[Senate Hearing 111-794]
[From the U.S. Government Publishing Office]


                                
                                                      S. Hrg. 111-794

 
                        EXPANDING THE ROLE OF 
                          BIOFUELS FOR AMERICA 

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

                             FIELD HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION


                               __________

                           SEPTEMBER 1, 2009

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov

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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            SAXBY CHAMBLISS, Georgia
KENT CONRAD, North Dakota            RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana                  THAD COCHRAN, Mississippi
BLANCHE L. LINCOLN, Arkansas         MITCH McCONNELL, Kentucky
DEBBIE A. STABENOW, Michigan         PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska         MIKE JOHANNS, Nebraska
SHERROD BROWN, Ohio                  CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, Jr., Pennsylvania   JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota
KIRSTEN GILLIBRAND, New York
MICHAEL BENNET, Colorado

                Mark Halverson, Majority Staff Director

                    Jessica L. Williams, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                 Vernie Hubert, Minority Chief Counsel

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Field Hearing(s):

Expanding the Role of Biofuels for America.......................     1

                              ----------                              

                       Tuesday, September 1, 2009
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, U.S. Senator from the State of Iowa, Chairman, 
  Committee on Agriculture, Nutrition, and Forestry..............     1
Thune, Hon. John, U.S. Senator from the State of South Dakota....     3

                               WITNESSES

Corcoran, Steve, Chief Executive Officer, KL Energy Corporation..    14
Couser, Bill, Couser Cattle Company..............................     8
Olthoff, Ed, Cedar Falls Utilities...............................    19
Rath, Anna, Director of Business Development, Ceres..............    11
Sheehan, John, Scientific Program Coordinator for Biofuels and 
  the Global Environment, Institute on the Environment, 
  University of Minnesota........................................    16
Stowers, Mark, Vice President for Research and Development, POET.     6
                              ----------                              

                                APPENDIX

Prepared Statements:
    Corcoran, Steve..............................................    42
    Couser, Bill.................................................    49
    Olthoff, Ed (with attachments)...............................    53
    Rath, Anna...................................................    79
    Sheehan, John................................................    85
    Stowers, Mark................................................    94
Question and Answer:
Harkin, Hon. Tom:
    Written questions for John Sheehan...........................   104
Stowers, Mark:
    Written response to questions from Hon. Tom Harkin and Hon. 
      John Thune.................................................   105



                         EXPANDING THE ROLE OF



                          BIOFUELS FOR AMERICA

                              ----------                              


                       Tuesday, September 1, 2009

                                       U.S. Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                   Sioux City, Iowa
    The Committee met, pursuant to notice, at 1:10 p.m., at 
Western Iowa Tech Community College, Sioux City, Iowa, Hon. Tom 
Harkin, Chairman of the Committee, presiding.
    Present: Senators Harkin and Thune.

 STATEMENT OF HON. TOM HARKIN, U.S. SENATOR FROM THE STATE OF 
   IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND 
                            FORESTRY

    Chairman Harkin  The Senate Committee on Agriculture, 
Nutrition and Forestry will come to order. Good afternoon and 
welcome everybody to this committee field hearing, and I want 
to thank Western Iowa Tech Community College for hosting us 
here today.
    Senator Thune, I want to thank you for being here today and 
for your contributions to our 2008 farm bill, especially your 
work on the biofuels program and other energy provisions that 
we put in that bill. The 2002 Farm Bill is something that we 
have worked very closely together on. Senator Thune is a very 
valued member of our Senate Agriculture Committee and, as I 
said, one of our leaders on biofuels.
    Well, rural America is rapidly increasing the production of 
renewable energy, including biofuels, and that is one of the 
bright spots in our rural economy. Equally important, producing 
and using more biofuels is one of our major strategies for 
reducing dependence on foreign oil.
    Congress recognizes this. Last year, our Country produced 
over nine billion gallons of ethanol. That reduced oil imports 
by 321 million barrels. This year, we will produce over 10 
billion gallons of ethanol, and that is quite a success 
compared to just 30 years ago when we put out only 175 million 
gallons.
    Under the Renewable Fuel Standard that we passed in 2007, 
our Nation is on exactly the kind of expansion trajectory I 
believe we need, growing to 36 billion gallons of renewable 
fuel used by the year 2022. The Food, Conservation and Energy 
Act, or what we call the Farm Bill, that we passed last year 
will boost and maintain that trajectory.
    Building on our base of corn ethanol, the new Farm Bill has 
payments, grants and loan guarantees to help farmers and 
biorefineries develop advanced biofuels, grow biomass crops, 
process them and market biofuels. It does so, as I said, with 
grants and loan guarantees, payments for biomass crops, 
payments to farmers to begin to grow energy crops, and payments 
for feedstock harvesting and delivery to user facilities.
    There are two pieces of legislation that I introduced this 
year, aimed at improving distribution and marketing. The first 
authorizes loan guarantees for renewable biofuels pipelines to 
provide critical infrastructure for transporting our fuel from 
the Midwest to places of high population centers. And, Senator 
Thune, again, we have worked together on that, as co-sponsors 
of that legislation.
    The second bill I introduced is one that I have had in 
previous Congresses, a bill that Senator Lugar and I have 
worked on. Actually, he started it I think when he was Chairman 
of the Agriculture Committee as a matter of fact. That bill 
requires that 90 percent of the vehicles manufactured in the 
U.S. are to be flex-fuel by 2013. I am convinced that we can do 
that if we just have the will to do it. Brazil does it right 
now. I do not know why we could not.
    It would also require increasing the number of blender 
pumps, pumps that can dispense ethanol blends ranging from 0 to 
85 percent, and would authorize grants to support their 
installation.
    Another important action we have got to take is relief from 
the blend wall. John and I have discussed that a lot in the 
Senate. I want to thank Growth Energy and all of the biofuels 
firms that supported the application to the EPA for the waiver 
to allow E-15 to be used, and, hopefully, that is going to be 
done before the end of this year.
    Actually, to tell you the truth, it could be higher than E-
15. We know that. POET knows that. We all know that, but we 
will settle for E-15. It could be E-20. It could be even as 
high as that without any problems whatsoever, but we will take 
E-15.
    Let me also mention that recently Senator Thune and I sent 
a letter to EPA Administrator Lisa Jackson, asking her to 
refrain from including international indirect land use changes 
in the rulemaking for the Renewable Fuel Standard. While I 
think we can all agree that we need to make sure our expansion 
of biofuels does not come at the expense of our environment or 
climate, we clearly do not have any data or analytic tools to 
link deforestation overseas to biofuels production here in the 
Midwest with any credibility whatsoever.
    So, again, to fulfill the potential of biofuels, we have to 
understand the obstacles and challenges and devise practical 
solutions, and that is why we are here today, to explore the 
current situation, including prospects from promising research 
and trials, market barriers, opportunities, and finally, the 
impact on the farm level and what farmers are doing out there 
at that level.
    So, again, this emerging industry, biofuels, is important 
to all of us in the Nation but really important to Iowa and 
South Dakota, and that is why you see us working very 
collaboratively here to move ahead in this whole area.
    So, with that, I would yield to my good friend and 
colleague, Senator Thune.

 STATEMENT OF HON. JOHN THUNE, U.S. SENATOR FROM THE STATE OF 
                          SOUTH DAKOTA

    Senator Thune. Thank you, Mr. Chairman. I want to thank you 
for holding today's hearing, and I want to thank our panelists 
too for joining us today.
    This is an extremely timely subject, timely hearing. And, 
as the Chairman mentioned, we did work very closely in the last 
Farm Bill on a lot of these issues that relate to the future of 
the biofuels industry, and that is why I think we need to make 
sure that we continue the forward momentum and continue to put 
policies in place that will encourage greater expansion and 
growth in that industry.
    I would say that I think today that our biofuels industry 
is at a crossroads. Traditional ethanol production has greatly 
expanded over the past few years, has already helped to reduce 
our dependence on foreign oil. However, existing ethanol plants 
are facing significant economic challenges, and the future 
widespread commercialization of advanced biofuels remains 
uncertain.
    A lot of this uncertainty can be attributed to what I call 
the Dr. Jekyll and Mr. Hyde national biofuels policy. The 
Federal Government has made biofuel production the cornerstone 
of our energy policy. However, at the same time, we have 
erected barriers that are having a negative impact on the 
profitability of existing ethanol plants and private sector 
investment in future advanced biorefineries.
    Over the past several years, we have invested billions of 
taxpayer dollars in growing our ethanol industry. We have 
enacted a per gallon volume metric excise tax credit. We have 
put in place a tariff that protects that American taxpayers 
from subsidizing foreign biofuel. We have incentivized the 
installation of E-85 pumps, and we have invested hundreds of 
millions in research and development of traditional and 
cellulosic ethanol production.
    In 2007, Congress took the boldest step toward energy 
independence by expanding the Renewable Fuel Standard to 36 
billion gallons by the year 2022. If this goal is achieved, 
almost one of every four gallons of motor fuel sold in the 
United States will come from clean, renewable biofuels. 
However, the Federal Government simultaneously hamstringed the 
future growth of biofuels in the United States. Perhaps the 
most prominent example of these barriers is the issue of 
indirect land use that the Chairman mentioned and the carbon 
footprint of renewable fuel.
    We all know that homegrown renewable fuel made from corn 
and other renewable sources is better for our environment than 
petroleum-based gasoline. However, the Environmental Protection 
Agency recently released draft regulations that would penalize 
domestic ethanol producers for land use decisions that are made 
around the world. Final analysis actually shows that corn-based 
ethanol production would unbelievably result in more carbon 
emissions relative to petroleum-based gasoline. If finalized, 
these regulations would prohibit soy-based biodiesel and 
efficient corn-based ethanol production methods from counting 
toward the new Renewable Fuel Standard.
    Another significant barrier is the overly narrow definition 
of renewable biomass. The new Renewable Fuel Standard requires 
the production of 21 billion gallons of cellulosic ethanol by 
2022. This is a tremendous vote of confidence in the ingenuity 
of our biofuels industry. However, a significant amount of this 
fuel is expected to come from woody biomass.
    Although woody biomass is abundant throughout the United 
States, the expanded RFS places all Federal lands and most of 
the private forestlands off limits. If we do not change this 
definition in the very near future, meeting the 2010, 2011, 
2012 goals of the new RFS will be difficult, if not impossible.
    We also have a 90 percent petroleum mandate within our fuel 
supply due to regulations in the Clear Air Act, only a blend of 
10 percent of ethanol can be used in non flex-fuel vehicles. 
Approval of E-13 or E-15 or, as the Chairman said, we could go 
much higher than that, but at a minimum we need to increase the 
blend wall to E-15 in the near future. That will increase the 
market for ethanol by up to 50 percent virtually overnight. In 
the long run, it will create thousands of jobs in rural America 
and greatly displace imported foreign oil.
    Recently, a group of 54 ethanol producers submitted a 
waiver to the EPA, requesting approval of up to E-15 for use in 
non flex-fuel vehicles. I would like to thank Dr. Stowers and 
POET for their leadership in this waiver. I am hopeful that EPA 
will follow the science that supports this waiver and approve 
an intermediate blend in the near future.
    In essence, Mr. Chairman, we are asking our biofuels 
industry to run a long marathon while hopping on one leg. And, 
breaking a century-old oil monopoly is enough of a challenge. 
We do not need the government adding additional roadblocks.
    Beyond removing the artificial barriers of the ethanol 
industry, Congress must keep moving forward effective and 
targeted biofuels policies. We must invest in the 
infrastructure that will break oil's monopoly on our fuel 
supply.
    We must continue to incentivize the installation of E-85 
and blender pumps. We currently have a little over 1,900 I-85 
pumps in the United States. That is simply not enough. If 
consumers are going to have a real choice for their fuel 
source, we must greatly expand access to E-85 and blender pumps 
across the Nation.
    Additionally, we must encourage our automakers to ramp up 
production of flex-fuel vehicles. Six million flex-fuel 
vehicles may seem like a high number but only until it is 
compared to the over two hundred and forty million vehicles 
that are on the road today.
    Intermediate blends of ethanol will provide much needed 
short-term relief, but the long-term growth of our biofuels 
industry depends on access to more flex-fuel vehicles and 
greater access to E-85.
    In addition to more access at the retail level, the 
government should work with ethanol producers and pipeline 
companies to construct a network of ethanol-dedicated pipelines 
that will reduce the cost of shipping ethanol from the Midwest 
to the East and West Coast. I am proud to be a co-sponsor of 
Senator Harkin's legislation that will expand the existing loan 
guarantee program with the Department of Energy to include loan 
guarantees for ethanol-dedicated pipelines.
    Finally, we must fully implement the energy title of the 
2008 Farm Bill. I want to thank Chairman Harkin and our Ranking 
Member, Senator Chambliss from Georgia, for their leadership 
and dedication to strong energy titles in the 2008 Farm Bill. I 
am particularly pleased to have worked with the leadership of 
the Ag Committee to include and create the Biomass Crop 
Assistance Program which the Chairman mentioned, which provides 
per ton and per acre incentives for collecting biomass and 
growing energy-dedicated crops for cellulosic ethanol 
production. As of July of 2009, the first half of this program 
is now available to our ethanol plants and agriculture 
producers.
    In closing, the combination of removing artificial 
regulatory barriers and enacting innovative policies that 
invest in infrastructure and advance biofuel production will 
lead to a consistent long-term biofuel policy. The result will 
be a growing and sustainable biofuels industry that will create 
jobs in rural communities, expand markets for agriculture and 
forestry biomass and reduce the dangerous dependence that we 
have on foreign oil.
    I also want to thank Chairman Harkin for holding this 
hearing over the August recess, and I want to thank the 
witnesses for joining us today. I look forward to your 
testimony.
    I look forward to working with you, Mr. Chairman, as we 
pursue these policies that are so important to the growth of 
this industry that is critical not only to the Midwest but to 
our entire Country.
    Thank you.
    Chairman Harkin. Thank you very much, Senator Thune.
    Before we start with the panel, I want to thank Bob Rasmus 
who is the Chairman of our Board out here at Western Iowa Tech 
and also our President, Dr. Bob Dunker, who is the President of 
Western Iowa Tech Community College, for hosting us today.
    I always like to introduce our elected people who are here. 
The only one I see is State Representative Roger Wendt who is 
in the State Legislature. Is there anyone I have missed?
    Is there anyone in the South Dakota Legislature here? I do 
not know. Anybody want to run for office?
    [Laughter.]
    Senator Thune. I think Dr. Bob should run for office, do 
you not? Rasmus needs another job.
    Chairman Harkin. All right. Well, thank you again for being 
here.
    We have all your statements. I read them over last night. 
They are very good statements. They will be made a part of the 
record in their entirety.
    We will just start at our left with Mr. Stowers, and we 
will just go down the aisle. I would like to ask if you could 
sum it up.
    Do you have these timers in front of you or do you not? You 
have one there.
    Well, maybe five to 8 minutes, somewhere in there, if you 
could just sum it up, I would sure appreciate it, and then we 
can kind of get into a good exchange that way. So, with that 
then, we will start with you, Dr. Stowers, Vice President for 
Research and Development, POET, Sioux Falls, South Dakota.
    Mr. Stowers, welcome and please proceed.

  STATEMENT OF MARK STOWERS, VICE PRESIDENT FOR RESEARCH AND 
                       DEVELOPMENT, POET

    Mr. Stowers. Chairman Harkin and Senator Thune, thank you 
very much for the opportunity to be here with you. I would like 
to talk to you about our company's efforts in cellulosic 
ethanol, the opportunities and challenges that presents.
    POET, headquartered in Sioux Falls, South Dakota, is the 
largest ethanol producer in the world. Our 21-year-old company 
has built and manages 26 ethanol plants principally in the Corn 
Belt while marketing 1.5 billion gallons and 4 million tons of 
distillers' grains, returning protein back into the animal feed 
diet and to human consumption.
    Our one-time capital investment since 2000 exceeds over a 
billion dollars to the farm economy. And, through its corn 
purchases, corporate and plant operations, we contribute over 
$3 billion annually to rural America. In addition, POET has 
encouraged farmer investment in its operations and now has over 
11,000 farmer investors.
    As a way of some background, according to a recent U.S. 
Department of Commerce International Trade Administration 
study, there is enough cellulosic ethanol available in the 
United States to produce nearly 50 billion gallons. There are 
other studies that even show that a greater amount of 
cellulosic ethanol could be produced.
    At 50 billion gallons, over 1.2 million barrels per day of 
crude oil could be displaced, creating over 54,000 jobs in U.S. 
agriculture. In practical terms, at this level, ethanol 
production in the United States could eliminate all oil 
purchases from OPEC in the Middle East, eliminating $840 
million per day in oil export of dollars to overseas producers. 
That is on a $72 per barrel price.
    Notwithstanding the economic benefit of cellulosic ethanol, 
there are also significant environmental benefits. Gasoline 
produces about two pounds of carbon dioxide equivalent in 
greenhouse gases. By comparison, cellulosic ethanol reduces 
greenhouse gases by a little more than 21 pounds. That is an 85 
percent reduction in the amount of greenhouse gas.
    The impact of ethanol in relieving our dependence on 
foreign oil is profound. I would like to share with you some 
work done by Adam Liska and Richard Perrin at the University of 
Nebraska where they published a well-reasoned study that showed 
the costs associated with foreign oil and the impact on the 
environment.
    In 1997, it was estimated that the U.S. military spent 
between 5 and 15 percent of all U.S. materials consumed and 
used up to 40 percent of the greenhouse gas equivalent 
materials. That resulted in, if you look at the overall 
military impact of greenhouse gas, about 10 percent of all the 
greenhouse emissions could be attributed to the military.
    The estimated expenditures related to Middle East oil 
security alone was about $138 billion annually out of $526 
billion spent on U.S. defense. That did not include the Iraq or 
Afghanistan operations.
    So, if you kind of go through the math, 10 percent of the 
total U.S. greenhouse emissions were due to the regular ongoing 
military activity in the Middle East and only 26 percent of 
those operations were for the protection of oil supplies. The 
total indirect military emissions would be somewhere in the 
neighborhood of 187 teragrams of CO2 equivalent per year.
    What that translates into is about two times the amount of 
what California and EPA estimate as the impact of gasoline on 
CO2 emissions. Put that in comparison, cellulosic ethanol will 
be fivefold less. So we are spending a lot of money as well as 
carbon dioxide equivalents or greenhouse gases to maintain our 
oil supply when we have a domestic source of renewable fuels to 
meet that demand.
    We believe that at this stage the value of cellulosic 
ethanol is profound at the economic, environmental and national 
security level.
    The technology is available for cellulosic ethanol. We have 
developed a strategy to bolt on cellulosic ethanol production 
into our 26 ethanol plants. Actually, our first plant is here 
in Iowa at Emmetsburg. It is currently a 50 million gallon 
corn-to-ethanol plant which will double in capacity to 100 
million and then bolt on 25 million gallons of cellulosic 
ethanol produced from corncobs. In addition, that will produce 
80,000 tons of Dakota Gold corn germ as well as over 100,000 
tons of Dakota Gold HP animal feed product.
    What I would like to do in closing here is walk you through 
three of the key elements that are going to be necessary to 
meeting the cellulosic ethanol challenge.
    The first is with the feedstock. POET has selected corncobs 
as its first cellulosic feedstock. Corncobs offer a significant 
advantage over other feedstocks based on technical, 
environmental and economic reasons. Corncobs are typically left 
on the field as corn stover after the harvest of corn grain. 
Corncobs are rich in carbohydrates, sugars that we can use in 
fermentation. They are heavier than the cornstalks, so we can 
separate them, and they can be removed from the field with 
little environmental impact as they contain little fertilizer 
value. And, last, they could be collected by the same farmers 
that provide grain to our plants in a similar kind of format.
    In 2007 and 2008, POET harvested nearly 13,000 acres of 
corn to supply over 7,000 tons of corncobs in Iowa, South 
Dakota and Texas. We worked with 13 different equipment 
companies, using 2 different cob harvest concepts: a corncob 
mix with the grain and the cobs are collected simultaneously, 
then separated at farm edge, and a towable corn stover 
separator that could be attached to a combine. The stover that 
would be jettisoned out of the combine could be collected and 
separated into corncobs.
    As we move into 2009, we have just completed our planning 
process. As we move into the harvest season, we will be 
harvesting over 25,000 acres of corn in Iowa and South Dakota 
with 15 equipment manufacturers, and we will evaluate 4 
different cob harvest methods.
    This really tees us up for 2012 where we will be harvesting 
over 250,000 tons of cobs, over across approximately 300,000 
acres involving 400 farmers.
    I would like to thank the Chairman and the Committee and 
Senator Thune for their efforts to promote biomass collection. 
These are critically important as we move forward.
    Our investment in cellulosic ethanol technology is another 
critical factor in the success of bringing this technology to 
market. POET has invested over $25 million in the past 2 years 
in cellulosic ethanol technology including an additional $10 
million of capital for a pilot plant that is operating in 
Scotland, South Dakota, where we process 1 to 2 tons 
lignocellulosic biomass per day.
    Some of the highlights that I can share with you is we have 
achieved lab-scale performance in our pilot plant within 30 
days of operating the facility. We have launched 24-7 operation 
of that facility 2 months after commissioning. The process was 
completely debugged in 3 months, and then we began a process of 
optimization that led us to a place where we are about $2.50 
per gallon for the production of cellulosic ethanol.
    I would like to just conclude with one additional 
supporting statement to the remarks made earlier about the 
blend wall. E-15 is a critical factor in the success of 
cellulosic ethanol. The addition of six billion additional 
gallons that would be afforded by moving from E-10 to E-15 is 
critical to our success.
    There is absolutely no critical scientific or technical 
information that would show that E-15 or, for that matter, E-20 
would harm engines. This is a real reasonable request, and we 
are hoping that EPA acts on this request very, very quickly.
    One final statement I would just like to share with the 
Committee is that cellulosic ethanol is not a magical solution. 
It is not another shiny silver ball to detract or distract our 
attention from the critical issue of clean domestic fuel for 
today.
    The technology to achieve cellulosic ethanol is here. It is 
real. We are making it every day as we speak.
    We need market access to ensure that cellulosic ethanol 
becomes a reality. It is time to break big oil's monopoly on 
gasoline as our only liquid transportation fuel.
    We can make a difference in the economy, the environment 
and national security by supporting ready to go right now 
domestic, clean-burning, agriculture-based ethanol.
    Thank you very much for the opportunity to be here today.
    [The prepared statement of Mr. Stowers can be found on page 
94 in the appendix.]
    Chairman Harkin. Thank you very much, Dr. Stowers.
    Now we will go to Mr. Bill Couser, Couser Cattle Company in 
Nevada--not Nevada--Nevada, Iowa.
    Bill, welcome to the Committee.

        STATEMENT OF BILL COUSER, COUSER CATTLE COMPANY

    Mr. Couser. Well, thank you, Mr. Chairman Harkin and 
Senator Thune. It is a real privilege for a farmer and a cattle 
feeder, I guess, to sit in a group like this and be able to 
discuss some of the issues that present us today.
    A little bit of my background, we do live in Nevada. My 
wife and I have a feedlot there. We finish about 5,000 head of 
cattle a year, and we are very involved in the biomasses that 
come off of some of these fields just for the simple fact that 
we have need them for bedding and feed. When you look at the 
rest of our operation, we are very involved in seed corn with 
Monsanto, commercial corn and all the other seed crops that go 
on with some hay--so, a little bit of that background.
    When we first started this, started farming, the fellow who 
had my farm before was an open door policy, Elmer Paul, to Iowa 
State students come out and practice and learn real knowledge 
and hands-on experience. So we have left that policy on right 
now, and today we have about 15 different projects going on 
with different kids. Whether it is the feedlot, whether it is 
the ethanol side of it, whether it is the environmental side or 
whether it is the farming practices, it is open door. If they 
want to try a project, we try to assist them any way possible.
    So, through that, we have been very involved with the 
collection of biomasses that have happened over the last few 
years. And, working with John Deere and Vermeer and a few of 
those companies, we are trying to figure out as a farmer-
feeder, how can we utilize those crops the best.
    The transportation issues, the gathering issues, the time 
window that we have to collect those products in the last few 
years has been very narrow. We have had two to 3 weeks to 
gather them in a timely fashion to where they will actually 
keep for the rest of the season.
    I think one of the issues there we have is storage. I know 
when we look at 300-bushel corn in the future. You know I 
started farming in 1977. I think I had a 125-bushel to the 
acre--well, in 1978. I had a drought in 1977, but in 1978 we 
had about a 125-bushel to the acre average. This year, our 
farms are going to make 250 plus.
    Chairman Harkin. That is amazing.
    Mr. Couser. What are we going to do with 300-bushel corn in 
the future? And, I know this is going to happen because working 
very closely with Monsanto in seed production we have got it 
all here. When we look at what has happened there, just the 
increase in bushels that we need to grind, they are already 
there. We have already manufactured them. So this food to fuel 
issue really is a no-brainer to us that are out in the country.
    When you address the biomasses or the cellulose that comes 
off of these acres, last year, we went from actually a project 
pilot with Monsanto. We went from 30-inch corn to 20-inch corn 
and raised the populations. We have seen an increase in stover 
that we take off of those farms from 20 to 40 percent in volume 
that we can get off of these fields.
    I guess I am a little disappointed when an individual in 
the White House mentioned switchgrass 1 day. We can do it all 
as Iowa corn farmers here. It is all right here. We can have 
the starch ethanol, and we can have the cellulose ethanol 
together.
    I see some interesting challenges in the future when it 
comes to the stover that we collect and just the education and 
the mindset of the farmer. Right now today, when we go to the 
field, you do not want to let that grain buggy get in front of 
anything because we have to get the corn out. So we have got an 
education process.
    I understand the importance of the products that are left 
in the field for food and bedding and the importance of them. 
But the question I go back to ask the consumer of tomorrow is 
in what form do you want that product? Do you want it in a 
pellet? Do you want it in a cube? Do you want it in a corncob 
or do you want it in a corn stock? Because I really feel that 
if we can figure out the most efficient way to get this out of 
the field, in a timely fashion, it is going to be imperative to 
new business that is coming down the road.
    I think we will be working with Green Products out of Green 
Mountain, Iowa. We had them come down last fall when we were 
doing some experiment with John Deere, and they made a comment 
to me that you know if we can figure out what the end consumer 
needs as far as what it looks like, the new business to come 
around the corner is incredible.
    Cellulose ethanol is just a part of it, but we look at what 
can happen in the future. And, when you look at job creation 
through that, it is just amazing. So I am very excited, working 
with these different companies, so is POET, when you look at 
what it can do for the livestock industry, the ethanol industry 
and the new industries to come down the road.
    Three-hundred bushel corn is not a challenge to us as 
farmers. We are very good at what we do, and I am bragging as 
an American farmer her, not as Couser Cattle Company. We are 
very good at what we do. We are environmentally sound when we 
look at some of those issues coming down the road.
    Senator Harkin, I would like to thank you for sending out 
one of your staffers 2 weeks ago. With Iowa Renewable Fuels, we 
put on a tour and Carla was able to go around with us. I think 
we were able to show people from Washington exactly what 
happens and exactly how a community and a family and a country 
can live together in Nevada, Iowa. There are all these little 
communities all over our State, and that is why we are so rich 
here.
    So, when you look at what is going to happen with 300- 
bushel corn, we are all talking about expenses. And, the farmer 
today, we are always trying to cut back on expenses.
    We are very heavily involved with manure management plans 
in our feedlot. We are very heavily involved with a new project 
called GreenSeeker that is an instrument that we put on our 
applicators to go out and apply nitrogen, and it can read that 
leaf tissue and tell exactly what it needs.
    We are very interested in Lincolnway Energy because it is a 
coal-fired ethanol plant that we can, with our fluidized beds, 
we can use this source of cellulose for energy. And, what is it 
going to take to bolt on to at least try it and get started?
    When you look at the ethanol plants and the biodiesel 
plants that are all around Iowa here, they are very 
strategically located. We do not need any more today. As he 
stated, we can bolt this on to the side. We do not need to 
build any more.
    I think we just need the help to educate the farmer. I see 
a huge challenge there on what is the value of that product and 
how do you stay out of the way of the chisel plow behind the 
combine because a farmer has basically two goals when it comes 
to harvest: get the corn out and get it black or get it tilled 
under.
    I guess in closing I would like to say we all remember 
where we were at 9/11, and we were in the middle of a seedfield 
picking seedcorn when the news came over the radio. My dad 
walked up to me, and he is one of the men from the Great 
Generation. He opened the door of the cab, and he said: Son, 
you are going to be asked to do great things now. You are going 
to be asked to do things that you have never been asked to 
before because your Country is going to ask it.
    We stepped up to the plate. The families, the communities, 
we built the ethanol plants. We have raised local investment, 
and we are very proud of what has happened. When I look up and 
down this table, that is the reason this Country is so strong, 
because of our families and our communities.
    I guess when you look at what is going on, whether it is 
the RFS2 debate, the E-15, cellulosic feedstock, I just want 
you to know that we as farmers, we are out there doing our job. 
We are protecting the environment. We are raising livestock in 
a very safe manner. We are helping feed the world.
    You know we have strong communities. We are going to have a 
strong Country. So I just want to give you that promise from 
the farmers.
    Thank you to both of you.
    [The prepared statement of Mr. Couser can be found on page 
49 in the appendix.]
    Chairman Harkin. Mr. Couser, thank you very much for a very 
poignant and timely statement. Thank you. I have some things I 
want to ask you about when we get into our questions and 
discussion.
    Now we go to Ms. Anna Rath, Director of Business 
Development for Ceres, Thousand Oaks, California.

STATEMENT OF ANNA RATH, DIRECTOR OF BUSINESS DEVELOPMENT, CERES

    Ms. Rath. Thank you, Mr. Chairman and Senator Thune.
    I am here representing Ceres. We worked very closely with 
this Committee in the development of 2008 Farm Bill and look 
forward to continuing to work with you on the Climate Bill and 
other future endeavors.
    Ceres is a leading, dedicated energy crop seed company. We 
develop and market crops such as switchgrass and high-biomass 
sorghum for biofuels and biopower under our Blade Energy Crop 
brand.
    Our 2008 field trials were very successful. We had over 
three dozen trials nationwide and demonstrated that academics 
and policymakers have often been too conservative when it comes 
to forecasting grower economics and bioenergy economics and 
perhaps too aggressive when estimating a land use change that 
could result from biofuels and biopower.
    Our average across all of our field trials for our Blade 
switchgrass varieties were 10 tons per acre, and our yields for 
high-biomass sorghum today are roughly 12 to 15 tons per acre, 
depending on the location.
    As the Committee knows, higher yields per acre have a 
significant impact on farm and conversion economics and can 
dramatically reduce harvest and delivery costs per ton, the 
largest single expense in providing raw materials to bioenergy 
facilities. Higher yields mean greater above and below ground 
carbon sequestration as well. So similar benefits would be seen 
in calculating greenhouse gas reduction by displacing petroleum 
with biofuels made from dedicated energy crops.
    We all understand the role of biofuels is threefold: First, 
to improve U.S. energy security as the demand for 
transportation fuels worldwide continues to increase; second, 
to reduce greenhouse gas emission; and, third, to provide 
agricultural producers new and expanded revenue opportunities.
    With this in mind, I would suggest the Committee should 
have two objectives in mind for the continued development of 
the U.S. biofuels industry in the short term. The first is 
continuing to improve the starch ethanol industry's 
environmental profile and amount of fossil fuel displacement, 
and the second is facilitating the commercial scale-up of 
cellulosic and advanced biofuels.
    To bring both of these two together, I am going to talk for 
a little bit about repowering. A simple, relatively low cost 
opportunity using available technology exists today to help 
starch ethanol facilities further improve their environmental 
profile and increase their displacement of fossil fuels. This 
is the opportunity to transition from natural gas or coal to 
biomass as their onsite source of heat and power. Existing coal 
boilers can be used as is or can be retrofitted or replaced. 
Small-scale gasifiers can be used to create a biomass-based syn 
gas that will work in natural gas boilers. Several facilities 
are either already using or have at least experimented with use 
of biomass in their boilers.
    The combination of the Repowering Assistance Program and 
the Biomass Crop Assistance Program, both included in the Food, 
Conservation and Energy Act of 2008, provide good support for 
this transition.
    Adoption of biomass as a heat and power source by the 
starch ethanol industry will not only provide benefits to the 
starch ethanol but will also provide benefits in helping the 
commercial scale-up of the cellulosic biofuels industry.
    Two critical elements of the cellulosic biofuels industry 
achieving scale are growers gaining experience with growing 
dedicated energy crops and facilities gaining experience 
dealing with the logistics of biomass harvest, transport and 
storage at large scale. Often, these elements of successful 
cellulosic scale-up are overlooked relative to the need to 
generate large-scale facilities.
    Use of dedicated energy crops for repowering would provide 
the necessary market for agricultural producers to begin 
growing dedicated energy crops. The experience gained with 
biomass handling by the companies using this biomass would 
provide useful knowledge and serve as a stepping stone to 
commercial-scale handling of biomass for cellulosic biofuels 
production.
    So what I would like to do now is share with you just a few 
policy priorities that we believe will help support these 
objectives.
    The first is expanded funding of the Repowering Assistance 
Program. When used in conjunction with the BCAP, the Repowering 
Assistance Program provides an attractive opportunity for 
starch-to-ethanol facilities to transition from coal and 
natural gas to biomass as their source of heat and power. Given 
the benefits of establishing a market for dedicated energy 
markets, the program should be expanded to accommodate this 
increasing demand.
    Second is planning appropriately for the funding 
requirements of BCAP. Because the Repowering Assistance Program 
creates an immediate market opportunity for biomass, it could 
lead to considerable early market demand for the BCAP program. 
We encourage the Committee to work with the USDA and the Office 
of Management and Budget on such matters to ensure adequate 
funding for 2010 success. Ceres will provide assistance 
wherever possible.
    The third priority would be extension of the BCAP matching 
payments for collection, harvest, transport and storage. As 
USDA implements this important BCAP provision, Congress should 
help ensure that facilities have the right incentives to make 
the transition from coal and natural gas to biomass. It is 
important that 2-year time line on matching payments for 
collection, harvest, transport and storage costs under BCAP be 
extended.
    The fourth is inclusion of high-biomass sorghums under 
BCAP. High-biomass sorghums are the only one of the primary 
dedicated energy crops that is an annual and that achieves a 
full yield in its first year. Having an annual dedicated energy 
crop will be critical for allowing rotation with other crops 
and for enabling immediate implementation of biomass as an 
alternative to coal and natural gas. It is, therefore, 
important that high-biomass sorghums are encompassed by BCAP.
    Ceres is working with the USDA to ensure that such 
sorghums, importantly, those designed for production south of 
Interstate 20, are not trapped in a no man's land between Title 
I crops and BCAP. We will keep the Committee advised of this 
work.
    Next would be limitation on BCAP establishment assistance. 
So, while we are supportive of rapid implementation of the 
establishment assistance that is due to be in place in time for 
the 2010 growing season, we would suggest caution regarding the 
magnitude of support that would be offered on a per acre basis. 
If the United States wishes to encourage energy crop production 
on the largest number of acres possible, it may want to 
carefully consider the high establishment costs associated with 
vegetatively propagated crops and avoid the experiences of the 
United Kingdom wherein they may have actually hampered biofuels 
expansion by dedicating too many resources to support the 
establishment of more costly crops that would not be able to 
stand on their own without the support program.
    Finally would be carbon offsets for below ground biomass. 
Biomass and, in particular, dedicated energy crops are the only 
source of renewable transportation fuels or power that has the 
potential to be not just carbon-neutral but, in fact, carbon-
negative. If farmers are to profit in a carbon-constrained 
world, we need to have a good handle on the amount of carbon 
sequestration that is provided by perennial dedicated energy 
crops root-based carbon sequestration. We would encourage the 
Committee to encourage the USDA to pursue public-private 
research to measure how much carbon is sequestered in the roots 
of dedicated energy crops and how this accumulates over time.
    Together, we believe these policy priorities will help 
achieve the dual objectives of continuing to improve the 
environmental profile and fossil fuel displacement of the 
starch ethanol industry and facilitating the commercial scale-
up of cellulosic and advanced biofuels.
    Thank you again for providing me with the opportunity to 
discuss our efforts and policy priorities. We look forward to 
working with you to help continue the rapid and successful 
development of these industries. I look forward to your 
questions.
    [The prepared statement of Ms. Rath can be found on page 79 
in the appendix.]
    Chairman Harkin. Thank you, Ms. Rath. I just learned 
something I never knew before, the difference between seedcrop 
propagated and vegetatively propagated, and I still do not know 
if I understand it.
    Ms. Rath. I can talk more about it.
    Chairman Harkin. We will get into that.
    Mr. Steve Corcoran, Chief Executive Officer, KL Energy 
Corporation, Rapid City, South Dakota, thank you for coming 
over.

STATEMENT OF STEVE CORCORAN, CHIEF EXECUTIVE OFFICER, KL ENERGY 
                          CORPORATION

    Mr. Corcoran. Thank you. Mr. Chairman, Senator Thune, thank 
you for the opportunity to provide testimony on the expanding 
role of biofuels in America.
    I am Steve Corcoran, the President and CEO of KL Energy 
Corporation, a biofuels energy company located in Rapid City, 
South Dakota. I am accompanied today by Dave Litzen, our Chief 
Technical Officer and Vice President of Engineering.
    Over the last several years, KL Energy has transformed from 
a first generation biofuels company to an organization which 
today is focused on providing second generation technology for 
the conversion of lignocellulosic feedstock to ethanol. Our 
experience from deploying and using first generation biofuels 
is being transferred to support and guide our second generation 
biofuels development. While there are several technological 
pathways to second generation biofuels, KL Energy has focused 
its research and development on a unique thermal mechanical 
pretreatment process to make ethanol from biomass feedstock.
    The use of wood waste, biomass for transportation fuels and 
power is increasingly being viewed as an opportunity to enhance 
energy security, provide environmental benefits and increase 
economic development particularly in the rural areas. Beyond 
the current accepted benefits of biomass-derived ethanol, our 
Nation's car manufacturers and fuel suppliers have a unique 
opportunity to leverage the elevated octane that ethanol in 
gasoline provides. The current energy policy identifies 
specific targets for increasing automotive fuel economy by 2020 
and represents a great challenge to our car manufacturers.
    KL energy would also encourage that the industry take 
advantage of the increased octane of higher ethanol blends. The 
octane rating of an automotive fuel is frequently misunderstood 
or misapplied by the general public, but, in general, the 
higher fuel octane rating enables higher energy compression, 
resulting in improved mileage efficiency without losing power. 
We need only to look at the engines used in the fuel design 
laboratories of the racing industry to prove that point.
    Since 2001, KL Energy Corporation made significant 
investments in research and development predominantly from 
private sources and self-funded efforts. Beginning at the 
laboratory and pilot scale, our R&D efforts have been focused 
on pretreatment. The purpose of pretreatment is to alter the 
structure of the biomass so that cellulose, which is entrapped 
in the lignin and hemicellulose matrix, can become more 
amenable to the enzymatic process.
    Some of the desired characteristics of our pretreatment are 
enabling the high conversion of all biomass carbohydrates to 
ethanol and minimizing the sugar degradation during the 
pretreatment, all in an environmentally friendly and cost-
effective manner. Our pretreatment is effective on soft woods, 
hard woods and other herbaceous forms of biomass because the 
process retains these characteristics.
    The research at the laboratory and pilot level resulted in 
the construction of our commercial demonstration facility in 
2007. Capable of commercial operation using wood waste from the 
Black Hills National Forest to produce ethanol, the facility, 
Western Biomass Energy, is located in Upton, Wyoming and 
includes pretreatment, hydrolysis, fermentation, distillation 
and co-product recovery stages, allowing us to evaluate our 
process for making ethanol at scale and validate the cost and 
performance assumptions to prepare for the deployment of 
commercial plants.
    Our business model for the commercialization of our 
technology is referred to as Community Energy Centers which 
will produce cellulosic ethanol and a co-product called lignin. 
Our model focuses on the economic development of our rural 
economy and is guided by three basic principles:
    First, to understand the locally available biomass 
feedstock. The economic competitiveness of cellulosic ethanol 
production is highly dependent on feedstock cost. Consequently, 
as the deployment of Energy Centers approaches, feedstock cost 
and availability are the driving factors that influence 
locations. KL Energy believes that providing flexible plant 
designs on the basis of feedstock availability, rather than 
ethanol production, will result in low-cost niche feedstock 
opportunities, minimizing the ethanol production cost.
    The recent provisions of the BCAP program, which provides 
matching payments for the collection, harvest, storage and 
transportation will encourage sustainable feedstock 
availability for the ethanol production.
    Second, to work with local economic developers. We want to 
keep the footprint of our operation small and in close 
proximity to the feedstock source. Our modular, decentralized 
design also offers better access to the synergistic 
opportunities such as locating with wood pellet production 
plants, existing cogeneration facilities and sawmills. The 
small Energy Center concept will create local jobs and energy 
alternatives in many communities that might not normally have 
that opportunity.
    Third, to optimize and leverage the value of the lignin co-
product. Our technology has the ability to take lignin, which 
is the outer layer that binds and protects the biomass fiber, 
and creates and a pellet. Lignin pellets yield up to 20 percent 
higher energy content over conventional wood pellets since most 
of the lower energy cellulosic sugars were removed during the 
ethanol process. As a natural consequence of KL Energy's 
process, the lignin co-product can be compressed into a highly 
durable pellet having a bulk density that is 20 percent higher 
than a typical wood pellet. Consistent with recent EPA studies, 
KL Energy's process will achieve at least 85 percent reduction 
in greenhouse gas emissions as compared with gasoline.
    In utilizing waste generated continuously by the forest 
products industry and the forest itself, we see the impact of 
strategically placed small Energy Centers as a win for locally 
produced, locally consumed energy and a win for the forest 
management by providing a destination for slash piles that are 
currently being burned or simply left to rot. The positive 
impact of turning forest waste into usable fuels and other 
products benefit the environment by reducing or eliminating the 
prescribed burning of the waste, eliminating the generation of 
particulate matters during the burn and the cost of soil 
remediation after the burn.
    The current energy policy restricts the use of waste from 
public lands, a restriction that must be reversed to help 
facilitate the implementation of all the positive benefits of a 
biomass utilization. If the government continues to 
aggressively pursue second generation biofuels research and 
development, enact investor-friendly tax incentives for the 
production and blending and enable the use of waste material 
from public land, the prospects for achieving sustainable 
biofuels markets will become a reality. Cellulosic ethanol 
represents a new way to pursue goals and increase energy 
security and economic development, especially for the rural 
areas, while protecting the quality of our environment.
    Mr. Chairman, thank you for the opportunity.
    [The prepared statement of Mr. Corcoran can be found on 
page 42 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Corcoran. The 
question is about fermentation.
    Now, Mr. John Sheehan, Scientific Program Coordinator for 
Biofuels and the Global Environment, Institute on the 
Environment, University of Minnesota, Mr. Sheehan, welcome.

 STATEMENT OF JOHN SHEEHAN, SCIENTIFIC PROGRAM COORDINATOR FOR 
     BIOFUELS AND THE GLOBAL ENVIRONMENT, INSTITUTE ON THE 
              ENVIRONMENT, UNIVERSITY OF MINNESOTA

    Mr. Sheehan. Chairman Harkin, Senator Thune, thank you very 
much for having me here.
    I am going to attempt to talk from my PowerPoint and stay 
within my time limit here. So let me jump right in.
    I was asked to talk about the promise of advanced biofuels 
technology, but in my subtitle for my talk I want to make a 
point of saying this is not just about advances in the 
technology for making biofuels. It is also about ongoing 
advances in agriculture, not unlike what Anna talked about in 
terms of breeding new energy crops for farmers, not unlike the 
kind of astoundingly high yield improvements that we heard 
about that are possible just for corn, and it is really the 
combination of those advances that are going to lead us to real 
sustainable production of fuel down the road and not just one 
or the other.
    A lot of what I am talking about here actually was just 
recently published. They devoted an entire issue of the journal 
Biofuels, Bioprocessing to a series of studies that I was a 
part of with folks from Michigan State, Dartmouth College, 
Princeton University, the Natural Resources Defense Council, 
who, by the way, were a major part of making this study happen 
and for whom I think this was a great learning experience 
because I think this was an opportunity for the NRDC and other 
environmental groups to learn that there are some real positive 
elements to what agriculture can do in the role of not only 
producing fuels like ethanol but also being positive 
contributors to environmental sustainability. If there was 
actually an outcome from that study that I think was the most 
important, that might have been it.
    So, advanced technology, I am helped a lot by some of the 
comments that have already been made here about the technology 
of producing fuels from biomass. I generally talk about these 
technologies in two different flavors.
    One is biological, biochemical processing, otherwise known 
as fermentation. Take something like starch from corn or 
cellulose from a plant, break it down to its sugar which is 
something that you can feed to a yeast or a bacterium, and they 
can convert it into ethanol.
    Actually, given the explosion in biotechnology that is 
going on today, there is an awful lot more these bugs can do 
than just make ethanol. If you want them to, they will make a 
renewable gasoline. They will make a renewable diesel for you. 
These are longer-term technologies, but they are options that 
are being considered down the road.
    Then there is thermo-chemical processing. Typically, what 
people are talking about is using a lot of high pressure, high 
temperature conditions, heat and pressure to bust biomass apart 
into really small chemical compounds that can then be converted 
into virtually anything you want, anything from ethanol to a 
diesel or a gasoline substitute or something that is 
indistinguishable from gasoline or diesel fuel.
    So those are sort of the two big technology camps. One of 
my frustrations, and this is a running theme for my testimony 
here, is that there are too many opposing camps, whether 
technologists or environmentalists or for the farm community or 
others who are battling with each other about who has the right 
or the wrong answer. The thermo-chemical technologists, who 
have things like gasification technology, are just as important 
to the fermentation folks as part of the solution. In fact, the 
ultimate advanced technology is going to be the run that brings 
those two pieces of technology together to give us the 
greatest, most efficient use of the biomass that we are trying 
to make.
    In fact, that fractionation step that is in the center 
block here of this integrated scheme I am showing is the kind 
of thing like the pretreatment technology we have been hearing 
about, where we can get the sugars away to do what the bugs 
like to do with them and we can take the rest of it, the lignin 
and the other things that bugs cannot eat, and use them for 
heat power and fuels themselves. That is what makes ultimately 
a really effective, sustainable technology.
    Again, new versus old technology, I wish we could throw 
this away. What we are really seeing is that the existing corn 
ethanol industry is going to be the industry that begins to 
adapt a lot of these new technologies. So it is not about old 
technology or old industries being replaced by a new industry.
    In this case, touching a little bit on what Anna said, and 
we did not talk about this in advance, in Minnesota at the 
Chippewa Valley Ethanol Facility, they have put in a 
demonstration scale gasifier where they are taking all sorts of 
biomass and most recently collecting corncobs and gasifying it 
for heat and power and replacing 25 percent of their natural 
gas demand with that biomass. What are they doing besides 
saving the cost of natural gas? They are reducing their carbon 
footprint. So what is viewed as a typical corn ethanol plant is 
not a typical corn ethanol plant, and I do not think that there 
are a lot of those out there.
    Continuing along those lines, the POET facility in 
Emmetsburg is a case where both cellulosic and corn ethanol 
technology are being put together, and that is the kind of 
thing that is going to succeed, building on what is 
effectively--I do not know--it must be somewhere between ten 
and twenty billion dollars in invested and in-the-ground 
capital in the existing corn ethanol industry.
    Economics, I am not going to spend a whole lot of time here 
except to say that when you look at where this technology can 
get to, between prices of say $75 and $125 a barrel oil, there 
is a huge amount of room for all sorts of thermal or biological 
or combined thermal and biological processes to compete with 
oil for fuel production.
    I want to point out one of the problems you will often see 
in the economics that are developed by DOE and other places is 
one of the ways they sort of get themselves down to a low-cost 
fuel is to assume a low-cost feedstock.
    Well, guess what, folks? That is the profit margin of a 
farmer you are talking about. So, at typical numbers of $35, 
$40 a ton, which you will quite often see as the basis for 
projecting costs of a technology, you will see farmers perhaps 
getting $175 to $300 per acre depending on the yield of the 
biomass they are collecting. And, after transport costs, that 
is not enough to convince them to become a biomass producer 
rather than some other crop producer.
    What we have seen is that even up to prices of $100 a ton, 
where the revenue to the farmer I think becomes serious, you 
can have cost-effective technology.
    The numbers are like the numbers we have already heard 
about. For 14 different permutations of biological and thermal 
processing that we looked at, all of them have an extremely 
high capability for reducing carbon emissions and for reducing 
dependence on petroleum.
    I want to touch very briefly, because my clock is running 
out, on the issue of indirect land use change which is 
something we can come back to. I have done a little bit of 
simple modeling which actually suggests that even if all we do 
as a globe, as a planet, is to continue to improve agriculture 
at the rate that we have been doing it over the last 40 or 50 
years, we could be coming to a place where we could feed our 
planet on less land. Well, if we are feeding our planet on less 
land, we are not causing land clearing in the rainforests of 
Brazil, and that changes the so-called indirect land use and 
food versus fuel issue into a completely different matter.
    I am actually going to stop here.
    I am very glad to hear Senator Harkin talk about the policy 
issues that are related all along the supply chain because 
there is a lot of chicken and egg problems going on now with 
the development of this industry.
    I have done modeling of looking at what it takes to make 
that whole supply chain grow into a successful industry, and 
not to get into the details, but among the findings we have 
seen is at the kind of oil prices we are seeing and have seen 
in the last year or two, certainly by 2050, probably even 
without policy help, there is a potential for somewhere 
between--let me get my numbers right--100 billion and 200 
billion gallons, that is with a B, production of cellulosic and 
corn ethanol down the road. But that might not be until 2050. 
What we need are policies that make that happen faster today.
    So, with that, I will stop.
    [The prepared statement of Mr. Sheehan can be found on page 
85 in the appendix.]
    Chairman Harkin. Very interesting and thought provoking. 
Thank you very much.
    Now we will finish off with Mr. Ed Olthoff, Cedar Falls 
Utilities, Cedar Falls, Iowa, who is going to talk about 
different processes that they are using.

         STATEMENT OF ED OLTHOFF, CEDAR FALLS UTILITIES

    Mr. Olthoff. Thank you, Mr. Chairman and Senator Thune.
    My name is Edward Olthoff, and I am representing Cedar 
Falls Utilities. It is my privilege to share with this 
Committee the ideas proposed and experiences gained in our 
Cedar Falls Utilities' biofuel project.
    Cedar Falls Utilities, or CFU, is a municipal utility 
located in Cedar Falls, Iowa. CFU provides electricity and 
three other utility services to the city of Cedar Falls. The 
electric utility owns coal-fired baseload generation at three 
remote locations, backup coal-fired generation at Streeter 
Station in Cedar Falls and emergency natural gas-fired 
generation at West 27th Street in Cedar Falls.
    The electric utility also owns shares of two existing wind 
farms and is a partner in developing a new wind farm project. 
CFU anticipates generating 15 to 20 percent of its electric 
needs with wind in 5 years.
    CFU is also investigating the potential to generate 
baseload electricity from biofuels at Streeter Station in Cedar 
Falls. Streeter Station has two electric generation units which 
have been operating 3,000 to 5,000 hours annually. Unit 6 is a 
stoker coal-fired boiler. Unit 7 is a pulverized coal-fired 
boiler.
    Unit 6 was designed to burn stoker coal, but the stoker has 
the flexibility to handle most solid fuels. In 2004, CFU began 
short duration biofuel test burns in Unit 6. In the next 2 
years, CFU was able to complete a series of test burns using 
five potential biomass feedstocks densified into two solid fuel 
configurations: pellets and cubes. Fuels for these test burns 
included corncob pellets, hardwood pellets, cornstalk pellets, 
corn stock cubes, switchgrass cubes and oat hull pellets.
    These short test burns demonstrated technical feasibility 
of the project. Future plans for longer duration test burns and 
continuous generation point to several significant challenges. 
All of the economic modeling shows biofuel-based electric 
generation to be significantly more costly than coal-fired 
generation.
    Existing policies and proposed policies have potential to 
equalize the cost just as policy has encouraged the development 
of wind energy. These policies include tax credits to benefit 
municipal utilities, renewable energy production incentive 
funding, Department of Agriculture policies, Department of 
Energy grants, green credits and carbon taxes. CFU has 
investigated the impact of these policies on the cost of 
biofuel and has advocated policy changes that would equalize 
the costs.
    Another significant challenge is the development of a 
supply chain for the biofuel. Electric production consumes 
large quantities of these biomass fuels. Preliminary 
calculations indicate the need for 200 tons of biofuel daily to 
operate Unit 6 at half of its rated capacity. Until fuel 
production capacities are increased, there is not sufficient 
supply to perform extended test burns, much less continuous 
generation.
    Links in the supply chain are the producers of the raw 
material, a transportation infrastructure to move the material 
from production sites to a processing facility, space to store 
the raw material, a processing facility to densify the material 
to the specifications needed for electric generation and a 
transportation system to move the densified material from the 
production site to Streeter Station. These links need to be 
developed or strengthened before a robust supply chain can 
emerge with a sustainable production capacity needed for 
continuous generation of biofuel-based electricity at Streeter 
Station.
    A third significant unknown is the effect of the biofuel 
combustion on the boiler. A thorough study of the performance 
of the boiler during biofuel combustion is needed. Impacts of 
mineral deposition and mechanical abrasion on the boiler tubes 
from biofuel combustion must be determined. The simplest way to 
determine these effects is to perform extended test burns, 
monitor the boiler during the burn and inspect the boiler after 
the burn.
    CFU has sought assistance for this project at the local, 
State and Federal levels. A Congressionally directed grant is 
now pending to advance the project.
    Three test burns are planned using three new feedstock and 
densification combinations. These are mixed native prairie 
grasses in a cube, mixed agriculture residue in a pellet and 
sugar cane bagasse in a bripell configuration.
    Following completion of the three short test burns, one 
test burn of a 10-day duration is planned. The choice of fuel 
for the 10-day burn will be guided by our assessment of the 
best densification configuration, the most available feedstock 
and the capacity of a producer to manufacture the quantity of 
densified material needed for the test.
    Additional long duration test burns are needed before any 
long-term commitments or contracts can be made. Further advance 
of the project will be dependent on development of a supply 
chain of sufficient quantity to initially support long duration 
test burns and, ultimately, continuous generation at a cost 
equivalent to the fossil fuels.
    Capital is needed to develop the supply chain required for 
sustainable production of the biofuel supply and dedicated 
energy crops grown on conservation reserve land will be needed 
to augment and satisfy the need for additional raw material. 
Public policy or funding favorable to biofuel-based electric 
generation will be critical to continue the development of this 
project.
    That is all I have. Thank you for the opportunity to 
present my ideas.
    [The prepared statement of Mr. Olthoff can be found on page 
53 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Olthoff, and 
thank you all for stimulating statements and also the written 
prepared statements you had.
    I think what I will do, John, is I will just start. I will 
take five or 6 minutes, you take five or 6 minutes and then we 
will just kind of open it up for a general free for all.
    Senator Thune. Sounds good.
    Chairman Harkin. OK. I think, first, I have a lot of things 
I want to talk about here. Productions, though you talked about 
that, I had a hearing about a year ago in Omaha, and Pioneer--I 
can say that, can I not, Pioneer?
    Senator Thune. Quietly.
    Chairman Harkin. Quietly, OK. One of your competitors there 
said that they anticipated a 40 percent increase--no, I will 
correct my words. They are going to have a 40 percent increase 
in yields with both corn and soybeans within a decade.
    I asked the question of the CEO at the time. I said, well, 
is this sort of what you are thinking about?
    He said, no, this is based on results already confirmed in 
their experimental plots.
    So, just think about that, in a decade, buttressing what 
you said, a 40 percent increase.
    Mr. Couser. Can I add one thing to that, Senator.
    Chairman Harkin. Yes, yes.
    Mr. Couser. We pick a lot of the small seed plots around 
the community there too for the research plots. Last year, we 
picked one seed plot that every stalk had 11 shanks on it. Five 
out of those eleven shanks had kernels on them. Can you imagine 
what happens if we get two big ears?
    Chairman Harkin. Instead of one per stalk, you mean get 
two. Well, we have 20 now on some stalks, but they are always 
small.
    Mr. Couser. But two big ears, it is coming very fast.
    Chairman Harkin. Will stalks stand? You have to have more 
cellulose.
    Mr. Couser. Well, that is one of the problems we have in 
the seed business is developing the machinery just to harvest 
the seed corn because of the size of the stalk and some of 
those new hybrids are so wide and the ear is small.
    Chairman Harkin. I heard it in a different context, and 
that was if you just added--I forget what it was--four kernels 
per ear, you would increase your production per acre by a lot. 
I forget the figures, if you just put a few more kernels on an 
ear, and you know ears are getting bigger.
    Mr. Couser. If we could just educate every farmer in the 
United States how to set a combine correctly, we would not have 
a food problem here.
    Chairman Harkin. Thanks. I am not going there.
    Mr. Couser. I said that. You did not.
    [Laughter.]
    Chairman Harkin. Dangerous, dangerous territory for a 
politician.
    But the other thing is, and I want to pursue this a little 
bit because we just have got to put to rest this whole thing 
about food or fuel.
    The other thing that is happening is through genetics at 
Monsanto and Pioneer and others, and this is being done in 
universities also, that they now are finding out how to grow 
corn in areas where before they could not. For example, right 
now, we know that there are certain plants that use 
photosynthesis, just like corn, but utilize saltwater. They 
have the genetic capability of separating the salt out and 
taking the water out, and they can grow fruit.
    The most prominent ones being coconuts, of course. Coconuts 
grow in seawater. We know about other plants too. I can get the 
names of them.
    So they are now looking at changing the structure of corn 
using genetics. If you can find the gene that does that, and 
you can put that in corn, you can now start growing corn in 
brackish water areas. Places they have never grown corn before 
in the world can now start growing corn.
    This is not pie in the sky. This is research that is 
happening right now.
    So there are a lot of things underway. That is why when 
they say, well, if you are going to go to fuel, then you are 
going to cut down forests and stuff, that is nonsense. That is 
just nonsense. The way to keep a forest from being cut down is 
through land use policies that are international in scope.
    Well, I did not mean to get off on that, but some of the 
things you said just brought that to my attention, and I think 
that is just something that we have really got to pay attention 
to because we are getting sidetracked on this. The indirect 
land use issue is at the heart of that, that whole thing of 
food or fuel.
    Mr. Corcoran, you talked about removing CO2 in your 
testimony. Let me see if I can find that right here. Oh, yes. 
By applying the fermentation process to convert biomass, the 
potential exists to actually remove atmospheric carbon dioxide, 
the only industrial process we know of that can make this 
claim.
    Well, now what about algae? Algae takes CO2 out of the 
atmosphere. That is one of the feedstocks for algae.
    Mr. Sheehan, you have done a lot of research in this area. 
So would not algae also be an area where we can actually remove 
carbon dioxide out of the atmosphere during the production of 
fuels? Mr. Sheehan?
    Mr. Sheehan. Well, I will comment on the algae. I was 
actually the program manager for algae at a point when the 
Department of Energy had made the decision to shut it down, and 
it has been really gratifying to watch the level of interest, 
certainly coming from the private sector and now from Congress 
and from the public sector in this area.
    But algae are really not that different from other crops. 
In my view, they are really carbon recyclers. They are capable, 
particularly in the case of a coal-fired power plant, of 
reusing the carbon dioxide that is coming from that coal and 
reprocessing it. That is perhaps their biggest advantage, that 
they can actually help the coal industry bring down its carbon 
footprint while we are contributing to secure production of 
fuels.
    Chairman Harkin. I just wanted to make that point because I 
have seen some test results on algae which look very promising 
for liquids.
    Mr. Corcoran. My statement, sir, was as we are biochemical 
process, unlike a thermal chemical process, and as a 
biochemical process we can isolate the CO2 during the 
fermentation process and therefore remove that atmospheric CO2 
unlike a thermo-chemical process that does not isolate the CO2 
because it gasifies the CO2.
    Mr. Sheehan. I would like to build onto that just briefly. 
One of the fascinating ideas that is being pursued by some 
ethanol companies is that biological process from a 
fermentation produces absolutely clean CO2. It is the cleanest, 
richest source of CO2 you could ask for.
    Chairman Harkin. From where?
    Mr. Sheehan. From the fermentation process of making 
ethanol from starch or any sugar, there is this wonderfully 
clean CO2 stream at just goes right out the top. You can do two 
things with it. You can do, I think, what Mr. Corcoran was 
suggesting, and you can sequester it. You can bury it 
underground. Or, you can feed it to algae.
    Chairman Harkin. Feed it to algae.
    Mr. Sheehan. And, algae will reuse that carbon dioxide and 
improve the overall footprint of the ethanol facility itself.
    Chairman Harkin. I never thought about that. That is 
interesting.
    Mr. Corcoran, before I turn it over to Senator Thune, you 
mentioned the fact that the public needs more info on the 
benefits of increased octane. Do you have some more on that you 
could give to us about the benefits of higher octane, what it 
means in terms of more efficiency, in terms of compression 
ratios?
    That was the first reason for using ethanol a long time 
ago. We first put lead in gasoline, right, and then we found 
out lead was a no-no.
    So then the oil companies decided, well, we have this new 
blend that we can put in to increase octane. It was polylene 
and benzene and something else, and then we found out that was 
really carcinogenic.
    So they said, how are we going to keep the octane up? Well, 
ethanol was the way to keep the octane up. I think we could use 
some more information. I never thought about that until you 
just mentioned it here.
    Mr. Corcoran. Chairman, I can provide that as part of my 
addendum.
    Chairman Harkin. Yes, any additional information you have 
got on how we might use that as a selling point.
    Mr. Corcoran. Yes.
    Chairman Harkin. Well, I have got a lot more, but I will 
turn it over to Senator Thune.
    Senator Thune. Yes, it has prompted a lot of questions, Mr. 
Chairman. I think we could probably keep this discussion for a 
long time.
    Mr. Stowers, what are the infrastructure restraints to 
approving E-15 today?
    Is it a fuel that can be used in existing gas station 
pumps? Could it be used in existing on-road vehicles? What is 
the infrastructure restraints that might get in the way of 
that?
    Mr. Stowers. Today, there are really no infrastructure 
constraints that would need to be alleviated to bring E-15 
forward.
    As early as the late eighties and through 1993, the 
automotive industry worked on standards that set forth a test 
fuel that all engine components and emissions systems would 
have to go through. It actually set up a synthetic fuel that 
included 15 percent methanol, and methanol is much more 
aggressive than ethanol. And so, all of our engines, should all 
of the automakers adhere to their own standards, al the 
materials, compatibility and emissions would be acceptable 
within the cars that are produced today.
    Second would be the issue of the pumps and tank and so 
forth. The UL has actually stated that the existing pumps and 
dispensers would be acceptable up to E-15. That is part of the 
reason why we chose E-15, to fit within that infrastructure 
requirement.
    Other minor details that we would have to go through, 
should the EPA approve the waiver, would be to go through an 
ASTM certification of that fuel which is something that we can 
do very simply. We are only adding a very small amount of 
additional oxygen to the overall fuel.
    So, in a real sense, though, the automotive should be able 
it. The pumps should be able to handle it. There are some 
mechanical issues relative to certification that we would need 
to go through.
    I might add that whereas there is a lot of public 
statements against using ethanol in general, and E-15 in 
particular, in small engines or marine applications, there is 
no information, no studies that have been done to date that 
would support the degradation of engine components in those 
equipment or a failure related to emissions.
    Senator Thune. So, if you went to an E-15 in a filling 
station, would the small engine users that come in to get fuel 
for their lawnmowers or whatever, because that has been one of 
the arguments that has been raised, that that would be a 
problem, would they still have to access that type of fuel even 
if EPA approves E-15 or do you think that E-15 would burn? You 
just said that you thought it would burn in there, but one of 
the arguments that is raised consistently by those who oppose 
moving to a higher blend is the small engine issue.
    Mr. Stowers. Yes. I mean from a strictly science and 
technological perspective, there should be no issues 
whatsoever. Recognizing that the public and choice may be an 
important factor in getting E-15 approved, as part of the 
waiver request we allowed for the opportunity of blends up to 
15 percent. So there actually could be lower level blends in 
particular regions or application areas that would afford a 
small engine user, a snowmobiler or a boater, to actually have 
E-0 if that made more sense to them in that application.
    Senator Thune. What are the environmental impacts of using, 
of approving E-15?
    Mr. Stowers. Well, with the use of ethanol in general and 
the increased use of ethanol, you have a reduction in the 
nonmethane organic gases. You have all the hydrocarbons are 
reduced. The overall regulated emissions are reduced relative 
to even E-10.
    Senator Thune. Is there, to your knowledge, any 
scientifically sound way to measure U.S. ethanol production's 
impact on land use decisions that are made in countries like 
Brazil? I would ask you that, and then maybe, Mr. Sheehan, if 
you would like to comment on that too.
    Mr. Stowers. Well, the first observation I would make is 
that as ethanol has increased in the United States over the 
past 5 years there has been a steady increase, as we have 
noted, 9 billion, 10 billion this year. Rainforest 
deforestation in Brazil has decreased on an almost equal 
decreasing slope. So first order is I cannot see any 
relationship between what we do here in Iowa versus what 
happens in Brazil, and I think that hardwoods, Brazilian 
hardwoods or Amazonian hardwoods are being used for another 
purpose and can be regulated by other means.
    The thesis that one acre of corn use for ethanol in again 
Iowa corresponds to one acre of deforestation just holds no 
validity. The models that the EPA is using and the ones that 
the Air Resources Board in California are using are flawed at 
many levels, and we have made public comment to both agencies 
in that regard.
    Senator Thune. Do you want to add any to that, Mr. Sheehan?
    Mr. Sheehan. Well, here is a hornet's nest. I guess a 
couple of comments.
    I have been heavily engaged in the discussions with the 
analysts in California as well as at EPA on the modeling that 
they have done. My general response is that they have done the 
best modeling that can be done right now, but certainly by the 
modelers' own admission, and again the folks in California, the 
folks at Purdue and elsewhere who have looked at this, they 
will tell you that we are in very early days with this kind of 
analysis. And, trying to make a direct cause and effect linkage 
between a farmer's decision in Iowa and a farmer's decision in 
Brazil is really, really problematic.
    In fact, I have shared some of this initial modeling work 
that I have done, which does not even try to do cause and 
effect. It just says: We have so much land. We know how yields 
have been improving, and we know, we think, how much new demand 
for food there is going to be. If I add all those up, can I 
construct scenarios where land demand does not have to rise 
globally for food production. The answer, I believe, is yes, 
there are scenarios where that can happen.
    What I think the analysts in California and at EPA are 
doing is taking a conservative, from an environmental point of 
view, worse case perspective on the question. They are 
basically saying let's assume that land demand must continue 
growing globally. If you make that assumption, the conclusion 
you will come to is that you will cause land-clearing if you 
take land in the U.S. away from food production.
    But that is a circular answer. It is saying I think we have 
a land demand problem. Therefore, if I add to the land demand, 
I am going to create a worse problem. The answer to that will 
be that is true.
    But are there things that we can do to mitigate? The 
Brazilians have talked a lot about the idea of one of the big 
issues for Brazil being how inefficient at raising cattle, and 
cattle is the really, really big land footprint item for food 
production. So, if you can address issues in more efficient 
cattle production in Brazil, and they are trying to do that, 
that will do more to solve, to eliminate a potential problem 
than not allowing biofuels.
    So that is a little bit of a roundabout answer.
    Senator Thune. Has anybody done any modeling on what 
happens if you get to 300-bushel corn or if you are at 250 
already, how that impacts land use not only here but around the 
house? I mean how that bears on this whole question of 
international indirect land use and its impact in the 
calculation of the carbon footprint of biofuels.
    Mr. Sheehan. In effect, I will say quickly the numbers I 
showed here, that showed that somewhere around 2020 land demand 
starts declining. It starts declining because average 
agricultural yields, even if they just continue at that lower 
rate, are already going to cause that land demand to go down.
    I have not had the nerve yet to put a number like 300 
bushels per acre in there, but it would be very interesting to 
see how that plays out.
    Senator Thune. But would not EPA be factoring that in too?
    Mr. Sheehan. They are not doing that very effectively. 
Their models are static models that are not good at accounting 
for the future improvements that could occur.
    Plus, you also have a lot of environmentalists who will 
argue that we hit the peak for future yield improvement. So, if 
you believe that, then it becomes a moot point.
    You mean if you hold corn acreage constant today out to 
2030, and you hit these 300-bushel break or yield targets. So 
we are fixing land and not putting any more land into corn 
production. Run through the math, and you can adjust the 
numbers how you want, but you can look at a way in which you 
can increase food production from corn by 40 percent and 
ethanol production by 400 percent on the same land.
    There is no change in land use. You are using the same 
amount of land that was envisioned after the enactment of ASIA, 
2007. So I do not see where we need more land to produce food 
and fuel in this Country.
    Ms. Rath. The single largest, most important factor, 
variable, in almost all of these models is in fact the yield 
assumptions. They tend to make very conservative yield 
assumptions in terms of improvements in corn, and, for energy 
crops, they tend to hold them absolutely constant and 
absolutely constant at a level that is typically less than half 
of the yields we are already achieving.
    So, when you put together the yields that we are currently 
getting in energy crops plus the potential for yield 
improvement in energy crops, which have not had the benefit of 
all for the breeding that a lot of our major row crops have 
had, plus the potential for yield improvements in row crops, a 
lot of these models start predicting that in fact we are going 
to have lots of excess land. So that is the key assumption 
underlying all of these models.
    Senator Thune. Just one, and then I will yield back, Tom. 
Just a follow-up on that point then, and this bears on the 
question of corn-based versus advanced cellulosic. We are at a 
15 billion gallon cap on corn-based and 21 billion on 
cellulosic.
    I guess the question for people who are involved with 
trying to scale-up cellulosic ethanol production and get it on 
a commercial level is can we hit those targets and/or should we 
be adjusting the 15 billion gallon cap that we have today 
attributable to corn-based ethanol, assuming that we are going 
to see higher yields going forward, because it seems like right 
now the cellulosic thing has not caught on yet quite to where 
it is going to ramp up quickly enough to meet the targets.
    I hate to see us go backwards and allow waivers of the RFS 
because we are not getting to where we need to be in terms of 
the goal. So anybody want to comment on the balance between 
corn-based versus cellulosic and whether or not we are going to 
be able to achieve the targets for cellulosic in the time lines 
that are called for in the RFS?
    I think the first point that I would make with regard to 
corn ethanol production is there is tremendous capacity. There 
is tremendous capacity to produce that at a very low greenhouse 
gas impact. To say it another way, we can reduce greenhouse 
gases compared to gasoline by greater than 50 percent. If we 
add in indirect land use, it is just a crazy calculation. So, 
in order to get to the next level, we need to have E-15 or E-20 
or another, to get past the blend wall.
    So there is a real opportunity from environmentally sound 
corn ethanol, and that technology is going to continue to 
improve not only at the farm gate level but also at the plant 
by improved efficiencies.
    The same thing is happening at the cellulosic side. It is 
behind corn ethanol. It is rapidly catching up. Our cost 
structure for cellulosic ethanol is decreasing almost at an 
inverse hockey stick in terms of lowering our overall costs.
    I think the point I would make is we are going to need 
both, and we have the potential to release all of our foreign 
oil requirements and produce all of our liquid transportation 
fuels from corn and cellulose. We have run the numbers, and, by 
2030, we could get close to 140 billion gallons liquid 
transportation fuel. That is what we are using in gasoline. So 
I think you need both.
    Cellulose is lagging corn ethanol. We started a little bit 
later, but it is rapidly catching up.
    Senator Thune. Thank you.
    Thank you, Mr. Chairman.
    Chairman Harkin. Anybody else want to comment?
    Mr. Couser. Well, I would just like from a farmer's 
perspective. The last few years, it has been a real privilege 
to grow a corn crop and sell it on the open market for a profit 
and not burden the taxpayer. LDP payments, I am sorry. I mean 
it was a great program while it lasted, and we are very proud 
of what has happened there. Hopefully, we can continue that.
    Just to go off of his thoughts, we need to increase this. 
Now do we need to raise the corn from starch cap even higher 
yet? I think we have to. I think that is a number that is a 
moving target, and it has to go up. But it would sure be great 
to be able to market this corn on the open market.
    Mr. Sheehan. I would like to touch on Anna's notion of 
repowering the ethanol industry as an important part of the 
failsafe step of allowing corn ethanol to increase more in 
order to maintain meeting the goals of the RFS.
    Even if we take the indirect land use issues aside, the 
amount of fossil energy that is consumed in a conventional corn 
ethanol plant is now so high that it offers some but not a 
whole lot of greenhouse gas reduction capacity. Clearly, one of 
the targets of the RFS and the low carbon fuel standard in 
California is to reduce carbon emissions. So, if we could do 
things to encourage the existing industry to expand and utilize 
biomass and renewable energy for its heat and power, its carbon 
footprint comes down so much, but that would be a very, very 
nice middle road to take while we are waiting for dedicated 
cellulosic ethanol technology to take hold.
    Chairman Harkin. If you are talking about dedicated 
cellulosic crops, now, Bill, in your area, that Story County 
land in central Iowa is so productive that it would not make 
much sense to grow a dedicated cellulose crop. I would think 
you would want to use residue from corn.
    Mr. Couser. We have it both. We have the corn, and we have 
the residue in Story County.
    Chairman Harkin. Yes, both. But there might be some areas, 
southern Iowa and places like that, where row crop production 
is both environmentally not very good but production-wise, 
where you might be able then to do dedicated kinds of crops. I 
am sure that is true in South Dakota and probably every other 
State. There are areas that would be more amenable to growing a 
dedicated cellulosic type of a crop.
    Now what that kind of leads me to is this. The other thing 
that is coming at us here is the Climate Bill, and what are we 
going to provide for offsets for farmers and what role 
agriculture can play in reducing our carbon footprint--is that 
the right word--or reducing the CO2 emissions.
    Right now, the data I have seem to say that agriculture is 
responsible for about 12 percent of the reductions. We grow 
crops. We take CO2 out of the air. Some of it, we do not put 
back. Some of it is sequestered. So it is about 12 percent.
    I have seen figures that say we could double that easily. 
In other words, agriculture could be responsible for removing 
25 percent of the carbon emissions, but that has to be 
sequestered. Now that is where you get into things like 
switchgrass, and I do not understand this vegetative seed 
propagation.
    But someone came into my office, John, about 2 weeks ago or 
3 weeks ago. Who was that? He came in from Tennessee and had 
that picture of the root structure.
    Unidentified Staff. Wes Jackson from the Land Institute of 
Kansas.
    Chairman Harkin. Wes Jackson from the Land Institute in 
Kansas, and he had a picture of a cutaway of the root structure 
of switchgrass, and the roots go down almost 20 feet. He had a 
20-foot long picture in my office. Well, that is a lot of 
carbon sequestration. You know.
    So I am thinking to myself, wait a minute, maybe we can 
have our cake and eat it too. We can grow a dedicated kind of 
crop in certain areas, like switchgrass which is perennial, and 
harvest that, and yet you get these 20-foot deep root 
structures that are going to be there for a long time.
    So is that a part of what we ought to be thinking about in 
terms of cellulosic ethanol, not just for the ethanol itself 
but for what we can do to provide the offsets?
    Ms. Rath. This is why I mentioned earlier that the amazing 
thing about using perennial dedicated energy crops to create 
biofuels or biopower is that they have the potential to not 
just be carbon-neutral as you cycle that above ground biomass 
into the facility, but in fact be carbon-negative because of 
that below ground sequestration. And so, switchgrass is a great 
example of a crop that provides for a lot of below ground 
carbon sequestration in the form of that root biomass.
    What has not been done is enough study to show how that 
sequestration takes place over time. Does it taper off? If you 
use no-till and plant a new crop, do you get to add yet more? 
And so, one of the things that needs to happen is for there to 
be a better understanding of how much sequestration is taking 
place so that growers would be able to get proper credit for 
that below ground carbon sequestration that their crops are 
providing.
    Chairman Harkin. Anybody have any other views on that?
    Mr. Sheehan. There is actually another huge benefit outside 
the world of carbon reductions, which, by the way, I think we 
spend obsessively too much time on because there are a lot more 
issues than just carbon out there in terms of sustainable 
fuels. But the issue I am thinking of is those root structures 
actually are the reason why land in the Midwest was as 
productive as it was when the pioneers first came and broke the 
soil. That is because of the grasses that were there for I do 
not know how many thousands of years, that built up the organic 
matter in the soil, that really created soil that is the 
healthy soil that was so productive. So, for sustainable 
agriculture, for maintaining that stewardship of the land, the 
value of rotating in these kinds of crops is tremendous.
    Ms. Rath. I thought you were going to say yet another one 
which is switchgrass requires a lot less fertilizer. One of the 
things that happens when you put down fertilizer is you get NOx 
emissions back into the atmosphere. NOx is a very potent 
greenhouse gas. So, by reducing your fertilizer usage per acre, 
by growing a crop like switchgrass, you also reduce your 
greenhouse gas emissions from the agricultural piece of it, as 
will all the nitrogen use efficiency technologies that are 
coming down the pipelines for corn and other crops.
    Senator Thune. Do you see any potential for sort of 
blending CRP program and energy-dedicated crops? We are seeing 
a lot of acreage taken out of CRP in South Dakota and being put 
back into production because the economic incentives are to 
plant as opposed to keep it in CRP.
    We saw a demonstration up at South Dakota State University 
a couple of weeks ago, not of switchgrass--we have switchgrass 
there planted too in plots--but also of cordgrass which can be 
grown in areas that will not grow anything else. You eliminate 
the food versus fuel argument because it grows in areas where 
you flat just would not be able to plant another crop, and it 
grows well, and it could be an energy-dedicated crop.
    But I am just trying to think if there is a way, and this 
comes back. I know it is partly the way our Farm Bill is done. 
We had a great conservation title in that. But what I am 
concerned about is seeing the reduction, significant reduction 
in CRP acreage in our State, a lot of it coming out and being 
put back into production, and that has implications not just 
for conservation but wildlife production and other things that 
are important to our economy.
    An energy-dedicated crop, in many cases it might be a 
switchgrass or something like that could serve or fulfill a 
function, deliver a conservation value, continue to promote 
wildlife production and be harvested at the right time a year 
as an energy-dedicated crop. We might be able to marry up some 
things. I think we have several objectives obviously in this 
part of the Country with the CRP program, but it might tie into 
the planting of an energy-dedicated crop that could be used for 
biofuel production.
    I mean do you see the potential for that?
    Ms. Rath. Absolutely. There are many different reasons why 
acres have gone into the CRP program, and so many of them have 
gone in because of issues of soil erosion. Well, that same deep 
root structure we have been talking about as a source of carbon 
sequestration is wonderful for preventing soil erosion. So 
there are many acres in CRP that would be perfectly appropriate 
for the growing of switchgrass.
    Mr. Sheehan. I will just add to that. You know I spent 17 
years at the National Renewable Energy Lab, and we eyed CRP 
acres. We drooled over those acres for years because of their 
potential, if done sustainably, to become a source of harvested 
energy and still deliver the benefits that the CRP program 
delivers for those lands.
    Chairman Harkin. If I may, Mr. Olthoff?
    Mr. Olthoff. Yes, I would like to address that question as 
well.
    We are kind of on the edge of technology. We do not use 
enzymes or those kinds of things to produce our product. We 
just direct burn.
    But we found that something like a switchgrass or mixed 
prairie type of planting, on conservation property or roadsides 
have several advantages for us. Since we are not particular 
about single species, we do not care whether they are mixed 
species or mono-cultures.
    They can be harvested at a different time, and they offset 
the corn harvest which is a small window of opportunity in the 
fall. Our experience shows that a spring harvest of grasses is 
probably the most appropriate time to harvest them for energy 
production.
    There are a lot less minerals left in spring. The biomass 
is less, granted that, but we are happy to sacrifice a little 
bit of biomass for the reduction in minerals which are 
problematic for us in combustion.
    Chairman Harkin. Are you familiar with the Chariton Valley 
Project?
    Mr. Olthoff. Yes.
    Chairman Harkin. Some of you are familiar with that. We 
started that back in the nineties.
    We were always told that you could not really crop CRP 
ground because it would erode, leading to runoff and that kind 
of stuff. So we had this project in Chariton Valley to grow 
switchgrass on CRP ground, harvest the switchgrass and burn it 
in a coal-fired plant. Alliant Energy was doing it, and they 
went through several years, and they experimented with 
different processes and everything.
    But I think what finally came out of it was, one, they had 
absolutely no erosion on the CRP ground whatsoever. They could 
harvest the grass. And, they experimented with different kinds 
of pellets and other approaches to packaging and compressing 
it. The last thing I saw was a bale of hay that weighed a 
thousand pounds.
    Senator Thune. One of their stages was they just chopped 
the material and blew it in.
    Chairman Harkin. Just blew it in, just chopped it and blew 
it in off those big bales.
    The only reason I say that again is not to belabor the 
point but that it seems to me that following up on what John 
was just saying, that we have to, we want to produce a lot of 
fuel in this Country, a lot of liquid fuel. Corn is always 
going to be the leader. It is always going to be out in front 
because it is an established technology, we are improving it 
all the time, we know the conversion ratios. So it is going to 
be out in front.
    But I am safe in saying it cannot do it all. We are going 
to have to have something else, and that is where the cellulose 
comes in and why we worked so hard on the cellulose part of it 
in the Farm Bill.
    John is right. We are going to have to think about how all 
this CRP ground in South Dakota.
    Now there is probably some of it coming out of CRP. As you 
know in the old CRP, in the old formula, every county had to 
have an allotment of CRP ground. There are probably some 
counties in Iowa, up in your area, that do not really need CRP 
ground. So, as that land will come out, and it will. It is just 
too productive to be not used for high-yield production, for 
crops, row crops.
    But then in other CRP areas, where you probably do not go 
to your crops. A farmer needs income. It can be productive. We 
want to protect wildlife, as you said, and address the 
conservation issues, but we can grow a cellulosic crop on those 
lands.
    Then, one of the arguments that we are making for the 
Climate Bill that came out of the House, that has come over 
now, is what I call stackability. It is to allow farmers to 
stack benefits.
    In other words, if you have got CRP ground, you get your 
CRP payment. If you want to grow switchgrass on that in a 
conserving manner and use that for electricity or for fuel 
production, whatever, you can do that. If you then are also 
sequestering carbon, you should be able to get an offset on 
that also, to stack these benefits one on top of the other. 
That way, a very nonproductive piece of land becomes highly 
productive, and you can actually make money on it, and at the 
same time have the benefits of conservation and carbon 
sequestration.
    So I just think there can be some real benefits for 
agriculture.
    Senator Thune. And raise pheasants.
    Chairman Harkin. What?
    Senator Thune. And raise pheasants.
    Chairman Harkin. And raise a lot of pheasants, that is 
right.
    [Laughter.]
    Chairman Harkin. And bring all those hunters out. They can 
come out in the fall and spend money and everything.
    I just think that there is a lot of promise there that we 
can move ahead on.
    I was going to ask some questions about algae here, but, 
no, I do not want to get into algae. I guess I could get into 
algae, but I am not.
    There is another thing I want to get into with you. Could 
you address yourselves to this? We are talking about liquid 
fuels. We are talking about taking cellulose or corn, making 
liquid fuels. Now we also are doing work on pipelines and 
getting dedicated pipelines going. Hopefully, that is going to 
happen pretty soon, but there's also the idea of using biomass 
for electric generation.
    Now I do not know how soon this is going to happen, but I 
think, looking ahead, I really think that we are going to be 
moving more and more to electric vehicles in this country, 
especially in heavy urban areas. I just think there is going to 
be more and more push to go to electric vehicles.
    Well, you have to produce electricity. You do not want to 
use coal to produce electricity. But, if we can use biomass to 
produce electricity, then again I know you are still putting 
CO2 in the atmosphere, but it is taking it out. So you have no 
net gain in greenhouse gases by doing that.
    There has been a lot of talk and thought about using 
biomass also as a feedstock. Now that is where you come in, Mr. 
Olthoff. You have been experimenting with how to use pellets or 
cubes or however you do this. We did this. That is what the 
Chariton Valley Project was about.
    You are all experts on this. What about the idea of using 
biomass as a boiler fuel for producing electricity, any 
thoughts on that?
    Mr. Olthoff. Well, I mean today we use biomass wood chips 
to power our boiler at Chancellor, South Dakota, a 100 million 
gallon facility, along the use of landfill gas that we have 
piped to the facility. We can offset about 60 percent of our 
natural gas utilization.
    Chairman Harkin. That is interesting.
    Mr. Stowers. Those are technologies that are ready and 
raring to go and can be deployed at all of the existing corn 
ethanol plants to reduce their overall carbon footprint.
    I guess I would highlight maybe a contrarian view on 
electric vehicles. Whereas I think electric vehicles have 
potentially a significant opportunity in dense urban areas as 
you indicated, one of the things that troubles me a little bit 
is the overall conversion to an electric economy for 
transportation, personal transportation in particular. There 
have been estimates that, for example, it would require 
extensive rewiring of charging stations in order to get a 
charge completed overnight, for example, to 20/40-amp lines and 
so forth, and an increase of the overall grid by 2-fold.
    So I think that is an interesting opportunity, but I think 
it needs to be thought through very carefully to see why one 
would do that when you have a clean-burning liquid fuel that is 
already in the distribution channel.
    Mr. Couser. I guess I will touch real quick. I think that 
is one reason that in Lincolnway when we decided to put on the 
fluidized bed we spent an extra $12 million instead of putting 
a gas pipe into it with the hopes in the future that we would 
burn a corncob, a cornstalk, clean construction waste out of 
Des Moines.
    There are recyclables and renewables that we are very 
excited about, and we have started testing with some of the 
wood chips, and now this next fall we are going to be getting 
set up to do the corncobs and whatever else we can do. We have 
got to get some tests in because I think the DNR is a little 
troubled right now. They really do not know what is going to 
come out the stack. So I think we are going to have to help 
prove to the regulators too that this is a viable situation.
    Mr. Corcoran. In the Black Hills, we are working with a 
small community to develop a project. This community runs on 
propane. Its small clinic, its schools, its administrative 
buildings run on propane, and they are interested in putting in 
a biomass boiler and using the lignin as our co-product from 
our cellulosic-based ethanol plant and taking that lignin and 
burning it into a biomass boiler and then utilizing that to 
power their facilities--so lots of different avenues with 
regards to using woody biomass.
    Chairman Harkin. I do not know if you wanted to comment?
    Mr. Olthoff. Yes, I would like to say a couple things just 
from the electric utility industry perspective. We do not start 
with a value-added product like ethanol and say, ``well, now 
can we add another stream and maybe fuel our boiler or 
something to that effect, with a pulp product or another 
fuel.''
    In the electric industry, the challenge is to try and come 
up with a fuel that can generate the electricity we can sell 
onto the wholesale market or generate locally to replace 
wholesale market price electricity. The electric industry is 
very good at making low-cost electricity. When we compare what 
it costs to generate electricity with biofuels, in whatever 
form will work, it cannot compete. We do not run biofuel 
because we know that it will be either a loss to the company or 
an extra charge to the community. It is an extra expense that 
we cannot pass on or will not pass on.
    Being a municipal, the board looks at us and says, no, we 
are not going to pay extra for electricity just because it is 
biofuel generated. We cannot sell that to the board. So that is 
one of the challenges for the electric industry to jump into 
biofuels, not only the whole problem of supply lines and 
transportation and all that but just the very fact that we 
cannot find the fuel at a price that actually make electricity 
compete on the market.
    Mr. Sheehan. I would just add a little bit to that. Again, 
I think part of what this comes down to is there will be no 
single use for biofuels. It will not be just one form. It will 
not be one single source of energy that we rely on.
    There was a recent Science paper that came out that 
suggested that because electric engines or electric motors are 
so efficient they will actually give you more miles per acre or 
per ton of that biomass than taking that biomass through a 
liquid fuel. The one weakness in that analysis is it requires 
us to have battery technology that we currently do not have. So 
that is one issue.
    But the other is I think we have to break transportation 
down into two big categories. One is personal transportation 
that you alluded to, but the other is in some ways more 
strategic, and that is freight transportation and air 
transportation. They are never going to run on electricity. 
They will always require liquid fuels, and they will always 
require high density in terms of energy content for that liquid 
fuel.
    So this is where in some ways I take the food versus fuel 
argument and say, OK, when it comes to some of those strategic 
uses for our land, there is a food and fuel requirement 
societally to deliver, but we need to be able to send our 
freight around and to get from Point A to Point B in a plane.
    Ms. Rath. There are two really good reasons to turn biomass 
into power. The first is what I have touched on before, which 
is not only is it carbon-neutral but because of the below 
ground sequestration with perennial energy crops it can 
actually be a carbon-negative source of power. The other is 
that it is, other than geothermal which is limited in scope, it 
is the only one of the renewables that offers baseload supply 
of power.
    So solar is on during the day, not on at night and not on, 
on cloudy days. Also, we do not have enough solar to do solar 
in all places in the Country.
    Wind actually peaks in the middle of the night when energy 
demand is at its lowest, causing in some places in the Country 
energy prices to drop to zero overnight because the supply is 
not coming when the demand is coming.
    So biomass, either as something used to co-fire with coal 
or in dedicated facilities, offers you that opportunity to have 
baseload power.
    We are actually talking to a lot of major utilities who are 
interested in biomass. Most of them are interested for one of 
two reasons. One is that they have a high renewable portfolio 
standard in their State and they have as much wind and solar as 
they can handle. The need baseload in their renewable 
portfolio, and so they are looking at biomass to supply that.
    The other is large utilities who have major coal footprints 
who are in areas where maybe wind and solar are not as 
plausible and see this as a really easy way to start co-firing 
10, 15 percent biomass in their existing coal facilities and, 
as a result, meet some of their renewable obligations.
    So, it does depend on renewable energy credits or mandates 
or things like that until you get a price of carbon that makes 
biomass competitive with coal. But where you have those things, 
like in Europe, you do see rapid adoption of use of biomass for 
power both in dedicated and in co-firing situations.
    Chairman Harkin. I think that certainly the challenge for 
us in agriculture is that. We are going to need liquid fuels 
for a long time, and so we have to make sure that we use 
biomass for liquid fuels but then also for baseload electricity 
production.
    The battles are going to be ferocious over the next few 
years on coal. It is cheap. It is abundant, and certain States 
produce a lot of coal. But we know the environmental impacts of 
that.
    So if the environment is not free--if the environment is 
free, what the heck, go ahead and do it. If the environment is 
not free, well, then you have to start calculating the cost of 
that. Once you start calculating it, then I think biomass is 
going to be looked upon as a valuable source of feedstock for 
baseloading for electricity.
    I have often thought about that as we proceed on our 
agricultural bills, not pushing just for ethanol but for 
biomass production for making electricity, and there are a lot 
of things I think that lend itself to that. I mean I have seen 
everything from willows, fast-growing willows out in the West 
to trees in the Northeast, fast-growing pines in Saxby 
Chambliss's area where they grow fast. They can be used for 
that kind of baseload power and harvested in a very conserving 
manner.
    So it seems to me that I still come back to the same thing, 
that anything you can get from a barrel of oil we can get from 
a bushel of corn or other crops out there.
    Ms. Rath. A ton of biomass, yes.
    Chairman Harkin. We can do it here in this country, and we 
can provide a lot of jobs, a lot of jobs, and it clean up our 
environment. So it seems like we can have our cake and eat it 
too with this whole approach of using biomass for both liquid 
fuels and for the production of electricity.
    I think all we have to do is just make sure we have 
policies in place, and that is why we need to hear from you 
about those kinds of policies and how we move ahead.
    Well, that is my 50-cent speech. John, do you have anything 
else.
    Senator Thune. Well, just a couple quick questions, and 
this will not take long. By the way, this was not focused on 
wind, but I do not understand why Iowa has more wind energy 
production when we are up there breaking the wind for you all 
the time in South Dakota. We should be having it.
    Chairman Harkin. Well, I have something on that, but I 
cannot say it in public.
    [Laughter.]
    Senator Thune. I was setting you up there, Mr. Chairman, 
but, no.
    I am curious in knowing. Somebody, I cannot remember, Mark, 
if it was you or, Ms. Rath, if it was you, talked about the 
cost, the current cost of production for cellulosic ethanol. 
About $2.50 a gallon, is that what you said?
    Mr. Stowers. Right.
    Senator Thune. So how soon are we going to be competitive 
in cost of production with corn-based ethanol and, beyond that, 
with petroleum-based gasoline?
    Mr. Stowers. By the time we Project Liberty in Emmetsburg, 
we expect to be about 50 cents per gallon higher than corn 
ethanol, and within 5 years we expect to be competitive with 
corn ethanol. Corn ethanol is a moving target of lower and 
lower cost. So I think that we are going to be very 
competitive. I mean even today ethanol is sold at a discount 
compared to gasoline based on the current Iraq prices.
    Senator Thune. And, Mr. Corcoran, just for purposes of what 
you all do in terms of trying to commercialize cellulosic 
ethanol from biomass in places like the national forests, the 
Black Hills, how important is getting that biomass definition 
changed for you, for you to be able to take that to the next 
level?
    Mr. Corcoran. It is absolutely imperative. I will just give 
you an example, in the Black Hills, roughly 1.2 million in 
forestland. Today, in slash piles alone, there is about 760,000 
tons of slash piles that today get burnt or it just rots away.
    Senator Thune. Convert that. What would that be in terms of 
gallons of fuels if you were able, say, 760,000 tons? That is 
probably not fair to ask.
    Mr. Corcoran. Thirty million gallons.
    Senator Thune. Thirty million gallons, OK. So it is an 
equivalent of a 30-million gallon ethanol plant every year. 
Right?
    Mr. Corcoran. Right.
    Senator Thune. I mean that is something that is going to be 
an annual amount.
    Mr. Corcoran. Right, and the selection of the site is 
determined as we go through our analysis as the availability of 
public land. If that public land is not available, we would 
evaluate that and maybe not select a site because the public 
land cannot be used in order to take advantage of some of the 
incentives.
    Senator Thune. If I might, Mr. Couser, this is for you. One 
of the probably biggest opponents of biofuels has been the 
livestock industry. I mean maybe not as much in the Midwest as 
it is in other parts of the Country, but it is kind of the oil 
companies, the people who feed livestock, some of the food 
marketers, some of the environmental groups. They have really 
put together a coalition of groups out there that have really, 
I think, misinformed. I am not saying livestock groups, but I 
am talking a lot of folks out there have misinformed the public 
about this whole food versus fuel thing and if there is not 
enough grain out there to do all these various things, which I 
think has set us back a lot in terms of the public relations 
argument that we have on this.
    But I am interested from your perspective, what impact has 
the availability of DDGs had on cattle feeders in Iowa and 
across the Midwest and is there enough DDGs? Is there a 
shortage or a surplus?
    Mr. Couser. Do I get an hour to talk about this?
    [Laughter.]
    Mr. Couser. You know that has been one of the greatest 
things that has happened to Iowa in the cattle industry are the 
coal products that come out of the soy diesel and the ethanol 
plants. When you look at 5 years ago, it used to take 75 
bushels of corn to finish out a 500-pound steer to 1,350 
pounds. Today, when you look at that at our feedlot, we are 
using from 11 to 16 bushels of corn.
    Everything else is coal products, from bean straw to 
distiller grains to syrup. There is an array of products that 
we use. Basically, what we do is we have about 10 different 
additives or feed co-products that we put into a computer every 
Monday and get a least cost ration.
    We look at what it is going to do for the livestock 
industry and especially as the ethanol industry grows and these 
co-products are changing so we can get the inclusion rates 
higher in the feathers and the pigs because right now we are 
limited to certain amounts that we can put in the feed. And, I 
really think there is going to be a driving force here to 
change those co-products. I think you would agree with that, so 
that we can get the inclusion higher in these feed rations.
    We look at Iowa and the Midwest here and what we can do 
with agriculture in both the animals and growing crops. It is 
just we do not see the end of the rainbow yet. We have still 
got a tremendous future.
    Chairman Harkin. Can I just ask one thing? How about pork 
production? You are cattle. It is more adaptable for cattle 
feeding, but Iowa State has been trying to do a lot of research 
in how to adapt this to hogs.
    Mr. Couser. And, it is coming too. I mean, like I say, it 
is going to be driven. When we look at what has happened to the 
hog market here in the past 12 months, we are going to find 
cheaper feed sources. Do we need to pull more oil out of the 
back side of that ethanol plant so it makes the co-product a 
little different, so the inclusion rate can be higher so that 
the feed costs can compete with corn or whatever other feed 
ingredient?
    I mean the whole variable just goes up and down. So we are 
very excited about what is going to happen.
    Senator Thune. I guess my broader point was, Mr. Chairman--
and I think that we have to obviously do a better job of 
communicating this--that there is, with the higher yield and 
with the DDGs and with the future of advanced biofuels, this 
whole notion that we cannot accomplish, that we cannot feed the 
U.S. and continue to feed the world and lessen our dependence 
upon, our dangerous dependence upon foreign sources of energy. 
It is a misnomer. I think we have to debunk and dispel that out 
there.
    The other side, those who oppose the biofuels industry have 
made it very challenging, I think, economically in some ways 
and probably more so politically for us because they have tried 
very hard to convince the American public and thereby people 
who make policy decisions in Washington that we cannot 
accomplish all these objectives at the same time. I happen to 
believe that we can, and I think we have to do a much better 
job of communicating that with the American people.
    Chairman Harkin. Bill, I have one more question on your 
testimony, sort of along that line. You said here, and I put a 
big question mark because I do not understand it. You said corn 
oil extraction should give us a carbon credit as a co-product.
    Of course, I circled that because you know we have this 
coming at us, this whole Climate Change Bill. And so, anything 
I am looking at, anytime I see something where we can give 
credits to farmers for something, a light bulb goes off. But I 
never heard about this.
    Mr. Couser. I think you can answer that. I would talk in 
farmer's terms. This is science.
    Chairman Harkin. But I do not understand that. Well, I mean 
I would like to be able to promote it. I just need to know what 
it is about.
    Mr. Couser. Well, I am not sure I can explain it all that 
way. We are evaluating this approach. We see that there is a 
great deal of opportunity to reduce the overall carbon 
footprint by separating out the corn oil and using that as a 
separate source for diesel application. The resulting overall 
footprint left in your ethanol plant is carbon-favorable by 
doing so. Perhaps offline, we can go into a little more of the 
details of how that actually works.
    Chairman Harkin. Since this is coming at us pretty fast, 
can you give us, give my staff something?
    Mr. Couser. Absolutely.
    Chairman Harkin. That way, we can talk about this.
    Mr. Couser. We would be happy to do so.
    Chairman Harkin. I am looking for every little item I can 
get in there. OK?
    Mr. Couser. You bet.
    Chairman Harkin. So I just do not understand it, but if you 
just help me understand it and how we might weave that into our 
Climate Change Bill, assuming it is coming at us sometime this 
fall.
    Mr. Couser. The reason I think that is such an important 
statement is we look at the value of what we can do with these 
ethanol plants. Just about all these plants are going to be 
spinning oil off some place in that plant. So it is very 
important.
    Chairman Harkin. Yes. I guess I just do not understand how 
it reduces the carbon footprint, but you are going to help me.
    Mr. Couser. We will give you the background.
    Chairman Harkin. Yes, you will do.
    Well, this has been great. This has been a great exchange.
    Anything else that any of you wanted to bring up that we 
have not asked? Any questions, anything that you would like to 
have us ask that either one of us did not ask, that you would 
like to bring out here for us to think about?
    Senator Thune. How soon will we be competitive making 
biomass into electricity?
    I mean you said the reason is your board and the people, 
your customers obviously are not going to tolerate higher cost 
associated with some other source of electricity. Are we going 
to be competitive cost-wise out there in the not too distant 
future?
    Mr. Olthoff. Without any changes to any of the present 
policies, actually, I cannot say that it ever would be. I will 
just cite a couple numbers for you.
    We did a small project this spring. We harvested some mixed 
species prairie grass plantings on Black Hawk County 
conservation land. It cost the utility about $$1,000 to harvest 
the material. We got 22 tons of material. It cost about $1,000 
to harvest it, about $1,000 to densify it. It cost $3,000 to 
ship it to Indiana and back to get it densified. So, for 
$5,000, this will produce about $440 worth of electricity.
    Now there is a lot of fat in this thing. We know that if we 
can eliminate the transportation by doing it locally we are 
going to eliminate three-fifths of the cost.
    Chairman Harkin. We did that it Chariton Valley.
    Mr. Olthoff. Pardon?
    Chairman Harkin. In Chariton Valley, it just went from 
there to a tumbler.
    Mr. Olthoff. Right, right. For Cedar Falls Utilities, we 
are looking at a very local collection system. Just north along 
the Iowa Northern Railroad would be our model, where we would 
work with the railroad for short-line transportation of the 
material but have the collection sites located along the rail 
line so they can gather the material locally, densify it and 
then just have it short-run. But that is still leaves about 
$2000 for the material.
    We are looking at ways to minimize the cost, and that is a 
challenge with the remaining cost. The densification process, 
if you could optimize that, would be $20 per ton instead of $50 
per ton.
    You do not want to cut the $50 per ton production cost. 
That is the $40 per ton farmer share basically. We do not want 
to dig into that very much, but we still end up with about a 
$70 per ton product, $70 per ton for fuel to produce $20 of 
electricity.
    Further to the detriment of the biofuels, it only has half 
the energy. So we almost need twice as much quantity to produce 
the same amount of electricity.
    Chairman Harkin. Is it also true that there are more BTUs 
per pound of switchgrass than in a pound of coal? More BTUs for 
a pound of switchgrass than for a pound of coal?
    Mr. Olthoff. Well, not for us.
    Chairman Harkin. That is just fact, yes, except that a 
pound of coal is this big and a pound of switchgrass is this 
big. That is the problem. But per pound--per pound--there are 
more BTUs in switchgrass than there is in coal per pound.
    Ms. Rath. Switchgrass BTUs per pound range. Actually, the 
grasses are over a pretty wide range. Switchgrass is typically 
about 8,300 BTUs per pound which makes it about the same as PRB 
coal but less BTUs per pound than bituminous coal. And so, it 
depends on for a given coal facility where they typically get 
their coal as to whether something like switchgrass can slot in 
very easily or whether it creates this issue for them of being 
less energy-dense.
    There are technologies being developed to try to improve 
the energy density of biomass by getting rid of some of the 
volatiles, but these all need to come down on the cost curve.
    So, just to sort of build on some of the points that you 
were making, the big difference between biomass to power and 
cellulosic ethanol is that biomass to power does not need to 
come down any, it does not need to improve its technology. The 
technology is there. You just burn the stuff. Right?
    There may be some improvements that can be made in 
densification technology, but you are not going to take costs 
out of through technology improvement the way you are in 
cellulosic ethanol.
    The sources where you are going to fix your cost problem 
are increasing the yields of dedicated energy crops because the 
higher your yield are the more revenue goes to the farmer, the 
lower your harvest and transport costs are, the lower your 
delivered price, the ton of feedstock can be. So yield is one.
    The second one is improving the efficiency of the supply 
chain, improving our densification technologies, improving our 
harvest and transport methodologies.
    Then, the third is putting a price on carbon because 
fundamentally as long as coal is not burdened by that, then 
biomass just will not measure up because biomass takes work to 
generate whereas coal, that work happened over the course of a 
million years. It is all plant material. It is just over a 
different time scale.
    Senator Thune. It has been very helpful, Mr. Chairman. I 
appreciate this. Thank you for calling the hearing.
    Chairman Harkin. Well, good, I thought this was great. Some 
of you came a great distance, and I appreciate it very, very 
much.
    We will leave the record open for a week for additional 
inputs and other things that people might want to put into the 
hearing record.
    Again, John, thank you very much for your leadership on 
this issue and it is great working with you and thank you again 
for coming here today to Sioux City.
    Bob, thank you again for hosting us here.
    Mr. Rasmus, thank you for hosting us here today.
    With that, the Committee will stand adjourned until we do 
not know when. Sometime in the future.
    Senator Thune. Whenever you call the next hearing, Mr. 
Chairman.
    [Whereupon, at 3:40 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                           September 1, 2009



      
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