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



                  CONFLICTS AND UNINTENDED CONSEQUENCES
                        OF MOTOR FUEL STANDARDS

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

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND
                              ENVIRONMENT

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               ----------                              

                      WEDNESDAY, NOVEMBER 2, 2011

                               ----------                              

                           Serial No. 112-49

                               ----------                              

 Printed for the use of the Committee on Science, Space, and Technology
















                 CONFLICTS AND UNINTENDED CONSEQUENCES
                        OF MOTOR FUEL STANDARDS

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

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND
                              ENVIRONMENT

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                      WEDNESDAY, NOVEMBER 2, 2011

                               __________

                           Serial No. 112-49

                               __________

 Printed for the use of the Committee on Science, Space, and Technology






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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois               GABRIELLE GIFFORDS, Arizona
W. TODD AKIN, Missouri               DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              MARCIA L. FUDGE, Ohio
MICHAEL T. McCAUL, Texas             BEN R. LUJAN, New Mexico
PAUL C. BROUN, Georgia               PAUL D. TONKO, New York
SANDY ADAMS, Florida                 JERRY McNERNEY, California
BENJAMIN QUAYLE, Arizona             JOHN P. SARBANES, Maryland
CHARLES J. ``CHUCK'' FLEISCHMANN,    TERRI A. SEWELL, Alabama
    Tennessee                        FREDERICA S. WILSON, Florida
E. SCOTT RIGELL, Virginia            HANSEN CLARKE, Michigan
STEVEN M. PALAZZO, Mississippi
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

                 Subcommittee on Energy and Environment

                   HON. ANDY HARRIS, Maryland, Chair
DANA ROHRABACHER, California         BRAD MILLER, North Carolina
ROSCOE G. BARTLETT, Maryland         LYNN C. WOOLSEY, California
FRANK D. LUCAS, Oklahoma             BEN R. LUJAN, New Mexico
JUDY BIGGERT, Illinois               PAUL D. TONKO, New York
W. TODD AKIN, Missouri               ZOE LOFGREN, California
RANDY NEUGEBAUER, Texas              JERRY McNERNEY, California
PAUL C. BROUN, Georgia                   
CHARLES J. ``CHUCK'' FLEISCHMANN,        
    Tennessee                            
RALPH M. HALL, Texas                 EDDIE BERNICE JOHNSON, Texas














                            C O N T E N T S

                      Wednesday, November 2, 2011

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Andy Harris, Chairman, Subcommittee 
  on Energy and Environment, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     8
    Written Statement............................................     9

Statement by Representative Brad Miller, Ranking Minority Member, 
  Subcommittee on Energy and Environment, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........    10
    Written Statement............................................    11


                               Witnesses:

Mr. Brendan Williams, Senior Director of Advocacy, National 
  Petrochemical and Refiners' Association
    Oral Statement...............................................    13
    Written Statement............................................    14

Dr. Ingrid Burke, Director of the Haub School and Ruckelshaus 
  Institute of Environment and National Resources, University of 
  Wyoming; CoChair, National Research Council Committee on 
  Economic and Environmental Impacts of Increasing Biofuels 
  Production
    Oral Statement...............................................    20
    Written Statement............................................    22

Ms. Margo T. Oge, Director of the Office of Transportation and 
  Air Quality, EPA
    Oral Statement...............................................    24
    Written Statement............................................    25

Dr. Jay Kesan, Professor and H. Ross and Helen Workman Research 
  Scholar and Program Leader, Biofuel Law and Regulation Program, 
  Energy Biosciences Institute, University of Illinois College of 
  Law
    Oral Statement...............................................    29
    Written Statement............................................    31

Mr. Bob Greco, Group Director for Downstream and Industry 
  Operations, American Petroleum Institute
    Oral Statement...............................................    35
    Written Statement............................................    36

Mr. David Hilbert, Thermodynamic Development Engineer, Mercury 
  Marine
    Oral Statement...............................................    38
    Written Statement............................................    40

Mr. Jack Huttner, Executive Vice President, Commercial and Public 
  Affairs, Gevo, Incorporated
    Oral Statement...............................................    41
    Written Statement............................................    43

Discussion
  ...............................................................    45

             Appendix 1: Answers to Post-Hearing Questions

Mr. Brendan Williams, Senior Director of Advocacy, National 
  Petrochemical and Refiners' Association........................    58

Dr. Ingrid Burke, Director of the Haub School and Ruckelshaus 
  Institute of Environment and National Resources, University of 
  Wyoming; CoChair, National Research Council Committee on 
  Economic and Environmental Impacts of Increasing Biofuels 
  Production.....................................................    61

Ms. Margo T. Oge, Director of the Office of Transportation and 
  Air Quality, EPA...............................................    65

Dr. Jay Kesan, Professor and H. Ross and Helen Workman Research 
  Scholar and Program Leader, Biofuel Law and Regulation Program, 
  Energy Biosciences Institute, University of Illinois College of 
  Law............................................................    73

Mr. Bob Greco, Group Director for Downstream and Industry 
  Operations, American Petroleum Institute.......................    80

Mr. David Hilbert, Thermodynamic Development Engineer, Mercury 
  Marine.........................................................    83

Mr. Jack Huttner, Executive Vice President, Commercial and Public 
  Affairs, Gevo, Incorporated....................................    87

             Appendix 2: Additional Material for the Record

Letter to Chairman Andy Harris from Dr. Virginia H. Dale, Member, 
  National Academies Biofuels Panel..............................    95

Letter to Honorable Lisa P. Jackson, Adminstrator,Environmental 
  Protection Agency, and White Paper, from Mitch Bainwol, 
  President and CEO, Alliance of Automobile Manufacturers........    97

Letter to Honorable Lisa P. Jackson, Adminstrator,Environmental 
  Protection Agency, from Michael J. Stanton, President and CEO, 
  Association of Global Automakers, Inc..........................   106

Letters Submitted to Honorable Lisa P. Jackson, Adminstrator, 
  Environmental Protection Agency, from NESCHAUM, Ozone Transport 
  Commission, and NACAA..........................................   109

Slide Presentation from Mr. David Hilbert, Thermodynamic 
  Development Engineer, Mercury Marine...........................   115

Presentation from Mr. David Hilbert, Thermodynamic Development 
  Engineer, Mercury Marine.......................................   123

Gevo White Paper from the Testimony of Mr. Jack Huttner, 
  Executive Vice President, Commercial and Public Affairs, Gevo, 
  Incorporated...................................................   178

Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP 
  Gasoline, Prepared for the American Petroleum Institute, July 
  2011, by Baker and O'Brien Incorporated........................   194

Letters from Autobile Manufacturers to Honorable Lisa Jackson, 
  Administrator, Environmental Protection Agency.................   213

Letters to Representative F. James Sensenbrenner, Jr., from 
  Briggs & Stratton, Subaru, General Motors, and Mercury Marine..   246

Association of International Automobile Manufacturers, Inc: 
  Response to EPA Decision to Approve E15 Ethanol Fuel for 2001-
  2006 MY Vehicles...............................................   264

National Research Council of the National Academies: Renewable 
  Fuel Standard: Potential Economic and Environmental Effects of 
  U.S. Biofuel Policy............................................   266

Letter from Chairman Ralph M. Hall to Honorable Lisa Jackson, 
  Administrator, Environmental Protection Agency.................   296

Letter to Chairman Ralph M. Hall from Honorable Gina McCarthy, 
  Assistant Administrator, Environmental Protection Agency.......   300

 
                 CONFLICTS AND UNINTENDED CONSEQUENCES
                        OF MOTOR FUEL STANDARDS

                              ----------                              


                      WEDNESDAY, NOVEMBER 2, 2011

                  House of Representatives,
                    Subcommittee on Energy and Environment,
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 2:38 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Andy 
Harris [Chairman of the Subcommittee] presiding.



                            hearing charter

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                     U.S. HOUSE OF REPRESENTATIVES

                Conflicts and Unintended Consequences of

                          Motor Fuel Standards

                      wednesday, november 2, 2011
                          2:00 p.m.--4:00 p.m.
                   2318 rayburn house office building

Purpose

    On Wednesday, November 2, 2011, the Subcommittee on Energy and 
Environment of the Committee on Science, Space, and Technology will 
hold a hearing to examine motor fuel standards currently in place at 
the federal level and under consideration at the federal or State 
level; assess the scientific foundation for such standards; explore the 
inherent conflicts and unintended consequences of such standards; and 
question whether or not conflicts exist within the standards and the 
consequences of such effect the fungibility of, safe use of, and 
affordability of the United States motor fuel supply.

Witnesses

      Mr. Brendan Williams, Senior Director of Advocacy, 
National Petrochemical & Refiners Association.

      Dr. Ingrid Burke, Director, Haub School and Ruckelshaus 
Institute of Environment and Natural Resources, University of Wyoming, 
and Co-Chair, National Research Council Committee on Economic and 
Environmental Impacts of Increasing Biofuels Production.

      Ms. Margo T. Oge, Director, Office of Transportation and 
Air Quality, U.S. Environmental Protection Agency.

      Dr. Jay Kesan, Professor and H. Ross & Helen Workman 
Research Scholar and Program leader of the Biofuel Law & Regulation 
Program, Energy Biosciences Institute, University of Illinois College 
of Law.

      Mr. Bob Greco, Group Director, Downstream and Industry 
Operations, American Petroleum Institute.

      Mr. David Hilbert, Thermodynamic Development Engineer, 
Mercury Marine.

      Mr. Jack Huttner, Executive Vice President of Commercial 
and Public Affairs, Gevo, Inc.

Background

    The Clean Air Act Amendments (CAAA) of 1970, 1977, and 1990 
provided a number of regulatory tools to the EPA to reduce air 
pollution across the U.S. These tools can be divided into two types of 
approaches: ambient air quality standards and technology standards. 
Each approach attempts to address difficulties in attaining air quality 
improvements in a variety of ways, utilizing regulatory mechanisms to 
focus on stationary and mobile sources, pollution that travels across 
state lines, and technology limitations.

National Ambient Air Quality Standards

    The regulatory scheme established by the CAAA of 1970 was based 
primarily on the concept of nationwide air quality goals and the 
development of individual State plans to meet those goals. EPA has 
identified six ``criteria pollutants'' for National Ambient Air Quality 
Standards (NAAQS): sulfur dioxide (SO2), particulate matter 
(PM), \1\ nitrogen oxides (NO2), carbon monoxide (CO), ozone 
(O2), and lead (Pb). For each of these pollutants, EPA has 
set a primary standard at a level designed to protect the public health 
within an ``adequate margin of safety.'' In addition, the statute 
allows EPA to set a secondary NAAQS to protect public welfare. At this 
point, EPA has not set secondary standards at different levels than the 
primary standards.
---------------------------------------------------------------------------
    \1\  For the first time, during the 1997 revision of the PM NAAQS, 
EPA established separate standards for fine particulate matter (smaller 
than 2.5 micrometers or PM2) and coarse particulate matter 
(smaller than 10 micrometers or PM2).
---------------------------------------------------------------------------
    The standards themselves are not directly enforceable. Rather, 
NAAQS establish ceilings for concentrations of criteria pollutants in 
ambient air. States are required to develop their own State 
Implementation Plans (SIPs) that outline source-specific emission 
limitations (either stationary or mobile sources) in which the NAAQS 
will be ``attained'' or ``maintained.'' SIPs must be approved by EPA. 
If EPA determines that a SIP will not be able to attain or maintain the 
NAAQS concentrations, EPA can require States to abide by a Federal 
Implementation Plan (FIP) until such time that the State develops an 
approved SIP.

Mobile Source Controls in the Clean Air Act

    Title I of the CAAA directs the EPA to set NAAQS and standards for 
other harmful air pollutants and focuses on reducing pollution from 
stationary sources such as coal-fired power plants, refineries, and 
factories. However, emissions reductions from these sources are 
typically not sufficient for States to achieve the goals laid out in 
their SIPs, so additional tools are needed. Title II of the CAAA 
provides a framework for achieving further emissions reductions through 
regulation of mobile sources. Although separate titles, changes to 
Title I automatically impact implementation of Title II, and vice 
versa. For example, if EPA sets a NAAQS at a more stringent level using 
the authority laid out in Title I, the tightened requirements apply to 
mobile sources under Title II.
    Mobile Source regulation under the Clean Air Act targets engines 
and the fuel used to power those engines. The Clean Air Act outlines 
categories of engines: on road, those used in the Nation's light duty 
and heavy duty vehicle fleet, and off road, those engines used in 
locomotives, aircraft, recreational vehicles such as boats and jet 
skis, as well as construction and farm equipment, lawnmowers, and 
chainsaws. On the fuel side of the equation, the Act provides for the 
regulation of not only tailpipe emissions but also evaporative 
emissions from motor fuels.

California Waiver

    Unique in Title II of the CAA is what is often referred to as the 
California waiver, Section 209(b), which provides that the 
Administrator may waive the prohibition against a State adopting or 
enforcing any standard relating to the control of emissions from new 
motor vehicles or new motor vehicle engines as long as the State 
standards are at least as protective of public health and welfare as 
the applicable federal standard. In practice, this permitted California 
to continue to adopt more stringent standards than the rest of the 
country. Given the State's economic size and market share, California 
regulations tend to influence national standards. For example, CAFE 
standards negotiated in 2009 included EPA, the Department of 
Transportation, California regulators, and the auto industry.

Tailpipe Emissions

    The 1990 CAAA expanded EPA's authority so as to require reductions 
of emissions previously ignored, including evaporative and refueling 
emissions, cold temperature emissions and air toxics. The amendments 
outlined new tailpipe emissions standards for light duty cars and 
trucks (Tier I) and authorized EPA to set more stringent standards down 
the road (Tier II). Tier II standards phased in beginning with the 
model year 2004, and attempted to be fuel neutral. Tier II targeted the 
refining process as well, requiring refiners to reduce the sulfur 
content in gasoline to 30 parts per million (ppm). This requirement was 
necessitated by States needing to meet more stringent revised ozone and 
particulate matter (PM) standards.

Fuel Specifications

    Section 211(f) of the CAA prohibits the introduction of a new fuel 
into commerce unless that fuel is certified to be ``substantially 
similar'' to an existing fuel on the market. Under the Act, EPA may 
waive the prohibition if the manufacturer of the fuel proves the new 
fuel or fuel additive (or concentration thereof) will not cause or 
contribute to a vehicle's failure to meet existing emissions standards.
    In the 1990 amendments, Congress sought to address the problem 
summertime ozone increases, by creating the Reformulated Gasoline (RFG) 
Program. The RFG Program required that gasoline sold in certain areas 
(starting with the nine largest metropolitan areas with the most severe 
summertime ozone levels and other nonattainment areas that opt into the 
program) be reformulated to reduce emissions of toxics and ozone 
precursors including volatile organic compounds (VOCs). VOCs are 
released in part due to the evaporative nature of gasoline. In order to 
make gasoline cleaner burning, the Act, as part of the RFG program, 
specified that RFG include two percent by weight oxygen content. The 
oxygenate requirement was initially met by adding the fuel additive 
MTBE to gasoline, as ethanol when used as an oxygenate introduced 
additional volatility, thereby increasing evaporative emissions. The 
Energy Policy Act of 2005, however, eliminated the oxygenate 
requirement for the RFG program as the Renewable Fuel Standard (RFS) 
became the primary driver of gasoline content requirements.
    The standard approach used to measure gasoline volatility is in 
pounds per square inch (psi) of Reid Vapor Pressure (RVP). The higher 
the RVP, the higher the fuel's volatility or tendency to evaporate. The 
gasoline standard ranges from 7.0 psi to 9.0 psi for the summer months. 
Since as mentioned above, ethanol, increases the volatility of 
gasoline, EPA provided a 1.0 psi (one-pound waiver) for gasoline 
containing 10 percent ethanol.

Boutique Fuels

    Under Section 211(c), the EPA has approved requests for some States 
to adopt fuel standards that are more stringent than those required 
under EPA's RFG program. These fuels, often called boutique fuels, are 
produced for a specific geographic area in order to help States achieve 
their NAAQS compliance. Boutique fuels produced for one area may not 
satisfy requirements in another area. The Energy Policy Act of 2005 
sought to address the proliferation of boutique fuels by limiting their 
number.

The Renewable Fuel Standard

    The Energy Policy Act of 2005 (EPAct05) established in law a 
renewable fuel standard (RFS). It required that four billion gallons of 
renewable fuel be used in the national fuel mix by 2006, rising to 7.5 
billion gallons by 2012. The Energy Independence and Security Act of 
2007 (EISA) greatly expanded the RFS (RFS2). EISA increased the volume 
of renewable fuel to be used in the U.S. to 36 billion gallons by 2022. 
Furthermore, in order to promote the use of advanced biofuels, the 
amount of corn-based ethanol to be used in meeting the RFS2 was capped 
at 15 billion gallons. In 2010, the United States consumed 
approximately 13.2 billion gallons of corn-based ethanol. RFS2 created 
four categories of biofuels:

      Total renewable fuels is the loosest definition, with the 
only requirement that the biofuel have a lifecycle greenhouse gas (GHG) 
emission profile that is 20% below the estimated lifecycle GHG emission 
profile of traditional gasoline. Corn-based ethanol qualifies in this 
category.

      Advanced biofuels must reduce lifecycle GHG emissions by 
50% compared with traditional gasoline. Corn-based ethanol does not 
qualify for this category, but ethanol derived from sugarcane 
(Brazilian ethanol) does.

      Cellulosic and agricultural waste-based biofuels must 
reduced lifecycle GHG emissions by 60% compared with traditional 
gasoline. These renewable fuels must be derived from cellulose.

      Biomass-based biodiesel must reduce lifecycle GHG 
emissions by 50% compared with traditional diesel fuel. Qualifying 
fuels are any diesel made from biomass feedstocks.

    RFS2 nests the requirements for the advanced biofuels. For example, 
in 2022, the RFS mandates the use of 36 billion gallons of biofuel 
(Table 1). However, only 15 billion can be from corn-based ethanol. The 
remaining 21 billion must come from advanced biofuels. Of the 21 
billion, 16 billion must come from cellulosic, at least one billion 
from biodiesel, and four billion of unspecified other advanced 
biofuels.
    EPA has the authority to reduce or waive the RFS requirements, in 
whole or in part, based on the availability of domestic supply. For 
example, in February 2010, EPA waived the 2010 cellulosic requirement 
of 100 million gallons to 6.5 million gallons, and in November 2010, 
EPA waived the 250 million gallon cellulosic requirement for 2011 to 
6.6 million gallons. Even if the adjusted volume of cellulosic biofuel 
is not actually produced, the obligated parties (including refiners) 
are still required to buy credits to satisfy the adjusted amount.




Unintended Consequences and Potential Conflicts

E15

    As a result of approaching the ethanol ``blend wall'' of 10 percent 
(E10) and the increasing volumes required by the RFS, EPA, prompted by 
an application by Growth Energy in March of 2009, has recently 
permitted the use of intermediate ethanol blends (up to E15) in some 
vehicles. \5\ Despite technical concerns involving emissions, 
reliability, infrastructure, and liability being raised by a diverse 
coalition of stakeholders, in October 2010 and January 2011, EPA 
partially approved waivers for the use of E15 in model year 2001 and 
newer light-duty motor vehicles. In approving the waiver, EPA was 
required by Section 211(f) of the CAAA to determine first that E15 
would ``not cause or contribute to a failure of any emission control 
device or system.'' In making the determination, the Administrator 
relied almost exclusively on a set of tests conducted by the Department 
of Energy in 2009 and 2010.
---------------------------------------------------------------------------
    \5\  For more background information on E15, see the Subcommittee's 
July 7 hearing, ``Hitting the Ethanol Blend Wall: Examining the Science 
on E15,'' http://science.house.gov/hearing/energy-and-environment-
hearing-science-e15.
---------------------------------------------------------------------------
    In June, EPA mandated a new label to be placed on service station 
fuel pumps when stations choose to sell E15 to ``help reduce the 
potential for vehicles, engines, and equipment not covered by the 
partial waiver decisions to be misfueled with E15.''

Tier 3

    EPA has signaled its intentions to move forward later this year 
with so-called ``Tier 3'' standards for light-vehicle emissions and 
fuels. This forthcoming action, which would strengthen limits on 
gasoline vapor pressure and sulfur content even further than the 
current Tier 2 standard, is prompted by the expanded use of renewable 
fuels under the RFS and the likely expansion of ethanol consumption 
resulting from the approval of E15. There are several elements of note 
to this Tier 3 rulemaking:

      Section 211(v) of the CAA requires EPA to first conduct 
and complete an ``anti-backsliding'' study to determine if the RFS will 
``adversely impact air quality.'' The study was required to be 
completed 18 months after enactment of the 2007 EISA legislation, but 
it remains unfinished.

      An analysis conducted earlier this year suggests that 
Tier 3 standards would result in negative economic outcomes, including 
the closure of up to seven refineries and gasoline price increases of 
up to 25 cents per gallon, as well as increased energy use and 
greenhouse gas emissions in order to comply. \6\
---------------------------------------------------------------------------
    \6\  Baker & O'Brien, Inc., ``Potential Supply and Cost Impacts of 
Lower Sulfur, Lower RVP Gasoline,'' July 2011, http://www.api.org/
Newsroom/upload/
110715-LowerSulfer-LowerRVP-Final.pdf.

      As a result of the predicted shift by automakers toward 
direct fuel-injection systems in order to comply with EPA greenhouse 
gas emissions standards, EPA's Tier 3 rulemaking appears poised to 
tighten vehicle emissions standards as well, including a first-ever 
particulate matter emission standard for all light-duty vehicles. \7\
---------------------------------------------------------------------------
    \7\  Curt Barry, ``Vehicle GHG Controls Drive EPA Plan for Strict 
PM Limit, Worrying Industry,'' Inside EPA, July 22, 2011.

      EPA is considering, as part of the Tier 3 proposal, 
changing the Agency's certification fuel from E0 (pure gasoline without 
biofuel additives) to E15 (15 percent ethanol blend). A change in this 
certification fuel, which is the test gasoline that EPA and automakers 
use to certify that engines meet emissions standards, could generate 
significant problems for automobile and engine manufacturers, refiners, 
---------------------------------------------------------------------------
and advanced biofuels.

Low-Carbon Fuel Standard

    Furthermore, proposed and enacted low-carbon fuel standards at the 
federal, State, and regional levels create additional regulatory 
tension and uncertainty in the marketplace. \8\ As the Congressional 
Research Service suggested in a 2008 report on the subject, ``The 
establishment of a Low Carbon Fuel Standard--at either the State or 
federal level--would add another major regulatory requirement.'' \9\ 
Studies have indicated that these new standards could significantly 
raise prices, reduce energy security, and, in some cases, increase 
greenhouse gas emissions. \10\
---------------------------------------------------------------------------
    \8\  These efforts include California's Low Carbon Fuel Standard 
Program (http://www.arb.ca.gov/fuels/lcfs/lcfs.htm), the Northeast 
States for Coordinated Air Use Management's (NESCAUM) proposed Clean 
Fuel Standard (http://www.nescaum.org/topics/clean-fuels-standard), and 
President Obama's proposed National Low Carbon Fuel Standard (http://
my.barackobama.com/page/content/newenergy-more).
    \9\  Brent Yacobucci, ``A Low Carbon Fuel Standard: State and 
Federal Legislation and Regulations,'' CRS Report 7-9662, December 23, 
2008.
    \10\  See: IHS, ``Assessment of the NESCAUM Economic Analysis of a 
Clean Transportation Fuels Program for the Northeast/Mid-Atlantic 
Region,'' October 22, 2011; Barr Engineering Company, ``Low Carbon Fuel 
Standard `Crude Shuffle' Greenhouse Gas Impacts Analysis,'' June 2010, 
http://www.npra.org/files/
Crude-Shuffle-Report-0616101.pdf; 
Michael Canes and edward Murphy, ``Economics of a Low Carbon Fuel 
Standard,'' 2009, http://www.marshall.org/pdf/materials/643.pdf; 
Charles River Associates, ``Economic and Energy Impacts Resulting from 
a National Low Carbon Fuel Standard,'' June 2010, http://
consumerenergyalliance.org/wp/wp-content/uploads/2010/06/CRA-LCFS-
Final-Report-June-14-2010.pdf.
---------------------------------------------------------------------------
    Chairman Harris. The Subcommittee on Energy and Environment 
will come to order. Good afternoon. Again, my apologies for the 
panel for the delay. We just got back from a series of votes, 
but the good news is we shouldn't have any more during the 
hearing.
    Welcome to today's hearing entitled, ``Conflicts and 
Unintended Consequences of Motor Fuel Standards.'' In front of 
you are packets containing the written testimony, biography, 
and truth in testimony disclosure of today's witness panel.
    I now recognize myself for five minutes for an opening 
statement.
    Again, I want to welcome everyone to this afternoon's 
hearing on, ``Conflicts and Unintended Consequences of Motor 
Fuel Standards.''
    I would like to note a couple of things at the outset. 
First, this hearing is not an attack on biofuels. It is about 
understanding the interrelation of the complex web of 
government fuel mandates and the economic and environmental 
consequences that result from those mandates. Second, many of 
the conflicts highlighted today emanate from a single policy 
passed by Congress back in 2007, a law expanding the Renewable 
Fuel Standard to mandate consumption of 36 billion gallons of 
biofuels by the year 2022. Collectively, these issues make one 
essential principle abundantly clear: whether through 
government handouts, as in the case of Solyndra, or through 
heavy-handed fuel mandates, as in the case of the RFS, the 
picking of energy winners and losers by government fiat is an 
exercise in futility destined to fail miserably.
    In the last eight months, this Committee has held numerous 
hearings illustrating EPA's penchant for pursuing outcome-based 
science. In all the program areas we have examined, the Agency 
continuously fails to do its homework before rushing into a 
regulatory judgment. Furthermore, much of the science supported 
and used as the basis for new regulations is done behind a veil 
of secrecy, contravening this Administration's promise of 
transparency.
    Consider just a few examples. EPA is undertaking a Tier 3 
rulemaking later this year despite not having completed the 
statutorily required, anti-backsliding analysis due in mid-
2009. EPA granted a waiver to allow 15 percent ethanol in our 
fuel based on a single set of test results that are still not 
complete and only made public the night before the waiver was 
granted, ignoring several other relevant test programs. And the 
Inspector General of EPA recently found that the 
Administrator's endangerment finding on greenhouse gas 
emissions failed basic peer review requirements.
    EPA's upcoming Tier 3 rulemaking is a perfect case study in 
regulatory folly. The three major elements of EPA's approach 
are all being driven by the excesses of past regulatory 
decisions including the RFS, not by any organic standard 
emanating from the Clean Air Act.
    First, there have been reports that the rule will include 
the first-ever particulate matter standards for vehicle 
tailpipes as the result of automakers increasingly shifting to 
direct fuel-injection systems, itself a trend that is growing 
in order to comply with EPA's greenhouse gas emission 
standards. Second, EPA will also seek to tighten sulfur and 
volatility limits for fuels to offset increases in air 
pollutants resulting from EPA's Renewable Fuels Standard. 
Finally, EPA is also proposing to change its gasoline test fuel 
from E0 to E15 in order to accommodate increasing amounts of 
ethanol in our fuel system.
    The volumes of biofuels mandated by the RFS were the 
driving force behind EPA's decision to permit mid-level ethanol 
blends, and we are seeing similar engine compatibility, 
liability, and infrastructure issues with higher blends of 
biodiesel. A study sponsored by the National Renewable Energy 
Laboratory and released two weeks ago raises even more red 
flags about the deployment of E15. It showed significant damage 
to marine engines, a problem unlikely to be mitigated by EPA's 
watered-down misfueling label.
    Similarly, we will also be discussing a recently-released 
report from the National Research Council on the economic and 
environmental impacts from U.S. biofuel policy. In addition to 
finding that RFS-mandated levels of cellulosic ethanol are 
unlikely to be met, the report also predicted a variety of air, 
water, and soil quality impacts from increased biofuel 
production. The study also concluded that the RFS is an 
ineffective policy for greenhouse gas emission reductions, one 
of the key motives behind the expanded mandate.
    Regulations and standards that create environmental 
problems that engender these secondary do-over regulations need 
to be rethought. We need to start thinking about the real 
objectives these standards are attempting to achieve. Is the 
goal reduced fossil fuels, low carbon fuels, low sulfur fuels, 
or reduced imported fuels? What are the real benefits realized 
with these standards and at what cost? Are we creating an 
environment that encourages job growth, or are we adding 
regulatory burdens that will continue to cost more jobs?
    As we have seen with regulatory approaches in the past, 
government intervention more often than not results in 
significant unintended consequences for the economy and the 
environment. Some, not all, of those consequences can be 
avoided with a little forethought and good scientific 
investigation. I hope the discussion today will help illuminate 
those areas where additional consideration or scientific 
investigation is warranted and what objectives we are truly 
trying to accomplish with current U.S. fuels policy.
    [The prepared statement of Mr. Harris follows:]

      Prepared Statement of Representative Andy Harris, Chairman,
                 Subcommittee on Energy and Environment

    I want to welcome everyone to this afternoon's hearing on Conflicts 
and Unintended Consequences of Motor Fuel Standards.
    I'd like to note a couple of things at the outset. First, this 
hearing is not an attack on biofuels. It is about understanding the 
interrelation of the complex web of government fuel mandates and the 
economic and environmental consequences that result from them. Second, 
many of the conflicts highlighted today emanate from a single policy 
passed by Congress in 2007--a law expanding the Renewable Fuel Standard 
to mandate consumption of 36 billion gallons of biofuels by 2022. 
Collectively, these issues make one essential principle abundantly 
clear: whether through government handouts, as in the case of Solyndra, 
or through heavy-handed fuel mandates, as in the case of the RFS, the 
picking of energy winners and losers by government fiat is an exercise 
in futility destined to fail miserably.
    In the last eight months, this Committee has held numerous hearings 
illustrating EPA's penchant for pursuing outcome-based science. In all 
the program areas we have examined, the Agency continuously fails to do 
its homework before rushing into a regulatory judgment. Furthermore, 
much of the science supported and used as the basis for new regulations 
is done behind a veil of secrecy, contravening this Administration's 
promises of transparency.
    Consider just a few examples. EPA is undertaking a Tier 3 
rulemaking later this year despite not having completed the statutorily 
required anti-backsliding analysis due in mid-2009. EPA granted a 
waiver to allow 15 percent ethanol in our fuel based on a single set of 
test results that are still not complete--and only made public the 
night before the waiver was granted--ignoring several other relevant 
test programs. And the Inspector General of EPA recently found that the 
Administrator's endangerment finding on greenhouse gas emissions failed 
basic peer review requirements.
    EPA's upcoming ``Tier 3'' rulemaking is a perfect case study in 
regulatory folly. The three major elements of EPA's approach are all 
being driven by the excesses of past regulatory decisions including the 
RFS, not by any organic standard emanating from the Clean Air Act.
    First, there have been reports that the rule will include the 
first-ever particulate matter standards for vehicle tailpipes as the 
result of automakers increasingly shifting to direct fuel-injection 
systems--itself a trend that is growing in order to comply with EPA's 
greenhouse gas emission standards. Second, EPA will also seek to 
tighten sulfur and volatility limits for fuels to offset increases in 
air pollutants resulting from EPA's Renewable Fuels Standard. Finally, 
EPA is also proposing to change its gasoline test fuel from E0 to E15 
in order to accommodate increasing amounts of ethanol in our fuel 
system.
    The volumes of biofuels mandated by the RFS were the driving force 
behind EPA's decision to permit mid-level ethanol blends, and we are 
seeing similar engine compatibility, liability, and infrastructure 
issues with higher blends of biodiesel. A study sponsored by the 
National Renewable Energy Laboratory and released two weeks ago raises 
even more red flags about the deployment of E15. It showed significant 
damage to marine engines, a problem unlikely to be mitigated by EPA's 
watered-down misfueling label.
    Similarly, we will also be discussing a recently released report 
from the National Research Council on the economic and environmental 
impacts from U.S. biofuel policy. In addition to finding that RFS-
mandated levels of cellulosic ethanol are unlikely to be met, the 
report also predicted a variety of air, water, and soil quality impacts 
from increased biofuel production. The study also concluded that the 
RFS is an ineffective policy for greenhouse gas emission reductions, 
one of the key motives behind the expanded mandate.
    Regulations and standards that create environmental problems that 
engender these secondary, ``do-over'' regulations need to be rethought. 
We need to start thinking about the real objectives these standards are 
attempting to achieve. Is the goal reduced fossil fuels, low carbon 
fuels, low sulfur fuels, or reduced imported fuels? What are the real 
benefits realized with these standards, and at what cost? Are we 
creating an environment that encourages job growth or are we adding 
regulatory burdens that will cost more jobs?
    As we have seen with regulatory approaches in the past, government 
intervention more often than not results in significant unintended 
consequences for the economy and the environment. Some, not all, of 
these consequences can be avoided with a little forethought and good 
scientific investigation. I hope the discussion today will help 
illuminate those areas where additional consideration is warranted and 
what objectives we are truly trying to accomplish with current U.S. 
fuels policy.

    Chairman Harris. The Chair now recognizes Mr. Miller for 
five minutes for an opening statement.
    Mr. Miller. Thank you, Mr. Chairman. One of the origins of 
this hearing, it appears, is that the majority needed to cover 
a variety of topics to placate various industries critical of 
EPA and State environmental measures, including the Federal 
Renewable Fuel Standard (RFS2) the California Low-Carbon Fuel 
Standard, Tailpipe Emission Standards, Tier 3 Motor and Fuel 
Standards, Greenhouse Gas Emissions Standards for Oil 
Refineries,and also the EPA's decision to allow the voluntary 
sale of E15. What am I leaving out? There is a little bit of 
this, there is a little bit of that.
    So we have a seven-witness hearing on motor fuel standards. 
I am pleased that the EPA is here at this time to testify, and 
Ms. Oge, at least we will not be talking about you behind your 
back at this hearing. Most of the issues raised today are 
actually outside of our Committee's jurisdiction, so the 
hearing is on the science behind the standards. Many of the 
standards are the result of complicated statutory procedures 
imposed by Congress, but procedures designed to ensure that 
everyone affected by a regulation will have a chance to be 
heard, and actually industry has insisted on those standards so 
they would have an opportunity to be heard in all of those 
procedures.
    And all the standards we discuss today are intended to 
protect the air we breathe, the water we drink, and to curb our 
dependence on foreign oil. Our economy is largely built on 
access to cheap motor fuels, but there are obvious consequences 
to our dependence on those fuels. Our transportation sector 
consumes 27 percent of the energy used in our country and makes 
us very vulnerable to economic disruption from the interruption 
of our oil supply from some of the most unstable nations in the 
world.
    And the use of motor fuel produces 1.8 million metric tons 
of greenhouse gases annually, polluting the environment with 
hazardous contaminants that can cause severe and chronic 
respiratory illnesses.
    The minority's one witness today, not counting Ms. Oge, 
will point out that regulations spur innovation. For example, 
the U.S. economy has grown by 64 percent since the enactment of 
the Clean Air Act, and the benefits of the Act are 40 times the 
cost of the regulation. Now, the innovation that has resulted 
from the Act's requirements has generated 65,000 American jobs. 
And other industries not invited to testify today support 
various regulations and have already invested greatly in the 
research and development to meet the standards of regulations.
    We will submit written statements for the record from some 
of those uninvited industries. Unfortunately, we will not hear 
today from a parent who has made a panic trip to an emergency 
room with a child suffering from an asthma attack. That should 
also be part of this hearing.
    I yield back the balance of my time.
    [The prepared statement of Mr. Miller follows:]

           Prepared Statement of Representative Brad Miller,
         Ranking Member, Subcommittee on Energy and Environment

    Thank you, Chairman Harris.
    What are the origins of this hearing? It appears that the majority 
needed to cover a variety of topics to placate various industries 
critical of EPA and State environmental measures, including the Federal 
Renewable Fuel Standard (RFS2), the California Low Carbon Fuel 
Standard, tail pipe emission standards, the Tier 3 Motor and Fuel 
Standards, and greenhouse gas emission standards for oil refiners. Oh, 
also the EPS's decision to allow the vountary sale of E15.
    What am I leaving out?
    So we have a seven-witness hearing on ``motor fuel standards.'' 
Most of the issues raised today are actually outside of our 
Committtee's jurisdiction, so the hearing supposedly is on the science 
behind the stadards.
    Many of the standards are the result of complicated statutory 
procedures imposed by Congress, but procedures designed to assure that 
everyone affected by a regulation will have a chance to be heard. And 
all of the standards are intended to protect the air we breathe and the 
water we drink, and to curb our dependence on foreign oil.
    Our economy is largely built on access to cheap motor fuels, but 
there are obviously consequences of our dependence on those fuels. Our 
transportation sector consumes 27 percent of the energy used in our 
country, and makes us very vulnerable to economic disruption from the 
interruption of our oil supply from some of the most unstable nations 
in the world. And the use of motor fuels produces 1.8 million metric 
tons of greenhouse gases annually, polluting the environment wiht 
hazardous contaminants that can cause severe and chronic respiratory 
illnesses.
    The minority's one witness today will point out that regulations 
spur innovation. For example, the U.S. economy has grown by 64 percent 
since the enactment of the Clean Air Act, and the benefits of the Act 
are 40 times the cost of the regulation. The innovation that has 
resulted from the Act's requirements has generated 65,000 American 
jobs.
    And other industries not invited to testify today support various 
regulations and have already invested greatly in the research and 
development to meet the standards. We will submit written statements 
for the record from those uninvited industries.
    Unfortunately, we won't hear today from a parent who has made a 
panicked trip to the emergency room with a child suffering from an 
asthma attack. That should be part of this hearing, too.

    Chairman Harris. Thank you very much, Mr. Miller. If there 
are Members who wish to submit additional opening statements, 
your statements will be added to the record at this point.
    At this time, I would like to introduce our witness panel. 
Our first witness is Mr. Brendan Williams, Senior Director of 
Advocacy for the National Petrochemical and Refiners' 
Association. Before joining NPRA, Mr. Williams spent over seven 
and one-half years on Capitol Hill specializing in energy and 
environment policy.
    The next witness is Dr. Ingrid Burke, Director of the Haub 
School and Ruckelshaus Institute of Environment and Natural 
Resources at the University of Wyoming and Co-Chair of the 
National Research Council Committee on Economic and 
Environmental Impacts of Increasing Biofuels Production. Dr. 
Burke has served as a member of several national research 
council committees to review national environmental research 
programs and policies.
    Next we have Ms. Margo Oge, the Director of the Office of 
Transportation and Air Quality at the EPA, where she has worked 
since 1980.
    Our fourth witness is Dr. Jay Kesan, Professor and H. Ross 
and Helen Workman Research Scholar and Program Leader of the 
Biofuel Law and Regulation Program at the Energy Biosciences 
Institute at the University of Illinois College of Law. His 
work focuses on patent law, intellectual property, 
entrepreneurship, Internet law and regulation, digital 
government, agricultural biotechnology law, and biofuels 
regulation.
    Next witness is Mr. Bob Greco, the Group Director for 
Downstream and Industry Operations at the American Petroleum 
Institute. Prior to his 21-year career at API, Mr. Greco was an 
Environmental Engineer with EPA with expertise in automotive 
emission control technologies.
    Next we have Mr. David Hilbert, a Thermodynamic Development 
Engineer for Mercury Marine. His main responsibilities include 
engine performance and emissions hardware development and base 
engine calibration mapping. He conducted the recently-released 
National Renewable Energy Lab report on high ethanol fuel 
endurance.
    Our final witness is Mr. Jack Huttner, the Executive Vice 
President for Commercial and Public Affairs at Gevo, 
Incorporated. Is that the way it is pronounced?
    Mr. Huttner. Gevo.
    Chairman Harris. Gevo. Gevo, Incorporated. Prior to joining 
Gevo, he was Vice President of Commercial and Public Affairs at 
Dupont Dansico Cellulosic Ethanol, and he was Vice President of 
Business Development at Genencor, the industrial biotechnology 
division of Dansico A/S.
    Thank you all for appearing before the Subcommittee today, 
and, again, thank you for your patience while we were voting. 
As our witnesses should know, spoken testimony is limited to 
five minutes each, after which the Members of the Committee 
will have five minutes each to ask questions.
    I now recognize our first witness, Mr. Brendan Williams of 
the National Petrochemical and Refiners' Association. Mr. 
Williams.

               STATEMENT OF MR. BRENDAN WILLIAMS,

                  SENIOR DIRECTOR OF ADVOCACY,

        NATIONAL PETROCHEMICAL AND REFINERS' ASSOCIATION

    Mr. Williams. Thank you, Mr. Chairman. Good afternoon, 
Chairman Harris, Ranking Member Miller, and Members of the 
Subcommittee. I am Brendan Williams, Senior Director of 
Advocacy for NPRA, the National Petrochemical and Refiners' 
Association. I thank you for giving me the opportunity to 
testify today.
    NPRA is a trade association representing high-tech American 
manufacturers of virtually the entire supply of gasoline, 
diesel fuel, jet fuel, other fuels, and home heating oil, along 
with petrochemicals used as building blocks for thousands of 
products. We favor sound and sensible environmental 
regulations. We are strongly committed to clean air and water. 
We have an outstanding record of compliance with regulations 
issued by the Environmental Protection Agency and other 
agencies, and we have invested hundreds of billions of dollars 
to dramatically reduce emissions.
    We have helped make America's air cleaner today than it has 
been in generations. Refiners have cut sulfur levels in 
gasoline and diesel fuel by about 90 percent, and we have 
reduced benzene in conventional gasoline by 45 percent in 
recent years.
    EPA data shows that total emissions of the six principle 
pollutants in the United States have dropped by 57 percent 
since 1980. Ozone levels have decreased by 30 percent. EPA data 
indicates there will be continued reductions in the years ahead 
under existing regulations.
    Despite this great progress, we are concerned that EPA and 
other agencies have moved away from sensible regulation towards 
an environment characterized by overregulation. This makes 
unreasonable and often conflicting demands on our members to 
make changes in manufacturing processes that carry an extremely 
high cost and bring little or no environmental benefit.
    Overregulation raises energy costs for every consumer. It 
strengthens foreign competitors eager to replace American 
manufacturers and American workers. It weakens U.S. economy, 
and it makes America more reliant on unstable parts of the 
world for vital fuels and petrochemicals.
    A Department of Energy report concluded that the burden of 
federal regulations was a significant factor in the closure of 
66 refineries in the past 20 years. Just since 2008, the 
recession, our refinery closures have led to 3,000 lost jobs in 
American refineries, a handful of refineries are also 
threatened with closure over the next year if they can't be 
sold.
    We have seen too many American manufacturing industries go 
overseas in recent decades, which led to millions of lost jobs, 
and we don't want the same thing to happen if overregulation 
forces the U.S. refining industry to move overseas.
    American manufacturers of transportation fuel are being hit 
with a blizzard of regulations. Some of these involve what are 
called Tier 3 regulations to reduce sulfur in gasoline. Others 
deal with mandate under the Renewable Fuel Standard involving 
ethanol and other biofuels, and others involve greenhouse gas 
regulations. These measures pose challenges individually; 
however, their impact is exacerbated because many individual 
regulatory demands are simply impossible to meet without coming 
into conflict with other regulations.
    One example deals with potential Tier 3 requirements and 
EPA's greenhouse gas standards. Additional sulfur controls for 
the fuel supply called for in Tier 3 will require more energy-
intensive processes which will actually increase greenhouse gas 
emissions at refineries.
    A similar example of conflicting regulations can be found 
in relation to the Renewable Fuel Standard. The National 
Research Council said increased ethanol required under the 
standard could increase ozone and particulate matter and other 
emissions, but the Renewable Fuel Standard also requires an 
amount of ethanol that cannot be realistically introduced into 
the fuel supply given current infrastructure and consumer 
demand. Such conflicts are costly and difficult to address.
    Unfortunately, the size, scope, and cumulative burden of 
current and impending regulatory activity is hurting the 
ability of refiners to preserve existing jobs and create new 
ones. Overregulation is also adversely impacting our ability to 
serve the American people with domestically produced, reliable 
transportation fuels.
    We believe America's national interest would best be served 
by a comprehensive and objective cost-benefit analysis of new 
and existing federal regulations. It is time for higher 
consumer costs, lost jobs, and damage to America's economic and 
national security to be considered as relevant factors in 
determining whether even more stringent regulations will do 
more harm than good.
    Thank you again for the opportunity to be here, and I will 
be happy to take any questions at the appropriate time.
    [The prepared statement of Mr. Williams follows:]

              Prepared Statement of Mr. Brendan Williams,
                      Senior Director of Advocacy,
            National Petrochemical and Refiners' Association

Introduction

    Chairman Harris, Ranking Member Miller and Members of the 
Subcommittee, thank you for giving me the opportunity to testify at 
today's hearing dealing with conflicts and unintended consequences of 
motor fuel standards. I'm Brendan Williams, and I serve as the Senior 
Director of Advocacy of NPRA, the National Petrochemical & Refiners 
Association. Since virtually every American drives or travels in 
vehicles powered by motor fuels manufactured by NPRA members, the topic 
of this hearing directly affects just about everyone in our Nation.
    NPRA is a trade association representing high-tech American 
manufacturers of virtually the entire U.S. supply of gasoline, diesel, 
jet fuel, other fuels and home heating oil, as well as the 
petrochemicals used as building blocks for thousands of vital products 
in daily life. NPRA members make modern life possible and keep America 
moving and growing as they meet the needs of our Nation and local 
communities, strengthen economic and national security, and provide 
jobs directly and indirectly for more than two million Americans.
    For well over 100 years, our refining members have been serving the 
American people by manufacturing the most efficient form of safe, 
proven, and reliable motor fuels. NPRA members have done this while 
making tremendous strides to improve the environment, strengthen 
America's economy, and provide good-paying jobs for American workers--
many of them union members.
    There is a very close connection between federal energy and 
environmental policies. Unfortunately, these policies are often debated 
and decided separately and without coordination. As a result, positive 
impacts for one policy area sometimes conflict with or even undermine 
goals and objectives in the other. Congress and the Administration can 
advance both the cause of cleaner fuels and preserve the domestic 
refining industry and the jobs it supports by adopting this principle 
of balance as part of our Nation's energy and environmental policies.
    A healthy and diverse U.S. refining industry serves the Nation's 
interest by maintaining a secure supply of energy products. 
Rationalizing and balancing our Nation's energy and environmental 
policies will protect this key American resource. Given the challenges 
of the current and future refining environment, America is fortunate to 
retain a refining industry with many diverse and specialized 
participants. Refining is a tough business, but the continuing 
diversity and commitment to performance within the industry demonstrate 
that it has the vitality needed to continue its important work, 
especially with the help of a supply-oriented national energy policy.
    We support sound and sensible environmental and other regulations. 
Our members are strongly committed to clean air and water, have an 
outstanding record of compliance with Environmental Protection Agency 
and other regulations, and have invested hundreds of billions of 
dollars to dramatically reduce emissions as measured by EPA.
    As a result of these emissions reductions by our members and by 
other industries, America's air today is cleaner than it has been in 
generations. Refiners have cut sulfur levels in gasoline by 90 percent 
just since 2004. We have also reduced sulfur in diesel fuel by more 
than 90 percent since 2005 and reduced benzene in conventional gasoline 
by 45 percent since 2010. EPA data shows that total emissions of the 
six principal air pollutants in the United States have dropped by 57 
percent since 1980, and ozone levels have decreased by 30 percent. 
These reductions occurred even as industrial output and the number of 
vehicles on the road have increased. EPA data indicates there will be 
continued reductions in the years ahead under regulations already in 
place.
    Refiners have spent nearly $50 billion just to remove sulfur from 
gasoline and diesel fuel and to manufacture reformulated gasoline. NPRA 
members have additionally addressed requirements for low Reid Vapor 
Pressure gasoline, including specially blended fuels required by State 
Implementation Plans under the Clean Air Act (CAA), which have reduced 
hydrocarbon emissions, an ozone precursor.
    Despite the great progress we have made in environmental 
stewardship under the CAA and other laws, we are concerned that EPA and 
other agencies have at times moved from regulation to overregulation, 
making unreasonable and often conflicting demands on our members to 
spend enormous sums to make changes in their manufacturing processes 
that bring little or no significant environmental benefit.

Unintended Consequences

    The demands of environmental overregulation--some of which are 
impossible to achieve without coming in conflict with other 
regulations--would raise energy costs for every American consumer. They 
would also strengthen foreign competitors eager to replace American 
manufacturers and American workers, weaken the U.S. economy, make 
America more reliant on nations in unstable parts of the world for 
vital fuels and petrochemicals, and endanger our national security.
    These are not alarmist statements--they are simple facts about the 
consequences of overregulation. The refining industry has historically 
been very cyclical and volatile financially. A Department of Energy 
report issued in March found that refining margins have been 
continuously decreasing over the past four years (Exhibit A). The 
report also concluded that the compounded burden of federal regulations 
was a significant factor in the closure of 66 petroleum refineries in 
the United States in the past 20 years (Exhibit B). Just since 2008, 
the recession and refinery closures have led to 3,000 lost jobs at 
American refineries. A handful of refineries are threatened with 
closure in the next few months if they cannot be sold. Some of the lost 
supply from shuttered refineries has been made up through capacity 
expansions at other facilities, and overall capacity has still been 
increasing. However, the rate of new capacity coming online is 
decreasing due to financial pressures and the threat of overseas 
competition--factors that are exacerbated by a domestic environment of 
overregulation.




    (Source: U.S. Department of Energy, Office of Policy and 
International Affairs, Small Refinery Exemption Study--An Investigation 
Into Disproportionate Economic Hardship, P. 28-30, found at: http://
www.epa.gov/otaq/fuels/renewablefuels/compliancehelp/small-refinery-
exempt-study.pdf.)
    We've seen how much of the American textile, steel, auto, 
appliance, and other manufacturing industries have moved to foreign 
nations in recent decades, with the tragic loss of millions of American 
jobs. We don't want the same thing to happen to our members and their 
workers if overregulation forces much of the refining industry to move 
from the United States to other nations as well. At a time of high 
unemployment and a poorly performing national economy, the last thing 
America needs to do is worsen conditions for another important U.S. 
manufacturing sector.
    The manufacturers of motor fuels are being hit with a regulatory 
blizzard that poses a significant threat to both refinery operations 
and our Nation. Some of these regulations involve what are called Tier 
3 regulations to reduce sulfur in gasoline, requirements under the 
Renewable Fuel Standard (RFS) involving ethanol and other biofuels, and 
greenhouse gas (GHG) regulations, to name a few.
    We believe America's national interest would best be served by 
comprehensive and objective cost-benefit analyses of these and other 
federal regulations. Existing regulations also need to be examined so 
those that do more harm than good can be eliminated. It is not 
realistic to demand that every last molecule of emissions be 
eliminated--no matter how insignificant, and regardless of the cost in 
lost jobs, harm to consumers, and harm to our Nation. Yet all too 
often, overregulation of motor fuels and environmental overregulation 
takes this approach.

    Conflicting Regulations

    We understand that different federal and state regulatory agencies 
have a hard time balancing the need for effective regulation with the 
demands of meeting sometimes conflicting decisions from the courts, 
positions of public interest groups, and even newly enacted laws. 
However, the size, scope, and cumulative burden of current and 
impending regulatory activity is creating both significant regulatory 
uncertainty and a slew of conflicting regulations that will impose 
significant burdens on domestic fuel manufacturers.
    Looking in more detail at the various regulations facing our 
industry helps illustrate the problem of conflicting regulations.

A. Tier 3 Gasoline Sulfur Regulations Conflict with GHG Requirements

    Under the CAA, EPA has adopted a series of increasingly stringent 
rules to reduce the amount of sulfur allowed in gasoline. Since 2004, 
EPA's Tier 2 rules have reduced sulfur levels in gasoline by 90 
percent, from an average of 300 parts per million in 2004 to an average 
of 30 parts per million today. We have seen no evidence that further 
sulfur reductions to enable future vehicle technologies are needed.
    Nevertheless, EPA is proceeding with what is known as a Tier 3 
rulemaking as part of its general authority to regulate fuels under the 
CAA. The rule would impose a high-cost, minimal-benefit regulatory 
requirement on America's already heavily regulated fuel supply. The 
rule could lead to significant domestic fuel supply reductions, higher 
petroleum product imports, potentially increased consumer costs, 
increased refinery emissions, closed U.S. refineries, and reduced 
energy security.
    A process called hydrotreating is the principal technology used to 
reduce sulfur in petroleum products, including motor fuels such as 
gasoline and diesel. This and other such technologies require energy 
consumption that results in increased GHG emissions and will also 
increase emission of other criteria pollutants. As a result, a 
regulation requiring a reduction of sulfur in petroleum fuel increases 
emissions that refiners are being told they must reduce under other CAA 
regulations.
    Although refiners have already slashed sulfur levels in gasoline by 
90 percent in the past seven years, EPA's Tier 3 rulemaking could 
require further reductions in sulfur levels in gasoline to an average 
of 10 parts per million--a 70 percent change from today's already low 
levels, while also reducing the gasoline volatility. EPA expects to 
issue a proposed rule by the end of 2011 and a final rule in 2012. 
There is no reason to regulate sulfur levels further. Sulfur emissions 
from cars are minimal.
    In addition, the Energy Independence and Security Act of 2007 
(Section 209) requires EPA to conduct an anti-backsliding study to 
determine whether mandated renewable fuel volumes will adversely impact 
air quality. The results of this study are critical to assessing 
whether or not the current RFS will hamper air quality, as well as how 
to mitigate such impacts and whether changes to the petroleum portion 
of the fuel supply are the most cost-effective way to address the 
issue.
    The anti-backsliding study was due in the summer of 2009. It was to 
be followed up with promulgated regulations to mitigate any potential 
impacts identified in the study by December 2010. Congress clearly 
required the study as a precursor to potential regulations, which the 
statute states should occur 18 months later. However, EPA has not 
completed this study, but intends to move forward with the Tier 3 
proposal anyway. The agency said it will release the study at the same 
time it releases its proposed Tier 3 regulations. This is contrary to 
Congressional intent, which clearly indicated the anti-backsliding 
study was to be completed prior to any new regulations being 
promulgated. This was to be a sequential schedule, not a concurrent 
one. EPA should release the study to assess the feasibility of and 
proper approach to any additional fuels regulations.

E15 and the Renewable Fuel Standard

    Another set of EPA regulations of motor fuels that is causing 
regulatory conflicts and problems for refiners and consumers involves 
the size and scope of the ethanol mandate created in the 2007 expansion 
of the RFS.
    EPA published a decision last November for approval of a partial 
waiver with conditions that would allow gasoline containing 15 percent 
ethanol--known as E15--to be sold into the marketplace for use in cars 
and light trucks produced in model year 2007 and later. EPA later ruled 
that E15 could be sold for use in vehicles produced in model year 2001 
and later. In addition to being illegal, these decisions hold the 
potential to create significant problems in the marketplace.
    As NPRA and many other groups argue in a lawsuit, EPA does not have 
the legal authority to grant a partial waiver. Section 211(f)(4) of the 
CAA is clear on this point, stating that EPA has to determine that any 
fuel or fuel additive ``will not cause or contribute to a failure of 
any emission control device or system (emphasis added).'' The CAA does 
not give EPA discretion to approve a fuel or fuel additive for sale if 
it will cause or contribute to the failure of some emission control 
devices and not others.
    Because E15 would theoretically be sold under the same canopy as 
regular gasoline, there is a high likelihood of consumer misfueling. 
This is a concern because several studies show that gasoline blends 
containing more than 10 percent ethanol could lead to engine damage in 
older vehicles and non-road engines, such as those in chain saws, 
lawnmowers, boats and snowmobiles. For example, a recent study by the 
National Renewable Energy Laboratory on testing conducted on the 
effects of E15 on three outboard boat engines found that E15 caused 
problems with engine performance, increased fuel consumption, and 
increased nitrogen oxide emissions.
    Ironically, an increased ethanol blend could also damage older 
cars' catalytic converters, which are installed to reduce emissions. In 
addition to engine and catalytic converter damage, studies have shown 
that as ethanol content in fuel increases, it burns hotter and is more 
corrosive. The combined effect of fuel burning hotter and the corrosive 
effects of ethanol create the possibility for serious physical injury 
to people who may misfuel and potential physical damage to vehicle fuel 
tanks and fuel dispensing equipment. Sufficient testing to assess the 
impact of these fuel blends on all automobiles--both old and new--and 
non-road engines has not been completed.
    Industries ranging from outdoor power equipment manufacturers to 
automakers to food producers have all expressed concern over EPA's E15 
waiver. However, EPA has ignored ongoing testing related to E15 and 
made a premature decision to approve the fuel. The same decision to 
approve E15 also contains a proposal for E15 misfueling mitigation. 
Therefore, EPA made a decision knowing that it would cause problems and 
initiated a rulemaking at the same time to mitigate the problems that 
the EPA itself created.
    EPA could have decided to deny the request to approve E15 as 
gasoline, but chose to approve it partially and conditionally. This 
decision has put refiners and consumers at significant risk and the E15 
misfueling mitigation rule--a cautionary label posted at service 
stations--is a woefully ineffective warning device.
    The American people are the losers in this situation because EPA 
has violated President Obama's 2009 commitment to them to put science 
ahead of politics. Consumers rely upon their government to ensure that 
the products offered are safe for the intended use. EPA's partial 
waivers for E15 ignore this responsibility. American families, farmers, 
truckers, and businesses rely on NPRA members millions of times every 
day to provide affordable, reliable, and safe fuels for use in their 
gasoline-powered on-road and non-road engines. EPA's partial waiver 
decisions undermine this reliance.
    EPA is rushing to bring E15 to the marketplace and putting 
consumers at risk. Congress should not allow EPA to continue down this 
path. Congress should repeal EPA's partial waivers for E15.
    This problem with EPA's E15 decisions is just one example of the 
numerous problems associated with an ill-crafted federal RFS. The 
existing program contains an extremely aggressive schedule for 
introducing a large amount of ethanol into the marketplace. Such an 
implementation schedule raises questions of feasibility, liability, and 
other economic costs for both refiners and consumers. If the existing 
RFS program is carried out without changes, it will create great market 
and economic uncertainty, which will in turn threaten additional 
refining investment and job growth and harm consumers.
    The RFS is challenging and faces several hurdles. Given the 
aggressive schedule of the mandate and the limits of what fuel and 
vehicle infrastructure can handle, our Nation will soon face a 
practical limit into the amount of ethanol that can be pushed into the 
fuel supply without causing significant consumer disruption. This so-
called ``blendwall'' will be reached when nearly all of the gasoline in 
the country contains 10 percent ethanol and there is a portion of E85 
(fuel containing 85 percent ethanol, 15 percent gasoline) being sold 
for use in Flex Fuel Vehicles (FFVs).
    However, consumers have been slow to accept E85, and it does not 
shape up to be a viable compliance option for the RFS. For example, E85 
has low energy content and could be used in cars not designed for the 
fuel or in small engines. No small engines are designed for E85, and 
only a small fraction of the fleet of cars is designed for the fuel. 
E85 requires an expensive investment at retail stations because of the 
corrosive nature of ethanol. This issue is yet another in a panoply of 
problems associated with the current structure of the RFS. Congress 
should address these issues to protect American drivers and consumers.

Conclusion

    NPRA members want a clean environment and have worked hard and 
invested heavily to achieve that goal. We have made big reductions in 
emissions, and more reductions will continue under existing 
regulations. But we want sound science and cost-benefit analyses to be 
used to examine which environmental regulations are in the best 
interests of the American people, looking at a broad range of criteria.
    Even when excessive regulations are imposed with the best of 
intentions, they can have harmful unintended consequences. Sometimes 
these harmful consequences--like a rise in consumer energy costs--are 
welcomed by opponents of fossil fuels, because these higher costs tilt 
the playing field to make other energy sources more competitive in the 
marketplace.
    EPA should not have unchecked power to take any action it wants--
without specific authorization by Congress--in the single-minded 
pursuit of unrealistic and harmful overregulation. It's time for higher 
consumer costs, lost jobs, and damage to America's economic and 
national security to be considered as relevant factors in weighing 
whether ever-more-stringent regulations do more harm than good.
    NPRA is ready to participate in an intellectually honest dialogue 
about how to build a stronger economy, a brighter energy future, and a 
more prosperous America.

    Chairman Hall [Presiding]. Thank you, and I now recognize 
our second witness, Dr. Ingrid Burke, from the University of 
Wyoming.

                 STATEMENT OF DR. INGRID BURKE,

       DIRECTOR, HAUB SCHOOL AND RUCKELSHAUS INSTITUTE OF

               ENVIRONMENT AND NATURAL RESOURCES,

                     UNIVERSITY OF WYOMING,

       AND CO-CHAIR, NATIONAL RESEARCH COUNCIL COMMITTEE

            ON ECONOMIC AND ENVIRONMENTAL IMPACTS OF

                 INCREASING BIOFUELS PRODUCTION

    Ms. Burke. Thank you. Good afternoon, Mr. Chairman and 
Members of the Committee. I served as the Co-Chair of the 
National Research Council Committee that authored the report, 
``Renewable Fuel Standard: Potential Economic and Environmental 
Effects of U.S. Biofuel Policy.'' This study was mandated by 
Congress in the Energy and Independence and Security Act of 
2007 and the 2008 Farm Bill.
    The study committee was asked to discuss the current and 
projected environmental harm and benefits of biofuel production 
as it increased in the United States to meet the biofuel 
consumption mandate of the Renewable Fuel Standard or RFS2. 
Today I will present our key findings in three areas: 
greenhouse gas emissions, air quality, and water quality.
    First, we found that if the consumption mandate of 36 
billion gallons of biofuels is to be met in 2022, the effect on 
greenhouse gas emissions compared to using an energy equivalent 
of petroleum-based fuels is uncertain. Many factors influence 
greenhouse gas emissions from biofuel production. They include 
the type of feedstock, management practices, and the features 
of the individual site. On the whole, the use of crop and 
forest residues for biofuels tends to emit lower amounts of 
greenhouse gases than the use of annual crops such as corn-
based ethanol for biofuels.
    If dedicated energy crops such as switchgrass are to be 
grown to meet the consumption mandate for cellulosic biofuels, 
conversion of both cultivated and uncultivated land will most 
likely be required, and this could result in market-mediated 
land-use changes that could result in additional greenhouse 
gases.
    Although RFS2 imposes restrictions to discourage some types 
of land clearing or land cover change for biofuel production in 
the United States, it cannot prevent land use or land cover 
changes overseas.
    In summary, because net greenhouse gas emissions depend 
upon site-specific management decisions made given the market 
conditions and available technologies at any given time, the 
extent to which increasing biofuel production in the United 
States to meet RFS2 consumption mandates will result in 
greenhouse gas emissions compared to using petroleum-based 
fuels is uncertain.
    Second, I will speak to the report summary of the effects 
of RFS2 on air quality. In general, gasoline and ethanol emit 
similar amounts of major pollutants such as particulate matter, 
nitrogen oxides, volatile organic compounds, and ammonia during 
vehicle use. That is from vehicle evaporative and tailpipe 
emissions.
    However, the amounts of these air pollutants emitted during 
the fuel production are typically higher for corn grain or 
cellulosic ethanol than for petroleum-based fuels. As such, 
compared to the full life cycle of gasoline, the production and 
use of biofuels tends to result in higher atmospheric 
concentrations of volatile organic compounds, nitrous oxides, 
particulate organic matter, and ammonia on a national average, 
and the effects of this on human health depend greatly on 
exposure quantity and duration.
    Third and finally, water quality effects of increasing 
biofuel production also largely depend upon how it is done on 
feedstock type, site-specific factors, management practices 
used in feedstock production, and in conversion yield. There is 
evidence that RFS2 and the push of biofuels has caused more 
land to come into corn production. Increases in corn production 
have contributed to increased nutrient loadings to surface 
waters and to exacerbating eutrophication and hypoxia.
    A recent analysis of data from the National Water Quality 
Assessment showed increasing concentration and flux of nitrate 
in the Mississippi River. Perennial and short-rotation woody 
crops for cellulosic feed stocks and use of residues hold 
promise for improving water quality under RFS2 because these 
crops require lower agricultural--agrichemical inputs than 
corn, and perennial root systems can be used to decrease 
nutrient loadings to streams compared to other crop management 
regimes. Taking the consumption mandates for different types of 
biofuels into account, the effect of producing biofuels in the 
United States adequate to meet RFS2 in 2022 on water quality is 
uncertain.
    In summary, the effects of RFS2 on greenhouse gas 
emissions, on air quality, and on water quality, as well as 
other environmental responses, are highly dependent upon what 
kinds of biomass feed stocks are chosen by our producers, the 
management choices that they make, and market-mediated 
responses in other land use for agricultural production in the 
United States.
    Thank you for the opportunity to testify. I am happy to 
answer any questions the Subcommittee may have.
    [The prepared statement of Dr. Burke follows:]
                Prepared Statement of Dr. Ingrid Burke,
           Director, Haub School and Ruckelshaus Institute of
       Environment and Natural Resources, University of Wyoming,
     and Co-Chair, National Research Council Committee on Economic
      and Environmental Impacts of Increasing Biofuels Production

    Good afternoon, Mr. Chairman and Members of the Committee. My name 
is Indy Burke. I am the Director of the Haub School and Ruckelshaus 
Institute of Environment and Natural Resources and Wyoming Excellence 
Chair and Professor at the University of Wyoming. I served as the Co- 
Chair of the Committee on Economic and Environmental Effects of 
Increasing Biofuels Production of the National Research Council (NRC). 
The Research Council is the operating arm of the National Academy of 
Sciences, National Academy of Engineering, and the Institute of 
Medicine of the National Academies, chartered by Congress in 1863 to 
advise the government on matters of science and technology. The report 
Renewable Fuel Standard: Potential Economic and Environmental Effects 
of U.S. Biofuel Policy is the product of an NRC study mandated by 
Congress in the Energy and Independence and Security Act of 2007 and 
the 2008 Farm Bill.
    The study committee was asked to discuss the potential 
environmental harm and benefits of biofuel production if it is to be 
increased in the United States to meet the biofuel consumption mandate 
of the Renewable Fuel Standard 2 (RFS2). The study relies on data from 
literature published up to the time of its preparation, and it found 
that if the consumption mandate of 36 billion gallons of biofuels is to 
be met in 2022, the effect on greenhouse gas emissions compared to 
using the energy-equivalent of petroleum-based fuel is uncertain. 
Greenhouse gases are emitted into the atmosphere or removed from it 
during different stages of biofuel production--for example, carbon 
dioxide is removed from the air by plants during photosynthesis, but it 
is also emitted from fermentation and the use of fossil fuels when 
biofuels are produced, as well as from the combustion of biofuels 
themselves. Many factors, including the type of biofuel feedstock and 
the management practices used in growing it, influence greenhouse gas 
emissions of biofuels. For example, biofuel feedstock type and site 
location affect carbon storage in soil; farmer choices about nutrient 
management practices, also determined by the biofuel feedstock type and 
site location, affect fertilizer input and gaseous losses of nitrous 
oxide, another greenhouse gas, through denitrification.
    Increasing biofuel feedstock production also could cause direct and 
indirect land-use changes that might alter the greenhouse gas balance. 
If the expanded biofuel feedstock production involves removing 
perennial vegetation on a piece of land and replacing it with an annual 
commodity crop, then the land-use change would incur a one-time 
greenhouse gas emission from biomass and soil that could be large 
enough to offset greenhouse gas benefits gained by displacing 
petroleum-based fuels with biofuels over subsequent years. Furthermore, 
such land conversion may disrupt any future potential for storing 
carbon in biomass and soil. In contrast, planting perennial crops in 
place of annual crops could potentially enhance carbon storage in that 
site.
    In addition to land-use conversion that is directly linked to 
biofuel feedstock production, indirect land-use change occurs if land 
used for production of biofuel feedstocks causes new land-use changes 
elsewhere through market-mediated effects. The production of biofuel 
feedstocks can constrain the supply of commodity crops and raise 
prices. If agricultural growers anywhere in the world respond to the 
market signals (higher commodity prices) by expanding production of the 
displaced commodity crop, indirect land-use change occurs. This process 
might lead to conversion of noncropland (such as forests or grassland) 
to cropland. Because agricultural markets are intertwined globally, 
production of biofuel feedstock in the United States is likely to 
result in land-use and land-cover changes somewhere in the world, which 
could, in turn, result in one-time greenhouse gas emissions from 
biomass and soil. Because greenhouse gases are well mixed in the 
atmosphere, their effects are global, irrespective of where they were 
emitted. The extent of those biofuel-induced, market-mediated, land-use 
changes and their net effects on greenhouse gas emissions are 
uncertain.
    Among the different types of biofuel feedstocks, crop and forest 
residues will likely not contribute much greenhouse gas emissions from 
land-use or land-cover changes because they are products of existing 
agricultural and forestry activities. However, adequate residue would 
have to be left in the field to maintain soil carbon. If dedicated 
energy crops such as switchgrass and Miscanthus are to be grown to meet 
the consumption mandate for cellulosic biofuels, conversion of 
uncultivated cropland will likely be required, resulting in the 
displacement of commodity crops and pastures. Although RFS2 imposes 
restrictions to discourage biofuel feedstock producers from land-
clearing or land-cover change in the United States that would result in 
net greenhouse gas emissions, the policy cannot prevent market-mediated 
effects in the United States or abroad, nor can it control land-use or 
land-cover changes in other countries. In summary, because net 
greenhouse gas emissions depend on all of these issues described above-
site, biofuel feedstock, fertilization, irrigation, direct and indirect 
land-use change, and residue management, the extent to which increasing 
biofuel production in the United States to meet the RFS2 consumption 
mandate will result in savings in greenhouse gas emissions compared to 
using petroleum-based fuels is uncertain.
    As in the case of greenhouse gas emissions, comparison of other air 
pollutant emissions from biofuels and petroleum-based fuels needs to be 
considered over the life cycles of the fuels. Production and use of 
ethanol results in higher concentrations of such pollutants affecting 
air quality as volatile organic compounds, nitrous oxides, particulate 
matter, and ammonia than gasoline on a national average. On the whole, 
estimates of emissions of pollutants affecting air quality from using 
corn-grain or cellulosic ethanol and gasoline in vehicles (including 
tailpipe emissions and evaporative emissions from vehicles and filling 
station) are comparable. However, the pollutant amounts emitted during 
the fuel-production phase (including feedstock production and 
transportation) are typically higher for corn-grain or cellulosic 
ethanol than for petroleum-based fuels. Unlike greenhouse gases, 
pollutants affecting air quality have local and regional effects on the 
environment. The potential extent to which these pollutants harm human 
health and well-being depends on whether the pollutants are emitted 
close to highly populated areas or to agricultural areas.
    Other than greenhouse gas emissions, the water quality effects of 
increasing biofuel production also largely depend on feedstock type, 
site-specific factors such as soil and climate, management practices 
used in feedstock production, land condition prior to feedstock 
production, and conversion yield. There is evidence that RFS2 and the 
push of biofuels has caused more land to come into corn production. 
Increases in corn production have contributed to increasing nutrient 
loadings to surface water and to exacerbating eutrophication and 
hypoxia. A recent analysis of data from the National Water Quality 
Assessment showed increasing concentration and flux of nitrate in the 
Mississippi River. Increasing corn production to produce corn-grain 
ethanol for meeting RFS2 likely will have additional negative 
environmental effects. Perennial and short-rotation woody crops for 
cellulosic feedstocks hold promise for improving water quality under 
RFS2 because those crops require lower agrichemical inputs than corn, 
and their perennial root systems can be used to decrease nutrient 
loadings to streams compared to other crop management regimes. 
Harvesting crop residues for biofuel would not require much additional 
nutrient input, but an adequate amount of residues would have to be 
left in the field to prevent soil erosion. Certain sites could 
withstand about 40 to 50 percent crop-residue removal. Taking the 
consumption mandates for different types of biofuels into account, the 
effect of producing biofuels in the United States adequate to meet the 
RFS2 in 2022 on water quality is uncertain. The effect on water quality 
will depend on site-specific details of the implementation of RFS2, and 
particularly the balance of feedstocks and levels of inputs.
    Consumptive water use is generally higher for biofuel production 
than for petroleum-based fuel production on an energy-equivalent basis. 
(The energy content of ethanol is about two-thirds of that of an 
equivalent volume of gasoline.) The range of estimates for biofuels 
(2.9-1,500 gallons per gallon of gasoline equivalent) is much wider 
than that for petroleum-based fuels (1.9-6.6 gallons per gallon of 
gasoline equivalent). The large range of estimates for biofuels can be 
mostly attributed to absence or presence of irrigation during biomass 
production. Estimates for consumptive water use in biorefineries that 
convert biomass to fuels are between 2.9 and 20 gallons of water per 
gallon of gasoline equivalent (four gallons of water per gallon of 
gasoline-equivalent average). Water efficiency at ethanol production 
facilities has been improving, but withdrawals from confined aquifers 
may still be a problem in certain locations.
    The effects of increasing biofuel production on soil and 
biodiversity can be positive or negative depending on feedstock type 
and management practices used. Thus, the effects of achieving RFS2 on 
those two environmental variables cannot be readily quantified or 
qualified largely because of the uncertainty in the future.
    Thank you for the opportunity to testify. I would be happy to 
answer any questions the Subcomittee might have.

    Chairman Hall. Thank you. She yields back her time.
    We now recognize our third witness, Margo Oge, from the 
Environmental Protection Agency.

             STATEMENT OF MS. MARGO OGE, DIRECTOR,

           OFFICE OF TRANSPORTATION AND AIR QUALITY,

              U.S. ENVIRONMENTAL PROTECTION AGENCY

    Ms. Oge. Thank you, Mr. Chairman Hall, Ranking Member 
Congressman Miller, and the Members of the Subcommittee. I want 
to thank you for giving me the opportunity to appear before you 
today to testify and hopefully clear the record on a number of 
issues that were raised earlier.
    I will begin with a very brief overview of the Renewable 
Fuel Standards Program. The Energy Independence and Security 
Act established renewable fuel standards for the transportation 
fuel of 36 billion gallons by 2022. This includes 16 billion 
gallons of advanced biofuels.
    Each year the law directs EPA to establish annual volume 
standards that refiners must meet the following year. To do 
this, we conduct an extensive transparent evaluation of the 
state of the renewable fuel industry and at the same time we 
also consult with our colleagues at the Department of Energy 
and Department of Agriculture.
    To give you an example, for 2011, this review resulted in 
EPA lowering the volume for cellulosics to six million gallons, 
substantially below what the Clean Air Act was requiring, which 
was 250 million gallons for 2011. This was due to the limited 
production capacity of the industry. For 2012, we propose a 
range of 3.5 to 12.9 million gallons, and we will finalize the 
final standards by sometime this fall.
    Let me say a few words, please, about E15 in gasoline. 
Under the Clean Air Act, companies that produce fuels cannot 
increase the concentration of ethanol in gasoline unless the 
administrator of EPA provides a waiver. The law provides for 
waivers when EPA determines that the increased concentration of 
ethanol will not cause or contribute to failure of vehicles or 
engines to meet emission standards.
    In 2010, we received a waivers request from Growth Energy 
for E15 gasoline. We sought in review in a very transparent way 
all the available evidence, including extensive data developed 
by the Department of Energy, by industry, and other 
organizations. Based on the available information we granted a 
partial waiver, allowing 15 percent of ethanol to be used in 
model years 2001 and in newer vehicles but prohibited, and I 
want to underline prohibiting the use for older vehicles and 
off-road equipment, including marine engines.
    We also placed several conditions on the waivers to reduce 
the potential for misfueling with E15, including labeling pumps 
dispensing E15, tracking E15 distribution, and requiring retail 
stations to survey. As a new gasoline, E15 must be registered 
under the Clean Air Act before it is marketed. Today E15 is not 
registered. Industry has given us a sufficient date for us to 
evaluate it, but we still have not registered E15.
    The last topic that I would like to cover is the 
development of the so-called Tier 3 standards. Let me explain 
to you what Tier 3 means. This refers to the potential new 
standards for clean vehicles and fuels to address basically the 
Nation's clean air goals.
    As you know, motor vehicles and their fuels are an 
important source of compounds that form air pollution. In 2008, 
120 million people still lived in counties that exceeded the 
public health-based standards. In many of these areas motor 
vehicles contribute anywhere from five percent to 45 percent of 
specific pollutants.
    When EPA established the Public Health Standard for ozone 
in 2008, under the previous Administration, the Regulatory 
Impact Analysis for this existing ozone standard included the 
so-called Tier 3 standards that we are talking about today, 
which is cleaner cars and cleaner fuel. And the reason for that 
was to help States and localities to meet the clean air goals 
of the existing ozone acts in a cost-effective way.
    Now, as we develop this proposal, we are considering 
vehicle and fuel as an integrated system. You know, this will 
enable us to optimize fuel and vehicle changes, finding the 
lowest cost in technical, feasible, and emission reductions. As 
lead in gasoline, we know that sulfur in gasoline degrades the 
performance of catalysts, and by doing that we are reducing the 
ability of catalysts to address emissions.
    So lowering the sulfur in gasoline would make emission 
control technology more effective, not just for new vehicles 
but also for the existing fleet, and the end result would be 
cleaner air.
    Thank you for the opportunity to testify, and I am looking 
forward to answer any questions that you may have.
    [The prepared statement of Ms. Oge follows:]
             Prepared Statement of Ms. Margo Oge, Director,
               Office of Transportation and Air Quality,
                  U.S. Environmental Protection Agency
    Chairman Harris, Ranking Member Miller, and Members of the 
Committee, I appreciate the opportunity to appear before you today to 
testify on various transportation fuel-related programs under the Clean 
Air Act (CAA), as amended by the Energy Independence and Security Act 
of 2007 (EISA). As requested, I will discuss three different fuels 
issues: the renewable fuel standards; partial waivers allowing the 
introduction into commerce of gasoline containing up to 15 percent 
ethanol (E15) for use in MY2001 and newer light-duty motor vehicles 
(which include passenger cars, light-duty trucks and medium-duty 
passenger vehicles), and potential future controls on vehicles and fuel 
quality, known as ``Tier 3'' standards.

Renewable Fuel Standards

    On March 26, 2010, the Environmental Protection Agency (EPA) 
finalized regulations to implement the updated national renewable fuel 
standard program (RFS) required by Congress under EISA in 2007. These 
provisions established new year-by-year specific volume standards for 
the amount of renewable fuel that must be used in transportation fuel, 
with the standards requiring a total of 36 billion gallons by 2022. 
This total includes 21 billion gallons of advanced biofuels, composed 
of 16 billion gallons of cellulosic biofuel, four billion gallons of 
``other'' advanced biofuels, and a minimum of one billion gallons of 
biomass-based diesel. The new requirements also include new definitions 
and criteria for both renewable fuels and the feedstocks used to 
produce them, including new greenhouse gas emission (GHG) thresholds. 
EPA applied the best available science, and conducted extensive 
analyses to implement these complex and challenging statutory 
provisions. The regulatory requirements went into effect on July 1, 
2010, and apply to domestic and foreign production of renewable fuels 
used in the United States.
    We estimate the RFS program, when fully implemented, would displace 
about 13.6 billion gallons of petroleum-based gasoline and diesel fuel, 
which represents about seven percent of expected annual gasoline and 
diesel consumption in 2022. We also estimate that the fully implemented 
program would decrease oil import expenditures by $41.5 billion 
dollars, result in additional energy security benefits of $2.6 billion, 
and reduce GHG emissions by an average annualized rate of 138 million 
metric tons of CO2 equivalent per year.
    EPA supports expanded use of advanced biofuels, especially 
cellulosic biofuels, which must achieve at least a 50% and a 60% 
reduction, respectively, in lifecycle greenhouse gases. As directed, 
each year EPA publishes the annual volumetric requirements for total, 
advanced, biomass-based diesel, and cellulosic renewable fuels that 
refiners must meet the following year. As part of this effort, EPA must 
determine the projected volume of cellulosic biofuel production for the 
following year and, if this is less than the volume specified in the 
statute, EPA must lower the standard accordingly. In developing 
proposed annual volume standards, we conduct a rigorous investigation 
of the cellulosic industry, including one-on-one discussions with each 
producer to determine their production potential for the following 
year. EPA also consults directly with the Department of Agriculture and 
the Department of Energy, including the Energy Information 
Administration (EIA) to determine the status of production capacity and 
capabilities of the cellulosic sector. These evaluations are based on 
evolving information about emerging segments of the biofuels industry 
and may result in applicable volumes that are different from those in 
the statute. We propose the annual volume standards through a 
transparent rulemaking process, allowing for public review and comment, 
prior to finalizing the standards. This process ensures the most robust 
determination possible at the time the standards are set.
    In 2010 and 2011, as a result of limited production capacity, we 
found it necessary to reduce the cellulosic standard to about 6.5 and 6 
million gallons, respectively, substantially below the CAA targets of 
100 and 250 million gallons for those years. For 2012, we proposed a 
range of 3.5 to 12.9 million gallons. We will finalize the volume 
standards later this fall. Under the statute, if we lower the 
cellulosic standard, EPA has discretion to reduce the total advanced 
and total renewable fuel standards. Thus far, we have not found cause 
to reduce the overall advanced and renewable standards.
    EPA also recognizes the importance of evaluating and qualifying new 
biofuels for use in the RFS program. We already have a long list of 
qualified advanced and cellulosic biofuels approved in the current RFS, 
including biodiesel and renewable diesel from certain feedstocks, 
ethanol from sugarcane, diesel from algal oil, ethanol and diesel from 
approved cellulosic feedstocks, and jet fuel and heating oil from 
certain feedstocks. In addition, we have established a process to 
evaluate new biofuel pathways for approved use in the RFS program and 
are using this process to qualify new fuel pathways that can support 
meeting the future standards. Many of the feedstocks or biofuels 
undergoing evaluation are under consideration as new advanced biofuels. 
These include ethanol, diesel and gasoline produced from renewable 
feedstocks like energy cane, camelina, and arundo donax, to name only a 
few.

E15 Waiver

    Under the Clean Air Act, companies that produce fuels cannot 
increase the concentration of ethanol in gasoline for use in gasoline-
fueled vehicles unless the Administrator waives this restriction by 
determining that the increased concentration will not cause or 
contribute to the failure of vehicles or engines to meet emissions 
standards. E10 (gasoline with 10% ethanol by volume) was granted a 
waiver by operation of law under a previous version of CAA section 
211(f)(4) more than 30 years ago. It is now ubiquitous in the 
marketplace, with E10 blends now accounting for over 90 percent of the 
total U.S. gasoline market.
    In 2010, EPA granted in part and denied in part an application from 
Growth Energy and 54 ethanol producers requesting a waiver that would 
increase the permissible concentration of ethanol in gasoline to 15 
percent. Based on the available evidence, including extensive test data 
developed by the Department of Energy (DOE) and other researchers, EPA 
determined that the CAA criterion in section 211(f)(4) was met for 
allowing E15 to be introduced into commerce for use in model year (MY) 
2001 and newer light-duty motor vehicles, which includes passenger 
cars, light-duty trucks and medium-duty passenger vehicles. EPA also 
found that E15 did not meet the statute's criterion in the case of 
motor vehicles older than MY2001 and other types of vehicles and 
gasoline-powered equipment. As a result, EPA granted partial waivers 
raising the permissible concentration of ethanol in gasoline to 15 
percent for use in MY 2001 and newer light-duty motor vehicles, but not 
for use in any other gasoline-powered vehicles or engines such as 
lawnmowers and boats.
    EPA placed several conditions on the waivers to reduce the 
potential for misfueling with E15. As a result, fuel producers that 
decide to introduce E15 into commerce must take a number of steps 
designed to reduce misfueling, including labeling pumps dispensing E15, 
tracking E15 distribution on product transfer documents and conducting 
retail station surveys. To further mitigate the potential for 
misfueling, EPA also issued regulations that apply more broadly, to 
fuel marketers as well as fuel producers, and that prohibit anyone, 
including consumers, from misfueling with E15.
    As a new gasoline, E15 must be registered under the Clean Air Act 
before it may be introduced into commerce for use in MY2001 and newer 
light-duty motor vehicles. Earlier this year, ethanol industry 
representatives submitted emissions and health effects information for 
use in completing registration applications for E15. They are now 
developing additional information for that purpose. Once complete, the 
information will be helpful to fuel producers in submitting 
registration applications for E15. Until such time as EPA approves a 
complete registration application, E15 may not be lawfully sold for use 
in MY2001 and newer light-duty motor vehicles.

Tier 3

    The last topic I will cover is development of what is commonly 
referred to as the ``Tier 3'' vehicle and fuel standards. Emissions 
from motor vehicles and their fuels contribute to ozone, particulate 
matter (PM), nitrogen dioxide (NO2), and carbon monoxide 
(CO), which are all pollutants for which EPA has established health-
based National Ambient Air Quality Standards (NAAQS). In 2008, over 120 
million people lived in counties that exceeded the health-based 
standards then in effect.
    Motor vehicles are an important source of the compounds that form 
this air pollution. We project that in many nonattainment areas, cars 
and light trucks will contribute 15-45% of total nitrogen oxides 
emissions; 10-25% of total volatile organic compound emissions, and 5-
10 percent of total emissions of fine particulate matter. When a 
revised health-based standard for ozone was set in 2008, the Regulatory 
Impact Analysis for the new standard included potential Tier 3 
standards as part of an overall assessment of measures that would help 
States meet the ozone standard.
    The Clean Air Act authorizes EPA to establish emissions standards 
for motor vehicles to address air pollution that may reasonably be 
anticipated to endanger public health or welfare. EPA also has 
authority to establish fuel controls where emissions products of 
gasoline may reasonably be anticipated to endanger public health or 
welfare or where they significantly impair motor vehicle emissions 
control devices or systems.
    In the decade since we set the Tier 2 vehicle and fuel standards, 
there have been advancements in vehicle catalyst technology and 
computer control technology that should enable significant, cost-
effective reductions in motor vehicle tailpipe emissions. Tier 3 
vehicle and fuel standards have the potential to cost-effectively 
reduce NO2, PM, and VOCs by hundreds of thousands of tons.
    As we develop this proposal, we are considering the vehicle and its 
fuel as an integrated system, which would enable technologically 
feasible and cost-effective emission reductions beyond what would be 
possible looking at vehicle and fuel standards in isolation. We first 
applied such an approach with our Tier 2 vehicle/gasoline sulfur 
standards, finalized in 2000. We believe that a similar approach in the 
Tier 3 proposal would be a cost-effective way to achieve substantial 
additional emissions reductions.
    There are extensive data showing that gasoline sulfur degrades the 
performance of catalytic systems that are key to reducing emissions 
from gasoline vehicles. Lowering the sulfur content of gasoline would 
make emission control technologies more effective for both existing and 
new vehicles. Gasoline sulfur reductions would be a key factor in 
enabling manufacturers to comply across the vehicle fleet with the new 
standards, while also achieving immediate significant benefits by 
reducing emissions from the existing vehicles.
    The Agency has been talking to diverse stakeholders as we develop a 
proposal for Tier 3 vehicle and fuel standards that would reduce 
emissions from passenger cars and light-duty trucks. The Alliance of 
Automobile Manufacturers has urged the Agency to harmonize vehicle 
emissions standards with the State of California's program, thus 
allowing manufacturers to design a single vehicle for nationwide sales. 
New Tier 3 vehicle and fuel standards would create a comprehensive 
program for regulating motor vehicles and fuels that would provide 
regulatory certainty and compliance efficiency for auto manufacturers. 
The Tier 3 proposal will also address a number of requests from fuel 
industry representatives to streamline fuels regulations during the 
retrospective regulatory review process conducted in response to the 
President's Executive Order on January 18, 2011.

The Clean Air Act

    These fuel programs are part of, or would continue, the 40-year 
Clean Air Act success story. For 40 years, the Clean Air Act has 
allowed steady progress to be made in reducing the threats posed by 
pollution and allowing us all to breathe easier. In the last year 
alone, programs implemented pursuant to the Clean Air Act Amendments of 
1990 are estimated to have reduced premature mortality risks equivalent 
to saving over 160,000 lives; spared Americans more than 100,000 
hospital visits; and prevented millions of cases of respiratory 
problems, including bronchitis and asthma. \1\ They also enhanced 
productivity by preventing 13 million lost workdays; and kept kids 
healthy and in school, avoiding 3.2 million lost school days due to 
respiratory illness and other diseases caused or exacerbated by air 
pollution. \2\
---------------------------------------------------------------------------
    \1\  USEPA (2011). The Benefits and Costs of the Clean Air Act from 
1990 to 2020. Final Report. Prepared by the USEPA Office of Air and 
Radiation. February 2011. Table 5-5. This study is the third in a 
series of studies originally mandated by Congress in the Clean Air Act 
Amendments of 1990. It received extensive peer review and input from 
the Advisory Council on Clean Air Compliance Analysis, an independent 
panel of distinguished economists, scientists, and public health 
experts.
    \2\  Ibid.
---------------------------------------------------------------------------
    However, few of the emission control standards that gave us these 
huge gains in public health were uncontroversial at the time they were 
developed and promulgated. Most major rules have been adopted amidst 
claims that that they would be bad for the economy and bad for 
employment.
    Some may find it surprising that the Clean Air Act also has been a 
good economic investment for our country. In contrast to doomsday 
predictions, history has shown, again and again, that we can clean up 
pollution, create jobs, and grow our economy all at the same time. Over 
that same 40 years since the Act was passed, the Gross Domestic Product 
of the United States grew by more than 200 percent. \3\
---------------------------------------------------------------------------
    \3\  Bureau of Economic Analysis, National Economic Accounts, 
``Table 1.1.5. Gross Domestic Product,'' http://bea.gov/national/
index.htm#gdp.
---------------------------------------------------------------------------
    Some would have us believe that ``job-killing'' describes EPA's 
regulations. It is misleading to say that enforcement of the Clean Air 
Act is bad for the economy and employment. It isn't. Families should 
never have to choose between a job and healthy air. They are entitled 
to both.
    The EPA's updated public health safeguards under the Clean Air Act 
will encourage investments in labor-intensive upgrades that can put 
current unemployed or under-employed Americans back to work. 
Environmental spending creates jobs in engineering, manufacturing, 
construction, materials, operation, and maintenance. For example, EPA 
vehicle emissions standards directly sparked the development and 
application of a huge range of automotive technologies that are now 
found throughout the global automobile market. The vehicle emissions 
control industry employs approximately 65,000 Americans with domestic 
annual sales of $26 billion. \4\ Likewise, in 2008, the United States' 
environmental technologies and services industry 1.7 million workers 
generated approximately $300 billion in revenues and led to exports of 
$44 billion of goods and services, \5\ larger than exports of sectors 
such as plastics and rubber products. \6\ The size of the world market 
for environmental goods and services is comparable to the aerospace and 
pharmaceutical industries and presents important opportunities for U.S. 
Industry. \7\
---------------------------------------------------------------------------
    \4\  Manufacturers of Emissions Control Technology (http://
www.meca.org/cs/root/organization2info/
who-we-are).
    \5\  DOC International Trade Administration. ``Environmental 
Technologies Industries: FY2010 Industry Assessment,'' http://
web.ita.doc.gov/ete/eteinfo.nsf/068f3801d047f26e85256883006ffa54/
4878b7e2fc08ac6d85256883006c452c/$FILE/
Full%20Environmental%20Industries%20Assessment%202010.pdf (accessed 
February 8, 2011).
    \6\  U.S. Census Bureau, Censtats Database, International Trade 
Data--NAICS, http://censtats.census.gov/naic3-6/
naics3-6.shtml (accessed September 6, 2011).
    \7\  Network of Heads of the European Environment Protection 
Agencies, 2005. ``The Contribution of Good Environmental Regulation to 
Competitiveness,'' http://www.eea.europa.eu/about-us/documents/
prague-statement/prague-statement-en.pdf 
(accessed February 8, 2011).

---------------------------------------------------------------------------
Conclusion

    Thank you for the opportunity to testify today.

    Chairman Hall. Thank you. The gentlelady yields back her 
time.
    I now recognize our fourth witness, Dr. Jay Kesan, from the 
University of Illinois College of Law, for five minutes.
    Mr.Miller. You need to turn your microphone on.

           STATEMENT OF DR. JAY KESAN, PROFESSOR AND

           H. ROSS AND HELEN WORKMAN RESEARCH SCHOLAR

                       AND PROGRAM LEADER

           OF THE BIOFUEL LAW AND REGULATION PROGRAM,

                 ENERGY BIOSCIENCES INSTITUTE,

             UNIVERSITY OF ILLINOIS COLLEGE OF LAW

    Mr. Kesan. Okay. Sorry. Good afternoon, Chairman Hall, 
Ranking Member Miller, and Members of the Committee. Thank you 
for the opportunity to appear before you.
    My name is Jay Kesan. I am a Professor at the University of 
Illinois and Program Leader of the Biofuel Law and Regulation 
Program at the Energy Biosciences Institute, which is a joint 
effort between the University of Illinois, the University of 
California, Berkeley, and the Lawrence Berkeley National 
Laboratory and which has been funded by BP as a multi-year 
research commitment.
    In 2005, the U.S. Congress passed the Energy Policy Act, 
which charged the EPA with developing and implementing the 
Renewable Fuel Standard Program. This program was significantly 
altered in 2007, with the passage of the Energy Independence 
and Security Act, and this expanded program is commonly 
referred to as RFS2.
    There were three main policy goals that drove the RFS 
legislation; national energy security, reduction in GHG 
emissions, and economic development, particularly in the rural 
sector. All three of these drivers are definitely still with us 
today and will continue to remain important in the foreseeable 
future.
    Under the RFS Program gasoline producers and importers, not 
the government and consumers, are responsible for introducing 
renewable biofuel into the U.S. market. In essence, the policy 
instrument of the RFS is a mandatory demand regime that 
requires the regulated parties to commercialize more renewable 
fuel than the amount the market would achieve in the absence of 
the RFS.
    So how does such a large-scale mandatory demand regime like 
the RFS help reduce production costs of renewable biofuel over 
time? This is well understood by conventional economic theory. 
The possibility of large-scale mandatory consumption allows 
renewable biofuel producers and their feedstock suppliers to 
operate at a large scale through economies of scale and/or 
Marshallian externalities.
    Second, the RFS2 Program induces biofuel producers and 
their feedstock suppliers to invest in R&D activities creating 
cost-saving innovation.
    Our empirical work has shown that ethanol plants in the 
past decade have actually contributed through the RFS to 
increasing economies of scales and to improving the level of 
competition among firms through existing plant expansion as 
well as expansion through new plant construction.
    Finally, uncertainty influences investment decisions 
regarding R&D activity. Hence, removing some degree of the 
uncertainty by creating several years of a mandatory demand 
regime makes it easier for biofuel producers to finance their 
R&D projects. The uncertainty and risk of an unstable policy 
have an even bigger impact on commercial investments because 
the costs are so much higher compared to R&D. On the other 
hand, a stable commitment to an RFS2 regime reduces that 
uncertainty and risk associated with commercial investments.
    Other regulatory initiatives such as E15 and E85 work in 
tandem with RFS2 to facilitate innovation and development of 
the biofuel industry. In addition, efforts to clarify 
regulations by removing some of the uncertainty about the 
approved level of blending for biobutanol is another initiative 
that works with the RFS2 Program to further expand the 
development of advanced biofuels such as biobutanol.
    We are in an era of heavily constrained government 
spending. Policy initiatives like the RFS do not require 
government money. Rather, RFS facilitates innovation and 
commercialization of new technologies by reducing some 
uncertainties by providing a guarantee of market demand.
    We are starting to see the RFS program begin to yield 
tangible results on the ground in terms of producing advanced 
biofuels and cellulosic biofuels. For instance, the commercial 
investments in biofuels derived from lignocellulosic biomass 
are real. There are credible players in the industry such as 
INEOS, Abengoa, POET and BP breaking ground on new plants and 
projects.
    I am an engineer and a lawyer, but my esteemed colleagues 
at the Energy Biosciences Institute, who are world-class 
experts in the plant sciences, tell me that scientific 
advancements have already solved the problem of obtaining sugar 
from lignocellulosic biomass many times. Therefore, it is only 
a matter of technological effort and time, together with the 
support of a foundational policy like the RFS, before we see 
large-scale production of advanced biofuels.
    There is extensive research showing that learning by doing 
lowers the production cost of biofuels. This has been shown to 
be true for corn ethanol and sugarcane ethanol. The RFS is a 
cornerstone piece of legislation for the biofuel industry. The 
RFS mandates will accelerate the production of advanced 
biofuels and lead to more cumulative experience and promote the 
innovation needed to lower production costs in the future.
    We need a broad-based approach to energy policy in the 
U.S., and biofuels will play a significant role in our national 
energy portfolio. We need important policy mechanisms like the 
RFS to ensure that we have new energy options. A healthy market 
is one that has a broad set of biofuel producers and, more 
importantly, a diverse portfolio of renewable energy options.
    Thank you very much for your attention. I am happy to 
answer any questions that the Members of the Committee may 
have.
    [The prepared statement of Dr. Kesan follows:]
           Prepared Statement of Dr. Jay Kesan, Professor and
     H. Ross and Helen Workman Research Scholar and Program Leader
     of the Biofuel Law and Regulation Program, Energy Biosciences 
                               Institute,
                 University of Illinois College of Law
    Good afternoon, Chairman Harris, Ranking Member Miller, and Members 
of the Committee. Thank you for the opportunity to appear before you.

Introduction

    My name is Jay Kesan. I am a Professor at the University of 
Illinois at Urbana-Champaign and the Program Leader of the Biofuel Law 
and Regulation Program at the Energy Biosciences Institute, a joint 
research effort between the University of Illinois, the University of 
California, Berkeley, and the Department of Energy's Lawrence Berkeley 
National Laboratory, and funded by BP as a multi-year research 
commitment.

The Renewable Fuel Standard (RFS) Program

    In 2005, the U.S. Congress passed the Energy Policy Act, which 
charged the Environmental Protection Agency (EPA) with developing and 
implementing the Renewable Fuel Standard Program (RFS). The RFS was 
designed to ensure the introduction and consumption of a certain volume 
of renewable fuel in the Unites States. More specifically, under the 
RFS Program, obligated parties such as gasoline producers and importers 
were required to produce or purchase a specific amount of renewable 
biofuel every year between 2006 and 2012.
    The RFS was significantly altered in December 2007 with the passage 
of the Energy Independence and Security Act of 2007, and the expanded 
Program is now commonly known as RFS2. Under the RFS2, the period of 
volumetric requirements is extended through 2022, and renewable fuel is 
sub-categorized into traditional renewable fuel, advanced biofuel, 
cellulosic biofuel, and biomass-based diesel based on fuels' feedstocks 
and the green house gas (GHG) emission reduction thresholds that they 
satisfied.
    There were three main policy goals that drove the RFS legislation--
national energy security, reduction in GHG emissions, and economic 
development, particularly in the rural sector. All three of these 
drivers are definitely still with us today and will continue to remain 
important in the foreseeable future.

The Economic Rationales for the RFS2 Program

    The RFS program is designed to facilitate the substitution process 
of domestically produced, renewable biofuels for petroleum, and to make 
renewable fuel economically viable in the future. In order to achieve 
this main goal, gasoline producers and importers are required to 
commercialize their obligated amount of renewable biofuel every year 
during the period between 2006 and 2022. These parties--not the 
government and consumers--are responsible for introducing renewable 
biofuel into the U.S. market. In essence, the policy instrument of the 
RFS is a mandatory demand regime that requires gasoline producers and 
importers to commercialize more renewable biofuel than the amount the 
market would achieve in the absence of the RFS.
    How does such a large-scale mandatory demand regime like the RFS 
help reduce production costs of renewable biofuel over time? This is 
well understood, and several mechanisms can be found in light of well-
established economic theory. First, economies of scale and/or 
Marshallian externality contribute to improving production cost 
conditions. A possibility of large-scale mandatory consumption allows 
renewable biofuel producers and their feedstock suppliers to operate at 
a large scale. Then, large-scale operation decreases their average cost 
of production. In particular, when the fixed cost of physical capital 
is very high, this effect is likely to kick in. High fixed costs are 
not limited to physical capital, and they may equally apply to R&D 
expenditures. Thus, large-scale demand raises the profitability from 
R&D activity, and, as a result, promotes technological advancement. 
Similarly, large-scale mandatory demand improves the infrastructure of 
the renewable biofuel industry. This externality positively affects the 
cost conditions of each producer involved in the biofuel industry.
    Second, the RFS2 program induces biofuel producers and their 
feedstock suppliers to invest in R&D activities creating cost-saving 
innovation. The basic logic of this relies on the well-established idea 
of ``market pull'' or ``cost spreading.'' In the context of the RFS 
program, a renewable biofuel producer reaps the benefits of cost-saving 
innovation by embedding them in biofuel technology and then selling 
biofuel as a final product. While his R&D expenditures are a fixed 
cost, the marginal benefit from such R&D is proportional to biofuel 
sales. That is, the producer benefits more from cost-saving innovation 
as its sales increase. Thus, the possibility of large-scale biofuel 
sales, brought about by the RFS, gives biofuel producers an extra 
incentive to invest in the R&D that creates cost-saving innovation. In 
addition, large-scale mandatory consumption provides incentives to new 
market entrants. Therefore, higher levels of market competition require 
more cost-saving innovation in order to survive. In such cases, 
technological advancement might not necessarily come with a larger 
scale of production. However, it is surely the case that costs are 
lower with improved production technology.
    Our empirical work analyzing ethanol plants in the past decade 
indicates that the RFS has contributed to increasing economies of scale 
and to improving the level of competition among firms through existing 
plant expansion as well as expansion through new plant construction. 
\1\
---------------------------------------------------------------------------
    \1\  J.P. Kesan, A. Ohyama, and H.-S. Yang, ``An Economic 
Evaluation of the Renewable Fuel Standard (RFS) Standard Program: An 
Industrial Policy Approach,'' Working Paper, available on SSRN, http://
www.ssrn.com (2011).
---------------------------------------------------------------------------
    Finally, uncertainty influences investment decisions regarding R&D 
activity. In general, returns to R&D investments are quite skewed, and 
firms may find it difficult to finance R&D expenditures through the 
capital market. Thus, removing some degree of uncertainty by creating 
several years of a mandatory demand regime makes it easier for biofuel 
producers to finance their R&D projects. Furthermore, according to 
option value theory, firms may postpone R&D projects because of great 
uncertainty even if the net present value of the project is not 
negative. As mentioned previously, the returns to R&D investments 
partly depend on demand conditions. Since the mandatory demand of the 
RFS guarantees a market to biofuel producers, it reduces the degree of 
uncertainty. This in turn leads to lowering discount factors associated 
with uncertainty of benefits derived from R&D projects. In sum, the RFS 
encourages R&D activity in the industry by easing credit constraints or 
lowering the value of postponing R&D projects.
    The amount of money spent on R&D is lower than the amount of money 
that biofuel producers need to spend to build commercial production 
facilities, and thus the uncertainty and risk of an unstable policy has 
an even bigger impact on commercial investments because the costs are 
so much higher. On the other hand, a stable commitment to the RFS2 
regime reduces that uncertainty and risk associated with commercial 
investments.
    Other regulatory initiatives such as the E15 and E85 programs work 
in tandem with the RFS2 to facilitate innovation and further 
development of the biofuel industry. In addition, efforts to clarify 
regulations by removing some of the uncertainty about the approved 
level of blending for biobutanol is another positive initiative that 
can work with the RFS2 Program and further expand the development of 
advanced biofuels such as biobutanol.
    Consider another example from another renewable energy sector--the 
case of wind energy. I have attached a graph to my written statement 
that shows that investment in wind energy has been stable and growing 
rapidly in the past decade whenever there has been a stable tax policy 
in place. This once again illustrates the importance of a firm and 
stable policy commitment instead of intermittent policy initiatives.
    We are in an era of heavily constrained government funding. Policy 
initiatives like the RFS mandates do not require government money. 
Rather, we are simply facilitating innovation and commercialization of 
new technologies by reducing some uncertainties by providing a 
guarantee of market demand.
    It is worth noting that similar regulatory regimes in other arenas 
designed to advance and facilitate the development and deployment of 
new technologies have a long and successful history. Such examples 
include automobile airbag technology, digital broadcasting, enhanced 
911 calling and the like.

Taking Stock of Where We Are Today and Looking Ahead

    We are starting to see the RFS program begin to yield tangible 
results on the ground in terms of producing advanced biofuels and 
cellulosic biofuels. For instance, the commercial investments in 
biofuels derived from lignocellulosic biomass are real. There are 
credible players in the industry such as INEOS, Abengoa, POET and BP 
breaking ground on new plants and projects this year and in 2010.
    I am an engineer and a lawyer. But my esteemed colleagues at the 
Energy Biosciences Institute (EBI), who are world-class experts in the 
plant sciences, tell me that scientific advancements have already 
solved the problem of obtaining sugars from lignocellulosic biomass 
many, many times. Therefore, it is now only a matter of technological 
effort and time, together with the encouragement and support of a 
foundational policy such as the RFS, before we achieve large-scale 
production of advanced biofuels.
    Relatedly, the U.S. has a substantial land base beyond that used 
for row-crop agriculture that can be mobilized to achieve substantial 
domestic biofuel production and meet all the biofuel mandates of EISA/
RFS2. \2\
---------------------------------------------------------------------------
    \2\  C. Somerville, H. Youngs, C. Taylor, S.C. Davis, and S.P. 
Long, ``Feedstocks for Lignocellulosic Biofuels,'' Science, vol. 329, 
pp. 790-792 (13 Aug. 2010); Huang, H., M. Khanna, and X. Yang, 
``Economic Implications of Energy Crop Production on Conservation 
Reserve Program (CRP) Land'' presentation at AFRI Meeting on Prosperity 
for Small- and Medium-Sized Farms and Rural Communities Programs, 
Miami, Florida, November 7-9, 2011.
---------------------------------------------------------------------------
    There is extensive research showing that ``learning by doing'' 
lowers the production cost of biofuels. This has been shown to be true 
for corn ethanol and sugarcane ethanol. The RFS is a cornerstone piece 
of legislation for the biofuel industry. The RFS mandates will 
accelerate the production of advanced biofuels and lead to more 
cumulative experience and promote the innovation needed to lower 
production costs in the future.
    The National Research Council report on the RFS is not a conclusion 
on the biofuel industry and is, more accurately, a report on a work 
that is still in progress. In fact, the NRC report is based on rather 
outdated information. For instance, it is not based on current biomass 
production estimates or on current technological information. That 
said, the NRC report does correctly acknowledge that commercializing 
advanced and cellulosic biofuel technologies will require policy 
certainty.
    We need a broad-based approach to energy policy in the U.S. and 
biofuels will play a significant role in our national energy portfolio. 
We need important policy mechanisms such as the RFS to ensure that we 
have new energy options. A healthy market is one that has a broad set 
of biofuel producers and, more broadly, a diverse portfolio of 
renewable energy options, including solar, wind, natural gas, 
hydroelectricity, and biofuels.
    Thank you very much for your attention. I am happy to answer any 
questions that Members of the Committee may have.



    Chairman Harris. Thank you very, very much.
    I now recognize our fifth witness, Mr. Bob Greco of the 
American Petroleum Institute.

          STATEMENT OF MR. BOB GRECO, GROUP DIRECTOR,

              DOWNSTREAM AND INDUSTRY OPERATIONS,

                  AMERICAN PETROLEUM INSTITUTE

    Mr. Greco. Thank you. Good afternoon, Mr. Chairman, Ranking 
Member Miller, and other Committee Members. My name is Bob 
Greco, and I am the Downstream Group Director for the American 
Petroleum Institute, API. Thank you for the opportunity to 
testify on the conflicts and unintended consequences of motor 
fuels, particularly the Tier 3 requirements now being developed 
by EPA.
    API represents over 480 member companies involved in all 
aspects of the oil and natural gas industry, an industry that 
supplies most of America's energy, supports 9.2 million U.S. 
jobs and 7.5 percent of the U.S. economy, and has invested 
nearly $2 trillion dollars in U.S. capital projects since 2000, 
including those spurring advances in nearly every formable form 
of energy.
    The U.S. refining industry already operates in an extremely 
complex regulatory environment. U.S. refiners have invested 
$112 billion in environmental improvements between 1990 and 
2008, significantly reducing emissions while producing cleaner 
fuels and improving energy efficiency.
    On top of these existing regulations, U.S. refiners are now 
facing a blizzard of significant and potentially very costly 
regulations that may take effect over the next few years. These 
regulations include more stringent Tier 3 standards; refinery 
controls including greenhouse gas limitations through the new 
NESHAP and NSPS requirements; the RFS implementation and the 
impending blend wall; refinery emissions controls to achieve 
more stringent air quality standards for ozone, particulate 
matter, and other pollutants; and new EPA requirements for 
boilers and incinerators.
    Today I will focus on the proposed Tier 3 gasoline 
standards being drafted by EPA.
    Under the Clean Air Act, EPA has already implemented 
stringent rules reducing the amount of sulfur allowed in 
gasoline and reducing vapor pressure. For example, the Tier 2 
rules have reduced sulfur levels in gasoline by 90 percent, 
from an average of 300 parts per million before 2004 to an 
average of 30 parts per million today. EPA is now developing a 
Tier 3 rulemaking that would reduce sulfur levels to an average 
of 10 parts per million, nearly a 70 percent change from 
today's already low levels, while also reducing gasoline 
volatility and perhaps other properties.
    EPA expects to issue a proposed rule by the end of this 
year and a final rule in 2012. EPA should not issue a Tier 3 
proposal without first justifying the impacts, costs, and 
benefits of further reducing sulfur and vapor pressure. EPA has 
not produced a scientific basis to justify these new 
regulations, and at this point EPA has not released the date of 
the agency claims to have already in hand.
    We have studied and believe that further sulfur and vapor 
pressure reductions would not produce benefits enough to 
justify the potentially onerous costs. These could include 
higher fuel manufacturing costs, refinery closures, lost jobs, 
increased emissions, and increased product imports.
    Researchers at Baker and O'Brien have studied the costs and 
impacts of several Tier 3 scenarios which could require a 
substantial reconfiguration of U.S. refineries. Their research 
shows that the refining industry could face up-front capital 
costs ranging from between $10 to $17 billion, with recurring 
annual costs in the range of $5 to $13 billion.
    As a result, they contend, gasoline manufacturing costs 
could rise by up to 25 cents a gallon.
    In addition, up to 14 percent of total gasoline production 
volume could be lost. This volume would suffer when sulfur is 
reduced and light-end components are removed from gasoline.
    Finally, because the processes used to reduce sulfur 
content and vapor pressure are also energy intensive, they 
could increase refinery carbon dioxide emissions by up to 2.3 
percent. EPA would thus needlessly put upward pressure on 
refineries to increase their CO2 emissions while 
separately proposing requirements to reduce their CO2 
emissions.
    Overall, this research estimate said up to seven U.S. 
refineries could close, as they would be unable to make or 
recover the required investments to comply with the new 
requirements. This would be in addition to the 66 U.S. 
refineries that have already closed in the last 20 years. The 
U.S. Department of Energy has identified the cost of regulatory 
compliance as a part of the economic stress that caused the 
shutdowns. The regulatory burden of Tier 3 requirements could 
add to that stress.
    In conclusion, America's refining industry is a strategic 
and valuable asset that provides U.S. with secure supplies of 
fuel products and directly and indirectly employs nearly 
500,000 Americans. It is already heavily regulated. Layering on 
new regulations is hard to understand when our economy is 
already not generating jobs, and then the Administration says 
it looks for ways to limit unnecessary or inefficient 
regulations.
    In the interest of more transparency in government and 
sounder regulations, we urge the agency to perform the needed 
studies and analysis and release all other pertinent 
information to stakeholders before going forward with the Tier 
3 requirements.
    Thank you for your time today, and I look forward to your 
questions.
    [The prepared statement of Mr. Greco follows:]

          Prepared Statement of Mr. Bob Greco, Group Director,
    Downstream and Industry Operations, American Petroleum Institute

    Good afternoon. My name is Bob Greco, and I am Group Director of 
Downstream and Industry Operations for the American Petroleum Institute 
(API). Thank you for the opportunity to testify today on overlapping 
and sometimes contradictory fuel requirements facing the refining 
industry. API is a national trade association representing over 480 
member companies involved in all aspects of the oil and natural gas 
industry.

U.S. Refining Is a Strategic Asset

    America's refiners are a strategic asset for the United States, and 
maintaining a viable domestic refining industry is critical to the 
Nation's economic security. The refining industry provides the fuels 
that keep America moving. The industry provides the Nation's military 
with secure, available fuels wherever and whenever they are required. 
In addition, it provides affordable and clean fuels products to 
industries that rely on those fuels to manufacture hundreds of 
thousands of other consumer products that Americans depend on every 
single day.
    Equally as important, U.S. refineries sustain hundreds of thousands 
of good-paying, highly skilled American jobs across the country, in 
addition to the raw material building blocks which support a vast 
number of other American production industries. According to a study by 
Wood MacKenzie, the U.S. refining industry employs or supports the 
employment of over 460,000 jobs in the U.S.
    According to the EIA and all credible studies, the United States 
(and the world) will continue to depend on refining petroleum-based 
products for decades to come in order to meet the increasing energy 
demand. Domestic refineries are competing directly with petroleum 
product imports. Because the refining industry operates on a global 
basis, the U.S. faces the choice of either manufacturing these products 
at home or importing them from other countries. The U.S. refining 
industry already operates in an extremely complex regulatory 
environment. U.S. refiners have invested $112 billion in environmental 
improvements from 1990 to 2008, significantly reducing emissions while 
producing cleaner fuels and improving energy efficiency. Since 2000 
alone, U.S. refiners have spent nearly twice as much on environmental 
improvements as the government and private sector \1\ spent on non-
hydrocarbon technologies. Regulations governing fuel composition, 
greenhouse gases, and environmental standards have an enormous 
financial impact on the refining industry, as do financial controls and 
taxation.
---------------------------------------------------------------------------
    \1\  Excluding expenditures by the oil and natural gas industry.
---------------------------------------------------------------------------
    There are significant and potentially very costly additional 
regulations under development that may take effect over the next five 
years. These regulations include:

      More stringent ``Tier 3'' gasoline standards;

      Refinery controls, including GHG limitations, through new 
NESHAP and NSPS requirements;

      RFS implementation and the impending ``blend wall'';

      Refinery emissions controls to achieve more stringent air 
quality standards for ozone, PM, etc.;

      New EPA requirements for boilers and incinerators (Boiler 
MACT).

    Today I will focus specifically on the proposed Tier 3 gasoline 
standards being drafted by EPA.

Tier 3 Gasoline Proposal

    EPA is developing a ``Tier 3'' rulemaking that would likely reduce 
sulfur levels in gasoline to an average of 10 ppm--a nearly 70 percent 
change from today's already low levels-- while also reducing gasoline 
volatility and, perhaps, other properties. EPA expects to issue a 
proposed rule by the end of 2011 and a final rule in 2012.
    EPA should not issue a Tier 3 proposal without first justifying the 
impacts, costs, and benefits of reducing sulfur and vapor pressure in 
gasoline. Although EPA maintains these changes to gasoline are needed 
to improve air quality and fuel economy, the Agency has not produced 
the justification to back up its claims. At this point, EPA has not 
released the data the agency claims to have already in hand.
    We have studied and believe that further sulfur and vapor pressure 
reductions would not produce benefits enough to justify the potentially 
onerous costs. These could include higher fuel manufacturing costs, 
refinery closures, lost jobs, increased emissions, and increased 
product imports.
    Under the Clean Air Act, EPA has already implemented increasingly 
stringent rules reducing the amount of sulfur allowed in gasoline and 
reducing vapor pressure. For example, the Tier 2 rules have reduced 
sulfur levels in gasoline by 90 percent, from an average of 300 parts 
per million before 2004 to an average of 30 parts per million today. 
EPA has told us that Tier 3 rules would likely require a further 
reduction to 10 parts per million. The Tier 3 changes EPA envisions 
could require refiners to install additional hydrotreating and 
fractionation units, significantly altering their refinery 
configurations and operations.
    Researchers at Baker and O'Brien, Inc., have studied the costs and 
impacts of several Tier 3 scenarios. The study was shared with EPA, 
DOE, and EIA a couple months ago. The Baker and O'Brien work shows that 
the refining industry could face up-front capital costs ranging from 
between $10 billion to $17 billion, with recurring annual operating 
costs in the range of $5 billion to $13 billion.
    As a result, they contend, gasoline manufacturing costs could rise 
between 12 cents per gallon and 25 cents per gallon.
    In addition, between seven percent and 14 percent of total gasoline 
production could be lost. Volume would suffer when sulfur is reduced 
and light end components are removed from gasoline.
    Finally, because the refinery processes needed to reduce sulfur 
content and vapor pressure are also energy intensive, the Tier 3 rule 
could increase refinery carbon dioxide emissions by up to 2.3 percent. 
EPA would thus needlessly put upward pressure on refineries to increase 
their CO2 emissions while separately proposing requirements 
to reduce refinery CO2 emissions. Refineries would also have 
to ensure that increased emission of other pollutants resulting from 
reconfiguring their refineries are properly controlled and permit 
limits maintained.
    Overall, Baker and O'Brien estimate that between four and seven 
U.S. refineries could close, as they would be unable to make or recover 
the required investments in plant equipment and operations necessary to 
comply with the new requirements. This would be in addition to the 66 
U.S. refineries that have closed in the last 20 years. The U.S. 
Department of Energy has identified the cost of compliance with various 
regulations as a part of the economic stress that caused the shutdowns. 
\2\ The regulatory burden of Tier 3 requirements would add to this 
stress.
---------------------------------------------------------------------------
    \2\  U.S. Department of Energy; Office of Policy and International 
Affairs. Small Refinery Exemption Study: An Investigation into 
Disproportionate Economic Hardship March 2011 http://www.epa.gov/otaq/
fuels/renewablefuels/compliancehelp/small-refinery-exempt-study.pdf.

---------------------------------------------------------------------------
Summary

    If America's refining industry is to remain viable, we need a 
regulatory structure that improves our environment while allowing the 
industry to remain competitive in the worldwide market. The domestic 
refining industry's outstanding history of regulatory compliance has 
made U.S. refineries among the cleanest and most efficient in the 
world. The industry remains committed to meeting regulatory 
requirements.
    However, government must adopt a more reasonable approach to 
regulations. For example, it should allow time for existing regulations 
to reach their full effectiveness before adding new layers of 
regulation. The high and very real costs of complying with overreaching 
regulations that have uncertain benefits may weaken the ability of our 
domestic refining industry to compete with foreign refiners.
    EPA's combination of suggested CAFE standards and Tier 3 fuel 
changes, coupled with potential refinery GHG controls, threatens the 
existence of U.S. refinery jobs and products. Domestic refining 
capacity could be reduced, thereby increasing imports and costs.
    Specifically regarding the proposed Tier 3 fuel requirements, EPA 
should complete the long overdue Anti-Backsliding study mandated by 
EISA (and now two years late), finalize and publish its scientific 
justification as soon as possible, and allow stakeholders adequate 
opportunity to review the data and provide input long before the Agency 
proceeds with a proposed Tier 3 fuel rulemaking. EPA should provide a 
credible analysis showing that lowering the vapor pressure or sulfur 
content of gasoline will achieve cost-effective, real emissions 
reductions, and air quality, health and welfare benefits.

    Chairman Harris. Thank you very much.
    I now recognize our next witness, Mr. David Hilbert of 
Mercury Marine.

                STATEMENT OF MR. DAVID HILBERT,

              THERMODYNAMIC DEVELOPMENT ENGINEER,

                         MERCURY MARINE

    Mr. Hilbert. Good afternoon, Chairman Harris, Ranking 
Member Miller, other Members of the Subcommittee. It is a 
pleasure to be here this afternoon. My name is David Hilbert, 
and I am a Thermodynamic Development Engineer from Mercury 
Marine, which is a division of the Brunswick Corporation. I am 
here today to testify on behalf of the NMMA.
    I was the technical leader of a test of E15 blend fuel in 
three different Mercury outboard engines. This was done under 
contract to the U.S. Department of Energy and coordinated by 
NREL.
    The test objective was to understand the effects of running 
a 15 percent ethanol blend on outboard marine engines during 
300 hours of wide-open throttle endurance. Three separate 
engine families were evaluated listed here. Two of each engine 
were evaluated, one being run on E15, the other being run on E0 
or ethanol-free gasoline.
    It is important to note two main effects seen in this test 
of the ethanol-blend fuel. One is that the use of ethanol fuel 
on these engines increases the operating temperature, which can 
reduce the strength of the metallic components. The other is 
that ethanol can cause material compatibility issues with the 
fuel system components due to the chemical interactions.
    So this first slide shows photos of the components from our 
9.9 horsepower test engine with E0 components being on the 
left, E15 on the right. The top photos are the undersides of 
the pistons, and the lower photo is of the connecting rods 
which connect with the pistons. You can see the evidence of the 
heavier carbon deposits which indicates the higher metal 
temperatures on the E15 engine.
    The next slide shows photos of the fuel pump gasket and 
then the mating check valve that it seals against, again, from 
the 9.9 horsepower engines, and in general the E15 gasket shows 
more deterioration, and this occurred to the point where there 
is actually material that transferred from the gasket to the 
check valve that it seals against, indicating that the gasket 
was breaking down as evidenced by the photo in the lower right-
hand corner.
    The next set of images is from the E15-fueled 300 
horsepower supercharged engine, which did not complete the 
entire endurance test on the E15 fuel. The exhaust valve failed 
as shown in the photo at the left, which ended the test. Upon 
disassembly, we found two other valves that were cracked. 
Metallurgical analysis of these valves show that the failure 
was due to the elevated metal temperatures.
    These photos show a comparison of the pistons and 
connecting rods from the 300 horsepower supercharged engines, 
and much like the 9.9 horsepower pistons and connecting rods, 
these components, again, show evidence of higher operating 
temperatures as evidenced by the difference in the carbon 
deposits.
    This last set of images I would like to show you are from 
the 200 horsepower, two-stroke engine that was operated on E15. 
This engine on E15 fuel did not complete the entire endurance 
test. It failed the rod bearing, which destroyed the engine, 
the remnants of which are shown in the upper right-hand corner 
of the screen. The damage was so severe to this engine that the 
root cause of the failure could not be fully identified, but it 
should be noted that two-stroke engines of this architecture 
mix the fuel and the oil and use that mixture to distribute the 
oil throughout the rest of the engine. More testing is needed 
to understand how the ethanol affects this type of lubrication 
system, as it is not well understood at this time.
    So despite the limited nature of this testing, several 
significant issues were identified. This testing was done on a 
small sample of engines running only one operating point. In 
addition to the need for more two-stroke lubrication system 
testing, as I just mentioned, more testing is really needed to 
understand how E15 fuel affects marine engines during other 
operating conditions. Examples of this would include cold 
start, hot restart, acceleration, part throttle, et cetera.
    And another main effect that needs more investigation is to 
understand the effect of the fuel on the engines that are 
stored with fuel in the fuel system over long periods of time, 
which occurs frequently with our engines.
    So what I have presented to you in brief today and what is 
available in the full report are the results of the limited 
testing conducted on three of Mercury's outboard engine 
families. Changes in the fuel formulations and the resulting 
effects on marine engine operability are of high importance to 
assure a safe and reliable fleet of marine engines. This study 
showed how misfueling marine engines currently in use with E15 
may cause a variety of issues for owners and can lead to 
premature engine failure.
    Thank you for allowing me the opportunity to testify today.
    [The prepared statement of Mr. Hilbert follows:]

                Prepared Statement of Mr. David Hilbert,
           Thermodynamic Development Engineer, Mercury Marine

    Good afternoon, Chairman Harris, Ranking Member Miller, other 
Members of the Subcommittee.
    It is a pleasure to be here this afternoon. My name is David 
Hilbert, and I am a thermodynamic development engineer for Mercury 
Marine, a division of the Brunswick Corporation, located in Fond du 
Lac, Wisconsin. Mercury Marine has been a manufacturer of recreational 
marine engines continuously since 1939, and currently makes and sells 
more marine engines than any other manufacturer in the world. I am here 
today to testify on behalf of the National Marine Manufacturers 
Association, which represents over 1,500 boat builders, marine engine, 
and marine accessory manufacturers.
    I was the technical leader of a test of E15 blend fuel in three 
different Mercury outboard engines. These tests were conducted at the 
Mercury Marine test facility in Fond du Lac in 2010-2011 by Mercury 
personnel under contract to the U.S. Department of Energy and 
coordinated by the National Renewable Energy Lab (NREL). The final 
report was released by the Department of Energy in October 2011.
    The objective of these tests was to understand the effects of 
running a 15% ethanol blend on outboard marine engines during 300 hours 
of wide-open throttle (WOT) endurance testing--a typical marine engine 
durability test. Three separate engine families were evaluated. A 9.9 
HP carburated four-stroke engine and a 300 HP supercharged electronic 
fuel-injected (EFI) four-stroke engine represented current products. A 
200 HP electronic fuel-injected (EFI) two-stroke engine was chosen to 
represent the legacy products still in widespread use today. Two 
engines of each family were evaluated. One test engine was endurance 
tested on E15 fuel, while a second control engine was endurance tested 
on ethanol-free gasoline.
    The primary point to remember when considering this test is that 
ethanol, in any blend, is an oxygenator. E10 fuel has 3% oxygen, while 
E15 fuel has 5%-6% oxygen. On a typical marine engine, this additional 
oxygen makes the fuel burn hotter, and the higher temperatures can 
reduce the strength of the metallic components. In addition, ethanol 
can cause compatibility issues with the other materials in the fuel 
systems because of the chemical interaction. I would like to show you 
some photos of the engine components after the endurance testing to 
illustrate the results of the testing.
    We were able to complete the entire 300-hour test running E15 in 
the 9.9 HP engine. Test results indicated poor running quality, 
including misfires at the end of the test. The poor run quality caused 
an increase in exhaust emissions. In addition, there were increased 
carbon deposits in the engine on the underside of the pistons and on 
the ends of the rods indicating higher engine temperatures. You can see 
the difference in the carbon deposits in this photo. Additionally, 
deterioration of the fuel pump gasket was evident, likely due to 
material compatibility issues with the fuel blend. This deterioration 
of the gasket could lead to fuel pump failure, disabling the engine. 
The effect on the gasket is shown here.
    The 300 HP four-stroke supercharged engine did not complete the 
endurance test on E15 fuel. The engine encountered a valve failure 
after 285 hours of endurance testing. As you can see from the photos, 
one valve broke apart, which ended the test, and two others developed 
cracks. I should mention that these are high-quality valves constructed 
of inconel, a high-temperature resistant alloy. Even so, when we did 
metallurgical analysis on this engine, we found that the cause of these 
fractures was deteriorated mechanical strength due to high metal 
temperature. The next photos show a comparison of the pistons and 
connecting rods from the Verado engine, also indicating that the E15 
test engine operated at elevated temperatures.
    The 200 HP two-stroke engine using E15 fuel also failed to complete 
the endurance test. It failed a rod bearing at 256 hours of testing, 
resulting in catastrophic destruction of the engine. You can see the 
remains of the bearings in the photos. There was so much damage to the 
engine that we could not determine the exact cause of failure. It is 
important to note that two-stroke engines of this architecture mix the 
fuel and the oil and use that mixture to distribute the oil to the 
critical interfaces such as the bearings and cylinder walls. Ethanol 
may have an effect on the dispersion or lubricity of the oil as it is 
mixed with the fuel. More testing of such engines is necessary to 
understand the ramifications of an E15 blend fuel on this type of 
lubrication system, as it is not well understood at this time.
    Despite the limited nature of this testing, several significant 
issues were identified. The testing was done on a small sample of 
engines running one operating point, wide-open throttle. In addition to 
the need for more two-stroke lubrication system testing, more testing 
is needed to understand how E15 fuel affects marine engines during 
other operating conditions. Examples would include starting, 
acceleration/deceleration, part-throttle operation, and the effect of 
E15 fuel on marine engines that are stored with fuel in the system over 
long periods of time, which occurs regularly with our engines.
    What I have presented to you in brief today--and what is available 
at the NREL Web site in full--are the results of the limited testing 
conducted on three of Mercury's outboard engine families. Changes in 
fuel formulations and the resulting effects on marine engine 
operability are of high importance. This study showed how misfueling 
marine engines currently in use with E15 may cause a variety of issues 
for owners and can lead to premature engine failure. Thank you for 
allowing me the opportunity to testify today.
    To see the full report from the testing performed by Mercury Marine 
on outboard marine engines, please visit the following Web site: http:/
/www.nrel.gov/docs/fy12osti/52909.pdf.
    To view the companion report from the testing performed by Volvo 
Penta on sterndrive/inboard marine engines, please visit the following 
Web site: http://www.nrel.gov/docs/fy12osti/52577.pdf.

    Chairman Harris. Thank you very much, and finally I 
recognize our final witness, Mr. Jack Huttner, from Gevo.

                 STATEMENT OF MR. JACK HUTTNER,

                   EXECUTIVE VICE PRESIDENT,

           COMMERCIAL AND PUBLIC AFFAIRS, GEVO, INC.

    Mr. Huttner. Thank you. Good afternoon, Mr. Chairman and 
Ranking Member Miller and Members of the Subcommittee. My name 
is Jack Huttner, Executive Vice President for Commercial and 
Public Affairs of Gevo, and I appreciate the opportunity to be 
here today.
    Gevo is a Colorado-based renewable chemicals and advanced 
biofuels company. We are developing cost-competitive biobased 
alternatives to petroleum and have 56 million gallons of 
production under development for 2012. We are a unique player 
in a number of ways that might add interesting insights for 
today's discussion. We do not fit neatly in either the biofuels 
or the refinery camps.
    We make isobutanol, which is a four-carbon alcohol. We make 
it in ethanol plants that we retrofit with our technology. 
Isobutanol can be easily converted using existing refining and 
petrochemical processes into gasoline, diesel, jet fuel, and 
chemicals like synthetic rubber. In short, Gevo combines 
advanced biotechnology and traditional chemistry to make a 
platform hydrocarbon molecule.
    So what kind of company are we after all? Well, we think we 
are something new, a harbinger of an energy future where 
barriers and boundaries between the agricultural and petroleum 
supply chains disappear. Welcome to the world of drop-in 
biofuels. Made from biomass but formed into end products using 
chemistry, drop-in biofuels require no flex fuel vehicles, 
special-blended pumps, or new pipelines.
    Gevo has been able to work across the industry frontiers 
here in Washington. For example, I am Vice Chairman of the 
Advanced Biofuel Association and sit on the Boards of Bio and 
Renewable Fuel Association. We are also associate members of 
NPRA and SIGMA, and since we use starch from corn as one of our 
carbon sources, we are also actively involved with the Corn 
Growers Association. We get to see all sides of the energy 
debate.
    I want to state up front that Gevo supports the RFS2 and 
stands ready to partner with Congress, the EPA, and our other 
stakeholders to assure its success. RFS2 is the most 
significant federal policy to spur the advanced biofuel 
industry. The program has helped create many opportunities for 
our company and our peer group companies, including the five 
that have recently become publicly traded.
    We are all growing, adding jobs, and contributing to 
reduced fossil fuel use and petroleum imports. We salute the 
EPA for their efforts to implement the important program.
    There are some aspects of policy and regulation that do 
present challenges to the adoption of advanced biofuels. This 
is understandable because these policies were established when 
ethanol was the only available biofuel, a time before the era 
of cost-competitive drop-in biofuels became possible.
    Technology has evolved over these last 10 years, and a new 
advanced biorefinery industry has developed. We need to look at 
our policy and regulatory framework with fresh eyes in order to 
realize its promise.
    I would like to just highlight one issue today to 
illustrate a challenge directly related to these conflicts and 
unintended consequences, subject of today's hearing. That is 
the issue of co-mingling, blending E10 gasoline with biobutanol 
or other advanced biofuels at retail gasoline stations. When 
the Clean Air Act was written, ethanol was the only available 
biofuel. So the act granted gasoline containing between nine 
and 10 percent a waiver to exceed evaporative emission 
guidelines by one pound of pressure, known as Reid Vapor 
Pressure or RVP.
    This is a problem actually for Gevo and other biofuel 
producers. If you blend E10 gasoline with butanol, which has a 
very low RVP by the way the ethanol content is diluted below 10 
percent, and thus, the fuel blended with biobutanol would, 
therefore, lose that one pound waiver, even though the fuel 
dispense would actually and could probably have a lower RVP 
than E10.
    Per the Clean Air compliance point of view, this doesn't 
make much sense. We should be able to find a way to allow the 
commingling of E10 and biobutanol so that the new biofuel could 
enter the market to lower evaporative emissions and contribute 
to cleaner air. We believe the EPA has the flexibility to 
address this issue, and we are currently in a very positive 
dialogue with them to resolve it.
    Writing federal statutes and regulations with only ethanol 
in mind made sense in the past because there were no other 
available biofuel additives for gasoline, but that will be less 
and less true as time goes on. Many advanced biofuel 
manufacturers, including Gevo, are seeking to enter the 
Nation's gasoline supply, and we all need a policy and a 
regulatory environment that is open to innovation and new 
technology and lets the market reward those advanced biofuels 
based on their energy content, their emissions profile, and 
their compatibility with all engines and existing 
infrastructure.
    So, in summary, we believe biofuels policy and regulation 
should create a level playing field for all biofuels and that 
the market should be empowered to choose those that have the 
best performance and price characteristics.
    Thanks again for inviting me, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Huttner follows:]

   Prepared Statement of Mr. Jack Huttner, Executive Vice President,
               Commercial and Public Affairs, Gevo, Inc.

    Good afternoon, Mr. Chairman, Ranking Minority Member Miller, and 
Members of the Subcommittee. I am Jack Huttner, the Executive Vice 
President for Commercial and Public Affairs for Gevo, Inc. Gevo 
appreciates the invitation to testify at this hearing today on the 
``Conflicts and Unintended Consequences of Motor Fuel Standards.''
    Gevo is a Colorado-based renewable chemicals and advanced biofuels 
company. We are developing biobased alternatives to petroleum-based 
products. We are a unique biofuels player in a number of ways--ways 
that might add some interesting insights into this discussion. First of 
all, we make isobutanol, a four-carbon alcohol, via fermentation, but 
it can be also be made from petroleum. Does that make us a biofuel 
company? Biobutanol can be easily converted using known refining and 
petrochemical process into gasoline, diesel, jet fuel, and chemicals 
like synthetic rubber. We are also building a processing unit in Texas 
to make hydrocarbons. Does that make us a refinery company? Besides 
combining advanced biotechnology and traditional chemistry, to confound 
matters further, we also retrofit current ethanol plants to make 
isobutanol.
    So, what are we in the end? Are we a biofuel company, a chemical 
company, a jet fuel producer, or what? Actually, we think we are 
something new, a harbinger of a new energy future where barriers and 
boundaries between the agriculture and petroleum supply chains 
disappear. Welcome to the world of drop-in biofuels, made from biomass 
but formed into end products using chemistry. Drop-in biofuels like 
biobutanol work well in small engines, marine engines, and automobile 
engines. It requires no flex fuel vehicles or special blender pumps. It 
can be transported through existing petroleum pipelines so no new 
transportation or fueling infrastructure is needed.
    There are advantages to early innovators like Gevo and some 
disadvantages. Let's start with the advantages. First of all, we get to 
work across the frontiers with all sectors and this is particularly 
true here in Washington. For example, I am vice chairman of the 
Advanced Biofuels Association and sit on the boards of the 
Biotechnology Industry Organization and the Renewable Fuels 
Association. But, we are also active associate members of the National 
Petrochemical and Refiners Association and the Society of Independent 
Gasoline Marketers of America. And, since we use the starch from corn 
as one of our carbon sources, we also are actively engaged with the 
National Corn Growers Association. We get to see all sides of energy 
policy. It is an exciting and challenging place to be.
    But, there are some disadvantages to go along with this ``neither 
fish nor fowl'' position. Chief among them is developing our various 
business segments in a policy and regulatory environment that was 
crafted before the era of cost-competitive drop-in biofuels became 
possible as they are becoming today. When ethanol was the only 
commercially viable biofuel, it was only natural that biofuel policy 
assumed that would always be the case. But technology has evolved over 
the last decade and a new industry has developed--advanced 
biorefineries.
    Gevo is retrofitting its first ethanol plant to make biobutanol in 
Luverne, Minnesota. It is scheduled to come online in the first half of 
2012 and is expected to have the capacity to produce 18 million gallons 
per year of biobutanol. About six months later, our second ethanol 
plant conversion, in Redfield, South Dakota, is scheduled to be 
completed, adding an expected additional 38 million gallons per year of 
biobutanol production capacity. By 2015, we plan to have approximately 
350 million gallons of biobutanol production capacity from about nine 
plants across the nation.
    We also recently announced a contract to supply the U.S. Air Force 
with blends of kerosene made from isobutanol and participation in a new 
project to develop cellulosic biojet technology.
    Gevo is exactly the type of company, and biobutanol is exactly the 
type of advanced renewable fuel, that Congress was trying to encourage 
when it enacted the revised Renewable Fuel Standard (RFS) as part of 
the 2007 energy bill. In 2006, Gevo did not exist as a company. This 
year, we have over 110 employees in three states. We are hiring now and 
expect to continue expanding by 25% or more for the next several years.
    Gevo supports the 2007 revisions to the RFS and stands ready to 
partner with Congress and interested stakeholders in assuring its 
successful implementation. The RFS2 program represents the most 
significant federal level policy to encourage the development of an 
advanced biofuels industry in the United States. We salute the EPA for 
their efforts in support of this program. The 2007 RFS2 program helped 
to create many opportunities for our company and we will continue to 
work hard to take advantage of those opportunities.
    Gevo continues to face challenges as well, including some that 
relate directly to the ``conflicts'' and ``unintended consequences'' 
that are the subject of today's hearing. Each of these challenges can 
be resolved in a positive manner without direct congressional action, 
as long as we can all work collaboratively on the congressional goals 
for the RFS2 program. To that end, we are currently working in a 
constructive and positive manner with EPA to create a smooth regulatory 
framework for the deployment of drop-in biofuels.
    One such challenge is the issue of commingling--blending E10 with 
biobutanol or other second-generation biofuels at retail gasoline 
stations. This challenge relates to the issue I mentioned earlier, 
namely, when the Clean Air Act was written, ethanol was the only 
biofuel available. So, the Clean Air Act granted gasoline containing 
between nine and 10 percent ethanol a waiver to exceed the evaporative 
emission guideline by one pound of pressure, known as Reid Vapor 
Pressure or RVP. This is a problem for Gevo and producers of some other 
biofuel components. If you blend a gasoline containing butanol with 
E10, the ethanol content is diluted below 10% in the underground 
storage tank and therefore loses the one-pound waiver, even though the 
fuel dispensed would likely have a lower RVP than E10. From a clean air 
compliance point of view, we should be able to find a way to allow the 
commingling of E10 and butanol so that a new, lower RVP biofuel can 
enter the market, lower evaporative emissions and contribute to cleaner 
air. We are currently in the early stages of discussion with the EPA 
and hope to resolve this issue.
    A second challenge faced by Gevo and other advanced biofuel 
manufacturers is connected with EPA's proposal for new motor vehicle 
tailpipe emissions standards, expected early next year. These so-called 
``Tier 3'' standards may include, among many other provisions, a change 
in the test gasoline used by EPA and motor vehicle manufacturers to 
certify that engines meet emissions standards. Since the 1960s, EPA has 
mandated that this ``certification fuel'' be pure gasoline without 
biofuel additives--in other words, E0. There is the possibility that 
the new Tier 3 rules will stipulate E15 as the new certification fuel.
    In a vacuum, this change from E0 to E15 may seem innocuous. After 
all, E10 currently is prevalent across the Nation, and EPA recently 
approved the use of E15 in certain motor vehicles. However, this 
proposal raises significant concerns to Gevo and other biofuels 
manufacturers. If adopted, all engine manufacturers will ``tune'' their 
engines to that fuel so they can meet emission standards. This will 
likely further establish ethanol as the presumptive biofuel additive.
    Writing federal statutes and regulations with only ethanol in mind 
made sense in the past, because there were no other viable biofuel 
additives for gasoline. But that will be less and less true as time 
goes on. Many advanced biofuel manufacturers, including Gevo, are 
seeking to enter into the Nation's gasoline supply in the coming months 
and years, and we need a policy and regulatory environment that is open 
to new technologies and lets the market reward advanced biofuels based 
on their inherent energy content, emissions, and engine compatibility 
characteristics.
    Congress did an admirable job in 2007 of drafting a revised RFS 
program that is technology neutral. A central focus of the RFS2 program 
was technology neutrality--allowing competing biofuel pathways to 
compete for market entry in a manner that is not biased by federal 
regulations. Congress drafted the RFS2 program in 2007 to avoid picking 
``winners and losers'' among different biofuels technologies. EPA 
should do the same and fashion rules that embody the same intent and 
outcome to the greatest extent possible. We look forward to working 
with the EPA and Congress to assure that the implementation of 
regulations creates a level playing field for all advanced biofuels.
    Thank you again for inviting me to appear at this hearing today. I 
would be pleased to answer any questions you may have.

    Chairman Harris. Thank you very much. I thank the panel for 
their testimony. Reminding Members the Committee rules limit 
questioning to five minutes.
    The Chair at this point will open the round of questions, 
and I recognize myself for the first five minutes.
    Ms. Oge, looking through your testimony, you claim a pretty 
amazing amount of hospital visits prevented and millions of 
cases of respiratory problems including bronchitis and asthma. 
I have asked a previous witness from EPA to actually show me 
some of that data, and they were not forthcoming. So I am going 
to just tell you right upfront I am going to request that 
information from you as well, and I hope you are more 
forthcoming than others from the EPA.
    Now, Ms. Oge, if the RFS did not exist, would, in fact, EPA 
be pursuing stricter limits on sulfur contents and fuel 
volatility as part of its Tier 3 rulemaking?
    Ms. Oge. Absolutely. Let me go back and remind us what--
when did we start thinking about Tier 3 until the previous 
Administration in 2008, a new standard was set to .075 parts 
per million. As part of the Regulatory Impact Analysis that the 
agency did at that time in 2008, we consider what we are 
calling today the Tier 3 Program. It is very typical for EPA 
when we establish public health standards to evaluate cost-
effective ways that we can enter at the national level. So we 
get in a way that will reduce costs for localities and States 
so we don't have to force controls at the local and State level 
that can be very expensive.
    So what we are calling Tier 3 today, which is a systems 
approach of reducing sulfur from gasoline because sulfur 
poisons catalysts and prevents catalysts from doing their job, 
and at the same time reduce emissions from cars. So the Tier 3 
effort started the thinking back in 2008.
    Now, in the meantime, we have been working with the State 
of California as they are moving forward to address car 
standards and, as you probably know, California has a low 
sulfur fuel, so they do have a 10-parts-per-million cap of 
sulfur so they are able to move forward with the standards. In 
order to have a 50-state program across the country and help 
areas that cannot meet today's existing ozone standard, which 
is about 55 areas across the country, we need to have clean 
sulfur to enable both the new technologies, but at the same 
time by lowering the sulfur level from 30 parts per million to 
lower, you can get significant reductions of nitrogen oxides 
and improve air quality across the board from the existing 
fleet.
    Chairman Harris. Okay. Can the EPA demonstrate that the 
ozone National Ambient Air Quality Standards can't be met 
without the fuel property reductions required by Tier 3?
    Ms. Oge. In 2008, the Agency looked at a number of 
strategies including Tier 3. We believe Tier 3 will be one of 
the most cost-effective ways that the Agency can undertake in 
order to reduce potential access at the State and local level, 
going to small facilities where the costs on reducing nitrogen 
oxide could be significantly higher.
    As part of our proposal we are going to lay out the cost 
effectiveness of the actions that we are going to take, both 
for cost and reducing sulfur in gasoline.
    Chairman Harris. Okay. Mr. Greco, Mr. Hilbert showed some 
pretty interesting pictures of the marine engines from the use 
of E15, pretty worrisome, actually. In your view does the final 
misfueling label for E15--is that going to solve the problem in 
not getting that fuel into those engines?
    Mr. Greco. We would say it is insufficient to do that. We 
submitted comments to EPA during the development of that label 
and feel that they were not accepted, and EPA, in fact, went 
with a label that we feel is less sufficient for that. So we 
have our concerns with the current label as finalized.
    Chairman Harris. Well, let me follow up a little bit on a 
similar topic. In October, Ms. Oge is quoted as saying the EPA 
has, ``held very productive discussions with both car companies 
and fuel providers,'' about the upcoming Tier 3 standards.
    Now, do you agree with her characterizations of EPA's 
outreach to your----
    Mr. Greco. I am hearing a different story from my members 
who have met with Ms. Oge. We feel that--in our discussions 
there has been unanimity about the concerns that we have raised 
today in our testimony about the costs, the impacts on jobs, 
and energy security from this. And there is a united view of 
that amongst the refining industry.
    Chairman Harris. Ms. Oge, that doesn't leave much doubt 
about where the industry stands, and they are the fuel 
providers. What do you define as a very productive discussion? 
I am not sure.
    Ms. Oge. That is a good question.
    Chairman Harris. If the fuel providers come in and say 
unanimously, look, this isn't practical, this won't work, what 
was the product of that? Because you used a very specific word, 
very productive discussion.
    Ms. Oge. Well, first of all, I believe that the discussions 
were very productive and----
    Chairman Harris. And that is my question: define 
productive.
    Ms. Oge [continuing]. Let me define productive. Starting 
last February, I took my team, and I went to all the 
refineries, most of the refineries. We went to Texas, to 
Kansas, California. So to me the fact that EPA spends hours 
listening to the regular community, you know, we didn't invite 
them to come to us. We went and visited with them.
    So I feel that what we heard from the industry was very 
productive, because that is how we are going to design the 
program. I think the program that we are designing and we 
haven't proposed anything. The Administrator has not proposed 
any standards, we haven't sent the proposal to OMB, so I think 
for the industry to say that our discussions were not 
productive, it is unfortunate, because they don't know how 
those discussions are forming the policy that the agency is 
going to recommend.
    So I would strongly suggest in my mind productive doesn't 
mean we agree on everything. Productive is that the EPA is 
listening carefully, and the industry was offering very 
important information, and we need it on a one-on-one basis 
with each of the refineries rather than meeting with the 
association where they could not disclose confidential 
information.
    So we have confidential information, I think, that 
discusses we are very productive, and when the proposal is 
going to go out, I think the industry is going to realize that, 
indeed, those discussions that we had with individual refiners 
have ended in a program that is going to be very flexible and 
cost effective.
    Chairman Harris. Okay. I guess people can disagree.
    Mr. Miller.
    Mr. Miller. Mr. Chairman, before I begin my testimony, I 
would like to move into the record. Mr. Costello could not be 
here, but he wanted to introduce into the record a letter from 
Virginia Dale, Dr. Virginia Dale, the director of the Center 
for Bioenergy Sustainability at Oak Ridge National Laboratory. 
The letter provides some helpful comments on the NRC report.
    Chairman Harris. Sure. I would note that the representative 
of Oak Ridge National Laboratory has informed us the letter 
from Dr. Virginia Dale, despite appearing on Oak Ridge National 
Laboratory letterhead, reflects her views as a member of the 
National Academy's biofuels panel and does not represent the 
views of the lab on the issue. Well, you laugh, but that is an 
important point, because you know when you write on 
Congressional letterhead, it has to be--you are representing 
the U.S. Congress, and you know, we have strict rules. But with 
that entered in the record here, I have no objection to the 
letter, just with that statement from Oak Ridge.
    [The information may be found in Appendix 2.]
    Mr. Miller. Thank you. Beginning my five minutes, Mr. 
Huttner's testimony was far more conciliatory towards the EPA 
than some of the majority witnesses in this Committee. I don't 
think he actually used the term very productive, but he seemed 
to suggest in his testimony that you were having useful 
conversations and that you were willing to talk to them.
    And both Mr. Huttner and Dr. Kesan mentioned a specific 
regulatory difficulty of blending E10 with biobutanol or other 
advanced fuels, and I do understand that there are some 
regulatory obstacles to the introduction of biobutanol to the 
marketplace.
    First, do you agree that biobutanol is a promising drop-in 
fuel, and assuming that those new fuels are able to meet all 
Clean Air Act standards, could the obstacle that Dr. Kesan and 
Mr. Huttner referred to be overcome through your procedures? 
Are you aware of the specific blending issue?
    Ms. Oge. Thank you, Mr. Miller. First of all, let me say 
that isobutanol or biobutanol is probably one of the most 
promising fuels because what it is it is a drop-in fuel, so 
actually you--it becomes part of the refining product so you 
don't have to blend it at the retail stations, so there are a 
lot of issues with infrastructure and so forth that isobutanol 
doesn't have. So, indeed, it is a very promising fuel.
    We are having productive discussions with a company, 
another company----
    Mr. Miller. Very productive or just productive?
    Ms. Oge. Very--I want to underline very productive.
    Mr. Miller. All right.
    Ms. Oge. And I think this is--you have raised very 
important issues because clearly when the Clean Air Act was 
drafted, there were different issues that Congress was 
intending at the time. So we are working very closely with the 
companies so that we are capable of finding pathways to allow 
this promising fuel in the marketplace.
    Mr. Miller. Okay. Dr. Kesan, I think that Mr. Huttner used 
the term flexibility. Since you are on the university faculty, 
I think you used the term regulatory innovation, but it seems 
to be the same concept, and that had happened in the past to 
meet Clean Air requirements to allow new fuels on the 
marketplace.
    How has that flexibility or regulatory innovation helped 
meet renewable fuel standards and other standards required by 
the Clean Air Act?
    Dr. Kesan. I agree with Ms. Oge and with Mr. Huttner that 
this is a really good opportunity, and isobutanol has some 
significant potentials. What I suggest in the written article 
that you are referring to is that if you are concerned about a 
particular oxygenate percentage by weight as being something 
that you have approved in the past, if that is the underlying 
scientific concern that you have sort of capped it at a 
particular percentage, 2.7, 3.7, whatever it is, to the extent 
that you can actually blend an equivalent of butanol that 
results in the same oxygenate percentage by weight, for 
example, then clarifying that and clarifying precisely what 
kind of blending percentages you can have would help a lot. It 
would help a lot because there is--that is an area of 
uncertainty, and there have been, as I outlined in the article 
you mentioned, there are sort of ways that you can do this, and 
the EPA has done that with various sort of substantially 
similar rulemaking in the context of methanol and other places.
    And so I do think that there is an opportunity to capture 
the benefits offered by a fuel that might satisfy the advanced 
biofuel threshold of, you know, 50 percent GHG reductions and 
which is an important objective in RFS2, at the same time meet 
all the concerns, you know, environmental and otherwise.
    Mr. Miller. Mr. Huttner, this was your issue. Do you have 
anything to say about the flexibility or the regulatory 
innovation of EPA in addressing this regulatory obstacle?
    Mr. Huttner. No. Thank you, and I appreciate the remarks of 
the other witnesses, and I would say that for a new and 
emerging company like Gevo bringing innovation and new jobs to 
the economy, representing the advanced biofuel sector, which is 
a new sector trying to work its way with the petroleum and the 
existing ethanol industry, engaging with the regulatory and 
policymakers early on in our activity is an important kind of 
value that we have as a company. Only in that way can we really 
assure that we can find our way into the market with all the 
big guys.
    So as a newcomer one of those things that we do is try to 
go out early and meet with people.
    Mr. Miller. My time has expired.
    Chairman Harris. Thank you. The Chair now recognizes the 
gentleman from California, Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman. I wasn't sure 
whether you were going to call myself or my colleague from 
California first.
    So, Mr. Williams, in your testimony you provided some 
achievements of the members of the NPRA in their commitment to 
clean air and clean water. Very commendable. You mentioned all 
have been outstanding, have an outstanding record of complying 
with the EPA, have provided hundreds of billions of dollars of 
investment to dramatically reduce the levels of sulfur in 
gasoline to 90 percent and diesel to 90 percent, too.
    These are excellent achievements. Let me ask you a simple--
two simple yes, no questions. Would your members have done this 
without federal regulation and enforcement?
    Mr. Williams. Some of the reductions, yes, I believe--we 
are not saying we are opposed to all regulations. The point of 
my testimony is that we are getting to a point where, you know, 
we would consider it to be almost a tipping point. You have 
lots of overlapping and conflicting regulations that are 
creating significant challenges for our industry, and that is 
one of the things I said in my written testimony and my opening 
statement was that, you know, we support sensible regulations. 
It is just a matter of measure, and it is a matter of whether 
or not these things actually can work together.
    Mr. McNerney. How many jobs were lost in that process?
    Mr. Williams. Well, they did have some costs. If you look 
at the chart in the back of my testimony, it isn't my chart, it 
is the Department of Energy. There were 66 refinery closures in 
the last 20 years because of some of those regulations, and 
those regulations obviously weren't the only factor. There were 
a lot of factors, but they were a significant factor according 
to DOE. I don't have specific job numbers on that, but again, 
the DOE chart----
    Mr. McNerney. So those refineries were closed before 2004?
    Mr. Williams. Those refineries, some of them closed after 
2004, and again, the chart lists just since 2008, there have 
been about three refinery closures. There was an announcement 
recently that two companies unfortunately feel they are going 
to have to close three more refineries if they can't find a 
buyer over the next year.
    Mr. McNerney. Well, at that point in your testimony, you 
changed and stated that you see no evidence that further 
reductions would improve future vehicle technology, but I would 
like to submit for the record, Mr. Chairman, two records, one 
from the Association of Global Auto Manufacturers and the other 
from the Alliance of Automobile Manufacturers who disagree with 
that in that the amount of sulfur still is damaging to their 
catalytic converters.
    Chairman Harris. Without objection.
    [The information may be found in Appendix 2.]
    Mr. Williams. Would you like me to comment on the----
    Mr. McNerney. Sure.
    Mr. Williams [continuing]. Auto Alliance letter? We have 
obviously seen that letter, too, and we haven't seen any 
evidence that current sulfur levels are actually deteriorating 
catalysts. There are obviously a lot of cars out on the road 
right now running on existing levels of sulfur in gasoline.
    Not only that but there are at least 19 vehicle models that 
can meet Tier 3 vehicle standards and run off Tier 2 sulfur 
gasoline, and they are not expensive models. They are things 
like the Chevy Malibu and the Ford Focus. So it----
    Mr. McNerney. Well, I am glad it is your opinion, but the 
two letters from the Automobile Manufacturers and the testimony 
of Ms. Oge contradict that. So I don't think it is a clear case 
there is no improvement still, and I think that is an area that 
we need to be diligent to move forward in.
    Let me ask what is it that is keeping the Association back 
from wanting to do additional refining. Is it the cost? Is it 
the jobs?
    Mr. Williams. Additional refining or additional regulatory 
measures?
    Mr. McNerney. Well, refining additional sulfur out of 
gasoline?
    Mr. Williams. Yeah. I mean, I think, you know, my colleague 
over at API highlighted some of the costs associated with those 
reductions and the Tier 2 reductions started in 2007, but 
weren't finalized until--or started in 2000, I am sorry, and 
weren't finalized until 2004, and 2007. EPA recognized those 
would be onerous, which is why you had the lead time.
    Mr. McNerney. Well, Mr. Greco indicated a 12 to 25 cent per 
gallon cost, but the National Association of Clean Air agencies 
state that the cost would be less than one cent. So, again, I 
don't see any verification for these statements that 
improvement is not going to hurt the economy and that the cost 
is going to be that drastic.
    Mr. Greco. We would be happy to go over our study with you 
at your convenience. We just got the NACA study like you did, 
so we did not have the benefit of looking at it. We did model 
112 refineries nationwide. So we stand by our study and feel it 
is very robust and credible.
    Mr. McNerney. Well, I think the statement of Dr. Kesan that 
uncertainty is the problem in terms of cost production. So 
putting regulations in place that allow refineries and 
producers to plan ahead for 10 years and meet these levels is 
going to be much more cost effective than waffling back and 
forth on these issues, especially when the health and safety of 
our children is involved.
    Thank you, Mr. Chairman.
    Chairman Harris. Thank you. The Chair now recognizes the 
gentlelady from California, Ms. Woolsey.
    Ms. Woolsey. Thank you very much.
    First of all, Mr. Williams, I am just going to not repeat 
what my colleague just asked you. Tell me what did the NPRA sit 
here and say when they were deciding on the first tier of 
regulations? Were you for it, did you know it was going to be 
okay, what did you say?
    Mr. Williams. Which--are you talking about Tier 2 
specifically?
    Ms. Woolsey. Tier 2.
    Mr. Williams. Tier 2. Yeah. Our association industry 
supported reductions in sulfur in gasoline. We did have some 
concerns about the extend of the reductions and some of the 
time frames.
    Ms. Woolsey. Uh-huh.
    Mr. Williams. And I can get you more details on that----
    Ms. Woolsey. Okay. Well, I just----
    Mr. Williams [continuing]. Prior to my time----
    Ms. Woolsey [continuing]. Want to be clear.
    Mr. Williams. But we did support some cuts in sulfur.
    Ms. Woolsey. Yeah. Right. Experience doesn't always support 
being against change because then we learn, oh, my, that was a 
success.
    Mr. Greco, on the 25 cents a gallon increase, what industry 
in this country has higher profits than yours? Why would that 
25 cents that it is going to cost to clean our air fall on the 
shoulders of the consumer?
    Mr. Greco. Well, first that 25 cents is a manufacturing 
cost. I cannot say how much of that cost would get passed onto 
the consumer.
    Regarding your other statement, if you look at the earnings 
statements of the various member--various companies, our 
profits on a per dollar sales basis are actually in line if not 
a little lower than many companies; many high-tech companies 
based in California, for example, have significantly higher 
profits than oil companies.
    That being said, we have invested as my testimony mentions, 
over $100 billion in the past 20 years on environmental 
improvements on making cleaner fuels, and we have seen the 
benefits of that. As Mr. Williams said, our air is 
significantly cleaner than it was 20 years ago. Now, that is a 
combination of cleaner vehicles enabled by cleaner fuels. We 
are just saying that at this point we are seeing diminishing 
returns from those changes.
    Ms. Woolsey. Okay. Well, thank you very much on that. It is 
my understanding that ethanol makes up 10 percent of the U.S. 
daily gasoline demand, about 10 percent. If ethanol were not 
part of our fuel system, how would that 10 percent of the fuel 
supply be filled, and do you think it would cost consumers more 
or less if we don't have ethanol?
    I will start with you, Mr. Greco, and Mr. Williams, I would 
like you to answer that and then I am hoping Ms. Oge will 
answer it also.
    Mr. Greco. I mean, I can't predict the cost in that case. 
We find----
    Ms. Woolsey. What would it be if it wasn't ethanol?
    Mr. Greco. It would be other components of the hydrocarbon. 
It would be lighter-ends gasoline. It depends on each refinery. 
Each refinery had to make those investment decisions and 
blending decisions based on their unique operation. So there is 
not a single answer that I can give you.
    Ms. Woolsey. Okay. Mr. Williams, do you have an idea of 
what would fill that need?
    Mr. Williams. So just for clarity, you are asking what the 
cost would be if there was more ethanol in----
    Ms. Woolsey. No, if there was less. If we took away the 
ethanol.
    Mr. Williams. So if you had less ethanol----
    Ms. Woolsey. Less ethanol. No ethanol.
    Mr. Williams [continuing]. What would the cost be, and you 
know, I would echo Mr. Greco's comments that we cannot predict 
price; however, we can say that ethanol has lower energy 
content than a gallon of gasoline, so there would be an 
efficiency boost. EPA has already said in a public letter that 
there is a mild, a fuel economy penalty, fuel efficiency 
penalty.
    Ms. Woolsey. Well, let us have Ms. Oge, if you would like 
to respond to that.
    Ms. Oge. We would not have 10 percent ethanol. I think you 
would have some ethanol because ethanol improves the octane of 
gasoline, so it is a very important property in gasoline, so 
you would have some ethanol, and then you would have other 
aromatics, other compounds that are gasoline-based, compounds 
that currently have ethanol. For example, ethanol reduces the 
amount of benzene and aromatics.
    So, again, that is somewhat less toxic substances in the 
gasoline make-up.
    May I speak a little bit about the price issue?
    Ms. Woolsey. Yes.
    Ms. Oge. So, you know, the API study basically makes 
certain assumptions of what EPA is going to do. EPA has not 
declared what we are going to do as part of Tier 3. Actually, 
our Tier 3 efforts are concentrating on reducing sulfur less 
than 30 parts per million.
    So the NACA report is more close, the stated report of what 
EPA is planning to do. API study made a lot of assumptions of 
actions that EPA is going to take as part of Tier 3, but that 
is not accurate.
    Ms. Woolsey. Thank you.
    Mr. Greco. Can I respond to that?
    Ms. Woolsey. My time is up. I would be glad to have them 
respond. Mr. Chairman, it is up to you.
    Chairman Harris. Sure, Mr. Greco.
    Mr. Greco. Thank you. We made the best assumptions we could 
at the time. It has been a shifting field with EPA as to what 
this target would be. We expect about a 60-day comment period. 
That is probably not sufficient time for us to do a full-blown 
study when we get the proposal, which is why we are asking for 
the study now to see the data and then go to a rulemaking.
    Chairman Harris. Thank you. I now recognize the gentleman 
from New York, Mr. Tonko.
    Mr. Tonko. Thank you, Mr. Chair. Mr. Williams, in your 
written testimony you applaud your industry for its significant 
emissions reductions through compliance with Tier 2 standards, 
which were responsible for a 90 percent reduction in sulfur 
emissions.
    You also claimed no further regulation of sulfur content is 
necessary. It is widely known that there is a harmful effect 
from sulfur emissions that is posed to public health. In fact, 
the National Association of Clean Air Agencies, the Northeast 
States for Coordinate Air Use Management, and the Ozone 
Transport Commission have all come forward in support of Tier 
through regulations, noting the significant impact reduced 
sulfur emissions have on public health.
    So, Mr. Chair, with your permission I would like to ask 
unanimous consent to submit for the record statements from 
these three organizations that I just mentioned.
    Chairman Harris. Could we see them? I don't think they have 
been shared with the Majority staff.
    Mr. Tonko. Certainly.
    Chairman Harris. If you can just keep them----
    Mr. Tonko. Okay.
    Chairman Harris [continuing]. I will rule on that.
    Mr. Tonko. Thank you. Thank you. The goal of the yet-to-be-
proposed Tier 3 standards is to reduce hazardous pollutants in 
order to help States and local air quality agencies reach the 
2008 National Ambient Air Quality Standards requirements. It 
seems to me that we have the technology to further reduce these 
toxic pollutants and achieve our current goals which will help 
reduce respiratory infections and other respiratory illnesses.
    So, Mr. Williams, in your testimony you state that there is 
a minimum benefit to reducing the already minimal amount of 
sulfur emissions from cars. Why do you claim there will be 
minimal benefit to reducing sulfur?
    Mr. Williams. Well, we are already going to continue 
getting reductions based on the Tier 2 standards that, again, 
were implemented in 2004 and 2007. In fact, you mentioned the 
2008 ozone NAAQS. The RIA itself doesn't explicitly say that 
Tier 3 for fuels is needed. It does talk about some catalyst 
technology improvements that could be a potential; however, I 
believe there are about eight new counties that are going to be 
out of attainment with the 2008 ozone NAAQS standard, and those 
counties are actually going to come into attainment with the 
Tier 2 standards before Tier 3 would even be implemented from 
what we preliminarily heard from EPA.
    And, again, there are--you wanted to discuss the vehicles 
earlier. There are Tier 3-capable vehicles that can run on Tier 
2.
    So you continue to see sulfur reductions. It is just a 
matter of we have gone from 300 down to 30 PPM and now we are 
looking to go down to 10, and we didn't go to 30 too long ago. 
Getting back to one of the other points of my testimony, how do 
all these things really interact with, you know, EPA in another 
letter mentioned that the Renewable Fuels Standard could 
actually see some potential emissions increases, and one of the 
reasons for the anti-backsliding study and the Energy 
Independence and Security Act was to assess that, and it was 
pretty clear that Congress said you do the 2008 anti-
backsliding study and then get an assessment of what is going 
to happen to the fuel supply and then what measures might be 
necessary to do any additional work.
    Now we are being told that the anti-backsliding study is 
going to come out at the same time as the Tier 3 regulations. 
So the reaction is happening before there is anything to really 
react to and we have a full understanding of the consequences.
    Mr. Tonko. Ms. Oge, do you have any comments on this 
regard?
    Ms. Oge. Thank you. We--scientifically it is proven that 
sulfur poisons catalysts. It is like back in the '70s when we 
had to remove lead to enable the three-way catalyst.
    So it is not a secret that the higher the sulfur level, the 
more it impacts the effectiveness of a catalyst. California has 
10 parts per million sulfur, Europe, Japan, other countries. We 
have the most advanced automotive technologies. We need a 
better quality for our fuel to enable the catalyst to perform 
to the best potential for those precious metals.
    On the other hand, there is extensive data to show that 
today's cars will benefit by having low sulfur, by reducing 
nitrogen oxides. As a result, cleaner air for 130 million 
people that breathe in healthy air in this country.
    Mr. Tonko. Thank you. When it comes to reducing NAAQS, what 
source, in your opinion, Ms. Oge, is the most cost effective?
    Ms. Oge. We believe that efforts that we are undertaking, 
the Tier 3 efforts, which is to reduce NAAQS, emissions, and 
hydrocarbons from tailpipe emissions and from cars, combining 
it with low sulfur level, would provide some of the cost-
effective strategies for local and State governments to address 
ozone air pollution.
    Mr. Tonko. Thank you. I yield back to Mr. Chair.
    Chairman Harris. Thank you very much. I would also like to 
take this opportunity to ask you--and by the way, we will enter 
those--there is no objection, so we will enter them.
    [The information may be found in Appendix 2.]
    Chairman Harris. I would like to take this opportunity to 
ask unanimous consent to add a few items into the record as 
well. These items are in the public domain and have been shared 
with the minority. The executive summary of the National 
Research Council's report, Renewable Fuel Standard Potential 
Economic and Environmental Affects on U.S. Biofuel policy, the 
National Renewable Energy Laboratory and Mercury Marine report, 
high ethanol fuel endurance, the study of the effects of 
running gasoline with 15 percent ethanol concentration and 
current production outboard four-stroke engines and 
conventional two-stroke outboard engines, the executive summary 
of the Baker and O'Brien study, potential supply and cost 
impacts of lower sulfur, lower RVP gasoline, responses 
requested by Vice Chairman Sensenbrenner on warranty and 
liability concerns about E15 which were sent by BMW Chrysler 
Ford GM, Honda, Hyundai, Kia, Mazda, Mercedes, Nissan, Subaru, 
Toyota, Volkswagon, Volvo, Briggs and Stratton and Mercury 
Marine, statements objecting to EPA's granting of a partial 
waiver for E15 from the Alliance of Automobile Manufacturers 
and the Association of Global Auto makers, and a letter send by 
the Chairman of the Full Committee to Administrator Jackson 
about Tier 3 and EPA's responses.
    Without objection, so ordered.
    [The information may be found in Appendix 2.]
    Chairman Harris. I thank the witnesses for their valuable 
testimony and the Members for their questions. We are going to 
get out on time despite a late start.
    The Members of the Subcommittee may have additional 
questions for the witnesses, and we ask, and we will ask you to 
respond to those in writing. Ms. Oge, I am going to have to ask 
you specifically; the EPA is particularly unforthcoming with 
answers. Other EPA witnesses. So I hope you break the mold on 
that. I will ask you to respond to the questions in writing. 
The record will remain open for two weeks for additional 
comments from Members.
    The witnesses are excused, and this hearing is adjourned.
    [Whereupon, at 3:57 p.m., the Subcommittee was adjourned.]


                                Appendix

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Mr. Brendan Williams, Senior Director of Advocacy,
National Petrochemical and Refiners' Association

Questions Submitted by Chairman Andy Harris

Q1.  In your testimony, you state that NPRA believes that a 
comprehensive cost-benefit analysis would be in the national interest. 
This Congress passed the TRAIN Act to require such an analysis on the 
stationary source regulation. Do you envision similar legislation for 
mobile source regulation? Or should the cost-benefit of the stationary 
regulation include existing and potential regulation on mobile sources 
as well?

A1.  Comprehensive cost-benefit analysis on both stationary and mobile 
source regulations is in the best interest of the Nation. We understand 
that federal and State regulators have a hard time balancing the need 
for effective regulation and economic development. However, the size, 
scope, and cumulative burden of current and impending regulatory 
activity is creating uncertainty and conflicts that burden the domestic 
fuel supply. Legislation like the TRAIN Act is a significant step 
forward to ensure the regulatory blizzard that fuel producers are 
facing does not put them out of business.
    Many mobile source regulations facing fuel producers need to be 
examined because of their tremendous cost, conflicts with other 
regulations, and their potential to negatively impact the economy. 
Considering both mobile and stationary sources together in cost benefit 
analysis is critical, because mobile source regulations can create 
conflicts with stationary source regulations. As discussed in my 
testimony, such is the case with EPA's Tier 3 gasoline regulations, 
which would require new energy-intensive processes that could lead to 
more greenhouse gas (GHG) emissions and come in conflict with EPA's GHG 
regulations under the Clean Air Act. In addition, EPA is moving forward 
with the Tier 3 rulemaking without conducting the anti-backsliding 
study required in section 209 of the Energy Independence and Security 
Act of 2007 (EISA 2007). Not only does this move contradict 
congressional intent, but it could lead to additional regulatory 
conflicts if the study indicates the RFS could complicate Tier 3 in 
some manner (or vice versa). In September, the House passed the 
Kinzinger-Gonzalez Amendment to the TRAIN Act 269-145. The amendment 
would ensure the economic and jobs impacts of EPA's Tier 3 regulations 
are thoroughly analyzed and reviewed. NPRA supported this important 
amendment.

Q2.  How has the inclusion of mandated volumes of com ethanol impacted 
our reliance on foreign oil? What effect will cellulosic ethanol 
production have on fossil fuel use?

A2.  The inclusion of mandated volumes of corn ethanol has not reduced 
U.S. reliance on foreign oil. While such a goal may have been the law's 
intent, the result has been negligible. Refineries still need crude oil 
to produce petroleum products that are not affected by corn ethanol, 
such as home heating oil, diesel, and jet fuel.
    Ethanol was used in the fuel supply before the RFS2 mandate because 
it is a source of octane. Ethanol currently makes up slightly less than 
10 percent of the domestic gasoline supply. It has lower energy content 
than gasoline, resulting in slightly lower fuel economy. It will be 
extremely difficult to blend more than 10 percent ethanol into the fuel 
supply given extensive issues that need to be addressed to overcome the 
``blendwall'' (e.g., the fact that vehicles and infrastructure handling 
the existing fuel supply are not equipped to run on gasoline containing 
more than 10 percent ethanol).
    It is premature to speculate on the effect of cellulosic biofuels. 
Large volumes of these fuels were mandated in EISA 2007. The law 
required the use of 100 million gallons of cellulosic biofuels in 2010 
and 250 million gallons in 2011. Yet despite these mandates, no 
cellulosic biofuels have been produced to date.

Q3.  In addition to the litany of mobile source regulations facing your 
industry, it is my understanding that President Obama has endorsed a 
low carbon fuel standard modeled after the one in California. What 
would be the impacts of a national low carbon fuel standard?

A3.  A national LCFS would essentially create a cap-and-tradelike 
system for the fuel supply, which would likely result in significant 
increases in fuel costs and threaten the availability of supply around 
the U.S. A recent study by Charles River Associates (CRA) shows that a 
national LCFS would raise the cost of transportation fuels by up to 80 
percent within five years and up to 170 percent within 10 years. Along 
with the significant increase in transportation costs, the study shows 
a national LCFS policy could lead to closures of upwards of 50 U.S. 
refineries.
     Furthermore, a national LCFS not only impacts the fuel supply, but 
the economy as a whole, significantly reducing consumer purchasing 
power and the fiscal health of the U.S. The CRA study indicates a 
national LCFS would result in an estimated 2.3 million to 4.5 million 
net American jobs lost by 2025 from baseline levels, with 1.5 million 
losses from the manufacturing sector alone. This study also indicates 
that the average American household's annual purchasing power would be 
reduced between $1,400 and $2,400 by 2025 relative to 2010 levels. In 
addition, studies conclude a national LCFS would lead to a decline in 
U.S. Gross Domestic Product of two to three percent--or $410 billion to 
$750 billion--by 2025.

Q4.  When the U.S. went from leaded to unleaded gasoline, EPA mandated 
fuel nozzles for leaded gasoline differ from those for dispensing 
unleaded gasoline. Despite this difference, there was a 20 percent 
incidence of misfueling. Given this historical figure, what is your 
opinion of the chance of misfueling with E15 for on-road legacy 
vehicles--pre-2001--and off-road engines if the only safeguard is a 
misfueling label?

A4.  NPRA cannot speculate on the likelihood of misfueling with the 
only safeguard being the misfueling label. However, NPRA has 
significant concerns about E15 being sold under the same canopy as 
regular gasoline, as this could result in a greater chance of 
misfueling. In June 2011, EPA introduced an orange and black label to 
make drivers aware of the change to prevent misfueling. We do not feel 
that the label is sufficient to prevent consumers from misfueling.
    EPA's decisions in November of 2010 and January 2011 to grant a 
partial waiver for gasoline containing 15 percent ethanol, known as 
E15, to be sold in the marketplace for cars and light trucks produced 
in model year 2001 or newer are illegal. EPA does not have the 
authority to grant a partial waiver, and this product will most likely 
create significant problems in the marketplace, including enhancing the 
probability of misfueling.
    Several studies show that misfueling with gasoline blends 
containing more than 10 percent ethanol can result in engine damage for 
not only cars and light trucks, but also non-road engines, such as 
lawnmowers and boats. For example, two recent studies by the National 
Renewable Energy Laboratory tested the effects of E15 on marine engines 
and found E15 resulted in problems with engine performance and 
durability, increased fuel consumption, and increased nitrogen oxide 
emissions. Furthermore, increased ethanol blends could damage cars' 
catalytic converters, which were installed to reduce emissions, and its 
corrosive nature could damages fuel tanks and fuel dispensing 
equipment, putting people at greater risk. Even the Government 
Accountability Office (GAO) released a report stating that E15 needs 
further studies due to the potential negative impacts it would have to 
consumers.

Questions Submitted by Ranking Member Brad Miller

Q1.  Please provide your name and employment organization(s).

A1.  Brendan Williams. National Pertochemical & Refiners Association.

Q2.  Are you an officer or employee of, or otherwise compensated by, 
any other organizations(s) that may have an interest in the topic of 
this hearing?

A2.  Yes.

Q3.  If the answer to question 2 is ``yes,'' please specify the 
organization(s) and the nature of your relationship with the 
organization(s).

A3.  NPRA represents virtually every refinery and petrochemical 
facility in the U.S., as well as many companies who have a relationship 
with the refining and petrochemical industries, but do not actually 
possess refineries or petrochemical facilities. A full list of NPRA 
members can be found on our Web site: www.npra.org.

Q4.  in the last three calendar years, including this one, have you 
been a registered lobbyist?

A4.  Yes.

Q5.  If the answer to question 3 is ``yes,'' please list all of your 
client(s) that may have an interest in the subject matter of this 
hearing, and the dates between which you represented that client or 
those clients.

A5.  For a list of all members of NPRA, please visit www.npra.org. I 
have been with NPRA since 2007.

Q6.  if you have worked as an attorney, contractor, consultant, paid 
analyst, or in any other professional services capacity, please provide 
a list of all of your firm's clients who you know to have an interest 
in the subject matter of this hearing. These should be clients that you 
have personally worked with in the past three calendar years (including 
the present year). Provide the name of the client, the matter on which 
you worked, and the date range of that work. If there was a 
deliverable, please describe the product.

A6.  N/A.

Q7.  Please provide a list of all publications on which you have 
received an author or coauthor credit relevant to the subject of this 
hearing. If the list is extensive, the 10 most recent publications 
would be sufficient.

A7.  N/A.
Responses by Dr. Ingrid Burke, Director of the Haub School and
Ruckelshaus Institute of Environment and National Resources, University 
        of Wyoming,
Co-Chair, National Research Council Committee on Economic and
Environmental Impacts of Increasing Biofuels Production

Questions Submitted by Chairman Andy Harris

Q1.  How has increased ethanol production had an effect on the number 
of acres dedicated to corn production in the U.S.? How has our soil, 
water, and wildlife habitat been affected as a result?

A1.  Responses are based on the content of the report NRC report 
Renewable Fuel Standard. Potential Economic and Environmental Effects 
of U.S. Biofuel Policy with references to specific pages.
    The percent of U.S. corn production used for fuel ethanol has been 
increasing since 2001 (Figure 2-3 on p. 37). USDA-ERS data indicate 
that planted acreage for corn has increased in this decade compared to 
the last one.
    As corn acreage increases, greater nitrogen fertilizer is applied 
to achieve desired yields. Thus, there is a tendency for greater runoff 
and loadings to streams and rivers from increased corn production (p. 
234), thereby decreasing water quality. In fact, a recent analysis of 
the National Water Quality Assessment programs found that since 1980 
most of the drainages associated with the Mississippi River increased 
in flow-normalized concentration and flux of nitrate. Many studies 
relate the hypoxic area in July to August to the nitrogen loading 
emanating from the Mississippi River and Atchafalaya River from May to 
June, suggesting that increases in nitrogen runoff serve to increase 
gulf hypoxia (p. 232).
    The effect of increasing corn production in the United States on 
soil and biodiversity is largely site specific and depends on the 
condition of the land before it was put into corn production. If the 
land was already in annual crop production, then the conversion to corn 
production might not have a large additional effect on soil and 
biodiversity. In contrast, if the expanded production involves removing 
perennial vegetation on a piece of land and replacing it with corn, 
then the land conversion results in losses of major stores of soil 
carbon and disrupts the future potential for storing carbon in soil (p. 
252). The land conversion from perennial vegetation to corn has also 
been shown to be correlated with reduced grassland bird diversity and 
population. Likewise, taking land from the Conservation Reserve Program 
(CRP) out of retirement to grow corn for ethanol raises similar soil 
quality and biodiversity concerns (p. 254).

Q2.  Will second generation bioenergy crops like switchgrass and 
Miscanthus use more or less water than current crops like corn and 
soybeans? Also, will they use more or less fertilizers and pesticides?

A2.  Whether switchgrass and Miscanthus use more water than corn and 
soybean largely depends on where the crops are grown and whether they 
are irrigated (pp. 244 and 248). Studies have shown that switchgrass 
and Miscanthus yield increases with precipitation and irrigation 
(Heaton et al., 2004; Robins, 2010). Thus, if the crops are grown in 
dry areas and are irrigated to enhance yield, then switchgrass or 
Miscanthus would not necessarily use less water than corn.
    The average nitrogen fertilization rate for corn is 138 lbs/acre 
(p. 207). The reported nitrogen fertilizer use ranges from 50 to 100 
lbs/acre for Miscanthus and from 0 to 200 lbs/acre for switchgrass (p. 
208). Although Miscanthus and switchgrass have the potential to use 
less nitrogen fertilizer than corn, it largely depends on the condition 
of the land on which the crops are grown and the management decisions 
that individual land operators make.
    Severe pest and disease outbreaks have not been reported outside 
the tropics for switchgrass and Miscanthus (p. 109). They are likely to 
use less pesticides than corn and soybean. However, the pest and 
disease dynamics could change if cultivation of switchgrass and 
Miscanthus increases and become more intensive to achieve desired 
yields.

Q3.  Why did the NRC panel find that the RFS ``may be an ineffective 
policy for reducing global greenhousegas emissions''?

A3.  Processes that affect GHG emissions of biofuels include land-use 
and land-cover changes, CO2 storage in biomass during growth 
and emissions from fossil fuel combustion in the manufacturing, 
transport, and application of agricultural inputs, from fermentation to 
ethanol, and from tailpipe emissions (p. 5). Some of those processes 
that affect GHG emissions are highly variable, even within one given 
type of biofuel. For example, GHG emissions are strongly influenced by 
whether a biorefinery uses fossil fuel or bioelectricity, or whether 
any direct or indirect land-use changes were incurred for feedstock 
production. The published estimates of life-cycle greenhouse gas 
emissions of corn-grain ethanol vary from 52-177 g CO2 eq 
per MJ (p. 220). The range of values illustrates how changes or 
variations in processes (for example, fossil fuel vs. bioelectricity 
use, coproduct production, amount of fertilizer input, or extent of 
indirect land-use change) can result in different GHG emissions for the 
same fuel type.
    If no direct or indirect land-use or land-cover changes are 
incurred, biofuels tend to have lower life-cycle GHG emissions than 
petroleum-based fuels. Feedstocks such as crop and forest residues and 
municipal solid wastes incur little or no direct and indirect land-use 
or land-cover changes; therefore, cellulosic biofuels made from those 
feedstocks are more likely to reduce GHG emissions when care is taken 
to maintain land productivity and soil carbon storage.
    Other cellulosic feedstocks such as switchgrass and Miscanthus can 
contribute to carbon storage in soil, particularly if they are planted 
on land with low carbon content. For example, planting perennial 
bioenergy crops in place of annual crops could potentially enhance 
carbon storage in that site. However, planting switchgrass and 
Miscanthus on existing cropland can trigger indirect land-use changes 
elsewhere that can result in large GHG emissions. Although RFS2 can 
levy restrictions to discourage bioenergy feedstock producers from 
land-clearing or land-cover change in the United States that would 
result in net GHG emissions, the policy cannot prevent indirect land-
use changes nor can it control such land-use changes outside the United 
States. Therefore, the extent to which RFS2 contributes to lowering 
global GHG emissions is uncertain.

Q4.  Can you describe the consensus process used by the NRC panel in 
reaching their conclusions? Did any of the individual members disagree 
with the findings?

A4.  Each member acts in an individual capacity and brings a unique 
expertise to the committee. Committee members are asked to consider 
respectfully the viewpoints of other members, to reflect their own 
views rather than be a representative of any organization, and to base 
their scientific findings and conclusions on the evidence. The 
committee deliberates in meetings to develop draft findings and 
conclusions.
    Once the study committee has a consensus draft of its report, it is 
subject to an independent peer review overseen by Academy members on 
the Report Review Committee. The peer review process typically 
strengthens the reports significantly, as the Academy will not issue a 
report until it is satisfied that the questions given to the study 
committee have been adequately addressed (and that the study committee 
did not go beyond its task to address other questions), that the 
conclusions made in the report are well supported, and that all 
important issues raised in the review have been addressed.
    Study committee members are asked to sign off on the final draft of 
the report. Each committee member has the right to issue a dissenting 
opinion to the report if he or she disagrees with the consensus of the 
other members.
    Thus, NRC reports not only represent the consensus views of the 
authoring study committee, but also have the institutional endorsement 
of the National Academies (http://www.nationalacademies.org/
studyprocess/index.html).
    All committee members agreed to the content and signed off on the 
report Renewable Fuel Standard: Potential Economic and Environmental 
Effects of U.S. Biofuel Policy. No dissenting opinions to the report 
were registered

REFERENCES

    Heaton, E., T. Voigt, and S.P. Long. 2004. A quantitative review 
comparing the yields of two candidate C4 perennial biomass crops in 
relation to nitrogen, temperature and water. Biomass and Bioenergy 
27(1):21-30.

    Robins, J.G. 2010. Cool-season grasses produce more total biomass 
across the growing season than do warm-season grasses when managed with 
an applied irrigation gradient. Biomass and Bioenergy 34(4):500-505.

Questions Submitted by Ranking Member Brad Miller

Q1.  As I understand it, your study assumes no further technology 
advances for biofuels. Would you characterize this as a reasonable 
assumption given the current state of the biofuels industry? Why did 
the NRC choose to make this assumption?

A1.  Response is based on the content of the NRC report Renewable Fuel 
Standard. Potential Economic and Environmental Effects of U.S. Biofuel 
Policy with reference to a specific page and appendix.
    The NRC study does not assume ``no further advances for biofuels.'' 
The committee performed a ``sensitivity analysis'' to account for 
technology advances for conversion of biomass to fuels (p. 109). Based 
on an exhaustive review of the literature (Appendix M), the committee 
concluded that the current and near future technologies for cellulosic 
biofuels could likely achieve a conversion yield of 70 gallons of 
ethanol equivalent for each dry ton of biomass. The committee ran the 
BioBreakeven model with that conversion yield and then performed the 
same analysis with a conversion yield of 80 gallons of ethanol 
equivalent per dry ton of biomass to account for any technology 
advancements between now and 2022.

Q2.  Please provide your name and employing organization(s).

A2.  Ingrid Burke; University of Wyoming.

Q3.  Are you an officer or employee of, or otherwise compensated by, 
any other organization(s) that many have an interest in the topic of 
this hearing?

A3.  No.

Q4.  In the last three calendar years, including this one, have you 
been a registered lobbyist?

A4.  No.

Q5.  If you have worked as an attorney, contractor, consultant, paid 
analyst, or in any other professional services capacity, please provide 
a list of all of your firm's clients who you know to have an interest 
in the subject matter of this hearing. These should be clients that you 
have personally worked with in the last three calendar years (including 
the present year). Provide the name of the client, the matter on which 
you worked and the date range of that work. If there was a deliverable, 
please describe that product.

A5.  None.

Q6.  Please provide a list of all publications on which you have 
received an author or coauthor credit relevant to the subject of this 
hearing. If the list is extensive, the 10 most recent publications will 
be sufficient.

A6.  List as follows:
    Evans, S.E., Byrne, K.M., W.K. Lauenroth, and I.C. Burke. Long-term 
drought reduces the dominant species and increases ruderals in a 
semiarid steppe. In press, Journal of Ecology.

    Evans, S.E., I.C. Burke, and W.K. Lauenroth (2011), Controls on 
soil organic carbon and nitrogen in Inner Mongolia, China: A cross-
continental comparison of temperate grasslands, Global Biogeochem. 
Cycles, 25, GB3006, doi:10.1029/2010GB003945.

    Gathany, M. and I.C. Burke. 2011. Post-fire soil fluxes of 
CO2, CH2, and N2O along the Colorado 
Front Range. International Journal of Wildland Fire, in press.

    Bontti, E.E., I.C. Burke, and W.K. Lauenroth. 2011. Nitrogen 
partitioning between microbes and plants in the shortgrass steppe. 
Plant and Soil, in press.

    McHale, M.R., E.G. McPherson, I.C. Burke. 2007. The potential of 
urban tree plantings to be cost effective in carbon credit markets. 
Urban Forestry and Urban Greening 6:49-60.

    Currie, W.S., M.E. Harmon, I.C. Burke, S.C. Hart, W.J. Parton, and 
W. Silver. 2010. Cross-biome transplants of plant litter show 
decomposition models extend to a broader climatic range but low 
predictability at the decadal time scale. Global Change Biology 16: 
1744-1761.

    Munson, S.M., T.J. Benton, W.K. Lauenroth, and I.C. Burke. 2010. 
Soil carbon flux following pulse precipitation events in the shortgrass 
steppe. Ecological Research, 25: 205-211.

    McCulley, R.L., I.C. Burke, and W.K. Lauenroth. 2009. Conservation 
of nitrogen increases with precipitation across a major grassland 
gradient in the central Great Plains of North America. Oecologia 
159(3):571-581.

    Burke, I.C., W.K. Lauenroth, G. Cunfer, J.E. Barrett, A.R. Mosier, 
and P. Lowe. 2002. Nitrogen in the central grasslands region of the 
United States. BioScience 52(9):813-823.

    Burke, I.C., W.K. Lauenroth, and D.G. Milchunas. 1997. 
Biogeochemistry of managed grasslands in the Central Grasslands of the 
U.S. Pages 85-102. In Paul, E. and K. Paustian, eds. Organic matter in 
U.S. agroecosystems. Lewis Publishers.
Responses by Ms. Margo T. Oge,
Director of the Office of Transportation and Air Quality, EPA

Questions Submitted by Chairman Andy Harris

Q1.  Why did EPA only choose to require service stations to label E15 
but not other gasoline ethanol blends like E10, E85, or other mid-level 
ethanol blends?

A1.  As part of the E15 Misfueling Mitigation Rule, EPA proposed to 
label E15 and sought comment about whether to also label E10. Most 
commenters stated that there is no need to label E10 fuel dispensers. 
Since E10 is currently prevalent in the marketplace (over 90 percent of 
the market) and already familiar to consumers, EPA concluded that E10 
labels are not needed to minimize misfueling with E15 and that the E15 
label contains the information needed to steer consumers to the fuel 
appropriate for their vehicles. EPA also noted that adding an EPA label 
to E10 fuel dispensers may confuse consumers since most States already 
require labels for E10 fuel dispensers.
    EPA also sought comment about whether to require labels for E85 and 
other mid-level ethanol blends. Public comments were split on that 
issue. The Agency decided not to require labels for those fuel 
dispensers because the Federal Trade Commission (FTC) already requires 
labels for pumps dispensing E85 and other alternative fuels, and the 
FTC is considering further labeling requirements for E85 and mid-level 
ethanol blends. EPA also observed that most E85 and mid-level ethanol 
blend dispensers already have signage that makes clear that they are 
appropriate only for flexible-fueled vehicles. In sum, EPA concluded 
that it was not appropriate to adopt labeling requirements for blends 
other than E15 at this time.

Q2.  Why did EPA backpedal on the content and language on the warning 
label from the initial proposal to the final label that was announced 
in June?

A2.  EPA adopted a final E15 pump label that reflects many commenters' 
suggestions and the Agency's consultation with consumer labeling 
experts at the FTC. The Agency determined that the final label 
effectively provides consumers with the key information they need to 
avoid using E15 in vehicles not covered by the partial waiver decisions 
without unduly alarming them. FTC experts advised that stronger warning 
language might result in consumers avoiding use of E15 in vehicles for 
which the fuel is appropriate under the waivers (i.e., MY2001) and 
newer light-duty vehicles).

Q3.  Since 14 automakers wrote to Representative Sensenbrenner saying 
that their warranties will not cover E15, who will be at fault when a 
motorist misfuels?

A3.  EPA cannot speak for auto manufacturers as to whether 
manufacturers' product warranties will cover the costs of any problems 
that result if a motorist misfuels. EPA's waiver decisions and labeling 
rule do not change the terms of manufacturers' warranty provisions. 
Under EPA's regulations governing emissions warranties, manufacturers 
may condition their emissions warranties on use of a particular fuel so 
long as the fuel is broadly available, and may deny an emissions 
warranty claim if use of a different fuel causes the problem. EPA does 
not have jurisdiction over other warranties that manufacturers may 
provide. However, manufacturers have a strong incentive to work with 
their customers to solve problems.
    EPA believes that the misfueling mitigation measures the Agency has 
established will minimize the potential for misfueling. EPA also plans 
to work with stakeholders to monitor the entry of E15 into the 
marketplace and the effectiveness of the required misfueling mitigation 
measures so that any issues that develop may be addressed on a timely 
basis. In addition, representatives of ethanol producers are currently 
working with automakers, boat manufacturers, EPA, and others to develop 
public education materials that will provide consumers with additional 
information to help them make appropriate fuel choices for their 
vehicles and gasoline-fueled equipment.

Q4.  When does EPA plan to register E15? What differences did EPA find 
between E10 and E15?

A4.  The timing of registration depends on the actions of E15 
manufacturers. Under the Clean Air Act, every fuel manufacturer that 
intends to introduce E15 must first register the fuel with EPA just as 
they need to register E10 fuels. To meet registration requirements, 
fuel manufacturers must submit an application that includes emission 
and health effects information as well as company-specific information.
    Last year, the Renewable Fuels Association and Growth Energy 
submitted information and analysis for meeting the emissions and health 
information requirements for registering E15. The Agency reviewed the 
information and identified a few gaps that the two associations then 
worked to fill. They made their final submission last month, and the 
Agency subsequently issued an evaluation document that finds that the 
submission would satisfy the emissions and health effects information 
requirements for a registration application for E15. The final 
submission and evaluation document considers the differences between 
E10 and E15.
    As noted above, each E15 fuel manufacturer must register the fuel, 
and a complete registration application includes more than emissions 
and health effects information. Since EPA has evaluated the final RFA 
and Growth Energy submission, fuel manufacturers may choose to rely on 
that information to complete their applications, but they must also 
provide company-specific information. We review and, as appropriate, 
approve complete applications as they are received. As of April 2, we 
have approved 24 applications for ethanol for use in E15.
    It is also important to note that, prior to marketing E15, there 
are other requirements under the E15 partial waivers that must be 
satisfied. These include submission, EPA approval, and implementation 
of a misfueling mitigation plan and a survey plan for reviewing 
implementation of labeling and other E15-related requirements. State 
and local fuel quality, safety, and other regulations may also apply.

Q5.  E15 is not a legal fuel until it is registered with EPA. EPA 
indicates they have received an application for registration. Can you 
identify a timeline for making a decision to approve or not approve the 
fuel?

A5.  As of March 16, 2012, EPA has received 18 applications to register 
ethanol for use in making E15. EPA's practice for all fuel registration 
applications is to review and act on them in the order they are 
received.

Q6.  As part of the Tier 3 rulemaking later this year, will EPA propose 
to change the current certification fuel from E0 (e-zero) to E15? If 
this has not been determined yet, what factors will EPA consider in 
making this decision?

A6.  As we look to set new vehicle emission standards, we are also 
considering changes to the test fuel used to certify them. The current 
test fuel is E0 and is no longer representative of in-use gasoline. We 
will be considering all the properties of gasoline, including the 
ethanol content that is expected to reflect in-use gasoline during and 
after the implementation time frame of the Tier 3 emission standards.

Q7.  EPA completed consultations with a Small Business Advocacy Review 
Panel about the upcoming Tier 3 regulations on October 14. Why was this 
review panel necessary, what concerns were raised by the small 
businesses, and what changes has the Agency made to the proposal in 
light of those concerns?

A7.  The Regulatory Flexibility Act, as amended by the Small Business 
Regulatory Enforcement Fairness Act, requires that the Agency convene a 
review panel for any rule subject to notice-and-comment rulemaking 
requirements that may have a significant impact on a substantial number 
of small entities. As we began the rulemaking process, we could not be 
certain whether the rulemaking would have a significant impact on a 
substantial number of small entities, so we decided to convene a SBAR 
Panel for the Tier 3 rulemaking. As we continued to develop the 
proposal, the Panel process enabled us to receive the views and 
recommendations of the Panel and small entity representatives. We are 
using this input and insights gained through the Panel process as well 
as prior Panels that we have convened to design the proposal from the 
outset in a way that is responsive to the concerns of small businesses. 
We have convened such a Panel in many of our major rules, and this has 
typically led to our providing flexibility for small entities, such as 
providing additional time to comply with the standards.

Q8a-b.  EPA stated that it intends to publish the Tier 3 Proposed Rule 
in December 2011. EPA has also stated this rule will include regulatory 
streamlining provisions to satisfy the President's July 11th Executive 
Order. (a) If the Proposed Rule is delayed beyond the end of the year 
for reasons unrelated to the streamlining provision, would EPA still 
include these streamlining provisions in the proposal? (b) Would EPA 
drop these important streamlining changes in order to meet the self-
imposed December deadline?

A8a-b.  The streamlining provision will be included in the Tier 3 
proposal, which clearly has been delayed beyond December of 2011. We 
are continually involved in a process of reviewing and updating our 
existing regulations to consider new information and to respond to 
changing circumstances. Sometimes these regulatory updates occur 
through stand-alone rulemakings, and sometimes for efficiency we 
include them with other major rulemakings, such as the Tier 3 rule. As 
we began the Tier 3 rulemaking process, we sought input from industry 
not only on potential Tier 3 vehicle emission and fuel standards, but 
also on aspects of our current regulations that could benefit from 
technical corrections, clarifications, and streamlining. The oil and 
auto industries both responded with a number of items that were 
candidates for updating. We ourselves identified a number of other 
areas. We are committed to following through with streamlining 
provisions as part of the Tier 3 proposal.

Q9.  EPA has stated it has data that demonstrates a reduction in sulfur 
in gasoline from 30 ppm to 10 ppm will result in substantive reductions 
in nitrogen oxide emissions and decreased ozone formation. Yet, EPA has 
not provided data to support this position. Please produce the evidence 
to show that reductions in sulfur from 30 ppm to 10 ppm will result in 
substantive reductions in nitrogen oxides and atmospheric ozone 
formation.

A9.  There is a large body of public literature on research which has 
shown significant impacts of gasoline sulfur on vehicle emissions. This 
will be included in the docket at the time of the Tier 3 proposal, 
along with our own emission testing and inventory and air quality 
modeling to support the potential Tier 3 sulfur standards.

Q10.  Mr. Hilbert's testimony detailed the results of the DOE-funded 
study on the impacts of E15 on marine engines, essentially finding that 
E15 will severely damage if not destroy these engines. What is your 
message to the millions of boat owners that now risk severe engine 
damamge (and potentially safety issues) as a result of running on E15? 
And is EPA doing anything beyond the labeling mandate to assist boat 
owners and others at risk from misfueling?

A10.  Based on our engineering assessment that marine and other nonroad 
engines, vehicles, and equipment (nonroad products) are generally 
equipped with less sophisticated emission controls that may not 
accommodate E15, EPA denied the waiver for all of those nonroad 
products, as well as for all motorcycles and heavy-duty gasoline-fueled 
engines and vehicles. Thus, E15 is not approved for use in these 
engines and vehicles. EPA's assessment was confirmed for marine engines 
by the recent report you cite from the National Renewable Energy 
Laboratory. The NREL study was conducted on an engine durability cycle 
designed to stress engines, and the engines used elevated ethanol 
levels throughout testing. We have no evidence that occasional 
misfueling would destroy engines. The main concern is habitual 
misfueling, most likely happening accidentally if there were no 
labeling requirement.
    The partial waivers EPA granted to E15 include conditions that 
require E15 producers to implement misfueling mitigation measures, and 
a final rule EPA issued in June requires that E15 producers and 
marketers take several specific steps, including fuel pump labeling, to 
help minimize the potential for misfueling. We based the misfueling 
mitigation requirements on similar requirements that proved successful 
in transitioning the marketplace to ultra-low sulfur diesel (ULSD) 
fuel. In the E15 misfueling mitigation rulemaking, we also noted that 
E15 marketers may supplement the required labels with signs or other 
means of communication that provide additional information appropriate 
for their customers. In addition, EPA described the importance of an 
industry-led public outreach and education campaign like that 
undertaken for ULSD. Development of an E15 outreach and education 
campaign is now underway, and representatives of many stakeholders, 
including marine engine manufacturers, are participating, as is EPA. 
The Agency is committed to working with stakeholders to monitor the 
entry of E15 into the marketplace and the effectiveness of misfueling 
mitigation efforts so that we many address any issues that arise on a 
timely basis.

Q11.  I understand that EPA will soon publish an annual rulemaking 
which will include an assessment of the cellulosic industry prospects 
for 2012. Will EPA's methodology in assessing the cellulosic standard 
prospects for 2012 incorporate lessons learned from the previous year's 
assessment in order to weed out the factors that caused EPA's 
projections to significantly overestimate the amount actually produced?

A11.  The statute specifies that EPA is to project the volume of 
cellulosic biofuel production, in consideration of the projections from 
the Energy Information Administration, for the upcoming year and must 
base the cellulosic biofuel standard on that projected volume if it is 
less than the applicable volume set forth in the Act. Since these 
evaluations are based on evolving information about emerging segments 
of the biofuels industry, and may result in the applicable volumes 
differing from those in the statute, we believe that it is appropriate 
to establish the applicable volumes through a notice-and-comment 
rulemaking process. In making this determination, EPA did consider all 
relevant factors, including historical production trends.

Q12.  The National Academy of Sciences report entitled ``Renewable Fuel 
Standard: Potential Economic and Environmental Effects of U.S. Biofuels 
Policy'' found that the RFS standards are unlikely to be met absent a 
surprise technological breakthrough or policy change. We are about to 
enter a dramatic ramp-up in required biofuel production due to the 
RFS--billions of additional gallons of biofuels that the National 
Academy says we we won't be able to produce. Does EPA have the 
authority to downwardly revise the overall RFS and will EPA exercise 
that authority?

A12.  Under RFS2, if the projected volume of cellulosic biofuel 
production is less than the applicable volume specified in the Act, EPA 
must lower the applicable volume used to set the annual cellulosic 
biofuel percentage standard to the projected volume of production. When 
we lower the applicable volume of cellulosic biofuel in this manner, we 
are also authorized to lower the applicable volumes of advanced biofuel 
and/or total renewable fuel by the same or a lesser amount. EPA has 
lowered the volumes of cellulosic the past two years, but has not 
lowered the total advanced or total renewable fuel volume standards 
because we anticipate that non-cellulosic advanced biofuels will be 
available in adequate supply to meet these standards. If, however, in 
the future, as the advanced volume mandate increases, our analysis 
indicates insufficient volumes of non-cellulosic advanced biofuels will 
be available, the Agency could exercise its authority to lower by the 
same or a lesser amount the total advanced and total renewable fuel 
volumes.
    Further, section 211(o)(7) of the Clean Air Act allows the 
Administrator of EPA, in consultation with the Secretaries of 
Agriculture and Energy, to waive the requirements of the national 
renewable fuel standard, in whole or in part, if the Administrator 
determines, after pulic notice and opportunity for public comment, that 
implementation of the RFS requirements would severely harm the economy 
or environment of a State, a region, or the United States.

Questions Submitted by the Chairman of the House Committee

on Science, Space, and Technology, Representative Ralph M. Hall

Q1.  In response to my letter dated July 25, 2011, Assistant 
Administrator Gina McCarthy stated that the Regulatory Impact Analysis 
(RIA) to the 2008 Ozone NAAQS standard indicated that Tier 3 tailpipe 
standards for new light-duty vehicles were needed to attain the 
standard. However, the RIA only mentions improved catalyst designs to 
achieve Tier 3 tailpipe standards for NO2 of 0.02 grams/mile, and it is 
silent on the need for additional controls on fuel properties. Can EPA 
cite where it states in the RIA that additional controls on fuel 
properties are needed? Can EPA demonstrate that this standard cannot be 
met with gasoline with an average sulfur content of 30 ppm, the current 
standard?

A1.  The Ozone NAAQS RIA did not specifically mention sulfur control. 
However, EPA has determined that in order for vehicle manufacturers to 
achieve more stringent NO2 tailpipe standards, they will 
need to employ advanced catalyst designs. These advanced catalyst 
designs are only effective when coupled with lower sulfur 
concentrations in fuel. In developing the Tier 3 vehicle standards, 
which will be based on improved catalyst designs, we have consistently 
looked at the vehicle and its fuel from a systems approach, such that 
the improved catalyst design and gasoline sulfur control are looked at 
together. Any proposal to reduce sulfur levels will include a 
demonstration of the need for lower-sulfur gasoline to enable the 
vehicle tailpipe standards contemplated in the NAAQS RIA.

Q2.  In September, EPA published a preliminary review of recent ozone 
data and identified eight new areas that would be in non-attainment 
with the 2008 NAAQS standard. For the five areas outside California 
that would presumably benefit from a lower sulfur standard, what 
percent would reach attainment (due to the continued penetration of 
vehicles certified to Tier 2, which is still being implemented) before 
2017, when the Tier 3 standards would presumably begin to take effect?

A2.  EPA's preliminary review of recent ozone data, included in a 
September 22, 2011, memo from Gina McCarthy to the EPA Regional Air 
Division Directors, found that 52 areas monitor air quality that 
exceeds the 2008 ozone NAAQS. According to the memo, EPA's modeling 
indicates that approximately half of the 52 hypothetical nonattainment 
areas would attain the NAAQS by 2015 as a result of rules already in 
place. The memo goes on to say that Tier 3 vehicle and fuel standards, 
as well as other stationary source rules under development, ``will 
ensure steady forward progress to clean up the Nation's air and protect 
the health of American families, while minimizing and in many cases 
eliminating the need for States to use their scarce resources on local 
actions.''

Q3a-c.  It has come to the Committee's attention that there is a 
concern regarding certain blends of biodiesel, specifically, above five 
percent or B5. There have been reports in some States of diesel 
vehicles breaking down to blends of 11 percent or more. On the gasoline 
side of the fuels equation, EPA establishes a certification fuel and 
requires quality control standards. (a) Is there a similar 
certification fuel for diesel? (b) What quality controls does EPA have 
to ensure biodiesel meets appropriate specifications? (c) Since the use 
of biodiesel is a federal mandate, why are the States the only ones 
involved in ensuring the quality of biodiesel fuel?

A3a-c.  (a) Biodiesel (B100) for use in motor vehicles is required to 
be registered under 40 CFR 79 as a diesel fuel. As part of 
registration, in accordance with the Clean Air Act, diesel fuel is also 
required to be ``substantially similar'' to the diesel fuel used to 
certify vehicles to emissions standards, or the fuel must have received 
a waiver approved under 211(f) of the Clean Air Act. However, we have 
not defined ``substantially similar'' for diesel, so we rely on the 
fuel meeting the ASTM D6751 standard for biodiesel or to be waived 
under the authority in 211(f) before it can be registered. We believe 
that biodiesel meeting ASTM D6751 is ``substantially similar'' to 
diesel certification fuel.
    (b) EPA requires the biodiesel manufacturer to present a 
certificate of analysis showing that the biodiesel meets the industry 
quality standard as noted above.
    (c) EPA's Office of Enforcement and Compliance Assurance conducts 
random and directed inspections of fuel production and dispensing 
facilities TKTKTK for compliance with our requirements for renewable 
fuels and gasoline and diesel fuel.

Questions Submitted by Representative Randy Neugebauer

Q1.  The refining industry is already heavily regulated. Additional 
regulations, such as Tier 3, may cause some U.S. refineries to close. 
Has EPA addressed this issue? What does EPA believe will happen to 
gasoline supply in the case of U.S. refinery closures? How would higher 
gasoline imports be helpful to achieve energy security?

A1.  There are many factors that contribute to the closure of 
refineries over time. The Energy Information Administration (EIA) data 
show that since 1982 there have been 154 net refinery closures as the 
refining industry, like any other industry, has continued to undergo 
the natural process of rationalization as it matures. Smaller, less 
efficient facilities have been replaced by larger facilities. During 
the period from 2003 to 2011, when the highway and Nonroad Ultra-Low 
Sulfur Diesel programs, Tier 2 gasoline sulfur control, gasoline 
benzene control, were all phasing in, EIA data posted on its Web site 
show a net of just two closures of refineries that were producing 
transportation fuels, far fewer than during any previous period. During 
this same time, the average size of U.S. refineries increased from 
113,000 barrels per day to 123,000 barrels per day, and total U.S. 
refining capacity increased by six percent. In each and every 
rulemaking, we have provided considerable lead time, phase-in 
flexibility, and, as necessaary, case-by-case refinery economic 
hardship relief to ensure our regulations were not causing refinery 
closures. We have processed at least a dozen individual hardship 
applications to date. During these hardship discussions, not one 
company has ever said that they were closing because of our standards.
    For these reasons, we are also confident that the Tier 3 
regulations would not cause refinery closures. We are once again 
developing the program with considerable lead time, phase-in 
flexibility, and case-by-case hardship relief to minimize the impacts. 
We are aware of the results of a study by Baker & O'Brien for API 
suggesting the potential for four to seven refinery closures. However, 
this study did not model the Tier 3 program, but rather fuel scenarios 
from a previous Automobile Alliance study. Furthermore, a prior Baker & 
O'Brien study for API for the ultra-low sulfur nonroad diesel proposal 
back in 2003 contained similar dire projections of as many as 12 
refinery closures and dramatic reductions in diesel fuel production, 
which would result in a need to import 640,000 barrels per day of 
diesel fuel. However, when we analyzed what actually transpired between 
2005 and 2010 when the highway and nonroad diesel fuel programs phased 
in, refineries did not close; diesel fuel and distillate production did 
not decline. Some U.S refineries are competing favorably with the rest 
of the world, although some refiners on the East Coast exposed to heavy 
competition from product imports and from the Gulf Coast refiners have 
recently closed.

Q2.  The EPA was required to conduct an anti-backsliding study by the 
summer of 2009 to examine the potential adverse air quality impacts of 
renewable fuel mandates. It is fairly clear that this report was 
intended to precede additional regulations, as its findings will be 
crucial to informing new regulatory decisions. However, the EPA has 
said it will announce the details of the study along with your Tier 3 
regulations. Why has the EPA ignored the Congressional intent for the 
purpose and schedule of this study and subsequent regulations? How can 
the Agency justify promulgating Tier 3 rules without first publishing 
the anti-backsliding study?

A2.  The primary driver for the development of the Tier 3 vehicle and 
fuel standards is the need for further control measures to help areas 
that aren't meeting air quality standards to achieve and maintain them 
and therefore protect public health. There are over 144 million people 
living in areas that are exceeding these standards. The EPA is 
developing Tier 3 standards for light-duty vehicles and their fuels 
using its general authority under Clean Air Act sections 202(a) and 
211(c). The Tier 3 standards under development are not intended to be 
an anti-backsliding control strategy but instead are justified on their 
own as an important strategy to address ozone and other air quality 
problems.
    We are also in the process of carrying out the anti-backsliding 
study as required under Clean Air Act sections 211(q) and 211(v) to 
assess the emission and air quality impacts resulting from the 
increased renewable fuel volumes required by Congress. The anti-
backsliding study and Tier 3 overlap in some technical areas, as they 
both consider the impacts of fuels and vehicles on emissions, and both 
actions will utilize an assessment of how renewable fuels affect 
vehicle emission. While they are designed for different purposes, this 
technical overlap is why we are conducting the anti-backsliding study 
in the same time frame as our Tier 3 proposal. However, the Agency 
would need to move forward with Tier 3 standards with or without the 
anti-backsliding study.

Q3.  Could you please detail options other than Tier 3 EPA assessed, if 
any, that could result in meeting the 2009 Ozone National Ambient Air 
Quality Standards (NAAQS)? Did EPA exhaust all other possiblities that 
could help us meet those standards, such as vehicle catalyst 
modifications?

A3.  The Regulatory Impact Analysis (RIA) for the 2008 ozone NAAQS 
modeled a variety of potential control measures that would help areas 
attain the NAAQS, including controls on stationary, area, onroad mobile 
and nonroad mobile sources. The Tier 3 vehicle standards represent the 
``improved catalyst design'' that is discussed in that RIA. In the 
analysis done for the RIA, all of these measures combined were 
necessary to bring areas into attainment with the 2008 NAAQS.

Q4.  What is EPA's end goal with emissions? Do you believe that 
emissions should ultimately be entirely eliminated? For example, should 
sulfur levels reach zero parts per million? At what point are we at 
final and acceptable levels of emissions?

A4.  EPA's goal, as established by the Clean Air Act, is for all 
Americans to have air quality that meets health-based standards. The 
Clean Air Act requires that EPA review the health-based air quality 
standards (such as the ozone NAAQS) every five years to ensure that the 
standards are requisite to protect the public health. Meeting the 
health-based air quality standards requires a joint effort by the 
States and EPA, through a combination of nationwide rules passed by EPA 
and local rules passed by State and local air quality management 
agencies.

Questions Submitted by Ranking Member Brad Miller

Q1.  Ms. Oge, my colleagues and I are very worried aobut the economic 
crisis in the country. Mr. Greco and Mr. Williams both claim in their 
testimony that oil refineries will have to close because of the not-
yet-proposed Tier 3 standard. The DOE study that Mr. Williams mentioned 
in his testimony did note that the ``cost of compliance contributed to 
economic stresses that resulted in the shutdown of 66 refineries from 
1990 through 2010,'' but the report did not state that compliance costs 
were the ``significant'' factor as Mr. Williams has stated. It seems to 
me there are a number of factors that could have contributed to the 
closure of refineries. What is your response to the statement by NPRA 
that EPA's rules have been a significant factor in the closure of 66 
refineries since 1990?

A1.  There are many factors that contribute to the closure of 
refineries over time. The Energy Information Administration (EIA) data 
show that since 1982 there have been 154 net refinery closures as the 
refining industry, like any other industry, has continued to undergo 
the natural process of rationalization as it matures. Smaller, less 
efficient facilities have been replaced by larger facilities. During 
the period of 2003 to 2011 when the Highway and Nonroad Ultra-Low 
Sulfur Diesel programs, Tier 2 gasoline sulfur control, gasoline 
benzene control, and the renewable fuel standards were all phasing in, 
EIA data posted on its Web site shows a net of just two closures of 
refineries that were producing transportation fuels, far fewer than 
during any previous period. During this same time, the average size of 
U.S. refineries increased from 113,000 barrels per day to 123,000 
barrels per day, and total U.S. refining capacity increased by six 
percent. In each and every rulemaking, EPA has provided considerable 
lead time, phase-in flexibility, and (as necessary) case-by-case 
refinery economic hardship relief to ensure our regulations were not 
causing refinery closures. We have processed at least a dozen 
individual hardship applications to date. During these hardship 
discussions, not one company has ever said that they were closing 
because of EPA standards.
    For these reasons, we are also confident that the Tier 3 
regulations, as well as the refinery sector rulemaking, will not cause 
refinery closures. For the Tier 3 rule, we are once again developing 
the program with considerable lead time, phase-in flexibility, and 
case-by-case hardship relief to minimize the impacts. We are aware of 
the results of a study by Baker & O'Brien for API suggesting the 
potential for four to seven refinery closures. However, this study did 
not model the Tier 3 program but rather fuel scenarios from a previous 
Alliance study. Furthermore, a prior Baker & O'Brien study for API for 
the ultra-low sulfur nonroad diesel proposal back in 2003 contained 
similar dire projections of as many as 12 refinery closures and 
dramatic reductions in diesel fuel production, which would result in a 
need to import 640,000 barrels per day of diesel fuel. However, when we 
analyzed what actually transpired between 2005 and 2010 when the 
highway and nonroad diesel fuel programs phased in, refineries did not 
close; diesel fuel and distillate production did not decline. Some U.S. 
refineries are competing favorably with the rest of the world, although 
some refiners on the East Coast exposed to heavy competition from 
product imports and from Gulf Coast refiners have recently closed. For 
the refinery sector rulemaking, we do not anticipate any refinery 
closures as a result of stationary source regulations. In line with the 
above discussion, refinery closures have resulted from such significant 
drivers as changes in demand for refined petroleum products, the 
addition of capacity in emerging markets, and the decrease in the price 
of other fuels (i.e., natural gas), not from regulating fuel quality.

Q2.  When did EPA start considering Tier 3 standards, and why?

A2.  EPA is continuously assessing motor vehicle emissions and how they 
affect air quality and public health, and also the development and 
application of vehicle and emission control technologies. As part of 
the regulatory impact analysis for the 2008 ozone NAAQS, we identified 
tighter vehicle standards as a control measure that would help areas 
attain the standard. We have been planning for such standards since 
that time.
    Emissions from motor vehicles and their fuels contribute to public 
health issues that exist currently and are projected to continue in the 
future. Motor vehicles are an important source of the compounds that 
form ozone, particulate matter (PM), and nitrogen dioxide 
(NO2). State and local areas need federal measures to reduce 
these motor vehicle emissions in areas where these emissions are a 
significant factor contributing to nonattainment of the health-based 
air quality standards. As EPA is moving forward to implement the 2008 
ozone standard, we project that about half of the expected 52 
nonattainment areas will need additional emission reduction--either 
from specific stationary sources of pollution or from motor vehicles--
in order to attain and maintain the public health standard.
    Federal measures to reduce motor vehicle emissions are a cost-
effective strategy for attaining public health standards. As the States 
have been telling us (e.g., the National Association of Clean Air 
Agencies [NACAA] and the Northeast States for Coordinated Air Use 
Managment [NESCAUM]), without new federal vehicle standards, areas may 
need to adopt other controls on industrial sources or small businesses 
that are more costly.

Q3.  Why was the National Association of Clean Air Agencies' (NACAA) 
cost estimate for a potential Tier 3 fuels program so much lower than 
API's estimate of costs of potential fuel controls? How do these 
compare to what EPA is considering?

A3.  One of the primary reasons is that the NACAA cost estimate was 
based on an analysis of the potential Tier 3 standards, whereas the API 
cost estimate was of fuel scenarios from a previous Automobile Alliance 
study, the least stringent of which is still more stringent than what 
EPA is considering for Tier 3. Beyond this, the API study made several 
conservative assumptions which tended to inflate the costs and impacts. 
As discussed in the response to question 1, this is consistent with 
prior studies' performance for API by the same contractor.

Q4.  What technology advancements in alternative transportation fuels 
are currently being reviewed at EPA? Could these fuels impact the 
ability of the country to meet the RFS?

A4.  EPA continues to evaluate new fuels and new technologies as part 
of its responsibilities to qualify new renewable fuel pathways under 
the RFS program. There are many fuels that offer the potential for use 
in meeting the RFS volume standards. Many fuels have already been 
approved and new ones are being approved on an ongoing basis. Just 
recently, EPA issued a direct final action to identify additional fuel 
pathways that the Agency determined meet the biomass-based diesel, 
advance biofuel, or cellulosic biofuel life cycle greenhouse gas (GHG) 
reduction requirement under RFS2. This rule, when finalized, will 
approve biofuels produced from camelina oil, energy cane, giant reed, 
and napier grass. It also includes an evaluation of renewable gasoline, 
biodiesel produced through alternative processing, and clarifies our 
definition of renewable diesel to explicitly include jet fuel.
Responses by Dr. Jay Kesan, Professor and H. Ross and
Helen Workman Research Scholar and Program Leader,
Biofuel Law and Regulation Program, Energy Biosciences Institute,
University of Illinois College of Law

Questions Submitted by Chairman Andy Harris

Q1.  In your view, did EPA adequately follow the Clean Air Act in 
granting partial waivers for E15?

A1.  Sec.  211 of the Clean Air Act states:

      ``Effective upon November 15, 1990, it shall be unlawful 
for any manufacturer of any fuel or fuel additive to first introduce 
into commerce, or to increase the concentration in use of, any fuel or 
fuel additive for use by any person in motor vehicles manufactured 
after model year 1974 which is not substantially similar to any fuel or 
fuel additive utilized in the certification of any model year 1975, or 
subsequent model year, vehicle or engine under section 7525 of this 
title.'' \1\
---------------------------------------------------------------------------
    \1\  Clean Air Act, 42 U.S.C. Sec.  7545(f)(1)(B) (2010) (emphasis 
added).

      ``The Administrator, upon application of any manufacturer 
of any fuel or fuel additive, may waive the prohibitions established 
under paragraph (1) or (3) of this subsection or the limitation 
specified in paragraph (2) of this subsection, if he determines that 
the applicant has established that such fuel or fuel additive or a 
specified concentration thereof, and the emission products of such fuel 
or fuel additive or specified concentration thereof, will not cause or 
contribute to a failure of any emission control device or system (over 
the useful life of the motor vehicle, motor vehicle engine, nonroad 
engine or nonroad vehicle in which such device or system is used) to 
achieve compliance by the vehicle or engine with the emission standards 
with respect to which it has been certified pursuant to sections 7525 
and 7547(a) of this title. The Administrator shall take final action to 
grant or deny an application submitted under this paragraph, after 
public notice and comment, within 270 days of the receipt of such an 
application.'' \2\
---------------------------------------------------------------------------
    \2\  Clean Air Act, 42 U.S.C. Sec.  7545(f)(4) (2010) (emphasis 
added).

---------------------------------------------------------------------------
Sub-Issues Raised by Rep. Andy Harris

Reliance on U.S. DOE Testing and Data by EPA

    In your question, you state the following:

      In discussing EPA's decision to grant a waiver for mid-
level ethanol blends in a recent article, you stated that the Clean Air 
Act ``language makes it perfectly clear that the fuel waiver applicant 
bears the burden of establishing that the waiver fuel will not 
negatively affect vehicle and engine emissions control systems. 
Nonetheless, when the EPA conditionally granted'' the E15 waiver, ``it 
relied almost exclusively on data supplied by the U.S. Department of 
Energy as opposed to data and analysis submitted by the waiver 
applicants.''
    These excerpts are from an article of mine published in Global 
Change Biology Bioenergy.

A. Arguments Against EPA's Action

    The language of the CAA explicitly states that the EPA should not 
grant a fuel waiver unless ``the applicant has established'' that the 
waiver fuel will not adversely affect the ability of emission control 
systems to achieve compliance with EPA's emissions standards. \3\ Yet 
when EPA conditionally granted the E15 Waivers, it relied primarily on 
testing conducted by the U.S. DOE. Specifically, when the EPA published 
its first decision regarding E15, it stated:
---------------------------------------------------------------------------
    \3\  Id.

      Growth Energy did not provide the necessary information 
to support a full waiver in several key areas, especially long-term 
durability emissions data necessary to ensure that all motor vehicles, 
heavy-duty gasoline highway engines and vehicles, highway and off-
highway motorcycles, and nonroad products would continue to comply with 
their emission standards over their full useful life. In 2008, DOE 
began emissions durability testing on 19 Tier 2 motor vehicle models 
that would provide this data for MY2007 and newer light-duty motor 
vehicles (``DOE Catalyst Study''). Consequently, the Agency delayed a 
decision until the DOE test program was completed for these motor 
vehicles in September 2010. EPA reached its decision on the waiver 
request based on the results of the DOE Catalyst Study and other 
information and test data submitted by Growth Energy and in public 
comments. EPA also applied engineering judgment, based on the data in 
reaching its decision. \4\
---------------------------------------------------------------------------
    \4\  U.S. Environmental Protection Agency, Partial Grant and 
Partial Denial of Clean Air Act Waiver Application Submitted by Growth 
Energy To Increase the Allowable Ethanol Content of Gasoline to 15 
Percent; Decision of the Administrator, 75 Fed. Reg. 68094, 68095 (Nov. 
4, 2010) (emphasis added) [hereinafter E15 Waiver I].

    Additionally, when EPA summarized its findings with respect to the 
fuel effects it traditionally analyzes in considering fuel waivers 
(i.e., durability/long-term exhaust emissions, immediate exhaust 
emissions, evaporative emissions, materials compatibility, and 
driveability and operability), it repeatedly relied on the ``DOE 
Catalyst Study'' and pointed out the shortcomings of the data submitted 
by the applicant. \5\ Moreover, when EPA deferred its decision on model 
years 2001-2006 light-duty vehicles, it again referred to ongoing DOE 
testing and stated that ``EPA expects to make a determination for these 
motor vehicles shortly after the results of DOE testing is available.'' 
\6\ While the EPA's decision pays some attention to the notion of 
relying on ``test data submitted by Growth Energy'' (amongst other 
sources), \7\ it remains abundantly clear that the data submitted by 
the applicant, when standing alone, was insufficient to justify 
granting the E15 Waivers. As such, the applicant did not establish that 
E15 would not adversely affect emissions control systems. Since the CAA 
only authorizes the EPA to grant a fuel waiver after the Administrator 
``determines that the applicant has established'' that the waiver fuel 
will not adversely affect emissions control systems, \8\ the 
Administrator may have abused her discretion and acted in an arbitrary 
and capricious manner in conditionally granting the E15 Waivers.
---------------------------------------------------------------------------
    \5\  Id. at 68096-97.
    \6\  Id. at 68097.
    \7\  Id. at 68095.
    \8\  Clean Air Act, 42 U.S.C. Sec.  7545(f)(4) (2010) (emphasis 
added).

---------------------------------------------------------------------------
B. Arguments in Support of EPA's Action

    As an initial matter, since the CAA requires the Administrator of 
EPA to ``determine[]'' whether the requisite burden has been 
established before granting a fuel waiver, the statute clearly 
envisions the exercise of agency discretion. \9\ Although the CAA makes 
it clear that the applicant ultimately bears the burden of proof in 
seeking a fuel waiver, it says nothing about what types of information 
EPA is permitted to rely on in reaching its decision. \10\ 
Additionally, the CAA explicitly provides that EPA must engage in 
``public notice and comment'' prior to issuing a fuel waiver decision. 
\11\ If EPA is not permitted to rely on information gathered through 
public notice and comment (i.e., information not supplied by the 
applicant), then the process is pointless. Moreover, the E15 Waivers 
provide a prime example of why EPA should be permitted to rely on 
information other than that submitted by the applicant. If, for 
example, the CAA were interpreted as requiring EPA to deny the E15 
Waivers because the applicant itself had failed to submit enough data 
to establish that the waivers should be granted, this would not have 
altered the results of the DOE testing, and the applicant would likely 
resubmit its application based on the DOE results, and EPA would be 
forced to begin the public notice and comment process all over again. 
It is clearly a more efficient use of resources for the EPA to base its 
fuel waiver decisions on all relevant information that is brought to 
light via the public notice and comment period. Finally, the CAA's 
reference to the fact that the applicant must establish that the waiver 
fuel will not adversely affect emissions control systems, could be 
explained as a hold-over from the waiver provision's previous version 
that did not require public notice and comment. \12\ Since the previous 
wording of the waiver provision did not require notice and comment, 
this language was likely originally included as a means to specify that 
EPA was not required to establish the merits of a fuel waiver (i.e., 
the EPA's role is to merely make a decision based on information 
submitted by the applicant). As the CAA now explicitly requires public 
notice and comment, it would be an absurd result to interpret the 
waiver provision as precluding the granting of a waiver when the 
applicant fails to establish the requisite burden on its own but 
sufficient information is gathered from other public sources.
---------------------------------------------------------------------------
    \9\  See id.
    \10\  See id.
    \11\  Id.
    \12\  Clean Air Act, 42 U.S.C. Sec.  7545(f)(4) (2006).

---------------------------------------------------------------------------
C. Explanation of the Quoted Excerpts From Our Article

    The quoted statement from our article is presented out of context 
in Representative Harris' question. In our article, the statement is 
preceded by noting that ``[i]f we unpack the CAA's fuel waiver 
language, some important and possibly misleading ideas emerge.'' As 
this article was intended for a non-legally trained audience, this 
portion of the paper was intended to compare and contrast the way a 
non-lawyer would read the plain language of the CAA with the way in 
which EPA administers the fuel waiver process. In doing so, we remain 
completely agnostic as to whether or not the EPA's approach is proper.
    In another article of mine, Making Regulatory Innovation Keep Pace 
with Technological Innovation, we again mention this issue in an 
agnostic manner, but go on to opine that if the EPA continues to view 
DOE testing as the gateway to fuel waiver approval, then it would be 
beneficial for the DOE to begin conducting tests on emerging types of 
biofuels (e.g., biobutanol).

Conditionally Granting the E15 Waiver for Some Vehicles

and Denying It for Other Vehicle/Engine Types

(i.e., conditionally granting a ``Partial Waiver'')

    In your question, you state the following:

      You also noted that EPA's decision to partially approve 
the waiver contradicted the Clean Air Act language that the ``fuel has 
no adverse effects on the emissions control system in a variety of 
vehicle and engine types.''

    These excerpts are from an article of mine published in Global 
Change Biology Bioenergy.

      A. Arguments Against the EPA's Authority to Conditionally 
Grant a "Partial Waiver" (Quoted directly from U.S. Environmental 
Protection Agency, Partial Grant and Partial Denial of Clean Air Act 
Waiver Application Submitted by Growth Energy To Increase the Allowable 
Ethanol Content of Gasoline to 15 Percent; Decision of the 
Administrator, 75 Fed. Reg. 68094, 68143-44 (Nov. 4, 2010) (internal 
citations omitted)).

    ``As stated in EPA's notice for comment on the E15 waiver request, 
a possible outcome after the Agency reviewed the record of scientific 
and technical information may be an indication that a fuel up to E15 
could meet the criteria for a waiver for some vehicles and engines but 
not for others. In this context, the Agency noted that one 
interpretation of section 211(f)(4) is that the waiver request could 
only be approved for that subset of vehicles or engines for which 
testing supports its use. We also stated that such a partial waiver for 
use of E15 may be appropriate if adequate measures or conditions could 
be implemented to ensure its proper use. EPA invited comment on the 
legal aspects regarding a waiver that restricted the use of E15 to a 
subset of vehicles or engines, and the potential ability to impose 
conditions on such a waiver.
    We received a number of comments expressing opposition to a partial 
waiver based on a lack of legal authority under section 211(f)(4). Some 
of those same commenters, as well as others, also stated that EPA 
should first conduct and finalize a rulemaking under section 211(c) to 
mitigate the potential for misfueling and limit the types of mobile 
sources for which E15 may be used.
    Many commenters pointed to the language in section 211(f)(4) and 
argued that the use of the word `any' in the phrase `will not cause or 
contribute to a failure of any emission control device or system (over 
the useful life of the motor vehicle, motor vehicle engine, nonroad 
engine or nonroad vehicle in which such device or system is used) to 
achieve compliance by the vehicle or engine,' means that if the waiver 
applicant has not established that the use of E15 meets the waiver 
criteria for any type of motor vehicle or nonroad product, then the 
waiver must be denied. Noting the statutory provision's use of the word 
`any,' commenters asserted that should E15 cause or contribute to a 
failure of any emission control device to achieve compliance under any 
single circumstance, then the waiver applicant has not met the waiver 
criteria and the waiver must be denied in its entirety. Another 
commenter suggested that the word `any' modifies `emission control 
device' and that if an emission control device for any of the types of 
vehicles in the parenthetical language in section 211(f)(4) is 
implicated, then the waiver must be denied. Still another commenter 
suggested that `In amending section 211(f)(4) in 2007 with enactment of 
the Energy Independence and Security Act, Congress expanded the types 
of devices for which an applicant must establish that a fuel or fuel 
additive will not cause or contribute to a failure while retaining the 
prohibition of causing or contributing to the failure of `any' device. 
With the expansion of section 211(f)(4), EPA is directed to only 
approve a waiver if all nonroad and on- road vehicles and engines would 
not be adversely affected.' Commenters asserted that the provision 
effectively required that there should be a `general purpose' fuel. The 
commenters noted that EPA would contradict this direction if it failed 
to address impacts on any portion of the vehicles or engines. 
Essentially, the implication of all of these assertions is that EPA can 
only grant a waiver if all emission control devices in all types of 
mobile sources listed in the statute will not be adversely impacted by 
E15.
    We also received several comments suggesting that if EPA desires to 
grant a partial waiver, it must first proceed under section 211(c) with 
a separate and full rulemaking to analyze the costs, benefits, 
necessary lead time, and the technological feasibility of a partial 
waiver. The commenters stated that this rulemaking should also include 
an analysis of the partial prohibition and controls on the use of E15 
and include detailed regulatory requirements to ensure adequate control 
measures and to mitigate misfueling with E15. Commenters stated that 
the inclusion in section 211(f)(4) of 270 days by which EPA must act 
does not allow enough time to address all the necessary marketing and 
other issues and thus Congress could not have envisioned a partial 
waiver.''
    U.S. Environmental Protection Agency, Partial Grant and Partial 
Denial of Clean Air Act Waiver Application Submitted by Growth Energy 
To Increase the Allowable Ethanol Content of Gasoline to 15 Percent; 
Decision of the Administrator, 75 Fed. Reg. 68094, 68143-44 (Nov. 4, 
2010) (internal citations omitted).

      B. Argument in Support of the EPA's Authority to 
Conditionally Grant a ``Partial Waiver`` (Quoted directly from U.S. 
Environmental Protection Agency, Partial Grant and Partial Denial of 
Clean Air Act Waiver Application Submitted by Growth Energy To Increase 
the Allowable Ethanol Content of Gasoline to 15 Percent; Decision of 
the Administrator, 75 Fed. Reg. 68094, 68144 (Nov. 4, 2010) (internal 
citations omitted)).

    ``Growth Energy and ACE stated that the Agency has the authority to 
grant a partial waiver or that EPA's authority for a partial waiver is 
a permissible interpretation of CAA authority, but that the evidence 
suggests a waiver for all vehicles and engines on the road today is 
appropriate.
    We also received comment noting that the prohibition in section 
211(f)(1) only applies to the use of any fuel or fuel additive in 
light-duty motor vehicles, indicating that the grant of the waiver of 
this prohibition under section 211(f)(4) is not dependent on findings 
with respect to nonroad products. The commenter further noted that 
although EPA has the authority and discretion to look at the effect of 
a fuel or fuel additive on nonroad products (in the context of 
examining impacts on motor vehicles), nothing in the statute or 
legislative history indicates that the amendment to section 211(f)(4) 
sought to limit EPA's discretion for issuing a waiver for motor 
vehicles. In light of Congress' decision in the Energy Independence and 
Security Act of 2007 to substantially increase the Renewable Fuel 
Standard Program's volume mandates, this commenter suggests that 
reading the word `any' in section 211(f)(4) as amended by the 2007 
Energy Act to apply to anything more than any emission control systems 
on the subset of motor vehicles would be at odds with Congressional 
intent.
    Regarding EPA's authority to impose conditions on a waiver, we 
received comment stating that EPA has the authority to grant waivers 
subject to a broad range of conditions that ensure that the fuel or 
fuel additive will not cause or contribute to the failure of any 
emission control device or system. One commenter pointed to four of the 
eleven waivers EPA has issued since 1977 that have placed conditions on 
a waiver. In EPA's first waiver decision in 1978, the Agency discussed 
its authority to grant conditional waivers, noting that it may grant a 
waiver `conditioned on time or other limitations,' so long as `the 
requirements of section 211(f)(4) are met.' This commenter also points 
to the legislative history of section 211(f)(4) which makes clear that 
EPA has authority to grant conditional waivers. The 1977 Senate Report 
regarding section 211(f)(4) states: `The Administrator's waiver may be 
under such conditions, or in regard to such concentrations, as he deems 
appropriate consistent with the intent of this section.' Senate Report 
No. 95-125, 95th Congress, 1st Session 91 (1977), pg 91.''
    U.S. Environmental Protection Agency, Partial Grant and Partial 
Denial of Clean Air Act Waiver Application Submitted by Growth Energy 
To Increase the Allowable Ethanol Content of Gasoline to 15 Percent; 
Decision of the Administrator, 75 Fed. Reg. 68094, 68144 (Nov. 4, 2010) 
(internal citations omitted).

      C. The EPA's Decision Regarding Its Authority to 
Conditionally Grant a ``Partial Waiver'' (Quoted directly from U.S. 
Environmental Protection Agency, Partial Grant and Partial Denial of 
Clean Air Act Waiver Application Submitted by Growth Energy To Increase 
the Allowable Ethanol Content of Gasoline to 15 Percent; Decision of 
the Administrator, 75 Fed. Reg. 68094, 68144-46 (Nov. 4, 2010) 
(internal citations omitted)).
    ``The issue before EPA is whether it is reasonable to interpret 
section 211(f)(4) as authorizing EPA to grant a partial waiver under 
appropriate conditions, as in today's decision. If Congress spoke 
directly to the issue and clearly intended to not allow such a partial 
waiver, then EPA could not do so. However, if Congress did not indicate 
a precise intention on this issue, and we believe that section 
211(f)(4) is ambiguous in this regard, then a partial waiver with 
appropriate conditions would be authorized if it is a reasonable 
interpretation. EPA has considered the text and structure of this 
provision, as well as the companion prohibition in section 211(f)(1), 
and believes it is a reasonable to interpret section 211(f)(4) as 
providing EPA with discretion to issue this partial waiver with 
appropriate conditions.
    It is important to put section 211(f)(4) in its statutory context. 
The prohibition in section 211(f)(1) and the waiver provision in 
section 211(f)(4) should be seen as parallel and complementary 
provisions. Together they provide two alternative paths for entry into 
commerce of fuels and fuels additives. The section 211(f)(1) 
prohibition allows fuels or fuel additives to be introduced into 
commerce as long as they are substantially similar to fuel used to 
certify compliance with emissions standards, and the section 211(f)(4) 
waiver provision allows fuels or additives to be introduced into 
commerce if they will not cause or contribute to motor vehicles and 
nonroad products to fail to meet their applicable emissions standards. 
EPA's authority to issue a waiver is coextensive with the scope of the 
prohibition--whatever is prohibited can also be the subject of a waiver 
if the criteria for granting a waiver are met. In addition, the 
criteria for each provision have similar goals. They are aimed at 
providing flexibility to the fuel and fuel additive industry by 
allowing a variety of fuels and fuel additives into commerce, without 
limiting fuels and additives to those products that are identical to 
those used in the emissions certification process. This flexibility is 
balanced by the goal of limiting the potential reduction in emissions 
benefits from the emissions standards, even if some may occur because a 
fuel or fuel additive is not identical to certification fuel or it 
leads to some emissions increase but not a violation of the standards. 
Together, these are indications that these provisions are intended to 
be parallel and complementary provisions.
    The section 211(f)(1) prohibition has evolved over time. Initially 
it was adopted in the 1977 amendments of the Act, and was much more 
limited in nature. It applied only to fuels or fuel additives for 
general use, and was also limited to fuels or fuel additives for use in 
light-duty motor vehicles. EPA interpreted this as applying to bulk 
fuels or fuel additives for use in unleaded gasoline. The prohibition 
did not apply to other gasoline, or to diesel fuels or alternative 
fuels, or to fuel additives that were not for bulk use. It was thus 
relevant only to the subset of motor vehicles designed to be operated 
on unleaded gasoline.
    In 1990 Congress amended the prohibition and broadened it. It now 
applies to `any fuel or fuel additive for use by any person in motor 
vehicles manufactured after model year 1974 which is not substantially 
similar to any fuel or fuel additive utilized in the certification of 
any model year 1975, or subsequent model year, vehicle or engine.' This 
extended the scope of the prohibition to apply to all gasoline, to 
diesel fuel, and to other fuels such as E85. However, the concept of 
applying this prohibition based on the relevant subset of vehicles 
continues. For example, a diesel fuel that is introduced into commerce 
for diesel vehicles does not need to be substantially similar to 
gasoline fuel or other fuels intended for non-diesel vehicles. This is 
so even though Congress used the phrase `substantially similar to any 
fuel or fuel additive utilized in the certification of any* * *vehicles 
or engine' (emphasis supplied). Clearly Congress did not intend the use 
of the term `any' in the prohibition to always mean all motor vehicles 
or 100% of the motor vehicle fleet. Diesel fuel does not need to be 
substantially similar to the fuel used in the certification of gasoline 
vehicles, and E85 does not need to be substantially similar to fuel 
used in the certification of diesel vehicles. For example, 
manufacturers who want to introduce E85 fuel or fuel additives for E85 
look to the certification fuel that was used for the subset of vehicles 
that were certified for use on E85.
    In some limited cases, EPA has approved a fuel additive as 
substantially similar even when it is introduced into commerce for use 
in just one part of a single vehicle manufacturer's product line. For 
example, where a fuel additive is considered part of the emissions 
control system for a vehicle model and is certified that way by the 
vehicle manufacturer, then it is not a violation of the substantially 
similar prohibition for manufacturers of the fuel additive to introduce 
it into commerce for use in just that very small subset of vehicles, as 
long as it is substantially similar to the fuel additive used in the 
certification of that vehicle model. In all of these cases, broad to 
narrow subsets of motor vehicles can be considered when deciding 
whether the introduction of a fuel or fuel additive for use by that 
subset of motor vehicles is in compliance with the prohibition.
    EPA has in fact applied this construct of this provision in all of 
its past waiver decisions. EPA has previously said that it is virtually 
impossible for an applicant to demonstrate that a new fuel or fuel 
additive does not cause or contribute to any vehicle or engine failing 
to meet its emissions standards. Instead, EPA and the courts allow 
applicants to satisfy this statutory provision through technical 
conclusions based on appropriately designed test programs and properly 
reasoned engineering judgment. For example, the sample size in these 
test programs does not include all motor vehicles in the current fleet; 
the sample size is comprised of a statistically significant sample of 
motor vehicles that, once tested, will enable the applicant to 
extrapolate its findings and make its demonstration. EPA believes that 
this practice of focusing on a relatively small but representative 
subset of motor vehicles does not violate the statutory use of the word 
`any' in this provision.
    Since the waiver and the substantially similar provisions are 
parallel and complementary provisions, this clearly raises the question 
of whether a waiver can also be based on a subset of motor vehicles 
meeting the criteria for a waiver. EPA believes the text and 
construction of section 211(f)(4) supports this interpretation.
    First, the term `waive' as used in section 211(f)(4) is not 
modified in any way. Normally one would read this provision as a 
general grant of waiver authority, encompassing both partial and total 
waivers, as long as the waiver criteria are met. Second, the waiver 
criteria, like section 211(f)(1), have evolved over time. In 1977, the 
criteria were phrased as providing for a waiver when the fuel or fuel 
additive `will not cause or contribute to a failure of any emission 
control device or system (over the useful life of any vehicle in which 
such device or system is used) to achieve compliance by the vehicle 
with the emission standards to which it has been certified.' This was 
not modified in the 1990 amendments. In EISA 2007, Congress amended the 
waiver criteria, providing for a waiver when the fuel or fuel additive 
will not `cause or contribute to a failure of any emission control 
device or system (over the useful life of the motor vehicle, motor 
vehicle engine, nonroad engine or nonroad vehicle in which such device 
or system is used) to achieve compliance by the vehicle or engine with 
the emission standards to which it has been certified.' Congress uses 
the term `any' in section 211(f)(4), as it does in several places in 
section 211(f)(1). One use of the term `any' was deleted in the 2007 
amendments, when the parenthetical was broadened to include 
consideration of nonroad engines and nonroad vehicles as well as motor 
vehicles. The term `any,' however, has always been paired with the 
consistent use of the singular when referring to vehicles and emissions 
control systems--`the vehicle' and the emissions standards to which 
`it' is certified, and the `vehicle in which such device or system is 
used.' Certainly Congress did not state that the applicant has to 
demonstrate that the fuel or fuel additive would not cause any devices 
or control systems, over the useful lives of the motor vehicles or 
nonroad products in which they are used, to fail to achieve the 
emissions standards to which they are certified. If Congress had stated 
that, then it would be clear, as one commenter suggests, that EPA 
should only grant a waiver if all emission control devices in all the 
types of mobile sources listed would not be impacted by the fuel. But 
Congress did not state that.
    Several aspects of section 211(f) thus support the reasonableness 
of EPA's interpretation. The prohibition and the waiver provisions are 
properly seen as parallel and complementary, and the prohibition 
properly can be evaluated in terms of appropriate subsets of motor 
vehicles, notwithstanding the use of the term `any' to modify several 
parts of the prohibition. This clearly raises the concept of also 
applying the waiver criteria to appropriate subsets of motor vehicles. 
`Waive' is reasonably seen as a broad term that generally encompasses a 
total and a partial waiver, as well as the discretion to impose 
appropriate conditions. The criteria for a waiver also refer to `any' 
but the entire provision does not provide a clear indication that 
Congress intended to preclude consideration of subsets of motor 
vehicles when considering an application for a waiver. Finally, a 
partial waiver gives full meaning to all of the provisions at issue.
    For example, in this case, granting a partial waiver means that E15 
can be introduced into commerce for use in a subset of motor vehicles, 
MY2007 and newer light-duty motor vehicles, and only for use in those 
motor vehicles. For those motor vehicles, EPA is not making a finding 
of it being substantially similar, but E15 has been demonstrated to not 
cause or contribute to these motor vehicles exceeding their applicable 
emissions standards. It will also not cause any other motor vehicles or 
any other on- or off-road vehicles or engines to exceed their emissions 
standards since it may not be introduced into commerce for use in any 
other motor vehicles or any other vehicles or engines. Thus, under a 
partial waiver, as the commenter suggested, all emission control 
devices in all the types of mobile sources listed will not be adversely 
impacted by the fuel. It can only be introduced into commerce for those 
vehicles and engines where it has been shown not to cause emissions 
problems; for other types of mobile sources, it cannot be introduced 
into commerce for use in such vehicles and engines. In concept, 
therefore, the combination of this partial waiver, with appropriate 
conditions, and partial retention of the substantially similar 
prohibition, has the same effect as when the criteria for a total 
waiver has been met--the fuel or fuel additive will only be introduced 
into commerce for use in a manner that will not cause violations across 
the fleet of motor vehicles and nonroad products. It can only be 
introduced into commerce for use in vehicles and engines where it has 
been shown not to cause violations of the emissions standards, and may 
not be introduced into commerce for use in other vehicles or engines.
    EPA recognizes that a partial waiver raises implementation issues 
regarding how to ensure that a fuel or fuel additive is only introduced 
into commerce for use in the specified subset of motor vehicles. The 
discretion to grant a partial waiver includes the authority and 
responsibility for determining and imposing reasonable conditions that 
will allow for effective implementation of a partial waiver. In this 
case, EPA has conditioned the waiver on various actions that the fuel 
or fuel additive manufacturer must take. The actions are all designed 
to help ensure that E15 is only used by the MY2007 and later motor 
vehicles specified by the waiver. If a fuel or fuel additive 
manufacturer does not comply with the conditions, then EPA will 
consider their fuel or fuel additive as having been introduced into 
commerce for use by a broader group of vehicles and engines than is 
allowed under the waiver, constituting a violation of the section 
211(f)(1) prohibition.
    EPA recognizes, as several commenters have suggested, that EPA can 
impose waiver conditions only on those parties who are subject to the 
section 211(f)(1) prohibition and the waiver of that prohibition. These 
parties are the fuel and fuel additive manufacturers. Waiver conditions 
can apply to them but cannot apply directly to various downstream 
parties, such as a retailer who is not also a fuel or fuel additive 
manufacturer. This is one reason EPA is also proposing specific 
misfueling mitigation measures in a separate rulemaking under section 
211(c), to minimize any risk of misfueling. This will also facilitate 
compliance with certain of the waiver conditions.
    Many commenters suggested that before EPA can grant a waiver of any 
type under section 211(f)(4), the Agency must first issue a rule under 
section 211(c) that addresses the proper prohibition and control of a 
new fuel or fuel additive to the extent necessary before such fuel or 
fuel additive is permitted under section 211(f)(4). However, there is 
no mention of timing in these two statutory provisions and EPA believes 
it appropriate to consider the merits of a section 211(f)(4) waiver 
request on its face.''
    U.S. Environmental Protection Agency, Partial Grant and Partial 
Denial of Clean Air Act Waiver Application Submitted by Growth Energy 
To Increase the Allowable Ethanol Content of Gasoline to 15 Percent; 
Decision of the Administrator, 75 Fed. Reg. 68094, 68144-46 (Nov. 4, 
2010) (internal citations omitted).

      D. Explanation of the Quoted Excerpts from Our Article

    Again, the quoted statement from our article is presented out of 
context in Representative Harris' question. In our article, the 
statement is preceded by noting that ``[i]f we unpack the CAA's fuel 
waiver language, some important and possibly misleading ideas emerge.'' 
As this paper was intended for a non-legally trained audience, this 
portion of the article was intended to compare and contrast the way a 
non-lawyer would read the plain language of the CAA with the way in 
which EPA administers the fuel waiver process (i.e., the statement was 
not intended to suggest that the EPA's approach ``contradict[s]'' the 
language of the CAA in a legal sense). In doing so, we remain 
completely agnostic as to whether or not the EPA's approach is proper. 
In another article of mine, Making Regulatory Innovation Keep Pace with 
Technological Innovation, we again mention this issue in an agnostic 
manner, but go on to opine that if the EPA is willing to conditionally 
grant a fuel waiver for use in some vehicles/engines and deny it for 
use in others, then the applicant should be permitted to ex ante 
specify which types of vehicles/engines it is seeking a waiver for and 
thereby mitigate the costs associated with seeking a fuel waiver (i.e., 
negate the need to incur the cost of testing the waiver fuel in the 
types of vehicles/engines that are not the subject of the application.
Responses by Mr. Bob Greco, Group Director for
Downstream and Industry Operations, American Petroleum Institute

Questions Submitted by Chairman Andy Harris

Q1.  What does API think ought to be done by the EPA to prevent the 
impending RFS ``trainwreck,'' i.e., the coming encounter with the E10 
blend wall and the severe shortage of advanced technology renewable 
fuels? What role could Congress play?

A1.  Congress should amend EISA to align the mandated biofuels volumes 
with the capacity of the existing vehicle fleet to safely use them. 
Congress should give authority to and require EPA to adjust the RFS 
requirement when the annual volume of any renewable fuel anticipated 
for meeting the RFS in any given calendar year exceeds that which can 
be reasonably produced; delivered through existing infrastructure; and 
consumed as determined by original equipment manufacturers' warranties 
at the time of manufacture of the vehicle or engine.

Q2.  The requirements in the Energy Independence and Security Act are 
driving us into the E10 blend wall. Will EPA's waiver to allow the use 
of E15 in today's automobiles be of any help in averting the coming 
confrontation?

A2.  No, it will not. EPA prematurely waived Clean Air Act (CAA) 
requirements to allow ethanol blends of up to 15% for model year 2001 
and newer cars and light trucks prior to the completion of 
comprehensive auto and oil industry studies on the vehicle safety, 
performance, and durability impacts associated with use of the new 
fuel. Should the driving public experience problems with their cars, 
the concern is that drivers could demand E0, which would make RFS 
compliance more difficult than it already is. Widespread consumer 
problems occurring because of the waivers (either misfueling non-road 
equipment and pre-2001 vehicle problems or 2001 and later model year 
vehicle problems) would put the entire renewable fuels program at risk. 
Even if E15 is eventually given a green light by auto manufacturers 
after completion of comprehensive research, it will take several years 
before E15 can be introduced into the marketplace due to other 
regulatory hurdles and necessary changes to retail station 
infrastructure.

Q3.  I understand that, in addition to the Baker & O'Brien analysis of 
potential Tier 3 regulation impacts, there have also been other studies 
released that project some smaller economic effects. Could you provide 
some context to these studies and their methodologies? \1\
---------------------------------------------------------------------------
    \1\  Baker & O'Brien: ``Potential Supply and Cost Impacts of Lower 
Sulfur, Lower RVP Gasoline,'' July, 2011.

A3.  We are aware of studies conducted by the consulting firm, MathPro, 
which analyzed the refining economic impacts of prospective gasoline 
standards, but MathPro in each of these studies used methodologies that 
are much less rigorous and realistic than the Baker & O'Brien analysis. 
\2\
---------------------------------------------------------------------------
    \2\  MathPro: ``Refining Economics of a National Clean Gasoline 
Standard for PADDS 1-3,'' June 27, 2008; MathPro: ``Refining Economics 
of a Single Octane National Clean Gasoline Standard,'' October 8, 2010; 
MathPro: ``Refining Economics of a National Low Sulfur, Low RVP 
Gasoline Standard,'' October 25, 2011.
---------------------------------------------------------------------------
    The main flaws in the MathPro's analytical approach are in the 
areas of modeling methodologies and study assumptions:

      Capital expenditure/refinery investment: The MathPro 
approach does not account for the unique characteristics and challenges 
of individual refineries. Instead, MathPro treats an entire PADD as one 
large ``notional'' refinery, and implies that adding required refining 
capacity can occur at the same rate and economies of scale across all 
refineries within the PADD. This results in over-optimization and an 
underestimate of compliance costs.
    In contrast, the Baker & O'Brien analysis employs a stepwise 
approach in its refinery-by-refinery economic assessment of investment 
required for compliance, modeling 112 refineries on an individual 
basis. The Baker & O'Brien analysis, which allows for refineries to 
shut down, makes an assessment of required new and expanded capacities.

      Treatment of natural gas liquids and refinery operation 
costs: The linear programming constraints and modeling assumptions 
employed by MathPro were unrealistic because they do not track how 
refineries are actually run. The constraints and assumptions forces the 
``notional'' refinery to increase the amount of crude oil used to 
offset the volumes of gasoline lost from reducing RVP. In reality, 
refiners may consider options which include reducing production of 
refined products or shutting down. The MathPro approach does not allow 
for refinery shutdowns, and recent history demonstrates that individual 
refineries have shut down. In addition, the MathPro model does not 
accurately account for how the petrochemicals marketplace will react to 
the excess natural gas liquids created by reducing gasoline RVP.

Q4.  Are further reductions in the sulfur content of gasoline necessary 
to meet the 2008 Ozone National Ambient Air Quality Standards (NAAQS)?

A4.  No. Nationwide concentrations of the key ozone precursor nitrogen 
dioxide (NO2) have dropped about 35% over the last 10 years. 
\3\ Additional mobile source reductions of NO2 will occur 
with vehicle turnover because of existing gasoline and diesel fuel on-
road requirements, mandated increased fuel economy standards, and 
reductions projected from recent diesel standards for off-road 
vehicles. \4\ Stationary source NO2 is projected to decrease 
with implementation of the Cross States Air Pollution Rule and 
achievement of existing requirements written into State Implementation 
Plans to meet ozone standards. There are a variety of options to reduce 
the NO2 emissions and thereby reduce ozone, but further 
reductions of sulfur content in gasoline are not necessary to meet the 
2008 ozone standards.
---------------------------------------------------------------------------
    \3\  http://www.epa.gov/airtrends/nitrogen.html.
    \4\  By 2030, this program will reduce annual emissions of NO2 
by about 800,000 tons, and further reductions will be made after 2030; 
see: http://www.epa.gov/otaq/regs/nonroad/420f08004.htm.

---------------------------------------------------------------------------
Questions Submitted by Ranking Member Brad Miller

Q1.  What technology advancements have the blenders made in the four 
years since enactment of legislation mandating the current RFS to 
prepare for compliance with the standard? What technology advancements 
are planned for the future?

A1.  Blenders have made significant changes to ensure that 10% ethanol 
gasoline can be sold in the majority of fuel in the country to give us 
the best opportunity to meet the biofuel volumes mandated in the RFS. 
Gasoline suppliers (blenders) have increased the use of rail and truck 
deliveries to their terminals to accommodate the increased volumes of 
ethanol. Since ethanol must be stored in separate tanks at terminals--
it cannot be moved via pipeline due to technical concerns--suppliers 
have installed tanks or converted them from other fuel service to store 
the ethanol. They have also installed advanced automated equipment that 
ensures that ethanol can be efficiently and accurately blended with 
gasoline to make a product that meets the specifications and State and 
federal requirements.
    However, as my testimony indicates, the blendwall is coming 
quickly, and our members have not been sitting idle. They have been 
conducting research to understand how to bring more biofuels to market. 
For example, research is ongoing to determine how to mitigate the 
technical concerns of moving ethanol in pipelines. If the results can 
be applied in areas where pipelines move product in the right 
direction, namely mid-continent to the east coast or to/ from marine 
terminals for transportation via barge, there could be improvements in 
efficiently moving fuel grade ethanol to market. But, of course, more 
ethanol simply exacerbates the blendwall problem. The technological 
solution is the development and commercialization of biohydrocarbons 
identical to those from petroleum sources that can be dropped into 
current petroleum products. To that end, the biofuels and oil 
industries continue to conduct research to create such a fuel. However, 
time is not on our side. Development of biohydrocarbons is seriously 
lagging and offers little promise of being available in time to avert 
the blendwall.
    E15 is sometimes held out to be a solution. While the Department of 
Energy and API have completed research on the ability of the existing 
retail gasoline station equipment to store and dispense gasoline with 
greater than 10% ethanol, the results of this research show that there 
are serious issues with using any equipment that is not specifically 
listed for a 15% ethanol fuel (E15) and the majority of equipment was 
not built for that fuel. Beyond the technical issues associated with 
storing/dispensing E15, suppliers and station owners have concerns 
regarding selling E15 to the consumer. Other research on the vehicle 
shows that some cars and trucks will be damaged by E15, and 14 
automobile manufacturers wrote letters to Rep. Sensenbrenner that their 
warranties would not cover damage that resulted from a vehicle that was 
refueled with E15. Taken together, there are significant concerns 
associated with storing and selling a fuel that has more than 10% 
ethanol that may require Congressional action to mitigate these 
concerns. Moreover, even if the green light were given to E15 today, 
the blendwall is approaching faster than the ability of the industry to 
upgrade the infrastructure needed to accommodate the huge volumes that 
would be required to avoid it.
Responses by Mr. David Hilbert,
Thermodynamic Development Engineer, Mercury Marine

Questions Submitted by Chairman Andy Harris

Q1a-c.  There have been some criticisms of the NREL report, 
specifically that it was a very limited study and tested only a few 
engines. (a) Are you aware of any plans by either the Department of 
Energy or EPA to conduct a larger study on the effects of higher 
ethanol fuel blends on marine engines? (b) If no other study is 
planned, are you aware of any other studies that are comparable to the 
one you conducted? (c) As an engineer, absent information beyond what 
was produced in this study, what is your opinion of the performance of 
marine engines running on higher ethanol blend fuels?

A1a-c.  Despite the limited nature of the testing, several issues were 
identified. The most striking example of these issues was the failed 
exhaust valves on the 300 HP supercharged four-stroke engine. The 
exhaust valve failure mechanism observed in the testing on E15 fuel was 
not experienced previously in the tens of thousands of hours of engine 
testing during the development and validation of this engine family on 
E0 and E10 fuel. The previous experience with the development and 
validation of the 300 HP engine family were outside the scope of this 
specific study, but was certainly taken into consideration by the 
Mercury Marine engineering team when assessing the risk presented by 
the different fuel. Thus, it presented a new failure mode due to the 
change in fuel.
    (a) Mercury Marine initially proposed a much more extensive program 
that totaled $3.8M and would have been a more comprehensive study. We 
were told by DOE and NREL that the only funds available for this 
testing were $300K-$400K. Mercury provided 50% cost sharing even though 
there was little incentive for us to do so. We are not aware of any 
larger studies being planned.
    (b) A comparable study was conducted by personnel at Volvo Penta at 
the same time we at Mercury Marine were doing our study. It was also 
funded by the Department of Energy, and it tested one engine family: a 
4.3 liter sterndrive based on a General Motors-derived engine. The 
results of that study can be found at http://www.nrel.gov/docs/
fy12osti/52577.pdf. This study noted difficulty in starting the engine 
when operated on E15 fuel.
    (c) The study showed that the 300 HP supercharged four-stroke 
engine had a major engine component failure and an increase in certain 
exhaust emissions due to E15 fuel. The 9.9 HP four-stroke engine showed 
a fuel system component material compatibility problem and also an 
increase in certain exhaust emissions due to E15 fuel. The 200 HP two-
stroke engine suffered the failure of a major internal engine component 
that relies on the fuel to carry lubricating oil to it, which calls 
into question if the ethanol portion affected the lubrication of that 
component. The number of problems observed in this study compared with 
the small sample of engines tested would suggest that the performance 
of E15 fuel was unacceptable.

Q2.  How many marine and other off-road or small engines could 
potentially be at risk of misfueling with E15?

A2.  Higher ethanol blend fuels certainly create a risk to all marine 
engines currently in use. Virtually none of the marine engines 
currently in use were ever calibrated for higher ethanol blends. As the 
fuel blends keep changing, at some point the legacy engines can no 
longer tolerate the fuels and will certainly exhibit an increased 
failure rate. In addition, materials used in the older engines were not 
designed to tolerate ethanol fuels, and increasing the allowable 
ethanol concentration will likely only add to the problem.
    The National Marine Manufacturers Association (NMMA) estimates 
there are 12 million engine-powered marine vessels in the U.S. with 
about 90% being gasoline engine boats. As to small engines, we have 
seen reports from such groups as the Outdoor Power Equipment Institute 
(OPEI) that estimate that there are more than 200 million legacy small 
engines in use in the United States. Other off-road and small engine 
categories should be addressed by those industries, so please defer to 
those organizations for further detail.

Q3.  What is the estimated cost of replacing small engines that may 
fail or be damaged when using E15?

A3.  For marine engines, outboards range from 2 HP to 350 HP and 
sterndrive engines range from 130 HP to over 1,000 HP. Replacement cost 
of individual engines can range from $500 to $15,000 for outboards and 
from $3,000 to $100,000 for sterndrive engines. For other engine types 
for other engine categories, please defer to those organizations for 
further detail.

Q4.  In the event that an E15 waiver is granted for off-road vehicles 
as well, in response, what would the marine engine manufacturing 
industry be doing to ensure its products are able to run safely and 
reliably on this higher blend? Are there additional costs to making 
marine engines resistant to the corrosion associated with higher 
ethanol blends, including E15? What technological advances would be 
required?

A4.  To answer this question, I need to break this question down into 
several parts. First, I will treat the existing legacy fleet separately 
from newly manufactured engines. Second, I will speak to the technical 
difficulties, and then finally to the other aspects of this topic. The 
technical aspects will be centered around materials compatibility/
corrosion resistance of the fuel system and also recalibrating the fuel 
system to supply the appropriate amount of fuel based on the fuel blend 
differences. There would likely be other technical challenges that 
would be discovered once the redesign process would begin, so the 
answer to this question is not meant to be all-encompassing.

      Legacy engines: Considering the millions of engines in 
the legacy fleet, there is no practical way to convert those legacy 
engines to operate on a fuel so very different from what they were 
designed to run on. To re-engineer 30+ years of service parts to have 
proper material compatibility, corrosion protection, and fuel delivery 
is simply impractical.

      Newly manufactured engines: Materials compatibility of 
the fuel system or any component that could come in contact with the 
fuel or fuel vapor (such as components that could be exposed to 
inadvertent contact with fuel during refueling or having fuel vapor 
cause problems) would need to be investigated and redesigned as 
necessary. Any type of elastomer, polymer, or sealant/adhesive must be 
subjected to ``aggressive'' ethanol blend exposure tests. Examples of 
these types of components would be gaskets, seals, o-rings, fuel hoses, 
etc. The ``aggressive'' ethanol blend refers to the fact that the fluid 
that the components are exposed to contains the proper chemistry to 
simulate real-world fuel with all of the contaminates, acidity, water 
content (including salt water), etc., that the engines will see. If the 
materials were found to be incompatible, more robust materials would 
need to be selected and then re-qualified with more bench tests and 
also running engine tests. The metal components, such as fuel 
reservoirs and fittings, must be tested for corrosion with the 
aggressive ethanol. If corrosion issues are found, the materials must 
be upgraded to metals with higher corrosion resistance or be coated 
with a corrosion-resistant coating, such as anodizing. The technology 
currently exists for the materials compatibility aspects, as evidenced 
by the use of Flex Fuel Vehicles in the automotive segment; however, 
the changes needed would likely increase the production cost of the 
engines.

    Mercury Marine manufactures three different types of engines sold 
in the USA that need to be considered separately when discussing fuel 
mixture control. The fuel system would need to be recalibrated to 
supply the appropriate amount of fuel based on the ethanol blend, but 
this would present difficulty in accounting for the range of fuels from 
E0, which is still available, to E15. The three types of engines are: 
electronically controlled four-strokes, carbureted four-strokes, and 
direct fuel-injected two-strokes. The main considerations for 
recalibrating the fuel system are exhaust emissions, engine durability 
due to exhaust gas temperatures (example: broken exhaust valve in 
original study), fuel economy, and other operating characteristics.
    Electronically controlled four-strokes offer the best potential for 
accepting E15 fuel. Electronically controlled outboard engines could be 
modified to include an oxygen sensor in the exhaust system to 
compensate for different fuels. On most outboard marine engines, the 
exhaust system is integrally cast into the cylinder block and cylinder 
head. The inclusion of a port for an oxygen sensor would mean that the 
block and/or cylinder head casting would have to be modified. There may 
also be other components that would need to be redesigned to make room 
for the sensor protruding out of the exhaust passage, which would also 
increase cost. The electronic engine controllers on many outboards 
would need to be redesigned to account for the additional sensor input, 
as well as developing and validating the software to control the oxygen 
sensor.
    Most of outboard marine engines 30 horsepower or lower are 
carburated and cannot be calibrated to run optimally on E0 and E15 
while still maintaining emissions compliance and acceptable operating 
characteristics. Common industry practice from the small off-road 
engine manufacturers identifies a 10% ethanol blend tolerance window 
(example 0-10% or 5-15%) in which carburated engines can be calibrated. 
[See the testimony of Kris Kiser: ``Statement of the Outdoor Power 
Equipment Institute before the Committee on Environment and Public 
Works-- U.S. Senate,'' April 13, 2011]. The carburated engines cannot 
use an oxygen sensor since the fuel system is not electronically 
controlled. There is no obvious or easily implemented solution to deal 
with the carburated models to make them tolerant of a wide variety of 
fuel blends. The technology that would need to be developed to remedy 
this problem would be a closed-loop electronic fuel injection system 
that would be competitive to a carburator in terms of cost (very cost 
sensitive on these small engines), reliability, and ease of service.
    Direct-injected two-stroke engines pose a different challenge. The 
nature of the direct injected two-stroke engine causes fresh air to 
bypass the combustion chamber and go directly to the exhaust. As such, 
an oxygen sensor in the exhaust system senses this fresh air and cannot 
reliably control the fueling rate on this type of engine at all speeds 
and loads. Therefore, there is no way to adjust for differences in fuel 
blends with an oxygen sensor in this type of engine. Some other means 
to provide sensor input into a closed-loop fuel controller to adjust 
for fueling differences would need to be developed.
    To estimate the total cost to redesign the current product 
offering, retool the necessary changes, validate the changes with 
analysis and physical testing, and move into production is a complete 
study in and of itself. The $3.8 million proposal mentioned in the 
answer to question 1.a. above reflects the scope of the preliminary 
investigation into this topic. The end result could be hundreds of 
millions of dollars of investment and lost opportunities to develop 
other more competitive products. The end result would be products that 
cost more to produce due to the higher-grade materials needed and more 
sophisticated control systems.

      Other considerations: When considering new engine 
installations into new boats, in many cases the boat hull and engine 
are from different manufacturers. The boat hull often contains a large 
portion of the fuel system such as the fuel tank, fuel lines, etc. The 
boat manufacturers would also have to validate the fuel systems on new 
boats with E15 fuel.

    Another point to consider is that many new marine engines are sold 
to replace worn-out engines in existing boat hulls. Even if the new 
engines are compatible with E15 fuel, the legacy boat in which they are 
installed may not be. There have been documented cases of older boat 
fuel systems which are incompatible with ethanol blended fuels. The 
legacy boat fuel system would need to be reevaluated to see if there 
are material compatibility issues. This would further exacerbate the 
issues of misfueling if there were some marine engines approved for E15 
and others that were not and also some boat fuel systems which are 
approved for E15 and others that are not.

Q5.  It has been suggested that the endurance and emissions problems 
you witnessed when testing marine engines with E15 would not occur with 
advanced biofuels. Why is that the case? What properties of advanced 
biofuels make them more suitable for use in a marine engine as compared 
with ethanol? Are there any studies available to support this 
suggestion?

A5.  What are being proposed as ``advanced biofuels'' are synthetically 
made fuels that are nearly chemically identical to current gasoline, 
diesel, and jet fuels. As such, they would not have the higher oxygen 
content of ethanol fuels, would not cause enleanment of the engine 
which leads to the increased engine operating temperature, would not 
have the material compatibility issues, and not absorb water. All 
proposed fuels require extensive testing, but the characteristics 
proposed for these ``drop-in'' fuels suggest that they will behave very 
much like the petroleum fuels they would replace.

Questions Submitted by Subcommittee Ranking Member Brad Miller

Q1.  Please provide your name and employing organization(s).

A1.  David Hilbert--Thermodynamic Development Engineer, Mercury Marine 
Division of Brunswick Corporation.

Q2a.  Are you an officer or employee of, or otherwise compensated by, 
any other organization that may have an interest in the topic of this 
hearing?

A2a.  No

Q3a.  In the last three calendar years, including this one, have you 
been a registered lobbyist?

A3a.  No

Q4.  If you have worked as an attorney, contractor, consultant, paid 
analyst, or in any other professional services capacity, please provide 
a list of all of your firm's clients who you know to have an interest 
in the subject matter of this hearing. These should be clients that you 
have personally worked with in the last three calendar years (including 
the present year). Provide the name of the client, the matter on which 
you worked and the date range of that work. If there was a deliverable, 
please describe that product.

A4.  I was the technical leader of a test of E15 blend fuel in three 
different Mercury outboard engines. These tests were conducted at the 
Mercury Marine test facility in Fond du Lac in 2010-2011 by Mercury 
personnel under contract to the U.S. Department of Energy and 
coordinated by the National Renewable Energy Lab (NREL). The final 
report was released by the Department of Energy in October 2011. This 
test was entitled, ``High Ethanol Fuel Endurance: A Study of the 
Effects of Running Gasoline with 15% Ethanol Concentration in Current 
Production Outboard Four-Stroke Engines and Conventional Two-Stroke 
Outboard Marine Engines,'' and it formed the basis for my testimony 
before the Subcommittee. It can be accessed on the Web site of DOE's 
National Renewable Energy Laboratory at the following URL: http://
www.nrel.gov/docs/fy12osti/52909.pdf.

Q5.  Please provide a list of all publications on which you have 
received an author or coauthor credit relevant to the subject of this 
hearing. If the list is extensive, the 10 most recent publications 
would be sufficient.

A5.  ``High Ethanol Fuel Endurance: A Study of the Effects of Running 
Gasoline with 15% Ethanol Concentration in Current Production Outboard 
Four-Stroke Engines and Conventional Two-Stroke Outboard Marine 
Engines''--as listed in question 4 above.
Responses by Mr. Jack Huttner,
Executive Vice President, Commercial and Public Affairs,
Gevo, Incorporated

Questions Submitted by Chairman Andy Harris

Q1a-1e.  In your written testimony, you discuss Gevo's projections for 
estimated biobutanol production capacity in the coming years and out to 
2015. You state that by 2015, Gevo plans to have approximately 350 
million gallons on biobutanol production capacity at an estimated nine 
plants. (a) How much biobutanol is Gevo currently producing? (b) Could 
you please explain how the composition of EPA's pending Tier 3 
standards may impact your projected production capacity? (c) Could you 
explain how this uncertainty over forthcoming standards has impacted 
your company and the industry in general? (d) What impact would the 
establishment of E15 as the new certification fuel for new tailpipe 
emissions standards have on Gevo's projected production capacity, the 
company's business model, and on the product's anticipated economic and 
environmental contributions? (e) What would be the broader impact for 
all fuel-based industries?

A1a-1e.  As I stated in my testimony, Gevo currently is converting two 
existing ethanol plants for isobutanol production, with the first 18 
million gallon per year (MGPY) facility expected to be online by mid-
2012 and the second with an additional 38 MGPY in 2013. Until the first 
commercial plant is in production, Gevo is producing isobutanol at its 
one MGPY demonstration plant in St. Joseph, MI, as needed by customers 
for product specification and qualification. Gevo's business plan is to 
build on the success of these early biobutanol units and accelerate the 
conversion of ethanol facilities to biobutanol manufacturing plants to 
reach approximately 350 million gallons of production from nine 
biobutanol plants by the end of 2015.
    EPA is not expected to propose its Tier 3 standards regulations 
until early 2012 and it is far from clear what the details on that 
proposal will be or whether the final Tier 3 standards--scheduled for 
adoption in late 2012 or early 2013--will be similar or significantly 
different from the proposal. With those caveats, however, EPA has 
conducted briefings with stakeholders regarding the direction of their 
Tier 3 Standards deliberations and, based on what Gevo has heard from 
EPA and other stakeholders, the proposal will have the following 
impacts on our projected production capacity and business plan.
    EPA is expected to require reductions in gasoline sulfur levels in 
the Tier 3 proposal. Given biobutanol has almost no sulfur content, 
Gevo anticipates that gasoline standards requiring lower sulfur content 
will increase demand for a renewable biofuel such as biobutanol. Our 
product's extremely low sulfur content will make it a very attractive 
biofuel blendstock for refiners and other obligated parties under the 
projected Tier 3 standards.
    EPA also has discussed reducing gasoline ``volatility''--measured 
by Reid Vapor Pressure, or RVP, measured in pounds per square inch--
under the Tier 3 proposal, to control ozone precursors. Biobutanol has 
a lower RVP than ethanol, again making Gevo's product a more attractive 
biofuel blendstock for obligated parties under the Tier 3 standards if 
RVP is restricted. However, in conventional gasoline areas of the 
country, Congress has allowed ethanol a ``one-pound'' RVP waiver for 10 
percent ethanol/gasoline blends (so-called E10). This ethanol RVP 
waiver limits the effectiveness of EPA's RVP constraints in terms of 
environmental protection, and reduces the competitive advantage that 
biobutanol's inherently lower RVP should bring to its blenders in the 
marketplace. Thus, in a vacuum, Tier 3 standards that constrain RVP 
should be advantageous to Gevo and biobutanol. With the presence of the 
one-pound ethanol waiver, however, that advantage is minimized or 
eliminated.
    A third matter EPA has floated as part of the Tier 3 proposal is 
changing the ``certification fuel''--the fuel used to certify vehicles 
and engines to the Tier 3 emissions standards--from ethanol-free, 
``neat'' gasoline (E0) to either E10 or E15. EPA posits that E10 is a 
prevalent gasoline blend sold across the United States today and that, 
given the Renewable Fuel Standard under the 2007 energy bill, E15 will 
be the prevalent gasoline blend sold across the country in the coming 
decade. Gevo has not taken a position on a re-designation of the 
certification fuel from E0, but we do have concerns about such a 
proposal.
    Gevo is concerned that moving to a certification fuel containing a 
specific biofuel, such as ethanol, as would be the case with E10, would 
create barriers to entry for non-ethanol biofuels such as biobutanol 
and a competitive advantage for ethanol over advanced biofuels as the 
latter seek to penetrate the gasoline markets in the coming years. Gevo 
continues to consider this matter and looks forward to reviewing the 
rationale that EPA will put forward in its Tier 3 proposal before 
taking a formal position on a re-designation of a certification fuel.
    Uncertainty is anathema to any business, and that includes the 
motor fuels production and biofuels production industries. It is very 
difficult for any business to make a commitment to a new capital 
project, a plant expansion or conversion, or a new business partnership 
when the business does not know what environmental standards it will be 
required to meet in the future. Thus, the mere fact that EPA is 
considering these Tier 3 Standards injects a degree of uncertainty into 
our industry--an uncertainly that impacts Gevo in the same manner as 
every other biofuels manufacturer. I am not able to identify a specific 
project that Gevo has not undertaken, or a commercial relationship with 
a refiner or marketer that has not developed, due to the uncertainty 
caused by the pending Tier 3 Standards. One cannot prove a negative.
    As noted in the response to 1(b) above, Gevo has not taken a 
position on re-designating the certification fuel at this time. We do 
have concerns about designating a biofuel such as ethanol as the 
``incumbent'' renewable blendstock in gasoline, but it may be that such 
concerns can be ameliorated by EPA or by other circumstances. To Gevo, 
however, it does not make sense to designate E15--a fuel that is not 
yet registered by EPA and thus not legal to sell anywhere in the United 
States--as the certification fuel. Many vehicle and small engine 
manufacturers have stated on the record that their engines will not 
operate well on E15 and that they likely will not warrant repairs 
caused by use of E15. Thus, it is unclear whether E15 will ever enter 
the marketplace in substantial volumes. Given this uncertainty, EPA 
should not force engine manufacturers to certify their engines using a 
fuel that is neither widely used by nor widely available to consumers 
across the United States.
    Gevo's concern with the designation of E10 as the emissions 
certification fuel is focused on preventing ethanol from converting 30 
years of federal tax and production supports for ethanol into a virtual 
monopoly of the renewable biofuels blendstocks for gasoline in the 
coming months and years. Congress intended the 2007 Renewable Fuel 
Standard to be technology neutral. If designating E10 as the 
certification fuel runs afoul of that neutrality, then Congress should 
monitor EPA's actions very closely on this matter.

Q2a-2c.  You state in your written testimony that you are ``in the 
fairly early stages of discussion with the EPA and hope to resolve'' . 
. . ``the issue of finding a way to permit the commingling of E10 and 
butanol so that a new, lower Reid Vapor Pressure (RVP) biofuels can 
enter the market, lower evaporative emissions, and contribute to 
cleaner air.'' (a) Could you please characterize the nature of the 
``early stages of discussion'' currently ongoing with the EPA? (b) What 
progress has been made on this issue? (c) What do you anticipate will 
be the upcoming stages of discussion and progress toward ``technology 
neutrality'' in the RFS2 that you emphasize elsewhere in your 
testimony?

A2a-2c.  Gevo would characterize its discussions with EPA to date as 
preliminary, but positive and productive. Gevo has explained its 
concerns to EPA staff in Ms. Oge's office, but has not yet discussed 
the commingling issue directly with Ms. Oge. Her staff has acknowledged 
the existence of the commingling issue and that, unless EPA guidance is 
altered, the commingling restriction will present a hurdle to the 
introduction of biobutanol and other renewable, non-ethanol biofuels to 
the marketplace. Gevo looks forward to the continuation of these 
discussions with EPA in the near future and to achieving what I believe 
is a joint goal of environmental protection and eliminating a barrier 
to the widespread introduction of a variety of biofuels into the 
gasoline market in the coming decade.
    Gevo has not had further discussions with EPA staff on this matter 
since the hearing, but expects to do so in the near future.
    Congress and EPA must remain vigilant to protect the technology 
neutrality built into the RFS2 program. While the RFS2 is a government 
program, it is regulating for-profit business entities seeking sales 
and income for their companies and positive returns for their 
shareholders. Thus, some may be tempted to seek to skew current or 
future EPA regulations towards one particular biofuel technology, 
process or molecule in an attempt to gain a competitive and economic 
advantage through government regulation. Gevo opposes such tactics and 
urges Congress and EPA to resist such efforts when they occur. 
Ultimately, consumers will decide the ``winners'' and ``losers'' under 
the RFS2 program and legislators and regulators should not seek to 
substitute their judgment for the harsh but generally accurate judgment 
of the competitive marketplace.

Q3-3a.  You briefly mention that Gevo continues to face challenges that 
relate directly to the conflicts and unintended consequences of the 
motor fuel standards that are the subject of today's hearing. You then 
limit your discussion of these challenges to the issues of commingling 
and that of the Tier 3 standards, and their specific relevance to Gevo. 
(a) From your perspective, could you please offer a broader assessment 
of these conflicts and unintended consequences, including issues 
directly related to your company, as well as a more general assessment 
of their impact on industry at large--and the subsequent impact on the 
U.S. economy?

A3-3a.  Federal and state regulation of motor fuels is a patchwork 
quilt of statutes and regulations adopted over the last three decades 
with, at times, conflicting public policy goals in mind. These public 
policy goals have variously ranged from increased overall production to 
environment protection to energy security to decreased use of fossil 
fuels. No observer should be surprised that these conflicting goals 
have given rise to conflicts and unintended consequences as one program 
or regulation is overlaid by others. If one adds to this mix the fact 
that principles of federalism and history allow States to regulate 
motor fuels in ways that in some cases contradict federal law, then it 
actually surprising that the system works as well as it does.
    With respect to federal and State regulation of biofuels and 
biofuels production, this patchwork quilt has been woven over several 
decades of good intentions into a complex web of incentives and 
mandates that may or may not be achieving today's public policy goals. 
Gevo encourages Congress and the States to review and to the extent 
necessary revise these statutes and regulations to promote renewable 
biofuels with the following common characteristics: (1) high energy 
content; (2) low environmental impact with respect to traditional 
criteria pollutants and greenhouse gases; and, (3) compatibility with 
the Nation's liquid transportation fuel infrastructure and existing 
motor vehicle and non-road engines.

Q4.  Are you currently or do you have plans to use cornstarch in 
isobutanol production? If so, would this biofuel qualify as a second-
general biofuel?

A4.  Gevo's business model is to convert ethanol from cornstarch plants 
to produce isobutanol. This strategy is meant to leverage the installed 
capital base (14 BGPY) of the current generation ethanol industry to 
make a fermentation alcohol with better gasoline-blending 
characteristics. But, we can also convert cellulosic sugars into 
biobutanol when the technology to convert biomass becomes economically 
competitive. In other words, Gevo's production technology does not 
require the use of cornstarch to produce biobutanol, but currently 
cornstarch is the most economically competitive and fastest route to 
our volume objectives available to Gevo.
    With respect to qualification as a ``second-generation biofuel,'' I 
suspect this question refers to whether Gevo's biobutanol will be 
certified as an ``advanced biofuel'' under the RFS2 program. The short 
answer to this question is yes, if the biobutanol pathway could show a 
greenhouse gas (GHG) reduction of 50% compared to 2005 gasoline. Gevo 
can achieve the GHG reduction if we were to invest the capital 
necessary to power our plants with renewable energy rather than fossil 
energy sources. While the RFS2 restricts cornstarch ethanol from ever 
qualifying as an advanced biofuel, there is no such restriction on 
biobutanol.

Q5a-5b.  When the RFS was passed in 2005 and expanded in 2007, wasn't 
the goal of Congress to move beyond food crops for fuel and instead use 
waste products and other non-food feedstocks to product second-
generation biofuels like cellulosic ethanol? (a) Does the RFS2 create a 
situation in which corn-based ethanol has the competitive advantage? 
How does that work? (b) What recommendations do you have for changes in 
the RFS that would allow for increased production of advanced biofuels?

A5a-5b.  Yes, that is Gevo's understanding. However, the development 
and commercialization of non-food feedstocks has not kept pace with the 
optimism inherent in the RFS2 statute's goals for advanced biofuels. 
Biobutanol is arguably, a second-generation biofuel, even if produced 
from grain derived fermentable sugars. It is a second-generation 
biofuel by virtue of its performance characteristics, i.e., its higher 
energy density, compatibility with existing infrastructure (engines, 
pipelines, dispensers) and its easy conversion into hydrocarbon fuels, 
like jet, diesel and gasoline.
    Gevo does not believe that the RFS2 program, as passed by Congress, 
inherently advantages corn-based ethanol. Rather, corn-based ethanol's 
competitive advantage stems from 30 years of federal and State support 
for ethanol through tax, energy and environmental policies. In all, 
this governmental support runs into the tens of billions of dollars. We 
believe that if ethanol (one fermentation alcohol) is to be supported 
by public policy, the same support should also be available to other 
fermentation alcohols, indeed other biofuels, so they may compete with 
ethanol on their performance and price characteristics. Otherwise, 
ethanol policy is a competitive barrier to the entry of other biofuel 
molecules.
    A technology-neutral RFS2, as Congress intended, would enable 
biobutanol a very good chance of challenging corn-based ethanol's 
current dominance of the renewable biofuel gasoline blendstock market 
in the coming years and decades.
    Gevo does not have a comprehensive set of recommendations for RFS2 
program changes to provide to the Committee, but again offers the 
following recommendations with respect to potential statutory changes 
to the RFS2 program and to future EPA implementation of the existing 
RFS2 program--Congress and EPA must promote renewable biofuels with the 
following common characteristics: (1) high energy content; (2) low 
environmental impact with respect to traditional criteria pollutants 
and greenhouse gases; and, (3) compatibility with the nation's liquid 
transportation fuel infrastructure and existing motor vehicle and non-
road engines.

Questions Submitted by Ranking Member Brad Miller

Q1.  Please provide your name and employing organization.

A1.  Jack Huttner, Executive Vice President, Gevo, Inc.

Q2a.  Are you an officer or employee of, or otherwise compensated by, 
any other organization(s) that may have an interest in the topic of 
this hearing?

A2a.  Yes.

Q2b.  If the answer to question 2a is ``yes,'' please specify the 
organization(s) and the nature of your relationship with the 
organization(s).

A2b.  I am the Vice Chairman of the Advanced Biofuels Association, 
which has an interest in the topic of this hearing, but receive no 
compensation from the Advanced Biofuels Association and I did not 
submit testimony on behalf of the association for this hearing. I am 
also on the governing board of the industrial and environmental section 
at the Biotechnology Industry Organization (BIO).

Q3a.  In the last three calendar years, including this one, have you 
been a registered lobbyist?

A3a.  No.

Q4.  If you have worked as an attorney, contractor, consultant, paid 
analyst, or in any other professional services capacity, please provide 
a list of your firm's clients who you now to have an interest in the 
subject matter of this hearing. These should be clients that you have 
personally worked with in the last three calendar years (including the 
present year). Provide the name of the client, the matter on which you 
worked, and the date range of that work. If there was a deliverable, 
please describe that product.

A4.  I am an employee of Gevo, Inc., and have no clients that may have 
an interest in the subject matter of this hearing.

Q5.  Please provide a list of all publications on which you have 
received an author or coauthor credit relevant to the subject of this 
hearing. If the list is extensive, the 10 most recent publications will 
be sufficient.

A5.  I have not authored or coauthored any such publications relevant 
to the subject of this hearing.
                               Appendix 2

                              ----------                              


                   Additional Material for the Record



                   Additional Material for the Record
       Letter to Chairman Andy Harris from Dr. Virginia H. Dale,
               Member, National Academies Biofuels Panel




           Letter to Honorable Lisa P. Jackson, Adminstrator,
 Environmental Protection Agency, and White Paper, from Mitch Bainwol,
        President and CEO, Alliance of Automobile Manufacturers





                  Letter to Honorable Lisa P. Jackson,
            Administrator, Environmental Protection Agency,
              from Michael J. Stanton, President and CEO,
                 Association of Global Automakers, Inc.



            Letters Submitted to Honorable Lisa P. Jackson,
             Adminstrator, Environmental Protection Agency,
          from Neschaum, Ozone Transport Commission, and NACAA



               Slide Presentation from Mr. David Hilbert,
           Thermodynamic Development Engineer, Mercury Marine



                  Presentation from Mr. David Hilbert,
           Thermodynamic Development Engineer, Mercury Marine



        Gevo White Paper from the Testimony of Mr. Jack Huttner,
    Executive Vice President, Commercial and Public Affairs, Gevo, 
                              Incorporated




 Potential Supply and Cost Impacts of Lower Sulfur, Lower RVP Gasoline,
       Prepared for the American Petroleum Institute, July 2011,
                   by Baker and O'Brien Incorporated




     Letters from Autobile Manufacturers to Honorable Lisa Jackson,
             Administrator, Environmental Protection Agency




         Letters to Representative F. James Sensenbrenner, Jr.,
   from Briggs & Stratton, Subaru, General Motors, and Mercury Marine



      Association of International Automobile Manufacturers, Inc:
          Response to EPA Decision To Approve E15 Ethanol Fuel
                       for 2001-2006 MY Vehicles




          National Research Council of the National Academies:
            Renewable Fuel Standard: Potential Economic and
              Environmental Effects of U.S. Biofuel Policy




     Letter from Chairman Ralph M. Hall to Honorable Lisa Jackson,
             Administrator, Environmental Protection Agency




                 Letter to Chairman Ralph M. Hall from
           Honorable Gina McCarthy, Assistant Administrator,
                    Environmental Protection Agency



                                    

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