[Senate Hearing 111-1025]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1025
 
                     EMPOWERING RURAL COMMUNITIES,
                      THE STATUS AND FUTURE OF THE
                      FARM BILL'S ENERGY AND RURAL
                          DEVELOPMENT PROGRAMS

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION


                               __________

                             JULY 21, 2010

                               __________

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


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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                 BLANCHE L. LINCOLN, Arkansas, Chairman

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

               Robert Holifield, Majority Staff Director

                    Jessica L. Williams, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                Anne C. Hazlett, Minority Chief Counsel

                                  (ii)

  
                            C O N T E N T S

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                                                                   Page

Hearing(s):

Empowering Rural Communities, the Status and Future of the Farm 
  Bill's Energy and Rural Development Programs...................     1

                              ----------                              

                        Wednesday, July 21, 2010
                    STATEMENTS PRESENTED BY SENATORS

Lincoln, Hon. Blanche L., U.S. Senator from the State of 
  Arkansas, Chairman, Committee on Agriculture, Nutrition, and 
  Forestry.......................................................     1
Chambliss, Hon. Saxby, U.S. Senator From The State of Georgia....     3

                                Panel I

Tonsager, Dallas, Undersecretary, U.S. Department of Agriculture 
  Rural Development, Washington, DC..............................     5

                                Panel II

Clark, Gen. Wesley, Co-Chair, Growth Energy, Washington, DC......    23
Tenny, Dave, President, National Alliance of Forest Owners, 
  Washington, DC.................................................    27
Zuber, Eric, Dairy Producer, Byron, NY...........................    31

                               Panel III

Bush, JoAnne, Mayor, City of Lake Village, Arkansas..............    48
English, Hon. Glenn, Chief Executive Officer, National Rural 
  Electric Cooperative Association, Arlington, VA................    46
Sternberg, Dennis, Executive Director, Arkansas Rural Water 
  Association, Lonoke, AR........................................    50
                              ----------                              

                                APPENDIX

Prepared Statements:
Bush, JoAnne.....................................................    58
Clark, Gen. Wesley...............................................    62
English, Hon. Glenn..............................................    69
Sternberg, Dennis................................................    73
Tenny, Dave......................................................    77
Tonsager, Dallas.................................................    95
Zuber, Eric......................................................   109
Document(s) Submitted for the Record:
Nelson, Hon. E. Benjamin:
    Written letter (with attachments) to Hon. Thomas J. Vilsack, 
      Secretary, U.S. Department of Agriculture, Washington, DC..   114
Question and Answer:
Chambliss, Hon. Saxby:
    Written questions for General Wesley Clark...................   120
    Written questions for Dallas Tonsager........................   125
Baucus, Hon. Max:
    Written questions for Dallas Tonsager........................   123
Bennet, Hon. Michael:
    Written questions for Dallas Tonsager........................   129
Grassley, Hon. Charles:
    Written questions for Dallas Tonsager........................   126
Harkin, Hon. Tom:
    Written questions for Dallas Tonsager........................   124
Thune, Hon. John:
    Written questions for Dallas Tonsager........................   132
Nelson, Hon. Ben:
    Written questions for Hon. Thomas J. Vilsack.................   125
Clark, Gen. Wesley:
    Written response to questions from Hon. Saxby Chambliss......   120
Tonsager, Dallas:
    Written response to questions from Hon. Saxby Chambliss......   125
    Written response to questions from Hon. Max Baucus...........   123
    Written response to questions from Hon. Michael Bennet.......   129
    Written response to questions from Hon. Charles Grassley.....   126
    Written response to questions from Hon. Tom Harkin...........   124
    Written response to questions from Hon. John Thune...........   132



                     EMPOWERING RURAL COMMUNITIES,
                      THE STATUS AND FUTURE OF THE
                      FARM BILL'S ENERGY AND RURAL
                          DEVELOPMENT PROGRAMS

                              ----------                              


                        Wednesday, July 21, 2010

                              United States Senate,
           Committee on Agriculture, Nutrition and Forestry
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:07 a.m., in 
Room SR328A, Russell Senate Office Building, Hon. Blanche 
Lincoln, Chairman of the Committee, presiding.
    Present: Senators Lincoln, Stabenow, Nelson, Klobuchar, 
Gillibrand, Chambliss, Roberts, Johanns, Grassley, and Thune.
    Chairman Lincoln. Good morning. The Senate Committee on 
Agriculture, Nutrition, and Forestry will now come to order. I 
am certainly pleased to hold our second hearing as we look back 
at the provisions of the 2008 Farm Bill and look forward to 
writing the 2012 Farm Bill.
    Today, we'll be discussing two very timely and interrelated 
issues, energy and rural development.
    Welcome, Senator Roberts.
    Senator Roberts. Where do you want me?
    Chairman Lincoln. Yes, wherever you'd like to sit. We're 
just glad you're here.
    Senator Roberts. Want to change places?
    [Laughter.]

  STATEMENT OF HON. BLANCHE L. LINCOLN, U.S. SENATOR FROM THE 
    STATE OF ARKANSAS, CHAIRMAN, COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    Chairman Lincoln. Maybe not. We have done that.
    As always, I am enormously honored and grateful to be 
joined by my good friend, Senator Chambliss, who I know shares 
all of our passion and commitment for rural America and pleased 
that he is here.
    We have a number of excellent witnesses that we will hear 
from today.
    I would like to extend a very special thanks to a fellow 
Arkansan, General Wesley Clark, Mr. Dennis Sternberg, and Ms. 
JoAnne Bush for joining us today. And it is also, again, a 
special thanks to Undersecretary Dallas Tonsager for his 
attendance and input.
    As a farmer's daughter and a product of rural Arkansas,
    I am honored to Chair the Committee on Agriculture, 
Nutrition, and Forestry. 48 percent of our state's population 
lives in rural areas. Arkansans now know firsthand that rural 
America is often the first to feel the impact of economic 
downturns and is often, unfortunately, the last to reap the 
rewards of the economic recoveries.
    The development and deployment of renewable sources of 
energy produced in rural America presents an enormous 
opportunity to change that trend. It is critical that we 
effectively utilize every tool at our disposal to create jobs, 
put our economy back on track, and reduce our dangerous 
dependence on foreign oil.
    It is not a coincidence that the majority of the energy 
programs that we will hear about today are implemented by the 
Rural Development Department at USDA. A flourishing renewable 
energy industry will bring good paying jobs and investment to 
Arkansas and rural communities all over our country. The Farm 
Bill energy programs provide a model which should be the basis 
of our national energy policy. We need to develop biofuels and 
biomass energy policies that work for rural America. And in May 
of this year, just one month, we sent $27.5 billion overseas to 
purchase oil, much of that to hostile foreign governments. 
Imagine, just imagine, if we had invested $27.5 billion in 
renewable and clean energy development in rural America every 
month, what we could do.
    In Arkansas, if we used only a fraction of that money to 
build just ten cellulosic ethanol facilities, we could create 
2,090 long-term jobs, generate $216 million in economic 
activity, and reduce Arkansas' need to import oil by 50 
percent. I do not know about you all, but that sounds like a 
great, great, story and a good, sound investment.
    Our farmers, ranchers, and foresters are ready for the 
challenge. They are innovative and eager to expand their role, 
to also provide an inexpensive, sustainable, and safe supply of 
renewable fuel and energy. However, our producers and forest 
land owners need new markets and new opportunities to help 
ensure prosperity in our rural communities, and that is why we 
must ensure that the programs we have enacted in the Farm Bill 
are achieving this vital goal. We can find beneficiaries of the 
Farm Bill's energy initiatives all across this great country, 
and I know there are a number of success stories in Arkansas, 
for example, Future Fuels Chemical Company in Batesville. It 
employs about 530 people and provides expanded markets for our 
farmers in addition to providing bio-based chemicals, products, 
and biodiesel.
    Arkansas has also greatly benefited from the Rural Energy 
for America Program, the REAP program. These grants provide 
funding for projects like weatherization of poultry houses, 
energy efficient grain dryers, and the installation of solar 
panels to provide renewable energy.
    That is the positive side. I do not want my colleagues or 
certainly Undersecretary Tonsager to think that I am looking at 
these programs through rose-colored glasses. We have a long way 
to go.
    Programs such as the Biomass Crop Assistance Program, the 
BCAP, have been mired with controversy throughout their 
implementation. The Biorefinery Assistance Program has also 
been difficult and slow to get off the ground. And I look 
forward to continuing my work with Secretary Vilsack and 
Undersecretary Tonsager to find solutions to the problems with 
these programs and others that we might uncover at this hearing 
today.
    The rural development initiatives of the Farm Bill contain 
a number of opportunities that provide our rural communities 
with the tools that they need to thrive and create new jobs.
    I have seen firsthand how critical rural development 
initiatives are to the economy of my home state. Recently, I 
worked with USDA to secure 55 million in funding to help the 
Ozark Mountain Public Water Authority in Arkansas provide safe, 
potable water to 22,000 residents in north central Arkansas. I 
know it is very hard for people here to believe that there are 
so many communities throughout our Nation that still do not 
have safe water.
    In addition to providing residents with safe drinking 
water, the construction of this project will create nearly 
1,000 jobs in a part of our state that could desperately use 
them.
    USDA's Community Facilities Program, which helps 
communities improve municipal facilities, obtain first 
responder equipment, and build hospitals. It is also a great 
example of a successful initiative that we must foster.
    I know my staff starts to cringe because I mentioned it 
absolutely every time I go into a community--is using that 
Community Facilities Program.
    Rural Development also offers several initiatives that are 
helping to create jobs by providing access to capital to rural 
small businesses. Without critical investments in 
infrastructure, a safe water supply, and affordable housing 
opportunities, it is absolutely impossible for rural 
communities to attract new industries, such as the type of 
renewable energy production opportunities that we will discuss 
today.
    Additionally, we are seeing that broadband Internet service 
is a requirement for many businesses when they consider where 
to locate. Rural America will not be able to compete with the 
rest of the country without. I know that there has been 
tremendous interest in broadband funding, and I plan to hold a 
hearing specifically on the Broadband Initiative Program in the 
near future. So, I hope my colleagues will know that we will 
definitely focus in on that specifically.
    The Farm Bill is the most important legislation that we 
consider on behalf of rural America, and the programs we will 
discuss here today are the key to creating jobs, rebuilding the 
rural economy, and putting our country on a path to ending our 
dependence on foreign oil.
    As Chairman, nothing is more important to me than 
empowering our rural communities and ensuring that future 
generations have the opportunity to enjoy the quality of life 
that rural America offers.
    Again, I want to thank all of you for being here. I would 
love to turn to my ranking member, Senator Chambliss, for his 
opening statement, and then we will move to our panel.

STATEMENT OF HON. SAXBY CHAMBLISS, U.S. SENATOR FROM THE STATE 
                           OF GEORGIA

    Senator Chambliss. Well, thanks, Madam Chairman, first of 
all, for your commitment to agriculture, your friendship, and 
your leadership here, and we are convening this hearing to 
review the implementation--continue to review the 
implementation of the 2008 Farm Bill.
    Last month, we discussed commodity programs in Title I of 
the Farm Bill and had a very good discussion about what is 
working well for our farmers and ranchers and where we can 
improve with the next Farm Bill. Today, we will examine energy 
and Rural Development Programs that we authorized in the last 
Farm Bill. As we hear the perspectives of the USDA and our 
witnesses who are on the ground everyday using these programs, 
I look forward to gaining an understanding of how these 
programs are working, and also where we have room for 
improvement. Our goal should be to ensure that the Farm Bill 
programs are helping deliver new opportunities to our citizens 
through the rural development and energy tools in order to keep 
a strong foundation for rural America. Undoubtedly, the grant 
and loan programs administered through the USDA Rural 
Development mission area are a crucial part of the support 
mechanism the federal government uses to complement private 
sector investments and local efforts.
    It is important we reflect on how these programs are 
working based on the 2008 Farm Bill changes before we begin to 
consider the next one.
    Beginning back in the 1930s, the Department of Agriculture 
has been aiding rural families struggling with the lack of 
basic services, such as clean water and electricity. Over time, 
Rural Development efforts at USDA have expanded to support a 
wide array of programs, including telephone service, broadband 
infrastructure deployment, small business assistance, renewable 
energy and advancement, as well as value added agriculture 
product development, just to name a few. While the conditions 
in rural America have changed a great deal over these last 80 
years, these geographically large but population small rural 
economies are still at a disadvantage to urbanized ones.
    Today, we know that fewer people are farming in rural areas 
and they are seeking sources for off-farm income. Additionally, 
these areas are not keeping pace with the population growth in 
the rest of the country. During the past decade, the U.S. 
population has increased by a national average of 9.1 percent, 
but rural counties gained only 2.9 percent. Couple this with 
dire state budget shortfalls and the broader global economic 
conditions, and you quickly realize how rural areas are 
struggling to create jobs, provide sufficient services and 
avoid out-migration. As we respond to these obstacles, we must 
ensure that those who live and work in rural America, our 
agriculture producers are prepared to meet the continued 
demands of the 21st century. They deserve a vibrant rural 
community in which to raise their families and appropriately 
targeted Rural Development Programs are essential to community 
development. Whether lowering input costs through increased 
energy efficiency or providing unique marketing opportunities 
for the commodities they produce, Rural Development Programs 
should benefit those who nurture our rural communities, namely 
farmers and ranchers.
    I believe that the future success of rural America is 
dependent on maintaining a strong agriculture sector in 
conjunction with vibrant rural economic development efforts. 
Chairman Lincoln. Thank you, Senator Chambliss. We do have 
three panels that we are anxious to hear from today. In the 
interest of time, if our Senators have any opening statements, 
we would certainly like to request them to be submitted for the 
record, or if you would like to make a brief one, we are more 
than welcome to hear from you.
    Senator Roberts. I will do it later.
    Chairman Lincoln. Thank you, sir.
    We would like to now welcome Undersecretary Tonsager to the 
Committee today.
    Prior to rejoining USDA, Mr. Tonsager served on the Board 
of Directors for the Farm Credit System Insurance Corporation 
and the Farm Credit Administration. In 1993, then-President 
Bill Clinton selected Mr. Tonsager to serve as USDA South 
Dakota State Director for Rural Development.
    Welcome back to the Committee. We are glad to have you. Mr. 
Undersecretary, your written testimony will be submitted for 
the record, and we certainly would like to ask that you keep 
your remarks to five minutes. So, welcome to the Committee.

 STATEMENT OF DALLAS TONSAGER, UNDERSECRETARY, U.S. DEPARTMENT 
                OF AGRICULTURE RURAL DEVELOPMENT

    Mr. Tonsager. Thank you, Madam Chairman, member Chambliss--
Senator Chambliss. We appreciate this opportunity to be here 
today.
    We also want to express our appreciation for the close 
collaboration we have had in working together on rural 
development issues with you all in this last year-and-a-half 
since our beginning of many of us coming on board with the new 
Administration.
    We share a deep commitment to rural America and an 
understanding of its unique challenges and opportunities, and 
we look forward to a continued partnership with you to bring 
those opportunities to fruition.
    We are committed to the future of rural communities. Rural 
America includes some of the Nation's most dynamic, rapidly 
growing areas, but the aggregate statistics tell another story. 
Rural America, on average, is older, less educated, lower 
income than the Nation as a whole, with an average per capita 
income of $11,000 below the urban and suburban averages. The 
unemployment and poverty rates are higher. Nine out of ten of 
the Nation's persistent poverty counties are rural. Assisting 
these communities in building a better future is a high 
priority.
    A second priority is renewable energy for environmental, 
economic, and national security reasons alike, we, too, wish to 
diversify our supply of fuel, reduce our dependence on foreign 
oils, reduce our carbon footprint, and develop our abundant 
renewable energy resources. This is an urgent national need, 
and because renewable energy is largely rural energy, it is 
also an historic opportunity for investment, jobs, and wealth 
creation in rural communities.
    We are committed to these objectives, and we are grateful 
to the Congress for its vision in the 2002 and 2008 Farm Bills 
which gave USDA tools to support this vital national effort.
    USDA's strategic plan published earlier this summer by 
Secretary Vilsack focuses squarely on these challenges. The 
Secretary has identified five pillars to support a new 
foundation for growth and opportunity in rural communities.
    First, the development of new markets to provide additional 
income opportunities for farmers and ranchers by promoting 
exports abroad, and supporting domestic, local, regional food 
systems that keep wealth in rural communities.
    Second, to provide new opportunities for prosperity and 
small business growth by investing in rural broadband access.
    Third, creating green jobs that cannot be exported by 
promoting the production of renewable energy in communities 
across the country.
    Stimulate economic--rural economies by promoting outdoor 
recreation like hunting, fishing, and other activities that 
create jobs, as well as conserving the national resources we 
cherish, and creating income opportunities for rural landowners 
by facilitating the creation of ecosystem markets that reward 
them for their taking care of the environment.
    It is a challenging agenda. In the short-term, the 
implementation of the last Farm Bill has coincided with the 
most severe economic crisis since the 1930s, and the response--
the Congress provided an additional $4.3 billion in our budget 
authority to support an estimated $21 billion in investments in 
broadband, single family housing, community facilities, water 
and waste services, and business development.
    As of July 2, 2010, Rural Development has committed over 
$17.4 billion of this total. My written testimony details the 
numbers. We are on track to fully obligate our Recovery Act 
dollars by September 30th.
    In the longer term, however, I am convinced that rural 
America is an entering an era of remarkable opportunity. Rural 
Development's job, whether it is broadband or renewable energy 
or local food systems or a provision of a central 
infrastructure and community services is to ensure that rural 
communities continue to receive the help they need to compete 
and thrive.
    So, in closing, as we look forward to the 2012 Farm Bill, 
let me briefly note some key areas for further discussion.
    First, our ability under our--to provide a flexible mix of 
loans and grants to broadband applicants have been extremely 
important. The Farm Bill Loan Program does not have this 
flexibility. That was an issue that was discussed at length 
during the consideration of the last Farm Bill, and it is a 
question that we would surely like to be revisited.
    Secondly, we would like to encourage--to be eager--we would 
be eager to discuss with you options for streamlining and 
rationalizing our program delivery. Rural Development 
administers over 40 programs, many of them are small and 
overlapping. This is a complex issue. We understand that 
members often have very targeted objectives in mind in crafting 
program authorities, but there may well be significant 
administration efficiencies to be gained through consolidation, 
provided that there is no negative impact on services, and we 
are open to this discussion.
    Another important initiative for the Obama Administration 
is regionalism. We are encouraged that the President has chosen 
to seek a pilot funding for regional initiatives in his 2011 
budget, and we look forward to continuing this discussion as we 
move towards the 2012 Farm Bill.
    Finally, we expect the definition of rural will be as 
contentious in the next Farm Bill as it was in the last. We 
have, in draft, a report to Congress on this question, and we 
will submit it to you later this summer.
    It is easy to describe the difficulties with the existing 
definitions of rural; the challenge is to identify a different 
definitional scheme that does not create as many problems as it 
solves. It is a difficult question, as the Committee fully 
appreciates, and I know that we will have extended discussions 
with you as we move forward.
    These are the sensitive questions on which we work 
collaboratively with stakeholders and Congress before proposing 
significant changes. I am glad that the Committee is beginning 
this discussion now in order to provide time for thoughtful 
consideration. I know that you share our commitment to 
improving our service for rural America, and I welcome your 
thoughts, comments, and questions as we begin this discussion.
    Thank you, Madam Chairman.
    [The prepared statement of Mr. Tonsager can be found on 
page 95 in the appendix.]
    Chairman Lincoln. Thank you, Undersecretary Tonsager, for 
your testimony. I will just begin on my questions.
    But first, we would just like to, again, reiterate, as I 
mentioned to you earlier this morning, there is an unbelievable 
enthusiasm and excitement in rural America about the role that 
they have to ply in both lessening our dependence on foreign 
oil and being able to reach their potential in adding both to 
the revitalization of our economy, and really solving some of 
the challenges that we face in this country, and I hope that we 
will not waste that enthusiasm or excitement or potential, but 
really work hard to make sure that we make available to them an 
environment through their government that will allow them to 
really play a strong role.
    First, I would just touch on the fact that Congress has 
authorized two renewable fuel standards: The first focused on 
corn-based ethanol, while the second aimed to increase 
production of advanced biofuels from non-food sources. I 
believe we have got to move forward on advanced biofuels, and 
doing so will avoid our fuel needs competing with our food 
supply, which is obviously an issue.
    Unfortunately, we are falling short, far short, of meeting 
our advanced biofuel targets. The advanced biofuel industry 
faces many hurdles, including an inability to acquire debt to 
finance projects. With this problem in mind, we authorized the 
Biorefinery Loan Guarantee Program in the 2008 Farm Bill. I 
have been very disappointed that, two years later, only two 
loan guarantees have been issued under the loan guarantee 
program. I was hoping you could share with the Committee what 
measures you are taking to increase the participation in that 
program, and also would be interested in hearing about 
additional measures that you are taking through other Farm Bill 
programs to help us achieve renewable fuel standards.
    Mr. Tonsager. Yes----
    Chairman Lincoln. Those targets, particularly.
    Mr. Tonsager. I agree with you regarding the enthusiasm. I 
think it is a very exciting time for all of us.
    I think, if I could, for--just briefly talk about the 
advanced biofuels in general, I think we are focusing on a 
number of fronts, because what we believe is the private sector 
will be the ones that build that biofuels industry. Everything 
we can do to build confidence in that new industry across the 
board will increase our opportunity to get people to invest and 
to lend towards the creation of that industry. And I think we 
are trying to learn from some of the things we learned from in 
the ethanol industry when that was successfully grown earlier 
in this decade and the last decade.
    As we look at the challenges we are faced with right now, 
there is a belief--there is not the level of belief in 
technology and some of the other components associated with the 
industry. So, we see our goal across the board is to build 
confidence and build confidence in opportunity. Part of that, 
of course, is the 9003 program and the loan guarantees 
associated with it.
    We have had 17 applications for the program. Of those, 10 
had to be rejected because they did not have lenders associated 
with them. So, at this point, we are seeing a holding back, I 
think, on the part of the lending community that is 
significant, and I think it has a lot to do with the recession 
and the difficulties of the recession.
    So, as we move forward, our strategy is to look for the 
technologies, help prove those technologies, demonstrate the 
usableness of those technologies, make the case for the 
viability in regions across the country about the economics of 
the situation. We were excited to have in our door the other 
day the airline industry who has a 20-billion gallon demand for 
jet fuel and wants to get it from all green sources.
    The Department of the Navy wants to get 50 percent of their 
energy from green sources in the next ten years.
    So, I think the more we can project to the community, to 
the investors, to the lenders, to farmers, producers that this 
is not just a small opportunity, it is a very large one the 
more excitement we can get.
    So, we are disappointed, too, in the response to the 9003 
program. We have taken for public comment, we are considering 
those comments, and considering adjustments to the program that 
could help us attract lenders.
    Chairman Lincoln. Great. Well, I think confidence is built 
by certainty, and I know certainly the idea of the tax 
extenders that we are working on right now for biofuels is a 
critical part of making sure those investors are feeling 
confident of the certainly of where we are going to be going 
and what we are going to do with that.
    So, and I know we can make jet fuel out of chicken litter, 
and I know we have a lot of poultry litter, so--just briefly, 
the American Recovery and Reinvestment Act provided 
Environmental Protection Agency the authority to use a 
significant portion of its funding for water projects in the 
form of loan forgiveness without regard to income or population 
of the area to be served by those projects. This authority was 
not provided to the rural development programs. USDA's current 
system requires a community to be within 81 percent to 99 
percent of the state's non-metropolitan median income to 
qualify for the immediate interest rate or to be able to 
receive that grant money.
    I am certainly not proposing a widespread change to Rural 
Development water and wastewater programs, but it does seem to 
me that this structure we have today creates barriers for some 
real rural communities. I know I have seen it in my state, and 
I am sure others have, too. They are having a very difficult 
time in the debt servicing large loan payments without any 
grant to reduce that cost, and just would certainly ask that, 
if you think that the Committee should provide you with 
additional statutory authority to be able to serve these 
communities like those in my state that really do need some 
assistance but are not being able to find it because of that 
lack of authority.
    Mr. Tonsager. We would be happy to explore it with you, of 
course. We have, in spite of the RF funds, we still have a $3 
billion backlog on funding for water and waste systems that of 
course we are wanting to address.
    So, I think this subject, as well as the rural definition 
subjects, are going to merit a lot of our discussion time on 
how we serve some of those communities that sit on the edge, so 
to speak, of our program service area. So, we would be happy to 
discuss that with you. We would be interested in those 
authorities, but of course we would want to strike the balance 
necessary to make sure that the communities--low-income--have 
their opportunities to get the grant level they need for 
affordability.
    Chairman Lincoln. That is great. Well, I will look forward 
to that discussion and certainly want to seek it out in a 
balanced way. I just had a little bit of concern that EPA was 
having that authority and you were not.
    Mr. Tonsager. I appreciate that.
    Chairman Lincoln. So, we want to make sure we look to it.
    Thank you.
    Senator Chambliss.
    Senator Chambliss. Thanks, Madam Chairman.
    Mr. Undersecretary, I was visiting with one of my rural 
electric co-ops not too long ago, and the comment was made by 
the manager of that co-op that they are in a fast growing area 
of our state and they are a participant with some other co-ops 
in the construction a new coal-fired power generating plant 
that was having some problems getting off the ground because of 
environmental challenges and whatnot but now, thank goodness, 
they are underway. But his comment that was important to me was 
that, if we do not get this plant up and running, then we have 
got a problem and we are going to be limited in the short term, 
before the new nuclear facilities that are under construction 
that will not be coming on line for several years--and if we do 
not get this coal-fired plant going, then we are not going to 
be able to serve our community. We are simply going to have to 
turn-- particularly commercial--customers away. So, that is 
beginning to be more and more of a concern, I think, around the 
country.
    The 2008 Farm Bill directed the Secretary to conduct a 
study on electric power generation needs in rural America, and 
that study explains that the demand for new generation capacity 
in rural areas is increasing just as it is in rural areas, and 
that rural cooperatives will need to double generation capacity 
by 2020 to meet the projected growth.
    How do you envision this demand being met to ensure that 
rural America continues to have a reliable source of electric 
power, and can you describe how you expect the RUS Loan Program 
to function in helping to meet this demand, given the current 
limitations on that program?
    Mr. Tonsager. We, of course, are anxious to make sure, in 
our work, that every time that somebody throws a light switch 
on, the lights come on, and I think that is a measurement for 
all of us.
    We are also anxious in our work to make sure affordability 
continues to exist for everybody who uses rural electric power. 
We want to explore all areas.
    We do have limitations on the things we can do at this 
point. We have been working closely with the National Rural 
Electric System and appreciate very much their skill sets 
relative to this.
    I think the nearest-term subject is efficiencies, and I 
know I have had several discussions on this subject, and there 
are opportunities within our programs regarding helping with 
the efficiencies, and the National Rural Electric System has 
done a fabulous job in the past working with their customers to 
make that happen.
    We want to use our resources, the authorities given to us 
by Congress, to the fullest extent we possibly can to make sure 
there is adequate generation capacity. The targets regarding 
environmental and carbon discharge, of course, are part of the 
dialogue we have to have going forward.
    Renewable energies, which we are doing quite--a little of--
are proven technologies that are funded through the RUS 
Program. So, we typically work with wind, solar, and some of 
the technologies that are clearly proven and they are the only 
ones we can finance through the direct loan program, and we 
hope to build on those as part of the supply chain for rural 
America.
    Senator Chambliss. I know you are working next year's 
budget, and I certainly hope that we are going to see rural 
America given its due consideration from the standpoint of 
electric generation and distribution.
    The American Recovery and Reinvestment Act provided over $7 
billion to help bring broadband to parts of the country, rural 
and otherwise, that are still underserved. Once the Recovery 
Act money is obligated, how do you plan to ensure that our U.S. 
broadband loans made through the Farm Bill are not overlapping 
with stimulus awards, and when do you intend to fulfill your 
obligation to implement the Farm Bill Program?
    Mr. Tonsager. The--we have a network of employees that 
directly go out and check out the applications provided to us 
on the broadband stimulus package. They are to test and look 
for the overlap potential in each geographic area where we have 
proposed projects. We believe that will help minimize the 
overlap risks that we may have in those areas.
    We anticipate on the broadband Farm Bill Program having 
rules out by this fall, and that is the goal that we have on 
that area. We want to keep moving forward and provide the 
services that the broadband program has in the Farm Bill, and 
continue to seek applicants that might find that program 
useful.
    During the course of the last 18 months, of course, people 
have focused their attention on the ARRA package broadband 
program that has been--has lots of grant in it.
    Senator Chambliss. We have a constant problem of 
competition between those broadband companies that are funded 
by RUS and other private sector companies that are not, that do 
not have access, and what kind of focus are you giving to that 
particular issue as we move forward?
    Mr. Tonsager. Well, again, we are seeking to verify the 
applicants' claims regarding the availability under the 
requirements of the Act to make sure that their overlap is 
minimized. And since we do a field operation of Rural Electric 
employees, particularly, and RD staff, we are trying to verify 
the claims before approving any particular grant that it does 
meet the requirements.
    Senator Chambliss. Well, as you go through that, you are 
going to have a lot of applicants that, frankly, meet the 
requirements, but you have a rural county, a metro county, a 
rural county, and in order to get from rural county to the 
other a provider goes through that more urbanized county, and 
that is where the conflict comes in, and you need to get real 
focused to that and direct some attention on how we are going 
to deal with that. We need to make sure that we get the 
broadband provided to truly rural areas, but when it has a 
negative impact on the private sector and their capital 
investment, then it becomes a major problem. So, I urge you to 
take a close look at that as we move ahead.
    Mr. Tonsager. Yes, sir.
    Senator Chambliss. Thank you, Madam Chairman.
    Chairman Lincoln. Thank you, Senator Chambliss.
    Senator Thune.
    Senator Thune. Thank you, Madam Chair.
    And I want to thank Senator Chambliss, too, for putting 
together this hearing and focusing on the 2012 Farm Bill. The 
last Farm Bill, I think, was really good in terms of looking at 
energy issues, and the energy title in there has helped us 
advance in a lot of respects.
    And I appreciate the discussion about the loan guarantee 
program, because that is something that is critically important 
in my state, too.
    And I would say to Undersecretary Tonsager that I have 
heard from a lot of cellulosic ethanol companies that one of 
the difficulties in participating in the federal loan guarantee 
program, either at USDA or Department of Energy is because many 
lenders require the applicant to have this off-take agreement 
which is a contract to sell fuel in the future.
    And I guess my question would be, how can we help potential 
applicants overcome that particular barrier to participation in 
the loan guarantee program.
    Mr. Tonsager. The off-take agreements, of course, have 
proven themselves generally in the ethanol industry in making 
sure that the credibility--or the credit became available for 
the creation of the projects. I think we do need to look at the 
term of the off-take agreements, because quite often we are 
looking at a very long term for the off-take agreements, and 
consider that.
    It is our hope that, as we continue to see interest by 
parties such as the airline industry, that those longer-term 
agreements could potentially be provided.
    I do think we need to look at the market part of the 
ethanol industry, as I am reminded quite often, if we do not 
grow the opportunity for consumers to access biofuels, we are 
going to be very limited in what we can do going forward in the 
industry. So, I think part of the off-take agreement discussion 
would be, as the market side, and making sure that access can 
exist where we can substantially grow the industry, will give a 
chance for those off-take agreements to be possible.
    Senator Thune. And which leads me to my next question, but 
do you believe that the EPA, if the EPA were to approve E15 
that lenders would be more likely to participate in the program 
to provide financing to some of these cellulosic ethanol 
plants?
    Mr. Tonsager. I would hope so. I think it would be a 
general sense of growth has to be provided. They will look for 
trends, having regulated the farm credit folks and being 
involved with other lenders, they are going to look for that 
sense of growth that exists in being a decision that would 
enlarge the percentage of Blend is going to be important, but 
also the mechanical part of making sure we can offer that to 
consumers.
    Senator Thune. From your perspective, what impact is the 
E10 Blend having on the renewable fuel industry and in 
agriculture in general? I mean, how important is it that we get 
to E15 and get there soon?
    Mr. Tonsager. I think it is very important that we grow 
that market, and I think that mix, that blend mix, is going to 
be critical to that, yes.
    Senator Thune. As you know, the EPA is delaying that 
decision--I mentioned this to Secretary Vilsack when he was in 
a couple of weeks back, and what is USDA's role in that 
decision and how actively are you all advocating for getting 
the higher blends approved and trying to bring EPA around to 
what many of us agree is the right conclusion with regard to 
higher blends?
    Mr. Tonsager. Certainly, the Secretary has been one of the 
prime advocates, and I agree with him in that advocacy.
    Senator Thune. Do you believe that our federal forest lands 
have the potential to provide a source of biomass for energy 
production in the U.S.?
    Mr. Tonsager. I do. I think there is opportunity and I hope 
that there becomes flexibility available for us in using 
particularly the waste material associated in the forest lands.
    We are--we do have projects, particularly one project, that 
is looking at wood base--or is developing for wood base to 
ethanol production, and I think there is also an opportunity in 
electrical generation in some areas of the country where we can 
have that capacity for generation to be used for that material.
    Senator Thune. Do you believe that the definition of 
renewable biomass in the 2008 Farm Bill strikes the right 
balance between meeting our energy needs and also ensuring that 
we are managing our forests in a responsible manner?
    Mr. Tonsager. Yes.
    Senator Thune. Does that existing definition of biomass--
would it be helpful, too, if that were applied to the renewable 
fuel standard?
    Mr. Tonsager. I am sorry, I have not contemplated that, 
exactly, but it would seem to make sense to me, yes.
    Senator Thune. Good. We have had a concern for some time 
that the definition be consistent in federal law so that some 
of these projects that might be able to use biomass that is 
located in our federal lands would be useful in terms of 
generating biofuels in this country.
    And there has been an, as you know, I think, ongoing debate 
about that up here, various Committees of jurisdiction warring 
with each other about how best to define that. We thought the 
Farm Bill struck the balance and would like to see that applied 
more generally and obviously applied to the RFS.
    Let me ask you one last question. There has been a lot of 
interest in the Biomass Crop Assistance Program or the BCAP 
program. Can you provide the Committee a general sense of what 
types of projects have been approved to participate in BCAP, 
how many of those are related to transportation fuel, and what 
would be the budget implications if the program were more 
narrowly tailored to biofuels?
    Mr. Tonsager. I am sorry; it is not my program area----
    Senator Thune. I understand that. I know it is an FSA 
program, but----
    MR. Tonsager. From our perspective, I would just generally 
say we are interested in every opportunity to get the biomass--
get biomass as an energy source off the ground, and the BCAP 
program is a real opportunity to assist with that, but 
unfortunately I do not have enough information to give you a 
good answer. We could certainly, as part of our response to you 
all, get some information from the FSA.
    Senator Thune. Okay. I appreciate that. Thank you.
    Thank you, Madam Chair.
    Chairman Lincoln. Thank you, Senator Thune.
    Senator Roberts.
    Senator Roberts. Thank you, Madam Chairman, and the Ranking 
Member Chambliss, who just returned, for calling this hearing 
to focus on our rural communities. And I would say anybody 
interested in rural development, including the Undersecretary, 
should be very thankful that we have your leadership, along 
with Saxby. You not only championed the production of 
agriculture, all of agriculture, but also rural development, 
and I thank you for that.
    I want to thank especially the witnesses. Dallas, thank you 
very much for coming up. I know you are a busy man.
    And General Clark, who is over there, holding up the 
bookcase, and Glenn English, who is protecting our flank over 
here in the audience.
    General Clark, also in the Armed Service and Intelligence, 
I was very privileged to meet with him, work with him, when he 
was the SAC here of Europe and protecting our national security 
in fine fashion with forceful leadership.
    Thank you, sir.
    And Glenn, I am sorry you left the Congress. We had a lot 
of English-Roberts amendments in the Farm Bills at that time 
that were past. Then you left before we could have any Roberts-
English amendments. But anyway, thank you for being here.
    Now, with all of that, I hope that does not count against 
me.
    Before I ask my question of the Undersecretary, I just want 
to spend a moment painting a picture of the challenges that we 
face in Kansas, and that many of our rural communities face, 
and it is along the lines of the excellent report and summary 
that the Chairman did in regards to Arkansas.
    I might just say, starting off, that the best rural 
development program we have--and this is a quote from former 
Congressman English on the floor of the House at one time-- he 
said, the best rural development program we can have is farm 
income, and I think that is something that we ought to always 
remember.
    But at any rate, of candidates, 627 cities, only a half a 
dozen, half a dozen, six, have a population of 50,000 or more 
residents, and less than twenty reach the 20,000 mark. That 
means 600 candidate cities and towns meet some definition of 
rural with regard to federal programs. So, when you say rural, 
obviously you are talking about candidates.
    I think I have been to all of these communities for 
listening tours. We not only go to the grassroots, we go to the 
grass weeds, and we have enjoyed some of the best coffee, 
biscuits, gravy, and chicken-fried steak that you cannot get in 
this town that you will ever taste.
    I appropriate the Undersecretary's testimony, as he points 
out our rural Americans are struggling. While urban areas fret 
over opportunities for growth, rural communities desperately 
seek relief from out-migration of our most precious resource, 
and that is our young people, and the loss of businesses.
    And I also appreciate the Undersecretary's comments about 
rural communities working together. Your testimony states, ``A 
holistic multi-community and multi-county approach will help 
address these challenges.''
    I am going to go a little bit further, and Madam Chair, I 
think we need a multi-agency coordination, if that has to be an 
acronym, it would be a MAC, and we need a big MAC--and I do not 
know if we need to have an acronym for that; everything else 
does, so we might as well do that.
    But multi-agency coordination in regards to rural 
development and the preservation of our rural communities, Mr. 
Undersecretary, over the course of the last year, we have had 
every community, every grower organization, every farm 
organization, anybody interested in lending, anybody interested 
in rural development comes through my door, and I know that is 
the case with every member here, and they always bring forward 
the same concern. They are very positive in regards to rural 
development programs, but they are very concerned if not very 
frustrated over burdensome and over-reaching government 
regulations.
    Senator Chambliss touched on this in regards to the clean 
energy coal plant they are trying to get started down in 
Georgia. Your testimony points out that 95 percent of rural 
income is earned off the farm, yet recently proposed government 
actions threaten, in my view, the viability of these off-farm 
opportunities.
    Now, let me just name a few: non-science based standards 
over particulate matter or what some call rural fugitive dust. 
Rural fugitive dust is back. In the 1970s-- actually, in the 
1980s, when I was a member--I finally tracked down the person 
in charge of rural fugitive dust. She was from Massachusetts--
where else?--and so, at any rate, I finally, out of 
exasperation, said, what do you want us to do? She said, well, 
you have all these gravel roads. Why don't you get water trucks 
to go out at 10:00 in the morning and 2:00 in the afternoon and 
spray the gravel roads? I indicated I was very favorable to 
this program if she would just supply the trucks and the water. 
But it is back: spray drift, atropine, EPA's potential carbon 
rural-- KFO, the definition of navigable waters--here we go, 
again-- playa lakes and very small farm ponds in Nebraska, 
Kansas, and--I mean, these are ponds where no self-respecting 
duck would ever land, and yet they are navigable waters; that 
is just ridiculous. And then we have levy certifications and I 
could go on and on and on and on.
    So, Mr. Undersecretary, your agency in charge with helping 
improve the economy and quality of life in rural America, with 
so many rural communities concerned that your sister agency's 
actions--and I am talking about the Department of Labor and EPA 
primarily--also the White House, for that matter, result in the 
direct opposite of your goal. There are cross-purposes there, 
and that does not make much sense to me.
    How does the Rural Development Agency work in a multi-
agency fashion to address these concerns? You could sit down 
with Lise over at Labor at Carol at the White House and have a 
cup of coffee. I know the Chairman would love to come, the 
Ranking Member would love to come, I would love to come, if you 
let me in the door. And we are at cross-purposes here. Is there 
some kind of a meeting process that we could have a multi-
agency coordination where you are for rural development over 
here but you are not stopping it over here with all these 
regulations that do not take into account a cost-benefit 
yardstick? There is a benefit yardstick, I know that; there is 
an agenda yardstick, I know that, but the cost part of it is 
the thing that really worries me.
    Now, please forgive me for my rant. If you would like to 
comment, have at it.
    Mr. Tonsager. I guess the only thing I would say is the 
position I want to do with my agency is that it is our job at 
all times to advocate for rural citizens and do the best we can 
to put projects together for them. We want to be a problem-
solving agency and address every problem we can and try and 
deal with it.
    Now, that is maybe a simplistic response to your very 
complex challenges you described, but I think for our agency, 
most of us come from the rural development community. We have 
worked in non-profits, we have worked in lending institutions, 
we want to--and every day----
    Senator Roberts. Yes, but what about the other agencies? I 
am talking about the Department of Labor and EPA with some of 
these regulations coming down that drive our farmers and 
ranchers and farm organizations about half nuts, not to mention 
people on the county commissions and everything else?
    Mr. Tonsager. We do have----
    Senator Roberts. Are you meeting with them at all or----
    Mr. Tonsager. Yes.
    Senator Roberts. Yes.
    Mr. Tonsager. We do meet with them. We do advocate for 
rural development, and we do look--typically, we are looking at 
programs they have that we think can be helpful to the mission. 
And HUD--others have resources that are available, so we try to 
tie together with those in a way that helps us move forward.
    Senator Roberts. Well, I thank you for that, and just say 
that I know the Chairman and the Ranking Member, all of us 
here, will back you up in any kind of forceful leadership that 
you want, anywhere that you think you can have better 
coordination and maybe say, whoa, on some of this stuff so that 
we can stop and say, maybe we can do this another way, but so 
many things just pop out of the woodwork it does not even come 
in the Federal Register. All of a sudden, they wake up one 
morning and they have another mandate or another regulation to 
deal with.
    Thank you for mentioning the President's initiative on 
exports. I hope, in his meetings with David Cameron, that that 
really comes to fruition. I would only remind everybody here 
that we have a Colombian, South Korea, and Panama trade 
agreement that had been languishing for several years. If we 
want to have an initiative, that would be a darn good place to 
start.
    Thank you, Madam Chairman.
    Chairman Lincoln. Thank you, Senator Roberts. And as usual, 
I find myself agreeing with most everything you have said.
    Senator Nelson.
    Senator Nelson. Thank you, Madam Chair.
    And I would like to associate myself with 98 percent of 
what Senator Roberts said.
    Senator Roberts. By the way, how are things in the Big Ten?
    [Laughter.]
    Senator Nelson. Listen, you have never gotten over the----
    Chairman Lincoln. They are terrific.
    Senator Nelson. You have never gotten over the Big Eight, 
so what is this deal about the Big Twelve--Big Six----
    Senator Roberts. I never got over the Big Six, but never 
mind.
    But I mean, are things better in the Big Ten? I know they 
were interested in Nebraska culture, and I just wondered how 
you incorporated that culture----
    [Laughter.]
    Senator Nelson. Our culture is very close to Michigan's 
culture.
    [Laughter.]
    Senator Roberts. I see.
    Senator Nelson. They are big in agriculture.
    Chairman Lincoln. That is right.
    Senator Nelson. What do you have? No, I'm just kidding----
    [Laughter.]
    Senator Roberts. Are you still going to speak to us in Iowa 
and Kansas and Kansas State?
    Senator Nelson. Well, Iowa is in the Big Ten. I am sorry 
about----
    Senator Roberts. Iowa State, pardon me.
    Senator Nelson. Iowa State. Well, sure, we will still 
speak----
    Senator Roberts. What you call the little sisters of the 
poor. Yes.
    Senator Nelson. I have never really made any disparaging 
comments about Iowa----
    [Laughter.]
    Senator Nelson. It is Kansas----
    Senator Roberts. In public conversation, that is true. 
Private, I do not know.
    Senator Nelson. Well, first of all, Mr. Undersecretary, I 
am pleased to see in your opening remarks that you made mention 
of the Rural Micro-Enterprise Assistance Program. As you know, 
I worked with others to get that into the 2008 Farm Bill, with 
the assistance of Senator Lincoln and the support of Senator 
Stabenow. But programs like RMAP are crucial to rural America 
and small businesses which make up 90 percent of all rural 
business, as more than one million rural businesses have 20 or 
fewer employees. And small firms in the rural areas need 
capital to finance startup costs as well as expansion. The 
continued success of these entrepreneurs is essential to 
ensuring that rural communities survive. And I know that you 
share my frustration and the frustration of others around the 
table who--and how long it has taken to get the program 
implemented, and I appreciate the time and energy that you have 
personally dedicated towards that end, and I am glad to read 
that you anticipate announcing the initial awards for loans, 
grants, and technical assistance later this summer.
    But despite the positive steps, I still do have some 
concerns about the Department's interim rule to implement RMAP, 
which I raised in a letter to Secretary Vilsack on June 22nd of 
this year. I am sure that has been shared with you, yes.
    I believe that the interim final rule contains a number of 
requirements and limitations that are nowhere to be found in 
the authorizing statute which, taken together, could increase 
the cost of the program to end users, and would limit the 
availability of RMAP to smaller organizations, especially the 
interim final rule's higher interest rates, lower grant levels, 
and unauthorized limitations and matching requirements.
    In the interest of time, I am going to skip some of the 
specifics and submit my letter that I sent to Secretary Vilsack 
for the record. But I would like to know if the Department is 
addressing the concerns that I have raised in implementing the 
final rule, formulating the final rule. Do you anticipate any 
challenges in resolving the issues with higher interest rates, 
lower grant levels, and unauthorized limitations and matching 
requirements? Do you believe it will have an impact on those 
who will be awarded by RMAP later this summer?
    And I guess maybe the ultimate question is, when can we 
anticipate the final rule being published?
    Mr. Tonsager. Of course, we are in the comment period and 
we have received--or excuse me, we have closed the comment 
period, I believe, and received significant comment from many 
parties, and yes, we will be addressing several of those 
comments that have been provided to us in looking for ways to 
make the program work as well as possible.
    The date, I am not sure we have a timeframe on the exact 
publication date of the rule, so I am sorry I cannot be more 
concise----
    Senator Nelson. Could we anticipate before the end of the 
summer?
    Mr. Tonsager. Do you have any idea?
    Senator Nelson. Before the end of autumn? Before the end of 
winter?
    Mr. Tonsager. Before the end of the calendar year.
    Senator Nelson. Before the end of the year. Well, I 
appreciate you working on it, and taking into consideration 
what we have raised, but it is so frustrating to enact laws and 
have the bureaucracy continue to take a longer period of time 
than I think any of us would have ever anticipated. I know when 
I was Governor we got the legislature to enact similar 
legislation in Nebraska and I know it did not take anywhere 
near as long to get it done then, back in those days, with the 
administration.
    And I know people have seen my frustration with alphabet 
agencies. In the kindest way possible, I would like to say 
this: We have to make sure that the legislation is followed 
more to the letter than to the like of an agency. While I am 
not naive about the Executive Branch, having run an executive 
branch, I am very concerned when the alphabet agencies know 
better and know best and take that approach. No agency is the 
fourth branch of government, and consequently, adding these 
requirements, which were never intended in the legislation, is 
more than implementation. To me, it is less in the field of 
regulating than quasi-legislating. So, I hope that you will 
keep that in mind and not make this legislation that was passed 
in good faith something that begins to work against the very 
groups that we are trying to support.
    I want to associate myself with the remarks of my colleague 
from Kansas when he said about having a coordinating agency as 
it relates to some of the environmental and the other limiting 
requirements that come along to help us. But in this case, 
there are no outside entities that we have to worry about, it 
is on the inside.
    So, in the kindest way possible, please do not try to 
improve this legislation by adding all kinds of requirements 
that take away from the intent. And I hope that the bureaucracy 
does not develop what I consider the ``we be'' attitude: we be 
here when you come, we be here when you go. So, please, please, 
in the kindest way possible, find a way to move this forward 
and not change it dramatically from what we intended to have it 
be.
    Mr. Tonsager. Thank you, sir.
    Senator Lincoln. Thank you, Senator Nelson.
    Senator Stabenow.
    Senator Stabenow. Thank you, Madam Chair.
    And first, thank you for holding the hearings, and we look 
forward to your leadership as we move forward into putting 
together the next Farm Bill. So, we have many challenges and 
many issues that we all share in common. I want to associate 
myself with Senator Thune's comments regarding biomass. I 
realize that is not all under your jurisdiction, but it is 
very, very important that we have definitions--I know the Chair 
shares that, as well--that we have definitions that allow us to 
move forward and benefit from biomass energy opportunities.
    I know, as well, that the Chair has spoken about the 
Biorefinery Assistance Program and the loan guarantee program. 
I want to expand on that by asking you some questions about a 
demonstration grant program, which was also put into the Farm 
Bills, and many of our biofuel companies believe that the 
demonstration grants would have a significant impact on the 
loan guarantee program itself, and on the economy as a whole as 
we pursue energy and oil independence, which we realize is so 
critical.
    The demonstration grants would help startup companies, as 
well as maturing biofuels companies, get the funding they need 
to prove their technologies beyond the pilot scale, and then 
help them get ready for commercial scale opportunities through 
the loan guarantee program.
    So, it is my understanding that the demonstration grant 
program has not been funded yet, and there have been concerns 
about the number of loan guarantees. And so, I am wondering if 
you would see the need for the demonstration grants, and how 
funding the demonstration grants might ultimately help the loan 
guarantee program and increase the number of applicants.
    Mr. Tonsager. We do have a clear understanding as we have 
talked to the numerous groups that have developed projects, and 
I guess the term is ``Valley of Death,'' quite often, where 
they get to the point where they need some more money to 
continue to move forward on projects where we are limited 
currently to financing proven technologies that are ready to 
commercialize. So, we do have a gap in the period involved.
    The funds we have, significant of course, but the scale of 
these plants are very large in a capital investment factor. So, 
we have thus far focused on the loan guarantee program for the 
financing part of this. Many of these plants could be hundreds 
of millions of dollars that we are dealing with in the capital 
costs and the financing side.
    We do believe that the grant program has merit. I mean, it 
certainly--if we are to address that gap, there is some sense 
to that. So, it is a challenge for us on the resources in 
trying to use them to the extent we possibly can.
    Senator Stabenow. But it is my understanding there have 
only been a few loan guarantees; is that correct?
    Mr. Tonsager. Yes, we have received 17 applications for 
loan guarantees; 10 of those, however, did not have lenders, 
which is the critical element in them. So, there were only 7 
potential ones. We have done 2 and we have some more in the 
works.
    Senator Stabenow. Okay. Let me talk about energy for a 
second, because the Rural Energy for America Program, the REAP 
program, I think is a very important step in the Farm Bill to 
focus on energy efficiency with farms and rural businesses, and 
I understand there have been some delays in issuing the funding 
notices, which can sometimes get in the way of producers' and 
small businesses' ability to apply for funding, and I know in 
Michigan we have been working hard to get the word out so that 
people would be aware of deadlines and so on. But the feedback 
that I am getting is that deadlines are too short for some of 
the applicants who need lead time to prepare applications, and 
I am wondering, looking ahead to next year, what we can do to 
accelerate REAP's funding cycle and give producers more time to 
be able to plan and apply for the funding.
    Mr. Tonsager. There are challenges with timeframes, and 
there have been challenges with the implementation of the 
program. We believe strongly in the program; it certainly is an 
important tool, and we are pressing the staff to move forward 
as quickly as we can to get in place the final rules as well as 
to get a funding cycle that works for everybody.
    Well, I would just encourage you to continue to press on 
that, because when we look at our national goals and needs in 
energy efficiency when we look at what we can do to support 
farmers, to support small businesses in rural areas, this is a 
very positive program put in place, and we need to make sure 
that it is working as it should and providing the kind of 
timelines and assistance that will allow people to really 
benefit from this.
    Mr. Tonsager. I would agree. Thank you.
    Senator Stabenow. Thank you.
    Chairman Lincoln. Senator Gillibrand.
    Senator Gillibrand. Thank you, Madam Chairwoman, for 
hosting this hearing. I really appreciate it. It is a very 
important issue for the State of New York, and I am very 
grateful for your leadership.
    Thank you, Mr. Undersecretary, for your testimony.
    What I would like to focus a little bit of time on is the 
biomass definition contained in the Energy Investment and 
Security Act of 2007 and the amount of confusion that it is 
creating because it does not really comport with the definition 
in the 2008 Farm Bill, and it is also creating-- there is also 
confusion being created with regard to the EPA's definitions, 
as well.
    And what I have heard from businesses all across New York 
is that there is real opportunity in my state to make the 
stewardship of our forests a very important component of energy 
independence, and because of these poorly thought out 
definitions, we are unable to really capture the full benefit 
of those investments.
    I really want to associate my comments with some of those 
of Senator Thune, who also talked a little bit about this 
issue. So, I would like your thoughts on how we can clarify 
these definitions to ensure that we are getting the full 
benefit. I mean, some reports say that up to 90 percent of 
private forest lands in the U.S. are being foreclosed by these 
current definitions and we have national forests in our state, 
we have protected lands, and all of this forest needs to be 
stewarded, and we really need to make sure that we clear out 
dead wood. We need to make sure that wood that is not used in 
papermaking and other byproducts can also be used. There are so 
many opportunities for that woody biomass to be part of energy 
independence agenda.
    Mr. Tonsager. I would just say that we certainly are 
looking for the flexibility components. We want to go there--we 
believe, as you do, that there is opportunity, not just with 
bioenergy but with all kinds of things and we, in every 
circumstances, seek highest and best use. If there is a highest 
and best use for the product, we want to go there to make sure 
the opportunity is the highest and best, and biofuels is 
certainly one of those.
    My skill set on the definitional issues is limited, other 
than to say that I do believe in seeking the flexibility. We 
can be more responsive by going back and giving some written 
clarification on the subject, I think would be the best----
    Senator Gillibrand. Well, I would be grateful to have the 
opportunity to work with you on that, because we really want to 
make sure this definition really does provide the opportunity 
for rural America to take advantage of these biomass 
opportunities that are real and really can make a huge 
difference in creating energy independence in this country.
    And the second issue I want to address is, I do not know if 
the USDA is working with the Department of Energy, but I would 
urge you to do so, particularly because we have so many 
opportunities for energy production in New York State, but 
there is no way to be ready for backwards energy. So, for 
example, if we have methane digesters at dairy farms in New 
York, there is very little opportunity to put that energy back 
into the grid, and that is an opportunity that would make a 
revenue stream for our farmers, but it would also make our 
country far more energy independent. And so, what we need is a 
much more focused, collaborative effort between USDA and rural 
America and the Department of Energy to work on this electric 
grid and to really make those investments, and I would like 
your thoughts on that.
    Mr. Tonsager. I have the opportunity to serve as Co-Chair 
with Steven Koonin and the Undersecretary at the Department of 
Energy to co-chair the National Biomass Research and 
Development Board. We are meeting quarterly and we are 
developing and agenda to coordinate efforts on that subject and 
others, and I agree with, relative to the rural electric grid 
and how we continue to develop access for all kinds of sources 
relative to that.
    So, yes, we are working with DOE. We are continuing to 
develop relationship with our--and we have a very proactive 
Biomass Research and Development Board, which is government-
wide, includes several agencies.
    Senator Gillibrand. Thank you, and thank you for your 
testimony.
    Mr. Tonsager. Thank you.
    Senator Gillibrand. Thank you, Madam Chairman.
    Chairman Lincoln. Thank you, Senator Gillibrand.
    Senator Johanns.
    Senator Johanns. Thank you, Madam Chairman.
    Thank you for being here.
    Let me, if I might, focus on the baseline, if I could, 
relative to the Farm Bill, and maybe I better lay the focus on 
that just simply because there is a ways to go and a baseline, 
I am sure, is being developed, but as I look at the next Farm 
Bill and think about the funding that will be available, it 
seems to me that the baseline is going to be very, very 
constricted. In fact, the budget baseline for USDA, if I have 
my numbers right--for USDA energy program-- suggests a decline 
from $1.9 billion for this Farm Bill to $500 million in the 
next Farm Bill.
    On the House side, Chairman Peterson has indicated that he 
wants to at least work in an effort to have a no new funding 
baseline. In other words, I think what he is thinking about is 
corralling the baseline, figuring out what that is, and living 
within that baseline.
    So, how do you have a biomass program, or any program 
relating to renewable energy, with a baseline that is going to 
be--at least projected to be a third of what it is today?
    Mr. Tonsager. I do not have the baseline information, so I 
cannot debate the relative amount of the baseline amount or 
discuss, excuse me, with you on that matter. One of the things 
that I am attempting to do as we go forward is to look how we 
work with capital markets in general to try and bring assurance 
to them, because we recognize that resources are going to be 
limited, and we recognize that bioenergy will be developed by 
the private sector. So, we are going to look for every 
opportunity we can as your program--at our programs, and look 
at how capital markets function and find the best way we 
possibly can to help access those markets with the resources 
that we are given with them when the time comes.
    And so, but yes, you are right, it is going to be a very 
narrow amount of resources given to us.
    Senator Johanns. Yes. Well, if you are trying to send a 
signal to capital markets that the world is going to be okay 
and their dollars should be invested here versus invested in 
some other area of the economy, would you not want to give them 
the certainty, then, of E15, for example? And now, we have had 
two delays on that.
    So, how do you send a signal to the capital markets that 
gives them more security?
    Mr. Tonsager. We need to, on every front, look to try and 
build confidence in the potential of the market.
    We had the airline industry in this past week who talked 
about--they need 20 billion gallons of jet fuel, and they want 
to get that from biological sources in the future.
    The Department of the Navy is committed to getting to 50 
percent usage of biologically related sources in the future. I 
believe we have to look closely at the access of the biofuels 
into the markets available directly to consumers, be it blender 
pumps, infrastructure, and so forth. We have to show that there 
is a growing effort to expand that market, to try and help 
build the belief with the investors and lenders that there is 
opportunity.
    And so, I think we want to try and address every front that 
we can that sends a signal to the private sector that this is 
happening, that it is important, that there is economic 
opportunity. We will look at modeling different regions of the 
country. We are taking a regional approach on the biomass 
sources, because we think that some predominate and just look 
like the best opportunity in some regions, and we are going to 
continue to analyze to see if we can make the case with the 
private sector that that is the case.
    Senator Johanns. Let me, if I might, focus on the Biomass 
Crop Assistance Program. It was added to the last Farm Bill. I 
think the CBO score for the entire program was $70 million over 
five years. USDA--again, if I have my numbers correctly--has 
already spent $500 million to implement it.
    Tell us what is going on with that program, and why $70 
million all of a sudden has morphed into $500 million to try to 
implement it.
    Mr. Tonsager. I cannot address it well. It is not part of 
my particular mission. I am aware of the program, understand 
how it is being used, and so forth, but I do not have 
information relative to the cost. If you like, we can 
certainly, as part of our response to the Committee, address 
that to you, but I cannot knowledgeably speak to it today.
    Senator Johanns. That would be appreciated.
    Mr. Tonsager. Yes, sir.
    Senator Johanns. Thank you.
    Thank you, Madam Chairman.
    Chairman Lincoln. Thank you. And thank you, Undersecretary 
Tonsager. We appreciate your hard work and dedication and are 
grateful to you for that, and I do think that, under rural 
development, we hold the key of really jumpstarting the issue 
of renewable energies and getting our Nation off of our 
dependence on foreign oil.
    So, we look forward to working with you.
    Mr. Tonsager. Thank you, ma'am, and thank you, Committee. 
We appreciate the chance to be here.
    Chairman Lincoln. Absolutely. We look forward to working 
with you.
    I would like to ask the witnesses on the second panel to 
come forward and be seated.
    The panel includes General Wesley Clark, Co-Chair of Growth 
Energy, Dave Tenny, President of the National Association of 
Forest Owners, and Eric Zuber, co-owner of Zuber Farms in New 
York.
    Gentlemen, your written testimonies will be submitted for 
the record, so we definitely want to ask that you keep your 
remarks to five minutes.
    In the interest of time, I am going to go ahead and 
introduce our witnesses as they are taking their seats.
    It is my pleasure to introduce our next witnesses. A fellow 
Arkansan and a good friend of mine, General Wesley Clark. 
General Clark serves as Co-Chairman for Growth Energy, which is 
a coalition that represents a broad range of energy producers. 
General Clark graduated first in his class at West Point and 
retired as a four-star general after 38 years in the U.S. Army.
    General Clark commanded at the battalion, brigade, and 
division levels, and served in a number of significant staff 
positions. He finished his career as NATO Commander and Supreme 
Allied Commander in Europe where he led NATO forces to victory 
in Operation Allied Force.
    At the conclusion--General Clark, I think--do we want to go 
ahead--we will let you make your opening statements, and then I 
will introduce the others.

   STATEMENT OF GENERAL WESLEY CLARK, CO-CHAIR, GROWTH ENERGY

    General Clark. Madam Chair and members of the Committee, 
thank you very much for--[off microphone]--and I did not come 
from a farm sate--from a farm family, and I did not understand, 
really, the Midwest farming culture.
    I signed onto this effort to represent Growth Energy not 
only though because I believe in America's agricultural 
community and rural development, but because energy 
independence is just an absolutely critical issue for America 
at this time.
    Now, we have been talking about it for 35 years since I was 
a Captain teaching economics at West Point, but with oil at $75 
a barrel, as you mentioned, it is about--it is over $300 
billion a year leaking out of this economy; it is a huge amount 
of money. It is more than we are paying for Iraq and 
Afghanistan. It is almost as much as we are paying in interest 
on our national debt. If we could keep that money in the 
American economy, we would be creating jobs and building 
education and homes and communities with that money, and 
instead, it is flowing out of the country, and particularly at 
a time when we have a high unemployment rate and we are 
desperate for job creation, I think we have to take urgent 
action on this issue of energy independence.
    And the truth is that we are not going to solve it with a 
hydrogen economy in the near-term. As much as I love electric 
automobiles and wind and solar, we are not going to get there 
with electric automobiles. There are 250 million automobiles on 
the road, and almost none of them are electric today, and 
Americans cannot afford to rush out and buy electric 
automobiles in a year or two, even if they were available, 
which they are not.
    The real way we address this issue is with liquid fuels, 
and today we do have a liquid fuel alternative to imported oil, 
and that alternative is ethanol, and I am here representing 
Growth Energy, and we would like to just mention a couple of 
things about where we are going, because we think this is a 
critical opportunity for us that we must establish.
    This $300 billion a year, if the American people just 
understood, it is $1,000 per man, woman, and child in America 
every year, just so we can fill up our tanks with imported oil. 
If a country said to us we had to pay that as tribute to 
maintain our freedom, we would go to war with them, yet we 
willingly pay this at the pump every time we fill up our gas, 
and we have a choice. We do not have to do this.
    The only thing that is really standing between us and 
keeping this $300 billion in the American economy is the 
resolve to fix the problem. So, at Growth Energy, we hope
    the United States Congress will establish a national energy 
policy that creates jobs in the United States, improves the 
environment, strengthens our national security, and we hope 
this Committee will take the lead, because this Committee is at 
the heart of one of the great technological innovations of the 
21st century, and that is biofuels. That is America's own 
innovation and we are leading it with corn-based ethanol. We 
created it here in America. The feedstocks are grown on our 
Nation's farms, the biorefineries are located in rural America. 
They are creating jobs that cannot be outsourced.
    I was in Copenhagen for the Climate Summit in December and 
people are coming up to me from all over the world, saying, how 
can we have ethanol. The Ambassador from Pakistan here in 
Washington said, General Clark, we want you to bring corn-based 
ethanol to Pakistan. I said, but tell me why, he said, because 
it creates value in our land and it saves us foreign exchange 
that we need for economic development.
    We have this incredible jewel of innovation in America's 
agricultural community and we have to take advantage of it and 
use it and we are calling on this Committee to take the lead in 
doing so.
    Now, right, ethanol is about 10 percent of Nation's 
gasoline consumption, but we could do a whole lot more, and I 
am not even talking cellulosic, here. Cellulosic is down the 
road, we will get there, but just with corn-based ethanol, 
every year our farmers are producing 2-3 percent more corn on 
the same acreage, and every year our ethanol refineries are 
getting more efficient. They are reducing cost, they are 
raising the net energy in ethanol, and what stands in the way 
is not supply. What is standing in our way is basically 
barriers to consumption.
    We are currently facing the so-called ``blend wall,'' which 
is the amount of ethanol that federal regulations say can be 
blended with gasoline, and as you know this is capped at 10 
percent; it is the amount that was set in 1978. So, at Growth 
Energy, we filed a waiver with EPA in March of 2009 to raise 
the blend wall to allow up to 15 percent ethanol in a gallon of 
gasoline, and the waiver has yet to be acted on. EPA is 
awaiting tests from DOE. They were first promised they would be 
complete and we would have a decision in June, then they were 
delayed until August. Now, we are waiting until the end of the 
year.
    And I understand the need for testing. I sure understand 
the need for automobile makers to be concerned about 
liabilities and so forth, but look, if we can get this waiver 
approved, we will create 136,000 new permanent jobs, maybe a 
quarter of a million construction jobs. We will reduce our 
dependence on foreign oil by 7 billion gallons a year, and not 
only that, we will spark a wave of development and investment 
in rural America. It is a big step forward, and we need to take 
it and raise this blend wall. We hope there will be no more 
delays.
    As the Senate prepares to debate energy legislation, we 
believe it is important to address a couple of other barriers 
to ethanol. The biggest challenge we face is having access to 
open market. Actually, the cost of production of ethanol is 
less than the cost of production of a gallon of gasoline right 
now, and we believe that ethanol can compete in a free market 
without government assistance if, but only if, the 
infrastructure barriers are removed.
    Last week, at Growth Energy, we rolled out the Fueling 
Freedom Plan that urges Congress to redirect some of the 
government assistance into building out the infrastructure, 
mandating flex-fuel vehicles' production and creating 
incentives to install blender pumps. If we had 120 million 
flex-fuel vehicles on the road and a couple hundred thousand 
blender pumps nationwide so consumers could decide how much 
ethanol they want to put in their vehicle, ethanol would 
compete with oil, and we would save a substantial amount of 
that $300 billion. We are not advocating the elimination of 
government assistance right now; what we are saying is to 
redirect some of it to the infrastructure so that we can have 
access to the market where we can compete, once that 
infrastructure is in place, without the government assistance.
    I know there are vested interests out there continuing to 
call for the elimination of any assistance to ethanol, but I 
think we have to bear in mind--I know this Committee will--that 
the amount invested by U.S. taxpayers has been a great 
investment, $5-, $6 billion a year has been invested. It has 
reduced government farm program costs by an equivalent amount. 
It has created almost 500,000 jobs. It has reduced our 
dependence on foreign oil and improved our environment and 
helped create a $66 billion industry and lead a technological 
innovation that will spread worldwide and change global 
dynamics if we move through this. So, but we have to move 
forward in America.
    Now, President Eisenhower, he proposed an interstate 
highway system to give Americans freedom to travel our great 
Nation. I think this Committee should take the lead in giving 
Americans the freedom to choose the fuel to travel on those 
highways.
    With fossil fuels getting dirtier and costlier and riskier 
to extract, now is the time to expand the production and 
consumption of clean, renewable fuels like ethanol that are 
getting increasingly efficient and easier to produce.
    Congress set an aggressive goal when it passed the 2007 
Energy Bill, but unfortunately that energy bill contained two 
destructive policies against agriculture and ethanol, and the 
first was a reference to indirect land use change which has now 
been interpreted to be international indirect land use change. 
It is a controversial theory. It uses speculative models and 
incorrect assumptions and is basically an attempt to blame 
American farmers for deforestation in foreign countries such as 
Brazil. It is a dangerous theory, it is incorrect, and if it is 
allowed to stand in statute, it will ultimately take down every 
sector of the American economy.
    If you can apply this theory to agriculture, then there is 
nothing to prevent the same theory from being applied to 
construction, residential homes, hospitals, highways, high-
speed transit, virtually anything that uses land and impacts on 
our economy. So, I think that we need to ask and seek the 
removal of this language from the legislation.
    And the second flawed policy within this legislation is the 
definition of an advanced biofuel. An advanced biofuel ought to 
be, one would think, something that gives you a substantial 
measure of reduction in greenhouse gas emissions from 
conventional fuel like gasoline, but the definition 
specifically excluded corn starch ethanol, despite the ability 
of corn starch ethanol to meet and exceed these greenhouse gas 
thresholds, and the continuous improvements in the production 
processes. We refer to the exclusions in the legislation as the 
corn discrimination clause, because it has absolutely nothing 
to do with the efficiency of production of ethanol or the 
environmental improvement, it is simply the discrimination 
against a particular feedstock.
    So, Growth energy strongly supports the implementation and 
full funding of the energy title of the Farm Bill. The 
Committee should be commended for its work in establishing a 
title that recognized the ability of the agricultural community 
to contribute and be part of our Nation's energy solution.
    So, Madam Chairman, if I could just have a second to 
summarize, we are on the verge of a technological breakthrough 
that could change international dynamics in the 21st century. 
The 20th century has been all about petroleum: We fuel our 
militaries with it; we fight for it; we deploy our forces to 
protect; it is all about the 20th century. This century could 
be about biofuels, if we take the lead and use the 
technological edge that we have right now. And the leading 
biofuel that is available right now and that we should use 
without further delay is ethanol. Increased uses of ethanol 
reduces our dependence on foreign oil, strengthens national 
security, creates jobs, revitalizes communities, improves our 
environment. It is our innovation and gift to the world. Other 
nations want it, we should take full advantage of what we have 
here at home.
    Again, Madam Chairman, members of the Committee, I 
appreciate the invitation to come before your Committee this 
morning. Thank you.
    [The prepared statement of General Clark can be found on 
page 62 in the appendix.]
    Chairman Lincoln. Thank you, General Clark. And you are 
right, the American people are looking for immediacy in terms 
of finding renewable fuel. So, we thank you for being here.
    We will hold our questions until the panel has finished all 
opening remarks.
    Dave Tenny is President and CEO of the National Alliance of 
Forest Owners, which represents private forest owners, 
managers, and organizations dedicated to protecting and 
enhancing the economic and environmental values of privately 
owned forests across the country. NAFO members manage more than 
75 million acres of forest land in 47 states. Prior to entering 
the private forestry arena, Dave served as Deputy 
Undersecretary for Natural Resources and Environment at USDA, 
and is a senior staff of the House Agriculture Committee.
    Thank you, Mr. Tenny.

STATEMENT OF DAVE TENNY, PRESIDENT, NATIONAL ALLIANCE OF FOREST 
                             OWNERS

    Mr. Tenny. As you pointed out, NAFO does represent a lot of 
forest land across the country, including three million acres 
or so in Arkansas and three million acres or so in Georgia, and 
we play no favorites.
    Our forests are part of the economic backbone of the 
forested states in our country, the 29 most forested states in 
our country. Our private forest lands are supporting 2.5 
million jobs and $87 billion in payroll, and contribute $102 
billion to the gross domestic product in these states. It is a 
very significant contributor to rural economies.
    Our members are forest leaders. We recognize the 
fundamental role that sustainably managed forests play in 
development of renewable domestic sources of energy', and we 
are positioned to help provide the energy resources we need as 
we move forward in this century.
    As General Clark pointed out, we reached a point of 
decision in our country. We are trying to decide whether we are 
going to fully embrace our renewable energy potential or not. 
If we are going to fully embrace our renewable energy 
potential, then it has to be reflected in our policy. That 
means that our policy is going to try to reach the potential of 
all the various renewable energy resources, and the potential 
of the various regions of the country that are dependent upon 
those resources and they can provide them.
    Working for us, the forests that NAFO represents are 
positioned to help. We can provide up to one-third of the 
renewable energy that is being contemplated in the proposals 
that are currently pending before Congress in the Energy Bill, 
and they are pending before this body, and we can also make a 
significant contribution to meeting the objectives of the 
renewable fuel standard and the Energy Independence and 
Security Act of 2007. But in order to make the right decisions, 
working forests need the right signals from policymakers in the 
federal government.
    Now, the energy title to the Farm Bill has sent generally 
positive signals to forest owners, research and development on 
breakthrough technologies, the effort to provide loan 
guarantees for project development, investments in the supply 
chain that help support renewable energy are all positive 
signals. These programs are not administered perfectly, and 
there is room for improvement, and we all know that, too, but 
they have sent a very positive signal and are moving us in a 
positive direction.
    Just as importantly, the Farm Bill has helped establish a 
level playing field among the various sources of renewable 
energy. It provides an inclusive definition of qualifying 
biomass, for example, that does not discriminate among the 
various sources of biomass energy, and this sends a clear 
signal as well to forest owners that their contributions and 
their investments are both welcome and encouraged in the 
policy. But notwithstanding these positive signals that this 
Committee has helped provide through the Farm Bill, other 
policies are sending a very different signal, a chilling signal 
that is undoing the forward momentum that we have hoped to 
experience. I think it has been mentioned that the biomass 
definition in the Energy Independence and Security Act, the RFS 
definition, constrains biomass utilization on up to 90 percent 
of the private forests owned and managed in the United States. 
This has softened investments in biofuels from forests at a 
time when those investments are needed in order to 
commercialize breakthrough technologies. It has also sent a 
very strong message to forest owners that the policy of the 
renewable fuel standard seems to be more about land use 
regulation than it is about renewable energy production.
    Unless Congress acts to replace this definition, and others 
like it that are currently pending in policies being considered 
by Congress with a more inclusive definition such as we have 
seen in the Farm Bill, forest biomass will be left behind. Our 
national policy will not achieve its goals because we need our 
forests to do that.
    Similarly, there is another signal that is being sent to 
forest owners by the EPA presently. The EPA's sudden shift in 
the treatment of carbon emissions from biomass energy and the 
PSD tailoring role is a significant contributor to the 
confusion that is existing in the marketplace today because it 
is now treating carbon emissions from biomass energy like it 
does carbon emissions from fossil fuels. EPA seems to have some 
ambivalence about how to account for carbon from biomass energy 
that conflicts with some of the more well established 
international conventions, the Greenhouse Inventory Data and 
EPA's own statements that recognize that biomass energy in 
countries like the U.S. where our forests are a net carbon sink 
do not contribute to the net amount of carbon in the 
atmosphere, when those forests are used for whatever purpose, 
including energy.
    Now, NAFO plans to work with this Committee. Chairman and 
Ranking Member, we appreciate the work that you have done in 
opposing the position that the EPA has taken in the tailoring 
role. We very much appreciate the work of all of you here on 
the Committee. Because of your intervention, the EPA is now 
seeking public comment on how to account for carbon emissions 
from biomass combustion, but this is really just a modest first 
step, and it may not clarify the question before that rule 
becomes effective in 2011. And as a result, the investment in 
biomass energy is stagnating.
    Current biomass energy producers, forest owners, 
manufacturing, and others who have been involved in this 
business for a very long time are left wondering, are we part 
of the solution--are we part of our renewable energy future--or 
are we going to be cast as part of the perceived problem--are 
we going to be treated as fossil fuels?
    We appreciate the commitment that Secretary Vilsack has 
made concerning the role that USDA will play in the review of 
the tailoring role, and we look forward to full USDA 
participation in engagement in that effort so that we can 
establish in the record once and for all that biomass energy 
from forests is carbon-neutral. It does not have a net carbon 
positive effect on the atmosphere under the Clean Air Act so 
long as our carbon stocks, our forests, continue to grow and 
increase the carbon in our country.
    In conclusion, I will end where I started. I thank General 
Clark for his service and agree with him that we are at a 
precipice. We are at a point where we are trying to decide, are 
we going to embrace our future in renewable energy or are we 
not? NAFO urges this Committee to take the initiative, re-take 
it--you have got the policy of the Farm Bill to do that--and to 
help correct some of the policies that are chilling investment 
and putting forest biomass on the backburner. We need your 
help, we look forward to working with you, and we think that we 
can come up with a policy that works for our forests and that 
works for our Nation, as well.
    Thank you very much.
    [The prepared statement of Mr. Tenny can be found on page 
77 in the appendix.]
    Chairman Lincoln. Thank you, Mr. Tenny, and thank you so 
much for NAFO's work with the Committee. We appreciate working 
with you and look forward to continuing that relationship.
    As a point of personal privilege, I am going to take a few 
minutes before I introduce Mr. Zuber and apologize to the 
Committee. I have got to excuse myself. Before, there was a--
the scheduling of the bill signing with the President came 
after we scheduled this hearing, and in order to make sure that 
the Ag Committee is well represented for the good work that we 
did in that Wall Street reform bill, I am going to be over 
there, and I have to say, a special thanks to Mayor JoAnne Bush 
as well as Dennis Sternberg, because the only thing that would 
encourage me to miss their testimony is actually the request of 
the President that I be over there.
    So, I am grateful to them, both great Arkansans in terms of 
their leadership and what they have taught me. Mayor has done a 
tremendous job in Lake Village and Dennis has been a longtime 
friend and someone I have learned an awful lot from.
    Glenn English, as well, I apologize that I will miss your 
testimony. Glenn and I served together in the House and we are 
grateful for all of that.
    And again, want to add a special thanks to General Clark 
for being here. I do not think we have ever had a four-star 
general before the Ag Committee, Senator Chambliss, and we are 
very proud to have you here today and, again, grateful for your 
service to the country.
    But please, now that your endeavors here are accentuating 
the things that we in Agriculture want to see happen in this 
country, we look forward to working with you.
    So, I thank all of you all and I appreciate my colleague, 
Senator Klobuchar who will continue the hearing on behalf of 
the Committee. But again, thanks to everybody that has 
participated.
    And now, we will turn to our last witness, Mr. Zuber. He 
and his brother, Kim own and run Zuber Farms in Byron, New 
York, near Rochester. This dairy farm has been in their family 
since 1937, and includes 1,750 cows and 3,000 acres of crops. 
Mr. Zuber has served on the Upstate Niagara Board for 11 years 
and is currently serving as Vice President of that Board.
    He also serves on the Board of OATKA; is that correct?
    Mr. Zuber. I believe that is Northeast Council of 
Cooperatives is what it should say.
    Chairman Lincoln. Oh, that is what it is. Okay--of the Milk 
Products Cooperative.
    Mr. Zuber. [Off microphone.]
    Chairman Lincoln. Okay.
    Mr. Zuber. Another board of directors which processes 60 
million pounds of milk a month.
    Chairman Lincoln. There you go. We just want to make sure 
we get all of those----
    Mr. Zuber. Yes.
    Chairman Lincoln. All that CV on there.
    Mr. Zuber. Also, if I may add, is been--in the last ten 
years--been voted five times as making the world's best better.
    Chairman Lincoln. Well, there you go, that is good to know.
    He is also President of the----
    Senator Klobuchar. Better than Minnesota?
    Mr. Zuber. Better than Minnesota.
    [Laughter.]
    Mr. Zuber. I do not mean to hurt--I do not want to offend 
anybody here.
    Chairman Lincoln. Watch out, she is getting ready to take 
over the Chair.
    He is also the President of the Northeast Cooperative 
Council, and we are grateful for his input today--Mr. Zuber, 
for your testimony.

            STATEMENT OF ERIC ZUBER, DAIRY PRODUCER

    Mr. Zuber. Thank you.
    It is an honor and a privilege to be here today to discuss 
the opportunities that USDA energy programs have given my 
family farm in the development and the operation of a methane 
digester.
    I would like to thank Senator Gillibrand for her efforts in 
addressing the milk price crisis that all dairy farmers have 
endured in the last 18 months.
    I was present in a hearing in Batavia in August of 2009 
that Senator Gillibrand put together to discuss the milk price 
crisis. The milk price is rebounding slowly; it has been a long 
road. When it first started, we thought this was going to last 
six months, and we are just starting now, maybe, to crawl back 
so that we can cash flow our businesses.
    The value of New York agriculture products in 2009 was 
about 4.4 billion. The dairy industry is the single largest 
sector. Even with the depressed prices, milk sales were over 
2.3 billion, New York remains the third largest dairy state in 
the United States.
    The quick history of our farm really began in 1937 when my 
dad was 13 years old and his father passed away. He had nine 
cows in an old barn 12 miles from what is now the Epicenter of 
Rochester, New York.
    Since then, we have moved the milking facility twice to a 
more appropriate location. Today, we have 1,750 milking cows, 
1,500 head of young stock, and a crop of about 3,000 acres. We 
have 26 employees that produce 36 million pounds of milk a 
year, and inject almost $6 million into our local town's 
economy.
    We became interested in building a methane digester because 
of the need for animal bedding. We had been buying sawdust for 
our sawdust needs and that have been growing at over $200,000 a 
year.
    When heating prices would go up, the sawdust supplies would 
put their sawdust to fire logs, and the sawdust became 
expensive, scarce, or even unavailable.
    In 2007, Mark Moser, of RCM International, a methane 
digester designer contacted me about the possibility of 
building a digester. NYSERDA, New York State Energy Agency had 
come up with a grant program that made digesters attractive for 
New York State. Mark Moser's people at RCM started running some 
proposals and I ran some proformas on what would make a viable 
project.
    It became apparent that there was not enough return on 
investment without added funding. When USDA announced their 
REAP, Rural Energy of America Program, Farm Bill Section 907, 
which provides competitive grants for up to 25 percent of the 
total cost of a renewable energy product, we realized the 
additional grant funding could make a viable project.
    Angela McEliece of RCM did most of the grant writing, and 
we supplied the necessary information and necessary funds of 
$413,000 was secured.
    The NYSERDA grant was mostly a production base, and we had 
to acquire a bridge loan through farm credit to cover the first 
3 years of production. By the time the grants were secured and 
approval of farm credit came through in early 2009, milk prices 
had hit us pretty hard. It became questionable whether to do 
the project under these financial circumstances. After months 
of consultation and our long-term commitment to dairy business 
in early spring 2009, we decided to go ahead with the project. 
There were contractors looking for work and we thought there 
might be some low-cost opportunities in this construction 
environment.
    Tom Hauryski and Titus Falkenburg of USDA Rural Development 
came out and we signed the paperwork. Titus Falkenburg, Rural 
Development's state engineer, was our point person, and we 
consulted and sent monthly reports and expense statements. We 
broke ground in April 2009 and reimbursement of 25 percent of 
the project went extremely well. After monthly expenses were 
submitted, we would get reimbursed in two to three weeks.
    When we started pouring concrete, Titus would come out and 
make visual inspections in a timely manner. As the rest of the 
project itself felt--we felt--crucial to keep it on schedule. 
Our goal was to start generating methane before the weather got 
extremely cold. It would be necessary to heat 1.5 million 
gallons of cow manure to 100 degrees Fahrenheit, we felt we had 
to get it there before the winter months, because if we did not 
get it done, we would have to delay until spring.
    The most challenging part of the project by far was the 
approval of the interconnect agreement with National Grid, our 
local electric company. There was a conflict in the 
interpretation of net metering law with New York that National 
Grid--the electricity--RCM, the subcontractor that was building 
the engine, machinery, and generator--the company who supplied 
the electric generator. New York's net metering law, until very 
recently, was capped at 500 kilowatts. They recently raised 
that to a 1000 kilowatts, but I think that is besides the 
point, because the infrastructure is not capable of taking that 
much power back through it, anyway.
    The machinery originally was supplied--Martin Machinery 
originally supplied the gas engine that was only capable of 
putting out 450 kilowatts, but putting a bigger generator on 
with heavier windings would add longevity and more stable-- 
make the generator more stable.
    This generator was capable of putting out 570 kilowatts, 
which was above the net metering law, even though it did not 
have the horsepower to do so, NYSEG, another utility in New 
York State was allowing this generator to be used in this 
configuration, but National Grids was insistent that we 
downsize the generator, which we eventually did, to 380 
kilowatts. We picked this size because it was the next lower 
size available to put on. As long as we were within that 
metering law, the utility company would have to foot the bill 
for the upgrades on the line to producing the power and 
upgrades were roughly half-a-million dollars. We began 
producing power 12/27/09. At the same time, we began separating 
our solids and making our animal bedding.
    We had one screw separator and we soon learned that we had 
to put another one; so, now, today, we are running two.
    Now that the digester is operating at a steady state, we 
have applied for funding from another 2008 Farm Bill Title IX 
program, Section 9005, payments for the producers of advanced 
biofuels. Any payments we receive in this program will help us 
in the capital and operating costs of the generator and the 
digester.
    Looking back on the project, where we are now, I would like 
to make the final summations. First, there seems to be a lot of 
gas in the cow manure. There is enough gas to generate twice 
the power to run our farm. One of the biggest obstacles is 
scrubbing the gas. The process makes hydrogen sulfide which 
needs to be taken out to extend the life of the engine and 
reduce the operating cost. Technology for doing so is in its 
infancy and needs to be further developed. There is a definite 
odor reduction in the manure. A few weeks ago we harvested a 
field--a 90-acre field right behind the campgrounds and we were 
able to spread three-quarters of a million gallons on that and 
my phone never rang once. Without it, it would not have worked.
    We are getting enough heat off the engine to supply all the 
heat for the milk house and energy. And also, in the 
wintertime, we can heat two houses.
    Lastly, we still to have some issues with the National 
Grid. At certain times, when we get over 320 kilowatts we 
produce and the demand is low on the line it appears we are 
driving up voltage too high on the grid. Although we are well 
below the 500-kilowatt level, the line upgrades apparently are 
not yet sufficient. I see a real problem is that the grid never 
was designed to take the power backwards. The systems in rural 
America are basically old. There needs to be infrastructure 
investment of this type if this technology is to become 
commonplace.
    I think, in the long run, if it is possible to purify the 
gas, it would be more efficient to put the gas in the pipeline 
rather than generate power right at the farm. There needs to be 
some studies done to determine where the biomass is, and the 
most efficient way to get it back to the end user. If on-farm 
electric generators are going to be successful, you will need 
to find a way to get incentives to the utility companies to 
make improvements to accept this power. In all, we need to 
continue to learn about anaerobic digesters. We are doing the 
things that we set out to do, and the deciding factor of how 
successful it will be is what our operating and maintenance 
costs will be going forward.
    With that, I would like to thank you again for this 
opportunity. One other point I would like to make real quickly 
is, in Wyoming County, the county just south of me, the cows 
outnumber the people three-to-one, and we can make the power--
we got the gas there, but we need to get it to where you can 
use it, and I think that is the most important thing I would 
like to set forth and what I had to say today.
    Thank you.
    [The prepared statement of Mr. Zuber can be found on page 
109 in the appendix.]
    Senator Klobuchar. [Presiding.] Well, very good, and thank 
you for that real world example of what is going on so that we 
can make some good decisions here.
    I am going to start with Senator Chambliss.
    Senator Chambliss. Thank you, there, Madam Chair. You 
handle that gavel well. You are a natural.
    Senator Klobuchar. Oh, thank you. I appreciate that.
    Senator Chambliss. General Clark----
    Senator Klobuchar. But we do have the best butter.
    [Laughter.]
    Senator Chambliss. General Clark, you talked about the 
proposal that our group rolled out recently to phase out the 
blenders credit, and I assume you are addressing in some way 
the tariff on ethanol coming into the country--you may or may 
not. I will ask you to comment on that in your answer, though.
    But the ethanol manufacturers in my state are just adamant 
that they need to have this blenders credit. I hear what you 
are saying about, the phase-out has got to be coupled with, I 
assume, other tax credits or something for manufacturing and 
insulation of infrastructure. So, I would like for you to 
elaborate on it a little bit, because either way we go, this is 
going to expensive. CBO has said that an extension of the 
blenders credit will have a cost of about $70 billion, almost 
that number, over 10 years. So, that is a lot of money to have 
to come up with, obviously, and it is going to be a real fight, 
whichever direction we go in.
    But I want you to expand on your proposal a little bit 
more. What timeframe are you talking about? What specific kinds 
of credits are you looking at recommending?
    General Clark. Well, thanks, Senator, and I want to say--I 
think you were out of the room when I made my opening 
statement, but I wanted to thank you also for the advice and 
friendship you gave me when I was in uniform. I am very 
grateful for that.
    As far as the proposal is concerned, we believe that we 
should have the ethanol tax--the blenders tax credit--but it 
needs to be redirected over time so it does not just go to the 
blenders; it should be going to round out the infrastructure so 
that Americans can buy the ethanol that we are producing.
    In other words, what we have done over 30 years is we have 
incentivized people to blend ethanol into gasoline, and that 
tax credit actually is--right now, a lot of it is going to the 
consumers in the form of reduced price of gasoline. It is not 
going to the ethanol producer and, in some cases, not even 
staying with the blender--but it actually goes to the blender. 
What we are saying is, ethanol is increasingly efficient, it is 
more competitive with gasoline, its lower cost and production. 
Now, it is time to think about, as you look at that 10-year 
RAMP out there, taking some of that billion dollars--$7 billion 
a year and putting it into building out the infrastructure. The 
pace of doing that is really up to the Administration and to 
the United States Congress. We are just saying that, in all of 
the struggle over, where do you come up with the $70 billion. 
And it is going to be a fight, and we have heard many other 
proposals.
    What our proposal is that we think about the end state we 
want to reach. Ethanol is increasingly competitive. It is going 
to--it needs to be increasingly widely used. We need to be 
offering E85. We need to be telling manufacturers to produce 
flex-fuel vehicles so that we can save some of that $300 
billion a year we are spending on foreign oil. But to do that, 
we have got to get the infrastructure in place to be able to 
use the ethanol we produce. So, it is a concept, not a rigid 
proposal with respect to timing. We just wanted to enter the 
dialogue and
    offer that concept to the United States Congress and ask 
you to consider feeding that infrastructure investment in as 
part of the revenue stream.
    As far as the tariff on imported ethanol, we are strongly 
in favor of keeping that tariff in place. It is very important 
to do so. There is absolutely no reason for the United States 
to trade dependence on foreign oil in place of dependence on 
foreign-produced ethanol. This is about what we can do for our 
own country and our own economy and we should be proud of it 
and should not be embarrassed by it or apologetic about it. So, 
we are in favor of keeping that tariff in place, Senator.
    Senator Chambliss. Okay.
    Mr. Tenny, some have argued that wood should not be used as 
a feedstock for energy, as the trees would be harvested instead 
of remaining in the ground for absorption of carbon or that the 
biomass boom might result in the wholesale conversion of 
working forests into plantations of short-rotation woody crops, 
the exclusive purpose of energy production.
    Dave, what is your reaction to that kind of statement.
    Mr. Tenny. Well, if I recall, we had a housing boom in our 
country, and that housing boom helped support probably more 
than two-and-a-half times the population today than we had when 
that boom started in the 1950s, and as a result of that boom, 
we have more trees in the ground today than we have ever had--
50 percent more, in fact.
    I think that the important point is that there is a 
fundamental relationship between markets and forests that 
cannot be lost in the debate. Markets are good for forests. If 
we are concerned about our forests--and we should be concerned 
about maintaining the markets so that we can maintain the 
forests over the long-term, and it is important to note that 
creating a plantation of intensively managed forests is not a 
cheap proposition. It requires a great deal of investment and 
that investment is probably not going to return for 40 to 80 
years down the road. Biomass is a low-value product. It does 
not figure that an investment of the magnitude that you need to 
make to produce an intensively managed forest is going to 
pencil out if what you are going to get in return is the lowest 
value product in the value stream.
    So, what more likely would occur is that we would see an 
opportunity to take some of the marginal land that is currently 
not in forest, put it in forest, or we will become more 
productive in the way we manage our forests today. We can grow 
more trees. We can grow more trees in all the forests if the 
market signals are there. And what we have learned, if 
anything, from our marketing experience in the past 100 years 
is that, if there is a market, the supply will respond. And at 
the end of the day, there is plenty of material. There is 
plenty of feedstock, there is plenty of raw material to go 
around. That has been our experience up to this point and we do 
not expect that to change.
    Senator Chambliss. Great. Thank you.
    Senator Klobuchar. Thank you very much, Senator Chambliss.
    Senator Thune from the South Dakota, which is very devoted 
to biofuels, like my state.
    Senator Thune. Yes, indeed, Madam Chair, and we look 
forward to working with you to promote even greater use of 
biofuels, and I appreciate the testimony of our panelists this 
morning and some of your thoughts about how we do that.
    Mr. Tenny, you mentioned in your testimony, but I want you 
to, if you could restate for this Committee, how much of our 
Nation's private forest lands are off-limits for energy 
production under the current definition of renewable biomass.
    Mr. Tenny. Yes. In the Energy Independence and Security 
Act, the effort was attempted to address a concern, the concern 
that Senator Chambliss described that we would somehow convert 
a great deal of our forests from a more natural state, or a 
more naturally regenerative, to a more intensively managed. And 
what happened in that definition was, in the attempt to 
regulate the management of the land, we ended up foreclosing 
the use of the land, and federal forests, as you know, were 
virtually excluded from the definition, which takes a very 
important piece of the entire value chain off the table, and 
then, with respect to private lands, there was a very 
constrained definition that focused on the most intensively 
managed forests to the exclusion of the forests that are not as 
intensively managed, which are also a vast resource that can be 
used in bioenergy. And because of the complexities and the 
costs of all the challenge that EPA is now working with to 
implement that policy, much of the material that would be 
available on those naturally regenerating forests would not be 
available for the program.
    Senator Thune. Would replacing that definition with the 
definition of the 2008 Farm Bill result in increased renewable 
energy production?
    Mr. Tenny. I think, without question, it would. We are 
talking about a resource that is plentiful, that, in regions of 
the country where wind, solar, and other types of renewable 
energy resources are not as plentiful, it will be the baseload 
for producing renewable energy.
    And if given the opportunity, as I mentioned before, it 
will respond to the market signals. We will have more forests 
and we will continue to manage them sustainably as we have for 
the last 100 years if we have the right signals, and we will be 
in a position to really make the contribution that I think 
Congress and the public is looking for.
    Senator Thune. And you do not think that would have any 
adverse impact on forest health?
    Mr. Tenny. It would help forest health. If you consider 
what happens when we manage our forests today, the return on 
investment goes into good productive forest health management. 
Without that return on investment, then there is no opportunity 
to reinvest in the land, and that is what we are facing today 
in the down marketplace.
    Senator Thune. Do you think that we can get to the numbers 
that the RFS calls for without an RFS that does not include 
woody biomass?
    Mr. Tenny. I think it would be difficult. The technology 
for converting woody biomass to the next generation biofuels is 
still working through the process of moving from bench scale to 
production scale. Those investments are looking for the 
signals. If the signal in the policy is, we are not really sure 
whether we want to use this resource to produce biofuels, then 
the markets are going to respond.
    If the signal is the opposite, that we do think that this a 
fundamental part of the policy, then the markets will respond, 
and we want the markets to respond, and we think they will if 
given the right signal.
    Senator Thune. General Clark, what impact is the blend wall 
having on the ethanol industry today?
    General Clark. Well, basically, we are at the blend wall 
today. So, what we are doing is we are forcing the marginal 
cost producers out of the market, we have ended the opportunity 
to invest in the market, and we are stifling forward momentum 
in the industry.
    So, it is an urgent matter for taking the industry forward 
to remove that blend wall.
    Senator Thune. And so--but I mean, your view is that it is 
having a chilling impact on investment.
    General Clark. And has had, because this started about two 
years ago when investors on Wall Street--I am also an 
investment banker, so we were looking at investments in our 
firm and bringing money into the ethanol industry, and it was 
an early--late in 2007 when we realized that there was enough 
investment in the ethanol industry to meet the E10 opportunity 
that was present, and that is when American money started 
flowing to Brazilian ethanol, and they thought, well, if we 
cannot invest in the United States, let's invest it in Brazil 
and then try to bring it back in to the United States through 
the backdoor and undercut the American investments.
    So, we have actually--for two years, we have deflected 
investments in the American ethanol industry because of that 
blend wall. We have to have a five-year horizon out there, and 
that is why it is important that it be E15, not something less, 
and it would be accompanied by a far--more far-reaching 
commitment to ethanol as a fuel.
    Senator Thune. And my guess is that, with--we have talked a 
lot about advanced biofuels and cellulosic ethanol, it becomes 
that much more difficult to get investment in those types of 
technologies if we do not have this blend wall increased today. 
I mean, obviously, the--those we are developing----
    General Clark. That is exactly right, Senator, because it 
is going to be up to corn-based ethanol to open the way for the 
rest of the cellulosic ethanol to come in. It is partly a 
matter of scale and it is partly a matter of infrastructure, 
and I was just--we were just mentioning the blenders tax credit 
and the importance of putting some of that money into flex-fuel 
vehicles, requirements in blender pumps.
    And Senator Klobuchar has introduced a bill that would help 
us with a lot of this infrastructure investment, including a 
loan guarantee for an ethanol pipeline, but all of this is 
required if we are going to move into cellulosic. So, rather 
than simply capping off corn and saying, that is enough of 
corn, let the marketplace--let innovation take place, but we 
have to work on the demand side. The supply side will take care 
of itself if there is demand there.
    Senator Thune. How many blender pumps do you think are 
necessary to create a true market for ethanol?
    General Clark. Somewhere between 50-and 200,000--50,000 and 
200,000.
    Senator Thune. Okay.
    My time is up. Thank you, Madam Chair.
    Senator Klobuchar. All right.
    Thank you very much. Thank you, all of you. I think we need 
to do a lot more work in this area. We had a good, strong 
start. And today, nearly 500,000 people, as you know, are 
working in the biofuels industry, and countless more are 
building and installing and maintaining wind turbines and solar 
panels across rural America, and America's farmers, including 
those in our three states of Minnesota and Georgia and South 
Dakota are literally growing and harvesting their own energy 
from the sun, the water, and the soil, and they are helping to 
reduce our dependence on foreign oil, which I really appreciate 
your involvement in this, General Clark, to make that point so 
succinctly that this is a national security as well.
    And I think it is incredibly important that we get this 
blend wall increased, and I thank my colleagues for their 
leadership on this. We just cannot keep going like this when we 
know that there is this opportunity out there for our country. 
It was not a biofuel plant that exploded in the middle of a 
corn field, and it was not a biofuel plant that is involved in 
a bunch of jobs that are going overseas. The biofuel plants are 
actually employing people right in our country.
    And I just wanted to note that, as we look at some of these 
subsidy issues, General Clark, that I know you were asked about 
earlier, over the last few decades, more than $360 billion 
worth of subsidies and loopholes have gone to oil companies. 
And we can debate if that is good or bad, but it is nearly ten 
times more what the biofuels companies have received, and if 
things proceed where we do not renew the biodiesel tax credit 
or we do nothing on ethanol, literally, the oil companies, as 
we look at how we can go to more clean energy, we have the oil 
companies who will continue to receive more than six billion in 
subsidies each year with nothing for this new burgeoning 
industry that is so important to our country. So, I think it is 
very important that we look at it in that light, and it is one 
of the reasons that Senator Johnson and I--and we are getting 
other people on the bill, introduced this SAFEST Act that you 
referred to, to focus more on this combination of looking at 
renewable clean energy, electricity, with a definition we hope, 
Mr. Tenny, that will work for some of the biomass issues and 
then also include these biofuels incentives that are so 
important to continue to look at this.
    I just look at both sides of the aisle. People keep talking 
about these clean energy jobs, and to me this is the way we can 
get there very quickly in addition to some of the other work 
that is going on right now in the Senate.
    So, my first question was actually related to that, General 
Clark, and that was about something that you just mentioned 
with Senator Thune, and that is the importance of the 
feasibility and the importance of the dedicated biofuels 
pipeline, and this idea that we need infrastructure to do this 
right. Could you comment on that.
    General Clark. Certainly. I mean, we need an ethanol 
pipeline to take Midwest ethanol to the Northeast. We have done 
the study on it. It is certainly technically feasible. It is 
just a question of really making it financially feasible.
    And it is like one of my friends in investment banking 
business said. He said, I do not like to invest in anything 
that depends on government decisions. Well, he is a little bit 
overstated, but that is really part of our problem, here. The 
ethanol industry is very healthy, and an ethanol pipeline makes 
perfect sense, but what we need is the policy leadership so 
that the country and Wall Street can see that we are committed 
to moving in this direction. The funds will be there. We would 
like to have the loan guarantee behind it just to make it more 
competitive--or equally competitive with natural gas and oil 
pipelines. But the most important thing is the blend wall which 
opens up those markets for us.
    Senator Klobuchar. Right. And I think we have all mentioned 
that we thought that this was going to be completed in June. It 
has been pushed back. I am very disappointed in that. I have 
complained to people in the White House. I know we are going to 
try to get a meeting with Secretary Chu and Secretary Jackson 
to talk about this, because they have assured that they are 
moving ahead, but this has got to get done.
    Mr. Tenny, Senator Shaheen and I--or Senator Shaheen has 
authored a bill called the Forest Carbon Incentives Program 
Act, which I support, that would compensate forest owners for 
the ecological benefits that their forest provides, such as 
carbon pollution storage.
    How can we incentivize sustainable forestry practices in 
the next Farm Bill to make sure that we are maximizing 
reductions in carbon from biomass-based energy?
    Mr. Tenny. I think that probably most the important thing 
that the Farm Bill can do is what the previous Farm Bill did, 
and more of it, and that is, send the signal to the forest 
owner community, to the biomass community, that the 
contribution that they can make will in fact be welcome by the 
policy.
    We will not have trouble continuing to realize the carbon 
benefits of our forests if the markets are there. It is when we 
start losing those markets that we get into trouble. If there 
is anything that is perilous to the future of our forests, it 
is the forest owner who is faced with difficult economic 
choices because the value of that forest land cannot compete 
with other land use values around it. And when that reaches a 
tipping point, then we start losing our forest resources, and 
then we start to have-- diminishing the full potential that 
they can contribute to our carbon economy.
    And so, I think that as we look forward in the Farm Bill, 
if we are looking at energy programs, we need to make sure that 
we send that signal that biomass energy is going to be a 
fundamental part of the program.
    The other thing that needs to happen is we need a clear 
signal from EPA. The tailoring role--I do not want to 
understate the change in position that has occurred as a result 
of the tailoring role. The international community has 
recognized that in countries like the U.S. where our carbon 
stocks are increasing in our forests year in and year out, we 
are net contributors to the solution. We are net sequesterers 
of the carbon; yet, if a policy comes out from the EPA that 
questions that or that changes the position of the United 
States and starts to wonder whether carbon emitted from 
renewable energy from forests is the same as fossil fuels and 
is not quite sure what the answer might be, that sends a very 
chilling message, and that needs to be corrected very quickly. 
Otherwise, the entire biomass community is going to be at a 
standstill wondering if they are going to be regulated or if 
they are going to be allowed to go forward to make their 
contribution.
    Senator Klobuchar. And I think that is frustration across 
the board when I look at General Clark with some of the 
biofuels issues that we need to set these standards and move 
ahead, because--and maybe General Clark--and then I have a 
quick question for Mr. Zuber--want to comment. I know you have 
mentioned this, but this investment is going to go overseas, if 
we do not start--and it is already happening, because they get 
it in Brazil, and everything in Brazil, doing biofuels, to 
China producing solar panels, to other countries using our 
technology and now manufacturing wind turbines.
    Do you want to comment on that, General Clark, and then I 
will have a quick question to Mr. Zuber?
    General Clark. Senator, I do want o comment on it, but 
first I want to say very clearly how grateful we are for the 
legislation that you and Senator Johnson put forward on SAFEST. 
It is a--across the board for renewables, it addresses and 
corrects many of the inconsistencies and problems that have 
been there. We thank you for that.
    But it is a competitive investment, environment, right now. 
We had the lead in this country in solar. We have the lead 
right now in biofuels. We lost our lead in solar, that has gone 
to China. Wind has always had a European lead to it, even 
though we have the greatest wind resources in the world, in the 
United States of America, and somehow we have to capture wind, 
solar, and biofuels in the United States.
    I would say, Senator, one of the things that has been most 
distressing to me is that if you look at the Stimulus Bill, 
that this great resource for investment in America is our 
pension funds, and because of the way that the Stimulus Bill 
was structured, our pension funds were not able to invest and 
take advantage of the Stimulus Bill. So, driven by rate of 
return considerations, they are looking for investments in the 
BRIC countries rather than in the United States in this 
renewable energy field.
    And in the case of biofuels, that money is just standing by 
on Wall Street waiting for a decision. It will pour into the 
Midwest of the United States if we have a strong decision that 
says, we are moving forward, E15 and beyond, in biofuels. There 
is plenty of investment capital; there are plenty of smart 
people who want to invest in this country. They just have to 
see the opportunity for return.
    Senator Klobuchar. And they need to get something like a 
renewable electricity and biofuel standards in place to get 
that return.
    General Clark. Yes.
    Senator Klobuchar. Okay.
    Quick question, Mr. Zuber, because then I want to turn it 
over the Senator Grassley, because in Minnesota, we never mess 
with Iowa, because they are our neighbor.
    In your experience and from talking with other producers, 
you clearly have that hands-on experience with the digester, 
are cogeneration and digester technologies getting cheaper and 
more efficient, or what have you seen in terms of progress?
    Mr. Zuber. I think they have got a ways to go.
    This gas scrubbing is crucial. I think if we can get the 
quality of gas--right now, the way we are scrubbing it, gasses 
with bacteria--the gas goes through a bacteria substance that 
filters it. If we can scrub that gas and get it pure enough so 
it is as pure as what can go in a natural gas line, I think it 
is unlimited.
    I think the biggest thing--I think more of these would have 
went in in this last round, but what got us was the milk price 
crisis. I mean, I had three or four other dairymen that were 
really interested----
    Senator Klobuchar. Right.
    Mr. Zuber. --and we all stood in a room and looked at each 
other, and I mean, when you are losing $700 a cow--and that is 
what we lost in 2009--I mean, it takes an awful lot of guts to 
do something----
    Senator Klobuchar. Right. And I think that is why you know 
we have done some improvements funding the Milk Act. Senator 
Sanders and others have worked on this. I know my friend, 
Collin Peterson is working on it as well, looking into the next 
Farm Bill with the milk program, as well as Senator Lincoln, as 
well as what we can do with the export market, which I think 
could really help with dairy, because the decrease in the 
export market has also gone hand-in-hand, as you know, with the 
decrease in prices.
    Mr. Zuber. Exports are crucial.
    Senator Klobuchar. Okay. Very good.
    I am now going to have Senator Grassley ask his questions.
    I said, as I noted, with South Dakota, Iowa is another 
great state for not just biofuels but also renewable energy. 
They lead--one of the leading in wind manufacturing and very 
interested--I know Iowa and other states--in how we can get 
some of that manufacturing to stay in the United States of 
America and build in the United States of America.
    Senator Chambliss, in keeping with the bipartisan nature of 
the Ag Committee, is going to take over for me because I am 
going to the Mall to give a speech to the Council on 
Independent Living, if all the audience has not yet wilted in 
the heat and sun.
    So, I want to thank our witnesses. You have been great, and 
thank you, Senator Chambliss, for taking over.
    Senator Grassley.
    Senator Grassley. General Clark, I support what your 
organization has put forward on infrastructure components. The 
plan does, as we know, include some reduction in the existing 
tax credit, and of course none of us can really predict whether 
Congress is going to pass a comprehensive energy bill that 
might provide opportunities to consider some of these 
infrastructure incentives.
    So, my question is, in the absence--and I want to emphasize 
the word ``absence''--in the absence of enacting these robust 
infrastructure policies, does Growth Energy supporting 
maintaining the existing tax credit for blending ethanol?
    General Clark. Senator, thank you, and we appreciate your 
support for Growth Energy and for the industry as a whole.
    And if we cannot pass comprehensive energy legislation, 
absolutely, we fully support the extension of current tax 
policies and the extension of the secondary tariff on foreign 
ethanol.
    Of course, our preference would be to extend and redirect 
some of this assistance into the building out of the 
infrastructure because ethanol is so competitive right now that 
really it is a matter of working the demand side so consumers 
can buy it as much as it is work on the supply side. But if we 
cannot get these issues addressed in the energy legislation, we 
certainly support the straight extension for five years at the 
current rate.
    And Senator, if I could, the critics, they often want to 
focus on the costs of these government programs, and they 
totally ignore or misinform the public about the benefits. The 
relatively small amount invested by our government in the 
development of biofuels has yielded tremendous benefits to the 
Nation, and I just think we can never forget what the ethanol 
community is doing for this country. We are replacing about 13 
billion gallons of foreign oil each year. We have created about 
500,000 jobs related to ethanol, we have improved the 
environment, we have reduced the cost of government farm 
programs, we have added $66 billion to the Nation's GDP. And if 
all government programs had this kind of return, our economy 
would be in great shape.
    Senator Grassley. Well, I think you just answered my second 
question, and you do not have to answer it, but I want to put 
it on the record--and if you did not answer it, then fill in, 
but I think that what you said is very, very important, that 
the cost to our economy of dependence upon foreign countries 
for 60 percent of our oil needs is great, and you just said 
that you believe the true cost of our foreign oil dependence is 
very great.
    Maybe one thing that you did not touch on that you could is 
the benefits for national security of not being dependent upon 
foreign sources of energy. And being in the military, as you 
are, you know more about that than anybody else.
    General Clark. Well, Senator, I appreciate the chance to 
talk about that.
    I was a Captain in 1973 and came down here in December. I 
was teaching economics and political philosophy at West Point. 
I came down here and worked at the Pentagon and wrote the first 
DOD papers on the impact of the energy crisis on the Defense 
Department, and it was a far-fetched vision in 1973, as we were 
coming out of Vietnam, that someday we might have to actually 
put U.S. troops into the Persian Gulf.
    I remember when I wrote that in a paper, there was outrage 
among these other colonels I was working with down there in the 
Pentagon. They said, you are going to get us in trouble. We are 
going to be called up on the Hill, the Senate--your Senator 
Fulbright from Arkansas is going to make you testify on this, 
and it seemed outrageous that an armed forces that was 
dedicated to protecting America from Soviet expansionism and 
safeguarding our allies was going to be worried about oil. And 
yet, if you look back over 35 years, our dependence on imported 
energy has distorted our foreign policy, it has fed billions of 
dollars into governments that do not agree with us, our values, 
that work against our interests, and it has led to basically 
three conflicts and an ongoing terrible conflict going on in 
the Middle East today as a secondary impact of the money that 
we have put out there and the consequences of this.
    And now, the dangers are even more substantial. It was bad 
enough when oil was $12 a barrel, but when it is $70, $75, and 
$80 a barrel, the $300 billion plus a year that we are spend--
if we could keep that money in the United States economy and 
use it and multiply it and get it into education and technology 
and business development, we would solve many of the economic 
issues facing this country, and we could do it right--we could 
start doing it right now. We do not have to wait for a hydrogen 
economy, we just need to turn America's farmers loose.
    Senator Grassley. Would you have a rough figure, if all 
these factors were quantified in the cost of a gallon of 
gasoline--and they are not today--if they were, what would be 
the cost of a gallon of gasoline?
    General Clark. The best figures I have seen show it to be 
around $7 or $8 a gallon when you count the subsidy and the 
expenses of the military commitments and so forth that are 
going in there for the cost of gasoline.
    Senator Grassley. And one last question. I missed your 
testimony, but I know from reading it that you stated Growth 
Energy filed a waiver with a lot of other people on the U.S. 
EPA to approve ethanol blends of 15 percent. EPA and the 
Department of Energy have been dragging their feet for a year-
and-a-half on this. It is anyone's guess as to when a decision 
will be finally be made. And quite frankly, in Iowa, I get 
asked this question an awful lot, when are they going to do it 
and can we do anything to make them do it, and it is pretty 
difficult, except it is their decision.
    So, a question that may be difficult for you to answer, but 
if you can answer it, I would appreciate it, do you believe 
that there is any anti-corn and ethanol bias at the Department 
of Energy or the Environmental Protection Agency?
    General Clark. Senator, I would just be way over my head in 
answering a question like that. I just do not know.
    But I do know this, that we always have a propensity in 
this country to look for the very, very best solution. I 
remember when we were talking about the hydrogen economy being 
the next big thing, and a lot of us were saying at the time--we 
were saying, a hydrogen economy, sure, 30 years out. So, it 
means that we will just keep business as usual. And there is a 
lot of interest in these advanced biofuels and I am all in 
favor of these advanced biofuels.
    But what I look at is--I travel around America and I see 
people without work, I see families in trouble. And I look at 
the opportunity cost of continued delay--we could add jobs 
tomorrow if we went to E15. And honestly, if we did it 
legislatively rather than by regulation, it would be even 
better, in my view. I would like to see us just move on into 
the biofuels revolution.
    One of the things I said in my testimony that I strongly 
believe is that this is one of the great technology 
breakthroughs, potentially, in the 21st century, and it is 
Americas. We developed it, developed--in Iowa, in the Midwest--
with ethanol, and it has gotten increasingly effective and 
efficient and people overseas are asking for it, because it is 
not just America that suffers from the cost and hazards of 
importing oil, it is many other countries in the world.
    Somehow, we have got to help our own citizens understand 
this tremendous jewel that we have created in our biofuels 
capacity in America. We should really be proud of it. There are 
people in the Midwest who are as innovative and far-thinking as 
people in Seattle with Microsoft or people in Silicon Valley. 
They are just as good, and if you roped up the stories, their 
business profiles would be just as glorious, they are just 
working in a different medium. We need to recognize those 
people and promote them. That is our future in this country.
    Senator Grassley. Let me finish, Mr. Chairman, but just 
adding to what he said.
    He could not answer my question, and maybe I cannot answer 
it in an intellectually honest way because you do not really 
know what the institutional biases are, but even in the 
previous administration, four or five years ago, there would be 
people like Senator Thune and me and people from the U.S. 
Department of Agriculture and the EPA and the Department of 
Energy sitting across discussing when can we move forward with 
this. Maybe it was even before the petition was filed, I do not 
know, but we got all sorts of-- now, this is in the previous 
administration, so there is nothing political about this; I am 
speaking institutionally. It seemed like USDA and Department of 
Energy were giving us reasons why you could move ahead, but I 
got the feeling that the EPA wanted to drag their feet and drag 
their feet and drag their feet in those initial discussions. 
And here we are, four years later, still dragging their feet on 
this issue.
    General Clark. Well, Senator, if I could just have a word 
in response.
    Our EPA Administrator has been very up front and cordial 
with us in saying she wants to move this forward. The Secretary 
of Energy apologized to me personally at a White House meeting 
several months ago for the delays in testing. So, I know there 
is goodwill and an intent to do this in this Administration, 
but I do think that, across America, we have a real 
communications problem with members of the public. This is 
somebody else's rice bowl.
    When we started the Internet Age and started personal 
computing, there was no opposition because there were no 
alternatives to personal computing. The slide rule 
manufacturers did not have enough of a say in the country to 
really put up any opposition to personal computing, and the 
trouble is, in this field, in energy, there are huge forces out 
there that we are challenging. Some of them have come to me 
personally and said, Wes, you are killing us with what you are 
doing because this ethanol, at the margin, it is cheaper, it is 
driving down the price of gasoline, it is making our refineries 
less valuable and so forth. And I hear those comments all the 
time. I know what we are up against, and those comments are 
reflected in political forces, they are reflected in 
advertisements, but I just think you cannot beat America's 
agricultural community. Year in and year out, America's farmers 
are increasingly productive, increasingly efficient, 
increasingly innovative. And Mr. Zuber here is an example of 
that in what he is doing with methanol. So, I think that is 
winning side to be on, and that is why we are at Growth Energy 
trying to do these communications with the public so they 
understand that this is America's strength, its tremendous 
agricultural community. We have to use it in the 21st century.
    Senator Grassley. When corn was $7 a bushel, ethanol was 
scapegoated to increase the price of food by--when corn was $7, 
increase the price of food by 20 percent. The price of food has 
not gone down when corn is down to $3.50.
    General Clark. It was a $100 million scapegoating campaign. 
We know it; we know who was behind it; and we are working out 
there every day to address it.
    And Senator, I just want to say, we sincerely appreciate 
your support in this effort; it is very, very important.
    Senator Chambliss. [Presiding.] Thank you, Senator 
Grassley. And I have a feeling if there is any bias against soy 
beans or corn at the Department of Energy or USDA, we will hear 
about it again as we go into the debate this fall on this tax 
credit.
    Well, gentlemen, thank you all very much for being here. 
Thanks for your testimony. You have been hugely informative 
this morning and we appreciate it and look forward to working 
with you.
    Our next panel is the Honorable Glenn English, Chief 
Executive Officer of the National Rural Electric Cooperative 
Association, Ms. JoAnne Bush, Mayor, City of Lake Village, 
Arkansas, and Mr. Dennis Sternberg, Executive Director of the 
Arkansas Rural Water Association.
    Let me thank all three of you for being here this morning. 
Your testimony is critically important to us and we look 
forward to hearing it.
    I would ask that you limit your statement to five minutes 
or less, and that way we will take your written statement for 
as long as you want it to be and insert it in the record.
    Our first witness today is my long-time good friend, Glenn 
English. Mr. English has served as CEO of the National Rural 
Electric Cooperative Association since 1994, and before that he 
served for ten terms in the U.S. House as representing the 6th 
District of Oklahoma, and he represented it well, a member of 
the House Agriculture Committee and Chairman of the House 
Agriculture Subcommittee on Conservation, Credit, and Rural 
Development while he was in the House. And he has worked 
directly on legislation affecting rural development programs, 
including REA and telecommunications issues.
    So, Glenn, thanks for being here, and we look forward to 
your testimony.

   STATEMENT OF HON. GLENN ENGLISH, CHIEF EXECUTIVE OFFICER, 
        NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

    Mr. English. Well, thank you very much. I appreciate that, 
Senator Chambliss, and we appreciate the committee having this 
hearing and giving us an opportunity to talk about this a bit.
    As you mentioned, since the written testimony is going to 
be made part of the record, I would like to talk about, 
perhaps, a little broader picture that includes all the 
elements of this testimony. I think many people are focused 
with regard to the importation of oil, and that is 
understandable. We want to cut back on the amount of oil that 
is imported in this country. That has been an objective for 
some years and certainly a worthwhile goal.
    What is not, I think, as well understood and well known is 
the fact that, while we expect, every time we flip the light 
switch the lights are going to come on, that the country is 
very quickly reaching the point of where the available capacity 
to generate electric power in this country is pretty much used 
up. Much of the generation was built in the 1970s, the 1980s. 
There has been some generation since then but not near enough 
to keep up with growth. And certainly, when you compound that, 
then, with the objectives of trying to reduce carbon emissions 
in this country to meet objectives of climate change and then 
move the ball even further and say, not only that, but we want 
to tell you how to do that, and you compound that, then, with 
the growth of the Nation itself, keeping in mind, particularly 
or electric cooperatives that we are growing twice as fast as 
the investor-owned utilities, the big power companies, in this 
Nation, you begin to think, I believe, to see some of the 
challenges that we face. And as certainly you know, electric 
cooperatives are not-for-profit. They are actually owned by 
their members, and we have an objective of making sure that our 
members have enough electric power to meet their needs, but to 
try at the same time that those electric bills they receive are 
affordable.
    And so, this is coming around to be quite a difficult 
effort on our part, and particularly when we keep in mind that 
much of what has been discussed here this morning are future 
goals and objectives and future technologies and future methods 
in which we could achieve those particular objectives, and that 
is fine and good, but the real problem we have is over the next 
ten years. How are we going to make certain that we have enough 
power at the right time and be able to meet the objectives laid 
out by government and to be able to keep those electric bills 
affordable for all those folks out in rural America and, as I 
think many of you know, rural development is very heavily 
dependent upon energy. If the energy sources are not there, it 
is not like you are going to have rural development, and that 
in itself is a stopper. And so, that is part of the challenge 
that we face.
    Electric cooperatives basically cover 75 percent of the 
land mass of the United States, and as such, that is probably 
where most of the renewable energy is going to be produced in 
this Nation. I am a member of a group known as 25x25. Our 
overall goal is 25 percent renewable energy by the year 2025. 
We hope that we will be able to move in that direction, but 
when you look at the amount of new power that is going to be 
needed in this Nation which is basically two-and-a-half times 
the amount of power being produced in the State of California 
today, that is what we are going to need over the next few 
years. And whenever you consider the growth of electric 
cooperatives, certainly that is a tall order.
    We have certainly very ambitious objectives of trying to 
establish that, within the next ten years, we have to have a 
certain percentage of that electric power being produced for--
through renewable energy, for instance.
    And we all believe that, and that would be helpful in rural 
development, but many people focus on the fact that, if as was 
pointed out to us in a recent study that was done through 
Navigant Consulting, a very reputable group, that if we are 
even going to hit 5 percent renewable energy in this country, 
that in the eastern interconnect alone--eastern part of the 
country, alone. It is going to require some 10,000 miles of 
high voltage transmission.
    If we, in fact, are going to go to 15 percent, that in 
itself would require 10,000 miles. And on top of that, the cost 
has got to be somewhere in the neighborhood of $150 billion. 
Well, obviously, if we are going to move to 5 percent to 10 
percent to 15 percent, that transmission has to be in place 
before we can achieve those objectives. If we are going to have 
those kinds of numbers producing that amount of power, it is 
going to take a tremendous amount of concentration in rural 
America to generate that much power and to do it as cost-
effectively as we possibly can. So, that pretty much dictates 
where that power is going to be produced, whether it is solar, 
whether it is wind, whether it is biomass, and then the 
question is going to come, what kind of transmission exists 
there.
    And the problem is not, believe it or not, cost. Cost is 
not the bottom-line problem. The bottom-line problem of what we 
are facing is deciding across state lines, their political 
objections, political difficulties, political challenges. Those 
are some of the hills that the Congress is going to have to 
address before we are going to be in position to be able to 
produce that much renewable energy, be able to achieve the 
particular objectives that I know the Congress is thinking 
about and learning about today.
    So, what I would encourage, Mr. Chairman, is for this 
Committee, particularly as applies to electric cooperatives, 
power for rural America, and particularly as it focuses on the 
objectives of trying to get as much of that power generated in 
rural communities to get the economic benefit of that, that we 
also focus on what can we do and when can we achieve it. How 
much power can we produce in what year that the electric 
cooperatives and others in the electric utility industry can 
rely on, and also the question of what is it going to take in 
the way of infrastructure to make sure that that power is 
delivered where it needs to be delivered.
    So, thank you very much. I appreciate that, Senator 
Chambliss, and the opportunity to testify here today.
    [The prepared statement of Mr. English can be found on page 
69 in the appendix.]
    Senator Chambliss. And thank you, Mr. English.
    Next witness is JoAnne Bush, the Mayor of Lake Village, 
Arkansas. Mayor Bush is now in her 20th year in elected office. 
She served as President of the Arkansas Municipal League in 
2009, and she currently serves on the Finance Administration 
and Intergovernmental Relations Steering Committee for the 
National League of Cities.
    Mayor Bush, welcome. We look forward to your testimony.

STATEMENT OF JOANNE BUSH, MAYOR, CITY OF LAKE VILLAGE, ARKANSAS

    Mayor Bush . Thank you. In the absence of Chairman Lincoln, 
Ranking Member Chambliss and members of this distinguished 
Committee, I want to thank you for having me here to testify 
before you today.
    As you said, my name is JoAnne Bush and I am Mayor of Lake 
Village, Arkansas. I am pleased to present this testimony to 
the Senate Committee of Agriculture, Nutrition, and Forestry, 
not only because this Committee oversees so many important 
issues for Arkansas, but also because Arkansas senior Senator 
Blanche Lincoln, is Chairman of this important Committee.
    Chairman Lincoln has proven time and time again to be a 
tried and true advocate for rural Arkansas.
    Lake Village is a rural community of 2,823 people. We are 
located in extreme southeastern Arkansas. I am pleased to be 
here today to discuss the USDA Rural Development Programs and 
the benefits they provide to rural communities.
    I am here today not as an expert on the technicalities of 
the Rural Development Programs but as someone who can provide a 
perspective on what it is like for a mayor of a rural community 
to utilize these programs and explain the positive impact that 
they have on rural America.
    I have worked for the City of Lake Village for 38 years. I 
served as City Clerk for 18 years and now I am in my 20th year 
as Mayor, and I am a current member of the Arkansas Municipal 
League and served as its President in 2009.
    Arkansas is primarily a rural state. Approximately 500 
cities make up Arkansas, and 70 percent of those are considered 
rural. Therefore, communities like these and Lake Village rely 
on USDA Rural Development Programs, from water and wastewater 
systems to housing and low-income housing. Rural Development 
Programs have changed the face of rural Arkansas and have 
allowed our small cities to thrive.
    In Lake Village, we have benefited from Rural Development 
Programs over the years, and currently have a number of 
developing projects.
    The program that Lake Village has found most helpful is the 
Community Facilities Program. This is one of the most versatile 
programs available to rural communities such as Lake Village. 
The program assists communities in a number of areas from 
helping a city provide a childcare center to helping police and 
fire departments obtain much-needed equipment.
    In recent years, Lake Village has utilized the community 
facilities to obtain new police cars for our police department 
and is currently working with USDA to obtain funding to 
construct a new farmers' market which will create employment 
opportunities and increase access to healthy, local foods.
    Right now I am working with Rural Development to fund the 
renovation of an historic building located on Main Street to 
house our new city hall. A newly renovated city hall means that 
downtown development can begin in earnest.
    Like many small communities, Lake Village downtown was once 
a thriving social center, and the City of Lake Village expects 
that renovation of this historic structure will bring new 
businesses to our downtown area and help people rediscover the 
social fabric that is so ingrained in small town living. In 
fact, the domino effect of economic development has already 
started.
    As a result of the investment to renovate a new city hall, 
local investors have already been approached about renovating 
other downtown buildings. I have learned through this 
experience it is very difficult to find federal funding for a 
project such as this. For a small community like mine with a 
limited budget, we work diligently to pull together several 
funding sources to begin construction on the new city hall. 
This type of innovative thinking is imperative for rural 
communities to survive, and Rural Development knows and 
understands that partnerships are what makes projects work.
    For a small town mayor with infrastructure and community 
needs, I have to lean on my local Rural Development area office 
in Monticello, Arkansas for support and assistance. I have to 
say that they have been tremendous with their help, and I would 
like to acknowledge their work over the years that I have been 
working with them.
    I cannot tell you how important it is for rural communities 
to have access to USDA staff who understand the unique issues 
facing our towns. Mayors of small towns like Lake Village do 
not have grant writers, and often do not have the ability to 
seek outside resources to help support grant and loan 
packaging; however, USDA staff understands that small town 
mayors are working their hardest to increase the quality of 
life for their citizens and support us through this process. I 
am thrilled to have access to personnel as dedicated as those 
in Monticello, as well as the USDA State Office in Little Rock.
    It is no secret that small rural communities have limited 
resources across the board. One particular challenge for rural 
communities, particularly in Arkansas, is the lack of broadband 
for rural services. Without this basic public infrastructure, 
rural communities are unable to compete in this ever-growing 
global economy, and we are left at a disadvantage for increased 
educational opportunities. USDA Rural Development sees and 
understands this challenge, and must continue to assist 
communities such as Lake Village, build this critical 
infrastructure.
    My experience as a small town mayor and as past President 
of the Municipal League, Rural Development Programs work, and 
they work at the local, state, and federal level. While public 
infrastructure is important, equally important is technical 
assistance to rural communities.
    Lake Village has been fortunate to participate in Winrock 
International's nonprofit improvement program, which is funded 
by the USDA Rural Community Development Initiative. This 
program has proven extremely helpful to local leaders like me. 
This program allows Winrock to provide capacity building 
technical assistance to small communities and nonprofits. 
Winrock's assistance and continued partnership has given our 
community access to grant reviewers and classroom instruction, 
and most importantly have led to introductions with individuals 
with the ability to assist us in all areas of economic and 
community development. This type of technical assistance 
program is effective, and we are thrilled USDA Rural 
Development funds this important program in Arkansas.
    Ranking Member Chambliss, I appreciate the opportunity to 
speak to you today, and I look forward to answering any 
questions you may have. Thank you.
    [The prepared statement of Mayor Bush can be found on page 
58 in the appendix.]
    Senator Chambliss. Thank you very much.
    And our next witness will be Dennis Sternberg. Mr. 
Sternberg has served as Executive Director of Arkansas Rural 
Water Association since 1993. In 2006, Mr. Sternberg received 
the Executive Director of the Year Award from the National 
Rural Water Association. And in 2009, the United States 
Department of Agriculture and National Rural Water Association 
recognized Dennis for leadership in emergency response 
preparation.
    So, Mr. Sternberg, you have a distinguished career. We are 
pleased to have you here and look forward to your testimony.

  STATEMENT OF DENNIS STERNBERG, EXECUTIVE DIRECTOR, ARKANSAS 
                    RURAL WATER ASSOCIATION

    Mr. Sternberg. Thank you, Mr. Chairman.
    Senator Chambliss, I am honored to be here representing 
Arkansas Rural Water Association and National Rural Water.
    I would like to make an addition to our written submittal 
on our testimony before I begin. One omission in the testimony 
on page two, the fourth paragraph, when I reference the 
historical low delinquency rates, I omitted the point, the 
decimal point. So, it should read ``.67 and .21 of 1 percent,'' 
and I apologize for that confusion, but I would like to have 
that inserted.
    Senator Chambliss. That will be inserted in the record 
without objection.
    Mr. Sternberg. Again, I am honored to speak to this 
Committee, to testify to you and on the Department of 
Agriculture's rural water and wastewater funding programs and 
associated technical assistance initiatives that directly 
benefit small and rural communities with safe drinking water 
and adequate sanitation.
    I look at these USDA investments in water, infrastructure, 
and their impact from a holistic view. This is not just putting 
pipes in the ground; these investments have many direct 
additional benefits that provide a catalyst for economic and 
community growth while, at the same time, enhancing and 
maintaining community health. A small community's ability to 
provide adequate drinking water and sanitation often determines 
their ability to thrive and remain viable in the future.
    Many small communities in Arkansas and other states are 
paralyzed due to the inadequate drinking and wastewater 
treatment and capacity limitations. Many cannot attract 
economic development, meet federal environmental standards, or 
maintain and grow their population base. With the limited 
federal resources, it is my hope that this Committee will look 
at a creative solution in the next Farm Bill to provide rural 
development, alternative, affordable financing options for our 
communities. Rural Water stands willing and able to work with 
you to accomplish this goal.
    As you are aware, the economic downturn has also 
disproportionately impacted many of these small and rural 
communities more than our urban counterparts.
    Small rural communities are also faced with the additional 
burden of reduced tax revenues that impact their ability to 
provide essential services like water and wastewater.
    Rural Development also has the unique advantage over the 
federal agencies because of their field structure that includes 
experienced staff with community development, expertise 
scattered throughout small town Arkansas and throughout rural 
America. This structure allows them to serve communities that 
are both small and remote.
    Mr. Chair, I would like to specifically address three 
sections of the Farm Bill that enable us to carry out our 
mission at Arkansas Rural Water Association.
    First, the Rural Development Circuit Rider Program-- since 
1980, circuit riders have produced onsite technical assistance 
to small communities in all states for water infrastructure, 
development, compliance, training, certification, operations, 
managements, rates, disaster relief response, public health 
protection, all necessary to encourage local responsibility and 
local solutions for protecting and enhancing water resources. 
The mission is to provide grassroots assistance to communities 
in need of providing safe, affordable, and sustainable water 
and wastewater service.
    Second is the Farm Service Agency's grassroots Source Water 
Protection Initiative. This is the only statewide initiative 
ensuring environmentally progressive local land use decisions 
for local elected officials, land owners, agricultural 
producers, and other interested parties.
    Third is the Wastewater Technical Assistance Program. This 
initiative provides on-the-ground technical assistance directly 
to communities for wastewater treatment facilities. Assistance 
includes design, upgrade recommendations, daily operations, 
maintenance, assisting with permit renewals and helping these 
systems meet compliance requirements from state and federal 
regulations.
    From the local community perspective, these initiatives are 
the most effective environmental protection efforts for 
drinking water and wastewater quality, groundwater protection, 
source water protection, compliance with federal mandates from 
the Safe Drinking Water Act and the Clean Drinking Water Act, 
and other federal laws.
    Rural and small communities want to ensure quality drinking 
water and wastewater. After all, local water supplies are 
operated by people who are locally elected, whose families 
drink the water every day; however, the need for common sense 
assistance in the form that they can understand. Many small 
communities rely on volunteers or part-time administration to 
operate their local water supplies. Rural Water uses funding 
from Congress to provide every small community in all states 
the technical resources to provide safe and affordable water.
    In closing, Mr. Chairman, I would urge the Committee to 
address the current underlying statutory authority for water 
programs that presently do not provide the Secretary the needed 
flexibility or waiver authority in administering these funds to 
local communities. I have heard numerous situations in Arkansas 
where a small community is not eligible because they slightly 
exceed the population or meeting income limit or needed to have 
a grant-to-loan ratio for affordability purposes. The ability 
to use grant dollars for the very low-income communities is 
critical. In some instances, communities cannot afford the debt 
to service large loans, especially in the economic climate. We 
would like to ask the Committee to explore providing the 
Secretary with this authority.
    All communities have leaders, some are elected and others 
are just concerned citizens, that want to improve the quality 
of life in their community. Arkansas Rural Water with USDA as 
our partner stand on the front line working daily with these 
leaders on a local level to ensure our rural communities are 
not left behind. No community can grow or improve without 
sustaining resources of water and wastewater services. With 
your continued support and leadership, we will continue to 
prosper.
    Thank you, Mr. Chair, for you allowing me to testify before 
you today, and I would be glad to take any questions.
    Thank you.
    [The prepared statement of Mr. Sternberg can be found on 
page 73 in the appendix.]
    Senator Chambliss. Thank you very much, Mr. Sternberg.
    And Glenn, let me start with you. You stated in your 
testimony that your number one objective of NRECA and your 
member cooperatives is to keep the cost of electric power low 
for your consumer owners in rural America.
    We are in a regulatory environment like I have never seen 
before in my 16 years. There is a lot of over-reaching, 
particularly by agencies like EPA into your realm, as well as 
DOE. We are now looking at whether we have an energy bill or 
not that may restructure or seek to restructure the entire 
power production industry in this country, or it may even be 
that we are looking at a utilities-only energy bill right now 
that would have a significant impact on you and your membership 
and thus their customers.
    How does this type of atmosphere play into the ability of 
your membership to look forward and anticipate that they are 
going to be able to keep utility bills at the residential and 
commercial level reasonable and affordable?
    Mr. English. Well, I think it has a huge impact. We have 
got, obviously, tremendous uncertainty. You cannot plan; you do 
not where to go; you do not know what direction and what road 
to go down. We all see different ideas proposed, different 
pieces of legislation, the Congress thinking about this or 
that.
    We have, as you pointed out, a large number of regulations 
that are coming forward on existing law, and taking new 
directions, and that, too, influences the decisions. So, it 
crowds our member ship, and as it does, the industry at large, 
but particularly I think it crowds our membership into just a 
very few options, and those options are generally going to be 
more expensive. And as you add more requirements onto that, 
then that obviously adds more expense, there is more cost.
    So, all of that compounds the problem, makes it more 
difficult to keep those electric bills affordable. And as you 
know, percentage-wise, you have more low-income people living 
in rural America than you do in urban America. So, there is a 
disproportionate aspect to this. And certainly, as you look at 
regulations dealing with carbon, that, too, will 
disproportionately hit certain regions of the country as 
opposed to others. So, there is nothing even about it. There is 
no distributing the burden for these increased costs, and that 
is the reason I am hopeful that we will begin to see some 
people looking at the realities of this thing, particularly for 
the next ten years, of what can you do and when can you do it. 
The Electric Power Research Institute probably has done more in 
this area than anyone else. They have laid it out and they 
continue to adjust their projections as to what can be done. I 
think everyone recognizes right now efficiency is probably the 
way that you avoid building generation. And any generation that 
is built now is going to be the most expensive generation in 
history, adds to the electric bill. So, anything that we can do 
to avoid building additional generation is beneficial, and the 
so-called Rural Star legislation is one way in which we think 
we can make a contribution and help avoid building that 
additional generation to help keep electric bills down.
    Second, right now, most of our folks, if they have to have 
additional generation, they are going to turn to natural gas. 
That is more expensive, but you can build a natural gas plant 
fast; you can get it within two to two-and-a-half years, but 
you are also recognizing the fact, if you have looked at this 
industry for any period of time, that gas has a history of 
being very volatile. And so, gas prices may be very affordable 
now, that is not to say where they will be down five to ten 
years from now, and that may have a huge impact.
    Nuclear, I know in your home State of Georgia, our members 
are interested in participating--have committed to participate 
in building a nuclear plant. It takes ten years to build a 
nuclear plant and a lot of money and then we still have the 
waste issues. Those have to be addressed in some way.
    So, as you begin to look at this, if you are looking at it 
from the standpoint, say, of an electric cooperative who is 
trying to meet the power needs of the future, the question is, 
okay, what do I do the first year, the second year, third year, 
fourth year, fifth year. What can I count being delivered when? 
And we have a lot of ideas, a lot of technology that is being 
viewed and looked at, but what can you rely on, and many people 
I do not think have a very good understanding of that. We have 
a lot of folks--and I know in this Committee--and my goodness 
knows we have a national renewable cooperative already set up--
that national renewable cooperative cannot do much. To be 
honest about it, they cannot generate much in the way of 
renewable energy. Why? There is no place to go. No place to go.
    We can build huge wind generation farms in the Great 
Plains, that is where the wind is. Most of us recognize and 
understand that. We do not have it in Georgia, but you can do 
that in the Great Plains, but there are not that many people 
living in the Great Plains. It does not take long to saturate 
the Great Plains with electric power. And so, if we cannot move 
that power out of the Great Plains, it does not do us any good 
to build it. We are not going to go out there and invest the 
money in a wind generator that does nothing except turn and 
does not really benefit anyone.
    Second point is you have certain realities with regard to 
renewable energy, such as--as I think we all understand and 
know--it is intermittent. The wind does not blow the same every 
day, and the wind has a tendency to blow at night more than it 
does during the day time. How do we offset that? So, we have to 
have some kind of baseload generation that you can count on and 
find some way to integrate renewable energy in with the rest of 
our energy plan, and that has to be laid out.
    Certainly, nuclear power--can we speed up the building of a 
nuclear power plant? I understand in China they can build them 
in five years. It takes us ten years, and at what cost? And 
what do we do with regard to that spent fuel, and can we, in 
fact, do as other countries do, reprocessing it? And I was 
involved, my goodness, years and years ago, the late 1970s, 
when we said, oh, we cannot do any reprocessing of fuel because 
it has the tendency to produce weapons-grade plutonium. Is 
there a more sensible way of going about that?
    So, I guess what I am saying, Senator, and you kind of 
pulled my chain on this one and did a pretty good job of it and 
excuse me for rambling on, but basically what it comes down to, 
wouldn't it be nice to look at the next ten years and have 
government be a partner saying, okay, this is what we can do 
during this period of time. You can count on it; you can rely 
on it; you can go out and depend on it as far as an energy 
industry, and you can build the generation and you can 
accomplish it in this fashion.
    But as you pointed out earlier, and as several Senators 
have--goodness, we cannot even get this straightened out 
between government agencies, and certainly this is happening in 
the State of Georgia with regard to trying to use biomass. We 
have got--you have the Farm Bill and the regulations came out 
in the Farm Bill and what USDA is doing, which we thought we 
all understood and that is what we can count on and depend on 
and we were going to be able to, in fact, use biomass and 
building generation, but out of EPA, we have a more narrow 
definition, and now you cannot build all the generation down 
there. So, we say we want biomass involved, we want renewable 
energy, but then, whenever we have one agency that comes out 
with a definition completely contrary to what this Committee 
produces, how in the world do you depend on that? And where do 
you go with that?
    So, that is the reason we are just shifting one foot to the 
next trying to figure out what the heck do we do now, and we do 
not know.
    Senator Chambliss. And we sympathize with you.
    Mayor Bush, in your current position and as past President 
of the Arkansas Municipal League, do you see advantages to 
regional approaches to rural economic development, such as 
those through the Delta Regional Authority, which includes 
numerous Arkansas counties, and are there any disadvantages to 
that type of activity?
    Mayor Bush . Senator Chambliss, I would say that you can no 
longer exist unless you develop regionally in all aspects, 
whether it is community development or economic development, 
you must take a regional approach.
    The DRA has been very helpful. We also have an organization 
in our region called the Southeast Arkansas Cornerstone 
Coalition, and we do depend on one another regionally to 
promote one another and move forward, and I think that that is 
the only way that we will survive.
    Senator Chambliss. Mr. Sternberg, I am sure you know my 
good friend Jimmy Mathews, the longtime head of the Georgia 
Rural Development and Water Authority, and as I talk to Jimmy 
from time to time about the same thing--I just visited with 
Glenn about the massive regulations coming out of Washington 
that are affecting rural water projects, how do you see small 
towns in Arkansas coping with these massive regulations, 
expensive regulations, that are coming out, and what thoughts 
can you give us as to how we ought to approach the lessening of 
those regulations from a practical perspective?
    Mr. Sternberg. Well, it is interesting--and when you 
mentioned Jimmy Mathews, Executive Director, from Georgia, I 
looked to see if he had his logo on these Georgia peanuts, but 
they are not there, but----
    Senator Chambliss. His name is probably on there somewhere.
    Mr. Sternberg. Somewhere. But no, Senator, rural and small 
communities are challenged, especially with the federal 
regulations continually coming down. Under the RUS, the Rural 
Development Programs, loan and grant programs, I do think that 
we need to take another look at the low to moderate income 
formula on how that is done for loan-to-grant ratios so some of 
these communities can access more grant funding.
    Some of them--Mayor Bush and I were talking--one of her 
projects is just exceeding that limit on the percentages to be 
able to afford the grant. So, there are issues, and it is 
throughout Arkansas and it is throughout the Nation, but 
especially in Arkansas, we have seen several of those issues.
    EPA regulations are continually going to be bothersome for 
all water and wastewater system in the future. I am not saying 
they are not needed, but there is a tremendous cost that these 
systems are going to have to comply with to get up and running, 
and that is one of the things, with the funding that this 
agency allows is through USDA to provide the funding through 
wastewater and source water to help those small systems comply 
with those regulations. They cannot afford to hire engineers 
every time a new regulation comes down. They need assistance 
and they need quick assistance a lot of times, and that is what 
the success of our programs have been throughout Arkansas and 
throughout this Nation with rural water and continued funding 
to them is definitely something--I would add that 
regionalization is something we are going to have to look at in 
the water industry. We are seeing it in Arkansas where you have 
regional suppliers supplying to the smaller communities because 
of the new federal regulations coming from EPA on compliance 
issues. There are several of the EPA regulations it is going to 
affect--Arkansas and throughout this Nation.
    Senator Chambliss. Well, thank you very much, and thank all 
of you for being here. And let me assure you that the lack of 
attendance in no way is reflective of the value of your 
testimony. We are all busy and have conflicts. In fact, I am 
late right now to another hearing that I have to get to. But we 
appreciate very much you being here. Thanks for the great work 
you do in your respective areas, and we look forward to 
dialoguing with you as we move towards the reauthorization of 
the Farm Bill in 2012.
    The record will remain open for five business days for 
members who could not attend to submit questions in writing. 
And with that, the Committee is adjourned.
    [Whereupon, at 12:03 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             July 21, 2010



      
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             July 21, 2010



      
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                         QUESTIONS AND ANSWERS

                             July 21, 2010



      
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