[Senate Hearing 111-1191]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 111-1191
 
                         BUSINESS OPPORTUNITIES
                           AND CLIMATE POLICY

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

                                HEARING

                               BEFORE THE
                               
                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 19, 2009

                               __________

  Printed for the use of the Committee on Environment and Public Works
  
  
 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 



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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                     ONE HUNDRED ELEVENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
FRANK R. LAUTENBERG, New Jersey      DAVID VITTER, Louisiana
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
AMY KLOBUCHAR, Minnesota             CHRISTOPHER S. BOND, Missouri
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico
JEFF MERKLEY, Oregon
KIRSTEN GILLIBRAND, New York
ARLEN SPECTER, Pennsylvania

                    Bettina Poirier, Staff Director
                 Ruth Van Mark, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page

                              MAY 19, 2009
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Bond, Hon. Christopher S., U.S. Senator from the State of 
  Missouri.......................................................     2
Udall, Hon. Tom, U.S. Senator from the State of New Mexico.......     4
Voinovich, Hon. George V., U.S. Senator from the State of Ohio...     4
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................     5
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..    49
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    55

                               WITNESSES

Holliday, Charles O. Jr., Chairman and Chief Executive Officer of 
  E.I. DuPont De Nemours and Company, Inc........................     6
    Prepared statement...........................................     8
Stiles, Mark W., Group President and Senior Vice President, 
  Trinity Industries, Inc........................................    13
    Prepared statement...........................................    15
Warner, Cynthia J., President, Sapphire Energy...................    23
    Prepared statement...........................................    25
Healey, Tim, Director of Regulatory Affairs, Lange-Segmann 
  Company........................................................    40
    Prepared statement...........................................    42
Lowenthal, Richard, Chief Executive Officer of Coulomb 
  Technologies...................................................    62
    Prepared statement...........................................    64
Krouse, Wayne F., Chairman and Chief Executive Officer of Hydro 
  Green Energy, L.L.C............................................    75
    Prepared statement...........................................    78
Taylor, Richard W., Chief Executive Officer of Imbue Technology 
  Solutions, Inc.................................................    89
    Prepared statement...........................................    91
Armstrong, Jack, Construction Initiative Leader, North America, 
  BASF Corporation...............................................   120
    Prepared statement...........................................   122
           BUSINESS OPPORTUNITIES AND CLIMATE POLICY

                              ----------                              


                         TUESDAY, MAY 19, 2009

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in room 
406, Dirksen Senate Office Building, Hon. Barbara Boxer 
(chairman of the Committee) presiding.
    Present: Senators Udall, Inhofe, Voinovich, Bond, 
Lautenberg, Carper, Klobuchar, and Merkley.

           OPENING STATEMENT OF HON. BARBARA BOXER, 
           U.S. SENATOR FROM THE STATE OF CALIFORNIA

    Senator Boxer. The hearing will come to order. Welcome, 
everybody. We are very happy you are here. Our schedule is such 
that we expect to vote shortly. So my intention is to have us 
each make a 2-minute opening statement at maximum and then put 
the rest of our statement into the record so that we can get 
right to our witnesses.
    So, I would ask unanimous consent that all statements be 
placed in the record and I will start with mine.
    Today we will hear testimony on just a sampling of the 
business opportunities that we can expect when we act to cut 
the carbon pollution that causes global warming and we do it in 
the right way.
    Our witnesses today will provide on-the-ground examples of 
the way the American people will benefit from the clean energy 
policy that drives an economic recovery, creates jobs and helps 
to break our dangerous dependence on foreign oil.
    So when you hear my colleagues on the other side say this 
is the worst time to ever do this, it is going to cost a lot, 
it is going to be terrible, I have a real opposing view because 
I have lived a long time and I have seen all of this.
    When we passed the Clean Air Act, they said the same thing. 
Every time California stepped forward to clean up our 
environment, and even this recent move where they said we are 
going to take the lead on cutting global warming pollution--and 
at noon we are going to find out at the White House that they 
have followed California's leadership--we have always been told 
oh, the sky is falling and everything is going to be terrible.
    The truth is that when you clean up the environment, you 
create good, clean, green jobs. We are seeing it in California 
today where we have a horrible recession. With our housing 
problems, we are about No. 2 in the Country in terms of our 
foreclosures. We have got all of these issues that have hit us 
in the financial sector, but yet we see 400 new solar companies 
springing up and venture capitalists just waiting for the 
Congress to act.
    I am a very upbeat, optimistic person. I think the fact 
that you have got this economic recession converging onto this 
need to do something about global warming, I think that will 
equal American leadership and American Jobs.
    In closing, I would say to all of you who have not read 
Thomas Friedman's book Hot, Flat, and Crowded, I highly 
recommend it because, in the most beautiful prose, he says what 
I just said but in a much better way. The country that leads on 
this will be the economic leader in this century.
    With that, I would turn to the Ranking Member, Senator 
Bond.

        OPENING STATEMENT OF HON. CHRISTOPHER S. BOND, 
            U.S. SENATOR FROM THE STATE OF MISSOURI

    Senator Bond. Thank you very much, Madam Chair. My 
sympathies to you and the Californians with the $42 billion 
deficit that you have incurred.
    We want to hear today from the experts who believe that 
global warming legislation can be profitable. In some 
instances, the problem is that the profit will come from the 
suffering of others, from the pain of energy taxes and the lost 
jobs through global warming legislation. There are some who 
want us to feel the pain of higher prices to produce carbon 
savings. And from the pain of many will come the profit of 
some.
    When energy prices are so high, high costs will finally 
become competitive. What some try to forget is that consumers, 
families, farmers and workers and will suffer under higher 
energy prices. All will face the pain at the pump, the light 
switch, the checkout counter and the unemployment line.
    I am very proud to have a Missouri witness, Mr. Tim Healey. 
Tim's family founded and ran fertilizer distributor Lange-
Stegmann in St. Louis. He will tell us how high natural gas 
prices the last few years led to record fertilizer prices for 
farmers. Many fertilizer producers could not pass on enough 
high prices and closed down. I have a chart that shows that 
more than a dozen fertilizer plants have closed in the last 10 
years to move their operations and their jobs to lower cost 
countries like China and the Persian Gulf. Global warming 
legislation can impose the same costs. Higher farm prices, food 
prices and jobs lost to China.
    Some would say that the savior to this suffering is green 
jobs. I support helping to create green jobs when it makes 
economic sense. We can, and should, do more to encourage 
renewable power, biofuels, clean energy technology, algae 
conversion. But we will create far too few green jobs to make 
up for crushing higher energy prices.
    Phil Angelides of the Apollo Alliance wrote in Roll Call 
yesterday that Michigan produced more than 3,000 new clean 
energy jobs. That is a nice number but that is less than 1 
percent of the 400,000 manufacturing jobs Michigan lost.
    I have laid all this out in a report I did called Yellow 
Light on Green Jobs that I will submit for the record.
    Senator Boxer. Without objection, Senator Bond.
    [The referenced chart follows:]
    [GRAPHIC] [TIFF OMITTED] T4585.001
    
    Senator Bond. Expected taxpayer subsidies are very 
expensive and Federal subsidies of $100,000 per green job plus 
the costs of the taxpayer subsidies for some of the energy 
generated by solar and wind are too high.
    Thank you, Madam Chair.
    Senator Boxer. Thank you very much. I will see our 
Republican Governor today and I will send your best wishes and 
he would tell you that our budget problems date way back. It 
has nothing to do with global warming legislation which is 
creating jobs in our State. But, once again, the party of no 
puts forward its arguments and we will hear a lot more of that.
    We are going to go to Senator Udall.

             OPENING STATEMENT OF HON. TOM UDALL, 
           U.S. SENATOR FROM THE STATE OF NEW MEXICO

    Senator Udall. Thank you very much, Madam Chair.
    Let me just say welcome to all of our witnesses and a 
special welcome to Cynthia Warner, the President of Sapphire 
Energy. I would also like to thank the Chair for inviting 
Sapphire to testify.
    I know that Sapphire is based in California but I think you 
do much of your work in New Mexico. This is an area that I will 
say we are very interested in in New Mexico in terms of 
renewable energy and using some of the lands that we have in 
New Mexico that have the ability to produce renewable energy. 
You talk about desert land and you talk about a hot climate and 
salty and brackish water. We have it all and we have it in a 
pretty significant quantity in certain parts of our State.
    We really look forward to working closely with you and 
developing this resource because it is something that I think 
is not only important for New Mexico, it is important for the 
Nation.
    So, welcome here and I would yield back any time so that we 
can get directly to our witnesses.
    Thank you, Madam Chair.
    Senator Boxer. Thanks so much, Senator.
    Senator Voinovich.

        OPENING STATEMENT OF HON. GEORGE V. VOINOVICH, 
              U.S. SENATOR FROM THE STATE OF OHIO

    Senator Voinovich. Thank you, Madam Chairman.
    Climate change is a complex issue that requires examination 
from a variety of perspectives. In this regard I would note 
that, while hearings on green jobs and climate science are 
helpful, they do not provide numbers with an adequate forum to 
examine the various policy options available to address climate 
change.
    Reports of an aggressive Senate agenda for the 
consideration of mark up legislation now in the House has 
caused me great concern. And I am glad, Madam Chairman, that we 
talked about this prior to the hearing, that you intend to have 
robust hearings here in this Committee of any bill that comes 
over from the House.
    Senator Boxer. Yes. Many, many workshops.
    Senator Voinovich. I would hope that beyond the workshops 
we have more than one mark up as we did last time and that we 
do get a lot more information about the impact that this 
legislation will have on the entire economy.
    Given our knowledge of the previous bills, we would expect 
that the potential costs to consumers to be high for 
Congressman Waxman's proposal. Many people now engaged in this 
debate downplay the impacts that climate change will have on 
our economy. Although the green jobs movement advanced by the 
environment establishment is trying to convince us that 
rationing energy resources will save the world and our economy, 
there is no credible analysis that support these claims.
    One of the things that people fail to realize is that 
eight-tenths of 1 percent comes from solar. One point 4 percent 
comes from wind power. The rest of it comes from other sources 
of energy in this Country.
    The other thing that has been failed to be mentioned is 
that the ``green industry,'' in terms of kilowatt hours, is a 
subsidy of about $24 per kilowatt as compared to a lot lower 
costs for other sources of energy.
    We understand that the industry has to get started and once 
they get going, maybe the price is going to come down. But to 
give us this impression that all of a sudden the green jobs are 
going to make up for the ones that we are going to lose from 
cap-and-trade legislation, which I am sure is going to happen, 
does not make sense.
    A lot of people tell me, George, do not worry about it. It 
is all going to be taken care of. It is going to work out. 
Well, if I am somebody that has been put out of work, or I am a 
person in Cleveland who is on fixed income, and I see my energy 
costs increase like they did for natural gas, I have some real 
concern about this legislation and its impact on me and the 
economy and on jobs.
    Senator Boxer. Thanks, Senator.
    Senator Lautenberg.

        OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, 
           U.S. SENATOR FROM THE STATE OF NEW JERSEY

    Senator Lautenberg. Thanks, Madam Chairman.
    People are appropriately concerned about how we work our 
way out of this recession that we are in. I and many around 
here believe that there are job opportunities in what we are 
calling the green environment. I think the title mystifies 
people to the tune of disbelief. They just do not see it. We 
have to make sure that we show the examples very clearly of 
what the benefits can be to our health and what we can do in 
terms of sharing with the public at large a look at how a green 
opportunity is a valuable one.
    I recently visited a company is West Hampton, New Jersey 
called Lighting Sciences. It employs 48 New Jerseyans and 110 
people across the Country. It makes a high efficiency LED bulb. 
These lights consume much less energy than standard bulbs, do 
not contain mercury, lead or other toxins, and LEDs pay for 
themselves in a short amount of time, saving money on energy 
bills for businesses.
    Having built and run a pretty good sized company, I can 
tell you savings like that do add up and will allow business to 
invest and expand and hire more workers. And in this economy, 
helping businesses expand and hire more workers should be our 
primary mission.
    I have great respect for our colleague from Ohio. He is 
always bringing to our attention the fact that higher costs are 
not something that would like they would help us out of a 
recession. But there are opportunities. I say to my friend, 
there are opportunities out there and we have to work very hard 
and I am pleased that our witnesses here are prepared to talk 
about business opportunities and the environment.
    Madam Chairman, I ask that my full statement be included in 
the record.
    Senator Boxer. Absolutely. Will do.
    [The referenced material was not received at time of 
print.]
    Senator Boxer. Now we will turn to our panel. I have been 
told that the votes have been pushed back a bit so we should be 
able to get through this panel. We are very, very proud that 
you have all agreed to be here. We really are. We thank you so 
much for taking your time.
    Charles Holliday, Jr., Chairman and Chief Executive Officer 
of DuPont. Welcome, sir.

   STATEMENT OF CHARLES O. HOLLIDAY, JR., CHAIRMAN AND CHIEF 
 EXECUTIVE OFFICER OF E.I. DUPONT DE NEMOURS AND COMPANY, INC.

    Mr. Holliday. Thank you, Chairman Boxer and distinguished 
Committee members.
    I am here as Chairman of DuPont, a $30 billion revenue, 
207-year-old American-grown company; but also as a member of 
the U.S. Climate Action Partnership. I appreciate the fact that 
you are holding these hearings focusing on the important need 
to address climate change and seize the opportunity for 
American companies to grow in the U.S.
    I believe that addressing climate change may be the single, 
greatest opportunity to reinvent American industry and put us 
on a more sustainable path than we face today. Yes, leadership 
has the potential to create real economic growth by providing 
the certainty companies need to increase their investment and 
accelerate the development and deployment of low carbon 
solutions, creating good jobs for American workers.
    That leadership can help the nations of the world all come 
together to adopt low carbon energy technologies that will 
create these massive new markets for large companies like 
DuPont and smaller companies. We need to be sure that American 
companies are leaders in this.
    I think it is very useful to think about this subject as 
two buckets. In bucket No. 1 are more energy efficient and 
effective solutions. In bucket No. 2 are expanded and new 
sources of low carbon energy.
    Turning first to efficiency, as you drive through almost 
any subdivision here in the U.S. you will see DuPont Tyvek 
wrapped around a home. That is a very efficient, cost effective 
way to conserve energy. A typical two-story house in the 
Midwest that uses Tyvek can reduce their energy use by 20 
percent from this one step alone. What we see is that there are 
clear opportunities on technologies that are here today. We 
must break down the barriers to deploy them and develop them 
more completely and we need to create those jobs here in the 
U.S. to do that.
    In the second bucket I described, there are new sources of 
energy. There are two examples from DuPont, both from the 
biofuels area. We are working on ethanol that can be made from 
corn cobs and switch grass. We are building a $40 million power 
plant in the State of Tennessee that will be operating by year 
end.
    Our second biofuel is biobutanol, which has some advantages 
over ethanol because it can be mixed freely with gasoline and 
has higher energy content per unit weight. We need to be sure 
that we provide the environment so that those projects can be 
developed here in the U.S.
    I have one last perspective that I would like to share with 
the Committee that is based on my 35 years of doing business in 
DuPont. This climate change issue is very complex. We believe 
the science is clear and you need to take action. But exactly 
what is going to happen and exactly when it is going to happen 
no one knows for sure. Therefore, we believe there will be very 
legitimate debate, very important work for your Committee, to 
debate how much you limit the impacts of climate change versus 
how much you adapt to it. That should be done with great vigor 
and you should work on that carefully as a Committee and I 
think that is very good use of your time.
    What I do not think you should debate is the need to create 
those jobs here in the U.S. for American companies and what it 
takes to be sure that not only the development is done here, 
but the jobs are created and the activities deployed here.
    Now let me be extremely blunt and say it is a lot easier to 
go to Singapore, Hong Kong or China today and get immediate 
government support for a clean energy project than it is in my 
own Country. Let me give you three specific examples.
    If I wanted to bring a new clean energy technology project 
out, I could get approval in the three countries I described in 
less than 100 days. At the same time, I could also go to those 
governments and find support for our action that would take 
down the amount of up front cash we have which would allow us 
to go faster and bigger. And third, what we will find is fast 
track approval for the permitting process, by no means relaxing 
the standards, but speeding things through.
    I urge your Committee to look at ways we can be just as 
competitive as the three entities I described, to make sure 
those new jobs come here, not just for American companies, but 
you can attract Japanese and German and Brazilian companies to 
do the same thing. I urge you to focus on that opportunity. I 
think it is the greatest opportunity we face as a Country.
    Thank you very much.
    [The prepared statement of Mr. Holliday follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Boxer. Thank you so much and I hope that your words 
resonate far through this U.S. Senate. You say this is a great, 
great opportunity.
    Mr. Stiles, we welcome you, Senior Vice President of 
Trinity Industries. We look forward to hearing from you.

 STATEMENT OF MARK W. STILES, GROUP PRESIDENT AND SENIOR VICE 
              PRESIDENT, TRINITY INDUSTRIES, INC.

    Mr. Stiles. Thank you, Madam Chairman, and Senators.
    It is a pleasure to be here today as we testify about the 
business opportunities for renewable energy as far as Trinity 
Industries sees it.
    We are a multi-industry company. We operate in 13 States. 
We have one of our largest barge building facilities in 
Caruthersville, Missouri. We have a number of our highway 
products businesses in Illinois and Ohio. We are in 10 other 
States.
    One of the things that I think is extremely important for 
us today, and to echo Mr. Holliday's remarks, is that the jobs 
that are created here are real jobs. We have lost jobs in the 
businesses we are in. We are in the rail car business, the 
barge business, the concrete and aggregate business. We are so 
tied to what goes on in this economy and the manufacturing 
portion of what is going on. We are one of the multi-industry 
manufacturers that are still left in this Country.
    A number of years ago, when we started building wind 
towers, it was looked at as a ``science project.'' But we 
participate in this business now. In 2003, we built no wind 
towers. Now, we are the largest manufacturer of wind towers in 
the U.S. We provide those wind towers for General Electric, 
Suzlon, Acciona, Gamesa, Impsa and Mitsubishi. Those companies 
are operating in the U.S. We do not want to lose jobs to 
foreign countries as well because it does not take them as much 
investment or take as much red tape, so to speak, to get their 
permits and start.
    The fact is that our people are productive and efficient. 
We use almost 100 percent recycled steel to build these 
products. We can compete as long as we are on level playing 
fields and these are real jobs that are being created. We have 
several hundred jobs in these businesses and we have put them 
in facilities that have previously been shut down from other 
businesses.
    There has been a drastic drop in the production of the rail 
car industry in the U.S. and one of the things that we have 
done is be able to take advantage of building these wind towers 
in these facilities. These towers, you will see, that is 15 
feet across, it weighs close to 30 tons, when it is finished it 
is going to be 200 feet tall, it is going to have 150 tons in 
it, all of those things are made from flat plate steel. That is 
American steel, American workers, American facilities that were 
shut down.
    One of the main reasons I think I was asked to be here 
today, and I am pleased to do it, is because in Newton, Iowa, 
there was a Maytag facility, and Senator Bond and Senator 
Voinovich both mentioned this, there were 4,000 jobs in Newton, 
Iowa working for Maytag. Those jobs are gone. They did not go 
overseas. They went to another State, as I understand it.
    We are not Maytag. We do not provide that many jobs. In 
fact, there are only about 100 there now. We expect to go to 
250. But they are good jobs with good benefits and what the 
people in Newton, Iowa have said is we did not have anything 
before you came.
    We worked with Governor Culver there in Iowa to get this 
facility started. Recently President Obama was there for Earth 
Day. We were very pleased to show him the plant. He asked me 
what the main problem was. The main problem was that a year ago 
there were 24 credit facilities that were out operating for 
wind tower development and there are only four at this time. 
The money that Congress is trying to put forward needs to get 
down to the developers. GE, one of our biggest customers, will 
tell you flat out that they have not had a turbine order since 
last August. And the opportunities are there.
    Transmission must be addressed. I want to say that when you 
stop and you look at this, these jobs that are created are in 
steel manufacturing, the people that collect the scrap that 
makes the steel, the transportation, the railroads that ship 
the steel, the fitters, the welders, the machinery operators, 
and the maintenance people. There are schools that are being 
set up all over this Country now to learn how to maintain wind 
turbines. There are the transmission jobs. There are hundreds 
of jobs, thousands of jobs, literally being created. But the 
money has to get down to the bottom, to the people that are 
developing these things.
    What I will tell you is that we had facilities that have 
been idled in Oklahoma, Georgia, Texas and in a number of other 
States. We have taken facilities in Illinois and Iowa and 
rebuilt them from what they were. These are real jobs and the 
money needs to get there.
    We believe that there is a future for the renewable energy 
business. There is some subsidy going on, as you said, for the 
wind and solar business, but the fact is that we are going to 
have to work ourselves out of the dependence on foreign oil in 
order to become a competitive Country and stay that way.
    Thank you very much.
    [The prepared statement of Mr. Stiles follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
        
    Senator Boxer. Thank you so much.
    Now, I am really very pleased, C.J. Warner, President of 
Sapphire Energy, headquartered in San Diego, California. 
Beautiful San Diego, California. Using algae to convert 
sunlight and carbon dioxide into renewable fuels. Sapphire's 
jet fuel has been successfully tested in a Boeing 737. We are 
very happy to see you here.

   STATEMENT OF CYNTHIA J. WARNER, PRESIDENT, SAPPHIRE ENERGY

    Ms. Warner. Thank you very much.
    I really appreciate the opportunity speak with you about 
Sapphire Energy. We are a very exciting new company with a 
great new technology. We were established in 2007. We have 107 
employees and we work in California and New Mexico. Our goal is 
ambitious. It is to become the world's leading producer of 
renewable fuels.
    At Sapphire, we have established four benchmarks to guide 
our work. First, is to produce ``drop in'' transportation fuels 
that are compatible with today's existing energy infrastructure 
including today's vast network of refineries, pipelines and 
terminals and the existing fleet of cars, trucks and jets. 
Second, is to produce fuels that can be grown on marginal 
desert lands and in brackish or in saltwater. Third, is to 
produce fuels with a low carbon impact. And fourth, is to 
produce fuels that are scalable in the near term and cost 
competitive in the long term.
    I am very pleased to say that we are well on our way to 
meeting these benchmarks. We have developed a product that is 
renewable. It is produced right here in the U.S. It has a low 
carbon footprint. It has no adverse environmental side effects. 
It is price competitive and it fits seamlessly into our 
existing energy infrastructure. That product is algae-based 
fuel, which we call green crude. I have a vial of it right 
here. And if looking at crude samples is something that you are 
familiar with, it looks a lot like West Texas Intermediate 
except it has a little bit more of a green tinge to it.
    [Laughter.]
    Ms. Warner. Algae is uniquely suited to serve as the 
foundation for a new generation of transportation fuels. It is 
one of most nature's most efficient photosynthetic organisms. 
It has a short growing cycle. It does not require usable farm 
land or potable water. The environmental benefits are dramatic. 
The production of algae consumes enormous amounts of 
CO2, both from industrial gas and from the 
atmosphere. The production of one gallon of green crude will 
consume about 30 pounds of CO2.
    This provides a two for one benefit, by using 
CO2 emitted by a facility, such as a coal fire power 
plant, as a feedstock for production of transportation fuel. In 
essence, the carbon gets used twice.
    When I explain the benefits of algae-based fuel, people 
sometimes ask jokingly if I have been drinking too much of the 
green Kool-Aid. It sounds too good to be true. But algae-based 
fuel is not science fiction fantasy. It is real.
    Just last year, Sapphire successfully produced 91 octane 
gasoline and 5 months ago we participated in a test flight with 
a Boeing 727 twin-engine aircraft. The flight was an incredible 
success. The algae-based jet fuel met all requirement standards 
and it actually burned 4 percent more efficiently than the 
petroleum based fuel. The test pilot said that the engines 
performance was textbook.
    This was a great demonstration that our products are not 
inferior, green compromises. They are premium fuels with 
desirable qualities, such as high diesel cetane numbers and low 
levels of undesirable qualities such as sulfur. Our unrefined 
algae could command a significant price premium over light 
sweet crude.
    In terms of production, we do currently operate an R&D 
facility in La Jolla, California and a 100-acre development 
facility in Las Cruces, New Mexico. Soon, we will open an 
additional 300 acres of processing capacity in New Mexico. Over 
here you can see depicted our various facilities. We will 
continue to expand as production expands itself.
    We plan to meet very ambitious milestones. It is 
illustrated in our commercialization time line over here: 
producing 1 million gallons of fuel per year by 2011, more than 
100 million by 2018 and 1 billion gallons by 2025. This is 
really exciting.
    The clear advantages of algae has gone on elsewhere, 
spawning more than 90 other algae-based companies in the past 2 
or 3 years. All told, it is realistic that by 2050, algae-based 
fuel can replace more than 25 percent of today's conventional 
petroleum usage.
    This will create thousands of green collar jobs all across 
the Country. In San Diego alone, algae is already responsible 
for 500 jobs, $25 million in wages and $63 million in economic 
output. Local analysts' predict that Sapphire's Las Cruces-
based facilities will produce nearly 750 direct and indirect 
jobs in rural New Mexico.
    The Algae Industry Trade Association recently estimated 
that, over the next three or 4 years, the production of algae-
based fuel will create almost 12,000 direct jobs and another 
30,000 indirect jobs.
    Sapphire's commercial success is closely tied to the 
important work that this Committee has undertaken. Our business 
model works best if the Country is on a path to energy 
efficiency, reducing greenhouse gas, and promoting domestic 
renewable fuel resources. Accordingly, we have been working 
with this Committee to ensure that cap-and-trade legislation 
provides a proper carbon accounting for algae-based fuel.
    In conclusion, Sapphire Energy believes that the business 
opportunity presented by climate policy can be 
transformational. By getting ahead of the curve, we can produce 
a new generation of transportation fuels for the world that are 
low carbon, produced right here in the U.S. and that generate 
renewed economic growth and new green collar jobs.
    Thanks and I look forward to answering your questions.
    [The prepared statement of Ms. Warner follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Boxer. Thank you so much for that.
    And now, last but not least, Tim Healey, Director of 
Regulatory Affairs at Lange-Stegmann. Welcome.

STATEMENT OF TIM HEALEY, DIRECTOR OF REGULATORY AFFAIRS, LANGE-
                        STEGMANN COMPANY

    Mr. Healey. Thank you very much, Chairman Boxer, Ranking 
Member Bond, Senator Carper, Senator Voinovich, Senator 
Lautenberg and Senator Udall for the opportunity to testify 
today about the impacts of climate change policy such as cap-
and-trade and the carbon tax on our business and our customers.
    I am Tim Healey, Director of Regulatory Affairs for Lange-
Stegmann Company. Lange-Stegmann is a fertilizer wholesale 
distributor, selling fertilizer for agricultural applications. 
We have 42 employees. The company has been in business since 
1926. Lange-Stegmann also owns Agrotain International, which 
manufacturers and markets nitrogen fertilizer additives that 
make urea nitrogen more efficient and reduce greenhouse gas 
emissions to the environment.
    We are concerned about the increased costs that will be 
associated with the manufacture and transportation of 
fertilizer. The manufacture of nitrogen fertilizer is very 
energy intensive. Natural gas is the feedstock for ammonia, the 
basic building block for all nitrogen fertilizers and this 
accounts for 70 to 90 percent of the production costs of 
ammonia.
    Climate change legislation may cause the power industry to 
switch fuel in order to meet greenhouse gas emission goals 
established by Congress. Switching to natural gas will cause an 
increase in demand with the only incentive to increase supply 
being price.
    When the price of fertilizer increased as it did from 
January 2007 to the apex in the third quarter 2008, our small 
company, and by the way we have a very strong financial 
statement, had to increase our line of credit by 50 percent in 
order to continue to purchase fertilizer. This additional line 
of credit came at a very steep cost to us: 1.5 points in up 
front fees, a 50 percent increase in the interest rate and soft 
costs (appraisals, audits and legal fees) exceeding $70,000. 
Our customers had to increase our lines of credit as well, with 
similar additional costs. Fertilizer dealers who were unable to 
increase their lines of credit simply closed their doors.
    In addition to increased fertilizer costs from natural gas 
prices and borrowing costs, we will experience increased costs 
to operate our facility. A cost of $30 per ton of a carbon 
dioxide equivalent would have increased our electric bill over 
last year by a minimum of $90,000, our natural gas bill by a 
minimum of $33,000, and our mobile equipment fuel bill by 
$16,000. To a small business such as Lange-Stegmann Company, 
the increased energy costs of approximately $140,000 per year, 
coupled with higher input and transportation costs, will be 
crippling to the company. These types of impacts will be 
multiplied by businesses nationwide at a staggering cost to our 
economy.
    Farmers cannot afford to pay more for fertilizer inputs. 
Farmers felt some pain last year but were able to offset higher 
input costs because crop prices were also higher. The same 
scenario does not apply this year because crop prices are 
considerably lower. In the autumn of 2008, very little 
fertilizer was sold due to historically high fertilizer prices 
and declining crop prices.
    The U.S. cannot unilaterally enact legislation regarding 
carbon taxes, fees or cap-and-trade program and expect to 
reduce overall greenhouse gas emissions while expecting our 
industries to remain globally competitive.
    Rather than penalizing Americans through a cap-and-trade 
system or a carbon tax, we recommend legislation that 
encourages the development and adaptation of energy efficient 
products and processes. During these tough economic times, our 
economy cannot bear the significant costs associated with 
unilateral implementation of a massive cap-and-trade program or 
a costly carbon tax. Such a program will significantly raise 
costs on our manufacturers, retailers, growers and, ultimately, 
the consumers who will be forced to pay higher prices for food, 
fuel and other products.
    Thank you very much.
    [The prepared statement of Mr. Healey follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
        
    Senator Boxer. I want to thank our witnesses. We will each 
have 5 minutes for questioning.
    Mr. Healey, let me start with you. I want to make sure I 
understand your issue. You need natural gas to make your 
product. Is that correct?
    Mr. Healey. Natural gas is required to make urea nitrogen, 
yes.
    Senator Boxer. OK. Right. Don't you think, because as a 
capitalist you believe in competition, you are sitting next to 
a woman here is going to offer us other ways to generate the 
fuel we need, et cetera. You are sitting next to gentlemen here 
who are telling us this is an opportunity. I guess what I am 
asking you is, if there is more competition for natural gas in 
the future, would that not keep the price down? If there is 
more competition?
    Mr. Healey. If there is more competition, there is going to 
be more demand and that could raise the price.
    Senator Boxer. Competition raises the price? Or more 
supply? More supply?
    Mr. Healey. Competition for the supply.
    Senator Boxer. Well, what if there is more supply?
    Mr. Healey. If we could guarantee it, and keep the price 
down----
    Senator Boxer. Is it not true that more supply in a 
capitalistic system, is important for you to keep your prices 
down? Is that correct?
    Mr. Healey. Yes.
    Senator Boxer. OK. More supply of what you need. I think 
that means you want to have more opportunities out there for 
people to use other things other than natural gas. If everybody 
relies just on natural gas, you have got a problem. But if 
there is other ways for people to get their needs fulfilled, I 
think you are in much better shape.
    Let me turn to, I guess I would ask Mr. Holliday and Mr. 
Stiles this question. I believe our Country has some of the 
most innovative companies and workers in the world. I think the 
three of you, as you spoke, and I am sure Mr. Healey is very 
innovative as well, so all of you represent innovation. If we 
pass legislation limiting carbon pollution, what do you think 
it will mean for U.S. companies' ability to compete 
internationally?
    As I look around the world, everybody is moving toward a 
low carbon future. Here in America, we see our President doing 
it. We tried to do it last year here but we have a lot of no, 
no, no, no, no, no. So, what does it mean if we have good 
legislation, let us say cap-and-trade, that gives you the 
flexibility? What do you think it would mean for us to complete 
internationally? Will it make you stronger? Will it make you 
weaker? What do you think?
    Mr. Holliday. Chairman, I will speak first and then turn to 
my colleagues. I think clearly we see other countries will 
follow the leadership, which is a question that must be on your 
mind. If we make the changes, but China and India do not make 
the changes, will we be disadvantaged? And if they do not make 
the changes, we would be. I think they will follow.
    The questions I had from many Chinese leaders I met with 2 
months ago is: Is the U.S. going to act? Because they were 
getting ready to seize the job. Fifty percent of the solar 
sales today are made in China. They want to grow that market. 
So, I think the issue back to us is to be sure, as I described 
in my testimony, that we provide the environment so that not 
only is the development done here--we have the greatest 
scientists in the world in the U.S., bar none, we will do the 
best development--then we have to make sure the manufacturing 
is put in place here so that we create the jobs here and not 
just create the technology. That is a big challenge, I think, 
for your Committee.
    Senator Boxer. And you believe that if there is good 
legislation passed limiting carbon that will be an incentive to 
move this quicker?
    Mr. Holliday. I think that is absolutely right. That is 
step one. That is essential to get the whole train moving. And 
then you need to think about how we do, just like Singapore and 
Hong Kong do, as I described, to be the most attractive place 
for everybody to build those plants.
    Senator Boxer. So, Mr. Stiles, as we hear from you, you 
have shown us that you are building wind towers. You have shown 
us the innovation that we talk about and putting people to work 
in clean industries to power our Nation. Do you think that 
legislation limiting carbon, if it is drawn up right, will help 
your business create more manufacturing jobs in this Country?
    Mr. Stiles. Senator, you said earlier that we are 
innovative people. We are. I believe we are a very 
entrepreneuristic company. I will tell you that I think that 
everything has to be done in moderation and, if there is a good 
piece of legislation, there is proven move in it, then positive 
results are going to occur.
    I think as a manufacturing company, and there is not many 
of us left, quite frankly, as long as there is a level playing 
field and we do not have to be subjected to subsidies from 
foreign countries, and at the same time do not kill off 
everything that we have, I mean, do not forget that when we are 
building wind towers, we are also hauling coal in rail cars and 
tank barges and chemicals and those things, I think that as we 
move into this and move into the changes that we have to do for 
our climate, we have to protect the jobs that we can. But if we 
prove and move those and keep a level playing field, I think it 
is going to be very positive for the Country.
    Senator Boxer. So, what I hear you both saying is, if it is 
good legislation, it is a real positive. If it is well thought 
out and well drafted.
    OK, Senator Bond.
    Senator Bond. Thank you, Madam Chair.
    You asked Mr. Healey about lower demand. If I remember my 
economics correctly, if the demand goes up and the supply stays 
the same, the price goes up. We have already seen plastics 
manufacturers, fertilizer manufacturers moving overseas because 
they do not have the same red tape, they do not have the same 
demand that we do in the U.S. We have gone to natural gas too 
much, in my opinion, for generating electricity, which has 
raised the price and hit the farmers.
    Now, a unilateral carbon tax puts us further at 
disadvantage. I would agree with Mr. Holliday that we need to 
bring other countries along and develop the technology. But it 
seems to me that we need to cut red tape. Unfortunately, folks 
on the other side of the aisle have been the ones who have said 
no to more expiration and production of natural gas in the U.S.
    Mr. Healey, would that help if we could produce the natural 
gas that we have in the U.S.?
    Mr. Healey. Yes, Senator. It would help tremendously.
    Senator Bond. Ms. Warner, I strongly support your algae 
production. I have seen it in Missouri. The Danforth plant 
science center and many others have shown, and we want to 
compete with you to be the most effective producer of algae-
based green crude. You take the carbon from a coal fire plant 
and convert it directly into your fuel; therefore, while you 
still release the carbon, it is used twice. You are saying it 
commands a higher price. I assume that you do not require very 
great tax subsidies to make this viable. Is that correct?
    Ms. Warner. That is correct. Our planning basis is to 
compete directly with the price of crude as it goes. So, we 
just want to have a level playing field during the period of 
time that we are developing and make sure we are treated the 
same as other renewable options.
    Senator Bond. I am all for that. Mr. Stiles, we are 
delighted to have your barge manufacturer in Caruthersville 
but, unfortunately, the red tape and the environmental 
restrictions have cut down significantly on our river 
transportation and I believe that rail transportation is 
certainly more efficient than truck transportation of bulk 
materials, but to me the river transportation which you support 
is probably the most economical and energy efficient way to 
move bulk products. What do you see as the future of river 
transportation?
    Mr. Stiles. Well, Senator, thank you very much and we have 
appreciated your help in Caruthersville. The Mississippi River 
lock system has got to be upgraded and maintained if we are 
going to have a good viable barge----
    Senator Bond. Would you repeat that? With emphasis? With 
feeling?
    [Laughter.]
    Mr. Stiles. Senator, we have never met and you did not set 
me up for this, but I will tell you that the Mississippi River 
barge and lock system has got to be upgraded because barge 
transportation in that part of the Country is by far the lowest 
cost and mode of transportation in any facilities or any 
locations that are in the Country.
    In order for it to be manageable though, you have to have 
things to move and right now there are just not a lot of things 
moving.
    Senator Bond. You might also include in your prayer to 
start reusing the Missouri River for barge transportation which 
would serve the Upper Midwest and unclog highways with the 
polluting trucks and lessen the pressure on rails.
    Mr. Stiles. Senator, I am an equal opportunity prayer. I 
pray for everybody right now.
    [Laughter.]
    Senator Bond. I think we all need it. Not only leadership.
    Mr. Holliday, I appreciate your leadership at DuPont. In 
one of our reports on green jobs, one of the most effective 
ways to reduce carbon emissions is first, through energy 
conservation. I believe that energy conservation is one that 
reduces costs. Do you have any time line on how quickly a 
homeowner can recoup the price of putting your----
    Mr. Holliday. Tyvek.
    Senator Bond. Tyvek. How long is required before the 
reduction in heating costs pays for the installation?
    Mr. Holliday. It varies by place in the Country, but about 
5 years. It is a very good investment for the homeowner if he 
is thinking long term at all. And somehow we have got to get 
them incentives to think that way. There are other new 
technologies coming out, such as a system that will retain heat 
during the day and release it at night, which also could be 
very effective.
    Senator Bond. Well, that, and commercial buildings. I also 
appreciate your work in batteries for battery-driven cars. We 
happen to be the battery capital in Missouri so if you want to 
work with us we would be happy to do that.
    Mr. Holliday. Your companies in Missouri are very good 
customers for our thin membranes that go in those batteries and 
we appreciate it.
    Senator Bond. Thank you, Madam Chair.
    Senator Boxer. Thank you, sir.
    I have a special request, if it is OK. Since Senator Carper 
has got to run to a health care meeting, he has asked, because 
he has a very special constituent here, if he could have 2 
minutes out of order and then I will go to Senator Lautenberg. 
If that is OK.

          OPENING STATEMENT OF HON. THOMAS R. CARPER, 
            U.S. SENATOR FROM THE STATE OF DELAWARE

    Senator Carper. Thank you, Madam Chair.
    I thought the special guest would be Chad Holliday. But 
after listening to Cynthia Warner's testimony, she can be a 
special guest, too. I am just really delighted that you are 
here, Chad, and I want to welcome you.
    We have got three things going at once and Senator Nelson 
on the Finance Committee wants to work on health care reform 
24/7 which is real important as well.
    I just wanted to come by and thank you for the leadership 
you have provided at DuPont, not just for DuPont, but really 
for a whole bunch of folks. We especially appreciate your 
leadership on the U.S. Climate Action Partnership. DuPont has 
been one of the founding members.
    I have a statement that I would like to leave for the 
record.
    Senator Boxer. Sure.
    Senator Carper. Thank you for being a very good example, 
individually and collectively, DuPont.
    Thank you.
    [The prepared statement of Senator Carper follows:]

           Statement of Hon. Thomas R. Carper, U.S. Senator 
                       from the State of Delaware

    Thank you, Madam Chairman, for convening this hearing to 
discuss business opportunities in light of forthcoming climate 
change policies. I would like to welcome DuPont CEO Chad 
Holliday. Albert Einstein once said that ``In the middle of 
every difficulty lies an opportunity.'' As you will hear 
today--clean energy provides real opportunity.
    I applaud the leadership of the businesses here today--I 
especially would like to applaud the leadership of DuPont, 
which is based in my State of Delaware. DuPont's investments in 
clean energy technology will ensure they are a global leaders 
in the energy tech revolution, while creating new jobs in 
States like mine.
    Not only has DuPont been providing Americans clean energy 
jobs, but the company has also reduced its own pollution 
through maximizing energy efficiency since the 1990s. Through 
energy efficiency, DuPont has held its energy use flat while 
increasing production. Its efforts reduced their greenhouse gas 
emissions by more than 70 percent, and actually saved the 
company $3 billion.
    Clean energy does create jobs. This is a story we are 
hearing throughout Delaware--a State participating in a 
regional approach to reduce climate pollution. Through one 
offshore wind project--we expect 1,200 direct and indirect jobs 
to be created in Delaware during construction--and 
approximately 300 jobs for operation and maintenance.
    Our economy cannot survive dependent on old, dirty fossil 
fuels--we must break free of our dependence. We have a choice--
do we give our businesses certainty and lead the world in clean 
energy technology--or do we become dependent on foreign energy 
technology and lose jobs to our competitors overseas?

    Senator Boxer. Thank you very much. And thanks for your 
work on health care. Please figure it out for all of us.
    Senator Lautenberg.
    Senator Lautenberg. Madam Chair, I think that Senator Udall 
may have been here a step earlier if that is how we are doing 
it. Or are we doing it by seniority?
    Senator Boxer. Oh, I should have actually called on Senator 
Udall.
    Senator Lautenberg. Too much barge traffic on the 
Mississippi.
    [Laughter.]
    Senator Boxer. I should have called on Senator Udall. But 
it is up to you and Senator Udall.
    Senator Lautenberg. Well, that is very kind. Thank you.
    Senator Boxer. I apologize, Senator Udall.
    Senator Lautenberg. Ms. Warner, your testimony is very 
exciting. It is kind of really more of a new idea than other 
alternatives that we talked about. What is left over after the 
fuel is consumed in the algae mix? What kind of a discharge do 
we get, and is there any residual environmental question that 
has to be answered?
    Ms. Warner. In terms of the fuel itself, it is essentially 
identical to the petroleum-based fuel that we use today, so 
there is an emission that we control in the same way that we 
control petroleum-based emissions. We use catalytic converters 
in vehicles and it would be identical equipment, et cetera.
    There is also a biomass product which is co-produced with 
the algae. It is basically the husks of the plant in addition 
to the oil that we extract. That biomass actually contains 
proteins and other energies. So we have various alternatives. 
We can use it for animal feed. We can use it to actually create 
fertilizer which we give back to the algae and fully recycle. 
We can also use more sophisticated technologies like anaerobic 
digestion or biomass to liquids actually to fully utilize the 
energy and recycle the CO2 that comes from that 
straight back to the algae.
    Senator Lautenberg. So there is kind of an infrastructure 
support change of some significance, I would assume, not to 
suggest that the value of having a relatively easy source, as 
you describe it, to add to our alternative fuel reserve. It is 
interesting and I appreciate the fact that you brought that to 
us.
    Ms. Warner. Thank you.
    Senator Lautenberg. Mr. Holliday. You are almost in New 
Jersey with your company. Your company is a forward-looking 
company and it always has been. You are a member of the U.S. 
Climate Action Partnership which supports an 80 percent 
reduction in greenhouse gas emissions by 2050. I guess the 
question is: Do I have to stay here that long? Scientists say 
it is equally important to achieve the short-term emission 
reductions of 20 percent by 2020. How does DuPont feel about 
that target? Cutting down 20 percent by 2020?
    Mr. Holliday. We do have three plants in New Jersey and we 
appreciate the opportunity to serve you there. We fully support 
the 20 percent reduction as a first step and we support the 50 
percent reduction by 2050. It is important, though, that we 
start the process now to make that happen. We believe the 
efficiency of my first bucket that I described in my testimony 
is the way you are going to get most of that accomplished. It 
will not be the major, new technologies, but finding ways to 
put those efficiency technologies to use right away.
    Senator Lautenberg. And to those who are doubters and do 
not think that we are going to be able to benefit from the 
healthy atmosphere that we live in and at the same time to 
succeed in doing more business and employing more people?
    Mr. Holliday. Sir, we have had, in DuPont, since we started 
on this drive to reduce our own emissions, we have reduced our 
emissions by 72 percent. Every project earned greater than 12 
percent, which was our cost of capital in the company. So there 
are really good efficiency projects out there. But people need 
to have a long enough time line because it may take 5 or 7 
years to get the payback on that.
    Senator Lautenberg. Mr. Stiles. The House of 
Representatives currently is considering a bill to regulate 
greenhouse gas emissions and we hope to pass a climate change 
bill out of this Committee very soon. How might you be affected 
by a law that regulates greenhouse gases?
    Mr. Stiles. Senator, it is a very interesting question. The 
businesses that we are in, the manufacturing businesses, 
basically do not have any emissions of that sort. In the 
facilities that we do, where we paint or where we have 
galvanizing, we have the best available current technology as 
it is, so it really, other than some new products that you 
would have to produce, hopefully it would be business, there is 
not a lot of impact on our manufacturing businesses.
    Senator Lautenberg. I would ask you the same, Ms. Warner, 
if I might.
    Ms. Warner. Right. Thank you, Senator. What I would say is 
if it is great legislation, it will be good. The whole point 
is, if the legislation is actually pushing us toward greater 
efficiency and encouraging more renewable fuels, then it will 
be good for us. And specifically for algae, the legislation 
needs to take into account that algae, in essence, is taking on 
CO2 from an emitter and that emitter needs to be 
able to get credit for that so that we can have an incentive, 
or actually they can have an incentive, to sell it to us. And 
for us, in particular, I think the legislation needs to take 
into account that we are a renewable fuel and we need to be 
treated similarly to the other renewable fuels.
    Senator Lautenberg. Thank you. Thank you, Madam Chair.
    Senator Boxer. Thank you very much, Senator Warner. I am 
sorry. Oh, gosh, I keep going back to Senator Warner. You think 
I wish that he was still here? I do.
    [Laughter.]
    Senator Bond. Well, I can see how you could do that.
    Senator Boxer. I am sorry, Kit. I, I did not mean----
    Senator Bond. I am trying to do my best.
    [Laughter.]
    Senator Boxer. I am so sorry about that.
    Senator Bond. He was speaking the same language.
    Senator Boxer. He was speaking the same language but he 
came to a different conclusion on global warming.
    Senator Bond. I know. I tried to help him.
    [Laughter.]
    Senator Boxer. Senator Voinovich. I am so sorry, everybody.
    Senator Voinovich. Maybe it is because I am retiring at the 
end of 2010 that you might think of Warner.
    [Laughter.]
    Senator Voinovich. We talked about the issue of the cost of 
increase in natural gas, not only to your business, Mr. Healey, 
but also Mr. Holliday to your business. I contend that, because 
of environmental policies here where we encouraged utilities to 
burn natural gas instead of coal and other sources, that we 
drove up the demand for natural gas.
    As a result, the price went up and as a result of the price 
going up, and also some environmental policies that made it 
more difficult for us to go after natural gas in this Country, 
demand goes up and the supply is not there. You have increased 
costs.
    I think that it is really important that we make clear that 
some of the decisions that we make do impact on industries and 
it is my understand that in your industry, that back before 
2000, you were exporting a lot of chemical products all over 
the world and today we are a net importer of chemical products.
    I know in my State I used to go to the Cather 
[phonetically] in Dusseldorf because we had so many plastic 
jobs. We do not go to Dusseldorf anymore. We have lost 
hundreds, maybe thousands of jobs, in Ohio because of that.
    The point I am making is the cost of energy does impact on 
your businesses and the fact is--are all of you concerned that 
if we had something that would drive up your electric costs or 
make it more expensive to buy gasoline? Are those not 
considerations that you have to take when you are supporting 
some of this legislation?
    Mr. Holliday. You are absolutely correct. The Gulf Coast 
natural gas was $2 per unit forever. Then all of a sudden we 
saw spikes to $12 and $14, which is why you see the red on the 
chart behind you around fertilizer plants. It impacted all of 
us.
    That is why we think it is very important that we have a 
planned approach that your Committee could put forward to have 
the alternative fuels so there is other examples and everybody 
does not go just to natural gas. That would be the wrong thing 
for jobs in this Country.
    Senator Voinovich. I also observed that many of the 
companies in U.S. cap are going to make money out of cap-and-
trade. I mean they are in the business: GE, you are in the 
business, a lot of people are going to make money.
    The question I have for all the witnesses is: If we would 
pass cap-and-trade legislation, would that make it unnecessary 
for us, particularly in the area of subsidies for wind and 
solar in this Country, in other words, could we back off from 
all of the subsidies that we are putting in these industries 
because the cap-and-trade would force some of the renewable 
portfolio standards people from going forward and doing things 
that maybe they would not have wanted to do without the cap-
and-trade? How important are the subsidies?
    Mr. Holliday. I think, as my fellow witnesses have 
described, if you are starting any new industry, whether it be 
fuel from algae or our biobutanol or cellulose-based ethanol, 
you need something to get you moving if you are going to move 
fast. So I think some incentives, like other governments are 
giving, would be important if we want to make sure those 
industries develop here. Those industries will develop 
somewhere. If we give the incentives, we make sure the jobs are 
here and the commercialization is here. That is what is really 
important.
    Senator Voinovich. I would just like to make one other 
point because I am running out of my time here. Was it you, Mr. 
Holliday, or you, Mr. Stiles, that said it is easier to get 
something done in China and Singapore than it is here?
    Mr. Holliday, OK. I know that in China they are putting on 
two coal-fired plants per week. And it is IGCC technology. In 
the U.S., the Sierra Club and other environmental groups have 
killed about 45 proposed coal-fired plants and China has been 
able to put them on. It is not a matter, in terms of the 
government. They do not have the non-governmental agencies that 
we have here in this Country. You are saying it is easier to 
do. Yes, because it would be easier here, too, if we did not 
have people saying, oh this is bad, even though China is 
putting them on two every week. Any comment?
    Mr. Holliday. I think, as your Committee decides the 
technologies that you want to see developed in the Country, I 
think you need to put into place a regulatory process that you 
can make sure those occur here on the scheme you want.
    Mr. Stiles. Senator, you were talking about the subsidies. 
The Government for a long time has been doing things to 
encourage different businesses. There has been accelerated 
depreciation for a number of years, and that has helped our 
barge business and our rail car business and it certainly does 
not hurt the wind business.
    But, if we are going to get away from the dependence on 
foreign oil to generate electricity in our homes or for natural 
gas to drive those prices up, there has to be some incentives 
to start. Now I believe it has to stop at some point in time. 
But there are so many problems with wind and with solar getting 
started because of transmission that if the Government does not 
get involved, then I believe that the foreign countries will 
produce the turbines like they have in the past and the wind 
towers like they have in the past and we will be importing them 
here because basically there was no one building wind towers in 
this Country 7 or 8 years ago. That is just an FYI for you.
    Senator Voinovich. So the subsidies have to continue?
    Mr. Stiles. Not for a long time, sir, but I believe they 
have to continue until you have the amount of renewable energy 
that is being produced in order to relieve the other energy 
sources that we are relying on.
    Senator Voinovich. Now, we said that about ethanol.
    Senator Boxer. Some people think that the big oil companies 
get a heck of a lot of subsidies and tax breaks and all the 
rest. So, I would not get into that topic because there is 
nobody that does not ask us to help them.
    Senator Udall.
    Senator Udall. Thank you, Madam Chair.
    Mr. Holliday, you have said a couple of times in your 
testimony we should start now, we should embark on setting 
these goals in law and develop a Federal climate policy. Yet, 
your company has already been out front. I mean, you have gone, 
I think you used the number that you have reduced your 
emissions by 72 percent. So you have seen something out there 
that maybe other businesses have not seen. You are doing this 
whether there is a requirement or not.
    Could you explain your thinking? Why are you taking the 
action you are taking?
    Mr. Holliday. I think our situation was a bit unique. We 
were involved in making CFCs, which impact the ozone layer. We 
saw it very early on in the 1980s and started to understand 
environmental science and saw this coming. So we got very 
proactive about it. Again, we are a 207-year-old company. We 
are planning our 300th birthday already. So we wanted to start 
taking the actions early on to do that.
    I think what you have got is a golden opportunity, if I 
could. You start funding the technologies right now, to get 
them in place, put the legislation and the reductions in place 
in 2012 or thereafter, you can create the jobs now and have the 
technology so that there will not be this big bump in the 
economy.
    Senator Udall. You see this as a great business opportunity 
for the United States of America, to develop jobs here and to 
create economic opportunities here? You have talked about the 
international situation and how we are in a very competitive 
situation. Yet you believe that by aggressively going out and 
setting some targets that we can become a leader in this area.
    Mr. Holliday. I believe that is absolutely right. From 
meeting with the Premiere of China, the Executive Vice Premiere 
and the Head of the Ministries, I know they are focused on the 
same thing. So if we do not move, there will be a head ups. And 
I think there is a very narrow window that we need to move.
    Senator Udall. I think from what Mr. Stiles or one of the 
other witnesses said, China is ahead of us in the manufacture 
of solar right now. And they are creating more jobs. So this is 
a great opportunity for us and I think you highlight that in 
your testimony.
    Ms. Warner, your testimony discussed how algae-based 
biofuel consumes large amounts of carbon dioxide in its 
production, which is one of your major costs, I believe. Could 
you briefly describe how a Federal climate policy to reduce 
greenhouse gases would promote the use of algae as a biofuel, 
not only as a renewable fuel but also as a carbon sequestration 
technology?
    Ms. Warner. Thanks, Senator Udall. Thank you very much for 
your welcoming words earlier on.
    Senator Udall. You bet we love having you create jobs in 
New Mexico, of course.
    Ms. Warner. Well, it is a great place to operate, too. It 
has a lot of sun, which is our energy source.
    Senator Udall. And a lot of salty water, too, down beneath 
the ground.
    Ms. Warner. That is right. A lot of salty water. And some 
real hard workers as well, I will add.
    I actually want to build on something that Mr. Holliday was 
saying because, actually if you think in the big picture about 
the legislation that we are contemplating, what we really are 
talking about is moving forward in a transformational way early 
before some of these inevitabilities could occur later. When I 
say inevitabilities, we know that the amount of energy that we 
use today is using up energy at such a rapid rate that the 
current available sources of energy will eventually diminish to 
the point that our demand exceeds our supply.
    At the same time, the climate change issues continue to get 
worse and worse. And that is a cliff that we are going to fall 
off in terms of energy prices. That will not be good for the 
economy and that will not be good for society.
    So if we are forward-thinking and we start planning and 
creating more renewable energy sources now, when we have time 
to do it and we have time to actually promote the technologies 
and enable them to develop and get up on their feet and be 
viable and produce enough material to actually make a 
difference in this huge amount of energy that we use every 
day--there has to be a lot to make a difference--if we do that 
now, we will not fall off that cliff someday.
    So if the legislation is wise, it is transformational 
because it is helping us do something now.
    Senator Udall. Thank you, Madam Chair.
    Senator Boxer. Thanks.
    Senator Inhofe, welcome.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Thank you, Madam Chairman. I apologize, 
being the Ranking Member of the full Committee here, I should 
have been here. But I am in the same position on Armed Services 
and one of these days, we will have to figure out how to do 
things at different times.
    I had a lengthy opening statement which I will just submit 
for the record. But I will read just two paragraphs out of it 
because I want to hear it.
    [Laughter.]
    Senator Inhofe. While House Democratic leaders are 
attempting to mark up their bills this week, they are picking 
winners and losers by distributing billions of dollars in 
pollution allowances to favorite industries. Not surprisingly, 
many of these companies are in turn supporting the Waxman-
Marchi bill. As former Congressional Budget Office Director 
Peter Orszag said, ``If you didn't auction the permits, it 
would represent the largest corporate welfare program that has 
ever been enacted in the history of the United States. All of 
the evidence suggests that what would occur is that corporate 
profits would increase by approximately the value of the 
permits.''
    It did not stop there. CBO also found that giving away 
allowances could yield windfall profits for the producers that 
receive them by effectively transferring income from consumers 
to firms, owners and shareholders.
    [The prepared statement of Senator Inhofe follows:]

            Statement of Hon. James M. Inhofe, U.S. Senator 
                       from the State of Oklahoma

    Madam Chairman, I commend you for having this hearing and I 
welcome all of the witnesses from the various businesses before 
this Committee today. I'd especially like to welcome Tim Healy 
from Lange-Stegmann fertilizer company and Jack Armstrong with 
BASF.
    The message I have is very simple and I hope it begins to 
make sense to my colleagues on the other side as we continue 
our global warming cap and trade debate this year. True 
innovation, job growth, and business opportunities should stem 
from the open and free market, and not from creation of more 
taxes and Government spending. Yet that is exactly the 
direction we will go if we pass cap and trade and create a new, 
Government-created market based on carbon, all at the 
taxpayers' expense.
    I am not opposed to new green jobs, or any kind of jobs 
that make sense in the global economic market. In fact, my 
State of Oklahoma knows a thing or two about making wind power 
cost effective. Oklahoma Gas and Electric's wind energy program 
has recently been ranked No. 1 in the country by the Department 
of Energy's National Renewable Energy Laboratory for the price 
premium it charges for new customer-driven renewable power.
    But what I am opposed to is increasing taxes. And cap and 
trade is, plain and simple, a tax. It's an indirect, hidden, 
sneaky tax, but it's a tax. And it's a tax on energy that will 
raise prices on energy and all goods and services that are 
produced with or use energy. It's a tax that will fall more 
heavily on poorer people because poorer people spend a higher 
percentage of their incomes on energy than do wealthier people. 
And finally it's a tax that, for every business opportunity it 
will create, it will destroy others, especially in energy-
intensive industries, which are concentrated in the States that 
use coal for electricity. The result is a net loss for jobs and 
the economy.
    I want to commend Senator Bond for his recent report on the 
cost of green jobs. The report very effectively highlights how 
Government-created green jobs can kill existing jobs.
    In the meantime, I also point you to a new study out of 
Spain, which I understand the President has used in many of his 
speeches as an example of the direction we are heading. Spain 
has real world examples over the past decade of implementing 
these types of policies. It found that for every 4 green jobs 
created, 9 other jobs were lost. Other findings from this study 
show that Spain spent 571,138 euros on average to create each 
green job. Spanish energy regulators estimate that the rate 
paid by end consumers for electricity must be raised by 31 
percent to repay this debt.
    Now as the House moves toward marking up their bill, I am 
hopeful we will have more hearings to discuss these types of 
substantive issues and how they factor into the debate on cap 
and trade. All sides of the issue should be heard.
    As we have learned though mandates in the past, with the 
most recent example being the RFS and biofuels, all will have 
unintended consequences. I am hopeful as we move forward that 
we provide real market-based incentives, rather than mandates, 
caps, and Government subsidies, for new job creation.
    While I understand that today's hearing is mostly focused 
on small business and startups, I want to comment on this issue 
of industry support for cap and trade policies. My colleagues 
on the other side frequently rail against ``big polluters'' for 
obstructing passage of cap-and-trade legislation. Yet it is not 
ironic these many of these selfsame ``polluters'' are 
supporting and lobbying for passage of cap and trade.
    While House Democratic leaders are attempting to mark up 
their bill this week, they are picking winners and losers by 
distributing billions of dollars in pollution ``allowances'' to 
favored industries. Not surprisingly, many of these companies 
are in turn supporting the Waxman-Markey bill.
    As former Congressional Budget Office Director Peter Orszag 
said, ``If you didn't auction the permits it would represent 
the largest corporate welfare program that has even been 
enacted in the history of the United States. All of the 
evidence suggests that what would occur is that corporate 
profits would increase by approximately the value of the 
permits.'' It didn't stop there. CBO also found that ``giving 
away allowances could yield windfall profits for the producers 
that received them by effectively transferring income from 
consumers to firms' owners and shareholders.''
    Now I am all for companies seeking to generate a profit in 
the market and competition and making a buck, but when it comes 
on the backs of my consumers in an artificially created market 
that is not economically sustainable, I must object.
    Once again I welcome all the businesses here before the 
Committee today and I look forward to hearing their testimony.

    Senator Inhofe. I have a comment to make about what I think 
is going to happen on this whole issue. But before I do that, 
Mr. Healey, I understand that in the last decade, half of the 
nitrogen industry was shut down as a result of high natural gas 
prices and foreign competition. American farmers, and I get 
this from my farmers in my State of Oklahoma, import 55 percent 
of their nitrogen needs as a result of this leakage. Do you see 
this trend continuing and how will this reliance on foreign 
sources of fertilizer effect American agriculture?
    Mr. Healey. If we have continued increases or an unstable 
price in natural gas, we will see more nitrogen plants in the 
U.S. idle and perhaps even close. And once these plants close, 
the generally do not start up again. The price of natural gas 
here in the U.S. is, I think Mr. Holliday said, for a long time 
it was at $2 per million BTUs. Once the price started going 
above $2 per million BTUs, we started seeing fertilizer plants 
closing. When the price of natural gas here in the U.S. gets up 
to $8, $9, $10 per million BTUs and the price overseas at 
foreign nitrogen manufacturing plants is less than $2, it is 
really tough for American companies to compete, not only in the 
world market but domestically.
    Senator Inhofe. Yes. That being the case, we have huge 
natural gas reserves our there right now.
    Mr. Healey. Yes.
    Senator Inhofe. I mean, like never before. The problem is 
us. It is Washington saying what you can and cannot do out 
there. We cannot drill in the places where we have these 
reserves. I agree with what you are saying. I think the best 
way to bring that down is to increase the supply. It is an old 
concept that no one believes in Washington, but it is still 
there. It is called supply and demand.
    In my State of Oklahoma, we still have three plants, three 
nitrogen plants, that are still operating. Tell us a little bit 
about the kinds of jobs because I am concerned. I want to keep 
our three operating. What kind of jobs do these fertilizer 
plants offer and what do they mean to the rural areas that are 
located in, such as Oklahoma?
    Mr. Healey. Well, each nitrogen plant employs about 150 
people. They are located, basically, in rural areas and the 
average salary at those nitrogen plants in those rural areas is 
around $74,000 per year. When those plants close, that has a 
terrific impact on the local economy.
    Senator Inhofe. Well, Senator Lautenberg asked a question. 
I will ask it a little bit differently. Tell us, what happens 
to your business if cap-and-trade specifically does not pass? 
To what extent is your business reliant on Federal Government 
mandating of carbon cap? Or is your business model sustainable 
without that? Would anyone like to respond to that?
    One of the things before doing that, because I see my time 
is rapidly expiring here, I think the answer probably will be 
yes. It is interesting that we are having this hearing right 
now. I have no doubt in my mind, Madam Chairman, that the House 
is going to pass the bill, and it will come over here and it 
will not pass here. There are not the votes right now for cap-
and-trade in the U.S. Senate. It is not even close.
    And I would say to you, Mr. Holliday, I mentioned several 
times when we had our hearing on U.S. CAP, you remember that, 
Madam Chairman, we had a hearing on the U.S. CAP and several of 
the companies, I think we had five including DuPont that came 
and testified. I have to tell you, Mr. Holliday, that I spent 
25 years in the real world. I was building companies. I was 
sitting on boards and all that. If I were on your board, I 
would be doing exactly what you are doing because, as I said 
during that hearing, you can stand to make a lot of money. 
There are a lot of winners in a mandated cap-and-trade system.
    The Wall Street Journal said DuPont has been plunging into 
biofuels, the use of which would soar under a mandatory 
CO2 cap. They called the cap-and-trade seeking 
corporations a ``pack of climate profiteers.'' That is not 
really a dirty word. That is what we are supposed to be doing, 
doing the best we can for our companies and our corporations. I 
think the Competitive Enterprise Institute, Fred Smith, said 
that DuPont would realize more than a 900 percent return on 
investment.
    I guess the best question to ask you now is what happens if 
I am right and you are wrong in terms of what is going to pass 
this Congress?
    Mr. Holliday. I think the best way to address your comments 
is that this U.S. Climate Action Partnership was very unique. 
It was NGO's, it was auto companies, chemical companies, 
science companies, energy companies, and we worked for a year 
and a half to try to deal with exactly this issue. If one 
profits greatly, that is going to come out of the pockets of 
another. So I think what we proposed in our blueprint is a good 
place for you to start looking and work away from.
    Senator Inhofe. But you did not answer the question though. 
What happens if I am right and you are wrong?
    Mr. Holliday. If you are right that we make a lot of money?
    Senator Inhofe. No. That we do not pass the cap-and-trade 
that would give a lot of people the opportunity to make a lot 
of money.
    Mr. Holliday. Cap-and-trade is a term. The details behind 
it are what is critical.
    Senator Inhofe. Thank you.
    Senator Boxer. Thank you. The Senator went 2 minutes over 
his time so I am going to take a minute to make a few comments.
    First of all, I thought I had seen it all. But now 
Republicans are criticizing Democrats for being pro-business. 
Think about it.
    Second, Senator Inhofe, before he has even seen what we 
produce out of this Committee is predicting the Senate will 
vote no. Party of no. No, no, no, no, no, no. So the whole 
world passes us by and no, no, no. I just think the people of 
America expect more of us than to predict the failure of a bill 
that we have not even worked on. We worked on one last year 
that did not get the votes and Congressmen Waxman and Marchi 
are sitting with people and we are sitting with people one at a 
time, so I hope we can, instead of saying, yes, it will pass, 
or no, it will not pass, is try to work together. But that does 
not seem to be possible.
    To Mr. Healey, I am going to send something over to you 
that will make you smile. Can you smile? Good.
    [Laughter.]
    Senator Boxer. This shows that, because of our energy bill 
in 2006 where we opened up for more drilling even though we 
were told no, no on drilling, we opened it up. In the Gulf of 
Mexico, there has been a 25 percent increase of natural gas 
from the level reported in 2006. So I am going to send this 
over to you because I want you to take a look at that.
    And here is where we going to go from here. Senator 
Klobuchar is going to close out with her questions and then she 
is going to have the gavel because, as you may have read, 
President Obama has reached an agreement with the State of 
California and the auto industry which is really historic 
because he believes in yes we can, not no, no, no. It proved 
that we can come together around a national fuel economy 
standard.
    So, I am going to be going over there and Senator Klobuchar 
is going to take over here and I am very happy and pleased that 
she is willing to do it.
    With that, Senator, I am going to hand you the gavel. After 
you finish your comments, you can call the new panel up and we 
will move forward.
    Senator Klobuchar. OK.
    Senator Voinovich. In other words, we are not going to get 
any more questions of these witnesses.
    Senator Boxer. No. This will be the last round. She has not 
had one round yet. We are just doing one round. And we have a 
second panel, Senator Voinovich, for questions.
    Go ahead.
    Senator Klobuchar [presiding]. Very good. Thank you, 
Chairman Boxer and thank you to our witnesses for being here.
    My State has one of the most aggressive renewable portfolio 
standards in the Country and we have truly seen the advantages 
of the jobs that can come out of homegrown energy.
    Just picking up on what I have heard in the last few 
minutes, I wanted to say, Mr. Holliday, that I was just 
recently in China and Vietnam and Japan with Senator McCain. I 
saw first hand some of the work that has been going on, and 
heard about the work that has been going on with energy 
efficiency. I think we had a space race many years ago, but it 
is truly going to be a race for energy efficiency. I was trying 
to think of word that rhymed with race that fit this, but it 
really did not. I think that we are just seeing a modern day 
version of that and we want to be in the best position possible 
competitively for our Country.
    The second thing is just for the U.S. as we look at this 
revolution with energy technology. One of the things I always 
like to tell my people back in Minnesota is that this is 
different from the IT revolution. The ET revolution is 
different.
    First of all, the IT revolution was very focused. It 
brought benefits to all of us in certain areas of the Country 
and certain States. I see the ET revolution as being much more 
broad based in terms of the jobs that it can bring to our 
Country, little towns to big towns all over this Country.
    Second, the ET revolution, if done right and with the 
incentives for manufacturing, can also have more jobs across 
demographic lines, while the IT revolution was very focused on 
graduate student degrees and Ph.Ds. The ET revolutions, with 
the production of wind turbines or solar panels or other 
things, I have seen in my own State can involve some blue 
collar and green collar jobs as well as jobs for the people 
with the PhDs.
    I wonder if you would comment on that.
    Mr. Holliday. From our perspective, I think that you are 
exactly right. I think we are going to need all the different 
forms of energy and more efficiency and I think there are 
reasons why every State can participate and each one will 
probably have their own niche.
    Senator Klobuchar. The President has called for increased 
development of biofuels, Mr. Holliday, and I know DuPont's 
Pioneer Hybrid International facility in Jackson, Minnesota, 
produces advanced agricultural seeds that will play a critical 
role in our transition to the new energy economy. I am also 
aware that DuPont is also working on the development of 
cellulosic ethanol demonstration facility. We have the work you 
are doing with algae. Can you talk, perhaps you and Ms. Warner, 
about plans to develop the next generation of biofuels and how 
we can do this in a way that will reduce greenhouse gas 
emissions.
    Ms. Warner. The plans we have I outlined in my testimony 
and I am glad to go into more detail there. We are actually 
accelerating rather rapidly because the technology is proving 
itself quite quickly. We can see that we can compete with 
current energy, actually, as long as do not have any barriers 
in our way in terms of permitting and in terms of legislation 
that does not create a level playing field. But we view that we 
will be making over a million gallons per day of biomass and 
bio-oil, rather, in 2011, which is coming rather quickly.
    Senator Klobuchar. One of the things that we have been 
working on with the EPA is trying to increase the blend level 
with fuel for biofuels. We have the E85. Minnesota has the most 
pumps in the Country. It is corn-based ethanol which we know is 
going to be transitioning to other parts of corn. But we would 
like to see E12 and E15 and that we do not lose this biofuel 
component of this, which is so important for our national 
security and such things.
    Ms. Warner. Right. The beauty of the algae-based fuel is 
that you can essentially blend it at any percentage that you 
want to because it is not just chemically compatible, it is 
chemically identical. So there is not a limit as far as that 
goes.
    Senator Klobuchar. Mr. Holliday, you talked about DuPont's 
role in promoting the Montreal Protocol Agreement in the 1980s, 
which was one of the more successful international 
environmental agreements.
    I recently introduced my former law professor, Cass 
Sunnstein, as Head of the White House Office of Regulatory 
Affairs. He has compared the debate regarding the Montreal 
Protocol and the Kyoto Protocol and he mentioned DuPont's role, 
when he spoke at his hearing, in helping to get President 
Reagan and more than 80 Senators in the Senate to support the 
ratification of the agreement to phase out CFCs.
    In his account, he mentioned how the Europeans claimed that 
America was engaged in scare-mongering and that the speculative 
science of the benefits of reducing CFCs did not justify the 
severe economic costs. That was back then.
    Mr. Holliday, we find ourselves in a similar place today. 
However, in the 1980s, President Reagan was able to see that 
the economic costs of letting the ozone layer disappear were 
more severe than the costs of finding a replacement for CFCs. 
Can you tell how DuPont's 1994 decision to reduce your 
greenhouse gases has been a positive one for you?
    Also, when you look back in history at the role that DuPont 
played in that debate with that Montreal Protocol, fast forward 
to today with Copenhagen and some of the work that we have to 
do in terms of how we need to have the business community 
strong in support of what we are trying to do here.
    Mr. Holliday. Thank you for your question.
    Just to put it into perspective, the Montreal Protocol has 
reduced five times more CO2 equivalents in the 
atmosphere than the Kyoto Protocol would have if it was done 
completely, which it does not look like it will be. So the 
leadership of the U.S. in that step, we should take pride as a 
Country, I think as an example.
    What we had with the Montreal Protocol was certainty. We 
had a timeframe and phase out, what is going to happen, what is 
going to happen in developed countries and developing 
countries, and with that certainty we unleashed more technology 
than we have ever had before. We found six companies working on 
it, and we shared technology cross-license and we had a 
commercial plant within 5 years.
    I think that same kind of thing could be done with 
certainty in your legislation.
    Senator Klobuchar. All right. Thank you very much. Thank 
you to the panel and we are going to be moving on to our second 
panel. This has been very enlightening. We appreciate it.
    As the second panel is coming up, I would just like to ask 
Mr. Lowenthal if he would raise his hand. I wanted to 
particularly welcome you, sir. We are very proud of your work 
with Coulomb Technologies and I am going to stay as long as I 
can and I so appreciate your being here.
    If everyone could get seated, please. It looks like we are 
having a large object being installed. This should be good. We 
are really trying to move on to our second panel because we 
also have votes today and we are hoping to get done by around 
noon. I cannot wait to hear what this is.
    OK, I am going to go through who the panelists are today 
and then ask them to get started. We have, first of all, 
Richard Lowenthal, who Senator Boxer already mentioned, who is 
the CEO of Coulomb Technologies, which manufactures charging 
stations for electric vehicles to provide commuters and others 
with flexible transportation options.
    We also have Wayne Krouse, who is the CEO of Hydro Green 
Energy, which uses a new form of underwater turbine to generate 
electricity. These underwater turbines were first installed in 
the Mississippi River at an Army Corps dam in Hastings, 
Minnesota.
    We have Richard Taylor who is with Imbue Technologies 
Solutions, which distributes and installs efficient lights that 
are manufactured in Pennsylvania. And, finally, we have Jack 
Armstrong who is with Leader Construction Markets with BASF 
which is one of the world's largest chemical companies and 
manufacturers of various products including installation, auto 
emissions reduction technologies and low-friction wind turbine 
blades.
    Please get started, Mr. Lowenthal.

  STATEMENT OF RICHARD LOWENTHAL, CHIEF EXECUTIVE OFFICER OF 
                      COULOMB TECHNOLOGIES

    Mr. Lowenthal. Thank you very much for having me here 
today. Thank you, Madam Chair and the Senators of the Committee 
for this opportunity to address you.
    I introduce my friend here. This is one our charging 
stations designed for the city of San Jose, California.
    [Slide shown.]
    Mr. Lowenthal. My responsibility is building companies and 
we do that in Silicon Valley and especially we like to kick off 
new industries and we see this as an opportunity to help a new 
industry get started. I will say up front that we are speaking 
in favor of cap-and-trade legislation.
    We make and sell charging stations for electric vehicles 
because a lot of the people in the U.S. cannot fuel an electric 
vehicle without some help from us, without infrastructure. We 
have five times as many cars, 247 million cars, but only 53 
million home garages to charge them in. So, we build 
infrastructure for EVs.
    In a place like San Francisco, 51 percent of the people 
park curbside at night. So, what we do is we change parking 
meters into combination parking meters and charging stations 
for EVs.
    Our charging stations all have a way to pay for recurring 
costs and they are all Smart Grid enabled and full integrated 
with the Smart Grid. We provide access to a fuel that is cheap, 
it is clean and it reduces our dependence on foreign oil.
    [Slide shown.]
    Mr. Lowenthal. We are creating jobs nationwide that cannot 
be outsourced. We have distributors across the U.S. with local 
installers. They have to be here. They have to be on the 
ground. They are electricians that can get permits from cities 
and install our stations. And we are excited about that.
    We have stations in California, Illinois, Florida, North 
Carolina, New York and Hawaii and new places every day. Our 
stations in Chicago charge cars off the sun. Our stations in 
Hawaii charge cars off of windmills. So we have a way to fuel 
cars that is actually quite clean. Next slide.
    [Slide shown.]
    Mr. Lowenthal. Electricity as a fuel is cheaper for the 
consumer than gasoline. Gasoline costs us about 10 cents per 
mile. That is with $2.30 gasoline which may soon be a thing of 
the past. Running your car on home electricity at home rates is 
about 2 cents per mile, so quite a bit cheaper than gasoline, 
and on a public infrastructure it is about 5 cents a mile to 
drive a car. So, a little bit less, actually less than half the 
cost, of driving on gasoline for the consumer. Next slide.
    [Slide shown.]
    Mr. Lowenthal. I want to talk about the story in San Jose 
where we put out our first network. This was an ad hoc cap-and-
trade system. The Mayor of San Jose, Mayor Reed, made a 
statement that he wanted his city to have a clean, zero 
emission streetlight system. So we took that on.
    What we do is we put these charging stations on streetlight 
poles in San Jose. And when you charge there, each time you 
charge your car there, it saves 19 pounds of greenhouse gases. 
The production of electricity for this costs about 9 pounds of 
greenhouse gases. So there is a net savings is 10 pounds of 
greenhouse gases every time you fuel your car at one of these 
stations. That is enough to pay for the greenhouse gases that 
are produced by lighting 9 street lights. So, through this 
mechanism, the city of San Jose is getting a carbon free 
streetlight system. Next slide, please.
    In San Francisco, the story was different. We have a 
network of stations there as well. In San Francisco, it was all 
about greenhouse gas savings and accountability of greenhouse 
gas savings. So we provide reports like these, these are actual 
active accurate reports from the city of San Francisco, about 
greenhouse gases saved by charging cars at our stations and the 
City uses that to justify further investment in clean fleet. 
Next slide.
    [Slide shown.]
    Mr. Lowenthal. I just want to highlight our growth. We are 
a tiny little company. But the percentages are good. We have 
3,000 percent year-on-year growth, which is easy to say when 
you are as small as we are. We had two people in September 
2007. We went to 12 in July 2008 and that is when Mayor Reed 
announced his initiative to have a clean streetlight system. 
That, you see, increased the slope of our growth to 40 people 
at February of this year. Then Mayor Newsome announced his 
program to measure his fleet in San Francisco and, as of today, 
we are about 95 people in the company. Next slide.
    [Slide shown.]
    Mr. Lowenthal. So, I just wanted to say thank you for 
addressing this issue of global importance. It has caused a lot 
of growth for us to have clean policy decisions and we look 
forward to continuing that. We are happy to hear the 
announcements today about emissions with cars and incentives 
for EVs and those things are all greatly beneficial to our 
industry.
    Thank you.
    I would also like to submit for the record a copy of the 
agenda for the legislative action by the Battery Electric 
Vehicle Coalition and highlight its support of EV 
infrastructure.
    [The referenced material was not receive at time of print.]
    [The prepared statement of Mr. Lowenthal follows:]
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    Senator Klobuchar. Thank you very much.
    Mr. Krouse. It is hard to see you with that big light.
    Mr. Krouse. It is quite large.
    Senator Klobuchar. I am sure Mr. Taylor will explain.

  STATEMENT OF WAYNE F. KROUSE, CHAIRMAN AND CHIEF EXECUTIVE 
             OFFICER OF HYDRO GREEN ENERGY, L.L.C.

    Mr. Krouse. Thank you, Senator Klobuchar. I want to thank 
Chairman Boxer for having me to the Committee. I also want to 
thank the rest of the Members.
    My name is Wayne Krouse and I am the Founder, Chairman and 
CEO of Hydro Green Energy. I really appreciate the opportunity 
to be here today to discuss clean energy companies like mine 
and how we can contribute to addressing the serious 
environmental and energy issues that this Country faces, while 
at the same time creating a large number of jobs for Americans 
throughout the Country. This will ultimately lead to economic 
development opportunities now and into the future.
    Hydro Green is a Texas-based renewable energy company in 
the water power industry. And as my written testimony shows, 
our patented power systems generate clean electricity for 
moving water at a variety of application points without the 
need to build new dams.
    We are presently developing 15 projects in eight States. 
Our projects will cumulatively generate over 500 megawatts of 
base load zero carbon renewable energy.
    Overall, the U.S. has 20,000 megawatts of water power 
potential that could be developed by 2025 without building a 
single new dam. That is enough for 15 million homes--that is 
million--and replace some 40 coal plants.
    Hydro Green is a startup company. We closed our Series A 
Funding in 2008 with a $2.6 million investment from the Quercus 
Trust, which is a prominent investor in alternative energy 
companies. The founder of Quercus has committed hundreds of 
millions of dollars to environmental causes and land 
conservation efforts and we are honored and proud to have 
Quercus as our lead investor.
    I am a chemical engineer by degree and left Exxon Chemicals 
Joint Venture in 2001 to start Hydro Green Energy. Prior to my 
job with Nalco/Exxon Energy Chemicals, I worked as a field 
engineer for Schlumberger out in the Gulf of Mexico oil fields. 
So I have a little perspective on some of the discussions that 
were going on here today.
    While I might not be as well-known as a certain other Texas 
oilman who is now interested and committed to renewables, I am 
also using my conventional energy background to ensure that 
promising new clean energy technologies are delivered to 
America. Hydro Green is the first company in America with a 
grid connected and FERC-licensed hydrokinetic power station at 
Army Corps of Engineers Lock and Dam No. 2 in Hastings, 
Minnesota. Our hydrokinetic power project was developed in 
partnership with the city of Hastings and began operation this 
year, the first in the Country to do so.
    The project led to the creation of 61 jobs in seven States 
over a 2-year period. It was a major milestone for our company 
and for U.S. clean energy policy. We hope that the Hastings 
project with act as a catalyst for growth in the promising new 
water power technology sector, which is the potential to 
deliver literally tens of thousands of megawatts of clean, 
carbon-free domestic power to America's electricity consumers, 
including those specifically in the Midwest and the Southeast 
where we have many of our projects in development.
    There is a common belief in some locations around the 
Country, on Capitol Hill and in the environmental community, 
that the U.S. water power industry is tapped out. Nothing could 
be further from the truth, as my written testimony will show. 
And if the Country is committed, truly, to reaching the clean 
energy goals of the Obama administration and of the current 
Congress, water power technologies must play a strong role and 
be given an opportunity to develop in a timely and efficient 
fashion. Currently, they represent between 7 and 8 percent of 
U.S. energy production on an annual basis.
    I was asked to focus today on job creation that could occur 
as a result of the potential climate policy. The best way I can 
do that is to discuss the job opportunities that we created to 
date with the Hastings project.
    The development of the Hastings project resulted, as I 
said, in 61 exciting and high-paying jobs in several States. It 
also created work for those who were out of work or who were 
soon to be without work due to jobs going overseas.
    These activities that resulted from the Hastings project 
will be replicated on a much larger and more permanent scale as 
Hydro Green develops these other 500 megawatts of projects. We 
are eager to create more employment and economic activity. Our 
current project pipeline that I discussed a few minutes ago is 
in position to potentially create as many as 2,000 jobs over 
the next 3 years, not only in other parts of the Country but 
specifically in the Midwest and Southeast where we have a 
number of our projects located.
    These are great jobs. These are engineering jobs, civil 
engineering, mechanical engineering, marine engineering, 
structural engineering, computational fluid dynamics 
engineering. Very well-paying jobs. But in addition to these 
engineering jobs, there are also green collar manufacturing 
jobs, jobs that may have gone overseas and we can now bring 
them back to help build America's energy future.
    The company currently plans to hire as many as 30 employees 
in 2009. Today, we are a company of three. Two years ago, we 
were a company of one.
    I am here today to state very clearly that policies that 
you are considering, such as the climate change legislation, 
that recognizes and sends a market price signal on carbon, has 
many benefits and that the clean energy technology, 
particularly their carbon-free profile, it will act as a huge 
driver for growth and development of the clean technology 
industry in America.
    Recent policies have helped insure our traction in the 
marketplace, as well as some interest from the investment 
community. Additional policies are needed, though. As the U.S. 
continues to struggle and emerge from the economic crisis, debt 
finance really still remains on the sidelines and properly 
drafted legislation will help bring some of that back.
    Even the idea of carbon policy being enacted has brought 
some of the major utilities in the U.S. to come to discussions 
with Hydro Green Energy, discussions that may not have taken 
place just a few years ago.
    The Committee knows that America is in a position to lead 
the world in clean energy technology development. 
Categorically, no other country in the world can match American 
ingenuity and creativeness. But only by taking decisive action 
on the policy in front of us can we accomplish these goals.
    Scores of companies like Hydro Green are fighting every day 
to make progress and we hope that the adoption of these 
particular legislations will help accelerate that trend.
    [The prepared statement of Mr. Krouse follows:]
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    Senator Klobuchar. Mr. Taylor, with your light.
    [Laughter.]

  STATEMENT OF RICHARD W. TAYLOR, CHIEF EXECUTIVE OFFICER OF 
                IMBUE TECHNOLOGY SOLUTIONS, INC.

    Mr. Taylor. Thank you, Madam Chair. I apologize to my 
fellow panelists for the bright light but I am excited to have 
the opportunity to enlighten the Committee on the benefits of 
LED lighting technology, Light Emitting Diode technology, and 
how it fits in the broader framework in the discussion around 
carbon cap-and-trade legislation.
    My name is Richard Taylor. I am CEO of Imbue Technology 
Solutions, ImbuTec. We are headquartered in Pittsburgh, 
Pennsylvania and we provide energy efficient lighting 
technology products and services to commercial, industrial and 
municipal customers.
    The reason why a discussion about LED lighting is important 
in the context of carbon cap-and-trade legislation is because, 
as several of the Committee members have pointed out, when you 
look at reducing carbon emissions, one of the most effective 
ways of doing that in the first instance is reducing energy 
consumption either through the use of energy efficiency 
technologies or through energy conservation. The lighting 
products that are before you are a great example of technology 
that can have a significant impact in that regard.
    There are three reasons why the lights that you are looking 
at, and the other products made by Appalachian Lighting Systems 
out of Elwood City, Pennsylvania, should be of interest to you.
    First of all, they are highly efficient. On average, 
products produced by Appalachian Lighting Systems reduce energy 
consumption by 80 percent or more. As you can see, the 
decorative acorn fixture, which is ubiquitous, you are looking 
at a light that replaces 150 watt fixture with 32 watts of 
energy drawn. The parking lot light, which still has the shield 
over it because clearly it would be very blinding, it is a 
fixture that draws 70 watts of power but replaces a light 
fixture that uses 400 watts of power, actually even more than 
that, 465 watts when you add in the ballast. So you are looking 
at significant reductions in energy consumption that benefit 
American consumers.
    The second reason why these products are important is 
because they are made in America. Most LED lighting products 
are produced in China or Taiwan, or they are made by 
manufacturers that rely on Chinese or Taiwanese components to 
make them. Seventy-five percent or more of the components of 
these products are from American companies. And if anyone likes 
to cook, you know that if you are going to make something, the 
quality of the ingredients that go into the product really help 
to produce a better result. What you find with LED technology 
is that the American components are of a much higher quality 
component and the enable the products to produce as advertised.
    That brings me to the next reason why this is important. It 
is the technology that drives these lighting products that is a 
quintessential example of American ingenuity. What Appalachian 
Lighting has done is patented the process of dissipating heat 
in these light fixtures. By dissipating heat in the fixtures 
and allowing these fixtures to operate cooler, you get 
dramatically longer life out the fixtures. In fact, these 
fixtures will operate, maintenance free, for 20 to 25 years and 
that is an extremely conservative estimate.
    To give you an example of the impact of these types of 
products, I will share with you an example of a project we 
recently completed converting the lighting in the Allegheny 
County Jail in Pittsburgh, Pennsylvania. As a result of that 
conversion to LED lighting, and this, by the way, is the 
largest interior LED lighting conversion in the Country, 
Allegheny County reduced its energy consumption by 83 percent, 
again with fixtures that will be maintenance free for 20 to 25 
years. Not only does the county benefit from the reduced energy 
consumption, but they also benefit from reduced operating 
expenses because you do not have to buy or stock bulbs and 
ballast and you do not have to pay for the labor to change them 
out. So, long after they realize the return on the investment, 
which is just over 5 years, the county will continue to reap 
dramatic reductions in energy consumption and operational 
savings.
    When you look at the impact of this type of technology, it 
has a very significant impact throughout the supply chain on 
American jobs. So I use the Allegheny County project as an 
example. Not only did we put Union electricians to work doing 
the installation, there was also a positive impact in the 
manufacturing of the fixtures themselves.
    When you look at American-made ingenuity, there is an 
impact in the supply chain that really has a geographic 
diversity as diverse as the composition of this Committee. For 
example, the circuit boards in these fixtures are produced by 
The Berquist Company in Minneapolis, Minnesota, lenses produced 
by Jamestown Plastics in Brocton, New York, housing and lenses 
from Lumax Industries in Altoona, Pennsylvania, Lytech 
Solutions in Salem, Oregon producer the drivers, the control 
boards and the LED chip-mounting services. Transformers are 
made by MCI Transformers in Babylon, New York. Peres Pattern 
Company in Erie, Pennsylvania produces castings. Housing, 
reflectors and lenses are made by the Warren Company in Erie, 
Pennsylvania and the LED lighting chips themselves are made by 
the Cree Company in Durham, North Carolina.
    This ripple effect throughout the supply chain with 
expanded use of energy efficient technologies has the benefit 
of not only providing significant benefits to the end users, 
but also has a positive impact on job and employment throughout 
the Country.
    Thank you for the opportunity to be with you.
    [The prepared statement of Mr. Taylor follows:]
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    Senator Klobuchar. Thank you very much, Mr. Taylor.
    Mr. Armstrong.

 STATEMENT OF JACK ARMSTRONG, CONSTRUCTION INITIATIVE LEADER, 
                NORTH AMERICA, BASF CORPORATION

    Mr. Armstrong. Good morning, Madam Chairman and members of 
the Committee. Thank you for inviting BASF to talk about 
business opportunities in the context of climate protection 
today.
    As a company formed over 140 years ago, BASF Corporation, 
the North American subsidiary of BASF SE, is the largest 
chemical company in the world. We have products that stretch 
across the spectrum of commerce from foam insulations to 
pigments and coatings and sealants to herbicides and 
fertilizers, to ingredients for cosmetics and nutrition. We 
have facilities in over 30 States employing over 15,000 people 
in the U.S.
    In the words of our global chairman, Dr. Jurgen Hambrecht, 
``A business cannot be successful in the long term if it does 
not act responsibly toward the environment and society.'' This 
is why sustainability is an integral role of BASF's strategy.
    And in fact, Madam Chairman, BASF products save three times 
more carbon dioxide during their life than is produced by their 
manufacturer and disposal. So, in essence, BASF has a virtual 
negative carbon footprint.
    Climate change is certainly a global problem requiring 
global solutions and we support congressional action to address 
climate change and lower greenhouse gas emissions.
    But what I would like to talk about today is about how BASF 
chemistry is used to reduce greenhouse gases and protect our 
climate, chemistry that reduces nitrous oxide in agriculture, 
plastics and coating for smooth low-friction blades on wind 
turbines, auto emission reduction technologies like catalytic 
converters, plastics and additives for sustainable 
transportation in roads and bridges. My written testimony 
certainly details work of ours in all of these areas. Suffice 
it to say that each one offers significant growth, not only for 
BASF, but for our customers. And the ultimate beneficiary is 
the environment and certainly the American consumer who saves 
energy and who saves money.
    Many more consumers, though, could save a great deal of 
money by having sustainable building enclosures in their 
commercial spaces and in their residences. By this what I mean 
are the foundations, the walls, the roof, the ceilings, the 
floors and doors of a structure. This is my particular area of 
focus at BASF.
    Department of Energy studies have shown that 40 percent of 
the energy we use for air conditioning and heating is lost in 
buildings and homes due to uncontrolled air leakage through 
just these same building enclosures and air duct systems. BASF 
chemistry improves insulation, sealants, wall and roof systems 
and coatings on doors and windows which aid significantly to 
keep the cold air in in the summer time and the hot air in 
certainly in the wintertime. And these integrated efficient 
high-performance systems allow smaller cooler and heating 
equipment which can be used less and save anywhere from 30 to 
80 percent energy.
    Improving energy performance in existing 130 million homes 
and 5 million buildings offers perhaps the most immediate, and 
certainly the most cost effective opportunity, for reduction of 
greenhouse gases by improving energy efficiency.
    Our chemistry solutions got into both new homes and 
existing buildings and certainly many new jobs will be created 
by the construction and the retrofit, the energy auditing and 
product manufacturing required to update these many buildings 
in the building stock.
    Some of the new innovations that BASF is commercializing to 
help the Country make the transition to a clean energy future 
are items like: organic solar cells that use organic compounds 
to trap the sunlight and turn it into electric energy; fuel 
cells that use the clean reaction between hydrogen and oxygen 
to produce energy. We just opened a factory in New Jersey; and 
lithium-ion battery technologies that will power the next 
generation of electric vehicles. I am glad to say that we are 
in the process of working to open a factory in Ohio for this.
    BASF is certainly proud to take what was once science 
fiction and turn it into commercial reality, demonstrating 
really that climate protection and social responsibility, 
combined with economic growth, is an achievable goal. A sound 
chemical industry is certainly mandatory to achieve these 
ambitious and sustainable targets as it delivers innovative 
products and solutions to all the consumer segments for 
efficient growth and development of our society.
    So, BASF welcomes the opportunity to work with this 
Committee on legislation that not only protects our climate, 
but ensures our Nation can press forward with its economic 
recovery.
    Thank you.
    [The prepared statement of Mr. Armstrong follows:]
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    Senator Klobuchar. Thank you very much.
    Senator Voinovich.
    Senator Voinovich. Thank you, Madam Chairman.
    Just for the record, I want to make it clear that I am a 
great supporter of green jobs. We have Owens Corning and Solar 
Industries, unlike many other businesses and you are talking 
about doing something in our State and I appreciate it.
    But I will say that because of, I think, some foolish 
energy police that we had that allowed natural gas prices to 
skyrocket, that it is going to be a long time before the new 
jobs in Ohio, the green jobs, are going to compensate for the 
jobs that we lost because of the high costs of natural gas.
    The last time we considered this kind of legislation, the 
impact on our State would have been a 50 percent cost in 
electricity, 60 percent in gas and 41 percent in gasoline. One 
of the dilemmas we have is does green overcome red to the other 
industries because they are less competitive because of 
increased costs and also in terms of costs to the rate payers, 
the folks out there that are struggling right now to keep 
going.
    Someone mentioned cap-and-trade in terms of China. They do 
not have cap-and-trade in China, but yet they are moving 
forward with manufacturing in many of these areas.
    For the record, Madam Chairman, I would like to just 
mention that in April of this year, China said the 
industrialized nations should contribute $200 billion a year to 
help developing nations fight global warming. It also said only 
developed nations should reduce emissions 40 percent of 1990 
levels by 2020, which is twice what the U.S. has pledged and 
twice what the Marchi-Waxman bill has proposed.
    We have a reality of competition between our Country and 
other countries, the issue of whether or not we are going to be 
moving jobs overseas in the event if we do something that is 
foolish in terms of a cap-and-trade program.
    That is enough of the editorial.
    I have to say that I am extremely impressed with the 
technologies that you are using in your companies and the 
progress that you have made and I can just sense the excitement 
that you all have. You are great promoters. You are very 
articulate.
    The question I would like to know is: How important to what 
you have been doing are the subsidies that we have put in place 
toward the beginning of your companies and also to the 
continued growth of your companies? And the second question is: 
If we do not pass the cap-and-trade piece of legislation, what 
impact would that have on the growth of your companies?
    So the first thing is subsidies, the second, if you do not 
have cap-and-trade now but you are going forward, how much do 
the subsidies help? The last question is, say we did not do 
this, the cap-and-trade legislation, what impact do you think 
it would have on your businesses?
    Mr. Lowenthal. I am ready to take that on, if you would 
like.
    So, one of the things about our business is that it co-
exists with the electrical vehicle business. Of course, that is 
a lot of jobs in Ohio, we know. But all of the American auto 
makers, not only General Motors and Chrysler and Ford but also 
the young companies like Tesla, Fisker and Phoenix, are all 
developing electric vehicles. I sat recently in a roundtable 
with General Motors where we discussed the need for 
infrastructure and the conclusion of that meeting was that the 
existence of an infrastructure will double their market size 
for electric vehicles.
    Senator Voinovich. I just want to interject something. One 
of the things that I recognize, and we all recognize, is that 
we, if we are going to talk about a subsidy, is in the grid.
    Mr. Lowenthal. Right.
    Senator Voinovich. The grid in this Country. We do not have 
the grid and we need to do it and I think if we are going to 
subsidize, then that is the big thing that overshadows 
everything that you are doing.
    Mr. Lowenthal. Very good, Senator. I will address that 
specifically then.
    So the first answer to your question is that the reason 
that we would like some money early on in this is that the 
existence of an infrastructure allows somebody to buy an 
electric vehicle who cannot otherwise do so. So, if you live in 
San Francisco and you park curbside and there is no way to 
charge the vehicle, you cannot buy a Chevy Volt. So there is a 
little chicken and egg problem. Nobody wants to put out 
infrastructure until they see cars, but nobody can buy cars 
without infrastructure.
    This is, frankly, a good place where one-time subsidy can 
make a difference. Our products, in particular, have built into 
them a billing system so ultimately the drivers pay for the 
energy used and it is a sustaining business. But to get it 
started at the beginning of the electric vehicle industry, we 
could use some money. It would be a great help to us. But we do 
not want it directly. We want our customers to get it. 
Typically, our cities and businesses that want to accommodate 
electric vehicles.
    With regard to the grid, every one of our stations is Smart 
Grid enabled and what that means is that they will charge these 
cars when the grid has plenty of energy. So we do not have to 
add increased transmission capacity and we do not have to add 
increased generation capacity. So typically these cars will be 
charged in the middle of the night and because every one of 
them is directly connected to the grid, the grid manages when 
the cars are charged.
    Mr. Taylor. Senator, for energy efficient lighting 
technology, there is no need for subsidy. This is a cost 
effective investment today. The best way that the Federal 
Government, however, support this industry is by being a 
customer.
    Mr. Armstrong. Senator Voinovich, I would say from a BASF 
perspective, investing in new, incubated technologies, whether 
they are fuel cells or whether they are battery technologies to 
store that energy produced by the windmills when it cannot get 
into the grid, some 20 percent gets lost because it cannot go 
through the grid, I would say that many of these are co-share. 
I know as far as BASF, we put some of our money in conjunction 
with DOE funds. So, it certainly is not all handouts and I 
think that these are important technologies to allow them to 
come into mainstream and overcome these frictions and barriers 
to implementation, certainly. But the money certainly should go 
to the technology and not the company.
    Mr. Krouse. Senator Voinovich, with respect to the grid and 
the new technologies, as you know, there is a huge difficulty 
in integrating intermittent renewable technology, such as wind 
and solar, because of that intermittent nature, water power, 
hydro power, is a great zero carbon base load way to integrate 
those resources, they help firm the load curve. DOE did a study 
in April 2004 that said that up to 95,000 megawatts of low-head 
hydro still exists in the U.S. to be developed.
    So when you think in respect to the grid and the incentives 
that might be necessary to get the renewables to market, so to 
speak, yes the incentives are needed and to not provide those 
incentives will suppress the potential growth rate of water 
power technologies but would also suppress the ability to 
integrate those other renewables into the existing electric 
infrastructure.
    Senator Klobuchar. OK. Thank you, Senator Voinovich.
    Mr. Lowenthal, could you talk a little bit about the status 
of developing batteries? I have heard different things about 
how far these batteries can take us and the status of battery 
development in the U.S. versus other countries.
    Mr. Lowenthal. Well, battery development tends to start 
here. There are very important, innovative companies like A123 
Systems in Massachusetts, as an example, that have led the 
industry in the development of lithium-ion batteries and these 
are the ones that are going in many of the cars. The batteries 
are fine. The message that I want to give is that these cars 
are ready for prime time. They are ready to be sold to 
consumers.
    The one aspect of batteries that is an issue is the cost. 
The cost is loaded, for example, especially by warranty costs. 
So to the extent that we could get some assistance in helping 
the auto makers warranty their batteries through some kind of 
guaranty from the Federal Government, it would be a great help.
    What General Motors has done with their battery is to put 
in one that is twice as big as otherwise needed, to ensure that 
they have enough battery capacity for the warranty life of the 
car. That is not a very cost-effective strategy. We could use 
some help there.
    Senator Klobuchar. How long, if we look at 5 years, how 
many electric vehicles do you think will be driving on our 
roads? Or 10 years?
    Mr. Lowenthal. Well, President Obama has told us there will 
be a million cars in 2015. We do not think that he is far off. 
That is pretty much consistent with Morgan Stanley that did a 
report a year ago about the report of the growth of the EV 
industry.
    Senator Klobuchar. And how do you think the new fuel 
efficiency standards being announced today affects the plug-in 
vehicle business?
    Mr. Lowenthal. It will be a great help to us because there 
are still vehicles that need to run on gasoline or diesel, so 
the auto makers will compensate for those by delivering more 
electric vehicles and allowing people that can use an electric 
vehicle for their daily driving to do so. So it will be a great 
help to the industry.
    Senator Klobuchar. Mr. Krouse, I am pleased that you chose 
Hastings as the site of one of your first power projects in the 
U.S. We are very proud in our State of our roles as leaders of 
both biofuel area and wind fuel and other new energies. We have 
this very aggressive renewable standard that has helped us a 
lot. How many jobs do you anticipate will created as a result 
of this facility and what sort of job training is necessary 
when you hire new people to build and maintain these turbines?
    Mr. Krouse. Well, the policies in the State of Minnesota 
were one of the primary reasons that drew us there in the first 
place. So, they are very important. We have hired people in the 
city of Hastings from a maintenance and operations standpoint 
on a permanent basis with our company.
    We are also developing projects at a number of other 
locations within the State of Minnesota and those, when you 
combine manufacturing and ongoing operations, maintenance and 
the spin-off of jobs that are created from electrical suppliers 
and instrumentation vendors, et cetera, could amount easily 
into the hundreds if not up to 1,000 jobs just in the State of 
Minnesota over time.
    As I mentioned area in the testimony, in that 3-year 
period, we easily could reach into the multiples of thousands 
for all of our projects across the Country.
    Senator Klobuchar. You mentioned in your testimony that you 
thought hydrokinetic power had the potential to produce tens of 
thousands of megawatts of clean power around the Country. Can 
you elaborate on that prediction and what are the impediments 
to making this a reality?
    Mr. Krouse. Sure. The Electric Power Research Institute, 
EPRI, released a study last year, toward the end of the last 
year, saying that 25,000 megawatts of hydrokinetic with zero 
head. Hydro power could be brought on by 2020 in the U.S. I was 
recently in Vancouver at a small hydro conference, about 3 
weeks ago, where the person from EPRI had updated their 
projections and essentially listed out the total amount of net 
energy that could be created through these hydrokinetic 
technologies and all their variety of application points and 
that ended up being about 429 terawatt hours. That is just a 
gargantuan number.
    In order to get those technologies to the market, we do 
need to have that climate legislation in place. It does send a 
price signal for carbon. Investors in projects, even though 
they have been on the sidelines, we continue to get a growing 
amount of interest as the markets begin to unlock and having 
that clear signal about what the value of carbon is would be 
very helpful is evaluating economically the project 
feasibility.
    Right now, it is probably the single greatest unknown in 
terms of trying to evaluate project financial feasibility.
    Senator Klobuchar. Thank you. Mr. Taylor, you mentioned 
that your products are not being sold to the Federal 
Government. I know I have some energy efficient light bulbs in 
my office that we installed. Is it your products or just no 
lead products?
    Mr. Taylor. No, I did not say there were none. But buying 
more, and different than the types of energy efficient light 
bulbs that you are talking about. These products do not contain 
mercury. In the whole discussion about energy efficiency, one 
of the things that I omitted in my testimony is that lighting 
is the most constant energy load in any commercial facility.
    So impacting lighting or energy consumption around lighting 
by 80 percent or greater has a dramatic impact on carbon 
emission. Not only are you talking about a cost-effective 
investment, but there is the benefit of the reductions in 
carbon emissions.
    And so as cap-and-trade legislation further encourages in 
the marketplace companies that want to take advantage of carbon 
credits, it further enhances the return on investment and 
encourages in investing in energy-efficient lighting 
technologies.
    Senator Klobuchar. OK. Very good. And last question, Mr. 
Armstrong, do you have some familiarity with the cap-and-trade 
with the EU in Europe?
    Mr. Armstrong. Actually, it is not my area of expertise for 
the European Union. I am sorry.
    Senator Klobuchar. OK. I thought you maybe had 
participated. Your company had in that in some way.
    Mr. Armstrong. No.
    Senator Klobuchar. Now we are trying to make sure that we 
learn from the good things and do not do the bad again.
    Mr. Armstrong. I am glad to say, if I may, Madam Senator, 
that our spray polyurethane foam business is headquartered in 
Minneapolis, Minnesota.
    Senator Klobuchar. Now everyone has business there. You 
should listen to that, Mr. Lowenthal.
    [Laughter.]
    Mr. Armstrong. And Shakopee, also, our building systems, 
has business there and it is actually our first lead EV 
building inside of our corporation so----
    Senator Klobuchar. That is right, and where Prince has 
Paisley Park, Mr. Armstrong. I am sure they are both just as 
famous.
    [Laughter.]
    Senator Klobuchar. So, all right. I wanted to thank all of 
you. It is going to be very important to this debate that 
business and the businesses that have sprung up around new 
energy, clean energy, green energy, whatever you want to call 
it, technology, has a seat at the table here. So much time, the 
debate that I have seen gets dominated by the debate that we 
had 10 or 15 years ago. I think people have to understand that 
there are new companies coming up.
    I come from a State that believes in science. We gave the 
world everything from the pacemaker to the Post-It note. We 
have always believed in new developments and that this can be a 
cause of great economic opportunity and you have shown it with 
all of your companies.
    So, I want to thank you for that and have a great day. And 
bring that light with you, Mr. Taylor, and you will get some 
business. Just keep bringing it into every Senator's office and 
set it up until you get to talk to someone.
    [Laughter.]
    Senator Klobuchar. Thank you. Have a great day.
    [Whereupon, at 12:04 p.m. the Committee was adjourned.]

                                 [all]