going to be able to support those projects, and the evolution 
of the industry will stop.
    Mr. Holden. Mr. Buis.
    Mr. Buis. Mr. Holden, I think you hit the nail on the head. 
If you want people to invest into an industry, you can't keep 
changing the policy that creates artificial hurdles. And I 
think this is an artificial hurdle. I think if I were looking 
to invest in a new technology, I would say, well, maybe I am 
only going to be this flavor of the month for a few years, and 
then they are going to switch gears again.
    I think that, really, there are people out there that think 
some magic new energy source is going to fall from the sky. It 
is not. It is going to take time to develop it. Brazil did 
that. They took that first wake-up call that I talked about 
earlier in the early 1970s. They stuck with it, and they moved 
forward. And they are reaping the benefits today from it. We 
need to do the same thing.
    Mr. Holden. Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman.
    The gentleman from Oklahoma, Mr. Lucas.
    Mr. Lucas. Thank you, Mr. Chairman.
    While a lot of folks might think this is more of an 
academic discussion, anything that will be able to change the 
outcome of indirect land use issues, and all of this, matters. 
Clearly, we have examples already where the California Air 
Resources Board is potentially freezing out ethanol by 
including indirect land use change in their lifecycle analysis.
    Tell me, gentlemen, you obviously have much experience in 
this area, how else can we meet our low carbon fuel standards 
if we do not incorporate renewable fuels? How can we meet this 
goal for the country? Anyone who wants to address it.
    Mr. Jennings. Mr. Lucas, today we cannot. There is no 
viable alternative to petroleum that is ready to go, that works 
in the infrastructure and the vehicles we have today, that 
meets the standards for reducing carbon emissions other than 
biofuels. And today, the only biofuel, I am speaking ethanol, 
is corn-based ethanol. There are no other alternatives. I think 
this is designed to box corn ethanol out and give time to some 
other alternatives. And we don't oppose other alternatives, but 
there has got to be a recognition that there is no silver 
bullet here to reducing carbon emissions and to dealing with 
energy security. And this is very damaging.
    Mr. Buis. Mr. Lucas, the ethanol industry, number one, we 
are producing a low carbon fuel today, and it is getting lower 
all the time. We have a plant that just announced that they had 
tapped into the Sioux Falls City landfill. They are capturing 
the methane from the landfill, piping it to an ethanol plant 
that produces 100 million gallons and, combined with a wood 
waste furnace, is going to provide 90 percent of the energy for 
that plant. Everyone is changing because they want to reduce 
their energy costs so the carbon footprint goes down.
    It is also the same in farming. Farmers are employing new 
techniques, new technology, no-till, strip-till, minimum-till, 
which lowers the carbon footprint because you disturb less of 
the soil. But they also are using things like auto-steer, which 
is a more precise application of chemicals and fertilizers, and 
reducing the cost of fuel across the nation.
    I think a lot of our critics like to look at the way we 
produced ethanol 30 years ago and the way we farmed 30 years 
ago, and there have been a lot of changes. And this Committee 
certainly understands that.
    Mr. Dinneen. Congressman, I would just add that I believe 
all alternatives are going to ultimately have a significant 
carbon benefit. Our frustration is that, right now, under the 
regulatory framework created by EPA, and that which California 
recently adopted, the penalty for indirect land use is only 
being applied to biofuels.
    California, for example, did not assign any kind of an 
indirect land use effect--or an indirect effect associated with 
electricity. I think electric vehicles would be great, but if 
the increased use of electric vehicles is going to result in 
increased demand for coal-derived electricity, I am sorry, 
there is likely going to be some kind of indirect effect 
associated with that. But California said, no, we are not going 
to consider that; we are only going to consider the impact on 
biofuels.
    And the same is true for petroleum. We kept trying to tell 
the State of California that, in the absence of biofuels, you 
are going to get a heck of a lot more of your energy supply 
from tar sands from Canada. And there is an absolute land use 
impact and environmental consequence of the increased 
production of petroleum from tar sands in Canada. So it is just 
the selective nature of this that makes no sense and puts an 
additional burden on our industry that nobody else is having to 
face.
    Mr. Riva. Mr. Lucas, if I could add a different dimension. 
I know that there are different technologies that are often put 
forward as being other solutions, things revolving around algae 
or synthetic petroleum and the like, but these are technologies 
that are very new. It will be a long time before they are 
scaled or developed into being able to make any kind of 
meaningful contribution. They will all have to go through the 
scaling process and disciplined scaling process that we have 
been through as a cellulosic ethanol industry. And I don't 
think that they are meaningful contributors in the near term.
    Advanced cellulosic ethanol is something which is ready to 
go now. It is ready to begin construction. The facilities are 
going to start making a very near-term difference to the fuel 
mix, and hence the carbon content of fuels. I think it is the 
only near-term possibility.
    Mr. Lucas. Thank you, gentlemen.
    Thank you, Mr. Chairman.
    The Chairman. The gentlewoman from South Dakota, Ms. 
Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman.
    And I thank Mr. Boswell for allowing me to ask questions 
out of order here.
    I thank all of our witnesses this morning for their helpful 
testimony: identifying which factors were not included in the 
EPA's analysis; the uncertainties of the various models that 
the EPA used that Mr. Dinneen focused on; as well as the future 
where we are headed that Mr. Riva has articulated with his 
company and, as he mentioned, his co-competitors; and why 
everyone on this Committee agrees that the science is with us, 
but the science--we can't back that up if we are not including 
all of the relevant factors, new information, advances in 
processes and technology, and using a combination of poorly 
designed models with various uncertainties that will then 
inhibit the development of advanced biofuels because of not 
including factors that are relevant in today's ethanol 
production, which has been commented upon as mostly corn 
ethanol.
    My questions for the panel focus on one avenue, at least 
the avenue that the EPA has identified to review the science, 
the peer review process that they are establishing.
    And both Mr. Jennings and Mr. Buis, you commented in your 
testimony on an issue that we all recognize as one of the 
faults in the proposed rule, in that it fails to recognize and 
account for the innovations of U.S. agricultural producers and 
biofuels processors who are pushing yields per acre up, and 
enhancing production processes all the time. You specifically 
mentioned the impact of dry distillers grains and improvements 
on farming methods and technology.
    And then, Mr. Jennings, I believe your written testimony 
refers to a letter sent to the various agencies by five leading 
university scientists with regard to how the use of dry 
distillers grains by the livestock industry and the improved 
seed technology can mitigate the need to expand the global crop 
base.
    So I guess for the two of you, would you recommend that 
these studies be incorporated into the questions asked during 
the peer review process, and should there be any other studies 
that are incorporated?
    And for Mr. Dinneen and Mr. Riva, do you have any other 
concerns or recommendations to the EPA as they undertake their 
peer review process?
    Mr. Jennings. Thank you for the question, Representative 
Herseth Sandlin. And we would absolutely recommend that the 
study and the letter that was sent by Professors Cassman and 
Klopfenstein of the University of Nebraska, and others, be 
submitted to EPA and the other agencies as part of this peer 
review.
    We are convinced that either EPA doesn't understand or 
overlooked the role that distillers play. And there is this 
assumption that distillers grains may be replaced as corn on a 
pound-for-pound basis in a feed ration. And most experts in 
animal nutrition say that that is not the case, that distillers 
replaces corn far greater than a pound for pound. And so, 
taking that into account, along with the yield increases that 
you mentioned, very well could, and some studies indicate, 
mitigate the need to expand the global crop base, mitigate the 
need for these induced international land use changes.
    And so, to the extent that you can have some leadership to 
bear on the peer review process and get material to the peer 
review, we would encourage you to do that and highlight these 
issues specifically, absolutely.
    Mr. Buis. Well, I agree with everything that Brian just 
said, but I would add a note of caution here. I don't think we 
can count on us winning the day necessarily in the rulemaking 
process. I hope they listen to all of our scientists. I hope 
they take into account all these--one that I don't think has 
been mentioned here today from the University of Nebraska that 
points out what some people want to talk about on the equity 
issue, and that is the carbon footprint of imported oil coming 
from the Persian Gulf.
    When you calculate that in there, that doubles gasoline's 
carbon footprint.
    I think what happened, this thing should never have gotten 
to this level. I think you ought to pass legislation to strip 
out the international land use change, period.
    Mr. Dinneen. Congresswoman, first of all, thank you for all 
of your leadership over the years on this issue and helping to 
grow this industry to where we are today.
    I would say that on the peer-review issue, I applaud EPA 
for doing it. I think it is EPA recognizing the limitations of 
the modeling that they have done. So, bravo, you are going to 
send it out to a peer review. But I do think that there is an 
issue of transparency here, because with those nine models, not 
all of those models are available to the public.
    So for groups like ours that want to get ahold of the 
models and replicate what EPA has done, dig into them to 
determine what assumptions are really driving the result, and 
see if they can truly work together in the way that EPA has 
asked, it is going to be very important for the public to have 
access to the models and all of the inputs and assumptions that 
EPA has utilized. And I also think it is important for the 
peer-review committee, whatever it ultimately is, to have 
access to the comments, to the concerns of stakeholders like 
ours.
    One of the real shortcomings of California's process, 
because they had sort of a peer review as well, they sent it 
out to four academics, two of which were on CARB's payroll and 
were consultants in the process, and another two which said 
that they really didn't know much about land use issues. 
Nonetheless, CARB had sent them their proposal, but they didn't 
send any of the comments from stakeholders. So the peer 
reviewers didn't have the benefit of the studies that the 
industry had done, that the Renewable Fuels Association had 
done, the hundreds and hundreds of pages that we had submitted 
to the CARB Board for review in this process. So they were 
spoon-fed by CARB, who were paying them to do the review, and 
it was no kind of an independent peer review at all.
    I would hope that EPA envisions a different process where 
there is more transparency, there is more openness, and that 
the peer reviewers will have access to all of the data, not 
just that which EPA gives them.
    Mr. Riva. Thank you for the question, Congresswoman.
    I guess my perspective is that, despite the peer review and 
the like, we are always dealing with a very high degree of 
uncertainty in the outcomes of these models. I think some of my 
co-panelists have expressed the range of possible outcomes.
    So our position is that no model is going to be accurate in 
demonstrating these impacts. However, we do know that at least 
for the early stages of the evolution of the advanced biofuels 
industry, that the impacts are going to be de minimis because 
it is still just so small. So we have taken the position that 
we think EPA should just take a breather on this and let the 
industry get established. If they then want to come and examine 
what kind of impacts there might be, use the data derived 
during that period to calibrate those models. That is a more 
effective way to deal with this issue than putting stumbling 
blocks in front of the infant before it has learned to walk.
    Ms. Herseth Sandlin. Thank you to our witnesses.
    Thank you, Mr. Chairman.
    The Chairman. We have three votes. We have a little bit of 
time, so I am going to recognize Mr. Moran. He says he can get 
it done in about 3 minutes, and then we are going to adjourn 
for three votes and then we will be back.
    Mr. Pomeroy seems to disagree, which is like the kettle 
calling the pot black.
    Mr. Moran. Mr. Chairman, thank you very much. My question 
is just a broad one in the sense, and maybe--I don't know, 
maybe Mr. Buis is a good person to ask.
    I really don't understand--I understand exactly what you 
are saying and I agree with the comments that are made about 
the science, about the--certainly the unfairness, the injustice 
of evaluating different forms of fuel by different standards. 
But what is confusing to me--and I pick on Mr. Buis because I 
know he has been in this process for a long time--what is the 
agenda that is being advanced here? I mean, Mr. Jennings talked 
about somebody who is anti-agriculture. Government agencies, do 
they just bring this tremendous bias to the process? Who is 
running the show?
    I mean, we have an Administration that says they are pro-
ethanol. We have a Secretary of Agriculture who is very 
interested in biofuels. Is the EPA operating in a vacuum? My 
broad question is: How do you explain what are clearly 
erroneous decisions based upon lack of science and, certainly, 
no sense of fairness?
    Mr. Buis. Well, thanks for that question. First of all, 
this has been in the process since 2007, and my understanding 
is EPA was supposed to get this rule out last year. I was 
wearing a different hat then, so excuse me for that. And they 
have been looking at this stuff for quite some time.
    So I don't think it is necessarily fair to pin on the new 
President what happened when the ball was rolling earlier. The 
Administration did order this biofuels working group to demand 
that they have a peer review of that science before going 
forward.
    I have no confidence in that peer review because, number 
one, Mr. Moran, I don't know--even if you give us a zero 
number, how do you calculate that? I mean, really, think about 
it. Where I live, here in Maryland, is on an old dairy farm. 
That probably forced some indirect land use. But if you have 
subdivisions that build up or strip malls or highways or 
bridges or schools, all of the land use change is going to be 
attributed to renewable fuels. I don't know where you stop.
    And I do think there is an agenda out there. I don't think 
it is an agenda by this Administration; I think it is an agenda 
by some people that probably best describe a western state 
governor--I won't mention his name--that thinks that we all 
ought to go naked, live in trees, and eat nuts.
    The Chairman. Well, I would say that one thing that hasn't 
come out very much, but what they did in California is 
basically set this up to get rid of American ethanol and rely 
on Brazilian ethanol. I think that is where some people are 
heading. You know, the port business down south, they want this 
because it is business and so forth. But there are a lot of 
folks who have agendas here, and they are not all on the same 
page in my opinion.
    Anyway, we will adjourn until the votes are over, and we 
will pick up after that. I appreciate your patience, to the 
witnesses.
    [Recess.]
    Mr. Holden [presiding.] The Chairman will be delayed for a 
few minutes, so he asked me to get the proceedings started. And 
the chair recognizes the gentleman from Iowa, Mr. Boswell.
    Mr. Boswell. Thank you, Mr. Holden. I appreciate that.
    And I appreciate the panelists taking the time today to 
come and prepare and do what you are doing. And I want to 
reiterate, and we all can do this, that we don't really have an 
axe to bear against the oil producers within the United States. 
They simply can't do what we need. And, as I said earlier, if 
you went full out, we would still be importing, unless we get 
into the alternatives, and I have known this for a long, long 
time. I want to keep emphasizing this, because I don't--in 
fact, Leonard Boswell was on a standard rig one time, north of 
Monahans, Texas when, a rig brought a well in. It was an 
experience of a lifetime. But we won't tell that story now.
    You know, we just hear from the press that E85 is not going 
to meet California's standard. Does anybody want to comment on 
that? Just briefly, because I have a couple of other things I 
want to use my 5 minutes for and I have people waiting on me. 
Anybody on that?
    Mr. Dinneen. It is true that the zero emission vehicle 
standards in California make it awfully difficult for auto 
makers to certify a vehicle to run on E85. Part of the issue 
there is the baseline gasoline that they are utilizing to 
compare against. And if they would use the proper baseline, 
ethanol would be able to qualify.
    Mr. Boswell. If we are going to have this discussion, maybe 
you want to comment on it. I see it fits right in with my 
question when I asked. But if we are going to get into this 
indirect stuff, then I suppose it would be reasonable if we 
checked the indirect impact on all possibilities of energy.
    And what comes to my mind immediately is the shipping and 
protection of the shipping coming out of the Gulf, coming out 
of OPEC. My gosh, is there anybody that has any data on that or 
just hip-pocket data? Because it has to be tremendous, and that 
has a part in what we are talking about here.
    Mr. Dinneen. Congressman, you are absolutely right. The 
fact of the matter is they have not yet considered any of those 
impacts, and they need to. There is not a single thing that we 
do that isn't going to have an energy and carbon impact.
    If I were to buy a bicycle--and evidence to the contrary 
notwithstanding, I like to ride a bike--and I were to ride that 
bike to work every single day--and there are days going down 
I&295 that I would probably get to work sooner--well, what is 
the consequence of that from a carbon standpoint?
    If you look at what EPA has done, you would have to 
consider the fact that, well, now maybe I have a little more 
money in my pocket because I am not spending it on gasoline. 
And when I get to the office, because of the energy I have 
expended riding that bike to work, maybe I will want some bacon 
and eggs to recharge and have some protein. You know, does the 
carbon impact of that get applied to the bicycle? I mean, that 
is the absurdity of what EPA has done.
    Mr. Boswell. Well, the whole point here I am trying to 
make--and you are affirming that--is more work needs to be 
done. And if we are going to really concentrate on this, then 
we have to get our arms around the whole thing and not just 
part of it.
    And I really believe if we did a better job, Tim, and all 
of us--and you hear me say this once in a while, every person 
in this country has a vested interest in agriculture. A lot of 
them don't know it. And that is why I talk to my good friends--
and I won't name names but I can--from inner cities, they have 
a vested interest. It is not just by chance that we have the 
most available, the least cost, and the safest food in the 
world. And if we didn't have that, you ought to hear--they 
would scream like a pig caught in a fence. They wouldn't like 
it. They have it because they have invested in it, in the 
programs that we do to sustain the production of agriculture 
and all that goes with it.
    So I would hope that we are successful in this. I commend 
you for your efforts to put the information together. I commend 
the Chairman and the Ranking Member for your work, Frank, for 
bringing this to our attention. We have to prevail. And so--
Tom.
    Mr. Buis. Congressman, if I could. There is a study that 
came out recently and it was submitted to the CARB hearings. In 
fact, it came out of the University of Nebraska. And it 
measures the carbon footprint of imported gasoline from the 
Persian Gulf, and it takes into account the military presence 
there to keep the shipping lanes open. And the end result is 
the carbon footprint for imported gasoline is double what 
California was figuring for regular gasoline today.
    Mr. Boswell. I am going to direct my staff, in fact--I am 
sure they are listening--get a copy of that. I want to see it.
    Mr. Buis. I will be glad to submit it to you.
    Mr. Boswell. Well, we will get it. We will come to you. You 
don't need to chase us down.
    Thank you, Mr. Chairman. I appreciate the opportunity, and 
we will just have to stay on target.
    Mr. Holden. The chair thanks the gentleman, and recognizes 
the gentleman from North Dakota, Mr. Pomeroy.
    Mr. Pomeroy. Thank you, Mr. Chairman. I think this panel 
has been absolutely excellent, straight-talking and on point.
    And the question that I have from this hearing is, you have 
to consider things relative to other things. And when you have 
public policy coming out of an agency that does not look across 
the spectrum in building policy, Congress has got to intervene 
and make sure that things are considered in context to one 
another.
    Specifically, this discussion on carbon footprint of 
ethanol relative to other fuels where they have made no effort 
to calculate the other fuels, this has been a problem and this 
has bugged me for years. So I am very pleased that you have 
some calculations and some examples. I think that puts it in 
context.
    And then, Mr. Riva, I honestly applaud--I think your 
summary testimony, your last paragraph of the testimony as 
succinctly distills all of this as anything I have heard. I 
will read it back to you:
    ``All of us are concerned about passing along a healthy 
environment to our children. We are also concerned about 
achieving all of the other critical goals of advanced biofuels 
deployment--including energy security, economic renewal, and 
jobs creation. All of these goals are important. None can be 
entirely subordinated to the others.''
    That is just sound public policy. That is how you consider 
things. I think you have made some terrific contribution here.
    Mr. Dinneen, I was really surprised when we had EPA 
explaining this new approach of theirs, and it looked to me 
like the productive capacity for biodiesel was just going to 
completely be mothballed. They were grandfathering ethanol; 
forget about new ethanol--corn-based ethanol, anyway--and 
biodiesel is just the top of the block--rotting steel on the 
prairie, I suppose.
    What would be the impact, the fiscal hit, if we are to 
follow the EPA approach and just shut those facilities down and 
walk away?
    Mr. Dinneen. Well, you are right in that the existing 
ethanol industry is somewhat protected by the grandfather 
clause. And the biodiesel industry is only partially protected 
by that because they would be able to be sold as a renewable 
fuel, but not as an advanced biofuel, because the grandfather 
clause does not extend to advanced biofuels.
    So while if you are just measuring the direct impacts of 
biodiesel and not taking into account these very speculative 
international indirect land use impacts, biodiesel would pass 
the 50 percent threshold as an advanced biofuels easily. But 
because of the way the EPA has done this international land use 
issue, it erodes a lot of the benefit, theoretically, and 
biodiesel plants would not be able to meet the 50 percent 
threshold for greenhouse gases established for advanced 
biofuels, and that would absolutely hurt them in the 
marketplace.
    Mr. Pomeroy. They had a great idea. You could make it 
work--blend in grease and some other things, used animal fats. 
Well, we have a terrific biodiesel facility up in Velva, North 
Dakota, the northwestern part of North Dakota close to the 
Canadian border. It is canola-based, I think it is. And you 
would have to haul grease from a long way away to blend into 
their--I can just see truckloads of french fry grease coming up 
from Atlanta or some darned thing.
    Mr. Dinneen. There are just not enough McDonald's in North 
Dakota, Congressman.
    Mr. Pomeroy. There are not enough McDonald's in North 
Dakota, let alone the carbon footprint on notions like that. It 
is really on its face absurd. And I appreciate very much the 
leadership of this Committee in giving us these kinds of fora 
to have us sit in the sun and dissect it a little bit. It is 
absolutely, patently absurd, and Congress has to put it right.
    Mr. Buis. If I could, Congressman. I don't think anybody 
has mentioned it today, but you also have to look at the cost 
back to American agriculture. And if you wipe out the biodiesel 
industry, then those canola farmers are going to have less 
demand, less price. The safety net is probably going to kick 
in. The cost to taxpayers goes up. It is the same for corn, it 
is the same for any of these commodities. That impact, economic 
impact in rural America, will be tremendous.
    Mr. Pomeroy. You are absolutely right. It all hangs 
together. Which is, Mr. Dinneen's very interesting example, I 
know full well I am not going to bike to work anymore and eat 
those bacon and eggs and kill the environment.
    Thank you. I yield back.
    Mr. Holden. The chair thanks the gentleman, and recognizes 
the gentleman from North Carolina, Mr. Kissell.
    Mr. Kissell. Thank you, Mr. Chairman.
    Mr. Riva, you had said earlier in having a more advanced 
approach to this process, a new kind of superplant that, at 
additional levels, it seemed like you were saying that you not 
only can use it for the energy process, but there are aspects 
of the plant that you can turn around and then use a fuel for 
the process itself.
    It almost sounded like it was self-sufficient energy-wise; 
that it didn't take any additional energy from any other 
sources other than what came in with the plants. And I was 
wondering if you could elaborate on that for me a little bit.
    Mr. Riva. Yes. Thank you very much.
    When you look at biomass, there are three principal 
components besides the water content. One is a six-carbon 
sugar, the other is a five-carbon sugar we refer to as 
hemicellulose, and then there is a protein component called 
lignin which is generally the higher BTU element of biomass.
    What cellulosic processes do, ours does and others of our 
competitors do, we take those five- and six-carbon sugars and 
ferment those into ethanol. And then the residue, which is 
anywhere from 25 to 30 percent of the composition of the 
feedstock, then gets put into a biomass boiler. And that is 
used to generate steam or in some cases cogeneration electric 
power to drive the energy needs of the process itself. There is 
some electricity and the light needed from outside sources, but 
generally speaking that is very minimal in the cellulosic 
ethanol process. And, frankly, that is one of the reasons why 
that process has a very favorable carbon footprint, because all 
of that energy to actually drive the process itself is from 
renewable biomass.
    Mr. Kissell. Thank you. And someone said--and I apologize--
I wrote this down, but apparently I put the notes somewhere 
when we were doing votes. Someone said that there is a 
reasonable chance, with the increased efficiency of 
agriculture, that we would be able to not only meet food 
demands, but we would also be able to have this additional 
growth that we would use in this process that we are talking 
about without really having to increase the amount of land 
under cultivation.
    If somebody wants to claim that one and kind of expound on 
that one, I would appreciate it.
    Mr. Riva. I would start again from the cellulosic side. 
Obviously, there is a lot of investment currently going into 
crop development. And, again, the grain and soybean industries 
have invested a lot in technology and we have seen miraculous 
increases in yield over the last several decades, the green 
revolution, if you will.
    In contrast, very little investment so far has gone into 
specific energy crops to improve yields. And what the plant 
scientists tell us is that we can expect, as energy crops 
become part of the agricultural reality, that those investments 
in new strains, healthier strains, more drought-resistant 
strains, could yield very significant increases in the per-acre 
yields for biomass energy crops to support cellulosic ethanol.
    So in our case we are looking at, on the order of, 20 dry 
tons per acre of feedstock. If that were to, say, double in 10 
years because of technology development, then we would be able 
to expand our cellulosic facilities and get even more ethanol 
production from a given parcel of land that was dedicated to 
this feedstock production.
    Mr. Buis. Congressman, you are correct. If you look at the 
future productivity of American agriculture, our ability to 
produce more on less acreage, or the same acreage, will far 
exceed the amount that we need to meet the 15 billion gallons 
RFS mandate on corn ethanol.
    If you look at the past, we have doubled yields in the last 
20 or so years. We are producing on the same amount of land. 
And the advancements in those yields have been tremendous. If 
you would just look, the corn belt used to be the ``I'' states 
and a couple others, but it has expanded. In Congressman 
Pomeroy's district, they are growing corn now in areas that 10 
years ago wouldn't have happened because of new types of 
hybrids that have been developed.
    That continues to happen around the country. Drought-
resistant seeds, new technology, new seeds with vigor, that can 
withstand cooler soils to warm up quicker to extend that 
growing season. So all that is happening. And, the only 
downside is if you don't have that market on the farm, that 
transformation is not going to take place. And if you reduce 
the demand for corn ethanol or soybeans or sunflowers or 
canola, whatever, people won't invest in that technology. And 
that is part of the problem.
    Mr. Kissell. Thank you, gentlemen. Thank you, Mr. Chairman.
    Mr. Holden. A few weeks ago we had a similar hearing in the 
Subcommittee that I chair, and we spent a considerable amount 
of time talking about the definitions in H.R. 6 and how 
restrictive it was for second-generation ethanol for regions of 
the country to participate.
    What is really troubling to me is I represent the 
anthracite coal fields of Pennsylvania, and Pennsylvania's 
Department of Environmental Protection commissioned a study 
last year that showed the abundance of which switchgrass would 
grow on abandoned mines. They are nothing more than an eyesore 
and an environmental hazard and make it impossible to attract 
any industry. I just wonder if anyone would like to elaborate 
again on the record, even though we have it from a few weeks 
ago, about the restrictive significance of the language in H.R. 
6 and how, regionally, second-generation ethanol is not going 
to be realistically achieved if we don't change it.
    Mr. Riva. Just to kick that off. I think that, without 
specifically commenting on H.R. 6, there is a lot of land that, 
today, is not used to benefit that could be used to grow high 
yielding energy crops, particularly the grasses. You mentioned, 
Congressman, switchgrass on anthracite piles. We have similar 
situations in the Gulf Coast which are old phosphate lands that 
could be turned into sources of land dedicated to energy crops. 
And, that this is an important consideration that needs to be 
taken into account when we consider, in fact, the land 
resources that we have to support a very large investment in 
advanced biofuels, and we shouldn't overlook any of these 
sites.
    Mr. Holden. Anyone else care to comment?
    Mr. Buis. I would just follow up by saying that there is a 
great opportunity to produce energy from a variety of crops in 
America and a variety of processes. But you have to have the 
marketplace. And right now, the marketplace is capped out at 
ten percent. And so unless there is a signal that they are 
going to have a market out there, it is going to be tough to 
bring in these new processes.
    Mr. Holden. While we are waiting for the Chairman, there is 
one question I believe he was going to ask, so I will ask it 
for him. There was a recent op-ed story that pondered over 
EPA's decision to keep the cellulosic ethanol target for 2010 
in their proposed rulemaking. Do any of you believe that there 
will be 100 million gallons of cellulosic ethanol production in 
2010?
    Mr. Riva. The mandate has always been a challenge that has 
been sort of slapped down in front of the industry to meet. And 
while we may not produce 100 million gallons of cellulosic 
ethanol in 2010, the industry is going to be well on its way to 
building 100 million gallons worth of capacity in 2010. Whether 
that is manifest in 2011 or even a little later isn't 
important. The important thing is that the industry gets 
rolling and start building that capacity, because once it 
starts and once we demonstrate the commercial model for 
effectively building these units, then I believe that the 
industry will start to replicate very, very quickly. And so I 
believe that the mandate, as structured, should not be changed 
in any way.
    Mr. Dinneen. Mr. Holden, I would just add to that, because 
Mr. Riva is absolutely right, that you have to have the RFS 
remain in place to keep that market signal there so that the 
investment community will continue to invest in these new 
technologies. But I am not willing, at this point, to say that 
it cannot happen, because I have been surprised before. And 
there are some technologies that could be rapidly utilized, 
processing the fiber that is already in the plants, and does 
represent a cellulosic feedstock. And as some of those fiber 
technologies are commercialized, it is still possible that we 
could meet that 100 million gallon mandate.
    But clearly, if you look at the landscape today in terms of 
greenfield cellulosic ethanol production technologies, whether 
it is from woody biomass or municipal solid waste, that is 
going to be a challenge by 2010.
    Mr. Jennings. Mr. Holden, if I could add to what the two 
previous speakers have said. The inconsistency, the uncertainty 
that is introduced to this equation on top of the complexities 
already in place with the financial markets, because of 
international land use change--and to reinforce something Tom 
said--the fact that the market for ethanol is effectively 
capped to ten percent right now only make it much more 
complicated for companies like Verenium to get it done.
    And I want to be optimistic about this, too. But those two 
uncertainties, the capped marketplace at just ten percent and 
the introduction of this international land use change 
component, make it much more difficult to get that done.
    Mr. Holden. The chair thanks the gentleman.
    The gentleman from Ohio, Mr. Boccieri.
    Mr. Boccieri. Thank you, Mr. Chairman.
    And to the panel, thank you for sharing testimony today. 
Can you speak to me about the vision you have for ethanol 
production at some point, either surpassing where it is today 
or perhaps gaining a larger market share?
    Mr. Jennings. Thank you for the question. I would take that 
first, if I could. And, the tremendous thing about ethanol 
today is that its better days are yet to come. And when you 
compare the future of biofuels to the future of oil, it becomes 
even more meaningful for this country, because future supplies 
of biofuel, whether from corn or from cellulosic products, are 
only going to be more efficient, more sustainable, cleaner for 
the environment, and ultimately help reduce prices for 
consumers.
    At the very same time, future sources of oil are going to 
be less sustainable, more expensive to extract, and more 
carbon-intensive; and so today, most reputable models would 
indicate corn ethanol. An average corn ethanol plant reduces 
greenhouse emissions by about 60 percent compared to gasoline 
based on the technologies that are available. Well, companies 
are developing new technologies as we speak, and so the future 
is only going to get better; meaning, we will produce more from 
grain than anyone ever thought. It will be more efficient. And 
we will--it is not a matter of if, it is when. We will be 
making cellulose all around the country from various biomass 
feedstocks.
    Mr. Boccieri. Tell me what kind of pressure this puts on 
other sectors of the economy. I know like 70 percent of our 
food supply in this country is based on some form of corn base. 
Now, only because I have four children I know about this, high 
fructose corn syrup, corn starch, and the like. But what type 
of pressures is this putting on other sectors of the economy?
    Mr. Jennings. I don't want to diminish pressures, but the 
fact that--and we talked about this a little bit earlier. The 
fact that farmers have increased corn yields 400 percent since 
World War II ensures that these pressures are not as 
significant as some would like to suggest. That means we are 
raising more bushels on the same or less acres, doing so using 
fewer chemicals, less water, and we are able to supply some of 
their needs.
    Now, the RFS contemplates that there is a limit on how much 
corn we are going to use to make ethanol, and right now that is 
at that 15 billion gallon level. And so that will meet its 
course at some point in time. But I don't foresee that the 
pressures are overwhelming given the technology that can be 
brought to bear on this.
    Mr. Dinneen. In addition to that, Congressman, just 
quickly, it is important to remember that when we are 
processing grain into ethanol we are just using the starch. I 
am sort of the poster child for the fact that we have too much 
starch in our diet. What is left behind is a very high protein, 
high vitamin and mineral content feed that then goes to cattle 
and poultry markets. And so you are not just taking grain away 
from these other markets, you are actually enhancing its value 
as a feed product.
    Mr. Buis. And, Congressman, if I could: That 70 percent of 
the food that you are talking about, 81 percent of that price 
is set after it leaves the farm. The farmer gets less than 20 
percent of that food dollar. And I was saying earlier in here 
that that was the most disingenuous campaign I have ever heard, 
to blame farmers and high commodity prices and corn ethanol on 
the increased food prices.
    We all know it didn't happen. Everyone looked at it and 
tried to point that finger. But every economic analysis has 
said, look, it was energy, it was excessive speculation in the 
futures markets, and it was exports. Because at the end of the 
day, last year when we were supposedly running out of corn we 
still put 1 billion bushels back in to the carryover for next 
year.
    Mr. Boccieri. My time is expiring here, but just answer 
this question. Can you mix ethanol with, like, with Brazil--
with the corn or the sugar beets or the sugar cane that they 
use? Can you mix those two products together?
    Mr. Dinneen. Ethanol is ethanol. Yes. It doesn't matter 
what the feedstock is.
    Mr. Boccieri. Okay. Thank you. Thank you, Mr. Chairman.
    Mr. Holden. The chair thanks the gentleman, and recognizes 
the gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman, for holding 
this hearing, and the importance of the subject matter.
    I want to follow up on--first of all, let me say, as maybe 
the only Californian that has participated in this hearing this 
afternoon, I am not here to defend the California Air Resources 
Board. Let's make that clear. I have had my differences with 
them over the years, and on occasions I have agreed with them 
on issues. But I want to talk about the methodology, because we 
have discussed that a lot today, and the robust and scientific 
efforts, as Mr. Boswell and others talked about, to identify 
direct and indirect emissions, and the international land 
change uses we have spoken of.
    In my area, it is a nonattainment area, so the air quality 
is a big issue and we have done a lot--agriculture has done a 
great deal to reduce from PM10 levels to 
PM2.5 and so forth. But can you highlight some of 
the impacts of what it would take into account to determining 
direct and indirect impacts, quickly?
    Mr. Dinneen. Congressman, we have done a lot of work in 
California. Throughout the rulemaking process, we have 
participated in every CARB workshop and we have filed hundreds 
of pages of comments.
    Mr. Costa. What examples does it take, quickly?
    Mr. Dinneen. I am sorry?
    Mr. Costa. What examples does it take to determine direct 
and indirect impacts?
    Mr. Dinneen. Well, California utilized a GTAP model that 
was developed by Purdue, which as we ran models and tried to 
replicate what they did, we learned how significantly they had 
undervalued the feed copilot credit and yields. They virtually 
gave no credit for increased yields, which we have talked a lot 
about today. And their modeling, while I will give them credit 
for being more transparent than EPA's process, the model they 
relied upon had some----
    Mr. Costa. So the models are flawed. Do you have other 
models that you would recommend to the Committee that ought to 
be considered?
    Mr. Dinneen. Well, the GTAP model, like many of these other 
models, were not developed to determine the carbon footprint of 
an industry. They were economic equilibrium models, and they 
may tell you something about commodity markets, but they can't 
tell you anything about carbon. And they are being forced to do 
something that they were not designed to do.
    Mr. Costa. Well, apparently 125 scientists agree with you. 
As you know, they submitted a letter to the California Air 
Resources Board talking of the frustration they had with 
regards to the methodology and the models that were used. Do 
you think it is possible to establish an appropriate measure of 
indirect land use across the globe?
    Mr. Dinneen. I think it is absolutely impossible to 
determine international land use impacts. And it also ignores 
all of the other factors involved, because there is more to 
indirect effects than----
    Mr. Costa. And I don't know if the others, if you want to 
opine. But it is virtually impossible to construct an unbiased 
formula when you talk about the complexities of global 
marketplaces, when you talk about in some instances, since we 
are in the Agriculture Committee, comparing apples and 
oranges--I think that is a good analogy--when we are talking 
about the myriad of different types of fuels and what it takes 
to produce those fuels around the world.
    Mr. Buis. Congressman, I think you stated it accurately, 
because I don't know how you would ever be able to determine a 
land use change in some other country based on commodity 
production in the United States that can go for a variety of 
reasons.
    Mr. Costa. Let's be clear about it. I think you can 
determine it, but I don't think you can determine it with any 
accuracy.
    Mr. Buis. Right. They have already determined it in 
California and at EPA, but there are so many factors that go 
into agriculture production, local food needs, exports, 
monetary.
    Mr. Costa. Do you think this holds true? I mean, we have 
been focused on the corn stuff. And, we don't grow a lot of 
corn in California, some for dairy feed. But how about the 
other biofuels?
    Mr. Buis. Absolutely, but, it goes beyond that. I think 
once they go down this road, you are going to see it for all of 
agriculture.
    Mr. Costa. So the next generation of biofuels you think 
will be thus impacted?
    Mr. Buis. Less impacted?
    Mr. Costa. No. The next generation of biofuels, we get 
beyond corn, because we are talking about it in California as 
well as elsewhere.
    Mr. Buis. Absolutely. If you change land and they figure 
out some model that they are going to use, land is land and it 
is going to change hands.
    Mr. Costa. Before my time expires, are there any things in 
the Air Resources Board that you think they did better than the 
Environmental Protection Agency with regards to the renewable 
fuel standard rule, or vice versa?
    Mr. Dinneen. The only thing, like I indicated earlier, they 
have been more transparent than has EPA in terms of the models 
used and the ability to get those models and replicate what 
they have done. But other than that, I mean, all of this stuff 
is based on the assumptions. And CARB's assumptions are every 
bit as flawed as EPA's has been.
    Mr. Costa. My time has expired. But, Mr. Chairman, if you 
would allow me one last line, because a number of us have been 
having conversations as we try to deal with an energy package 
that the Congress, both the House and the Senate, are working 
on, and the Administration. And, we can create a robust energy 
package without, for example, having to deal with cap and 
trade. I think if we focus on caps like the CAFE standards and 
other kinds of things and then be clear--you noted, some of 
you, in your testimony, about the importance of having clear 
rules and keeping the rules in place.
    What is the biggest criticism that any of you would like to 
opine with the current energy package that we are producing now 
as it relates to agriculture's role to date? And how would you 
urge Members who represent strong agricultural areas to 
consider what to look out for, based upon the measure that is 
being formulated in the House?
    Mr. Buis. Well, kind of speaking wearing my old hat as a 
farm leader, I think the offset issues are very troubling. They 
count all international agriculture offsets equal to U.S. 
agriculture offsets. I know that is a big problem. Who 
regulates the marketplace is a big issue, as well as some of 
these other issues that we have talked about here today.
    Mr. Costa. So you are saying that others--if you are 
representing an agriculture area, that you would think twice 
unless there are significant improvements for voting for the 
package, some 2,000 pages now, that is being formulated on the 
House side?
    Mr. Buis. What I am saying is that they left agriculture 
out of the current legislation. Hopefully, they will allow you 
guys to have your input into it.
    Mr. Costa. Do the other three of you feel the same?
    Mr. Riva. I don't know if I would comment on whether it has 
been left out or not. But I would make the point that for any 
kind of biofuels industry, advanced biofuels industry in 
particular, agriculture needs to have an important 
consideration in whatever legislation is taking place, because 
we are clearly seeing a convergence of agriculture and energy 
in the current energy mix.
    Mr. Costa. And in the Waxman-Markey bill, you don't see it?
    Mr. Riva. I haven't seen the latest, so I couldn't comment 
on that.
    Mr. Dinneen. I think there is very little in there for 
biofuels generally. There is no requirement any longer for 
flexible fuel vehicles. They have not done anything to address 
some of the concerns that have been raised about the RFS. I 
think that there certainly are some issues that they have yet 
to address.
    Mr. Jennings. I would share the view that Bob just shared 
with you. There is very little in there for biofuels. So for 
the narrow interest that I am representing here today relative 
to ethanol, it is--far be it from me to opine on that large 
legislation.
    Mr. Costa. You have been very generous with my time, Mr. 
Chairman. Thank you very much.
    The Chairman [presiding.] I thank the gentleman. The 
gentleman from Maryland, Mr. Kratovil.
    Mr. Kratovil. Thank you, Mr. Chairman. If this has already 
been answered, forgive me coming back into this. But a number 
of you obviously suggest an absurdity in connecting the 
increased biofuel production here with deforestation elsewhere. 
But then you say we need to make sure we get the science right 
before making decisions.
    My question is, do you believe that the science isn't there 
yet and we just don't know whether or not there is a 
connection? Or is your opinion that there is no connection? In 
other words, do you foresee a time when those indirect 
consequences would be considered?
    Mr. Jennings. I will take a first stab at that. Thank you 
for the question.
    As was noted by Bob Dinneen, there are indirect effects 
domestically that can be verified with relative scientific 
consensus. But the fact that the real-world measurements and 
the predictions surrounding international land use change are 
not cohesive, that they don't match up, that presents a serious 
problem.
    So with respect to that part of it, the international and 
indirect effects, yes, more scientific rigor is needed. Will 
they ever get to accuracy, as Mr. Costa asked? No, I don't 
think you will ever get to 100 percent accuracy.
    There is nothing wrong with trying to make sure that every 
fuel source is as low carbon as it can be in the world that we 
are dealing with, though. And so we support continued research 
on this; it is not as if we want to shy away from being under 
the microscope when it comes to our greenhouse gas impact. We 
are proud of the greenhouse gas impact we have, and we welcome 
this. But it needs to be more scientifically rigorous.
    Mr. Kratovil. Okay. And Mr. Jennings, you indicate in your 
statement, you are suggesting that we undertake a complete 
evaluation of the lifecycle assessment of the indirect 
emissions associated with petroleum. Specifically, what are 
some of those examples that you think we should be considering?
    Mr. Jennings. Sure. And we talked a little bit about that 
earlier. But some examples of indirect effects from petroleum 
could be the amount of fossil fuels used to protect the 
shipping lanes that bring Middle East oil from there to the 
United States. You know, the fuel used to support our military 
presence in part in the Middle East comes for those supplies of 
oil.
    When it comes to where we will get future supplies of oil, 
increasingly that will come from Canada and the Tar Sands, and 
there are enormous indirect impacts from the energy that is 
used to extract those sorts of oils, to remove the oil from the 
sand. Some of the land use changes that take place in Alberta 
with respect to what they do with the wastewater, none of those 
are captured in the analysis that EPA and CARB are undertaking 
right now.
    Mr. Kratovil. And, again, in your report on page four, you 
have the chart that demonstrates the lack of connection, 
arguably, between the ethanol production and the deforestation 
in Brazil. Are you aware of any studies that demonstrate 
something else elsewhere in the world?
    Mr. Jennings. With respect to?
    Mr. Kratovil. Deforestation. In other words, any arguments 
other than that, the report that you referred to, indicating 
that there is some connection.
    Mr. Dinneen. If I could, because I had asked for it to be 
submitted for the record, but here is a report from Greenpeace 
suggesting that virtually all of the deforestation happening in 
Brazil is attributable to the growing cattle industry. And, 
people would point to cattle, they would point to lumber. It is 
a real stretch to suggest that there is deforestation as a 
result of biofuels.
    Mr. Kratovil. Thank you.
    The Chairman. I thank the gentleman. The gentlelady from 
Pennsylvania.
    Ms. Dahlkemper. I apologize for not being here earlier. I 
actually just came from my Small Business Committee hearing. I 
am Chairwoman of the Subcommittee on Regulation and Health 
Care. We actually had a hearing going on regarding the same 
issues and just the really dire situation that this industry is 
in currently. And not knowing really where the questioning has 
gone, at this point I yield back.
    The Chairman. I thank the gentlelady. You guys were all out 
and testified at the CARB hearing. Right?
    Mr. Dinneen. The RFA was.
    The Chairman. When they made this decision, one of my 
ethanol plants had put in a digester and so they are using the 
corn cobs and wood in place of natural gas. Did any of that 
stuff get counted in whatever they did out there?
    Mr. Dinneen. Not yet. And actually that is a very good 
point, because one of the attributes of the California program 
that is better than what EPA has done is that they at least 
allowed for the possibility for a plant that can demonstrate it 
has a technology, whether it is a biomass gasification unit, as 
in Chippewa Valley, or something else that would reduce its 
carbon footprint. At least the California program allows that 
company to go in and make a case that its process should have a 
lower carbon number than the default would suggest.
    EPA, although the statute certainly does not prohibit it 
and industry has certainly encouraged it, has to this point not 
proposed a similar opportunity. And we hope in the comment 
period and throughout this process that EPA may as yet adopt 
that kind of mechanism. We do think it would allow companies 
that have these technologies to demonstrate a lower carbon 
footprint.
    The Chairman. So under the California thing, an individual 
plant can get treated differently? In other words, the fuel 
from one plant might have a better number than a fuel from 
another plant?
    Mr. Dinneen. That is correct.
    Mr. Buis. That is the theory, Congressman. I don't think, 
in practicality, it would ever work.
    The Chairman. That doesn't sound very reasonable.
    The other thing, can any of you speculate about when the 
President came up with these new CAFE standards? You know, that 
is going to cost I don't know how much, $1,000&$1,500 a car or 
whatever, to do this new deal, why do you suppose they didn't 
require that the car companies produce flex fuel vehicles like 
they do in Brazil? I mean, General Motors and Ford are making 
those vehicles. I have been down there. They tell me they can 
probably do them for no extra cost, or maybe $50 a car. Why 
wouldn't they have put that into the mix at this point? That 
way, we can get to a place where we could build a marketplace, 
and we won't have to be so reliant on the government and the 
RFS and all this stuff.
    Mr. Dinneen. They absolutely should have.
    I mean, at least to the point where Ford, General Motors 
and Chrysler have each already committed that, voluntarily, 50 
percent of their vehicles will be flexible-fuelled by 2012. And 
I believe that they are going to stick to that commitment. But 
the foreign auto manufacturers have made no commitment 
whatsoever to E85 vehicles, to biofuels; they are sort of 
ignoring that opportunity. I think that a requirement, at the 
very least to that which the domestic manufacturers have 
already committed, would make a great deal of sense. And 
whether it happens by Executive Order or it happens in this 
legislation, similar to the Open Fuel Standard Act, it is going 
to be a very necessary public policy.
    Mr. Jennings. If I could, Mr. Chairman, to add to that, not 
only do we need the vehicles in place, but we need the 
infrastructure in place. As you know very well, that you have a 
lot of blender pumps in your Congressional district that mix 
E85 with unleaded to give consumers a meaningful choice at the 
pump. Today, it is approved for FFVs only, but we still should 
have those in the context of this Biofuels Working Group that 
created this market development program. So to the degree that 
the Committee can bring some leadership to bear on this, 
ensuring that some policies are put in place to support the 
installation of blender pumps, it would be enormously helpful.
    The Chairman. Well, we all need to get focused on this 
because there was a story today that was forwarded to me, you 
may have seen it, from The Guardian in London. Apparently, they 
are very anti-ethanol and anti-agriculture. But they are 
basically using E85 as a reason why ethanol should be 
eliminated.
    And E85 served a purpose, but it is just the infrastructure 
that it takes to get that whole thing going, and the fact that, 
apparently, even under this new edict, the car companies are 
going to be able to get some kind of extra credit if they make 
E85 vehicles, I guess, that hasn't been changed. And we are 
kind of missing the point here.
    I think we need to re-examine this because of the mileage 
decrease. We have a study up in North Dakota that was done that 
says, what the Brazilians figured out, that the right blend is 
25&30 percent. At that level, you don't really get any mileage 
reduction; you get better greenhouse gas results and so forth.
    So, we all need to take a look at this. And if we can build 
a marketplace, we are a heck of a lot better off than relying 
on the government and going through these fights all the time. 
I think we would all agree with that.
    Thank you all very much. You have been very generous with 
your time. Your testimony has been great, as well as the 
answers to the questions.
    We will continue to focus on this. And our Committee will 
do what we can to try to straighten this deal out. So thank you 
very much.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 days to receive additional 
material, supplementary written responses from the witnesses to 
any questions posed by a Member to the panel.
    This hearing of the Committee on Agriculture is adjourned.
    [Whereupon, at 1:25 p.m., the Committee was adjourned.]
    [Material submitted for inclusion in the record follows:]
      
   Submitted Statement of Manning Feraci, Vice President of Federal 
                   Affairs, National Biodiesel Board
    Chairman Peterson, Ranking Member Lucas and Members of the 
Committee, the National Biodiesel Board (NBB) appreciates your 
steadfast leadership on efforts to promote the use of biofuels and we 
thank you for giving our industry a voice when addressing rainforest 
deforestation and assumptions pertaining to indirect land use change 
(ILUC). Our goal is to work with you and the California Air Resources 
Board (CARB) to create a workable solution that will measure biofuels 
through appropriate scientific methodologies.
    There are significant economic, energy security and environmental 
public policy benefits associated with the domestic production and use 
of biodiesel. Though the U.S. biodiesel industry has experienced growth 
since 2004, biodiesel producers find themselves in the midst of a 
severe economic crisis that threatens the nation's ability to 
domestically produce low carbon, renewable diesel replacement fuel. In 
2009, we anticipate production of biodiesel will be less than half of 
2008 production, and nationwide production compared to capacity will be 
about 15%.
    It is important to note that the biodiesel industry does not 
support the degradation of sensitive rainforest ecosystems. However, 
the science associated with ILUC is incomplete and inexact. The science 
pertaining to direct emissions is well established. The USDA/DoE 
lifecycle study was initially published in 1998, and has been 
continually refined and updated since this time. According to this 
model, biodiesel reduces greenhouse gas (GHG) emissions by 78%.
    Many studies rely on uncertain and inexact assumptions when 
applying ILUC to biodiesel's GHG emission profile. There are many 
factors unrelated to U.S. biodiesel production that impact land use 
decisions abroad. For example, in Brazil, forestry, cattle-ranching and 
subsistence farming drive land use decisions, not the production of 
soybeans for biodiesel. In fact, acreage in Brazil dedicated to soybean 
cultivation actually decreased from 2004 through 2008, by more than 1.5 
million hectares--a time period during which U.S. biodiesel production 
increased from 25 million gallons to 690 million gallons. If U.S. 
biodiesel output drove Brazilian land use decisions then the opposite 
would be true.
    In April, the California Air Resources Board (CARB) approved a Low 
Carbon Fuel Standard (LCFS), which includes a number of issues that are 
flawed from both a scientific and logic standpoint. Below are the NBB's 
comments and observations on how the program can be improved.
    More importantly, the issues relating to the indirect impacts 
associated with GHG lifecycle analysis that were included in the draft 
regulation but were not approved by CARB are considerable. On March 5, 
2009, the NBB commented on these issues, and today we will reiterate 
those points.
    We appreciate the willingness of CARB's staff to work cooperatively 
in a professional manner with our NBB stakeholders throughout this 
process. It certainly has been spirited process. While we continue to 
believe the implementation schedule for diesel is unnecessarily back 
loaded and we continue to have one significant difference of opinion on 
the lifecycle assessment for soy-based biodiesel, when taken as a 
whole, we feel that CARB is doing a commendable job, particularly in 
light of the immensely challenging time constraints the agency has been 
given. So it is on this basis, and with the understanding that CARB 
staff will continue to work collaboratively on potentially difficult 
issues like indirect lifecycle GHG impacts, that we provide the 
following comments:

    1. We respectfully urge the CARB to take its time with regard to 
        work on ILUC modeling. While we support investigating this 
        issue fully, and wish to participate in and contribute to the 
        effort in any way possible, we are keenly aware that the data 
        and models needed to properly assess this issue are not yet 
        available. Since the LCFS is not, in a real sense, implemented 
        until 2011, and more biodiesel will not be required until 2014 
        than is currently sold in the state, we see no reason to rush 
        to judgment on this issue. Rather than prematurely publishing a 
        questionable result, we recommend investigating ILUC until 
        January of 2011 when the LCFS is actually implemented but could 
        still be met quite easily with California-produced ultra low 
        carbon biodiesel from recycled cooking oil. This approach would 
        be much more in keeping with generally accepted scientific 
        principles. It is also interesting to note that the European 
        Commission is employing just such a strategy by moving forward 
        with implementation of its renewable fuels mandate, but not 
        including a factor for ILUC until 2017. While we are not 
        advocating for CARB to wait until 2017 to address ILUC, we do 
        feel strongly that a 1 year deferral would inform thought on 
        this issue significantly by providing more time for data 
        gathering and model improvement and development.

    2. At a basic level, it is our understanding that CARB is 
        considering a methodology that attributes deforestation in the 
        Brazilian Amazon to the production of U.S. biodiesel from 
        vegetable oils. Statistically, we know that from 2004 through 
        2008, U.S. biodiesel production increased from 25 million 
        gallons in 2004 to 690 million gallons in 2008. If most of the 
        analysis under consideration by CARB is accurate, then one 
        would assume that Brazilian soybean acreage would have shown a 
        corresponding increase from 2004 through 2008. However, the 
        attached chart, (Attachment I) establishes that U.S. biodiesel 
        production increased from 2004 to 2008, while at the same time 
        land dedicated to Brazilian soybean cultivation actually 
        decreased by 1.52 million hectares. This real-life example 
        contradicts the ILUC modeling under consideration in 
        California.

    3. The fact that CARB has indicated it will not perform an 
        assessment of indirect GHG impacts associated with petroleum-
        based diesel represents a flaw in the agency's analysis. While 
        CARB staff is on record indicating this information is 
        difficult to find and would likely result in only minor 
        modifications to petroleum's GHG reduction assessment, the same 
        statements could also be made about soy-based biodiesel as it 
        relates to global land use changes and the causes of those 
        changes. In the latter case, rather than using a factor of zero 
        as the CARB has for petroleum-based diesel, the agency has, in 
        truth, simply ventured a guess to derive a ``temporary'' 
        number--a number which, by the way, is quite large. Ultimately, 
        this is clearly an instance in which petroleum diesel and 
        biodiesel are treated very differently, resulting in a less 
        accurate analysis, in general, and a less favorable analysis 
        for biodiesel, in particular.

    4. CARB does not include historical yield trends in its modeling. 
        With all due respect, this is a catastrophic error that could 
        distort the modeling results by a factor of 80 percent or more. 
        At the most recent CARB public workshop, John Sheehan from the 
        University of Minnesota presented data from a model he 
        developed with the Natural Resources Defense Council which 
        showed that once a historical yield trend is included in the 
        analysis, the ILUC factor becomes zero because the higher 
        productivity of agricultural land means there is more than 
        enough crops available to address both energy and food needs. 
        The NBB, as strongly as possible, encourages CARB to reconsider 
        its position on this issue. Although CARB's current approach is 
        simpler and easier, it distorts the final results immensely, 
        perhaps to the point of needlessly cancelling the only 
        compliance pathway capable of meeting the ten percent diesel 
        reduction target.

    5. As a follow-on to point number four above, CARB should recognize 
        the GTAP model's major weakness--that it assumes supply and 
        demand are always in equilibrium. CARB should address this 
        shortcoming by adding a component to the model that can account 
        for increasing yields, which would allow the model to show 
        greater supply than demand over the long-term. Since 
        substantial data exists showing supply and demand in the 
        agriculture industry are never in balance, it is difficult to 
        understand why CARB would use this model for long-term 
        forecasting. (Notably, one of the CARB's own peer reviewers 
        made this same point in his recent response to the draft 
        regulation by stating that GTAP should not be used for 
        forecasting periods longer than 15 years). This limitation of 
        the GTAP model is precisely why CARB was unable to verify its 
        ILUC model against 2001&2007 corn data. Of course, this is not 
        entirely unexpected since the GTAP model was never intended for 
        the purpose for which it is being used by CARB.

    6. Page X&4 of the proposed regulation states that ``The lowest 
        cost way for many farmers to take advantage of these higher 
        commodity prices is to bring non-agricultural lands into 
        production.'' This assumption causes the ILUC model to predict 
        that a significant amount of new land will be brought into 
        agricultural production, artificially increasing the ILUC 
        factor and thus decreasing biodiesel's GHG benefits. We would 
        be interested in seeing any data CARB has that shows clearing 
        land for additional plantings is less expensive than improving 
        agricultural practices such as purchasing higher quality seed 
        varieties. Based on our calculations, the math does not come 
        close to supporting this assumption, meaning CARB believes 
        farmers will consistently--and on a long-term, worldwide 
        basis--make decisions counter to their economic interest.

    7. With respect to GHG modeling, CARB mentions the words ``full 
        transparency'' in the draft regulation on multiple occasions. 
        We are pleased to state that this has been the case with regard 
        to the direct emissions model, CA&GREET. To date, however, this 
        has not been the case with respect to ILUC/GTAP modeling. CARB 
        staff have indicated at public meetings that the GTAP model is 
        publicly available. Unfortunately, this is only technically 
        true because to gain access to the model one has to pay Purdue 
        University a sum of approximately $9,000. And even if one 
        musters the financial resources to access the GTAP model data, 
        he or she still would not know what assumptions had been 
        changed by CARB staff and contractors because that information 
        has not been made available to the public. Given the extreme 
        importance of the ILUC modeling effort to the biodiesel 
        industry and the fact that CARB appears to be moving forward on 
        this issue at a very rapid pace, we would hope all data related 
        to this work would be made publicly available in the very near 
        term so that organizations such as ours could participate 
        meaningfully in the effort. As it stands currently, we have 
        contracted with a noted expert in the field to analyze CARB's 
        work who is unable to do so because no significant information 
        has been released.

    8. While we have a high level of confidence in the intellectual 
        integrity of CARB, we cannot help but note that most 
        governments and organizations which employ a peer review 
        process mismanage it by hand picking a few like-minded junior 
        professors from a small set of geographically diverse 
        institutions. Typically, these exercises have the effect of 
        rubber stamping the agency's views rather than informing the 
        process. As such, we urge CARB to be exceptionally thoughtful 
        with regard to how it manages the peer review process. 
        Specifically, we suggest a fully transparent and unbiased 
        process that focuses on soliciting opinion from the premier 
        North American experts in this area. Already, we understand an 
        ``Expert Panel'' will be created. Please keep in mind that a 
        panel of experts is a panel of all experts, not just those that 
        agree with CARB's current line of thinking. The biofuels sector 
        has any number of readily available ``experts'' who should be 
        tapped to serve on any expert panel where indirect land use is 
        the issue.

    Furthermore, on the issues approved CARB, we provide the following 
insights:

    1. We continue to be puzzled by CARB's resistance to accelerating 
        the diesel implementation schedule, particularly in light of a 
        study we forwarded to staff which conclusively shows price and 
        supply should not be concerns. It is important to note that, 
        under the current schedule, the LCFS will not begin requiring 
        more biodiesel to be sold in the state than is currently sold 
        until at least the fourth year of the program. And California 
        biodiesel plants' current production capacity will likely not 
        be exceeded until the fifth year of the program. Ultimately, 
        this overly cautious implementation schedule will only serve to 
        delay development of a California-based industry that has 
        significant potential for improving the environment and 
        creating green jobs.

    2. With respect to the CA&GREET model for soy-based biodiesel, CARB 
        should have, in our view, used a consistent co-product 
        allocation method. Employing the displacement method for corn-
        based ethanol and the energy allocation method for soy-based 
        biodiesel defies logic given their inherent and rather obvious 
        similarities. No other government does it this way. This 
        decision is particularly harmful because the chosen methods 
        result in the worst possible assessment for each fuel. And in 
        the case of soy-based biodiesel, the error is compounded 
        because CARB adds GHG emissions associated with the 
        inefficiency inherent in livestock feed uptake to the oil/
        biodiesel side of the equation. This is illogical since the 
        amount of energy that animals metabolize has nothing to do with 
        the oil/biodiesel side of the GHG assessment; those GHG 
        emissions should be counted on the meal side since they are 
        related 100 percent to livestock feeding within the animal 
        production industry. Further, it is important to understand 
        that soybean oil has historically been viewed by the soybean 
        industry as a by-product rather than a co-product. Even with 
        the development of biodiesel, the majority of the value of a 
        soybean continues to reside in the meal. As such, it is common 
        knowledge that farmers grow soybeans for the meal and not the 
        oil. This makes it doubly inaccurate to add GHG emissions 
        associated with meal/livestock feed to oil/biodiesel.

    3. With respect to the lifecycle analysis for direct emissions 
        related to petroleum-based diesel production, it is difficult 
        to understand why CARB would only assess the fuels that are 
        produced in-state, since these fuels merely comprise \1/3\ of 
        the fuels sold in California. It has been said that this data 
        is difficult to obtain, so one is left to conclude that the 
        default value in GREET is simply being used by CARB for the 
        sake of convenience. Given that many view GREET's assessment of 
        petroleum to be favorable to that industry, we urge CARB to 
        reconsider its decision to not conduct a full lifecycle 
        assessment of petroleum-based diesel fuels produced outside 
        California.

    4. We wish to point out that the ``system boundaries'' of the 
        direct emissions models for petroleum-based diesel and soy-
        based biodiesel are inconsistent in so far as GHG emissions 
        related to oil exploration and oil well drilling are not 
        included in CARB's assessment while GHG emissions associated 
        with soybean planting are included in CARB's emissions figure. 
        Clearly, a direct parallel exists between oil well drilling and 
        soybean planting. Unfortunately, this goes unrecognized in 
        CARB's model, compromising its accuracy. As such, we 
        respectfully request that this difference in system boundaries 
        be remedied by adding GHG emissions associated with oil 
        exploration and drilling to the petroleum-based diesel total.

    Chairman Peterson, Ranking Member Lucas and Members of the 
Committee, the NBB again thanks you for the opportunity to share our 
thoughts and observations on the LCFS that is being formulated by CARB. 
We remain ready to work constructively with you to ensure that sound 
science and realistic assumptions are applied to Federal and state 
policies that are meant to achieve the worthwhile goal of displacing 
petroleum with low carbon renewable fuels.


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