[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
 THE AMERICAN ENERGY INITIATIVE, PART 6: CHALLENGES AND OPPORTUNITIES 
           FOR ALTERNATIVE TRANSPORTATION FUELS AND VEHICLES
=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 5, 2011

                               __________

                           Serial No. 112-45



[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]



      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov
                              __________




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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan                ANNA G. ESHOO, California
SUE WILKINS MYRICK, North Carolina   ELIOT L. ENGEL, New York
  Vice Chair                         GENE GREEN, Texas
JOHN SULLIVAN, Oklahoma              DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania             LOIS CAPPS, California
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky              Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 7_____

                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
JOHN SULLIVAN, Oklahoma              BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JAY INSLEE, Washington
GREG WALDEN, Oregon                  JIM MATHESON, Utah
LEE TERRY, Nebraska                  JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana             GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
PETE OLSON, Texas                    MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia     CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     3
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     5
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, opening statement.................................     6
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................   179

                               Witnesses

Howard K. Gruenspecht, Deputy Administrator, Energy Information 
  Administration.................................................     8
    Prepared statement...........................................    11
    Insert for the record........................................    55
    Answers to submitted questions...............................   181
Patrick Davis, Program Manager, Vehicle Technologies Program, 
  Department of Energy...........................................    25
    Prepared statement...........................................    27
Margo T. Oge, Director, Office of Transportation and Air Quality, 
  Environmental Protection Agency................................    33
    Prepared statement...........................................    35
    Answers to submitted questions...............................   184
James T. Bartis, Senior Policy Researcher, Rand Corporation......    88
    Prepared statement...........................................    90
Lucian Pugliaresi, President, Energy Policy Research Foundation, 
  Inc............................................................   102
    Prepared statement...........................................   105
Jeffrey G. Miller, Chairman of the Board, National Association of 
  Convenience Stores.............................................   115
    Prepared statement...........................................   117
Diarmuid O'Connell, Vice President of Business Development, Tesla 
  Motors.........................................................   124
    Prepared statement...........................................   126
Richard Kolodziej, President, NGVAmerica.........................   133
    Prepared statement...........................................   136
Michael J. McAdams, President, Advanced Biofuels Association.....   143
    Prepared statement...........................................   145
Robert Dinneen, President and Chief Executive Officer, Renewable 
  Fuels Association..............................................   153
    Prepared statement...........................................   155
    Answers to submitted questions...............................   192

                           Submitted Material

Letter, dated May 3, 2011, from Dave McCurdy, President and CEO, 
  American Gas Association, to subcommittee leadership, submitted 
  by Mr. Sullivan................................................    41
Statement, dated May 5, 2011, of the National Petrochemical and 
  Refiners Association, submitted by Mr. Sullivan................    44
``Economic Impact of Methanol Economy,'' undated report, Methanol 
  Institute, submitted by Mr. Shimkus............................    70
Testimony of Admiral Dennis Blair, U.S. Navy, Retired, submitted 
  by Mr. Shimkus.................................................    73
Letter, dated May 5, 2011, from Matt Horton, CEO, Propel Fuels, 
  Inc., to subcommittee leadership, submitted by Mr. Shimkus.....    83

 
 THE AMERICAN ENERGY INITIATIVE, PART 6: CHALLENGES AND OPPORTUNITIES 
           FOR ALTERNATIVE TRANSPORTATION FUELS AND VEHICLES

                              ----------                              


                         Thursday, May 5, 2011

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:37 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman of the subcommittee) presiding.
    Members present: Representatives Whitfield, Sullivan, 
Shimkus, Walden, Terry, Burgess, Olson, McKinley, Gardner, 
Pompeo, Griffith, Barton, Rush, Inslee, Green, Capps, Doyle, 
and Waxman (ex officio).
    Staff present: Charlotte Baker, Press Secretary; Jim 
Barnette; General Counsel; Maryam Brown, Chief Counsel, Energy 
and Power; Patrick Currier, Counsel, Energy and Power; Garrett 
Golding, Legislative Analyst, Energy; Cory Hicks, Policy 
Coordinator, Energy and Power; Heidi King, Chief Economist; Ben 
Lieberman, Counsel, Energy and Power; Dave McCarthy, Chief 
Counsel, Environment/Economy; Alex Yergin, Legislative Clerk; 
Greg Dotson, Democratic Energy and Environment Staff Director; 
Caitlin Haberman, Democratic Policy Analyst; and Alexandra 
Teitz, Democratic Senior Counsel, Environment and Energy.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. I would like to call this hearing to order 
this morning. This is our sixth of a multi-day hearing entitled 
the American Energy Initiative. The topic today is focusing on 
the challenges and opportunities for alternative 
transportation, fuels, and vehicles. With gasoline prices 
exceeding $4.00 a gallon in many parts of the country, it is 
timely that we look at alternatives to petroleum derived fuels 
for the transportation sector. Efforts to diversify away from 
reliance on oil for cars and trucks have been underway for a 
number of years and we know that it has been a goal of the U.S. 
Government to be less dependent upon foreign oil for many, 
many, many years. And so the purpose of today's hearing is to 
provide an overview of these alternative opportunities. We need 
to know where we stand today and where we would like to be in 
the years ahead as it relates to alternative fuels and 
vehicles.
    Most notably we have now more than 5 years of experience 
with the renewable fuel standard which was first put into place 
in the 2005 Energy Bill and was expanded in the 2007 Energy 
Bill. The targets for 2011 call for 12.6 billion gallons of 
corn ethanol and additional amounts of other biofuels such as 
cellulosic ethanol, biodiesel, and algae based fuels. I should 
stress that many aspects of the ethanol mandate are going very 
well. Nonetheless there are issues facing regulators as they 
translate the law into workable arrangements as well as 
challenges facing refiners and incorporating increasing amounts 
of ethanol into the existing supply chain.
    Biofuels, I might add, are but one of the alternative fuels 
in vehicles in the works. Vehicles that run on natural gas 
continues to make inroads especially in the heavy duty sector, 
propane vehicles are also seeing increased use. Progress 
continues on electric vehicles and even coal to liquids is 
another possible non-petroleum source of transportation fuel. 
Each alternative fuel and vehicle has its unique mix of 
attributes and more than one will play a constructive role it 
the vehicles of the future.
    However, as I indicated earlier there are obstacles to 
overcome before new fuels and vehicles and technology can take 
significant market share away from petroleum. Not only must the 
alternative fuel in the vehicles be economically and 
technologically up to the task, but the fueling infrastructure 
must also be in place. As we are learning with ethanol, we can 
get there but it is not always an easy path. The good news is 
we have a host of alternatives that show promise and are the 
subject of federal research and development tax incentives and 
loan guarantees.
    But the fact that there have been so many false starts 
since the federal government first got involved in alternative 
fuels in vehicles in the 1970s is a sobering reminder that we 
need to carefully review our efforts. So developing cost 
effective alternatives will take time and in no way should 
serve as a substitute for taking steps to reduce gasoline 
prices. We need to do both. For this reason, the American 
Energy Initiative will pursue efforts to unlock America's vast 
untapped oil potential along with other efforts.
    So we also will have I think two panels of witnesses today 
and we look forward to the testimony to all of you and we do 
appreciate your taking time to be with us because your 
testimony will be vitally important to help us get a better 
understanding of where we are on this important subject.
    [The prepared statement of Mr. Whitfield follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    And at this time I would like to recognize the gentleman 
from California, Mr. Waxman, for his 5-minute opening 
statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. You are 
correct that this hearing on alternative fuels in vehicles is a 
very timely one. With gasoline prices over $4.00 a gallon in 
some cities, the cost of our dependence on oil is glaringly 
apparent to consumers.
    For decades the Energy Information Administration projected 
that U.S. oil consumption would grow year after year. And it 
did.
    In 2005, nearly 60 percent of U.S. fuels were imported. And 
the future looked bleak: higher oil consumption and more 
imports far into the future. Republicans claimed then--just as 
they do now--that the solution was to produce more oil 
domestically.
    Production has increased dramatically since that time. Our 
domestic crude oil production has increased by nearly 300,000 
barrels a day. We have increased our crude oil production to 
the point that we are producing more oil today than we have at 
any time in the last 7 years.
    And yet, gasoline prices are still climbing. And the money 
we spend on oil abroad continues to conflict with our foreign 
policy goals and national security.
    The fact is, more U.S. production is never going to be 
enough to appreciably reduce global oil prices or U.S. imports 
of foreign oil. We use 25 percent of the world's oil, but we 
only have 2 percent of the world's oil reserves. So we could 
double or even triple domestic production and it is simply not 
going to affect global oil prices all that much.
    In fact, this subcommittee has received testimony that 
increasing domestic production, as has been proposed, would 
increase production by just two-tenths of one percent a decade 
from now. The effect that would have on gasoline prices would 
be negligible.
    The key to making progress is to reduce, and to focus on 
how much oil we use. And reducing our share of global oil 
consumption from 25 percent can have a real impact both on 
global oil prices and on imports.
    The new motor vehicle standards promulgated by the Obama 
administration illustrate the benefits of greater efficiency. 
These carbon pollution tailpipe standards have had a remarkable 
impact. They are projected to save 1.8 billion barrels of oil. 
They are expected to yield net savings to consumers of roughly 
$130 to $180 per year, and $3,000 over the life of a vehicle.
    And being able to bring efficient vehicles to the market 
has greatly assisted domestic auto makers. General Motors had a 
27 percent gain in American sales, led by strong demand for its 
new compact sedan and more fuel-efficient sport utility 
vehicles. Ford earned $2.5 billion last quarter, up 22 percent 
from last year, as its sales have shifted to more fuel-
efficient cars.
    Most remarkable is the impact of these standards on U.S. 
oil imports and consumption. The Energy Information 
Administration now projects that we will be importing less oil 
in the future than we did in 2007, reversing decades of 
increasing reliance on foreign oil.
    And in a fundamental and historic shift, overall U.S. 
consumption of oil is predicted to stop growing. By requiring 
improvements in how efficiently we use oil, the administration 
has reversed a dangerous trend.
    The administration wants to build on their success with 
stronger standards after model year 2016. It is also working on 
standards for trucks and other commercial vehicles. Those 
standards could save even more money at the pump while further 
reducing our dependence on foreign oil.
    At the same time, we need to continue our push toward 
alternative-fueled vehicles, whether they are plug-in electric-
drive commuter vehicles, long-haul natural gas trucks, or 
renewable fuels used in various vehicles. The Obama 
administration has made real progress on the seemingly 
intractable problem. We are finally heading in the right 
direction.
    I look forward to hearing from today's witnesses about how 
we can continue and build on this progress. Thank you, Mr. 
Chairman. Yield back my time.
    Mr. Whitfield. Thank you, and at this time recognize the 
gentleman from Oklahoma, Mr. Sullivan, for 5 minutes.

 OPENING STATEMENT OF HON. JOHN SULLIVAN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF OKLAHOMA

    Mr. Sullivan. Thank you, Chairman Whitfield and thank you 
for holding this important hearing today on challenges and 
opportunities for alternative transportation fuels and 
vehicles. With the price of oil over $110 a barrel, it is vital 
that we look at alternative transportation options to give 
consumers and businesses--excuse me--options at the pump. Our 
national and energy security demand it. And given the fact that 
69 percent of the oil consumed in America is used for 
transportation, two-thirds of which we import from foreign 
nations, we are spending $2 billion per day importing foreign 
oil. This is the largest transfer of wealth in the history of 
mankind.
    The U.S. has enough natural gas reserves to last us more 
than 125 years. By diversifying our fleet--our vehicle fleets, 
heavy duty trucks, and utilizing natural gas as a 
transportation fuel we can significantly reduce U.S. demand for 
foreign oil and begin doing that immediately. Almost a month 
ago I introduced bipartisan legislation, The Natural Gas Act, a 
common sense bill that makes real world solutions to this major 
national security issue. Today I am proud to announce that we 
have over 180 cosponsors on this bill including 22 from this 
committee alone.
    The NAT Gas Act is designed to be a short term 5 year 
market driving program to allow the economies of scale to work 
with the production of natural gas vehicles and fueling 
infrastructure. The bill calls for private capital investment 
not by the Federal Government in the production and use of 
natural gas fueled vehicles. The bill is consistent with the 
goals of the National Energy Policy that would encourage the 
use of clean burning domestically produced fuel without the 
heavy hand of government mandates.
    All told, this legislation will create over 500,000 jobs. 
As Congress debates energy solutions and many options are 
offered up, but at the end of the day these options give 
American consumers few real choices today. In the near term, 
natural gas is the best present day alternative to imported 
oil, one that can be put in place virtually overnight with the 
support of the Nation behind it. And Mr. Chairman, I yield back 
the balance of my time.
    Mr. Whitfield. Thank you, Mr. Sullivan. At this time I 
recognize the gentleman from Illinois for the purpose of making 
an opening statement.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Mr. Chairman. And I want to 
thank the--all the guests for their participation and for being 
here this morning. Today's hearing is timely, as prices at the 
pump climb to $4.00 a gallon for regular gasoline. It is 
extremely important that this committee identify short- and 
long-term strategies and objectives for developing alternative 
fuels for vehicles so 5 and 10 years from now we won't be 
having the same debates over rising gas prices due to unrest in 
the Middle East.
    For far too long, we have been seeing widely fluctuating 
gas prices here in this country due to a lack of comprehensive 
policies to move us away from imported oil and petroleum. And 
every American--and every year or two we are back in the same 
place exactly doing the same thing that we find ourselves doing 
at this moment, discussing extremely high gas prices at the 
pump but no closer to solving this issue, which has had such a 
devastating effect on the budgets of American families, both 
lower and middle-income families who must once again choose 
between putting food on the table or filling up their car in 
order to go to work.
    I look forward to today's hearing to discuss both the 
opportunities and the challenges that we face as we attempt to 
transition to alternative fuels to power our cars and to power 
our trucks. Americans love their cars and we love to drive, so 
it only makes sense that we provide direction for the American 
people and move our country away from its heavy dependence on 
foreign sources of oil. As a Representative from the corn-
growing State of Illinois, I look forward to learning more 
about the impact that corn ethanol has had on the alternative 
fuel debate.
    A few years ago, it was thought that relying solely on corn 
ethanol was the win-win alternative to diesel and petroleum 
fuels. Since that time, my office has met with several 
constituents and groups that have informed us of the impact of 
using corn ethanol for fuel and its subsequent effect on 
increased prices for feedstock and the overall fuel supply. So 
I am very interested to hear from the experts here today on not 
only the impact of corn ethanol, but also the opportunities for 
additional alternative fuel sources for transportation, 
including biofuels, electricity, natural gas, coal-to-liquids, 
and many others.
    I believe if we are prudent and we work together, both 
sides of the aisle, we can develop a policy for alternative 
fuel production that would be to the benefit of all of our 
constituents and the American people as a whole. Mr. Chairman, 
I sincerely hope that this can be an issue that we can find 
common ground on and we can--that we can work together on the 
issues for the good of this entire Nation. If we are willing to 
provide direction and funding to develop alternative fuel 
supplies, we can provide economical and practical benefits to 
Americans by decreasing the amount of oil we import while also 
eventually decreasing the price our families pay at the pump.
    Mr. Chairman, however, we all understand that before we are 
able to enjoy the benefits that will ultimately come from 
alternative fuels we must first invest in research and 
development of these supplies. And even if we are able to come 
together on a comprehensive policy to develop these fuels, we 
must also invest in the infrastructure to support these fuels 
as well. So we have our work cut out for us, and I am pleased 
today that we are taking our first step in understanding where 
we are and what we need to do to move forward. With that, I 
yield back the balance of my time.
    Mr. Whitfield. Thank you, Mr. Rush. At this time I would 
like to introduce the first panel. We have with us this morning 
Dr. Howard K. Gruenspecht, who is the Deputy Administrator of 
the U.S. Energy Information Administration. We have Mr. Patrick 
Davis, who is the Program Manager for Vehicle Technologies 
Program at the U.S. Department of Energy. And we have Ms. Margo 
Oge, who is the Director of the Office of Transportation and 
Air Quality at the U.S. Environmental Protection Agency. Thank 
you once again for being with us, and I am going to recognize 
each one of you for 5 minutes for your opening statement and 
there is a little instrument on the table there that will show 
red when your time is up. So--but we do look forward to your 
testimony and what you have to say. So, Mr. Gruenspecht, I will 
recognize you for your opening statement.

STATEMENTS OF HOWARD K. GRUENSPECHT, DEPUTY ADMINISTRATOR, U.S. 
   ENERGY INFORMATION ADMINISTRATION; PATRICK DAVIS, PROGRAM 
   MANAGER, VEHICLE TECHNOLOGIES PROGRAM, U.S. DEPARTMENT OF 
 ENERGY; AND MARGO T. OGE, DIRECTOR, OFFICE OF TRANSPORTATION 
     AND AIR QUALITY, U.S. ENVIRONMENTAL PROTECTION AGENCY

               STATEMENT OF HOWARD K. GRUENSPECHT

    Mr. Gruenspecht. Mr. Chairman and members of the 
subcommittee, I appreciate the opportunity to appear before you 
today. The Energy Information Administration is a statistical 
and analytical agency within the Department of Energy. EIA does 
not promote or take positions on policy issues and has 
independence with respect to the information and analysis that 
we provide. Therefore, our view should not be construed as 
representing those of the Department or other federal agencies.
    The transportation sector and petroleum use are tightly 
linked. In 2009, 72 percent of total U.S. petroleum use 
occurred in transportation while petroleum products provided 
about 94 percent of transportation energy. Light-duty vehicles, 
including both passenger cars and light trucks, accounted for 
63 percent of total transportation energy use in 2009. In that 
year, gasoline vehicles had an 85 percent market share out of 
9.8 million new light-duty vehicles sold. Flex fuel vehicles 
that could use gasoline up to E-85, hybrid electric, and diesel 
vehicles held 11 percent, 3 percent, and 2 percent shares, 
respectively.
    Looking forward, EIA's Annual Energy Outlook provides 
projections for the U.S. energy system through 2035. Our 
reference case is a business-as-usual trend estimate using 
known technology and technological and demographic trends on 
the assumption that current laws and regulations including any 
applicable sunset dates remain unchanged. We expect vehicles 
other than those that can only be fueled with gasoline to play 
a growing role in the reference case due to both policies and 
rising fuel prices. And their share would grow to 42 percent of 
projected sales in 2035. Flex fuel vehicles represent the 
largest share of those vehicles, with sales of electric and 
hybrid vehicles that use stored electric energy also growing 
considerably as do sales of diesel vehicles.
    Nonetheless, gasoline-only vehicles maintain a projected 58 
percent sales share by 2035 because they are able to 
incorporate technology such as lightweight materials and 
advanced engine and transmission components that improve fuel 
economy. Although growth in the number of drivers and vehicle 
miles per driver results in a projected growth of 50 percent in 
light-duty vehicle travel between 2009 and 2035, overall light-
duty vehicle energy use increases by only 10 percent due to 
improved fuel economy. And projected light-duty vehicle 
petroleum use is about 8.2 million barrels per day in 2035, the 
same level as in 2009, because there is a shift away from 
petroleum toward other fuels in the transportation mix.
    There are really four key areas of uncertainty in this 
projection: fuel prices, technology costs, consumer acceptance, 
and potential changes in policies, which are your business, not 
mine. In the high oil price case--and I know many people think 
oil prices are high enough, but we have one where oil prices 
double in real terms by 2035--we would expect overall light-
duty vehicle fuel consumption to grow by only one and a half 
percent between 2009 and 2035, and petroleum use in 2035 would 
be only 6.6 million barrels for light-duty vehicles, a million 
and a half barrels below the current level.
    Vehicle cost is another factor that will play a critical 
role in determining the success or failure of unconventional 
vehicles in the future. For example, plug-in hybrid and plug-in 
electric vehicle incremental cost is heavily dependent on the 
cost of a battery. Just how much more these vehicles will cost 
the consumer depends on future technology breakthroughs or lack 
thereof, and my colleagues will discuss that.
    Consumer acceptance is the third critical uncertainty, and 
I think some of the opening statements mentioned that regarding 
the success of unconventional vehicles and alternative fuels. 
As discussed in my written testimony, attributes such as cost 
and performance, as well as refueling infrastructure 
availability, are essential to acceptance.
    And finally, the future regulatory environment is also 
uncertain. Fuel economy standards are currently set through 
2016. We do assume that they are raised at least through model 
year 2020 to reflect the requirements of the Energy 
Independence and Security Act. But additional fuel efficiency 
requirements that may be promulgated under existing authority 
could also have a very significant impact. Our Annual Energy 
Outlook includes two fuel economy sensitivity cases, one 
assuming a 3 percent annual increase through 2025, the other 
assuming a 6 percent annual increase.
    Again, in these cases we find sales of unconventional 
vehicles grow dramatically to 70 percent of total sales in the 
3 percent case and nearly 90 percent of total sales in the 6 
percent case compared with 40 percent in the reference case. 
And in addition we would likely slow the rate of vehicle stock 
turnover relative to the reference case. But overall light-duty 
vehicle energy consumption and petroleum use decline relative 
to their 2009 level.
    This concludes my statement, Mr. Chairman, and I would be 
happy answer any questions you or the other Members may have.
    [The prepared statement of Mr. Gruenspecht follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Whitfield. Thank you very much. And Mr. Davis, you are 
recognized for 5 minutes.

                   STATEMENT OF PATRICK DAVIS

    Mr. Davis. Good morning, Chairman Whitfield, Ranking Member 
Rush, and members of the subcommittee, and thank you for the 
opportunity to testify here today. I am Pat Davis, Program 
Manager of the Vehicle Technologies Program at the U.S. 
Department of Energy.
    The transportation sector accounts for approximately two-
thirds of the U.S. oil consumption. Closer, you say, thank you. 
Maybe two--there you go. After housing, transportation is the 
second biggest monthly expense for most American families. The 
President recently outlined a portfolio of actions which taken 
together could cut U.S. oil imports by a third by 2025 and 
these include programs that would put one million electric 
vehicles on the road by 2015, increase the fuel economy of our 
cars and trucks, and expand biofuels market and commercialized 
new biofuels technologies. Viewing these past, present, and 
future investments are critical to reducing costs for American 
families while reducing our dependence on oil and enhancing our 
national, economic, and environmental security.
    Making our cars and trucks more efficient is one of the 
easiest and most direct ways to limit our petroleum consumption 
and save consumers money. And while the Department continues to 
work on improving existing engine technology, today I will 
focus on alternative fuels technologies.
    As noted, the administration's goal is to put a million 
electric vehicles on the road by 2015. In 2009, the U.S. had 
only two relatively small battery manufacturing facilities 
manufacturing advanced batteries for vehicles. Over the next 
few years, thanks to Recovery Act investments, the U.S. will be 
able to produce enough batteries and components to support 
500,000 plug-in and electric vehicles per year and 
simultaneously create over 6,200 jobs. At the same time, DOE 
projects a drop in battery costs of 50 percent by 2013 compared 
to a 2009 baseline.
    To make electric vehicles even more affordable, the 
President proposes transforming the existing $7,500 tax credit 
into a point-of-sale rebate, and our fiscal year 2012 budget 
also proposes a new Energy Innovation Hub, energy storage 
research hub, and competitive programs to encourage communities 
to invest in electric vehicle infrastructure.
    Domestically produced biomass can provide a cost-effective 
alternative to oil while creating business opportunities and 
jobs in the U.S., especially in rural areas. U.S. DOE develops 
programs that both increase the current use of biomass 
technologies and support research development and demonstration 
on the next generation of biomass technology.
    DOE's efforts to increase the use of biofuels have been 
strengthened by the expansion of the Environmental Protection 
Agency's Renewable Fuels Standard program and DOE's work with 
EPA to understand the potential impact of E-15 on compliance 
with vehicle and emissions standards.
    DOE is also making investments in next-generation biofuels 
technologies from a variety of feedstocks such as corn stover, 
wood waste, algae, and other materials, and we are exploring 
ways of converting corn and cellulose to cost-competitive drop-
in substitutes for gasoline, diesel, or jet fuel.
    Recovery Act funding also enabled us to invest in 29 
integrated biorefinery projects to validate first-of-a-kind 
technologies at the pilot, demonstration, and commercial scales 
which will further reduce risk to investment. These projects 
are expected to generate at least 170 million gallons of 
advanced biofuels annually, and bringing more commercial 
biorefineries online will help us meet the Nation's ambitious 
renewable fuels standard goals.
    In summary, DOE's transportation portfolio will save 
consumers money, reduce our dependence on foreign oil, lower 
our environmental impact, and keep America on the cutting edge 
of clean energy technologies enabling us to build a 21st 
century clean energy economy. Thank you again for the 
opportunity to discuss these issues and I welcome any questions 
you may have.
    [The prepared statement of Mr. Davis follows:]
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    Mr. Whitfield. Thank you, Mr. Davis. Ms. Oge, you are 
recognized for 5 minutes.

                   STATEMENT OF MARGO T. OGE

    Ms. Oge. Chairman Whitfield, Ranking Member Rush, and 
members of the committee, good morning. I really appreciate the 
opportunity to appear before you today.
    Biofuels can play a very important role in reducing our 
dependence on foreign oil, decreasing greenhouse gas emissions, 
and improving the world economies. A year ago in compliance 
with the Energy Independence and Security Act, EPA finalized 
the Renewable Fuel Program commonly known as RFS Program. This 
program established an annual volume standards for renewable 
fuels of 36 billion gallons in 2022. This includes 21 billion 
gallons of advance biofuels for that timeframe.
    When fully implemented, biofuels required by the RFS would 
displace about 13.6 billion gallons of petroleum-based gasoline 
in diesel fuel. That is approximately 7 percent of the expected 
annual gasoline and diesel consumption in 2022. This will 
decrease all imports by $14.5 billion and provide additional 
energy security of $2.6 billion annually.
    It should also reduce greenhouse gas emissions by an 
average of 138 million metric tons of CO2 
equivalent. This is approximately the emissions created by 27 
million vehicles on an annual basis. EPA strongly supports 
expanded use of advanced biofuels especially cellulosic 
biofuels. When Congress enacted ESA, it recognized that 
cellulosic targets are very indeed aggressive. It included 
provisions directing EPA to reduce the mandated levels set in 
the statute if cellulosic ethanol production were lower than 
the statutory requirements. Simply put, Congress did not 
require refiners to use more cellulosic ethanol than would be 
produced on an annual basis when they set those annual 
standards.
    Unfortunately, the cellulosic industry is not developing as 
quickly as Congress anticipated and we have had to lower the 
cellulosic mandate for the 2011 timeframe in 2010. For 2010 and 
2011, we set the cellulosic standard at about 6.5 million 
gallons which is substantially below the initial targets of 100 
to 250 million gallons for those years. Although EPA has the 
discretion to reduce the total advance and total renewable fuel 
standards, we did not do so mainly because we expect sufficient 
volume of other advance biofuels would be available in 2011 
time frame.
    We set the standards in a very transparent rule making 
process based on the evaluation of the cellulosic industry 
including discussions, one on one discussions with each 
producers working with the Department of Agriculture, the 
Department of Energy, and the Energy Information 
Administration. We intend to propose the 2012 standards early 
this summer and to finalize them by end of November 2011.
    The biofuel sector is a dynamic one. It is important for us 
to evaluate and qualify new fuels where possible for use in the 
RFS Program, corn and advanced and cellulosic biofuels approved 
for the RFS include biodiesel and renewable diesel from certain 
feedstocks, ethanol from sugar cane, biodiesel, and renewable 
diesel from algae oil, ethanol and diesel from approved 
cellulosic feedstocks in jet fuel and heating oil from certain 
feedstocks.
    We have also a process of evaluating new biofuels. Last 
year we successfully evaluated canola based biodiesel as an 
approved pathway. Lastly, I would like to briefly highlight 
steps that we have taken to remove barriers from the production 
of alternative fuels and vehicles in the auto sector. 
Essentially EPA announced a new regulation that would 
streamline and simplify the process by which manufacturers of 
clean alternative fuel conversions systems made them with said 
compliance where at the same time they can maintain the mission 
control standards required for those vehicles and engines.
    In closing, EPA is currently working to successfully 
implement the RFS Program both by following the specific 
direction established in ESA and by recognizing that the 
statute's strong intent is to replace conventional petroleum 
derived fuels with advanced biofuels. I want to say that we are 
currently witnessing a period of great innovation in our 
country with respect to the development and introduction, not 
just of the new fuels but also of new vehicle technologies. We 
at EPA strongly supports this innovation and we believe that 
the result in new fuels and new vehicle technologies hold a 
tremendous potential to reduce independence on foreign oil, 
save consumer dollars, and clean the environment.
    Thank you for the opportunity. I look forward to your 
questions.
    [The prepared statement of Ms. Oge follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Whitfield. Thank you, Ms. Oge. I will recognize myself 
for 5 minutes of questions. And once again we appreciate your 
being here. Mr. Davis, you mentioned in your testimony that by 
2015, the goal was to have one million electric vehicles on the 
roads. How many electric vehicles are out there right now, or 
do you know?
    Mr. Davis. A few hundred.
    Mr. Whitfield. A few hundred.
    Well, you know this renewable fuel standard obviously is 
very important and I think it is also important that we not 
look through rose-colored glasses as we try to anticipate the 
future. I was reading an article--two articles recently. One 
was in the New York Times. This was the 1917 issue of the New 
York Times, front page and it said electric vehicles are the 
cars of the future. And then I read an article about a company 
in California called DC Green that was formed a few years ago 
to go out and remodel service stations to provide electrical 
outlets and so forth, and they are now in bankruptcy. So I was 
just--would you elaborate? And it is my understanding that the 
Volt electric car for example costs like $42,000. So would you 
elaborate a little bit on why you are as optimistic as having a 
million cars by 2015?
    Mr. Davis. Sure. Thank you very much for the question. 
First of all, let me say a million vehicles by 2015 is not the 
end point. It is a milestone. We want to get to a million 
vehicles by 2015. We want to go beyond a million vehicles to 
get to five million, 10 million, and even tens of millions and 
we are really pretty confident that that milestone is 
obtainable. And I would suggest that the situation today is 
much different than in the '70s or any other previous time.
    We believe that the pieces are in place to achieve this 
goal. First of all, the Recovery Act, battery manufacturing 
facilities are in place to support the widespread production of 
electric drive vehicles. Two billion in batteries and electric 
drive component funding that was matched by industry for a 
total of 4 billion in manufacturing facilities that are 
supporting----
    Mr. Whitfield. So how many manufacturing facilities are 
there out there now with an advanced battery production?
    Mr. Davis. Well, the Recovery Act is supporting a total of 
20----
    Mr. Whitfield. Twenty.
    Mr. Davis [continuing]. And that is an entire supply chain 
from the component level, anodes, cathodes, electrolytes, to 
cell production, the battery manufacturing and assembly, and 
even to recycling. In addition to the Recovery Act projects, 
there is the tax incentive of $7,500. We are bringing the cost 
of batteries down very quickly. We are highly confident that we 
are going to meet our goal in 2015--the middle of this decade--
to get to $300 per kilowatt hour. There is the ATVM, the 
Advanced Technology Vehicle Manufacturing Loan Program, 
supporting manufacturers of advanced vehicles. In addition to 
that, the manufacturers have announced production capacities 
that when you look at the total production and the ramp-up 
rates, total over one million vehicles through 2015. Now, that 
is announced production capacity. It doesn't indicate consumer 
acceptance or that consumers will buy those vehicles. But we 
are very confident that the production capacity will be there 
to meet that goal.
    Mr. Whitfield. Yes, you also mentioned that you want to 
move from a $7,500 tax credit to a point-of-sale rebate. How 
would that rebate be determined?
    Mr. Davis. Well, the--of course, the details of that are 
still being worked out, but the concept is that a consumer who 
goes in to buy a vehicle will be much more incentivized by an 
immediate $7,500 benefit off the cost of a vehicle versus 
having to pay the entire price of the vehicle with the hope----
    Mr. Whitfield. Right.
    Mr. Davis [continuing]. Of getting $7,500 back when they do 
their taxes some, you know, perhaps 12 months later.
    Mr. Whitfield. Mr. Gruenspecht, not too long ago we heard 
people talking all the time about hydrogen fuel cell technology 
and I don't really hear a lot about that today. Or Mr. Davis, 
maybe I should ask you that question. What is happening on the 
hydrogen fuel cell technology?
    Mr. Davis. Well, the fuel cell technology office is making 
great progress. They reduced the cost of fuel cell systems from 
about $275 per kilowatt in 2002 to $51 per kilowatt today. That 
is a high-volume production cost, and their ultimate goal is 
$30 per kilowatt. So we are getting very close to where we need 
to be on cost. Infrastructure and hydrogen production is--
remains the most serious challenge, along with storage of 
hydrogen.
    Mr. Whitfield. OK. All right, my time is expired. Mr. Rush, 
I recognize you for 5 minutes.
    Mr. Rush. Thank you, Mr. Chairman. I think I will ask Mr. 
Gruenspecht these questions. The Energy Security and 
Independence Act once passed out of Full Committee and to the 
House in '07 contained a renewable fuel standard with the goal 
of reaching 36 billion gallons of renewable fuels by the year 
2022. Question is where are we? Are we currently on pace to 
meet that goal and if not why not? What additional steps are 
needed in order to make sure that we are on pace to meet that 
objective?
    Mr. Gruenspecht. Thank you for that question. I guess from 
the--soon after passage of the Energy Independence and Security 
Act, EIA as part of its duty needs to put out a projection, and 
I think in the projections issued in 2008 and since that time 
we have not been showing the 36 billion gallon target being 
met. In large part the issue involves cellulosic ethanol. As 
was specified by my colleague, that industry is coming along 
somewhat more slowly than had been anticipated by the framers 
of that legislation. There is waiver authority, and in our 
projection that waiver authority is used to reduce that 
cellulosic mandate. But over time we expect the use of 
renewable fuels to exceed that 36 billion gallon level. So it 
is really a matter of the speed with which the cellulosic 
ethanol--or cellulosic biofuels more generally, because it is 
not just ethanol, you can make other biofuels out of cellulosic 
material--can be ramped up.
    Mr. Rush. Mr. Davis, on the discussion on cellulosic 
biofuels, we have heard a lot of discussion about the greens 
and the impact that this type of alternative fuel may have some 
day in meeting our war on energy needs reducing our carbon 
footprint and decreasing the price of gas at the pump. Are 
there any--what are the most promising types of cellulosic 
biofuels currently and when will this type of alternative fuel 
realistically have an impact on a commercial scale? And are 
there any additional policies that can help us move this 
process forward at a quicker pace in order to go from a good 
idea to a better idea to best idea to reality?
    Mr. Davis. Well, thank you very much for your question. 
There is quite a lot built in there so let me just try to touch 
on a couple things. You know first of all, the biomass program 
within DUE has invested more than a billion dollars in 29 
integrated biorefineries. So these are projects that are at the 
pilot scale, the demonstration scale, and even at the 
commercial scale. And we--that $1 billion investment has been 
matched by industry with $1.7 billion and these plants in total 
would be able to produce about 170 million gallons annually. 
And these are projects that are--you know there are many 
different types of projects represented in those 29 
biorefineries. But they represent mostly cellulosic projects 
converting cellulosic resources into biofuels.
    I would say you mentioned what kind of other things could 
you do. One thing that could be done is a proposed in our 
budget for--to support a reverse auction which would support 
these commercial scale facilities becoming more cost effective 
in the very near term. And could enable more than 50 million 
gallons annual biofuel production by 2014. So that is one 
thing. And I would say in general our R&D program is continuing 
to lower the cost of these biofuels to be directly competitive 
with conventional fuels in the long term.
    Mr. Whitfield. Your time is up, yes. Mr. Sullivan you are 
recognized for 5 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman. And before I start 
my questioning I would like to ask unanimous consent to submit 
two statements for the record.
    Mr. Whitfield. What are the statements?
    Mr. Sullivan. The first one is from the American Gas 
Association supporting my legislation H.R. 1380 the NAT Gas Act 
and the natural gas vehicles in general.
    Mr. Whitfield. OK.
    Mr. Sullivan. And the second is the one I would like to 
submit is a written statement for the record from the National 
Petrochemical and Refiners Association outlining their concerns 
with the renewable fuels mandate.
    Mr. Whitfield. Without objection.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Sullivan. Thank you, Mr. Chairman. Mr. Davis, in your 
testimony you don't make any mention of the role of natural gas 
vehicles--that natural gas vehicles contain our nation's 
transportation portfolio. I hear Secretary Chu talk about 
electric vehicles all the time but he hardly every mentions 
natural gas vehicles. This is perplexing given the massive 
amounts of natural gas resources that we have in this country 
and the fact that natural gas vehicles help reduce all types of 
pollution. What is DOE's position of the role of natural gas 
vehicles or what is their position on the role natural gas 
vehicles will play especially in the heavy duty market? Why 
don't natural gas vehicles have a primary place in DOE's 
strategy?
    Mr. Davis. Thank you so much for the question, Mr. 
Congressman. You know, actually natural gas does play an 
important role in our strategy. We supported natural gas 
vehicles and the implementation of natural gas fueling 
infrastructure for 17 years through our Clean Cities Program, 
most recently, through the Recovery Act, placing thousands of 
natural gas vehicles on the road along with the infrastructure 
that supports them.
    I would say that the Vehicle Technologies Program, being 
primarily a research organization, does struggle sometimes with 
the fact that natural gas is a pretty mature technology. It is 
really more about deployment than it is about R&D. We know how 
to build natural gas engines. We know how to build natural gas 
vehicles, and that is why we have concentrated our efforts on 
natural gas through the Clean Cities Program, the deployment 
arm of the Vehicle Technologies Program.
    Mr. Sullivan. Well, again this year the administration's 
budget request had no R&D funding for natural gas vehicles. Why 
does DOE always seem to be promoting alternative fuels of a 
distant future, stuff that is 15, 20, 50 years or more--years 
away from possibly being commercial to the exclusion of proven, 
cleaner, domestically available fuels and technologies like 
natural gas vehicles which could make a real difference 
tomorrow? Natural gas vehicle technology is readily available 
and widely used throughout Europe, South America, and Asia. 
There are over 12.5 million natural gas vehicles worldwide, and 
we only have 150,000 here in the United States. Can you 
elaborate on that?
    Mr. Davis. Yes, thank you for your question. Well, I would 
say that first of all in fiscal year 2010 we put in place some 
natural gas engine development projects, and those projects are 
underway this year, in which we leveraged $5 million in funding 
for a total of over $15 million in engine development funds 
supporting new natural gas engines that could be used in a 
variety of vehicles, mainly medium-duty to heavy-duty-type 
vehicles. That said, once again our effort has been focused on 
deployment, and although you might note that in FY '12, we 
don't request any direct funds for R&D in natural gas, we 
continually support natural gas vehicles through the Clean 
Cities Program, our deployment arm, and we will continue to do 
so, both vehicles and infrastructure.
    Mr. Sullivan. Thank you, Mr. Chairman. I yield back.
    Mr. Whitfield. Thank you, Mr. Sullivan. Mr. Doyle, you are 
recognized for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman. Thanks for holding this 
hearing today. You know I--it seems like we repeat this cycle 
in this country and here in Washington decade after decade. 
Gasoline prices get high and there is great interest in all 
these alternative fuels and vehicles. And there is this great 
effort to move forward and then all of a sudden the OPEC 
ministers get together, or the speculators stop speculating, 
or--and gasoline prices come down, and we get lulled back in 
this complacency that everything is oK now and we can go back 
to our big SUV's and just keep putting gasoline in cars. And it 
is-- you just wonder how many times you let the board hit you 
in the face before you duck. And we just seem to not be good at 
that.
    We have to not only put money into R&D, but we have to 
sustain an effort in this country to create a situation here 
where we can mass produce vehicles that don't use gasoline. 
That is the future of the country. When I bought my first 
hybrid I used to complain to the Detroit people all the time 
why don't we have an American SUV hybrid? And why is it that 
other countries developed this technology before ours did? 
Well, I got a call one day from the Ford guy who said Ford was 
coming out with a Ford Escape hybrid. And I says I want one. He 
says well they are putting a waiting list together. So I said 
put my name on the list. About 7 months later I got a call that 
my car was here in Washington. I forgot I ordered it.
    And so I went down to the dealer to pick up that car and I 
remember the sticker price on the car was $29,000 and I had 
never paid sticker for a car in my life. I didn't think that 
was un-American somehow and I said to the dealer how much do 
you want for the car? He says $29,000. And I says that is the 
sticker price of the car. You don't think--do I look stupid to 
you? I am not paying $29,000 for this car. And he said sir, he 
says these cars are going for not only sticker price; some 
dealers are selling them for sticker plus, the start of the 
hybrid cars.
    But you know I thought I had this American hybrid car. Of 
course that battery came from Japan because we didn't make 
those batteries in the United States of America. I am glad to 
see we used some stimulus money and one of the factories by the 
way is in Pennsylvania that is doing this new battery 
technology. As we start to develop this battery technology, 
institutions like Carnegie Mellon in Pittsburgh are doing lots 
of research on how to make batteries that will allow cars to go 
further and further and further. This is the key to the future 
and once we can mass produce them, the cost goes down.
    Everybody remembers what that first flat screen TV cost. It 
cost a cazillion dollars. Right now you can pick one up for 
practically nothing. Why? The technology gets better, people 
start to buy the product, they mass produce it, the price comes 
down. It is going to be the same with batteries in automobiles 
in the future once we put--but we need to build them here in 
this country. You have to develop an infrastructure in the 
United States of America that allows us to do this not just 
when gasoline prices are high, but to do this once and for all 
and finally relieve ourselves of this constant trap we fall 
into with these oil prices. And you know we could drill every 
oil well in America and that doesn't mean these oil companies 
are going to sell us the oil any cheaper because it comes out 
of the ground in America than it does in any other place in the 
world. There is no discount for oil that comes out of the 
ground in United States of America. It is a world commodity. So 
we got to learn to duck. We have got to learn to start building 
these facilities in the United States of America. That takes 
commitment and R&D. We got to put money in R&D. The first thing 
that gets cut when we get tight budgets are the R&D budgets. 
That is what gets cut in this country. It is stupid. We need to 
not do that. We need to do more to get more of this research in 
there.
    Let me just ask about incentives. Everybody thinks there is 
some magic bullet to bring gasoline prices down here in the 
United States in the next six months or a year. I mean it is 
complete fantasy that this Congress can do anything that would 
reduce gasoline prices in the very short term. But I do think I 
want to see how we can incentivize consumers to maybe drive 
vehicles that let them go a little bit further on that gasoline 
so that they get more miles for their dollar. I know we 
subsidize I think just three cars right now: the Chevy Volt, 
the Honda Civic, and the Nissan Leaf. I want to ask the three 
of you just to comment would the marketplace see more 
innovation in a wider spectrum of fuel efficient vehicles if we 
simply rewarded vehicles for overall fuel savings regardless of 
the technology? In other words, we become technology neutral 
and say let's just get the most fuel efficient vehicles out 
there. Do you think that is a better idea? And how do we 
incentivize consumers in the short term over the next 3 to 5 
years, say, not 6 months to a year. That is just fantasy talk 
here in Washington, D.C. But realistically how do we 
incentivize consumers to start driving more fuel efficient 
vehicles? And I will let all three. You can just go in order 
and give your opinions. You notice I ended my question just in 
time for the guys to answer. That is the technique here. Go 
ahead.
    Mr. Gruenspecht. I feel the board hitting me in the face. 
No, you know, I think in some sense just, again, casual 
observation, it is one of the things we don't like, but the--I 
think the price of gasoline is having an effect on what people 
buy in the way of vehicles. There are various--there are fuel 
economy standards as one possibility, policy instrument. 
Another one that has been discussed in the academic literature 
are fee-bates to--you know, so there are a number of options 
that have been proposed. Again, given EIA's role, I wouldn't 
really want to--we would analyze them for you, but I don't 
really want to express a preference.
    Mr. Davis. Well, thank you so much for your remarks. And 
thank you for East Penn Manufacturing in Pennsylvania, who is 
manufacturing some critical battery technology that will be 
excellent application to start/stop hybrids.
    You know, we have been doing--I personally have been doing 
this for 18 years, the Department has been doing it for decades 
to try and reduce our dependence on petroleum and raise the 
fuel economy of vehicles and reduce our dependence on 
petroleum. So pretty much most of what you said we are in 
violent agreement on. I would just echo my colleague's remark 
that we would be pleased to work with you on policy instruments 
that could be less technology-specific. He mentioned one, fee-
bates, which are similar to the French Bonus Malus Program, and 
we would be pleased to talk to you more in depth about that.
    Ms. Oge. You ask like the million or $10 million questions. 
If we can stay here for the whole day and we can do a 
brainstorming session--but clearly gasoline prices are playing 
a very important role. As we are seeing right now in talking to 
the OEMs, small cars and most recently GM and Ford announce 
making profits from selling small cars something pretty unique 
for this companies and for the country. So gasoline price is 
very important. But also what is very important is the 
continuing development of all technologies. There is a huge 
opportunity to improve the conventional gasoline engine 
significantly. And we are seeing that. All the OEMs that we are 
talking to because we are in the process of setting the new 
standards for 2017 to 2025 for fuel economy and greenhouse gas 
emissions working with the Department of Transportation in 
California. All the OEMs are investing and they are introducing 
cleaner, more efficient gasoline engines. Anywhere from 
reducing the size of the engine with different sizing, you know 
fuel injection systems, stop and start, very mild hybrids. As 
they introducing these technologies in the marketplace in 
bigger numbers including hybrids and electric supply kits, the 
cost will come down. So at least we at EPA we are very 
optimistic that the efforts that we are seeing right now in our 
country to improve the fuel efficiency, reducing the greenhouse 
gas emissions from the transportation sector as a whole--both 
cars and trucks, if it continues we are going to find ourselves 
in a tremendous place in the history of this country.
    Also what I want to mention is that there is a program that 
EPA and DOT announced last year setting the first set of 
greenhouse gas standards and fuel economy standards from 2010 
to 2016. By 2016 we are going to have on an average the fleet; 
the new fleet sold in the United States at 35.5 mpg is pretty 
historic. And we start seeing these new fuel efficient vehicles 
introduced in the marketplace today. The program costs about 
$900 on an average in 2016, but the consumer because of the 
fuel savings will get $3,000 back for that $900 investment just 
in fuel savings.
    Mr. Whitfield. Ms. Oge, thank you. Thank you. Mr. Barton, 
you are recognized for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. I want to tell my good 
friend Mr. Doyle when he is ready for another hybrid, come see 
me. They make--we make the Chevy Tahoe hybrid in my district 
with United Auto Workers union employees and I will bring you 
down to Arlington, Texas, and you can pick it out. And within 
the confines of the ethics rules that we operate under we will 
make you a deal. I will make you the best deal that it is 
possible for you and I to accept under the laws that we have to 
operate.
    Mr. Doyle. All right.
    Mr. Barton. And I am not opposed to the Ford, but we make 
the Chevy hybrid in my district and it is a good--I drive one. 
It is a good product. It is a good product.
    We welcome our witnesses. I want to associate my remarks 
with Mr. Sullivan. I am a cosponsor of the natural gas bill 
that Mr. Sullivan is the chief sponsor of. We think it is a 
fuel that has some real opportunity for transportation. I want 
to direct my questions to the representative of the EPA. In 
your testimony, you talk about the cellulosic standard which 
under the law that was passed several years ago was supposed to 
be somewhere between 100 million and 250 million gallons for 
this year and next year. And in a very understated way said 
because of the ability to actually produce that product they 
had to reduce it to 6.5 million gallons. To put that into 
perspective--just doing some back of the envelope calculations, 
6.5 million gallons is about 20 minutes of fuel consumption for 
the United States. Twenty million--about 20 minutes. So my 
question, Madame, is at what point in time do you expect the 
cellulosic biofuels industry to become viable enough that 
volumes are actually commercial and substantial enough to make 
an impact?
    Ms. Oge. We are also disappointed to see that the 
cellulosic industry was not able to meet the 250 million 
gallons this year. But clearly Congress did recognize that this 
is a new industry. That there would be uncertainties, 
especially the early years to meet those volumes. And it has 
given the authority to EPA to access that volume. And that is 
what we did for 2011. We are in the process of setting the 
cellulosic volumes for 2012. The proposal will be coming out 
sometime in early summer. And our evaluation we give for 2012 
is based in having one on one discussions with all the major 
players in the cellulosic industry along with USDA and EIA. The 
industry's facing two major challenges right now. One is the 
opportunity to raise capital to invest in this new 
technologies, or rather on this technological challenges to 
move from pilot to commercial levels. However, we remain 
optimistic that those levels will be met. There are some 
significant number of companies and significant companies in 
the oil industry that are investing in this area so we remain 
optimistic that these goals will be met.
    Mr. Barton. OK. I want to ask the gentleman from EIA is--
what is the fuel used for transportation on a daily basis in 
the United States right now?
    Mr. Gruenspecht. That is about 70 percent of overall 
consumption, so 70 percent of 19--18--19 million barrels a day 
probably this year.
    Mr. Barton. The number that I use is 12 million.
    Mr. Gruenspecht. Yes, that would be pretty good.
    Mr. Barton. OK.
    Mr. Gruenspecht. Close enough.
    Mr. Barton. Yes, that is barrels. That is just to put in 
perspective we are using 12 million barrels a day cellulosic we 
got 6.5 million gallons last year for the whole year. So I mean 
the curve needs to go up fairly rapidly. I am--my time is 
expired, Mr. Chairman, and I yield back.
    Mr. Whitfield. Thank you. Ms. Capps, you are recognized for 
5 minutes.
    Mrs. Capps. Thank you very much. And thank you for holding 
this hearing. It is a great topic and further, our witnesses. 
Some would argue--we hear repeatedly here in Congress that the 
best way to address high gasoline prices is with more offshore 
drilling. Mr. Gruenspecht, EIA can bring an analytic 
perspective of this discussion. In your recent annual energy 
outlook--excuse me, EIA begins with a reference case. This 
scenario assumes that our laws remain unchanged and that there 
are only conservative adjustments in our expectations regarding 
technology improvements and the resource base. Is this correct?
    Mr. Gruenspecht. Correct.
    Mrs. Capps. Close enough?
    Mr. Gruenspecht. Close enough.
    Mrs. Capps. However, EIA also examined a hypothetical 
scenario called the High OCS Resource case. This scenario 
assumes that offshore oil and natural gas resources in 
undeveloped areas of the Pacific, of the Eastern Gulf of Mexico 
and the Atlantic, and Alaska are much higher--would be much 
higher than currently expected and are developed in the coming 
years. This is hypothetical. This is the assumption in the High 
OCS Resource case also assumes that oil and gasoline resources 
in these areas to be three times higher than in the reference 
case. So far so good? OK. If one were a strong advocate for 
offshore drilling the High OCS Resource case would be just 
about our best case scenario. Right?
    Mr. Gruenspecht. It would be a good scenario.
    Mrs. Capps. It would be a good scenario. As part of your 
analysis of this scenario EIA examined the effects of these 
increased resources and the production in oil prices and their 
influence on oil prices. The impact appears almost negligible. 
In 2025, increased offshore production under this High OCS 
Resource case would result in oil costing $117.12 per barrel 
instead of $117.54 per barrel. That is a difference of $.42 per 
barrel or just one penny per gallon of crude oil, according to 
this scenario as I read it. Mr. Gruenspecht, can you tell us 
why changes in domestic oil production tend to have such a 
small impact on crude oil and petroleum product prices?
    Mr. Gruenspecht. Well, I guess the fundamental point would 
be that the oil market is a global market. I also think that 
another aspect of this is that there is a lot of time involved 
in bringing particularly deep water resources into production 
so you would have a geophysical and geological evaluation; 
could be a couple years for a deep water prospect. You have 
exploratory drilling; could be up to four years for a deep 
water prospect. Development after a confirmed discovery could 
be seven years. So it takes a long time to get going on these 
things and in fact in that case, if you look further out, there 
is again a larger impact on production and a larger impact on 
price but it is still relatively modest. We are talking about a 
world market that by that time is 100 million barrels a day. It 
is about 88 million barrels a day now. I guess the idea is that 
no one measure is going to have a massive effect on world oil 
prices. I think it is really adding up a series of actions that 
affect both demand and supply rather than viewing actions as 
alternatives to each other that matter a lot. Again, I think 
the development of improved production technologies for either 
oil or for alternative fuels can lead to higher production not 
only in the U.S. but throughout the world because it is a 
global production. That matters. Similarly, improvements in 
efficiency in the U.S.--and that can be translated throughout 
the world--can have an effect on global demand. And so really 
you go to move both I think demand and supply if you want to 
have a significant impact on prices. Fuel flexibility probably 
helps a lot also.
    Mrs. Capps. Thank you. Maybe just--there are only 40 
seconds but if the other two of you would like to comment on 
this scenario and how you interpret it?
    Mr. Davis. Actually, I think my colleague handled it 
extremely well.
    Mrs. Capps. So then I would just I guess finally I will ask 
one quick question. Have you translated what a penny per gallon 
difference in crude oil would translate for consumers at the 
gasoline pump?
    Mr. Gruenspecht. I think it was more than a penny per 
gallon difference in crude oil.
    Mrs. Capps. It--that a 42 cents per barrel or just one 
penny per gallon of crude oil in your High Resource case--OCS 
case.
    Mr. Gruenspecht. If you drive 12--drive 20,000 miles a year 
and the vehicle gets--and in your household the vehicle gets 20 
miles per gallon on the road, you are talking about 1,000 
gallons a year. So a penny per gallon would be $10.00, I 
imagine. That is just off the cuff. Instant analysis is about 
as good as instant coffee, so maybe I will give you a better 
answer for the record.
    [The information follows:]
    [GRAPHIC] [TIFF OMITTED] T0930.143
    
    Mrs. Capps. That is all right. That is good enough for me 
for now. Thank you. I will yield.
    Mr. Whitfield. Yes, we were really impressed with that.
    Mrs. Capps. How fast he did it, right?
    Mr. Whitfield. We have two votes on the House floor. So we 
are going to recess. We will be back here about 11:10. So and 
then we will resume with this panel. Thank you.
    [Recess.]
    Mr. Whitfield. We will call the hearing back to order and 
we will renew our questioning period for the first panel. At 
this time I will recognize Mr. Terry for 5 minutes.
    Mr. Terry. All right, I appreciate that, Ms. Oge. I can 
barely see you but on cellulosic biofuels you had mentioned in 
your opening statement a little bit. I couldn't get all with 
Joe Barton, but I was off part--very much part of those 
discussions when the RFP came out. And the history of the 
mandated sub-mandate on cellulosic was part of the food versus 
fuel capping corn as ethanol. And also the secondary is really 
to force the markets, the research, and the development into 
the cellulosic.
    And Mr. Davis, you could help me on this so this question 
is really for you. As a supporter of biofuels and cellulosic 
fuels, it is frustrating because it doesn't seem like in the 
five years since that bill has passed that we have made a lot 
of progress. I don't see the cellulosic plants. There may be 
pilots out there, small pilots, but I would have expected mass 
production today.
    So the overall question and I want to start with Ms. Oge, 
why aren't we there? What is the holdup? What is the problem 
here? It seems like we are spending money on research, but we 
are not getting there. Is it the feedstock? What is our holdup?
    Ms. Oge. Based on the discussions, you know when we set the 
2011 standard for the 6.6 million gallons, our team was 
actually was in touch with over 100 companies that had some 
form or another of investments on advanced biofuels. You know 
from different feedstocks, different processes. This year we 
talked about 15 to 20 companies that they continue to have 
significant investments. And as I said in my testimony that I 
really--two things that are going on and I would dare to say it 
is not--something it was to have expected because indeed it is 
an extraordinary new industry. And there are different ways to 
get there as far as a commercialized volume that is cost 
effective and can compete with fossil fuels.
    And it has to do with--notice with the feedstocks the type 
of feedstock. But those are the type of process they used. What 
we have seen--and I cannot--you know, a lot of the information 
is company by company, plus it is confidential. We see there 
are two things going on. One is that companies don't have--some 
of the companies don't have sufficient capital investment to 
proceed based on the original plans that they had. And second 
is technology challenges that companies are finding as they are 
doing these pilot projects, make corrections, and then coming 
back to invest more and do more. So my personal view and this 
is completely my personal opinion is that we will be able to 
catch up on these volumes but it is too early to say the 
timeframe.
    Mr. Terry. OK. Well, I want to give Mr. Davis some time 
here to answer the question.
    Mr. Davis. Well, actually my colleague from EPA really hit 
the highlights very well. I would just add that ,we started 29 
integrated biorefineries. Those projects were initially 
started, and some of them as early as 2007, 2008, right before 
the economic downturn. This is an emerging industry and what--
their access to capital was very constrained in that timeframe, 
and so what you are really seeing as we emerge from that 
downturn are these projects starting to get started on a more 
rapid basis. And we also have to recognize when you are talking 
about building a plant that could cost tens or even $100 
million, it takes time to build that plant. Once you have the 
capital to do it, you are still looking at a 24-month build 
schedule. So I would agree. We, like you, would like to see 
this grow faster. And certainly the economic downturn has hurt 
us, but I think we are going to start picking up pretty quickly 
now.
    Mr. Terry. Yes, I would hope so because I think we are 
losing credibility frankly the longer it takes. I yield back.
    Mr. Whitfield. Thank you, Mr. Terry. Mr. McKinley, you are 
recognized for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. McKinley, excuse me just one minute.
    Mr. McKinley. As a new member to Congress I have a--I have 
admired Mr. Doyle's comments a minute ago about the analogous 
groundhog day. He didn't use that term but it just--we seem to 
be hearing this one over the years. That is all I have ever 
heard. We are just--we keep working in cycles that we are going 
to have another gas increase and we are going to worry about it 
and do nothing. And then we are going to do it again in a 
couple of years and we will do it again. I mean, I think the 
technology here--excuse me, the--I thought the goal was to use 
less energy. We want to be energy independent, but then I think 
that is as admirable as it is--but that is not what this 
administration is doing with the National Energy Technology 
Lab, he slashed the budget for fossil fuel research, the EPA's 
overregulation, and causing instability in the private sector.
    The assertions that coal is a subsidized industry and I 
would ask any of you to please--all I keep hearing answers from 
you when I ask this question--we will get back to you. And 120 
days later no one has gotten back to me. I want to know what 
subsidy is going to coal. If you could please get back to me. 
OK? The--so I think it is a false assertion that we have 
demonized our large, multi-national corporations.
    We have no--as Sullivan said there is no funding here for 
natural gas vehicles. We don't have an energy policy. We have 
an environmental policy and I am just frustrated. I am 
frustrated that when I go home on the weekends with people 
talking about how the price of gasoline has gone up $2.00 a 
gallon in the last 2 years, I have looked at the--I read a book 
the other day and it talked about how we industrialized America 
without subsidies when Henry Ford and Auto Denzler developed 
not only the engine, but implemented the--that wasn't a 
subsidized industry. Thomas Edison developing the light and 
other--it wasn't subsidized. He did this all without federal 
subsidies. Westinghouse developing the A/C motor. No subsidies. 
Charles Lindbergh flew across the Atlantic Ocean with aerospace 
technology of the time just simply to win a prize. That--we use 
that of--what was it, $20,000? There was no subsidy with that.
    I guess I am just skeptical that I don't think there is a 
real hunger here for us to solve anything. Congress seems to 
want and the research group just to continue the debate. We 
have the technology right now to deal with coal liquefaction, 
gas liquefaction, using natural gas vehicles, battery powered. 
Why don't we just stay on the ones that we are close to 
achieving and finish the job instead of taking on new things 
and diverting, dispersing our energies so that we don't 
accomplish anything? Or is this--we are simply just trying to 
have a full employment bill for researchers across this 
country? Why don't we just finish the job? Dr.--Mr. 
Gruenspecht?
    Mr. Gruenspecht. Well, I would say that with respect to 
your issue about energy subsidies EIA has put out a couple of 
reports, three reports on that issue. I think the most recent 
one in response to a request from Senator Alexander that----
    Mr. McKinley. I am sorry, could you?
    Mr. Gruenspecht. Yes, we had put out a report on energy 
subsidies that we update fairly regularly so that might be of 
use to you now.
    Mr. McKinley. Can you tell me one coal company that is 
being subsidized? Because I hear it from this side all the time 
and I am getting pretty irritated about it that coal is a 
subsidized industry. That is why we have to find something 
else. I would like to find one coal company that is being 
subsidized and everyone says they are going to get back to me.
    Mr. Gruenspecht. Well, I--we do not talk about specific 
companies, but I think you will find the information in the 
report responsive to your request.
    Mr. McKinley. OK.
    Mr. Gruenspecht. Let me just leave it there. Thank you.
    Mr. McKinley. The--are we on the wrong track here? What do 
we have to do to finish a job? Why are we continuing to take on 
other things instead of--if we truly want to be energy 
independent we know how to be energy independent, but yet we 
start new projects whether it is cellulosity, Biomet, whatever 
those are? Those are all fine. I have want to support those in 
a way, but why don't we just finish the job that we started 
with the ones that we are closest to if we really want to 
accomplish it instead of taking on spending new money when 
industry over the years has worked without these subsidies. Why 
are--why is--is it just simply the full employment of research? 
Is that what this is about? Because if it is, I just need to 
understand. I can play by the game, but I am getting irritated 
that we don't solve anything. Mr. Davis?
    Mr. Davis. Well, I appreciate your question and I also 
appreciate your frustration. This is a very difficult problem 
to solve. We have 240 million vehicles on the road today. We 
only sell about 12 million per year. It takes 20 years to 
turn----
    Mr. McKinley. Can we liquefy gas?
    Mr. Davis. It takes 20 years----
    Mr. McKinley. Can we liquefy gas?
    Mr. Davis. Of course we can liquefy----
    Mr. McKinley. I am sorry?
    Mr. Davis. Of course we can liquefy gas.
    Mr. McKinley. Why aren't we doing it?
    Mr. Davis. So I think, yes, natural gas is growing in 
momentum. Electric vehicles are growing in momentum.
    Mr. McKinley. Why is there no--nothing in the budget for 
natural gas vehicles? I am sorry--run out of time.
    Mr. Whitfield. Sorry, Mr. McKinley. Mr. Green, you are 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and I don't come from a 
coal area, but I come from an oil and gas, and we were always 
hit about our subsidies. But a lot of them are actually 
manufacturing subsidies, but Mr. Davis, the--you discussed the 
impact. Can you discuss the impact of E-10 and potentially 
higher levels of--we have on non-rogue, small, and older 
engines and material durability?
    Mr. Davis. Are you specifically asking about E-10 or E-15?
    Mr. Green. E-15, I guess. E-10, we have E-10 now because of 
our smog problems. In our area we have had it since the early 
'90s. And typically 10 percent of our fuels--well, it was MTB, 
but now it is ethanol, so.
    Mr. Davis. So as you may know, I'm sure you know, the EPA 
recently issued a rulemaking that would allow sale of E-15, and 
I am sure our colleague from EPA can speak to that. We, in 
support of that rulemaking, conducted a fairly large test 
program, a program costing about $45 million involving over 100 
vehicles and over--almost 30 models on the effects of E-15 on 
the long-term durability of those vehicles. That data was 
turned over to the EPA for their consideration in their 
rulemaking and ultimately did lead to the positive rulemaking 
to allow E-15 for sale, basically indicating that the effect of 
E-15 on those vehicles was minor, was minimal.
    Mr. Green. Ms. Oge, the--I would like to talk about corn 
based ethanol and air quality. Corn production takes a lot of 
fuel to produce the crop, but you have to clear the fields to 
get the corn to produce the ethanol. And it seems like there is 
air quality benefits is maybe even worse than what we do using 
fuel from oil. The promotion of this type seems contrary to the 
administration's clean air goals, but we see that with--you 
know because it is an alternative, domestically produced fuel. 
But is it really a benefit for our air quality when you look at 
the corn ethanol--ethanol based on corn. Is it--you do from 
gasoline based on oil?
    Mr. Oge. The law that Congress passed in 2007 has mandated 
36 billion gallons of renewable fuel to be used by 2022. Also 
the same law requires that EPA evaluates to what extent there 
maybe any increases of air quality as a result of the use of 
the 36 billion gallons. It requires EPA to take actions to 
address these potential increases. As part of the--too, EPA 
concluded that renewable fuels, the 36 billion gallons mandate 
would reduce greenhouse gas emissions significantly. But also 
we have determined that there is some small increase in 
nitrogen oxides particularly in particular matter. So we are in 
the process right now to evaluate those increases then taking 
appropriate steps to address these through biofuel quality and 
reductions from new vehicles.
    Mr. Green. OK. I also have a concern as my question of Mr. 
Davis is the misfueling of the first few years of E-15. If you 
have an older car, you know to make sure that E-15 could damage 
your engine. Is the EPA mandating that kind of information on 
the pump? I know we have now on our pumps at least in the 
Houston area it is you know this contains ethanol. And folks 
know that but what about somebody that has a 6 or 7 year old 
vehicle and they go up and decide they are going to fill up 
with an E-15? Could the damage that could happen to their 
engine--is there enough consumer information available?
    Ms. Oge. Is it for me?
    Mr. Green. Yes, well either of you.
    Ms. Oge. Of my colleague from the Department of Energy 
since we are doing this work. So you are absolutely right. Last 
October the agency based a significant technical data would 
give a waiver to 50 ethanol producers to allow E-15 to be 
introduced in the marketplace for 2007 in newer vehicles. In 
last January we give a second waiver for 2001 and newer 
vehicles. However, based on limited data for older cars and off 
road equipment as you suggested and engineering concerns that 
we have we are in the process of requiring labeling of pumps so 
we can educate the consumer about the appropriate fuel that 
they need to use. So there is a regulatory proposal that we are 
going to finalize early summer that would put those steps in 
place because we do recognize the importance to reduce the 
events of misfueling with E-15.
    Mr. Green. OK. Thank you, Mr. Chairman. I appreciate. I 
have some questions I would like to submit to the panel.
    Mr. Whitfield. Yes, the record will be open for 10 days on 
that. Mr. Pompeo, you are recognized for 5 minutes.
    Mr. Pompeo. Thank you, Mr. Chairman. You know it has been 
interesting to sit here and listen this morning to the 
discussion. Lots of smart people, many of whom think they know 
what the next great energy technology is. I don't think any of 
us know. I have been in Congress now for four months, a little 
bit more. I--full disclosure, I came from the natural gas 
industry. I sold the equipment to independent producers all 
over the world. I think natural gas holds tremendous promise. I 
come from a State where ethanol is very important. It has made 
some real progress, too, so I cannot understand for the life of 
me why were are here talking about all these subsidies, all 
these handouts, all this taxpayer money going to help these 
industries as if we know best which technology will ultimately 
be the victor.
    I heard and I agree with Congressman from Oklahoma, my good 
friend who says natural gas could be the next great 
transportation fuel. I part company from him, a piece of 
legislation like H.R. 1380 which says to the taxpayers, you 
will choose that technology. I understand like no one else how 
important getting that next right technology is, but I think 
consumers will get us there. I believe these markets will 
choose it. I understand that there are opportunities and 
challenges when you allow the market to work, but when I listen 
to decades and decades of folks at EPA and DOE talk about how 
they have got it all figured out and if we could just get one 
more grant. If we could just take a little bit more money from 
the taxpayers, we would cross that hurdle. And when you look 
1380, look at its subsidies for natural gas vehicles, I hope 
natural gas makes it. I hope it does it in its own way with the 
money from the industry. And that is really where I come back 
to.
    I heard a question or I heard you say, Mr. Davis, today 
talk about there being a shortage of risk capital. Did it ever 
occur to you that that shortage of risk capital might be a 
direct result if we are taxing too much? That is my question 
for you this morning. The under--that there is a connection 
between. You said DOE made investments, but DOE doesn't have 
any money, right? Is that correct, Mr. Davis?
    Mr. Davis. We only have funds that are provided by 
Congress.
    Mr. Pompeo. By Congress and those monies come----
    Mr. Davis. And those come from taxpayers.
    Mr. Pompeo [continuing]. In every case from the taxpayers, 
United States taxpayers.
    Mr. Davis. Absolutely.
    Mr. Pompeo. So is it possible in your mind, is it possible 
that if we had not taken those monies and made a decision--a 
political decision about where to direct that money that we 
might be further along in finding out the next great 
technology?
    Mr. Davis. Well, I don't believe so. I would say that the 
President has said there is no silver bullet. I have been 
working transportation area for a couple decades. If anyone 
knew the absolute one answer, you can believe that we would be 
concentrating on it.
    Mr. Pompeo. I appreciate that Mr. Davis. I actually agree 
with you.
    Mr. Davis. Yes.
    Mr. Pompeo. This is not about this President. It is not 
about the President before him. This is about all of us trying 
to centralize the decision making process and trying to pick 
that silver bullet. I think it is a fool's errand. And I think 
50 years of energy subsidy history demonstrates that quite 
clearly. Ms. Oge, do you think it is possible that if we had 
left more resources with the taxpayer over the last 50 years we 
would be further along in finding the next great American 
energy technology.
    Ms. Oge. Well, you know----
    Mr. Pompeo. Just--it is impossible.
    Ms. Oge. Let me say this. I agree with you that we should 
not be choosing winners and losers when it comes to technology. 
And actually I just want to bring to your attention a very 
important program that the President just announced last year 
and another important program that we are going to announce 
this year is to reduce the fuel consumption from on road 
vehicles both light duty and heavy duty. So last May our office 
worked with the Department of Transportation jointly to have a 
national program 2016 will improve the fuel efficiency by 35.5 
mpg equivalent.
    Now the consumer will pay something. We are not telling 
them that--we are not telling the audience how to get there. We 
are not telling them to use hybrids or electrics. It is a 
neutral standard so companies will get there by using the best 
market innovations. And the consumer saves money. You know they 
will save about $3,000 from fuel saving.
    Mr. Pompeo. I appreciate that. I do appreciate that. 
Consumers are going to pick the right solution. Today you can 
see it. They are driving less. Right? When gasoline is at 3.50 
or 3.80 in Kansas or $4.00, consumers will conserve. And I 
just--I have more faith in the American people and innovators 
than I do in Government bureaucrats.
    Ms. Oge. And I do, too.
    Mr. Pompeo. I think that is where we part company.
    Ms. Oge. And I do, too, but there can be a hybrid we will 
both work together.
    Mr. Pompeo. Yes, I think if we would lower marginal income 
tax rates, lower corporate tax rates and shrink the size of the 
EPA and the Department of Energy, we would get cheaper, better 
fuels much more quickly. And so those are just different world 
views. I appreciate that and I am going to work hard every day 
that that is the direction that this Congress goes. Mr. 
Chairman, I yield back my time.
    Mr. Whitfield. Thank you, Mr. Pompeo. And at this time 
recognize Mr. Griffith from Virginia for 5 minutes.
    Mr. Griffith. Mr. Gruenspecht, am I correct in stating that 
your office has predicted that coal share of electricity in the 
generation mix will only decline slightly in the future?
    Mr. Gruenspecht. We project the supply and the share of 
electricity----
    Mr. Whitfield. Microphone?
    Mr. Gruenspecht. I am sorry. Yes, we do foresee a decline. 
We see very few new coal plants being--few, if any, new coal 
plants being built, but the ones in use under existing laws 
continuing to be used.
    Mr. Griffith. And it is also correct to state that the 
electric needs of this country will increase?
    Mr. Gruenspecht. They increase slowly in our reference case 
projection, about one percent a year.
    Mr. Griffith. OK. If you take an increase and a slight 
decrease in coal and no new power plants built with coal, we 
are still going to need more coal for power generation. Isn't 
that true?
    Mr. Gruenspecht. I think we have slow, very slow growth in 
coal production--mostly going to power generation as you point 
out. Significant export potential for coal as well.
    Mr. Griffith. Because other countries don't have the 
regulations that restrict them that we have?
    Mr. Gruenspecht. Well----
    Mr. Griffith. Wouldn't that be true? Yes or no? Sorry to--
--
    Mr. Gruenspecht. I am not an expert in regulations in all 
other countries, but----
    Mr. Whitfield. I think that is true.
    Mr. Gruenspecht. Note that was a statement from the 
chairman, not from the witness.
    Mr. Griffith. Does the EIA see an achievable path for 
increasing our energy security without using coal if you 
completely did away with it?
    Mr. Gruenspecht. Coal is a very significant domestic 
resource. Natural gas is a very significant domestic resource. 
Renewables are significant domestic resources. Oil is less of a 
domestic resource than the others. But again, there is 
significant oil reserves and resources as well. So I think 
there are--clearly, almost 100 percent of our coal use comes 
from domestic production.
    Mr. Griffith. All right, Mr. Davis, President wants to have 
a million electric cars by what--2015?
    Mr. Davis. Yes, sir.
    Mr. Griffith. And do you anticipate that coal will be 
pretty much passe?
    Mr. Davis. I don't believe so.
    Mr. Griffith. I don't believe so either and so therefore, 
in order to use the electric cars on the highway, we are going 
to have to have a lot of coal, aren't we?
    Mr. Davis. Well, we would call the--when you plug your 
vehicle into the wall to charge it, we normally refer to that 
as the grid mix, which is a mix of coal, nuclear, renewables, 
all types of generation.
    Mr. Griffith. But right now that mix--and we are only four 
years away from 2015--would be more than 50 percent coal, would 
it not?
    Mr. Davis. I am not an expert on our generation capacities 
by fuel, but I will take your word on that.
    Mr. Griffith. All right, it doesn't sound off base to say 
that?
    Mr. Davis. No.
    Mr. Griffith. All right.
    Mr. Davis. It is somewhere in the 40s.
    Mr. Griffith. Oh, it has moved into the 40s?
    Mr. Davis. Yes.
    Mr. Griffith. I just know in my district it is still up in 
the high 70s. And so let me ask you some questions, ma'am, if I 
might. Would I be correct in assuming that the EPA supports the 
electric vehicles?
    Ms. Oge. We support advanced technologies including 
electric vehicles and plug in hybrids because it really does 
offer a tremendous opportunity.
    Mr. Griffith. And you are aware of the situation that with 
coal we are in the 40s according to one gentleman?
    Ms. Oge. Yes.
    Mr. Griffith. I have heard, you know different parts of the 
country different numbers. And I guess the problem is when you 
hear the President saying he wants a million cars, I am trying 
to figure out--and you hear the EPA talking about you know coal 
is bad and we--they are putting all these restrictions on coal. 
How do you expect informed citizens of the United States who 
know that a significant portion of our electric grid and I am 
sorry I don't have that term right is coming from coal 
production, but we are going to save the environment with 
electric cars. How do you expect informed Americans to 
reconcile those two positions and to think that eliminating 
coal and stopping permits and doing all this stuff is actually 
in the best interest of the environment and the economy long 
term?
    Ms. Oge. Sir, I am here as an expert in the transportation 
field. I am not an expert on permits and secondary services----
    Mr. Griffith. But you would, you would--I understand that, 
but you can understand----
    Ms. Oge. If I may, if I may----
    Mr. Griffith [continuing]. That as a reasonable person----
    Ms. Oge. Yes.
    Mr. Griffith [continuing]. It would be difficult for other 
reasonable people to reconcile those two positions. Would you 
not?
    Ms. Oge. So we believe that----
    Mr. Griffith. You think----
    Ms. Oge [continuing.) Electric vehicles----
    Mr. Griffith [continuing]. Yes or no? Is it easy for people 
to understand that or is it not?
    Ms. Oge. To understand?
    Mr. Griffith. To understand that on the one hand we want a 
million cars but we are still using somewhere around 50 
percent, maybe in the 40s now, of our electricity coming from 
coal. Do you understand that it is incongruent for most people 
to grasp how we are going to have a million electric cars save 
the environment, put coal out of business, and have the two 
work together?
    Ms. Oge. The assumption is that EPA's trying to put the 
coal industry out of business. I cannot comment on that. I 
cannot comment on that.
    Mr. Griffith. Yes, ma'am, that is my assumption. It seems 
to be evident in my district.
    Ms. Oge. I cannot comment on that, sir.
    Mr. Griffith. I yield back my time.
    Mr. Whitfield. Gentleman from Texas, Mr. Olson is 
recognized for 5 minutes.
    Mr. Olson. I thank the Chair and I would like to welcome 
our witnesses. Thank you for your patience today and thank you 
for your expertise. And I have got a couple of questions for 
you, Mr. Gruenspecht. And first of all I would just like to 
talk about some of your projections, EIA's projections of the 
past years. And earlier this year, President Obama said that, 
and this is a quote ``oil production from federal waters in the 
Gulf of Mexico has reached its highest level in 7 years.'' 
Although this makes a great sound bite I believe that the full 
picture in the Gulf tells a different story. Can you tell me 
what EIA's projections in the Gulf production were for 2010?
    Mr. Gruenspecht. Close to 1.6 million barrels a day for 
2010. I think all the data, MMS collects all of the data from 
operators over time, so I am not sure that all of the end-of-
year data is in yet. Probably close to 1.6 million barrels, 
approximately.
    Mr. Olson. OK, sir.
    Mr. Gruenspecht. Excuse me, probably close to 1.6 million 
barrels a day.
    Mr. Olson. OK. Thank you, but did actual Gulf production 
meet those--your expectations?
    Mr. Gruenspecht. I believe that actual Gulf production, it 
is well up close to 1.6 million barrels a day in 2010.
    Mr. Olson. But what were your projections? Was that 1.6 
your projection?
    Mr. Gruenspecht. I am not sure when the--I am not sure. The 
projection evolves over time as----
    Mr. Olson. OK. I appreciate that, sir. I have some numbers 
that show it is 20 percent less than you projected in 2007. 
That the actual----
    Mr. Gruenspecht. 2007, OK.
    Mr. Olson. And again, that is the President saying that 
production is higher and again it is his policies didn't get 
that. We have actually had a reduction in production because we 
have loosed our expiration and the moratorium had a significant 
impact on that. I have got a question, another one for you, Mr. 
Gruenspecht and you, Mr. Davis, as well. And can you guys tell 
me what your agencies are doing to ensure that the small 
refiners can comply with the RFS mandates and that they are not 
being overly burdened? I mean, I have many, many refineries, 
small refineries in the district I represent and I--they are 
concerned about increase costs for compliance. They want to 
compete. Can you assure us that they can compete that these 
mandates aren't going to affect them negatively?
    Mr. Gruenspecht. Well, I am aware that another part of the 
Department that is not represented here--the policy office--I 
recently completed a study on small refiners and I believe some 
of that information was sent to EPA. So maybe Ms. Oge would be 
able to----
    Mr. Olson. Ms. Oge, if you have comments, please.
    Ms. Oge. Yes, yes. Actually you know Eastside actually 
required that small refineries are given an exemption all the 
way through 2010, December of 2010. And then the Department of 
Energy was required to undertake a study and advise EPA's 
administration how to proceed with additional exemptions of 
small refineries. DOE completed that study I believe in 2009. 
They commended new exemption. Congress asked DOE to go back and 
take another look at that. So last week Secretary Chu sent 
Administrator Jackson a letter outlining a number of refineries 
that DOE is recommending to be exempted based on actual data. 
And we are in the process to notify all those refineries by the 
end of the week.
    Mr. Olson. Can I have a copy of that list?
    Ms. Oge. This is two year's exemption from RFS.
    Mr. Olson. Yes, ma'am. Can I get a copy of that list? 
Because again, I have got many, many refiners would qualify on 
my district.
    Ms. Oge. Would be glad to provide it to you.
    Mr. Olson. Thank you very much. I appreciate that. And I 
have another question for you, Ms. Oge. Can you assure the 
members of this committee and my constituents back home that 
EPA's waiver for E-15 blends in vehicles will not cause 
excessive wear and tear on the vehicles?
    Ms. Oge. Sir, we understand the concerns that have been 
expressed and what I can assure you is that the findings of the 
waiver were based on a very robust and sound science. So we are 
very confident that E-15 will not damage any vehicle 2001 and 
newer. However, we have concern about off-road equipment and we 
are concerned about altered vehicles. And we are taking steps 
to minimize misfueling and putting labeling, appropriate 
labeling on across the country.
    Mr. Olson. Thank you, and one follow-up question. Why was 
the exemption for vehicles model years before 2001? Why did EPA 
give that exemption?
    Ms. Oge. The exemption--sir, right now what we are saying 
is that for 2001 and newer, E-15 will not under--you know will 
not damage emission control systems. So we are very confident 
the newer vehicles can use E-15 gasoline blend. But for older 
vehicles, 2001 and older and older equipment, both lack of data 
and engineering judgment about how those engines were built 
gives us a lot of concern. So we are not allowing at this point 
E-15 to be used for those for those vehicles.
    Mr. Olson. Appreciate that and again I represent the 22nd 
Congressional District of Texas. There is a huge off-shore 
recreation, private recreation industry right in the shadow of 
the Johnson Space Center and they have been really hurt by the 
impact of E-10 on those marine engines, those outboard engines. 
And I don't want that to happen with our vehicles, so thank you 
for your time.
    Mr. Whitfield. Gentleman from California is recognized 5 
minutes.
    Mr. Waxman. Thank you, Mr. Chairman. Ms. Oge, you have been 
working closely with the National Highway Traffic Safety 
Administration and the California Air Resources Board to 
develop vehicle, tailpipe, and efficiency standards for 2017 to 
2025. These standards will reduce our oil dependence through 
increased vehicle efficiency and use of alternative fuel and 
advanced technology vehicles.
    Last September, NHTSA and EPA released the technical 
analysis of the potential vehicle technologies, fuel savings, 
and emissions reductions, and costs of various alternatives. 
Could you please describe the results of this analysis in terms 
of the potential efficiency improvements and cost savings for 
consumers?
    Ms. Oge. I will, thank you, sir. Last September, we put 
forward a document over 300 pages document based on an 
extensive dialogue with major car companies, major OEM 
suppliers, but also experts in the Department of Energy, 
laboratories, academics and looking at extensive peer review 
data, plus work that we have done in our office, Department of 
Transportation. And as you know we are working----
    Mr. Waxman. Give me the answer to that question of the 
potential efficiency improvements and cost savings to 
consumers.
    Ms. Oge. So it is three--we looked from three percent to 
six percent annually from 2017 to 2025 and the cost for those 
type of improvements were anywhere from $900 to $3,400 for six 
percent. But the payback to the consumer from fuel savings 
could be as much as $7,000.
    Mr. Waxman. You talked about the work that went into this 
analysis. You said you talked to the auto industry. Did you 
look at recent peer reviewed literature?
    Ms. Oge. Yes, we did.
    Mr. Waxman. OK. Technical staff experienced auto--technical 
staff of experienced automotive engineers, used most recent 
technical information, and many peer reviewed technical papers 
and reports, commission new studies. You also talked to DOE 
about forecasting work for battery costs, right?
    Ms. Oge. Yes.
    Mr. Waxman. Right, oK. I understand that EIA has also done 
some analysis of potential vehicle standards. Did EIA talk to 
you about their analysis and do you know if they spoke with 
NHTSA?
    Ms. Oge. No, actually I spoke with a colleague from EIA 
yesterday about this analysis.
    Mr. Waxman. OK.
    Ms. Oge. I don't know if they spoke with NHTSA.
    Mr. Waxman. OK. Are the EIA results consistent with NHTSA 
EPA analysis?
    Ms. Oge. They are not.
    Mr. Waxman. They are not. I think we should make sure that 
all of these analyses used the best available data and 
incorporate realistic assumptions. For example, EIA hasn't 
released the details of the analysis but it appears that EIA's 
analysis may use quite different assumptions from EPA and 
NHTSA's analysis about how consumer's value improved fuel 
economy and the resulting savings at the pump when they make a 
decision about buying a new vehicle. This is a critical 
assumption in getting it right and they have a big impact on 
the results. As you said earlier in the hearing, Mr. 
Gruenspecht, right now we are seeing the effect of the price of 
gasoline on what consumers buy. The auto industry has just had 
a great month. GM sales went up by 27 percent and the industry 
is telling us that gas prices are driving consumers to choose 
more efficient cars. Don Johnson, GM's Vice President for U.S. 
Sales said ``rising fuel prices have led many to rethink 
vehicle of choice.''
    Last time gas prices went up over $4.00 a gallon, the 
American automakers weren't prepared. This time thanks in part 
to the new emphasis on efficiency they have an expanded and 
attractive lineup of smaller cars and more efficient trucks and 
SUV's and sales and profits are up. Ms. Oge, is what we are 
seeing now consistent with your analysis of how the 2012, 2016 
standards would affect the auto industry? Did you project that 
more efficient lower polluting vehicles would actually increase 
sales?
    Ms. Oge. Yes, we did. Actually for our 2012, 2016 Program 
that was announced last year, we estimated about 600,000 to 
800,000 vehicle sale increase due to that regulation. And 
clearly, sir, as you know the car companies have supported this 
analysis.
    Mr. Waxman. Well, it makes sense if owning a new car will 
cost less because fuel savings outweigh any price increase 
people have more money to spend. And we certainly need to have 
a good understanding of this as NHTSA and EPA develop a new 
round of standards. I had some other questions, but Mr. 
Chairman, my time is expired, so I will cease.
    Mr. Whitfield. Thank you. Mr. Gardner, you are recognized 
for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman, and thank you to the 
witnesses for your time today. I appreciate the opportunity to 
learn from you and wanted to follow up, Ms. Oge, with something 
you had said, Ms. Oge at the beginning of your statements 
regarding cellulosic ethanol. And I think you had said it 
wasn't developing quite as quickly as the administration or the 
EPA had thought. I wondered if you could go into that a little 
bit more and the reasons why.
    Ms. Oge. In both my oral and written statement what I said 
is that it was not developed, actually then what the Congress 
intended back in 2007 when ESA was signed into law where the 
expectation was 100 million gallons of cellulosic fuel in 2010, 
and 250 million gallons. But also, Congress I believe 
recognized the innovative nature of that industry and how new 
it is. So they gave us the opportunity to adjust those levels 
which we have done for 2010 and 2011.
    And as I said earlier there are two major issues that we 
are seeing. One is capital investment. You know Department of 
Energy and Department of Agriculture is investing in a number 
of companies but what they really need to be on Government 
investments so we are seeing limited capital investment for 
some of the companies. And the second is they are learning a 
lot lessons as they are going so there have been a lot of 
technological challenges to move from a small R&D, you know 
pilot project to a commercial project. But also we have been 
discussing this issue with a number of companies including some 
oil companies that are making investments on these advanced 
biofuels. So we are moderately optimistic that this industry is 
going to come up with the volumes that Congress expected in 
2007 time frame.
    Mr. Gardner. Thank you. And recently the GAO, Government 
Accountability Office recent--issued a report a couple of 
months ago as a requirement of the last time the debt ceiling 
was increased--a report that identified duplication, 
inefficiencies in the Government. One of the areas that that 
report talked about was the volumetric ethanol excise tax 
credit. And are you familiar with that report?
    Ms. Oge. I am not.
    Mr. Gardner. OK. Then I can submit that question for the 
record then. Wanted to just follow-up a little bit to more on 
parity across the tax code when it comes to various kinds of 
alternative fuels. Is there do you believe a parity in the tax 
code when it comes to alternative fuels and if not, could you 
explain why some get more credits than others?
    Ms. Oge. Sir, that is not my area of expertise, so I cannot 
comment.
    Mr. Gardner. And I don't know if----
    Mr. Davis. I would just make one comment and that is you 
know when you talk about parity, I would say that the tax 
incentives are greatly different. For instance you mentioned 
the tax incentive for ethanol. That is a great--that incentive 
is greatly different than the $7,500 tax incentive when you buy 
an electric vehicle. So there are great differences. I don't 
know of anyone who has done a comprehensive study that looked 
at those various incentives to compare them.
    Mr. Gardner. Thank you. And Mr. Chairman, I yield back my 
time.
    Mr. Whitfield. Thank you. This time recognize the gentleman 
from Illinois, Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I apologize for being 
late. The electric mix of--in electricity generation today as I 
understand it is coal 45 percent, nuclear 20, natural gas 23, 
hydro seven, and renewable 3.6. Just to get that on the record 
because my colleague Congressman Griffith and I obviously are 
big coal supporters and it still has a major impact and it 
will. There is an expectation that electricity creates, without 
even the electric fuel debate, will increase 30 percent by 
2035. I think that is EIA's estimation. Anyone confirm that 
or----
    Mr. Gruenspecht. We are a little bit lower than that.
    Mr. Shimkus. And what is your----
    Mr. Gruenspecht. In the 20s. In the 20s.
    Mr. Shimkus. So and that is without a massive increase in 
electric vehicles?
    Mr. Gruenspecht. Right. Right.
    Mr. Shimkus. Well, at least a 20 percent increase which 
will speak to the argument of needing more generation not less 
generation. Even with efficiencies as some people would 
profess, we are going to need more generation. I would wish 
that the administration would look at empowering new power 
plants, looking at older facilities, and moving to more supply 
in this debate. The 2007 debate on the Energy Security Act is a 
curious debate because we are in a very similar position as we 
are today: high gas prices, the reality and political reality 
was we were pushing for more supply. My friends on the other 
side were not--the only way they could do it environmentally 
was go through and hope that the cellulosic science would be 
there to meet this new demand. It is not there yet. So it 
brings me the question is for EPA what about raising--there is 
a debate based upon the ethanol side, much discussion on the 
blend wall and or a second generation being considered to meet 
the next generation renewable fuel portions. What is your 
position on that?
    Ms. Oge. For 2011, there is as you may know we lower the 
volume from 250 million gallons to 6.6. But what we did not do, 
we did not lower the advance biofuel.
    Mr. Shimkus. And that is what I meant to say. Then----
    Ms. Oge. Yes, exactly. It is because today if clearly if 
you look at various sources of biodiesel we believe the 
capacity is there to make up for the difference of the 200 
million gallons of cellulosics. And I believe the second 
question that you ask has to do with the blend wall. We believe 
that the blend wall, the blend wall meaning that by 2014 time 
frame we believe 100 percent approximately of the fuel won't 
be--will contain 10 percent of ethanol. So the question then is 
how do you distribute the remaining of the renewable fuel 
mandate into the marketplace? And that is where we believe the 
E-15 it can play a----
    Mr. Shimkus. Yes, and let me reclaim my time just to get 
some other work done here. Mr. Chairman, I would like to submit 
for the record a couple letters: one from the Methanol 
Institute on the Economic Impact of the Methanol Economy On an 
Open Field Standard; also from the--from Admiral--former 
Admiral Blair who is a member of the Energy, Security, 
Leadership Council member on electric vehicle issues. Also, 
comments for the record submitted by Propel Energy, an ethanol 
company in the Bay area of California and very supportive of 
that. If I may for the record.
    Mr. Whitfield. Without objection.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Shimkus. And let me just take this time to--and if 
Eliot was here, Eliot Engel, my colleague from New York, he 
would have taken time to do this also. He is with the President 
in New York City in my understanding--led the charge on a 
debate called an Open Field Standard. I mean imagine a world 
where we have a set standard for vehicle design and people can 
drive up to a--instead of a gas station, a refueling station 
and allow commodity products to compete at the pump for the use 
of a transportation fuel. And that is what the open fuels 
standard would do whether that is fuel produced by methanol, 
cold to liquid, biofuels, crude oil, I take this time to make 
sure I put that into the record, give credit to Elliot Engel 
who has been leading this charge. I am now the key sponsor 
because of course Republicans are in charge. He allowed me to 
be the head sponsor of that legislation. It is bipartisan with 
Steve Israel and Roscoe Bartlett. The roll out is right now. 
You are lucky to be here. And I would encourage all my 
colleagues to look at that. Remember we are constrained by 
crude oil. We have to have different commodity products that 
will compete at the pump that will increase energy security and 
it is best for America. And I yield back my time.
    Mr. Whitfield. John, thank you for letting us share this 
roll out with you today. All right, that culminates our 
questions, so I want to thank the first panel for your time and 
testimony. And at this time I would like to call up the second 
panel. And on the second panel, we have Mr. James Bartis, 
Senior Policy Researcher of the Rand Corporation; Mr. Richard 
Kolodziej, President NGVAmerica; Mr. Diarmuid O'Connell, who is 
Vice President of Business Development for Tesla Motors; Mr. 
Jeffrey G. Miller, who is Chairman of the Board of the National 
Association of Convenience Stores; Mr. Michael McAdams, 
President of the Advanced Biofuels Association; Mr. Robert 
Dinneen, President and CEO Renewable Fuels Association; and Mr. 
Lucien Pugliaresi, President of the Energy Policy Research 
Foundation. So we welcome all of you to the committee. We 
appreciate your taking time to be with us. And I am going to be 
recognizing each one of your for your opening statement and you 
will be given five minutes for that. And there is a little 
device on the table that will turn red when your time is up. So 
I hope that you would focus on that as well. So at this time, 
Mr. Bartis, we will recognize you for--huh? How do we know 
that? Well, let us just go on. Go ahead, Mr. Bartis. You are 
recognized for 5 minutes.

 STATEMENTS OF JAMES T. BARTIS, SENIOR POLICY RESEARCHER, RAND 
   CORPORATION; LUCIAN PUGLIARESI, PRESIDENT, ENERGY POLICY 
 RESEARCH FOUNDATION, INC; JEFFREY G. MILLER, CHAIRMAN OF THE 
  BOARD, NATIONAL ASSOCIATION OF CONVENIENCE STORES; DIARMUID 
   O'CONNELL, VICE PRESIDENT OF BUSINESS DEVELOPMENT, TESLA 
 MOTORS; RICHARD KOLODZIEJ, PRESIDENT, NGVAMERICA; MICHAEL J. 
 MCADAMS, PRESIDENT, ADVANCED BIOFUELS ASSOCIATION; AND ROBERT 
DINNEEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENEWABLE FUELS 
                          ASSOCIATION

                  STATEMENT OF JAMES T. BARTIS

    Mr. Bartis. Mr. Chairman and distinguished members, thank 
you for inviting me to testify on the opportunities for the 
greater production and use of alternative fuels for 
transportation. My remarks today are based on Rand studies that 
cover a spectrum of alternative fuels including oil shale, coal 
derived liquids, oil sands, and biofuels. An important finding 
from this research centers on the vastness of the resource base 
from alternative fuels in the United States. The largest 
deposits of oil shale in the world are located in Western 
Colorado and Eastern Utah. The potential yield is about triple 
the oil reserves of Saudi Arabia.
    Our coal resource base is also the world's largest 
dedicating only 15 percent of recoverable coal reserves to coal 
to liquid production would yield roughly 100 billion barrels of 
liquid transportation fuels, enough to sustain 3 million 
barrels per day for more than 90 years. Our biomass resource 
base is also appreciable offering to yield over 2 million 
barrels per day of liquid fuels. And over the longer term, 
advanced research and photosynthetic approaches for alternative 
fuels production offers the prospect of even greater levels of 
sustainable production.
    Today I will be giving particular emphasis through our 
recently published congressionally mandated study on 
alternative fuels for military applications. In this research 
we examined near term alternative fuels that could substitute 
for conventional jet fuel, diesel fuel, and marine fuel. While 
our focus was on military applications, many of our findings 
also hold for the much larger civilian consumption of these 
fuels. In particular, the combined demand in the United States 
for these fuels is currently over 5 million barrels per day 
most of which is directed at transportation.
    Of the various options that we examined we found that the 
Fisher-Tropsch Method to be the most promising near term option 
for producing diesel, jet, and marine fuels in a clean and 
affordable manner. The Fisher-Tropsch Method also produces 
gasoline. The method can accept a variety of feedstocks 
including natural gas, coal, and biomass. Modern commercial 
plants are in operation but none are located in the United 
States.
    When using coal, our best available information suggests 
production would be competitive when world crude oil prices 
exceed $70 per barrel. This estimate includes the cost of 
capturing and sequestering nearly all of the carbon dioxide 
generated at the coal to liquids production facility so that 
life cycle greenhouse gas emissions would be in line with those 
of petroleum derived fuels.
    We also looked at using a combination of coal and biomass 
as the feedstock to a Fisher-Tropsch facility while again 
capturing and sequestering carbon dioxide emissions. In this 
case, production would be competitive when crude oil prices 
exceed $100 per barrel. Moreover, life cycle greenhouse gas 
emissions can be less than half of petroleum derived fuels. In 
particular, with sequestration, a feedstock consistent of a 60/
40 coal to biomass blend should yield alternative fuels with 
life cycle greenhouse gas emissions that are close to zero.
    Other nearer term sources of diesel and jet fuel are 
renewable oils. These oils can be prepared from animal fats or 
vegetable oils obtained from seed-bearing plants. Biodiesel 
from soybean oil is the most well-known of this class of fuels. 
When treated with hydrogen, these renewable oils can be 
converted to hydrocarbon fuels that are suitable for both 
military and civilian applications.
    Unfortunately the prospects for these renewable oils are 
dim. For sea oils the main problem is the low oil yield per 
acre. Consider producing 200,000 barrels per day which is only 
one percent of current U.S. oil consumption. Producing this 
amount from seed oils would require about 10 percent of the 
total crop land under cultivation in the United States. There 
are also serious issues regarding greenhouse gas emissions, 
production costs, and adverse effects on food prices. Taking 
together waste oils, animal fats, and seed oils, it is highly 
unlikely that domestic production can exceed 100,000 barrels 
per day. From a national energy policy perspective, this class 
of fuels will not contribute much.
    Our research also examined advanced alternative fuels such 
as oil shale and fuels based on algae or microbial processes. 
With regard to oil shale, most of the high grade resources are 
on federal lands. Six years ago when we published our 
examination of oil shale, we concluded that the prospects for 
development were uncertain. They remain so today.
    The key to progress lies in formulating a land access and 
incentive policy that rewards those private firms willing to 
take on the substantial risks associated with investing in 
pioneer production facilities. However, it would not be 
appropriate to develop detailed regulations that would pertain 
to full blown commercial development until more information is 
available on process performance. Algae and other microbial 
processes may yield alternative fuels without the limitations 
and adverse land use changes associated with seed oils. But 
these approaches are in the early stages of the development 
cycle.
    Large investments in research and development will be 
required before confident estimates can be made regarding 
production costs and environmental impacts. In my written 
testimony I have also highlighted the national importance of 
alternative fuels, and further discuss policy issues associated 
with gaining early commercial experience in emerging 
alternative fuel technologies. This concludes my remarks. Thank 
you.
    [The prepared statement of Mr. Bartis follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Whitfield. Thank you very much. And Mr. Pugliaresi, we 
will recognize you for your 5-minute opening statement. Be sure 
to get the microphone around so it is close----
    Mr. Pugliaresi. Thank you, Mr. Chairman.
    Mr. Whitfield [continuing]. And make sure it is turned on.

                 STATEMENT OF LUCIAN PUGLIARESI

    Mr. Pugliaresi. Chairman Whitfield, Ranking Member Rush, 
and members of the Subcommittee on Energy and Power. On behalf 
of myself and EPRINC, we welcome this opportunity to testify on 
the topic of alternative transportation fuels. I will summarize 
my key points of my testimony but submit the entire statement 
for the record.
    The Energy Policy Research Foundation is a non-profit 
organization that studies energy economics with special 
emphasis on petroleum and the development of downstream 
petroleum markets. We have been researching and publishing 
reports on all aspects of the industry since 1944.
    The Federal Government provides a range of subsidies, tax 
incentives, and regulatory mandates for multi-use of ethanol 
and other renewable fuels into the National Gasoline Pool. 
Until recently, ethanol was limited by law to a maximum of 10 
percent but as well as a specialty fuel at high levels, what we 
call EV5 or 85 percent. Under the Renewable Fuel Standard, 
volumetric requirements for ethanol increased annually 
regardless of the growth in gasoline use.
    For 2001, the renewable fuel standard requires the gasoline 
pool to achieve almost 10 percent of by volume and which is 
historically level--we have limited for conventional fuels, for 
conventional vehicles over concern about safety. So called 
obligated parties such as refiners and importers can only 
market additional volumes through greater sales of E-85. But E-
85 has met a lot of consumer resistance through poor mileage 
performance. E-85 also requires a large investment in new pumps 
and tanks. In response to concerns over market limitations of 
E-85, EPA has authorized the use of a new fuel with 15 percent 
ethanol, or E-15. It is only available for model year 2001 and 
newer cars with certain exceptions. These initiatives to 
increase the blending volumes for gasoline have been sought as 
a means to create additional market access for the mandated 
volumes of ethanol as a 10 percent volumetric level or blend 
while it is reached. Could we go to the first slide?
    [Slide]
    Domestically produced--oK well my in--domestically produced 
ethanol should have provided some modest constraint on the 
rising cost of gasoline as turmoil in the Middle East and North 
Africa sent crude prices well above $100 per barrel. Instead, 
ethanol has seen its feedstock costs more than double over the 
last 10 months and increase considerably greater than the 
rising crude prices over the same period.
    Now if we go to the second slide----
    [Slide]
    See that U.S. policy requiring ever larger volumes of 
ethanol blended into the gasoline pool is now running two 
distinct and important cost realities both of which are likely 
to contribute to an increase in the price of gasoline.
    The first is a rapidly rising cost of corn. Disappointing 
U.S. corn yields, loss of wheat crops worldwide and the 
increasing domestic and international demand for corn has 
pushed prices from $3.50 a bushel to over $7.00 a bushel in the 
last 10 months. The second problem is the volumetric mandate on 
the use of ethanol in the U.S. gasoline pool which will soon 
exceed the threshold of 10 percent by volume. We have different 
debates on when that will happen, but this is going to cause 
some serious problems because this transportation fuel sector 
will be left with a program that mandates the blending of a 
fuel regardless of cost, demand, infrastructure, or value. We 
move to the third slide.
    [Slide]
    We can see in a market free of volumetric mandates, cost 
would be the prime determinate of evaluating the appropriate 
mix of ethanol and gasoline sold at the pump. EPRINC's analysis 
shows that the volumetric ethanol mandate for the gasoline pool 
is bringing more costly product to the market, but when ethanol 
prices are converted to a gasoline energy equivalent basis, the 
wholesale price of ethanol is $3.95 a gallon. Ethanol when 
adjusted for BTU and miles per gallon equivalents sells above 
the price of premium gasoline at retail outlets. This is DOE 
data. Now if we move to the last slide?
    [Slide]
    The congressional debate over the deficit has highlighted 
concerns over the cost of ethanol subsidies now estimated at 
nearly $6 billion per year. Ethanol is highly valuable and we 
often get criticized that we don't like ethanol, but actually 
ethanol's highly valuable as an octane booster and as it 
oxygenates. If we had no subsidies, we would use a lot of 
ethanol, probably 400,000 to 500,000 barrels a day. So what we 
are getting out of the subsidy program in the mandate is the 
second increment around 400,000 barrels a day and we are paying 
a lot for that.
    It is not surprising that the volatility in the oil market 
are also present in the corn market. Corn is a globally traded 
commodity and China, the world's second largest corn producer 
has recently become a net importer of U.S. corn for the first 
time in many years. As long as both of these commodities are 
locked into a regulatory environment that strictly prohibits 
adjustments to changes in market conditions. Opportunities to 
temper the costs of market volatility through adjustments in 
the domestic fuel mix with corresponding and unnecessary cost 
increases for transportation fuels will remain limited.
    We are well aware that ethanol producers have made 
expensive capital investments in the production of conventional 
biofuels. And EPRINC is always maintained that ethanol is an 
important critical component in the production of domestic 
transportation fuels. We should not abandon this investment, 
but existing law would drive the mandate above 10 percent of 
the gasoline pool. These higher blend rates for ethanol, one, 
pose major cost on the wholesale and retail distribution 
components of the fuel sector. In addition to these primal 
risks, financial risk, we may find that he mandate has 
foreclosed more cost effective alternatives such as drop in 
fuels.
    Given the costs involved, we should consider holding the 
mandate at 10 percent until we can get a full understanding of 
the risks and costs of the full range of strategies to increase 
the volume of domestic fuels in the transportation sector. 
Thank you, Mr. Chair.
    [The prepared statement of Mr. Pugliaresi follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    Mr. Whitfield. Thank you. At this time I recognize Mr. 
Miller for his 5-minute opening statement.

                 STATEMENT OF JEFFREY G. MILLER

    Mr. Miller. Chairman Whitfield, Ranking Member Rush, 
members of the subcommittee, my name is Jeff Miller and I am 
President of Miller Oil Company headquartered in Norfolk, 
Virginia. I also currently serve as Chairman of the National 
Association of Convenience Stores or NACS. Thank you for the 
opportunity to testify today on the topic of renewable and 
alternative fuels.
    The convenience and fuel retailing industry, which sells 80 
percent of the fuel in the Nation to 117,000 outlets, has a 
unique perspective on the future of transportation fuels. Let 
me start by stating that we support the use of renewable fuels 
and are working hard to expand their use for the motoring 
public. However, we are in the customer service business and 
have to make decisions every day regarding what products to 
sell and which services to offer our customers.
    Choosing to sell a new fuel is very different than choosing 
to sell a new candy bar. As new fuels come under the market, we 
want to have a reasonable expectation that we will be able to 
generate a return on our investment and we will have the option 
to sell them while being in compliance with all laws and 
regulations. But to do this we need your assistance.
    I would like to highlight some of the issues retailers face 
when considering whether to sell a new fuel. To illustrate my 
points, I will use E-15 just as an example, but these issues 
can be applied to almost any other fuel that is being 
developed. First off is compatibility. By law, all of the 
fueling equipment I use at my stores must be listed by 
underwriter's laboratories as compatible with that liquid. If I 
use nonlisted equipment I violate OSHA regulations, tank 
insurance policies, and other regulatory requirements.
    Because UL will not recertify any existing equipment even 
if it is technically compatible with the new fuel, my only 
legal option is to replace my dispensers. This could cost me 
about $20,000 per unit or roughly $80,000 to $100,000 per store 
depending on the number of dispensers. Further, if my 
underground equipment is not listed for E-15 I would have to 
replace that as well. Once we start breaking open concrete, my 
costs could easily exceed $100,000 per site. So offering E-15 
could become very expensive.
    But if I choose to make this investment I am then faced 
with a second issue: misfueling. Under EPA's partial waiver, 
only certain engines are authorized to fuel with E-15. So how 
do I prevent the consumer from buying the wrong product? If I 
don't I could be fined or sued under the Clean Air Act or if 
using the wrong fuel causes engine problems I could be sued by 
the consumer or the word could spread that my fuel causes 
engine damage. But let's say I am willing to take this chance. 
I come to my third issue and that is long term liability 
exposure.
    What if the future of E-15 is determined defective? There 
is significant concern that such a change in the law would be 
retroactively applied to any who manufactured, distributed, 
blended, or sold the product in question. We have experience 
with this situation and it is a major concern. Now if I am 
willing to change my equipment and accept these liability risks 
I have to ask myself will my customers purchase the fuel. It is 
important to note that this is the first fuel transition in 
which no person is required to purchase the fuel, so there are 
no assurances of consumer demand.
    It is also important to remember that E-15 is approved by 
the EPA for only certain vehicles and that the auto 
manufacturers do not support this decision. So it is almost 
impossible for me to evaluate consumer demand and this creates 
a great deal of uncertainty. This leads me to what Congress can 
do to help retailers like me reach a decision that will help 
renewable fuels growth in our country. Congress can take the 
following actions to lower the cost of entry and my exposure to 
unreasonable liability.
    First, authorize an alternative method for certifying 
retail equipment. Last Congress Representatives Mike Ross and 
John Shimkus introduced H.R. 5778 which would do this. 
Secondly, insure that retailers that comply with the EPA's 
labeling regulations cannot be held liable for self service 
customer misfueling of nonapproved engines. H.R. 5778 also 
included provisions for this. Third, provide regulatory and 
legal certainty that compliance with certain laws and 
regulations will protect us from retroactive liability should 
the laws and regulations change at some time in the future. And 
finally, support the development of vehicle and infrastructure 
combatable fuels also known as drop-in fuels.
    If Congress takes these actions to lower the cost of entry 
and to remove the threat of unreasonable liability more 
retailers may be willing to take a chance and offer new 
renewable fuels. The market then will be able to determine the 
fate of the new fuels. Thank you for the opportunity to share 
my perspectives.
    [The prepared statement of Mr. Miller follows:]
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    Mr. Whitfield. Thank you very much. Mr. O'Connell, you are 
recognized for 5 minutes.

                STATEMENT OF DIARMUID O'CONNELL

    Mr. O'Connell. Thank you very much. Start again. Thank you 
very much, Mr. Chairman, distinguished members of the 
committee. It is an honor to be here as a representative of the 
electric vehicle industry, an emerging industry and of the 
leader of the technology leader in that industry Tesla Motors, 
a California based company.
    Tesla Motors was founded in 2003, 2004 by a group of 
entrepreneurs, engineers, and venture capitalists with the idea 
of creating a company to achieve the mission of catalyzing the 
market for electric vehicles. The motivation behind this 
mission was a combination of factors. One, our analysis of the 
cost of the dependence effective monopoly of oil in our 
transportation infrastructure and the fact that has as many of 
our representatives have mentioned; a serious negative 
economic, environmental, and perhaps most importantly national 
security implications, I myself having come from out of the 
national security sector to this situation.
    Also there is a fact of an absence by virtue of this 
monopoly and by virtue of the policy that is effectively 
supportive of an incumbent lack of a market or policy signal 
that we are seriously interested in approaching any of these 
advanced technology fuels or vehicles in a serious fashion. 
Also, in terms of facilitating factors is the emergence of a 
new suite of battery technologies, batteries having been the 
major gating factor for electric vehicles over the course of 
time. As the Chairman's mentioned, electric vehicles have been 
on the scene since as early as the turn of the last century and 
were a serious contender absent the emergence of a facilitating 
battery technology to be the car of the future in the early 
1900s.
    But the fact is that a new suite of lithium ion battery 
technology largely growing out of the demand for consumer--
mobile consumer electronics has made a new class of electric 
vehicles possible. Plus in terms of technology addressing such 
issues as range as well as increasingly addressing the 
important issues of economic access.
    Finally and perhaps most importantly was the suitability of 
our project to the application of the disruptive technology 
introduction model. This is the model of bringing together 
innovation, venture capital, and available bench technologies 
which has led to the emergence of just about every industry 
that we have either mentioned here today or could think of. 
Most recently in mobile technology whether it is the cell 
phone, the personal computer, or all the associate technologies 
there, but going back even further in history the fashion in 
which airline travel became a commercial reality. Or in the 
automotive sector the fashion in which safety technology such 
as airbags and antilock brakes have emerged. And that is that 
initial technology, early technology tends to be expensive. It 
is expensive because of the substantial investments that we 
make in the R&D. It is also expensive because economies of 
scale and manufacturing are not available for widespread 
deployment and thus early unit costs are low.
    So in just about all of these technologies and services 
that I have just referenced initial costs were high. It was 
effectively a luxury item or characterized as such accessible 
only to wealthy early adopters. But with commercial viability 
proven at that point, further investments are attracted to the 
project, economies of scale are increasingly achieved, but most 
importantly iteration of that technology, improvement of that 
technology is achieved. You will note that the early 
generations of this technology, the 1984 version of the cell 
phone were substantially bigger and more cumbersome, also much 
more expensive.
    Tesla Motors has made great progress over the course of 
time. Our first project was to develop an electric drive train 
that would achieve the necessary efficiency and cost profile. 
Our second project was to deploy it. And our first car, the 
Tesla Roadster, which is a vehicle which there are over 1,600 
vehicles on the road in over 30 countries. Our third project is 
to develop an electric vehicle sedan, less than half as 
expensive as the Tesla Roadster at less than $50,000 which will 
optimize the vehicle to the power train in the same fashion 
that cars optimized the early internal combustion technology 
evolved from horse carriages powered by internal combustion 
engines to more suitable platforms.
    Along the way, we have attracted serious investment 
interest and validation from the auto industry. Daimler has 
invested in our company almost $50 million, so too, Toyota. 
Both of those companies are customers for our technology. Their 
deploying our batteries and our power trains in their own EVs 
and this is helping us to achieve on an accelerated basis our 
overall goal which is to create a mass market for EVs. We are 
getting there on our own by making increasingly larger volumes 
of lower cost vehicles. But the way that we are working with 
the industry to effectively borrow their economies of scale to 
allow them to put their own vehicles on the road. And already 
on the road is the Smart under the Daimler family, the Smart EV 
in the U.S. and Europe. They are deploying an A class vehicle 
in Europe and coming next year will be the Toyota RAV4 SUV 
powered entirely by a Tesla developed and manufactured drive 
train.
    One other point I would like to make and that is with 
respect to infrastructure. In truth, electricity is in terms of 
its feedstock and as my friend Pat Davis mentioned, it is 
mixed. The ultimate flex fuel vehicle in that the grid is 
powered by diversity of historic and new technologies, those 
will only get cleaner and better over the course of time. And 
it is--the infrastructure is already in place. Mr. Chairman, 
you could plug one of our cars into the outlet behind you and 
charge that. That exits in every home in America and requires 
no investment in large scale infrastructure. Thank you very 
much.
    [The prepared statement of Mr. O'Connell follows:]
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   Mr. Whitfield. Thank you. Mr. Kolodziej, you are recognized 
for 5 minutes.

                 STATEMENT OF RICHARD KOLODZIEJ

    Mr. Kolodziej. Mr. Chairman, Mr. Rush, members of the 
committee, subcommittee, my name is Rich Kolodziej. I am 
President of NGVAmerica. We are the National Trade Association 
for vehicles that are powered by natural gas and biomethane. 
Thank you for the opportunity to be here today to discuss how 
increased use of natural gas can reduce our dependence on 
foreign oil while also reducing greenhouse gas production and 
reducing urban pollution. And we are doing all this while 
creating more jobs here at home.
    It is now clear that we have massive amount of natural gas 
right here within America's borders. The U.S. information--
Energy Information Administration, the Potential Gas Agency, 
other expert bodies have now estimated that we have up to 100 
years supply of natural gas as technology improves, that number 
is going to continue to go up.
    For petroleum, America must pay a well price which is out 
of our control. We are a price taker. But because there is no 
way to ship large quantities of natural gas off of North 
America, the supply and demand of natural gas here is set by 
prices here--is actually set to price here. So we have much 
more supply than we have demand, so natural gas prices are 
forecast to be way below oil. The question is how do we use all 
that gas? Well the market tells us that the vehicles, four 
vehicles that is the highest valued application of all natural 
gas uses. That is why we are seeing such rapid growth in the 
NGV market worldwide.
    In fact, NGVs are the fastest-growing alternative fuel, 
alternative to petroleum in the world. In 2003, we had only 
about 2.8 million NGVs globally. Today we have over 13.2 
million, and according to the forecast by the International NGV 
Association, but 2020, we are going to have 65 million vehicles 
on the world's roads.
    Most of those are smaller sedans, but for a number of 
reasons including the sheer size of America, the strategy of 
the U.S. NGV industry has been to focus on high fuel use 
fleets: trash trucks, transit buses, short haul, 18 wheelers, 
school buses, urban delivery vehicles, shuttles of all kinds, 
taxis. We estimate that last year these vehicles used about 43 
billion cubic feet of natural gas. That is the equivalent of 
320 million gallons of gasoline we did not have to import. 
However, with proper government policies, the number could 
reasonable grown to 1.25 trillion cubic feet or the equivalent 
of about 10 billion gallons within 15 years.
    Now some of this will displace gasoline, but the majority 
would displace diesel. Diesel represents about a quarter of on-
road petroleum use. While there are many options to displace 
gasoline in light duty vehicles, there are very few options to 
displace diesel in trucks and busses and other heavier 
vehicles. Of those options, natural gas can make the biggest 
impact the fastest. This is important since trucks are the 
economic lifeblood of America. Everything we buy moves by 
truck. If we reduce the cost of trucking, we reduce the cost of 
everything and that is going to benefit businesses and 
consumers alike. And NGVs can help do that.
    Right now the cost of NGVs are--the cost to buy an NGV is 
high. It is higher than gasoline and diesel. But the cost to 
operate those vehicles is less, therefore, the more miles 
driven, the faster the payback. For some fleets, the most 
intensive fuel use fleets, NGVs are economic today. But to 
expand the use of NGVs and maximize NGVs oil potential--oil 
displacement potential, we need to bring down the cost of NGVs, 
that first cost of NGVs. We have to make them more economic for 
more fleets. And that is going to happen through economies of 
scale and through a more large scale production. That is why 
the industry is so excited about the bill recently introduced 
by Mr. Sullivan, H.R. 1380, the NAT Gas Act of 2011.
    That bill would provide federal incentives for the 
production, purchase, and use of natural gas vehicles and the 
expansion of NGV fueling infrastructure. That bill which was 
introduced on April 6 as Mr. Sullivan had mentioned already has 
180 bipartisan cosponsors. It would only be in place for 5 
years. It is only a 5 year program, but during that time and 
long thereafter this would make a big impact on the number of 
NGVs for which the fleets would be found and economically 
attractive.
    This is going to accelerate the NGV use in this country 
which in turn would bring more NGV manufacturers into the 
market, increase competition, and drive down that first course 
premium. NGVs are here and now technology. We don't need any 
major technological breakthroughs. What we do need is to grow 
faster and the NAT Gas Act would help jumpstart that growth. 
Thank you for your attention.
    [The prepared statement of Mr. Kolodziej follows:]
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    Mr. Whitfield. Thank you. Mr. McAdams, you are recognized 5 
minutes.

                STATEMENT OF MICHAEL J. MCADAMS

    Mr. McAdams. Chairman Whitfield, Ranking Member Rush, and 
members of the committee, I am honored to be with you this 
morning.
    The Advance Biofuels Association represents 36 of our 
Nation's and world's leading advance biofuels companies and 
feedstock producers. Since its inception, the Association has 
advocated technology neutrality, feedstock neutrality, and 
subsidy parity. Said another way, put everyone on a level 
playing field and please do not pick a winner.
    Speaking to the focus of today's hearing, recent energy 
information data showed that we as a country use 290 billion 
gallons of various fuels products in 2010. Most of those 
gallons came in the form of gasoline, diesel, jet, marine 
fuels, and heating oils. Over 50 percent of this demand was met 
using foreign oil or imported products. Advance biofuels and 
cellulosic producers are uniquely positioned to produce fuels 
that can meet this demand while delivering more sustainable 
environmental performance.
    The Association and its members believe that all the 
various renewable and alternative fuels have an opportunity to 
make a contribution towards reducing the dependence on foreign 
oil. We urge Governments to provide stable, long term, common 
sense policies which allow everyone to compete to achieve a 
clear set of National energy objectives. Recent developments in 
the advance biofuels technologies enable our companies to make 
significant contributions in diversifying our transportation 
fuels.
    One of the most noteworthy developments in advance sector 
is the ability of many companies to manufacture gasoline, jet, 
diesel, heating oil, and crude oil from renewable resources. 
These fuels are called drop-in fuels. They are fungible in 
today's planes, trains, boats, and automobiles. They do not 
require changing current infrastructure or transportation 
fleets. Many of them are economically competitive with current 
products on the market today.
    There are some that would like you to believe that advanced 
and cellulosic biofuels are a long way off, but nothing could 
be further than the truth. These fuels are commercially being 
produced today with many more gallons on the way. In fact, 
dynamic fuels, a joint venture between Tyson Fuels of Arkansas 
and Centroleum of Oklahoman is currently producing 75 million 
gallons of renewable diesel and jet fuel. This plant makes 
diesel and jet fuels as if they were made from a traditional 
refinery out of a traditional barrel of oil.
    In addition, I am pleased to report that several advanced 
biofuels companies have gone public with great success. This is 
the private sector's money, not the Governments. GVO as a 
result of its recent $127 million offering 40 days ago has 
begun its plans to retrofit traditional corn ethanol plants to 
produce 18 million gallons of isobutanol next year. They 
further have plans to develop 350 million gallons of production 
by 2015.
    These developments would simply not be occurring if it were 
not for the vision of this committee and Congress to enact the 
RFS. Our Association and member companies strongly believe that 
the current RFS is the most important federal policy in 
supporting the development of all biofuels in this country. We 
specifically urge the committee and the Congress not to tinker 
with this statute at this time. One issue we would like to 
bring to the committee's attention today is the regulatory 
process at EPA and the certification of RIN credits.
    When Congress expanded the statue in 2007, the intent was 
to back out as many types of gallons of foreign fuel products 
as possible. Currently the EPA and their RIN certification 
process is showing a tendency to be prescriptive and narrow in 
approving some determinations for qualified pathways as well as 
qualifying some potential feedstocks. We would urge the 
Congress to remain closely engaged with the Agency on these 
determinations.
    Many are moving forward at this time and could have a 
significant chilling effect if not resolved correctly. While we 
support EPA's efforts to protect the environment and the 
existing commercial change of delivery, we encourage them to 
air on the side of bringing as many types of renewable advance 
biofuels to the market as reasonably possible.
    Additionally we need to acknowledge for the last 20 years 
our regulatory structure has regulated gasoline and ethanol and 
a number of new types of fuels will need to be harmonized with 
existing regulatory system so we are able to compete on a level 
playing field. We should not allow the regulatory elements of 
the past to be barriers of entry for these new high performance 
fuels of the future. As most of you are aware, the chief 
challenge of the advance and cellulosic industries has been 
acquiring the necessary funding to build the next generation 
facilities.
    One of the primary reasons is the disappointing lack of 
commercial funding has been our biofuels tax policy. The 
current code is inconsistent and what it rewards according to 
the molecule, the feedstock, or the process used. Advanced and 
cellulosic biofuels tax policy does not provide parity and in 
many cases the credit is not in the right form to enable the 
companies to monetize their value. The depending on the size 
and scale of the company, many in the advanced or cellulosic 
believe they would have been more successful if they had had a 
similar investment tax credit to the solar and wind industries 
rather than the production tax credits afforded under the law.
    In conclusion, a significant amount of progress has been 
made over the last two years by the advance biofuels sector. 
Much more is on the way as these fuels continue to make 
significant contributions to America's world's transportation 
pool. Thank you for the opportunity to be with you and I look 
forward to your questions.
    [The prepared statement of Mr. McAdams follows:]
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    Mr. Whitfield. Thank you. Mr. Dinneen, you are recognized 
for 5 minutes.

                  STATEMENT OF ROBERT DINNEEN

    Mr. Dinneen. Thank you, Mr. Chairman. Chairman Whitfield, 
Ranking Member Rush, members of the committee, I want to thank 
you for the opportunity to be here today. I do believe as 
others have stated that this is an incredibly important and 
timely hearing. Look, CNN yesterday had a poll of economists 
across the country and every single one of them said--suggested 
that the single most important threat to our Nation's economy 
today is the skyrocketing price of gasoline. We need to get a 
hold of this issue as many of you have noted so far this 
morning.
    But I can tell you that as a consequence of this 
committee's actions over the past several years, no matter who 
has held the gavel with the 2005 Energy Bill and the 2007 
Energy Bill, we are making some progress. As a result of that 
bill we now have 200 ethanol plants in operation across the 
country. Companies, Mr. Chairman, like Commonwealth Agrienergy 
in Kentucky. Certainly, Mr. Rush, many in Illinois, in 
Nebraska, in Kansas, in Colorado. And even, Congressman 
Griffith, we have a plant now in Virginia in Hopewell, 
Virginia, that is processing ethanol from barley, a cover crop. 
It is exactly what the renewable fuel standard was hoping to 
do. It was hoping to evolve this industry to new feedstocks and 
new technologies. It is having some success.
    As a result of this committee's work in 2005 and 2007, our 
industry is now producing some 13 billion gallons. Our industry 
is now responsible for some 400,000 jobs across this country. 
This industry is responsible for $53 billion to the gross 
domestic product. We are displacing some 445 million barrels of 
oil that would otherwise be used in the production of gasoline.
    But most importantly and critical to the debate going on 
today with respect to gasoline prices, the fact that we are 
producing 13 billion gallons, the fact that ethanol is now 
blended in 10 percent of the Nation's fuel is having a 
dramatically positive impact on gasoline prices. A report that 
was released earlier this week by Iowa State University and 
professors at the University of Wisconsin concluded that in 
2010, the blending of ethanol actually reduced consumer 
gasoline prices 89 cents a gallon. That is a savings to 
household incomes of about $800 a year. That is a meaningful 
impact and it is just going to grow as the ethanol industry and 
other biofuels continue to grow and evolve. But a couple things 
still need to happen.
    As Mr. McAdams just noted, the renewable fuel standard that 
has helped propel this industry in this fashion needs to stay 
in place as it is. You ought not be tinkering with it. I would 
suggest, however, and my testimony goes into many areas where 
the Environmental Protection Agency needs to pay a little bit 
closer attention to the statute and congressional intent in 
implementing this program. There are a number of areas where 
they have hampered the continued development and evolution of 
biofuels in the implementation of the renewable fuel standard. 
And my testimony goes into many--I will just maybe mention one.
    The process by which the Agency approves new feedstock and 
new pathways is extraordinarily cumbersome and limiting and it 
is keeping new fuels from gaining access to the marketplace. In 
addition to that, though, we have to find a way to get through 
the blend wall. If the 36-billion-gallon renewable fuel 
standard requirement is going to be met, we have to blend more 
than 10 percent ethanol into gasoline. Now EPA has made some 
useful steps in the right direction by allowing E-15 for 2001 
in newer vehicles, and I applaud them for that. But quite 
frankly by placating the market in the way that they have, by 
only making it available to those newer vehicles and not making 
it available to consumers that have an older vehicle, they are 
causing issues with the implementation of that.
    We support efforts and legislation that would address some 
of the issues that marketers have brought to bear on this 
issue. We do need to find a way to the--assure that the 
liability and the implementation issues that the marketers have 
raised are addressed.
    We supported in the last Congress H.R. 5778. I look forward 
to that being introduced again, but ultimately we need to get 
beyond just the blend market anyway. We need to be utilizing 
some of these biofuels and alternative fuel markets as E-85. 
And so we are very supportive of the legislation that 
Congressman Shimkus introduced yesterday, H.R. 1687, the Open 
Fuel Standard. That will empower consumers to make the choices 
that are best for them. Look, every one of you today has talked 
about our desperate energy situation, the need to have more 
energy choices. We need to stop demonizing domestic energy 
supplies no matter where they are whether it is coal or corn-
based ethanol. We need to be empowering consumers to make the 
choices that are best for them. Things like the Open Fuel 
Standard would do that. Things like making sure the RFS is 
implemented as Congress intended will do that. But the 
inexorable march toward more domestic renewable fuels like 
ethanol, like cellulosic ethanol, like other advanced biofuels, 
has got to continue. It is too important for our Nation's 
economy, and energy security. Thank you.
    [The prepared statement of Mr. Dinneen follows:]
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    Mr. Whitfield. Thank you, and thank all of you for your 
testimony. We have four votes on the House floor and 
unfortunately one of them is a Motion to Recommit in which it 
is not only a 10-minute debate on each side, but also 15 
minutes. So I am just--I am going to go on and ask my 
questions. We will get you, Mr. Rush, and maybe we won't use 
all of our time and try to get as many in as we can. And then 
we will decide what we are going to do. But, Mr. Dinneen had 
indicated that the renewable fuel standard hadn't reduced the 
price of fuel by 89 cents a gallon. And I think in your 
testimony, Mr. Pugliaresi, you had indicated that the renewable 
fuel standard had actually increased the cost. Is that correct?
    Mr. Pugliaresi. Yes, I mean, we can -- talking the blend 
wall provides that such a threat. It is really crossing the 
blend wall is what the major problem is. I can explain while I 
think that Mr. Dinneen got his numbers, they removed, their 
study removes all ethanol from the gasoline supply. Ethanol has 
a value, a very high value at small volumes, three to five 
percent because it boosts octane and then it provides an oxygenator. After five percent in the gasoline pool its value 
is less than gasoline because it has 30, 35 less BTUs. So the 
real question is what is the cost of the fuel? And when corn 
prices go up the price of the fuel goes up. And so when we have 
a mandate you force that into the system even if they are a 
competitive environment you wouldn't call for that. You could 
see conditions in which people would want blended or 10 
percent, just depending on relative prices. But in the prices 
of corn, the feedstock goes way up, we have got a problem.
    Mr. Whitfield. Yes.
    Mr. Dinneen. Could I just----
    Mr. Whitfield. Yes.
    Mr. Dinneen [continuing]. Clarify?
    Mr. Whitfield. Yes.
    Mr. Dinneen. This was not Mr. Dinneen's numbers. This was a 
study done by Iowa State University and the University of 
Wisconsin.
    Mr. Whitfield. OK.
    Mr. Dinneen. And you know really what they were looking at 
was ethanol today. We are more than a dollar cheaper than 
gasoline at the rack and just by the fact that we are 13 clean 
gallons of the U.S. motor fuel market we are having a downward 
pressure on gasoline prices.
    Mr. Whitfield. OK.
    Mr. Dinneen. And they concluded 89 cents benefit.
    Mr. Whitfield. Mr. Miller, I really appreciated your points 
because renewable fuels is good for farmers, certainly good for 
a lot of people in this country and it helps us become less 
dependent. But it sounds like it presents a lot of just 
practical problems for the retailer who is trying to get it out 
to the consumer. And do you feel like that most convenience 
store owners around the country have this same experience that 
you have?
    Mr. Miller. Yes, sir. I think the issue for us you know is 
the equipment incompatibility with the higher blend of ethanol.
    Mr. Whitfield. So if it is certified for EPA-10 it cannot 
be recertified for EPA-15 that is on equipment?
    Mr. Miller. The certification process now that we go by is 
under writers laboratories and they will not go backwards. They 
will only certify equipment going forward which was why a 
provision was put in the bill last Congress about establishing 
a method for certifying older equipment, because some of the 
older equipment may work. But we don't have a method of getting 
it certified so therefore we would be out of compliance.
    Mr. Whitfield. Dr. Bartis, the Fisher-Tropsch's technology, 
it is my understanding that they will not license it for use in 
the United States. Is that true or not true?
    Mr. Bartis. That is not true.
    Mr. Whitfield. Not true. OK. All right, thank you. That was 
easy.
    Mr. Bartis. Some of my members are planning to use it.
    Mr. Whitfield. OK. Mr. O'Connell, in your company with 
these electric cars, I know they are quite expensive, but it 
sounds like you are obviously doing very well with it. And 
right now how far can the car go if it is fully charged?
    Mr. O'Connell. We saw our first generation Tesla Roadster 
had the ability--has the ability to drive at the EPA of--using 
EPA roles, 244 miles on a single charge. They have been driven 
in demonstrations over 300 miles. Our next generation sedan--so 
that's sports car, two-seater, nice weekend car. The sedan, 
five plus two seating so a regular everyday driver will have 
the ability to drive up to 300 miles on a single charge.
    Mr. Whitfield. OK. Thank you. Mr. Rush, you are recognized.
    Mr. Rush. Thank you, Mr. Chairman. I--Mr. Dinneen, your 
passion is certainly commendable. I am from a corn state--
ethanol-producing state and I just want to ask you and maybe I 
will ask this of Mr. Pugliaresi also. I am sorry if I am 
mispronouncing your name. Please accept my apology. But it 
seems to me that the most striking arguments against the 
ethanol is impact on overall food supply. Can you address that, 
Mr. Pugliaresi? If you could also address those issues? What do 
you think about that argument?
    Mr. Dinneen. Thank you for giving me the opportunity to 
address that issue. With 5 minutes it is a little bit hard to 
get everything in and I certainly wanted to address that 
because it has been mentioned so far here today. Look, ethanol 
is absolutely not driving crude price inflation today. What is? 
It is the skyrocketing price of gasoline. It impacts everything 
from the fertilizer the farm utilizes to the diesel fuel to get 
the product to the stores, to the packaging that is used to 
package the fuels, to the marketing. I mean, petroleum drives 
all of our economy today. So that is the single most important 
impact.
    The second might be the speculation in the marketplace that 
is going on today. I mean, it has been a phenomenon just really 
over the past five or six years, but you know hedge funds today 
with long positions on grain supplies control more corn 
ethanol--I am sorry, more corn that does the entire ethanol 
industry would utilize in the year. So the role that 
speculators is having an incredibly important role in this.
    But at the end of the day, Congressman, we are just 
utilizing the starch in the processing of corn. All of the 
protein, all of the vitamins, the feed value of the corn is 
retained and is then used in livestock and poultry markets 
across this country. We have produced some 36 million tons of 
feed products last year; enough feed to feed every cattle that 
is fed on a feed lot. So this is not a food versus fuel 
industry. This is a food and feed industry and people need to 
take a step back, leave the hyperbolic scaremongering aside and 
recognize that the industry is continuing to grow, it is 
continuing to evolve, and we need it if we are ever going to 
get a handle on skyrocketing prices of energy.
    Mr. Pugliaresi. Congressman Rush, I think the issue is not 
really--you can talk to the Department of Agriculture, the long 
run--we can produce a log more corn at relatively low cost. It 
is when we get into these situations in which there is a lot of 
volatility in the market that the producers aren't able to 
adjust their fuel mix to deliver the product at the lowest 
possible cost. So we put this--it is the mandate where we have 
the problem. The mandate says we don't care what the cost of 
ethanol is, you have to use it. And what we really need is a 
lot more flexibility so that when the cost of one feedstock 
goes up producers can alter their mix to deliver the product at 
the lowest possible costs to the consumer.
    Mr. Rush. Thank you so much. Mr. Kolodziej--I am sorry. Are 
you familiar with the administration's initiative to green the 
fleet? Yes, are you familiar with the administration's 
initiative to green our fleet?
    Mr. Kolodziej. Green the federal fleet?
    Mr. Rush. Right.
    Mr. Kolodziej. Yes.
    Mr. Rush. OK. What role could natural gas play an advance 
in that objective of using more Government owned vehicles that 
run on alternative and more efficient fuels?
    Mr. Kolodziej. Well, it is a--just like with all the 
alternatives, if the Federal Government moves to alternative 
fuels you are going to use less fuel. Natural gas has the 
benefit of being also less expensive, significantly less 
expensive so that you would help reduce the cost of operating 
those vehicles especially in the bigger vehicles. I mean, in 
the Federal Government has a lot of light duty fleets; you know 
vans, pickups, sedans. But they have a number of--a significant 
number of larger vehicles where the option is diesel and we are 
the best alternative to that.
    Mr. Rush. Mr. Chairman, this is the time I am going to 
yield back my time.
    Mr. Whitfield. Thank you. Mr. Pompeo, you are recognized.
    Mr. Pompeo. Great. Thank you. I will try to do this in less 
than 5 minutes so we can get on our way. I want to ask Mr. 
O'Connell, Kolodziej--we get you pronounced right?
    Mr. Kolodziej. Yes.
    Mr. Pompeo. I get mine pronounced wrong all the time, too, 
so----
    Mr. Kolodziej. I know.
    Mr. Pompeo [continuing]. And Mr. McAdams, I heard each of 
your three testimonies they sounded eerily similar. Each of you 
has got industries that have made technological progress. Each 
of you has got vehicles that are in production phase. Each of 
you believe that you have got the low cost future technology. 
You should know that you are the three of 12 industries that 
have been in my office in 100 days to tell me that you have 
provided the great next American energy solution. I have heard 
from 12 different industries. I wish you would go to the 
capital markets and not Washington, D.C. for your solutions. I 
want to ask each of you, this is a yes or no--are you prepared 
for your personal tax dollars to go to the other two guys to 
support the tax credits and subsidies that they are looking 
for?
    Mr. Kolodziej. Yes.
    Mr. McAdams. Absolutely.
    Mr. O'Connell. Yes, sir.
    Mr. Pompeo. So we should subsidize all 12? So everybody who 
comes to my office with a great energy solution, the taxpayers 
should underwrite each and every one of those industries?
    Mr. Kolodziej. No, we should look at--I would suggest is 
look at each technology on its own. And with respect to natural 
gas vehicles, I can tell you that that is one of the reasons we 
have 65 million--we will have 65 million natural gas vehicles 
on the road eventually in 2020. We have 13 million now is 
because primarily because Governments are supporting that 
activity to get oil out of the market. There is very few--and 
again there is very few options with respect to diesel 
vehicles. And if you want--if the goal of the Federal 
Government is to reduce independence on foreign oil and diesel 
is one of the problems, natural gas has to be one of the 
alternatives.
    Mr. O'Connell. And let me expand by giving you the 
businessman's answer on this. If you don't believe that there 
is a moral hazard in the cost of gasoline, if you don't believe 
the cost of national security and protecting supply lines, if 
you don't believe that there are subsidies in that I can't 
convince you of anything. What I would suggest is that if the 
Federal Government or the decision makers in this city decide 
that we are going to move away from gasoline, that the best 
strategy would be that of an investor which is a portfolio 
strategy. Now I believe I have got the best--the best solution. 
I will fight it out on those terms both against the incumbents 
as well as against the new entrance, but I think that the best 
strategy for the investor of the Federal Government if they 
decide to go that way is a strategy of variety.
    Mr. Pompeo. I agree. I--let me reclaim my time. We will get 
out of here. I agree. The best portfolio strategy is exactly 
right and the best portfolio strategy is to not invest in any 
of them. It creates an infinite number of possible solutions 
and outcomes where the best technology will advance. And I 
happen to have industries that I think are closest, too. I 
happen to think natural gas is the place where we are very, 
very likely to get there, but just one guy and I am afraid I 
may just not be smart enough to get it right. So my inclination 
is just very, very different. And so with that I will yield 
back my time.
    Mr. Whitfield. OK. Thank you. I want to thank the panel 
very much. We have certainly looked at all of your testimony. 
We appreciate you presenting it today. I know that there were a 
lot of other questions, but because of this sort of erratic 
schedule on today particularly I am not going ask you all to 
stay around for another hour and half or so. So we are going to 
keep the record open for 10 days for additional questions to 
the panelists and with that we look forward to working with all 
of you as we continue our efforts to solve the problems facing 
our country in relation to transportation and if there is 
anything the committee can do to be of assistance to any of 
you, please let us know. And with that we will adjourn the 
hearing. Thank you very much.
    [Whereupon, at 1:00 p.m., the subcommittee was adjourned.]
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