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



 
 THE AMERICAN ENERGY INITIATIVE, PART 23: A FOCUS ON ALTERNATIVE FUELS 
        AND VEHICLES, BOTH THE CHALLENGES AND THE OPPORTUNITIES

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 10, 2012

                               __________

                           Serial No. 112-159


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

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

                                 7_____

                    Subcommittee on Energy and Power

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

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. John Sullivan, a Representative in Congress from the State 
  of Oklahoma, opening statement.................................     1
    Prepared statement...........................................     3
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     4
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     4
Hon. Mike Pompeo, a Representative in Congress from the State of 
  Kansas, opening statement......................................     6
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
    Prepared statement...........................................     9

                               Witnesses

Joseph H. Petrowski, Chief Executive Officer, The Cumberland Gulf 
  Group..........................................................    11
    Prepared statement...........................................    13
Jack N. Gerard, President and Chief Executive Officer, American 
  Petroleum Institute............................................    23
    Prepared statement...........................................    25
Bob Dinneen, President and Chief Executive Officer, Renewable 
  Fuels Association..............................................    33
    Prepared statement...........................................    35
Tom Tanton, Executive Director and Director, Science and 
  Technology Assessment, American Tradition Institute............    41
    Prepared statement...........................................    43
Richard A. Bajura, Director, National Research Center for Coal 
  and Energy, West Virginia University...........................    60
    Prepared statement...........................................    62
Michael J. McAdams, President, Advanced Biofuels Association.....    71
    Prepared statement...........................................    73
Mike Breen, Vice President, Truman National Security Project.....    78
    Prepared statement...........................................    80
Felice Stadler, Director, Dirty Fuels Campaign, National Wildlife 
  Federation.....................................................    89
    Prepared statement...........................................    91
Gregory A. Dolan, Acting Chief Executive Officer, Methanol 
  Institute......................................................   129
    Prepared statement...........................................   132
Don Althoff, Chief Executive Officer, Flex Fuel U.S..............   140
    Prepared statement...........................................   142
Shane Karr, Vice President, Federal Government Affairs, Alliance 
  of Automobile Manufacturers....................................   146
    Prepared statement...........................................   148
Tom Hassenboehler, Vice President of Policy Development and 
  Legislative Affairs, America's Natural Gas Alliance............   157
    Prepared statement...........................................   159
Mary Ann Wright, Vice President, Global Technology and 
  Innovation, Power Solutions Division, Johnson Controls, Inc., 
  and Chair, Electric Drive Transportation Association...........   166
    Prepared statement...........................................   168

                           Submitted Material

Letter, dated July 10, 2012, from Tom Buis, CEO, and Jim Nussle, 
  President and COO, Growth Energy, to Mr. Whitfield and Mr. 
  Rush, submitted by Mr. Shimkus.................................   198
Letter, dated July 9, 2012, from Charles T. Drevna, President, 
  American Fuel & Petrochemical Manufacturers, to Mr. Whitfield 
  and Mr. Rush, submitted by Mr. Shimkus.........................   200
Statement, dated July 11, 2012, of Mark W. Oberle, Senior Vice 
  President, Corporate Affairs, Celanese, submitted by Mr. 
  Shimkus........................................................   203


 THE AMERICAN ENERGY INITIATIVE, PART 23: A FOCUS ON ALTERNATIVE FUELS 
        AND VEHICLES, BOTH THE CHALLENGES AND THE OPPORTUNITIES

                              ----------                              


                         TUESDAY, JULY 10, 2012

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:05 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. John 
Sullivan (vice chairman of the subcommittee) presiding.
    Members present: Representatives Sullivan, Shimkus, 
Burgess, Bilbray, Scalise, McMorris Rodgers, Olson, McKinley, 
Pompeo, Griffith, Cassidy, Barton, Rush, Castor, Sarbanes, 
Markey, Engel, Green, Gonzalez, and Waxman (ex officio).
    Staff present: Anita Bradley, Senior Policy Advisor to 
Chairman Emeritus; Maryam Brown, Chief Counsel, Energy and 
Power; Allison Busbee, Legislative Clerk; Cory Hicks, Policy 
Coordinator, Energy and Power; Ben Lieberman, Counsel, Energy 
and Power; Chris Sarley, Policy Coordinator, Environment and 
Economy; Michael Aylward, Democratic Professional Staff Member; 
Greg Dotson, Democratic Energy and Environment Staff Director; 
and Caitlin Haberman, Democratic Policy Analyst.
    Mr. Sullivan. I call this hearing to order, and I recognize 
myself for an opening statement.

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

    This is the 23rd day of our hearing on the American Energy 
Initiative. This morning we will be discussing alternative 
fuels and vehicles, both the challenges and the opportunities.
    Gasoline and diesel fuel currently dominate the 
transportation sector, and that is not likely to change any 
time soon. For that reason, we need to take steps to ensure 
plentiful and affordable supplies of petroleum and the fuels 
that are made from it. That means expanding domestic oil 
production, approving the Keystone XL pipeline to allow more 
Canadian oil to come into the country, and reviewing the red 
tape that raises the cost of refining crude into gasoline and 
diesel fuel. That is why I strongly supported measures like the 
Domestic Energy and Jobs Act, and why I will continue to fight 
for a commonsense, pro-consumer, pro-jobs, and pro-energy 
policy.
    But in addition, we need to look at options other than 
petroleum derived fuels, and indeed we are doing so. We are 
well into the implementation of the Renewable Fuel Standard 
created in the 2005 energy bill and expanded in the 2007 bill. 
The RFS has achieved some successes such as increased ethanol 
production. However, some also see shortcomings with the RFS 
that need to be addressed.
    Even beyond ethanol and other biofuels, there are many 
other alternative fuels and vehicles, including natural gas, 
electricity, coal-to-liquids, methanol, and flex-fuel vehicles. 
Each offers its own unique mix of advantages as well as 
disadvantages, and all offer the benefits of diversification.
    I look forward to learning more about these options, and 
exploring the question of what role, if any, the Federal 
Government should play in shaping the fuels and vehicles 
markets of the future.
    [The prepared statement of Mr. Sullivan follows:]

    [GRAPHIC] [TIFF OMITTED] T1616.001
    
    Mr. Sullivan. Thank you, and I yield the balance of my time 
to Congressman Shimkus.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Chairman Sullivan. I want to thank 
Chairman Upton also for allowing us to have the hearing.
    Gasoline remains the primary source of fuel, and it will 
remain that for a long time. The Republican position on energy 
security is ``all of the above,'' and so part of the RFS 
hearing today and other pieces of legislation that I have 
introduced are really to address that ``all of the above'' 
arena.
    Ethanol has been a great success at this time. We will hear 
more about that from Mr. Dinneen, but a couple highlights I 
wanted to start with were ethanol produced 14 billion gallons 
in 2011. U.S. oil and imports dropped to just 45 percent of 
demand that same year. Ethanol represents 10 percent of our 
national gasoline pool. Last year, ethanol reduced wholesale 
gas prices by an average of $1.09 per gallon. And as I try to 
remind people, that is without a blender's credit, which has 
gone away. People still think that there is a tax credit with 
ethanol blending, and that is not the case.
    So the question is, why not add a variety of alternative 
transportation fuels to the mix, which is the part of this 
debate, and I am glad we have a huge panel today. Our country 
must challenge our scientists and engineers towards that end. 
The bipartisan Open Fuel Standards, H.R. 1687, is intended to 
move this conversation forward, and I really want to thank my 
colleague and friend, Mr. Engel from New York, for really being 
a leader on that and Congresses before this one.
    H.R. 1687 would have an increasing percent of new 
automobiles take on a variety of fuels like natural gas, 
electricity, biodiesel, hydrogen, flex fuel vehicles that can 
run on blends of methanol and ethanol, or other emerging 
technologies. This would create a marketplace where fuels can 
compete with each other for the consumer's dollars.
    I look forward to hearing from our witnesses on the 
opportunities and challenges presented by having an open Fuel 
Standard. I also look forward to the panel talking about some 
of the challenges that are faced in EPA permitting a defined 
liquid transportation fuel, but then liability concerns and 
restrictions that is addressing some of the concerns in H.R. 
4345.
    I appreciate all the witnesses for being here, and 
particularly want to thank Don Althoff from the Flex Fuel U.S. 
for rescheduling from earlier in the year to testify today.
    And with that, Mr. Chairman, I yield back my time.
    Mr. Sullivan. Thank you, Mr. Shimkus, and I yield to 
Congressman Rush for 5 minutes.

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

    Mr. Rush. I want to thank you, Mr. Chairman, for holding 
this hearing and I want to thank all of the witnesses for being 
here today.
    Mr. Chairman, it is extremely important that both sides 
work together to identify short and long-term strategies and 
objectives for developing alternative fuels for vehicles. So 5 
or 10 years from now, this country will not be subject to 
fluctuating global gas prices due to unrest in the Middle East 
or anyplace else in the world.
    For too long now, we are seeing wildly fluctuating gas 
prices due to a lack of a comprehensive policy to move us away 
from imported oil and petroleum. Every year or two, we are back 
in the same exact position where we were a few months ago, 
discussing extremely high gas prices at the pump. We are no 
closer to permanently solving this issue which has such a 
devastating effect on the lower and middle income family's 
budget who must, too often, choose between putting food on the 
table or filling up their cars in order to go to work.
    Mr. Chairman, we are willing to provide much-needed 
direction, much-needed funding to develop alternative fuel 
supplies. We can provide economical and practical benefits to 
Americans by deciding the amount of oil we import, while also 
permanently decreasing the price our families pay at the pump. 
However, we all understand that before we are able to enjoy the 
benefits that will also come from alternative fuels, we must 
first invest in the research and development of these supplies. 
Even if we are able to come together on a comprehensive policy 
to develop these fuels, we must also invest in the 
infrastructure to support these fuels as well.
    So Mr. Chairman, I look forward to today's hearing to 
discuss both the opportunities and the challenges we face as we 
attempt to transition from alternative fuels to power our cars 
and trucks. The National Oceanic and Atmospheric Administration 
informs us that the first 6 months of 2012 were the warmest 
first half of any year on record in the lower 48 contiguous 
States, and more than 170 temperature records were tied or 
broken just in the month of June, according to the agency. Mr. 
Chairman, as a representative from a corn-growing State, my 
beloved Illinois, I look forward to hearing more about the 
impact that this record-breaking heat wave has had on corn 
crops and how it may impact the production of corn ethanol.
    Mr. Chairman, I am very interested to hear from these 
experts today on not only the impact of corn ethanol, but also 
the opportunity for additional alternative fuel sources for 
transportation, including biofuels, electricity, natural gas, 
coal and liquids, and many others. That means if we are prudent 
and we work together on both sides of the aisle, we can develop 
a policy for alternative fuel production that would be to the 
benefit of all our constituents and to the American people in 
their homes.
    Mr. Chairman, we have our work cut out for us, but I am 
pleased that today we are taking the first step toward 
understanding where we are and what we need to do in order for 
us to move forward.
    With that, I yield back the balance of my time.
    Mr. Sullivan. Thank you, Congressman Rush.
    Now I recognize Congressman Pompeo from Kansas for 5 
minutes.

  OPENING STATEMENT OF HON. MIKE POMPEO, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF KANSAS

    Mr. Pompeo. Thank you, Mr. Chairman. Thanks for holding 
this hearing today on alternative fuels, and thank you for 
inviting a panel with what I know will be a broad and diverse 
set of views with respect to this.
    I have to say when I hear us talk in Washington about 
alternative fuels, I think you could sometimes substitute 
alternative for consumer rejected or unaffordable or imaginary, 
in normal, everyday, practical existence fuels. When we talk 
about alternative fuels here, we often talk about government 
mandate and subsidies. When we talk about coal and oil and 
natural gas, we talk about relieving Federal burdens from the 
EPA and others. We have very different views or very different 
policy principles when we talk about these very different 
potential energy sources. I, like no one, hope that we can find 
the next great energy source and we can have a broad and 
diverse array of those.
    But when I hear us talk about alternative energies, it is 
always about if the mandates goes away, so will my business. If 
the subsidy goes away, so will my ability to make consumers 
happy. All of these things are interventions at the Federal 
that, in my judgment, often do enormous risk to consumers and I 
know to taxpayers as well.
    I have my own views on what will be the best next energy 
source. I imagine most of the folks on this panel have their 
own idea of what this would be, too, but that is not my role. 
My role is not to decide which of these technologies is best 
and which one will be successful. It is all of the great 
innovators and engineers and technicians out there trying to 
find that great next energy source that we ought to free to do 
that without the Federal Government's intervention. I think 
things like Solyndra, which is just a simple, single example of 
where the government thought we had a good solution and we were 
smarter than the average bear and we could direct consumers to 
the right place. This demonstrates the absolute dangers of 
Federal intervention in energy markets.
    Sooner or later on all these energies we have got to take 
the training wheels off and let all these energies compete in 
an open space. With that, I yield the balance of my time to 
Congressman Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Pompeo. Do I yield time to 
somebody, too, or--OK.
    Well first, I want to thank Chairman Whitfield and also 
Chairman Sullivan for holding this hearing. I think this is the 
23rd in the series of hearings on this. Today we are going to 
look at alternative fuels. I would have to say that natural gas 
or LNG should be one of those that we take a serious look at. I 
have a company in my district called Green Energy Orefield 
Services that is beginning to outfit trucks to run on LNG to 
carry the various hydraulic fracturing products to and from the 
gas and oil wells. I think this is a win/win.
    I know there is quite a bit of controversy over biofuel 
program in the Navy. I think it is appropriate for the Navy to 
be doing some pilot programs on biofuels, but at the expected 
cost of over $27 a gallon, I certainly think that we shouldn't 
forget, again, LNG and natural gas and even coal to liquids, 
for that matter, as alternative energy sources for our Navy. 
Biofuels should and can play an important role in a balanced 
energy portfolio, there is no question about that, but we 
shouldn't forget the fuels that have made it possible for us to 
have the greatest economy in the world, and that is our basic 
hydrocarbon fuels that we are so adept at right now in 
manufacturing and discovering and producing and transporting.
    All in all, Mr. Chairman, I think this is a very good 
hearing, and I look forward to hearing from the witnesses.
    I still have a minute, so I am willing to yield to somebody 
if there is another member that wishes--would like some time. 
If not, I yield back to the distinguished chairman.
    Mr. Sullivan. Thank you, Congressman Barton. Next I yield 5 
minutes to the gentleman from California, Congressman Waxman.

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

    Mr. Waxman. Thank you, Mr. Chairman. Today, the 
subcommittee examines the opportunities and challenges 
associated with the alternative fuels and vehicles. This topic 
is important for the Nation's environmental and economic 
health, and our national security.
    Just a few years ago, nearly 60 percent of U.S. 
transportation fuels came from abroad, and projections were 
discouraging. Experts predicted higher oil consumption and more 
imports far into the future. Carbon pollution for the 
transportation sector was expected to grow and grow and grow. 
Under the leadership of President Obama, we have reversed this 
trend in a historic and fundamental shift.
    In April of 2010, the administration finalized fuel 
efficiency and carbon pollution standards for model year 2012 
to 2016 cars and trucks. These standards will save consumers on 
average more than $3,000 in fuel costs over the life of a new 
vehicle. This is the net savings after accounting for any 
increased vehicle costs. This is a good example of government 
intervention that has been very successful.
    In November, 2011, the Obama administration proposed to 
expand this successful program to include model years 2017 to 
2025. The benefits of this program to the Nation are profound. 
Families will save $8,000 in fuel costs over the life of a new 
vehicle. These savings will accumulate and consumers, as a 
group, will save $1.7 trillion over the life of the program. 
These standards will save 2.2 million barrels of oil a day by 
2025. This will make our economy stronger and help ease our 
national security challenges. It will also reduce our carbon 
pollution by over 6 billion metric tons. That is as much as the 
whole country emits in a year. This reduction is an important 
step in our efforts to stabilize the climate.
    These carbon pollution tailpipe standards are a win/win/win 
for the Nation, improving our environment, economy, and 
national security, but we have more work to do. American 
families are still getting rip-sawed when gasoline prices 
unexpectedly spike. The money we spend on oil abroad continues 
to conflict with our foreign policy goals and national 
security, and the wildfires, drought, heat waves, and extreme 
weather events tell us that we must do more to address climate 
change.
    In March, the Intergovernmental Panel on Climate Change 
released a report concluding that climate change already has 
led to climate extremes and extreme weather events around the 
world. As carbon pollution climbs and as our climate continues 
to warm, these extreme weather events are likely to become more 
frequent and more severe. Last year, 14 weather-related 
disasters, each costing more than $1 billion, struck the United 
States, a record number. This year has seen even more bizarre 
weather, according to the National Oceanic and Atmospheric 
Administration. More than 40,000 hot temperature records have 
been set this year. The deadly combination of heat and drought 
has resulted in more than 2.1 million acres burned in wildfires 
so far. At the end of June, more than 113 million people in the 
U.S. were in areas under extreme heat advisories. Some of those 
are areas that vote Republican, as well as Democratic.
    We are seeing the types of extreme events that scientists 
have been predicting who are common with climate change. For 
instance, Jonathan Overpeck with of the University of Arizona 
recently stated, ``The extra heat increases the odds of worse 
heat waves, droughts, storms, and wildfire.'' We cannot afford 
to ignore climate change in the development of our energy 
policies. The two are inextricably linked.
    The good news is that as we increase our efficiency and 
move towards alternative fuels, we not only reduce our 
dependence on fossil fuels, we also have the opportunity to 
reduce our carbon pollution. It is not a given that we will 
make the right choices. Some will advocate today that we 
abandon our efforts to cut carbon pollution. That would be a 
serious mistake. Progress will not be easy, but it is 
necessary. We need to continue our push toward alternative fuel 
vehicles, whether they are plug-in electric drive commuter 
vehicles, long haul natural gas trucks, or renewable fuels. The 
Obama administration has made real progress on a seemingly 
retractable problem. We are finally heading in the right 
direction.
    I look forward to hearing from today's witnesses, reading 
their testimony, and I hope we can continue to build on this 
progress.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Waxman follows:]

    [GRAPHIC] [TIFF OMITTED] T1616.002
    
    [GRAPHIC] [TIFF OMITTED] T1616.003
    
    Mr. Sullivan. Thank you, Congressman Waxman.
    Now we will move to our first panel, and I want to thank 
our eight witnesses for being here. Thank you so much for 
coming up to the Hill and presenting this. Each of you will 
have 5 minutes.
    We are going to hear today from Mr. Joseph Petrowski, CEO 
of the Cumberland Gulf Group; Mr. Jack Gerard, President and 
CEO of the American Petroleum Institute; Bob Dinneen, President 
and CEO of the Renewable Fuels Association; Tom Tanton, 
Executive Director and Director of Science and Technology 
Assessment, American Tradition Institute; Richard Bajura, 
Professor, Mechanical and Aerospace Engineering, Director of 
National Research Center for Coal and Energy, West Virginia 
University; Michael McAdams, President, Advanced Biofuels 
Association; and Michael Breen, Vice President, Truman National 
Security Project; and Felice Stadler, Director, Dirty Fuels 
Campaign, National Wildlife Federation. First, we will go to 
Mr. Petrowski. You have 5 minutes, sir.

STATEMENTS OF JOSEPH H. PETROWSKI, CHIEF EXECUTIVE OFFICER, THE 
  CUMBERLAND GULF GROUP; JACK N. GERARD, PRESIDENT AND CHIEF 
 EXECUTIVE OFFICER, AMERICAN PETROLEUM INSTITUTE; BOB DINNEEN, 
    PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENEWABLE FUELS 
   ASSOCIATION; TOM TANTON, EXECUTIVE DIRECTOR AND DIRECTOR, 
     SCIENCE AND TECHNOLOGY ASSESSMENT, AMERICAN TRADITION 
   INSTITUTE; RICHARD A. BAJURA, DIRECTOR, NATIONAL RESEARCH 
 CENTER FOR COAL AND ENERGY, WEST VIRGINIA UNIVERSITY; MICHAEL 
  J. MCADAMS, PRESIDENT, ADVANCED BIOFUELS ASSOCIATION; MIKE 
 BREEN, VICE PRESIDENT, TRUMAN NATIONAL SECURITY PROJECT; AND 
   FELICE STADLER, DIRECTOR, DIRTY FUELS CAMPAIGN, NATIONAL 
                      WILDLIFE FEDERATION

                STATEMENT OF JOSEPH H. PETROWSKI

    Mr. Petrowski. [Inaudible.] Gulf Oil Group, and as part of 
background, we are the Nation's eighth largest convenience 
retailer of petroleum products and convenience items in Sover 
13 States. Our wholesale oil division, Gulf Oil, carries and 
merchandises over 350,000 barrels of petroleum products and 
biofuels over 29 States, $13 billion revenue places us in the 
top 50 private companies in the country. We employ 8,000 
employees, and I would like to report successfully that we are 
a growing company.
    As part of, also, background, we like to say that our 
company is fuel agnostic. We do not drill, we do not refine 
petroleum products. What we care to sell are products that our 
customers want to buy that are most economic for them to 
achieve their desired transport, heating, and other energy uses 
in a lawful manner.
    We blend--in addition to selling petroleum products, which 
is our primary product that we sell, we blend over 1 million 
gallons a day of biofuels across our system, and just recently, 
we have purchased 24 Class A trucks to begin to fuel on natural 
gas to deliver our fuel products to our stations and stores.
    While I like to say we are fuel agnostic, we are not 
unbiased. We believe that a sound energy policy rests on four 
bedrocks. One is that we have diverse fuel sources, and there 
are two reasons for that. The future is unknowable. The new 
shale technology that has taken over the industry in natural 
gas was unheard of more than 2 decades ago. Technology and 
events are beyond our abilities to understand where we are 
going, and so to bet any of our future on one single source of 
fuel would be a mistake. We believe diversity in all systems 
ensures health and stability. And so we look for diversity in 
fuel, not only by fuel type, but to make sure that we are not 
concentrated in taking it from one region, particularly the 
Middle East and unstable regions. So we do support that.
    Number two, we have a bias. We want low costs and non-
volatile fuel. A million and a half customers pass through our 
stores and stations every day. We see what the high prices do 
to our consumers. In the State of Massachusetts where we are 
headquartered, the per capita consumption is about $50,000 a 
year. The average resident in Massachusetts uses about 2,500 
gallons of fuel, both in home heating oil and in gasoline. The 
average car uses about 600 gallons a year. A $1 rise in the 
price of fuel takes almost 50 percent of discretionary income 
away from that family. High fuel costs are the most regressive 
form of taxation possible.
    Number three, we believe in secure and domestic sources. I 
think I heartened a few years ago, our net imports of BTU 
products was approaching $1 trillion. Today, because we have 
made advances in domestic drilling for oil from 4 million 
barrels to almost 6, shale gas has increased dramatically from 
65 BCF a day to 100 BCF, and because of better consumption and 
conservation, we now use--our net imports are $400 billion, and 
we believe in the next 3 years that this country, with the 
right policies, can be a net exporter of BTUs, which will break 
our dependence on Mideast oil.
    Finally, we think that in any policy, the fourth bedrock is 
that anything you put in place, we have to take into account 
costs and externalities. We think House Bill 4345 is a large 
step in the right direction. I do want to point out to all the 
members that we have billions, hundreds of billions of dollars 
invested in terminals, gas stations, barges, transportation, 
and we have to live with the realities of the marketplace and 
the particulars.
    I have pointed out many times when people talked about the 
XL pipeline that it is seven times more expensive for us today 
to move petroleum product from Chicago to Philadelphia than it 
is from the east coast of India to Philadelphia. And so we 
think as we craft and design policy, understanding the external 
cost is important.
    Thank you.
    [The prepared statement of Mr. Petrowski follows:]

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    Mr. Sullivan. Mr. Gerard, you have 5 minutes. Sorry.

                  STATEMENT OF JACK N. GERARD

    Mr. Gerard. Thank you, Vice Chairman Sullivan and members 
of the committee. It is a pleasure to be with you today. As 
mentioned, I am Jack Gerard, President and CEO of the American 
Petroleum Institute. We appreciate the opportunity to present 
our views on the Renewable Fuel Standard today. We represent 
all sectors of America's oil and natural gas industry. We 
employ 9.2 million Americans, responsible for 7.7 percent of 
all the gross domestic product in the United States, and 
contribute $86 million a day to the Federal Treasury.
    API's more than 500 member companies include many of our 
Nation's refiners, who are critical to our U.S. national and 
economic security. U.S. refiners support over half a million 
jobs, provide the vital products that Americans rely on daily. 
It is these refiners who shoulder the principal 
responsibilities for meeting the RFS requirements.
    Over the past 7 years, the two RFS laws passed in 2005 and 
in 2007 have substantially expanded the role of renewables in 
America. Biofuels are now in almost all gasoline. While API 
supports the continued appropriate use of ethanol and other 
renewable fuels, the RFS law has become increasingly 
unrealistic, unworkable, and a threat to consumers. It needs an 
overhaul.
    Most of the problems relate to the law's volume 
requirements. These mandates call for blending increasing 
amounts of renewable fuels into gasoline and diesel. Although 
we are already close to blending an amount that would result in 
a 10 percent concentration level of ethanol in every gallon of 
gasoline sold in America, that which is the maximum known safe 
level, the volumes required will more than double over the next 
10 years. The E10, or 10 percent ethanol blend that we consume 
today could, by virtue of RFS volume requirements, become at 
least an E20 blend in the future. This would present an 
unacceptable risk to billions of dollars in consumer investment 
in vehicles, a vast majority of which were designed, built, and 
warranted to operate on a maximum blend of E10. It also would 
put at risk billions of dollars of gasoline station equipment 
in thousands of retail outlets across America, most owned by 
small independent businesses. I believe well over 60 percent of 
retail establishments in this area are Ma and Pa operations.
    The research on higher ethanol blends, including testing 
performed by DOE's National Renewable Energy Laboratory, shown 
an estimated half of existing service station pumping equipment 
may not be compatible with just a 15 percent ethanol blend, or 
E15. Vehicle research conducted by the Auto Oil Coordinated 
Research Council shows that E15 could also damage the engines 
of millions of cars and light trucks, estimates exceeding five 
million vehicles on the road today. E20 blends may have 
similar, if not worse, compatibility issues with engines and 
service station attendants.
    Automobile manufacturers, who I believe you will hear from 
in the second panel, now advise car owners not to exceed the 10 
percent blend amount. They say damage to an engine caused by 
higher concentrations may not be covered by warranties. EPA's 
premature approval of E15 thus raises substantial product 
liability issues that we would like to thank Mr. Shimkus for 
his leadership, as mentioned by Mr. Petrowski, in looking at 
that liability question to help make it more feasible to 
introduce these products into the market.
    Despite the warning signs, EPA has already approved the 
sale of E15. Apparently EPA finds it acceptable to let the 
market, including consumers, sort out any problems that may 
arise, whatever the cost.
    The RFS law also requires increasing use of cellulosic 
ethanol, an advanced form of ethanol that can be made from a 
broader range of feed stocks. The problem is, you can't buy the 
fuel yet because no one is making it commercially. While EPA 
could waive that provision, it has decided to require refiners 
to purchase credits for this nonexistent fuel, which will drive 
up costs and potentially hurt consumers. Mandating the use of 
fuels that do not exist is absurd on its face and is 
inexcusably bad public policy.
    Another problem with implementation of RFS is how EPA is 
handling fraudulent renewable Federal credits, known as RINs, 
that some refiners have purchased in good faith under a program 
that the EPA created.
    We believe that there is a solution and a resolution of 
this challenge. We are working closely with EPA to fix it at 
this time.
    Thank you for the opportunity to share our views. As 
mentioned, we believe biofuels are an important part of our 
Nation's energy mix, but the current law and its implementation 
is increasingly problematic and can hurt consumers. We need to 
fix it.
    Thank you.
    [The prepared statement of Mr. Gerard follows:]

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    Mr. Sullivan. Thank you, Mr. Gerard. Mr. Dinneen?

                    STATEMENT OF BOB DINNEEN

    Mr. Dinneen. Thank you, Mr. Chairman and members of the 
committee.
    This is a timely hearing. Continued volatility in crude oil 
markets, last spring's near-record gasoline prices, threats by 
hostile nations to shut down key oil shipping routes, new 
concerns about the environmental impacts of hydraulic fracking 
and tar sands, these issues and others underscore our Nation's 
desperate need to recommit to an energy future that embraces 
alternative transportation fuels and vehicles, an energy future 
that is truly ``all of the above,'' not just finite resources 
from below.
    One important alternative fuel, ethanol, is already helping 
to address these national concerns. America's ethanol industry, 
buttressed by a visionary Renewable Fuel Standard, is already 
decreasing our reliance on foreign oil, already exerting 
downward pressure on gasoline prices, already employing tens of 
thousands of American workers, and already cleaning up our air. 
As a result of the forward-looking nature of the RFS, the 
industry is poised to make even more significant contributions 
to our Nation's economic and environmental security in the 
future. Simply put, the RFS is among the most successful energy 
policies this Nation has ever adopted. It is working exactly as 
intended. It most certainly does not need an overhaul.
    As Congressman Shimkus had noted in his opening, from an 
energy security standpoint, the RFS is most definitely 
demonstrating its success. As he noted, when the bill passed in 
2005, our Nation was 60 percent dependent on imported oil for 
liquid transportation fuels. Today, as a consequence in the 
growth in ethanol, as a consequence in ethanol now represents 
10 percent of our Nation's motor fuel supply. As a consequence 
of the RFS, we are now just 45 percent dependent on foreign oil 
for our liquid transportation fuels.
    Now, some at this table would suggest to you that that is 
because we have increased the production of oil in this 
country, and that is true. Over the last couple of years, that 
is true. But 80 percent of the increased domestic production of 
liquid transportation fuels has been ethanol since 2005. It is 
absolutely ethanol that has driven those numbers to where they 
are today.
    I will tell you that I absolutely agree with many of you, 
that we need to have an all of the above, all energy sources 
energy policy in this country, but I will also tell you that we 
cannot frack our way to energy independence. A study that EIA 
produced a short while ago said that if you take the two 
largest shale places in this country, the Bakken fields and 
Eagle Ford in Texas, that that would get you 7 billion barrels 
of oil, a big amount, absolutely. But when put in context of 
our oil needs in this country, that represents 1 year and 4 
months of supply. I will tell you that the need for domestic 
renewable fuels will outlive the current fracking frenzy.
    Ethanol today is already having a tremendous impact driving 
down the price of gasoline. Mr. Shimkus noted a study that had 
been done by Iowa State and University of Wisconsin that 
concluded ethanol is helping to reduce gasoline prices by $1.09 
a gallon when you look at last year's prices. If you don't like 
the Iowa State study, how about a Louisiana State study in the 
home of oil country that concluded ethanol was helping to drive 
down the price of gasoline by some 84 cents a gallon, when you 
look at 2011. Without a doubt, because ethanol is less 
expensive than gasoline today, because ethanol is displacing 
the need for 10 percent of our Nation's imports, we are having 
a tremendous impact on gasoline prices.
    Let me just say as well, one of the principle objectives of 
the RFS was to drive investment in new technologies. It is also 
doing that. Not as quickly as anyone would like, but I will 
tell you that nobody anticipated the economic collapse of 2008 
and the consequent freeze on lending that occurred. But the 
next generation of biofuels facilities is happening today. 
There are four cellulosic plants that are under construction 
today in States like Florida, in Kansas, in Iowa, and 
elsewhere. There are other biofuels operations that are moving 
forward as well.
    I look forward to working with this committee to talking 
about some more of the issues that have arisen already, perhaps 
in questions, and I appreciate the continued interest of this 
committee to move this Nation's energy policy forward, but I do 
trust that that means all energy sources, because we need them 
all.
    Thank you.
    [The prepared statement of Mr. Dinneen follows:]

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    Mr. Sullivan. Thank you, Mr. Dinneen. Mr. Tanton?

                    STATEMENT OF TOM TANTON

    Mr. Tanton. Thank you, Mr. Chairman, members of the 
committee. I am here to testify today about the strategic 
importance of energy for transportation fuels. I am from 
California, and I am here to help. But I am not here to help in 
the way you might expect. I am here to give you a cautionary 
tale.
    In California, we have had almost 4 decades of energy 
policies, many of which have been suggested to you today, many 
of which you have considered. It hasn't worked. We remain 
second highest per capita petroleum consumption in the country. 
Our economy is worse than the rest of the country. Our 
unemployment is worse than the rest of the country. Our rate of 
foreclosures is worse than the rest of the country. These are 
inextricably linked to our energy policies over the last 4 
decades. Truckers are leaving California on one-way trips. They 
are taking manufacturing away from us. They are taking 
agricultural production away from us. It is unfortunate that 
our energy policies have driven us to this point.
    I have a few remarks to make with respect to the Open Fuel 
Standard, H.R. 1687, but my comments should be viewed more 
generally. What we have missed consistently in California, and 
I think in the Nation, is as Mr. Pompeo mentioned, a consumer 
perspective. When alternative fuels are more expensive, the 
natural reaction is to subsidize the price differential, but 
that doesn't take into account the fact that most alternative 
fuels require more frequent refueling, and the time value of 
that extra refueling is a consideration for most consumers.
    The stated purpose of the Open Fuel Standard is to ensure 
that new vehicles enable fuel competition so as to reduce the 
strategic importance of oil to the United States, and it has in 
it a ramp-up provision of mandated percentages of cars that can 
use the variety of different fuels. I would suggest to the 
Republican caucus that it not be all of the above, but in fact 
be any of the above. Any of the above that satisfies consumer's 
needs, desires, opportunities, and challenges.
    In my view, the Open Fuel Standard replicates, in many 
regards, California's failed Zero Emission Vehicle Standard, 
which also had a ramp-up schedule, but in which was basically 
just an electric vehicle mandate. In each case, they have 
failed due to the lack of the consumer's acceptance of the 
alternative subsidized or mandated by the government.
    H.R. 1687 also fails or falls short in enabling real 
competition. There is nothing today that precludes auto 
manufacturers from selling alternative fuel vehicles, except 
for one thing, and that is the consumer's acceptance of them. 
Such vehicles are offered for sale. They are not sold in 
numbers. Many of them have other strategic and important 
strategic considerations. Electric vehicles require rare 
earths. We are more dependent on rare earths from one country, 
China, than we are on petroleum from a variety of countries. 
There is not adequate time for the markets to evolve and bring 
with them the technologies.
    There is also no flexibility to account for changes in the 
future. For example, the EIA estimates that our level of 
imports will drop by 13 percentage points between now and 2035. 
That in itself improves the strategic importance of petroleum 
to this country. XL pipeline would as well.
    We need more informed consumers, not informed with myths, 
but informed with facts. They need to know that many of these 
alternative fuels have with them indirect costs that are not 
reflected in either the initial cost of the car or the price 
differential of the alternative fuels. Electric vehicles, for 
example, and plug-in electric vehicles are more expensive to 
insure, reflecting the higher cost of replacement.
    Bottom line is that government efforts must acknowledge 
consumer perspectives, needs, and opportunities, not try and 
overwhelm them. My recommendation is don't mention any fuel in 
legislation or in standards. Base the standards, base the 
legislation on performance and protocols and principles, and 
rely on the free market wherever possible, which is everywhere.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Tanton follows:]

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    Mr. Sullivan. Thank you, Mr. Tanton. Next, Dr. Bajura, you 
are recognized for 5 minutes.

                 STATEMENT OF RICHARD A. BAJURA

    Mr. Bajura. Thank you, Mr. Chairman.
    In my activities at West Virginia University, I have had 
the benefit of working with the University of Kentucky on the 
Consortium for Fossil Fuels Science. We believe that there are 
more things you can do with coal than just simply generate 
electricity.
    We can generate alternative fuels such as jet, diesel, and 
gasoline that are almost sulfur-free, have very few 
carcinogenic compounds. They out-perform petroleum, and have 
fewer particulate emissions. We do this by a process called 
gasification, where we take coal and turn it into carbon 
monoxide and hydrogen. These are very simple building blocks on 
which we can construct anything chemically, aspirin, for 
example, urea, and chemicals and gasoline. The other aspect is 
a Fischer-Tropsch process, which converts this fuel--this gas 
into a liquid fuel. These are known technologies. They are 
fairly expensive, but in the age of high oil prices, we think 
we can be competitive. We are now also faced with the challenge 
of sequestering the carbon dioxide that comes out of these 
processes. We do this by injecting CO2 into geologic 
formations, or we use biomass, which in effect is using CO2 
from the atmosphere instead of liberating new CO2 from the 
ground. These processes are very effective. We can capture the 
CO2 from these processes for as little as 15 cents a gallon.
    We know that projections for the future are that costs for 
petroleum will be in excess of $100, perhaps even up to $200 by 
2035. With the technologies I described, we can reduce liquid 
fuels at about $94 a barrel with carbon storage capability, and 
$104 a barrel with 15 percent biomass in carbon storage. These 
estimates are based on today's technology. They can be even 
more improved by advanced research. We would also emit 25 
percent less CO2 over the life cycle compared to regular 
petroleum fuels.
    The other aspect I would like you to consider is using the 
CO2 that is captured. In an oil reservoir, we punch a hole in 
the ground and the oil comes up by the pressure underground. 
That is called primary. Next, we use water to flood the 
reservoir and produce additional oil. That is called secondary. 
We might leave as much as 70 percent of the oil in place. If we 
do a tertiary process with CO2 injection, we can produce 
additional oil, perhaps getting as much as 50 percent now of 
the oil in place.
    I would like to introduce you to a concept called CCUS with 
EOR. This stands for using the carbon dioxide that is captured 
from a process to produce oil through this EOR recovery 
process. A study conducted by the National Coal Council last 
month, which I chaired, showed that we have about $4 million 
barrel per day capacity of oil that we could get with enhanced 
EOR applications.
    Consider this example. For example, if we said we wanted to 
have a national program to produce 2.5 million barrels a day of 
synthetic fuels, we would capture that CO2 and we would also 
capture the CO2 from 100 gigawatts of advanced coal plants. 
With this CO2, we can produce 4 million barrels a day in 
enhanced oil recovery. That, coupled with 2.5 million barrels a 
day that we are producing from the coal plants get us 6.5. By 
2035, we are anticipating an import of about 7.4 million 
barrels a day. That leaves us less than a million that we have 
to import. In 2011, 61 percent of our trade balance was due to 
imported oil. You can see the impact this would have on our 
economy.
    This case I described would yield benefits by 2030 of $200 
billion in industry sales annually, $60 billion in taxes to 
Federal, State, and local jurisdictions, and would create one 
million jobs.
    This CTL industry that we are discussing would also give us 
some sense of security from things like hurricanes. If you 
remember, we were knocked out of oil production with the 
hurricanes that hit the Gulf several years ago. We can deploy 
these plants into other regions, taking advantage of the oil in 
place in States like Ohio, and bringing additional jobs to 
those jurisdictions.
    I focus today here on the benefits of this technology. We 
need additional research that would improve our ability to 
capture the carbon, to deploy these enhanced oil recovery 
technologies better, and to buy down the cost of putting these 
plants in place. It is very expensive to put a Fischer-Tropsch 
plant in place to produce liquid fuels.
    We know that we are going to depend upon petroleum and the 
internal combustion engine for many years to come. I recommend 
that we do these kinds of technologies that will help reduce 
our costs of production and reduce the need to employ--import 
foreign oil. Financial risks need to be brought down. We need 
new technologies to recover oil more effectively, and we need 
to encourage early movers to build these first-of-their-kind 
plants.
    I view that H.R. 2036, which Congressman Griffith has 
introduced and three other members of this committee have 
introduced, would be a very good place for us to use the CO2 
technologies as a way to accomplish these goals.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bajura follows:]

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    Mr. Sullivan. Thank you, Mr. Bajura. Next, Mr. McAdams, you 
are recognized for 5 minutes.

                STATEMENT OF MICHAEL J. MCADAMS

    Mr. McAdams. Thank you, Mr. Chairman. Vice Chairman 
Sullivan, Ranking Member Rush, members of the committee, I am 
delighted to be here with you today on behalf of the Advanced 
Biofuels Association. Since our inception, we believed strongly 
in technology neutrality. It has been our driving force.
    The Advanced Biofuels Association represents over 45 
companies deploying advanced renewable technologies that are 
helping to create jobs and reduce dependence on foreign oil by 
adding to our domestic fuels production capacity. The Advanced 
Biofuels Association supports an all of the above energy 
approach for the United States.
    Today, I want to leave you with two points. First, the 
Renewable Fuels Standard is the bedrock of our Nation's 
renewable transportation fuels policy, and it is directly 
responsible for the progress that has been made to date in the 
advanced biofuels sector.
    Second, as a result of this policy, a number of companies 
have made significant investments in R&D, pilot and 
demonstration phases, as well as commercial deployment. 
Currently, a number of sophisticated manufacturing companies 
have over a billion dollars of private capital ready to build 
their first commercial facilities.
    As you well know, uncertainty chills investment, and 
uncertainty about whether the Congress might change the rules 
at this critical time by changing the RFS would have negative 
implications for those who have already invested in the future 
of this country. This past has brought significant--the past 
year has brought significant progress for our industry. We have 
seen the top fighter planes in the Air Force, Navy, and Marines 
fly using drop in jet fuels produced from a wide range of feed 
stocks and technologies. We have seen U.S. major airlines fly 
U.S. transcontinental flights--I was on it--and last year 
alone, Lufthansa operated more than 1,000 flights in Europe on 
a 50/50 blend of biofuels. Last week, the Air Force flew an A-
10 warthog on the first alcohol-to-jet fuel produced by U.S.--
in the U.S. by Gevo, a Colorado company.
    As I look down the list of those testifying today, I doubt 
a single witness would disagree that adopting a portfolio 
approach to energy is in the Nation's best interest. Energy is 
not a partisan issue. It is an issue of economic and national 
security. Energy policy is a key driver in the future 
prosperity of this Nation, and I applaud the chairman and the 
committee members for holding a truly fact-finding hearing 
today.
    Biofuels, as you heard from my colleague, Mr. Dinneen, have 
already made a significant contribution to our Nation's 
transportation supply. America began our journey in renewable 
fuels policy with ethanol in 1978. It took 20 years to deliver 
the first 2 billion gallons of fuel. Since the adoption by this 
committee of the Renewable Fuels Standard in 2005, we have seen 
an explosion in gallons of U.S. renewable fuels. As a result, 
the BP Statistical Review of 2012 released on June 15 now shows 
the United States having 48 percent of the production of 
biofuels worldwide.
    It was only 5 years ago that this committee extended the 
government's commitment to renewable transportation fuels by 
passing the Energy Independence and Security Act. As you know, 
the legislation challenged the industry to produce 36 million 
gallons of fuel by 2022. In less than 5 years, we already have 
new operating plants turning out hundreds of millions of 
gallons of advanced biofuels. If you consider that it generally 
requires 18 months to 2 years to site, permit, and build a 
plant, that is simply a remarkable achievement, and many more 
are on the way.
    In speaking with members of Congress this year, I have been 
asked where are the gallons? Is this another technology that is 
always 5 years away? The answer is emphatically no. We are 
putting steel in the ground and creating jobs for Americans all 
over this country today.
    So let me share with you a few examples. In my testimony, I 
included a picture of the new Dynamic Fuels facility located in 
Geismar, Louisiana. That has a name plate capacity of 75 
million gallons. It is making 1 million gallons a week without 
a tax credit in place, and it is selling it in a competitive 
basis. Additionally, Neste Oil has built over 650 million 
gallons worldwide, and expects to deliver 30 million gallons of 
renewable diesel to the United States this year. With a name 
plate capacity of 27 million gallons, last year my small 
family-owned company, Triton, employed 15 people and used corn 
oil as its base feed stock, and the list goes on. This year, we 
will see Texas-based KiOR bring an 11 million gallon facility 
in Mississippi, Gevo a 22 million gallon facility in Minnesota, 
and additionally, companies like BP and DuPont have 
demonstrated their technologies, purchased the land, and are 
deep into engineering a design for the first cellulosic ethanol 
plants.
    My message is simple, that it has only been 5 years since 
you passed the RFS. Too, the RFS is fundamentally working, and 
we are just getting started.
    Let me conclude by observing this new industry is helping 
make America steadily more energy and economically secure. We 
all watched the price of oil spike earlier this year and felt 
its impacts. You have the ability to send a signal to industry 
and markets that you stand behind the RFS. That signal, like 
this hearing of a balanced portfolio approach, would be greatly 
appreciated and we appreciate being here.
    [The prepared statement of Mr. McAdams follows:]

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    Mr. Sullivan. Thank you, Mr. McAdams. Next, Mr. Breen, you 
are recognized for 5 minutes, sir.

                    STATEMENT OF MIKE BREEN

    Mr. Breen. Thank you, Chairman Sullivan, Ranking Member 
Rush, ladies and gentlemen. I serve as the Vice President of 
the Truman National Security Project, and I am also proud to be 
one of the leaders of Operation Free, a fiercely nonpartisan 
coalition of over 1,000 patriotic veterans across the country, 
who stand together in the common belief that our dependence on 
oil as a single source of fuel poses a clear national security 
threat to the United States.
    To be clear, oil is an immensely important substance to our 
economy and will remain so for the foreseeable future. Its 
value goes far beyond its utility as a liquid fuel. Petroleum 
is a key input in advanced manufacturing, pharmaceuticals, 
agricultural products, and a host of other applications. 
Unfortunately, however, a near total dependence on oil as a 
fuel has eclipsed petroleum's other contributions. Our 
dependence on oil as a single source of transportation fuel 
poses a clear national security threat to the Nation.
    Oil is a fungible, globally traded commodity with prices 
set on a world market. In other words, global supply and global 
demand set the market and drive the price, not American supply 
and American demand alone. This has crucial implications for 
policy. Since any potential increase in U.S. supply must be 
considered in light of global demand.
    Some claim that recent technological advancements will 
solve our oil-related national security problems, eliminating 
the need to develop alternatives, but this is a fallacy for at 
least three reasons.
    First, it is highly unlikely that we can drill enough here 
in the United States to meet our needs, at least for any 
appreciable length of time. Second, American families will 
remain vulnerable to swings in gasoline prices, even if U.S. 
oil imports drop dramatically. In 2000, truck drivers in the 
United Kingdom went on strike over rising gas prices. The 
United Kingdom was a net oil exporter at the time, but that 
didn't protect British truckers from rising world oil prices. 
The tough reality is that when it comes to the price we pay at 
the pump, there is simply no such thing as foreign oil. Third, 
global demand for oil is rising at a breathtaking pace, with no 
sign of slowing. According to the EIA, America's oil 
consumption is expected to grow by 11 percent over the next 2 
decades. Meanwhile, China's oil consumption is expected to grow 
by 80 percent, India's by 96 percent.
    This is a market with clear winners and losers. The 
winners, by and large, are non-free market countries, with 
nationalized oil companies, many of whom are openly opposed to 
the United States. According to the CIA, over 50 percent of 
Iran's entire budget comes from the oil sector. As the price of 
oil climbs, Iran's nuclear program and support for global 
terrorist organizations are among the biggest winners. 
Meanwhile, the losers are American service members facing oil 
fueled uncertainties, Syrian revolutionaries facing Russian 
supplied weapons, and American families at the gas pump.
    Small wonder that Secretary of the Navy Ray Mabus recently 
called the Navy's reliance on oil a ``strategic 
vulnerability.''
    Today, oil is a strategic commodity, but 2 centuries ago, 
the world's top strategic commodity was not oil, it was salt. 
Salt was the world's preeminent way of preserving food, 
especially on long voyages. Wars were fought over salt, 
kingdoms were built on it, and then salt was out-innovated by 
an alternative technology, the ice box. Every one of us still 
uses salt, but it no longer dictates the fate of nations.
    When government sets aggressive yet maintainable standards 
for private industry while providing real incentives for 
innovation, there is nothing American businesses can't achieve. 
That is the real strength of technology neutral standards, like 
CAFE standards and the Open Fuels Standards Act, legislation 
sponsored by two members of this committee, Congressman Shimkus 
and Congressman Engel. There is nothing new or radical about 
this, it has worked countless times before.
    Next week, over 25,000 American sailors and Marines will 
embark on one of the largest Naval war games ever conducted. 
The exercise will be an opportunity to test a wide range of new 
technologies produced by American companies, including 
submarine-launched unmanned aerial vehicles, ``blue laser'' 
underwater communications technology, and the fuel for the 
exercise itself, a 50/50 biofuel blend based on advanced algae 
oils and recycled cooking oil. Navy pilots will fly the world's 
most advanced combat aircraft at over twice the speed of sound, 
powered by renewable American fuel.
    We can and must follow the military's example. The credible 
debate on oil dependence and national security is all but over. 
There is simply no question at this point that single source 
dependence threatens our future security and our prosperity. It 
is time for Congress to act and to lead.
    Thank you.
    [The prepared statement of Mr. Breen follows:]

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    Mr. Sullivan. Thank you, Mr. Breen. Next, Ms. Stadler, you 
are recognized for 5 minutes.

                  STATEMENT OF FELICE STADLER

    Ms. Stadler. Great, thank you. I am here today representing 
National Wildlife Federation's four million members and 
supporters who are united by a shared value for clean air and 
clean water, and for open spaces that are safe havens for 
wildlife and places where we go to seek solace.
    I am here today under the assumption that we all share 
these values, that we are working together to identify the best 
course for our country when it comes to the energy choices we 
make today.
    We are at an energy crossroads, and now, more than any 
other time, is when we need to put politics aside and choose 
the path that will sustain and grow our economy, protect our 
local water supplies, and prevent disastrous climate-related 
weather events from increasing.
    I would like to take a minute to share a personal story of 
what my neighbors and I experienced nearly 1 week ago. I live 
in Silver Spring, Maryland, and I share a street with elderly 
residents, local business owners, government employees, with 
Republicans, Democrats, artists, lawyers, and sportsmen.
    I faced the ``derecho'' storm with a profound sense of fear 
for my children. I prayed my kids wouldn't wake, that no tree 
would fall on my house and that any destruction facing me in 
the morning would be tolerable. We were lucky. Sadly, my 
elderly neighbor down the street wasn't. She lost her life when 
the top half of a giant oak tree crashed through her roof. And 
my neighborhood was not alone.
    As we know, the damage we have sustained from weather-
related disasters is being felt in communities across the 
country. Fires in Colorado have destroyed over a thousand 
homes, already costing taxpayers $40 million to fight. The 
Poudre River, Colorado's only wild and scenic river outside of 
Fort Collins, is running black, a toxic mix of ash, debris, and 
fire retardant. In Florida, extensive flooding occurred last 
month when Tropical Storm Debbie deluged parts of the State 
with an astounding 26 inches of rain over a 72-hour period. The 
heat wave has been lost on no one.
    The weather extremes affecting us are exactly the sorts of 
climate change impacts that scientists have been projecting for 
years, so here is where we stand at a crossroads. Carbon 
pollution is changing our climate; and our changing climate is 
contributing to extreme weather; and in order to slow down this 
devastating trend, we need to dramatically cut carbon 
pollution.
    This is an urgent matter. We must begin this downward trend 
by 2020, just 8 years from now, if we are to have at least a 2 
to 1 chance of keeping temperatures from rising to the point of 
dangerous interference with the climate system. Yet, our carbon 
emissions are still on a decidedly upward trajectory.
    Faced with these stark climate-changing realities, the 
National Wildlife Federation is propelled to ignite a national 
call to move this country swiftly down an alternate, 
sustainable, low-carbon fuels and electric generating path.
    We are not naive to think that getting off high-carbon 
liquid fuels will be an easy task. It will require a major 
overhaul of our car and truck fleet; a major revamping of our 
public transit systems; a major investment in sustainable, 
renewable fuels; and a major shift in our fossil fuels 
subsidies structure.
    The good news is that we are making progress in a few 
limited areas. Corn ethanol has shown what is possible, but it 
is not the long term answer to our Nation's energy needs. We 
need more support to get us to the next generation of biofuels 
from non-food, perennial crops and wastes, that create 
significant greenhouse gas reductions and not lead to other 
major environmental problems.
    New fuel economy standards are essential. Recent and 
proposed fuel economy and greenhouse gas standards for cars, 
SUVs, and pickups has the potential to cut about 10 percent of 
total U.S. carbon pollution. In addition, steady expansion of 
electric vehicle technology can take us even further, to a mass 
market, high performance vehicle fleet that uses little oil and 
produces near zero pollution.
    Consumers can save money, communities and natural resources 
will not stand in harm's way of climate-related impacts, and 
American ingenuity can thrive. But this will only happen if we 
are bold in our resolve to address the root causes of climate 
change, the runaway carbon pollution that is generated by our 
current fossil-intensive fuel mix. This is the energy vision we 
need.
    National Wildlife Federation looks to you for your 
leadership at this critically important time, and Americans are 
eager to learn of the solutions path you will lead them down as 
you exert your authority and power as lawmakers.
    Thank you for the opportunity to provide comments on this 
important matter.
    [The prepared statement of Ms. Stadler follows:]

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    Mr. Sullivan. Thanks, Ms. Stadler.
    Now we will move to the question period, and I will 
recognize myself for 5 minutes.
    Mr. Petrowski, the first one is to you. What are the costs 
to gas station owners of complying with the RFS? Do you expect 
those costs to increase in the years ahead, and if so, why? 
What other current or proposed regulations pose challenges for 
you? What is the impact of the RFS and other regulations on 
your customers?
    Mr. Petrowski. Well right now, the main threat we face on 
the RFS is, as was mentioned, when we mandate the use of a fuel 
that doesn't exist. We have to go out and purchase RINs. That 
adds to the cost of gasoline. Ethanol, which has spent most of 
this year actually below the price of gasoline, has not added a 
lot of costs this year. Ethanol has been blended in and 
accepted by our customers. Our customers are very, very price 
sensitive. I mean, that is one thing that you know in the 
retail business. A 2 to 3 cent differential between gas 
stations will cause huge shifts in demand.
    What I am worried about going forward, in addition to 
higher blends than are mandated, our liability of our 
equipment, our dispensers, private action lawsuits that are all 
addressed by House Bill 4345, and I worry right now currently 
the drought that we are experiencing in the Midwest, ethanol 
has gone up 40 to 45 cents in the last 2 months and we may 
reach a situation this summer where ethanol is a significant 
premium to gasoline, and that will add to the cost of the 
finished product. We have a price-resistant and price sensitive 
customer.
    Mr. Sullivan. Thank you. Mr. Gerard, from a refiner's 
perspective, what are the problems created by the blend wall? 
If E15 must be used, what legal risks do refiners face? Is 
there any way under existing law to avoid the blend wall? What 
do you feel you need in order to address the challenges posed 
by the blend wall?
    Mr. Gerard. There are a lot of answers to that, Vice 
Chairman Sullivan, but let me just address it generally, if I 
can.
    First as to the blend wall, we have come to the blend wall 
much quicker than anticipated. Back when the RFS was first 
enacted, though I was not part of that debate, I think it was 
expected in 2018, 2019, et cetera is when we had come to that 
point of addressing it. What has happened today, if we go 
beyond the blend wall, then we are pushed into other fuel 
blends like E15. As I mentioned in my testimony earlier, recent 
research we have done with the auto industry shows that E15 has 
impacts on engine durability. The engines that we test with the 
auto shows that as many as five million of our existing 
vehicles would not be able to operate or would have adverse 
impacts.
    So there is issues associated with moving beyond the E10 
blend wall, as mandated by the RFS. That is why we believe it 
is critically important to come back and address that issue by 
opening it up.
    Looking at the other questions Mr. Petrowski talked about, 
such as cellulosic, our guys are major investors in alternative 
renewable forms of energy. In many ways, we lead the country in 
investing these energies. But we have got to be realistic about 
what it does, particularly to the consumer. When you talk about 
impacts on local service stations, convenience stores, impacts 
on autos, not to mention small utilities, boats, chainsaws--the 
list goes on--we think we have got to step back and address 
that and make sure we are thoughtful, because at the end of the 
day, if we impact the consumer adversely unintentionally, we 
are going to discourage the very use of the fuels that we are 
trying to promote. So we think it is a serious issue that needs 
to be looked at. RFS should be reopened to adjust for the 
reality of what the marketplace shows.
    Mr. Sullivan. Also, Mr. Gerard, what is the potential for 
increased E85 use, and why has it not caught on so far?
    Mr. Gerard. Well I think it really goes back to consumer 
choice. As I understand it, it is about 4 percent of the 
vehicles today that are E85 compatible or flex fuel vehicles. 
Less than 2 percent of our service stations around the country 
can provide it, and even flex fuel vehicle owners and users use 
it less than 1 percent of the time.
    So once again, it is a consumer question. If you make it 
available out there and the consumer chooses not to buy it for 
whatever reason, we need to be sensitive about that. We need to 
make sure the policy is done in a way that we don't get the 
rejection from the very people we are trying to convince to 
new, better forms of energy, other forms of fuels.
    Mr. Sullivan. Thank you, Mr. Gerard.
    Mr. Tanton, the President has officially--occasionally 
pointed to California energy and environmental policies as a 
model for the Nation. Do you agree with him?
    Mr. Tanton. No, I don't. I mean, people often point to 
Hollywood models, but you know, we suffer from the Charlie 
Sheen phenomenon. We have very many self-inflicted wounds.
    We often hear during campaign season that we need to run 
government more like business. In 40 years in California, I 
have finally figured out what business we are in. We are in the 
business of building stranded assets. We had a large corn-to-
ethanol facility. It went belly up. It is now just coming back 
online, but what happens often in policy is we try to pick the 
technology du jour, and tomorrow it is another technology. We 
need to focus on constantly improving productivity, which is 
what got this Nation to be the wealthiest nation on earth. We 
need to practice our policy--focus our policies on principles 
and process, not picking technologies.
    Mr. Sullivan. Thank you so much. Next I recognize 
Congressman Rush for 5 minutes.
    Mr. Rush. I want to thank you, Mr. Chairman. Mr. Chairman, 
I have a question I am going to ask both Mr. Dinneen and Mr. 
McAdams to address. Under the Energy Security and Independence 
Act, which passed out on the floor for many in 2007, contained 
the RFS as a role of reaching 36 million gallons of renewable 
fuels by the year 2022.
    I want to ask each of these fine gentlemen, are we 
currently on pace to meet that goal, and if not, what 
additional steps are needed in order to make sure that we are 
on pace to meet those objectives? And what are some of the 
broader benefits to our economy that Renewable Fuel Standard 
would bring? What would be the standard--what would the 
standard have--the effects of the standard on future gas 
prices? What type of an impact would meeting the goals of the 
Renewable Fuel Standard have on jobs here in America? So first, 
Mr. Dinneen, and then Mr. McAdams.
    Mr. Dinneen. Congressman, thank you for that question and 
the opportunity to respond. Look, I have been in this business 
for 25 years, so I am the eternal optimist. I do believe that 
the 2022 target of 36 billion gallons can be met, but it needs 
to have some policy certainty to it. As Mr. McAdams noted, the 
uncertainty created about the RFS or the uncertainty with 
respect to tax incentives is going to have a big role in 
determining whether or not those targets are met in the out 
years. Clearly we are not meeting them early on, but that 
really is a function of an economic collapse in '08 and the 
consequent freeze on financing that occurred.
    But I have been to half a dozen plants producing cellulosic 
ethanol today from a variety of feedstocks. It really is not a 
technological question, it has been how do you encourage the 
financing to be given. It is happening today. Once the ethanol 
industry is allowed to continue to grow and evolve, as I 
believe that it can and it will, you are going to see 
tremendous economic and energy benefits beyond what you have 
today.
    I am real proud of the ethanol industry today. It is an 
industry that is responsible for some 400,000 jobs. It is an 
industry that last year added $53 billion to our gross domestic 
product. It is an industry that displaced the 477 million 
barrels of oil last year. It is a tremendously successful 
industry as it is. Those benefits will just expand further if 
the ethanol industry is allowed to continue to evolve.
    Mr. McAdams. Let me just echo what Mr. Dinneen said. I 
represent more of the second and third generation parties, and 
so I want to correct one myth. There is only one pool that has 
been short of--yes, I have it on. There is only one pool that 
has been short in terms of hitting the targets, and that is the 
cellulosic pool. So let me take Mr. Gerard's comment on about 
that pool.
    So what the EPA has under your vision, when you wrote the 
statute you allowed EPA to have flexibility to waive if the 
pool was short. So you waived--the EPA waived over 95 percent 
of the statutory mandate for the cellulosic pool. And so what 
we are dealing with is less than 5 percent of the pool that was 
kept in place. If you waived it back in, then you have 
completely removed any certainty of the market to finance the 
building of any plant that will build the fuel.
    So that is why we have a dispute about it, and I would--
with Jack, thoughtfully--about you can't give it--you can't 
give away 95 percent of the statute up front and then give away 
the last 5 percent in the back or no one will believe that they 
need to finance the building of these plants. The financing of 
the building of these second generation plants is the big deal.
    Jobs, here is a neat idea. All over the southeast, all over 
the west, there are different feedstocks that will be available 
for these new advanced technologies. Woods, different types of 
trees that grow oil, different types of grasses, an enormous 
amount of biomass that will be used in these different types of 
platforms. They create new jobs. They create new farm 
opportunities. Many of these feedstocks are grown on lands that 
couldn't sustain row crops, so they have no other use but to 
grow, for instance, maybe a pine tree. Now you can grow giant 
Miscanthus or something else.
    So you see not only on the technological deployment side an 
opportunity, you also see on the rural development side an 
opportunity with the advent of these new fuels. Thank you for 
the question.
    Mr. Gerard. Mr. Rush, could I respond to that?
    Mr. Rush. Certainly.
    Mr. Gerard. Thank you. Let me just add a little nuance to 
what Mr. McAdams said, and generally we are in sync on these as 
we work on these important alternative fuels. The--cellulosic, 
it has not met its target. We agree on that. The EPA did waive 
the 95 percent of it. The problem is there is 5 percent they 
didn't waive. It cost the industry $15 million, merely because 
EPA set a fictitious number out there. We sought a waiver after 
it was already determined that there was no cellulosic produced 
that year to meet the requirement of the RFS, and we were just 
ignored and they said sorry, we decline your waiver.
    So what has happened under the law is you have given EPA 
almost a taxing authority. EPA could have mandated the $500 
million under that--500 million barrels under the statute and 
put a very significant tax on the oil and gas industry because 
of that, or the obligated party.
    So that is where we think we need to open this up and take 
a close look at it. We are not trying to discourage what is 
trying to be accomplished in a broader energy policy here. 
Where we take great issue is when a statute mandates 
essentially a fan of fuel, and then you have the EPA, 
supposedly Environmental Protection Agency, that has almost 
unfettered discretion to decide how much they are going to 
charge the obligated parties each year. It is absurd. It is 
outrageous. It is bad public policy. That is what we are trying 
to address, not to discourage the advanced biofuels. We 
understand that. Again, our industry are major investors in a 
lot of those, as I think most on the panel here know.
    Mr. Sullivan. Thank you, Mr. Rush. Next, Mr. Shimkus, you 
are recognized for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman, and again, to the 
panel. I appreciate your coming in. I wish I had 5 minutes for 
each one of you. I am sure our visitors wouldn't like that, but 
I sure would.
    Let me go first to Mr. Petrowski. You know, EPA has 
approved the E15 for sale, so what are your hurdles?
    Mr. Petrowski. We need some liability protection.
    Mr. Shimkus. What do you mean by that?
    Mr. Petrowski. A private action--if a customer comes in, 
even though the EPA has deemed E15 usable, and he puts it in 
his vehicle that does not warranty anything above E10, we do 
not want to be held responsible for that private action. It 
is--if we have a dispenser or an underground tank, we need to 
have the manufacturer and our insurance certificate warranty 
that it is OK to have E15 in there. We don't want to be excused 
from handling fuel properly and from things that we do that are 
our fault, but we don't want to try to comply in putting E15 in 
our equipment and then be held liable for that later.
    Mr. Shimkus. What about E85?
    Mr. Petrowski. We have 70 E85 stations within the Gulf-
Cumberland network. Special equipment was used----
    Mr. Shimkus. And let me interrupt. In my congressional 
district I have--I can travel throughout my now--my 30 county 
area and always fill up at an E85 location anywhere in my 
congressional--but it is primarily the independent marketers. 
Why is that? Do you have any idea why it is more the 
independents than----
    Mr. Petrowski. I really don't--again, the retailer cares to 
sell the most volume he can and get his customer to come in, 
especially coming into our stores. And do remember, 85 percent 
of the gas stations in the United States are owned by 
independents and major oil is down to 10 to 15 percent. We had 
a very successful E85 program when it was priced accordingly. 
As the price spread between conventional gasoline or RFG 10 
percent blend and E85 now, we lost demand for the E85. It is 
simply a matter of price.
    Mr. Shimkus. Great, thank you.
    Let me--can I ask to put now--giving credit to Bungee, we 
are going to put up a slide, a picture of a kernel of corn, and 
I do this because a lot of times the debate on food fuel or 
anything else, or cellulosic, people don't really understand 
what occurs with a kernel and they think well, the whole thing 
goes.
    So first I would like Mr. Dinneen to talk about the 
component parts of a kernel, and then Mr. McAdams, I will segue 
to you really talking about next generation cellulosic, based 
upon a National Research Center, you know, announcement about a 
month ago.
    Mr. Dinneen?
    Mr. Dinneen. Well not being a farmer myself, the corn 
kernel is not necessarily my wheel house, but I will tell you, 
in the production of ethanol, we are just using the starch 
component of that corn kernel, and what is left behind is a 
very high protein, high fiber, high mineral content feed 
product that then goes to cattle and poultry markets across 
this country.
    Mr. Shimkus. So it is called distillers dry grains after 
the processing of the kernel, and distillers dry grains is 
really a major component in feed products for livestock. And I 
do this for my colleagues and friends who are concerned about 
the corn--the food fuel debate on livestock. The distillers dry 
grains is a commodity product sold after the refinery process, 
is that correct?
    Mr. Dinneen. Yes. In fact, last year, the ethanol industry 
produced some 36 million metric tons of distillers dry grains 
that was then fed across the country, and to put that in 
context, 36 million metric tons is enough feed to feed every 
cattle fed on a feed lot in this country.
    Mr. Shimkus. Well, and I would also say that we have--we 
produce so much distillers dry grains that we are exporting 
distillers dry grains to other countries throughout the world, 
China, in particular, in their feedstock, so again, addressing 
the food fuel debate.
    Mr. McAdams, we talk about cellulosic, and I am not sure 
you followed the National Corn to Ethanol Research announcement 
where they talked about research demonstrated proof of the 
viability of generation 2.0 ethanol, and it is basically from 
the bran portion of the kernel, and that is why we have the 
kernel up there.
    Mr. McAdams. Well you also can use this stock in the----
    Mr. Shimkus. Pull that microphone closer. I think that----
    Mr. McAdams. You can also use this stock in the leaves. So 
when you are looking at cellulosic technologies, you have 
different types. Thermal chemical, which is gasification at 
different degrees, can use a range of different feedstocks. 
Prevalent in the southeast, for instance, in the woody biomass, 
woodchips, so you have a company like Sun Drop, I see you have 
Louisiana members here, that is going to build a 50 million 
gallon facility in Louisiana using wood chips and rice hulls, 
and they are going to turn it into synthetic gasoline with an 
MGA Exelon technology, again, to the partnership that Jack was 
talking about across the range.
    You have Enios using grasses, you have other people with 
synthetic biology now that can take cellulosic sugars, that is, 
extracting say, 40 or 50 percent of the sugar out of various 
compounds, either grasses or woods. Now you use bacteria, you 
modify the DNA bacteria and the bacteria literally spits out an 
oil, a gasoline, a jet fuel, exactly as if it came out of the 
barrel oil through a refinery. It is amazing technology that is 
coming----
    Mr. Shimkus. Thank you very much. Thank you, Mr. Chairman.
    Mr. Sullivan. Thank you, Mr. Shimkus. Next, Congressman 
Green from Texas, you are recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. McAdams's and Mr. Dinneen's testimony that he thinks 
that the RIN fraud situation is being overblown, but I am 
hearing that this is a real problem that the industry groups 
affected parties are working hard to solve this issue. First, 
do you agree with Mr. Dinneen on this overblown--that it is 
overblown?
    Mr. McAdams. I can understand--honestly, I can understand 
why Bob feels that. Ethanol does not have the same issue as the 
D-4 RIN pool. I can tell you, I have six members that 
effectively shut down in November when EPA announced the fraud 
that took place in Maryland and Texas. They completely shut 
down. Why? They are small operators. They make what is called a 
D-4 RIN credit, which is the biomass-based diesel pool, and for 
them to sustain their operations, they had to be able to sell 
the RIN credits. They went through--not to get too detailed, 
but they went through a RIN separation process. That created an 
issue with respect to whether the major oil companies felt safe 
with their RINs, given the fact that they got stuck for $60 
million, so we are, as Mr. Gerard said, we are working very 
closely with EPA and API to try to range the risk of the 
various opportunities, the various buckets of RINs, so that we 
can have a more reliable system and stand the OFS up so that 
you have surety and liquidity in the marketplace.
    Mr. Gerard. So Congressman, I would be glad to put a little 
context around that comment, if you would like.
    Mr. Green. Well let me finish with my question, though. Do 
you take those RIN frauds seriously then, it sounds like?
    Mr. Gerard. I think all of us in the biofuels industry do 
not want to have fraud in our market, and so yes, we do take it 
seriously. And so the issue here is how do you de-risk the 
current market.
    Mr. Green. Well, again, you know, I know you are trying to 
work on it, but we haven't had much success on our subcommittee 
with EPA wanting to step up to the table. Hopefully they are.
    Bob, I know you wanted to get in.
    Mr. Dinneen. I appreciate that. Look, all I was trying to 
point out is we have had 29 billion RINs that have been issued, 
and 140 million of those, all D-4 RINs, have been found or 
alleged to be fraudulent. The lion's share of this program are 
D-6 RINs, ethanol RINs, and there has not been any suggestion 
of an issue with those RINs. So you are talking about half of 1 
percent that deserves a serious response, and the RFA is indeed 
working with the API and others to identify an appropriate 
response. But I think the response needs to be focused on where 
the problem is, and people ought not get too disturbed about 
the integrity of the whole program, because I think the whole 
program has----
    Mr. Green. Let me get Mr. Gerard to respond to that.
    Mr. Gerard. Let me just very briefly respond, and I 
appreciate what Bob is saying. However, back to what Mr. 
McAdams said, these RINs are in buckets. When you look at the 
bucket on the biodiesel area where we found the fraud, it is 5 
to 12 percent of the market. That is a serious problem, as 
those who buy the RINs and then EPA turns around and says well 
gee, you bought a fraudulent RIN, so go buy another one. So we 
have come back to the EPA and say let us create a process here 
where we can certify a mechanism to make sure we are not 
promoting or allowing fraud in the RIN process. It is that 
simple, but it is a serious issue. Five to 12 percent of the 
market in the biodiesel area has been determined or estimated 
to be fraudulent. That is a problem for those of us buying the 
RINs.
    Mr. Green. So are you--is API and Mr. McAdams and the 
renewable fuels folks actually working with EPA, and what is 
the response from EPA?
    Mr. Gerard. Well Mr. McAdams and I are working together. I 
think today Bob and company haven't really thought it was their 
issue because in their space, in their bucket of RINs, there 
doesn't appear to be a problem, not yet. We hope there never 
is. We are working with the EPA. They have been slow to respond 
with solutions, but in combination with the White House and 
EPA, we are hopeful we can get a resolution by the end of the 
calendar year, so going in to 2013. We have got certainty in 
the program because you can appreciate, those buying the RINs 
will look to those we have got most confidence in, and that 
discourages some of the smaller plants and others that are 
trying to get into the market.
    Mr. McAdams. Let me drive that home, just real quickly. Let 
me put money on the table.
    So in the D-4 RIN pool, the D-4 RIN credit today is $1.20. 
For a small producer, $1.20 represents this whole margin. That 
is his cash flow in his business. If Mr. Gerard's numbers don't 
believe the D-4 RIN pool is valid and that there is more fraud 
in it and my guys can't sell that $1.20 RIN, they can't 
operate. And that is why we have to have quality assurance in 
the D-4 pool.
    Mr. Green. And that is a concern that I have, because that 
$60 million, believe me, the folks at the pump paid for that, 
and so that is just an additional adding to our gasoline costs.
    Mr. Chairman, I know I am out. I wish I had more time for 
Mr. Dinneen because I have a line of questions, so I don't know 
if we will have time to do a second round, but thank you.
    Mr. Sullivan. Thank you, Congressman Green. Next we 
recognize Congressman Burgess from Texas for 5 minutes.
    Mr. Burgess. Thank the chair for the recognition.
    On the RIN issue--and I wasn't going to devote any time to 
this, but we are having a subcommittee hearing in Oversight and 
Investigations on this issue. I have several small producers in 
my district in Texas who were, in fact, harmed very badly by 
this and their margin was cut to the point where they are 
likely out of business, and there is a significant dollar 
involvement that they will be looked to to make good on, and it 
is rather startling to think that we set up a program that had 
all of the good aspects of retailing of--securities and product 
of the energy market, and probably an object lesson for all of 
us. But I would just--an open invitation, if any of you have 
things that you would like to share with my office, we are 
going to be looking into this in detail during the Oversight 
and Investigations Subcommittee that will probably be in this 
very room.
    Mr. Gerard, I wanted to ask you a question on the--you 
know, I do travel some and travel by automobile, and when I go 
out of the Dallas/Ft. Worth immediate metroplex area, of 
course, we are under some air quality considerations where 
ethanol blends are mandated in our fuels that we sell over the 
summer, but sometimes when you get out to east Texas or even a 
State like Oklahoma or Arkansas, there will be a gas station 
that will put a big placard up that says no ethanol in my gas. 
And I always rejoice when I find those stations, because I am 
going to get extra miles per gallon out of my little Prius when 
I fill up. But is that day coming to an end where those 
retailers are going to be able to have ethanol-free gas? Your 
comments that under the current mandates that that 10 percent 
volume will have to be in every gallon of gas that is sold, and 
what did you say, by 2020 there will have to be a 20 percent 
volume?
    Mr. Gerard. Well, if you look at the mandates in the 
Renewable Fuel Standard, it could grow to essentially--and this 
is projection--an E20 standard. And what I mean by that, when 
you get to the 36 billion gallons that were talked about by 
2022 in the current construct, that is about where it is 
projected to go. In fact, some people believe it will go higher 
than that.
    So the more you mandate that, the less likely you are to 
find pure, conventional gasoline. I imagine there will be some 
creative folks out there, and Mr. Petrowski has probably seen 
some of them in the industry, who may try to avoid some of that 
or to offer it as an alternative, but at the end of the day, 
the more you mandate, the less likely it is you will see some 
without a blend, without fuel mix.
    Mr. Burgess. And of course, it is troubling as a consumer 
but also, I mean, I guess because of the--of 10 percent ethanol 
I spend a lot of time at my lawn mower repair shop, Lowery's 
Motors, in Lewisville, Texas, and he said that the ethanol in 
gasoline had been very good for the lawn mower repair business 
or the small engine repair business, because he gets a lot of 
business. Is that observation accurate?
    Mr. Gerard. Very much so. In fact, particularly in the 
small business area, motor boats and others, I noticed just the 
other day on a boat system around the gas cap, you know, 
nothing beyond E10. Toyota and the other individual companies 
now will tell you that it is unlikely they will warranty 
anything that goes beyond E10, and there are actually gas caps 
on their automobiles this year that do that.
    So it is a serious issue. The warranty question is a 
serious question, and perhaps more so even in the small 
engines, to your point, the lawn mowers, the other engines. And 
that is why we believe you have got to go back and look at 
these questions. Let us be thoughtful about energy policy. We 
need all of the above, but we don't need to mandate and push 
something that creates problems for consumers that could cost 
them hundreds of millions of dollars.
    Mr. Dinneen. I am sorry, if I could just add here----
    Mr. Burgess. Well no, because I have an----
    Mr. Dinneen. Just to corroborate an interesting point 
though----
    Mr. Burgess. Let me just--I will give you a chance to 
follow up, but just a moment. In the last Congress, we should 
have had a hearing on this and we didn't. What we had was a 
briefing. We had a briefing down in the committee room, but the 
difference between a briefing and a hearing is there was no 
record. C-SPAN wasn't on and some very good questions were 
asked about what was the testing that went into the E15 
regarding older engines and smaller engines. And it really was 
a series of finger pointing by the Environmental Protection 
Agency and Department of Energy. We had asked who is in charge 
here and it was this sort of activity. That is why I am so 
grateful we are having this hearing today. We should have had 
one in the last Congress before we got so far down the road on 
this. But we are putting people's investments at risk, 
certainly the retail gas outlets are going to be under some 
difficulty from liability concerns, and we have a 
responsibility to do this correctly. Unfortunately, in the last 
Congress we found it necessary not to.
    I also just need to point out, Mr. Tanton, I hope you gave 
us the upbeat version of your testimony? Is that right?
    Mr. Tanton. Staying in California requires that one is an 
eternal optimist.
    Mr. Burgess. Well, in a joint Economic Committee hearing 
that we had here just before the break, the green jobs 
phenomenon was looked to actually cost jobs. Is that something 
that you have experienced in your State as well?
    Mr. Tanton. Yes, and you are referring to the studies out 
of Spain, Italy, Denmark----
    Mr. Burgess. Right.
    Mr. Tanton [continuing]. Germany? Yes.
    Mr. Burgess. One green job equals three lost regular jobs.
    Mr. Tanton. Yes, we haven't enumerized it yet, but it is 
not a positive.
    Mr. Burgess. All right, thank you.
    Mr. Sullivan. Go ahead for a second.
    Mr. Dinneen. Thank you, Mr. Vice Chairman.
    Congressman, your points are all well-taken, of course, but 
you had teed up that question--that series of questions to Mr. 
Gerard suggesting that your own lawn mower was having 
difficulties with E10. I just wanted to point out that all 
small engine manufacturers warranty up to E10, and Mr. Gerard's 
answer indicated that above E10 might be an issue, and that 
could be true. I agree with you that there probably should have 
been a hearing to discuss the testing that had been done before 
E15 was approved, because I think the record would have shown 
that there was an exhaustive amount of testing. The Department 
of Energy and EPA did more than 100 vehicles, more than 6 
million miles, 12 trips to the Moon and back, testing on E15. 
They did not do testing on older vehicles or small engines, 
older vehicles in part because it is difficult to test for the 
full life of a vehicle on vehicles that have already been 
beyond their full useful life.
    And so in an abundance of caution, EPA did not approve the 
use of E15 in those older vehicles or for small engines. We 
support that action. We do think that there was enough on the 
record to demonstrate that older vehicles would not have seen a 
problem as well, but again, in an abundance of caution, EPA has 
limited E15 so that those engines for which it is not 
appropriate would not be able to use it.
    Mr. Burgess. So the retailer is going to have to rush out 
and say no, no, you can't fill your 2000 year automobile with 
this tank because you need to use the tank around the corner? I 
mean, this was the problem. We had that--we had a briefing and 
not a hearing. There is no record. I promise you, that was a 
series of finger pointing.
    Mr. Chairman, I thank you for your indulgence. I am going 
to yield back, but it was not the proper way to go about this. 
We have an obligation to people to do this correctly. I yield 
back.
    Mr. Sullivan. Mr. Gerard?
    Mr. Gerard. I will be very brief, Mr. Vice Chairman. My 
apologies. I just can't let that entirely stand. I am not sure 
how long the research went that EPA did to the Moon and back. I 
will tell you it was very limited research and it was conducted 
on the basis of catalytic converters. It wasn't engine 
durability. We, in combination with the auto industry, with DOE 
and with EPA, were doing a comprehensive analysis on engine 
durability. We told the EPA, let us wait until we get our 
research done. Let us look at this before we make a final 
decision. They rushed ahead. Our research now shows that two of 
those engines essentially failed of the eight we tested, and 
puts at risk five million autos in the current fleet as a 
result of the E15 decision. That is what the actual research 
shows on engine durability.
    So we believe, again, we should have more research. We have 
been doing this in collaboration with DOE and EPA, and we 
shouldn't rush into these issues. That is why we got to take a 
look at the RFS.
    Mr. Dinneen. But one of those engines also failed on E0, so 
it suggests that there maybe is an issue with the vehicle 
technology, not the fuel----
    Mr. Sullivan. OK.
    Mr. Dinneen. And one of the failures was about a component 
of the vehicle that was under recall----
    Mr. Sullivan. We have got to move on.
    Mr. Gerard. So let us suggest we need more research, Mr. 
Vice Chairman, and I think we agree on that as opposed to 
rushing head on into policy decisions without careful 
consideration.
    Mr. Sullivan. Thank you, sir.
    Mr. Gonzalez, you are recognized for 5 minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. I am going 
to ask each of the witnesses for a yes or no answer. I would 
appreciate if you would give me a yes or no answer. It goes 
directly--it ties right in to what my colleague from Texas was 
pointing out about E15 and the mandate of increasing ethanol 
blends.
    This question is going to be predicated on two points. One 
is fact and the other is just an assumption in worst case 
scenario, but the fact would be that the following 
manufacturers will not warrant their vehicles if you exceed 
E10: Chrysler, Ford, General Motors, Mercedes Benz, Honda, 
Mazda, Toyota, Nissan, Volkswagen, Volvo, BMW, Hyundai, Kia. I 
don't know who that--I don't know, I guess that leaves out 
Ferrari, Maserati, Lamborghini, but I assure you, they probably 
would not warrant their engines either.
    The second--that is fact, unless it has been updated and 
they have reversed their positions. I don't think that is going 
to happen. The other is the assumption is that EPA was just 
wrong and Mr. Gerard was right. They didn't conduct the 
research as they should have to arrive at that particular 
conclusion and mandate.
    Do you believe that it would be proper for Congress--now we 
are talking judiciary, but we will work with judiciary--to pass 
a law that would immunize the producer, the supplier, and the 
retailer of E15 from liability by the consumer? Just a yes or 
no, is that a good thing for Congress to do?
    Mr. Petrowski. Yes.
    Mr. Gerard. Yes.
    Mr. Dinneen. Yes.
    Mr. Tanton. No.
    Mr. Bajura. No.
    Mr. McAdams. No.
    Mr. Breen. I don't know.
    Ms. Stadler. I don't think that is going to make sense.
    Mr. Gonzalez. All right. Does it make sense for Congress to 
pass a law that will allow the consumer who, in fact, suffers 
some damage as a result of a miscalculation or inappropriate 
testing by the Federal Government that requires a mandate for 
the supplier to supply, the retailer to obviously make 
available, something they put in their gas tank that destroys 
their engine, should that consumer have a remedy against the 
Federal Government to make them whole again? Yes or no.
    Mr. Petrowski. Yes.
    Mr. Gerard. If you are going to mandate the fuel, the 
government should take responsibility. They are the mandater of 
the fuel.
    Mr. Dinneen. Yes.
    Mr. Tanton. I got to think about it more.
    Mr. Bajura. Yes, but more importantly, every November.
    Mr. McAdams. I don't think that is a proper role.
    Mr. Breen. Yes, I have to think about it.
    Ms. Stadler. Yes, I am going to pass.
    Mr. Gonzalez. If you think this--I mean, from the point of 
our constituents, your customers, come on. They have to put 
something in their engines that is mandated by someone out 
there in authority, and then everyone escapes liability. I 
believe liability instills accountability. It is called human 
nature, and if we don't have that, then EPA or even the private 
sector can do whatever they want without any consequence. And 
that is what we are seeing today.
    I am a supporter of what EPA does most of the time. In this 
particular case, they did move quickly, prematurely. If I have 
the manufacturers of these vehicles telling you they are not 
going to warrant this, how is it fair for us to impose that 
kind of consequence on the consumer? We are all concerned about 
the producers, we are all concerned about the suppliers and the 
retailers. Is anyone talking about the consumer? Why wouldn't 
all of you say look, if the Federal Government is requiring you 
to do something, you shouldn't be held liable for any 
unintended consequence? Why aren't all of you all saying to the 
American people that if we force something on you and you have 
no choice but to use it, and it basically destroys your only 
means of transportation, someone should be held liable. Believe 
it or not, that is the basis of our American jurisprudence, is 
liability, believe it or not. It instills responsibility and 
accountability. That is what has been missing.
    Now I am going to tell you, we do have a piece of 
legislation out there when it comes to the producers, 
suppliers, retailers, and so on. Mr. Green and I have a piece 
of legislation out there that views it from the consumers' 
viewpoint and will allow them a remedy. I do think all of us 
need to be acting, you know, going in that particular direction 
so that we move forward, and I know that we are going to have 
conflicts among many of you as to what is the proper blend and 
such, but at a minimum, we should be looking at this incredibly 
important question.
    Thank you for your testimony today, and I yield back, Mr. 
Chairman.
    Mr. Green. If the gentleman would yield just 1 second?
    Mr. Gonzalez. I think I have got a second.
    Mr. Green. I know our committee passed a bill that would 
not provide it, but the bill you and I have that would actually 
follow up just like we did on vaccines that the Federal 
Government mandates, we take the responsibility, why wouldn't 
we do that though on my 2002 Blazer I like to drive at home. So 
thank you.
    Mr. Sullivan. Mr. Olson, you are recognized for 5 minutes.
    Mr. Olson. I thank the chairman, and good morning to the 
witnesses. Hope you all had a happy 4th of July.
    Before I start with my questions, I just want to be sure we 
all have the facts, because every one of us is entitled to an 
opinion, but none of us are entitled to their own facts. Here 
are the facts about the American energy future.
    Our Nation thrives because we have cheap, reliable sources 
of energy, American fossil fuel energy. We will be a fossil 
fuel Nation for at least the next 25 years minimum. We have 
limited abilities to recover the oil and gas we have in our 
country. Now for most of the past century, we only got about 25 
percent of the oil and gas out of the ground that we knew was 
down there, but we didn't have the technology to do that.
    Enter the American entrepreneur. In two techniques, 
directional hydraulic drilling--I am sorry, directional 
drilling, horizontal drilling, and hydraulic fracturing. 
Because of those two techniques, our energy portfolio has 
changed dramatically. We actually have a chance--I have been on 
this planet for about 50 years now. We have a chance to become 
energy independent, or at least depend upon North American 
sources of energy, Canada and Mexico, and it is because of 
these two techniques.
    We have got shale plays happening all over this country. 
North Dakota last month became the second largest producer of 
oil and gas in America. North Dakota. They got ahead of Alaska 
with that pipeline. My home State is still number one, I am not 
worried about that.
    None of us in this room could have foreseen these 
technologies and what it is doing for our country 20 years ago. 
None of us could see that. And so I want to tell everybody in 
this room, never, ever underestimate the power of the American 
entrepreneur in a free market system.
    And that is what concerns me about the RFS, because it 
interferes with the American innovator in the market, and 
forces them to pursue technologies that the government wants, 
not that the market supports.
    So my first questions are for you, Mr. Gerard and Mr. 
Tanton. A civil--we are stuck with the RFS, and I really want 
to get rid of it. I mean, again, it is the government choosing 
winners and losers, but assuming that we are stuck with the 
program as it currently is, given the increase in volume of 
ethanol mandate each year, shouldn't we diversify the sources 
from which we can produce ethanol to include abundant and cheap 
fossil fuels developed right here at home in America?
    Mr. Gerard. Well, if you allow fossil fuel production to 
meet the mandate, that could be one option, of course. But let 
me just add to your earlier comment on technology. One of the 
overlooked technology developments in the country today is in 
the oil and gas spaces you commented, our deep water drilling, 
hydraulic fracturing, horizontal--it is a whole new game and we 
shouldn't overlook that as we, once again, consider the energy 
future of the United States. So those would be options.
    Mr. Olson. Yes, sir. Care to comment, Mr. Tanton?
    Mr. Tanton. Yes. We need to diversify our sources, 
including the sources for renewable fuels. There has been a lot 
of talk today about cellulosic ethanol requirement. It is very 
simple to make cellulose into an alcohol fuel. It turns out as 
wood alcohol, methanol. You know, if I was going to make one 
tweak to the RFS, I would allow cellulosic methanol to compete, 
as well as cellulosic ethanol. But you can also make methanol 
out of natural gas, and of all the resources that have been--
become available, expanded, I think perhaps natural gas is the 
one.
    Now I sort of bad-mouthed California energy policy. We are 
considering passing a hydraulic fracturing ban in California. 
For those of you from California or any influence in 
California, please help me stop that. California is the third 
largest refining State in the Nation. We are about to lose 30 
percent of our refining capacity because of this so-called Low 
Carbon Fuel Standard, which was passed as part of our Global 
Warming Act.
    Mr. Olson. You kind of led to my next questions for you, 
Mr. Dinneen. I mean, you noted in your testimony that the 
Renewable Fuels Association's main mission is to drive expanded 
production of the U.S. American made corn-based ethanol.
    Mr. Dinneen. Just ethanol.
    Mr. Olson. OK, exactly. But there are examples out there in 
this world, Brazil has an ethanol mandate but it is sugar-
based. Mr. Tanton, this wasn't coordinated but I have got a 
company in my district that select these natural gas to make 
some sort of--ethanol. So do you support extending the RFS 
beyond corn-based ethanol?
    Mr. Dinneen. I think the RFS envisions that there are going 
to be a wide range of renewable fuels that will compete, and I 
would inform Mr. Tanton, including methanol if it is produced 
and can be done so competitively. The fact of the matter is, 
corn-derived ethanol today is the lowest cost alternative fuel 
that is out there. We are less expensive than Brazilian 
ethanol. Brazilian ethanol still comes in, it does compete, but 
the RFS is not an ethanol mandate. It is a renewable fuels 
mandate. It empowers the kind of entrepreneurship that you are 
seeking, because Mike's members and some of my members are 
looking for ways to evolve this industry to new feedstocks and 
new technologies. It is really an exciting time to be in the 
industry, because you see that evolution occurring before our 
eyes.
    But one thing that would undermine that, however, is to 
repeal the underpinnings for that development. And if you 
choose to move the Renewable Fuels Standard away from its 
foundation of a renewable fuel to allow for non-renewable 
technologies to compete, then you are going to drive investment 
there. Then you are picking winners and losers. I think that 
there is certainly a role for some of those nonconventional, 
you know, petroleum fuels and if there are programs that you 
can develop in addition to the RFS to encourage those, have at 
it. We would support it. But the RFS was designed as a 
renewable fuel program, and I think it should stay as such.
    Mr. Olson. And the chairman has given me about 2 minutes 
extra time, so I thank him for that, and I yield back.
    Mr. Sullivan. Thank you. Next yield to Ranking Member 
Waxman for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    It is a good thing when we are less dependent on foreign 
oil. It is a good thing that we can have lower costs for our 
fuels, but the elephant in the room is climate change. And this 
year, the United States has experienced record heat waves 
across the country, debilitating droughts, and forest fires 
that threaten our communities in the West.
    Two weeks ago, Rex Tillerson of the Exxon Mobil 
acknowledged that burning fossil fuels is warming the planet 
and changing our climate, and I was pleased to hear Mr. 
Tillerson acknowledge this serious threat. Mr. Gerard, does the 
API agree with Mr. Tillerson that the burning of fossil fuels 
increases the temperature of the planet?
    Mr. Gerard. I think there are two responses to that, Mr. 
Waxman. First is, as you know, Mr. Tillerson is an important 
member of ours and we have a broad diversity within our group. 
I will say the general consensus is they recognize it as a 
challenge, but what they have done as industry is they have 
stepped forward and their single largest industry investors in 
forms of energy that are zero carbon emitting or low carbon 
emitting technologies.
    Mr. Waxman. That is helpful. So the association does not 
necessarily agree with Mr. Tillerson? They have different 
views?
    Mr. Gerard. No, our membership has different views, 
particularly different views as to how you would address it. 
Some support a carbon tax, you know, we had some that supported 
your----
    Mr. Waxman. Well before--we have those who support one 
thing or another. Presumably those who support one position or 
another recognize there is a problem and that we have global 
warming.
    Dr. Bajura, you aren't a climate scientist but you are the 
director of University Energy and Environmental Center. You are 
an expert on coal. I understand that you have acknowledged that 
fossil fuel pollution is responsible for climate change. In a 
presentation you gave to the National Coal Council, you stated 
that carbon management must be an integral part of coal-to-
liquids technology. Dr. Bajura, I have a simple question for 
you. Is climate change a hoax?
    Mr. Bajura. I don't want to get involved in the issue of 
climate change is a hoax. We are concerned about CO2 emissions 
and if we are looking at the effect of CO2 emissions, it is a 
greenhouse gas. We have learned that in our fundamental science 
and engineering. It could contribute to climate change.
    Mr. Waxman. Unfortunately, the House Republicans seem to 
think climate change is a hoax. They voted to deny this science 
and to repeal any authority to address the problem.
    Ms. Stadler and Mr. Breen, I want to ask you about whether 
our energy policies should be rooted in science or in denial. 
Particularly Mr. Breen, can you explain from a national 
security perspective how climate change should inform our 
energy policy?
    Mr. Breen. Absolutely, and thank you for the question.
    There is a pretty strong emerging consensus among many 
national security leaders, including most of the most prominent 
think tanks in the field, that climate change is a dire 
national security threat. It is what the Pentagon calls an 
accelerant of instability or a force multiplier of instability. 
It creates the conditions that lead to insurgency, terrorism, 
interstate warfare, large mass migrations of people. We are 
already seeing some of this happening, that according to even 
the most conservative climate projections, is set to increase, 
especially in some of the most volatile areas in the world 
where our military is the most active, including central Asia. 
It is a huge problem.
    I am not a climate scientist, but according to all the 
research I have seen, 95 percent of climate scientists do 
believe that climate change is real and as a military officer, 
if I were informed that 95 percent of my intelligence told me I 
was facing a lethal threat, if I didn't act I would be 
committing unconscionable military malpractice.
    Mr. Waxman. Well military matters are handled by 
government. It is not left to private entrepreneurs to figure 
out what the military strategy ought to be for national 
security. Energy policy should be, in some ways, directed by 
our government. Not to--and we should not expect that private 
entrepreneurs are going to risk their profits in order to 
develop some technologies that may help our attention to the 
climate change issue when it is not profitable for them.
    Ms. Stadler, can you explain what our energy policy should 
look like if we want to be guided by science, and do we have 
the luxury of time to establish such a policy?
    Ms. Stadler. Well, we are running out of time, so I don't 
think we can sit around and think we have another decade to 
figure this out. I know this is going--is a debate that has 
been dragged on for multiple decades. There is strong 
scientific consensus that we are nearing a tipping point and 
that we really need to start ratcheting down carbon pollution, 
and if we don't, we are going to see more extreme storms and 
weather events like we have already seen.
    In terms of how we develop fuels policies, you know, we 
believe that we need to--not just when it comes to fuels, but 
energy policy more broadly, we need to evaluate them based on 
their ability to drive down carbon pollution. So when we talk 
about all of the above, we don't think that works when we are 
in this time of a tipping point.
    Mr. Waxman. Well all of the above is unfortunately the 
direction we have to take, because no one is going to stop 
using coal. No one is going to stop using oil. But what we need 
are alternatives and market incentives to develop the 
technology that will allow us to use oil and coal and other 
fossil fuels and take the carbon out of it, because our focus 
has to be, I think, on this climate change threat. It is not 
going to happen with the free market responding to it, because 
there is no competition to try to achieve what is a national--
international goal by entrepreneurs, unless they can also make 
money. So we have got to give them the financial incentives to 
accomplish that goal.
    Thank you very much, Mr. Chairman.
    Mr. Sullivan. Gentleman's time is expired. I recognize the 
gentleman from Kansas, Mr. Pompeo, 5 minutes for questions, 
please.
    Mr. Pompeo. Great. Thank you, Mr. Chairman.
    You know, if folks back in Kansas were listening to this 
hearing this morning, they would be amazed, talking about D-4 
RINs and mandates and liabilities and fining companies because 
they don't buy a product that doesn't exist. I mean, they would 
be floored, I just have to tell you.
    Mr. Dinneen, you talked about RFS. Did you say there need 
to be no changes in the RFS? Did I understand that correctly? 
You said not to make broad sweeping changes. Does that go to 
say that you think there ought to be no changes in the RFS as 
well?
    Mr. Dinneen. I think it has been a tremendously successful 
program. I think one of its successes is founded upon the fact 
that this committee gave EPA tremendous flexibility in 
addressing some of the issues that have arrived.
    Mr. Pompeo. So is that no changes----
    Mr. Dinneen. Yes, no changes.
    Mr. Pompeo. No changes. So in spite of the fact that a 
product doesn't exist, you think we should penalize companies 
for not purchasing the product?
    Mr. Dinneen. The product does exist. It is being produced 
today. It is not being commercialized as rapidly as we would 
like, but EPA has had the authority to reduce the cellulosic 
requirement, and they have done so.
    Mr. Pompeo. Right, it is amazing. You all talk about having 
reduced 95 percent of the requirement, is that right? What a 
stunning statement, to say that they have reduced it by--what a 
mess we made.
    Mr. Dinneen. It was a pretty stunning recession, I agree.
    Mr. Pompeo. I guess we are just not as smart on this side 
of the podiums as we thought we were.
    You also talked about how price sensitive consumers are. In 
fact, in Wichita, you can flip the radio on in the morning and 
they are advertising which gas station has the lowest price 
that morning by 2 cents, you know. They will talk about--I hear 
it all the time. Why are--do I not hear from my constituents 
screaming for E15 and E85 if it is such a good thing to lower 
consumer prices? I will tell you what, my constituents don't 
hesitate to call me when there is something they want. Tell me 
why I don't hear that very often.
    Mr. Dinneen. Well, I think there are going to be some 
constituents that will want it, absolutely.
    Mr. Pompeo. But I am telling you, in my experience--I have 
only been here 18 months, I will concede that--but I don't hear 
it. I was in four parades this week, and not a sole asked me 
about, sir, please, bring me E85.
    Mr. Dinneen. Maybe your constituents don't want to have 
choice, but I think most consumers----
    Mr. Pompeo. No, I promise you they do.
    Mr. Dinneen [continuing]. Around the country want to have 
the option to utilize E15 if it is a lower cost, if it is 
appropriate for their vehicle, and we are not talking about 
mandating E15, and Mr. Gerard's repeal, he talked about E20, 
were are not talking about mandating E20. We are talking about 
giving consumers the choice to use it.
    Mr. Pompeo. That is just not right. You are not talking 
about giving them a choice, you are talking about a mandate. 
You are talking--you are not--I am happy--E100, knock yourself 
out. If you are prepared to give up the mandate here this 
morning, I am prepared to advocate for E100. Deal? I mean, you 
talk about choice, but it is fundamentally misleading to say 
that the consumers aren't looking for just--you are looking for 
a government mandate for your product.
    Mr. Dinneen. For 100 years, we have had a government 
mandate for gasoline. What we are doing right now is trying 
to----
    Mr. Pompeo. Sir, if you will point me to statute----
    Mr. Dinneen [continuing]. Create incentive for other 
alternatives.
    Mr. Pompeo. If you will show me the statute mandating 
consumer's use of petroleum products, I will be happy to 
withdraw my previous comment. You can't. You can't point to it. 
I have asked your organization before for that very statute, 
and you can't point to it. I don't want to get into an 
argument. It is true.
    Mr. McAdams, you talked about financing. Why wouldn't--
should we not just have government financing? You said you 
can't get these things financed because there is uncertainty 
about the RFS. Just have a government loan program.
    Mr. McAdams. I didn't suggest that.
    Mr. Pompeo. No, you didn't. I am suggesting it would be 
easier and cleaner----
    Mr. McAdams. I suggested there needs to be a partnership 
and vision with the advanced biofuels industry with the Federal 
Government, much like we had with the aircraft industry or we 
wouldn't have airplanes today; much like we had with the space 
program or we never would have put a man on the moon; much like 
we did with the internet, or we wouldn't have the internet.
    There is a partnership that can take place between the 
Federal Government and this innovative technology----
    Mr. Pompeo. Right. I am suggesting an even deeper 
partnership. Why don't we just give you the money, or loan it 
to you at a really cheap rate that you couldn't get any place 
else because the market just won't accept your product?
    Mr. McAdams. I am not going to sit here and defend the Loan 
Guarantee Program. I am not so sure that model worked very 
well. After all of my members looked at the Loan Guarantee 
Program, in all honesty, they were only awarded one. Most of--
felt the transactional rates weren't right.
    Mr. Pompeo. Mr. McAdams, you agree it is the same effect. 
We are lowering the cost of financing. You want a mandate to 
lower the cost of financing. There is--it is different, the 
economics are slightly different, but the outcome for 
industries that are demanding Federal mandates is largely the 
same.
    Mr. McAdams. I don't know what the combination between tax 
policy, grant policy is. I just know that we went through a 
very difficult period of time from 2008 to date----
    Mr. Pompeo. The whole economy did. So did our consumers, 
who were having to pay the tax bill----
    Mr. McAdams. Absolutely.
    Mr. Pompeo [continuing]. For your mandates and your 
subsidies.
    I want to ask one other question. So we have this 
restriction on RFS that only certain things--I have had several 
folks come into my office and talk about products like Mr. 
Olson was talking about that don't fit today's mandate. Another 
way to open this up, you complain about cheap natural gas. It 
is--that causes problems because natural gas--because you 
can't--you don't have enough price differential. Why not just 
put an enormous tariff on imported oil? Solves Mr. Breen's 
problem. We won't be taking oil from nasty companies. I am not 
advocating, I am just asking Mr. Dinneen or Mr. McAdams, why 
not just put an enormous tariff on imported oil and let 
everyone compete across that spectrum? We would obviously raise 
the price for gasoline.
    Mr. McAdams. If history serves me, I believe it was Bob 
Dole that suggested an import tariff, and it didn't receive 
much support.
    Mr. Pompeo. Would you advocate for that?
    Mr. McAdams. I wouldn't.
    Mr. Pompeo. Mr. Dinneen, would you?
    Mr. Dinneen. I wouldn't, but I think it does point right to 
the issue that we have here, is that you don't have a free 
market when it comes to energy.
    Mr. Pompeo. I am past my time. Thank you, Mr. Chairman.
    Mr. Burgess. [Presiding] The gentleman's time is expired. 
Chair recognizes gentlelady from Florida, Ms. Castor, for 5 
minutes.
    Ms. Castor. Thank you, Mr. Chairman. Thank you all on the 
panel for being here today.
    I do believe that the overarching goals of the Renewable 
Fuel Standard are very important, and I think that they are 
goals that while we may not have our constituents demanding E85 
at the pump, they do believe that it is important to reduce 
greenhouse gases and the Renewable Fuels Standard proposes as a 
goal by 2022, a greenhouse gas emission reduction of over 138 
metric tons. We do hear our constituents clamoring for ways to 
reduce the risk of these extreme weather events tied to climate 
change. They can't do it by themselves, and they need 
leadership out of the Congress to do it. I think that is an 
important goal, and we are all struggling for how to get there 
and provide that leadership.
    I think our constituents also believe that it is important 
to provide our country with greater energy security, and that 
means greater domestic sources, and this is one in the all of 
the above category, that really challenges how we get to the 
second generation. I am frustrated by it, but you know, we 
are--the American people are kind of impatient and this is a 
goal that was set in 2005, 2007. It is 2012, and gosh, we 
haven't seen the second generation of biofuels emerge. That is 
frustrating. And I hear people say well, be patient. But you 
know, we are hearing a lot more now, a growing chorus saying 
this is impacting our ability to have affordable food. The 
relying so much on corn has not--while maybe people were 
willing to say up front OK, we will do that to kick this off, 
we have got to make that transition now off corn-based ethanol 
into the second generation. I have heard some discussion here 
today, and Mr. McAdams, I wish you would get a little more 
specific with financing and how we move into the advanced 
biofuels and beyond the corn-based ethanol that is competing 
with food.
    Mr. McAdams. Well, let me give you an example why one size 
doesn't fit all. So if I am BP or DuPont, I can still finance 
the building of a cellulosic plant. I am a big entity, I have 
my own draw and capital. That is something I can do, and both 
of those companies are looking at building their own plants. If 
I am a smaller, innovative company, I don't have that line. So 
for instance, one of my companies, Sun Drop Fuels, has adopted 
a different model, so they went to Chesapeake, a natural gas 
company, because they are going to use natural gas as part of 
the feedstock in their plant. And so Chesapeake is going to 
help build this plant, along with the State of Louisiana. The 
State of Louisiana has put up $450 million worth of bonds to 
build this plant, to create this new 50 million gallon 
cellulosic gasoline plant.
    And that is one point I want to make to Madam 
Congresswoman, is this is not all about ethanol. Most of the 
people that I represent make hydrocarbon drop-in fuels. So most 
of the technologies I am talking about are sugar-based fuels to 
gasoline, diesel, or jet fuel. Our wood-based fuels to 
gasoline, diesel or jet fuel, they are not going to make 
ethanol. They are going to make a fungible fuel which we will 
partner with the oil industry with, that will move through the 
existing infrastructure, does not need infrastructure changes 
and does not need changes to the engines. We will not have a 
lot of these subsidiary issues.
    So I think there is a bright future there, but my answer on 
what do you need, which is why I appreciated Mr. Pompeo's 
questions, it depends on who you are trying to help and what 
the scheme looks like. It is a tax piece, is it depreciation? I 
can tell you, if a big oil company wants to partner with one of 
my members and you give them accelerated depreciation, that is 
a lot more appealing than other forms of tax structure. So it 
depends. Multiple limited partnerships just offered by Senator 
Kuhns, another interesting model, then used very well by the 
independent oil industry. We don't have multiple lending 
partnerships in the biofuels world. We don't have intangible 
drilling costs in the biofuels world.
    So when you look at energy policy, you have got to create a 
level playing field across the whole sector, because we are 
going to use oil and gas for the next 30 to 40 years. And we 
ought to also have the same kind of optionality for advanced 
biofuels and cellulosic biofuels that we have given to the 
inherent incumbent----
    Ms. Castor. And I think that you said here in the U.S. we 
are a leader globally when it comes to advanced biofuels, but 
are there some lessons we can take from what is happening in 
other countries when it comes to the advanced biofuels?
    Mr. McAdams. I think we can look from other companies for 
guidance, OK, and the concept that we have a free market, well, 
go talk to China or Brazil. They are financing the building of 
a lot of innovative technologies. We are developing the IP in 
the United States. I got two companies building their first 
plant in Brazil. Why? The federal government of Brazil sees a 
future there and they are helping fund the building of the 
plant. We are not doing that here. We are arguing about whether 
or not the Department of Defense can, you know, help glide a 
limited amount of money to build three plants.
    Mr. Burgess. Gentlelady's----
    Mr. McAdams. Brazil is building them all over the country.
    Ms. Castor. Thank you very much.
    Mr. Burgess. Gentlelady's time is expired. Recognize the 
gentleman from Virginia, Mr. Griffith, 5 minutes for questions.
    Mr. Griffith. Thank you, Mr. Chairman.
    Dr. Bajura, one of the greatest benefits of coal-derived 
fuels is the ability to provide our military with a more stable 
domestic source of energy. I was happy to hear you mention my 
bill, H.R. 2036, in your testimony, the American Alternative 
Fuel Act of 2011, which would repeal Section 526 of the 2007 
Energy Bill. This section effectively sets us on a course to 
rely even more on unstable regions where many of our military 
personnel are now deployed. Do you believe the potential to 
source military fuel from domestic resources, such as liquid 
fuel derived from coal, is a national security issue?
    Mr. Bajura. Yes, sir, I think it is, and it makes sense for 
us to have a diversity of supplies. The Department of Defense 
wants to ensure that it has the ability to have fuel to fund 
all of its operations. I think another thing that could be 
benefitted by having the Department of Defense program put in 
place is we talked about $4 a gallon petroleum, we talked about 
$27 a gallon renewable fuels, but at the war theater, a gallon 
of fuel might cost $300. If we had coal-to-liquids or 
gasification in Fischer-Tropsch technologies, we might be able 
to produce that fuel right there at the theater, and that would 
reduce the cost of transporting it, which is another advantage 
to the Defense Department.
    I would also----
    Mr. Griffith. Hang on, sir, before you go on, can you 
explain that in a little bit more detail for all of us folks 
and at home who are watching?
    Mr. Bajura. Well, what we are doing----
    Mr. Griffith. Why would it cost so much at the war theater 
and what makes it advantageous to perhaps have that technology 
in that theater?
    Mr. Bajura. You want to ensure a security of supply, not 
only getting it there but the quality of supply. If you bought 
something elsewhere, would you know that it wasn't 
contaminated, for example. So you want to ensure security. So 
we take our own fuel to the theater. If we made our fuel there, 
it would be cheaper. Using gasification Fischer-Tropsch, we 
could produce it with materials that are there in that country.
    Mr. Griffith. All right. Go ahead.
    Mr. Bajura. I would also--one other comment to you, Section 
526 is based upon an assumption of the amounting of greenhouse 
gases emitted in 2005 when we set a baseline for petroleum 
production. We are outmining the Department of Defense by 
alternative fuels, say, from coal, but yet if we import fuel 
from Venezuela, for example, petroleum, it doesn't have the 
same greenhouse gas content. It is emitting more, but we are 
allowing them to import the fuel but on our own industries to 
make the fuel here.
    Mr. Griffith. And you believe that with using the coal 
gasification we can actually reduce the greenhouse gas in the 
total process of that fuel, is that correct?
    Mr. Bajura. I think in doing coal gasification, for 
example, we have the ability to capture the CO2 there. If we 
produce Fischer-Tropsch fuels, as I commented earlier, we use 
biomass, we can sequester the carbon that is generated and as a 
result, we have fewer emissions than with regular petroleum.
    Mr. Griffith. OK. What role do you believe long-term 
contracting authority for the Department of Defense could play 
in the development of a robust alternative fuels industry?
    Mr. Bajura. Long-term contracting is--it was proposed--was 
designed to provide some guarantees for a company that builds a 
plant. We are talking big bucks here if you are saying it is 
$100,000 per daily barrel of output and you need 25,000 barrels 
a day, you are talking billions of dollars. There is a lot of 
risk in investing in a technology like that. We might say the 
elements are known, but putting such a big plant together is 
very costly. The price of oil is dynamic. I think it is 
important for us to have the floor and ceiling for prices, and 
as that legislation was proposed, we were even looking at ways 
where the Federal Government would not have to pick up the cost 
if it were a higher price--if the fuel production was cheaper 
than on the market, it would be beneficial.
    I think this is important that we ensure that development 
of the technology, once it is developed and proven, then I 
think industry will step in and do it.
    Mr. Griffith. And so part of what you are saying is--and I 
think I am correct in interpreting this--is that if we use that 
research capability, then we put it into the field, if somebody 
is going to invest the billions of dollars in putting something 
into the field, it might need something longer than a 5-year 
contract from the military to feel comfortable in putting that 
money into the investment. Is that a correct statement?
    Mr. Bajura. That is correct. That is why I want to do a 
long-term contract, because you look at a coal plant and you 
have got a 20-, 30-year repayment cost for your capital 
contents. And we need that stability.
    Mr. Griffith. And so 20 years is more rational than a 5-
year?
    Mr. Bajura. Most definitely.
    Mr. Griffith. All right. Thank you very much, and I believe 
my time is up. I yield back.
    Mr. Burgess. Gentleman yields back his time. I recognize 
the gentleman from New York, Mr. Engel, 5 minutes for 
questions, please.
    Mr. Engel. Thank you very much, Mr. Chairman. I am very 
happy that this hearing includes legislation that I have long 
championed, the Open Fuel Standard Act, H.R. 1687. Every 
President for the past 40 years has pledged to free ourselves 
from the dangers of oil dependence, and you know, our 
transportation sector is the reason why we are still dependent 
on oil. Only 1 percent of U.S. electricity is generated from 
oil, but virtually every car and truck and bus and train, ship 
and plane manufactured and sold in America runs on oil, and for 
the most part, they cannot run on anything less. It is by far 
the biggest reason why we send $400 billion per year to hostile 
nations and we know that money winds up funding terrorists in 
their efforts to harm us.
    What frustrates me in conversations about oil dependence 
are usually dominated by calls to drill more or use less. Both 
can be helpful, but neither is even close to sufficient. 
Between 2000 to 2008, drilling increased by 66 percent, and yet 
gas prices tripled. OPEC merely responded by decreasing its 
supply, keeping the overall amount of oil in the market the 
same. So I believe we need a game changing way to alter this 
dynamic.
    My colleague, John Shimkus, and I believe that the cheapest 
way and most effective way to do this is to allow fuels to 
compete in every new vehicle sold in the U.S., and that is why 
we have worked together to write the Open Fuels Standard Act. 
It has 28 sponsors in the House, 16 Democrats and 12 
Republicans, and our bill would simply require new vehicles to 
be able to operate on non-petroleum fuels, in addition to or 
instead of petroleum-based fuels. Any kind of fuel would 
qualify: natural gas, alcohol, hydrogen, biodiesel, plug-in 
electric, fuel cell, anything other than just plain gasoline, 
and we are simply looking to open the fuel market to 
competition so that consumers can choose whichever fuel they 
want at any given price.
    Mr. McAdams, you mentioned and you talked about Brazil. I 
travel to Brazil, and it has long frustrated me that in Brazil 
fuel competition is a regular part of life. Not here, but in 
Brazil. Drivers pull into a fueling station and they get to 
choose which fuel they want to buy. Drivers make the choice, 
not the government, not the oil companies, and as a result, 
when global oil prices spiked in 2008, Brazilians simply 
purchased more ethanol than gasoline and were largely 
unaffected. But the American consumer cannot be as smart or as 
shrewd as the Brazilian consumer, because our cars cannot run 
on anything but oil, and that would change if we passed our 
Open Fuels Standard Act.
    And I want to just say before I ask my question, the United 
States Energy Security Council, really smart people, former 
Secretary of State George Schultz, former Secretaries of 
Defense Bill Perry and Harold Brown, former Secretary of 
Homeland Security Tom Ridge, former Chairman of the Federal 
Reserve Alan Greenspan, former Director of the CIA Jim Woolsey, 
they are all part of this and they stress that we need to break 
oil's monopoly over our transportation sector by opening the 
fuel market to competition from sources other than petroleum 
and fully support Mr. Shimkus's and my bill.
    So let me say, Mr. Petrowski, your testimony made 
references to four bedrock points. One was the need for diverse 
fuel sources, which I clearly support, and another was a 
concern over externalities. Your written testimony provides 
more detail in what you mean by that, but I just want to ask 
you simply would you be willing to sit down with Mr. Shimkus 
and myself to discuss how these externalities would be impacted 
by the Open Fuel Standard?
    Mr. Petrowski. Sure, I would love to. I would love to sit 
down. As I stated in my written statement and oral statement, 
we believe in diversity. I would caution, I would not exclude 
petroleum. Again, we may be on the verge of seeing ethanol 
spike for a short period of time this summer if we don't get 
sufficient rain and relief in the Midwest. You do not want to 
lock the industry into one fuel, whether it is ethanol or 
petroleum. Flexibility and optionality is the key to survival.
    Mr. Engel. I agree with you.
    Mr. Breen, your testimony mentioned that the price for oil 
was set by the global market and when the price of oil spikes, 
it spikes for everyone. You mentioned that in '08 when the 
price of oil went to $147 per barrel, truckers in the U.K. went 
on strike over the high cost of fuel and that happened even 
though the U.K. was self-sufficient, thanks to the oil it 
produces in the North Sea. And the global price spikes impacted 
them like everybody else. So contrary to popular belief, only 9 
percent of U.S. oil supply comes from the Persian Gulf, yet the 
U.S. economy is affected by spikes in oil prices when the 
Persian Gulf destabilizes. So since '05, we have been producing 
more and more oil while consuming less and less, so we 
increased our production, decreased our demand, yet American 
motorists paid more for fuel than any other year. Clearly 
something is wrong in our approach. I would like--Mr. Breen, do 
you agree?
    Mr. Breen. I do. I think we have got to remember that this 
is a globally traded commodity. Like many, many other globally 
traded commodities, there are spikes and decreases in the 
price, depending on what the global demand and the global 
supply looks like. I think the key point is the point that you 
made and the point that your bill makes, which I very much 
endorse, which is that flexibility and optionality is, as Mr. 
Petrowski said, are absolutely key. It is not that oil is not 
incredibly important to our economy and unlikely to be so for 
the foreseeable future, it is. It is that we need to have 
choices. It is that we can't be blocked into a single--the 
behavior of a single commodity that determines our national 
destiny. That is the issue.
    Mr. Engel. I couldn't put it better myself.
    Thank you. Mr.----
    Mr. Burgess. Gentleman's time has expired.
    Mr. Engel. Oh, I am sorry. Thank you.
    Mr. Burgess. The chair will recognize the gentleman from 
West Virginia, Mr. McKinley, 5 minutes for questions.
    Mr. McKinley. Thank you, Mr. Chairman.
    Dr. Bajura, if I could focus back a little bit on some of 
your remarks and some of your testimony and things that you had 
submitted. There is--from the Energy Information Agency that 
suggested that there are about 18 billion short tons of coal 
recoverable assets in America. Is that--do you agree with that?
    Mr. Bajura. I think that is a reasonable number, yes.
    Mr. McKinley. And what would--so that we can relate to it, 
at the current burn rate that we have in America, what would--
how many years would that provide us for service in this 
country?
    Mr. Bajura. We are currently consuming about 1.1 billion 
tons a year of coal, so that would be 18 years.
    Mr. McKinley. So we have--you say we have 18 years left of 
coal? I don't think that is correct.
    Mr. Bajura. I don't think that is right either.
    Mr. McKinley. Thank you.
    Mr. Bajura. I think we have like 250 years of coal.
    Mr. McKinley. Thank you. Do your math and--but so do you 
think the Federal policies are helping us or hurting us in the 
coal production?
    Mr. Bajura. I think we have coal at the resource that we 
could continue to use. We generate much more electricity from 
coal than we do from renewables. I think it would be worthwhile 
for us to make more investments in coal----
    Mr. McKinley. Well that is what I want--that is where I am 
really headed towards, Doctor, is trying to get us over into 
that--first identifying what we have and then how we can use it 
so that we are not importing it.
    But the--you are aware, perhaps, with the National Energy 
Technology Laboratory in Morgantown, just nearby where you 
work, also in Pittsburgh, that the President has thumped his 
chest that he was good for all of the above and he was going to 
help innovate--how to innovate, be creative, but yet, you are 
aware he slashed the clean coal technology and the research 
into alternative fuels there at the NETL by 41 percent. Are you 
aware of that?
    Mr. Bajura. Yes, I am, sir, and I had done some homework on 
the recommendations for funding for a fossil energy program of 
all of the five energy programs, nuclear, renewable, science, 
and things of that sort. Coal has taken, by far, the biggest 
hit, roughly say 33 percent in terms of requested funding and 
allocated funding since the last 2 years. I think we do need to 
use coal in the future. I think with technology we can answer 
the concerns people have about carbon sequestration, taking 
coal, putting the CO2 in the ground, making electricity. There 
are no----
    Mr. McKinley. I think some of the things you said are very 
innovative, and I have had a chance to read your report that 
you submitted last year.
    But let us go back to how we are, as engineering and 
scientists in America, how we are competing, what we are doing 
compared to the global market with China and perhaps India as 
well, with the CTO and SNG, what are we doing? Are they 
outperforming us? What kind of investments are they putting 
into coal-to-liquid?
    Mr. Bajura. China is making investments in coal-to-liquid 
technology. They don't have much as a petroleum-based resource, 
and so they are making these investments, and they are doing 
them with government support. They are taking very big steps 
whereas we are taking smaller steps. They have no concerns 
about demonstrating a technology that hasn't been extremely 
well proven, because they are willing to put the money behind 
it. We are not funding our programs well enough that we can do 
demonstration programs. I think if we did demonstration 
programs, we could also hasten this technology into our 
marketplace. I am concerned that with the way the Chinese are 
developing their technologies in advanced coal electricity 
plants and coal-to-liquids, coal-to-chemicals plants, we may 
wind up buying our technology from China if we don't make 
investments here in this country to develop these technologies 
ourselves.
    Mr. McKinley. Do you subscribe to the fact that perhaps 
with the fact that they are developing in such a rapid way in 
the production of coal because they wrapped in at 3 billion 
tons of coal production a year? Are they just ignoring the 
environment, or do they have a different view on it than we do? 
Are they going to be--could we anticipate they are going to 
have bad weather conditions in the years ahead because they are 
producing coal--burning coal?
    Mr. Bajura. My observations about China is they are going 
to come lately, so to speak, to the aspect of global climate 
change. But what I have seen in terms of the technology and the 
discussions I have had with the people from China, their 
managers of their coal plants are very concerned about meeting 
environmental standards. They are doing everything they can to 
deploy new technologies to capture the criteria pollutants, and 
they are making great strides in terms of doing carbon capture 
and sequestration. For example, they built a large coal-to-
liquids plant that produces 25,000 barrels per day of liquid 
fuels. They are capturing the CO2 that comes from that. 
Roughly, that is like 3 million tons a year of CO2 and they are 
planning to inject it underground. To actually doing that with 
the plant, we are were not able to go forward with our plant, 
the Mountaineer plant in West Virginia because we couldn't get 
the financing to make it happen. While China might be late to 
the game, I think they are aggressively pursuing not only 
developing the technologies, producing the products, but they 
are also taking advantage and doing what they can for the 
environment.
    Mr. McKinley. Unfortunately my time is expired, but thank 
you very much for coming here today.
    Mr. Burgess. The gentleman's time has expired. The chair 
recognizes the gentleman from Massachusetts, Mr. Markey, for 5 
minutes for questions.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    This is a very important hearing, and because it focuses 
upon what became a consensus after the first oil embargo, which 
was that it was critical for the United States to not have 
American produced oil be exported to foreign countries. And 
that is an almost 40-year policy now, a consensus that we had 
reached. And with few exceptions, that has been consistent with 
American policy over the last 37 years, to keep American crude 
oil in America, to supply fuel for Americans.
    So Mr. Gerard, you were quoted last month as saying that 
you support the lifting of restrictions on the exportation of 
American crude oil and that that needs to be a serious 
consideration, that we start increasingly exporting our crude 
oil. My problem is that even with Americans paying an average 
of $3.38 for a gallon of gasoline, that the large oil companies 
want to send our resources to foreign countries. With American 
men and women on the ground in the Middle East, fighting and 
dying to protect oil supply lines, I don't think that it is 
really good for the American Petroleum Institute to say that we 
should be sending American crude oil abroad, otherwise, we 
should just change the name of the institute to the World 
Petroleum Institute, not the American Petroleum Institute, 
because it is not about America anymore. Because I just don't 
think that we are advancing American security, American 
employment, and American economy if we are thinking about this 
oil supply is anything other than something that should be used 
here in the United States, given the vast amount of oil that we 
still import into our country on a daily basis. Exporting oil 
just doesn't make any sense. It actually goes counter to our 
goal to reduce our total dependence upon imported oil.
    Mr. Breen, do you think it is a good idea to export 
American crude oil as long as there are American soldiers that 
are dying to protect foreign oil overseas? Shouldn't we keep 
our domestic resources right here at home so that fewer 
Americans will have to give their lives so that we can put 
gasoline into our cars and our trucks?
    Mr. Breen. I think, Mr. Markey, the--my sort of central 
point standard is that it is a global market and so when we 
talk about American production, even if we are talking about 
American exports, we have got to ask ourselves, are we going to 
be able to produce enough to meet global demand, which is 
skyrocketing? Again, you know, Chinese demand is supposed to go 
up 80 percent in the next 2 decades, Indian demand 96 percent 
in the next 2 decades. So I think it is highly unrealistic to 
imagine that we are going to be able to produce enough to touch 
that, especially in a global market where many of the dynamics 
are dictated by OPEC in cartels that will just lower their own 
production.
    Mr. Markey. Well as you know, since President Bush left 
office the amount of imported oil in the United States has 
dropped from 57 percent down to 45 percent. My goal would be to 
see it just keep going lower and lower, the percentage of oil 
that we import. Do you think that would be a good goal for the 
United States?
    Mr. Breen. Absolutely.
    Mr. Markey. You think exporting crude oil advances that 
goal?
    Mr. Breen. Probably not.
    Mr. Markey. That is what I am saying. That is the goal that 
I would have, to make sure that we don't see that occur, 
especially since we are now at our highest level of production 
in the United States in 18 years, highest level of production 
of oil in 18 years right now, today, in the United States of 
America. And that is quite an achievement for the Obama 
administration. I mean, Obama really has embraced ``drill baby, 
drill.'' I mean, he is just incredible. Eighteen-year high, 
something the United States never achieved by the Bush 
administration. In fact, it kept going down during the Bush 
administration, so let us give this guy credit, all of us. He 
deserves a lot of credit.
    Mr. Gerard. Mr. Markey, can I comment on that?
    Mr. Markey. About the exportation? I would like you to 
comment on the exportation of crude oil, if you could.
    Mr. Gerard. I am anxious to see which quotes you are 
saying. I am not aware that I ever said that as it related to 
crude oil.
    But we have strongly opposed approaches like you have 
advocated at others to get in the business of managing the 
marketplace and denying exports, be it natural gas and----
    Mr. Markey. If I may just interrupt you, you said it is a 
serious consideration that as America's changing energy--call 
for more supporters of domestic oil and gas production, and 
possibly an eventual shift of U.S. energy export policy. 
American Petroleum Institute President Jack Gerard told Roiters 
in an interview. ``It is a serious consideration as we continue 
to produce more and more in this country,'' Gerard said, at the 
API's Washington, DC, office----
    Mr. Gerard. Absolutely, it is a very serious consideration. 
The very reason it is a serious consideration is due to modern 
technologies, that is why we are driving down the amount of 
imported oil in this country.
    Mr. Markey. Right.
    Mr. Gerard. There are two reasons. Number one, the 
economy----
    Mr. Markey. Well should we keep the oil here?
    Mr. Gerard. Well, why don't we--let us produce our resource 
here.
    Mr. Markey. That is what I am saying. Should we--if we 
produce the resource here, should we keep it here? That is the 
question. Yes.
    Mr. Gerard. We would love to work with you to expand the 
development of U.S. oil production----
    Mr. Markey. I am saying but if we produce it here, should 
we keep it here?
    Mr. Gerard. Absolutely, until we can produce enough to fill 
our market and then allow the market to work on a global 
basis----
    Mr. Markey. So you don't think we should export crude oil 
until we achieve that goal of filling our own market, is that 
what you are saying?
    Mr. Gerard. As you know, today we export less than 1 
percent, and that is generally in a trader market. As you know, 
that is the current public policy and has been for----
    Mr. Markey. But should that be--should we continue the 
policy of keeping the crude oil here----
    Mr. Gerard. Yes, we should focus on adding to the supply to 
get----
    Mr. Markey. But should we keep it here if we do add to the 
supply?
    Mr. Gerard. The marketplace will dictate that and it----
    Mr. Burgess. Chair would instruct that the gentleman's time 
has expired. The witness has answered the question.
    Mr. Gerard. I would be happy to come visit with you.
    Mr. Markey. He has not answered the question.
    Mr. Burgess. The chair recognizes the gentleman from 
California, Mr. Bilbray, 5 minutes for questions, please.
    Mr. Bilbray. Thank you, Mr. Chairman. Mr. Chairman, I just 
want to clarify the history. There was a reference to the 
development of the aircraft being a government-subsidized 
endeavor. I think if you remember your history--well, the 
partnership was you had one government-financed effort here on 
the Potomac, and you had one private enterprise of two bicycle 
makers in the Midwest. The fact is, Langley was highly 
subsidized by the Federal Government and spent more time 
worrying about getting his government subsidy than developing 
the wind tunnels that could develop a successful aircraft, 
where the bicycle makers were the ones who actually developed 
it. So there is a perception that government involvement helps 
to move technology along the times. History again and again--
and I can talk about environmental stuff--have proven that 
government intervention and control actually can divert those 
resources and the development of aircraft really is an example.
    On the dome of the Capitol, you do not see in that relief 
Langley's painting on the wall, you see the Wright Brothers 
chasing the airplane. So I think that we have got to learn from 
our mistakes.
    Now, I would ask Mr. McAdams, do you believe that we should 
be fuel neutral?
    Mr. McAdams. Yes, sir.
    Mr. Bilbray. OK. Do you believe that we should make sure 
that our standards are fuel neutral?
    Mr. McAdams. Yes, sir.
    Mr. Bilbray. Now, if I can get 100 miles on one fuel with 
this much, and 100 miles with this much, do you think we should 
be giving our mandates and our benefits based on volume or 
based on BTUs?
    Mr. McAdams. Well, our association specifically when we 
went into the RFS----
    Mr. Bilbray. I want to know--don't go around. Should it be 
based on how much energy or how much volume?
    Mr. McAdams. We support energy density as a key component 
of the Federal policy, and we did in the RFS too, and----
    Mr. Bilbray. Excuse me. Last I checked, aren't we at 10 
percent by volume?
    Mr. McAdams. You are talking about ethanol. I am talking 
about hydrocarbon based----
    Mr. Bilbray. I am talking about across the board, do you 
think that we should--our standards should always be based on 
percentage of BTU rather than volume of the fuel itself?
    Mr. McAdams. I think that is a novel policy in terms of 
performance-based. Our association specifically supported 
energy density as a component in the RFS----
    Mr. Bilbray. OK. Do you believe that this should get the 
same benefits as this if the same amount of energy is contained 
in each?
    Mr. McAdams. That is certainly a policy a lot of my members 
would endorse.
    Mr. Bilbray. But you can't--you wouldn't endorse it at this 
time?
    Mr. McAdams. Well, I don't know what you are talking about. 
Are you talking about a tax policy, are you talking about RIN 
credits?
    Mr. Bilbray. Mandate 10 percent by volume is a pretty clear 
definition. Now, if I put 10 percent of something that has only 
70 percent of the energy in of something that has 100 percent. 
Let us-- you know, we can get into it, but the fact is BTUs is 
what the consumer--you want to give the consumer choice. When 
they buy--fill up their tank, don't they have the right to know 
that they are getting the same amount of mileage, quality, 
performance out of what they are putting in the tank----
    Mr. McAdams. I don't have a problem with that. Most of my 
guys make 124,500 BTU molecule----
    Mr. Bilbray. OK.
    Mr. McAdams. That is identical to a molecule coming out of 
a barrel of oil through a refinery.
    Mr. Bilbray. OK, and when we get into our environment, per 
emissions, we have been going to--don't you think it is a 
little absurd that we continue to give a per gallon emission 
standard rather than a per mile or per BTU? In other words, we 
are back to this issue that when you have unequal fuel 
potential, don't you think our support, our mandate, and our 
environmental regulation should reflect the reality of how much 
mileage you get out of that fuel, not just how much of the fuel 
is there?
    Mr. McAdams. I think you have a series of regulations 
across the board that are incumbent regulations that need to be 
looked at to recognize the new molecules that will come into 
the market.
    Mr. Bilbray. OK. I am just getting back to the fact that in 
California--let us move over to in California we ran into a 
situation with the liability issue, didn't we, Mr. Tanton?
    Mr. Tanton. Yes, we did.
    Mr. Bilbray. We actually had boat owners suing the oil 
companies for putting ethanol into their fuel system, right?
    Mr. Tanton. Correct, and I think those were misdirected. 
They should have been aimed at the Air Resources Board and the 
elected officials who mandated that ethanol.
    Mr. Bilbray. Well, as a former member of the Air Resources 
Board, I so agree with you. The question really comes down to 
is that we got into that conflict, nobody is talking about 
would you, Mr. Tanton, leave your lawn mower with E10, let 
alone E15, with gasoline in it? Would you actually leave your 
lawn mower without burning out all the fuel before you put it 
away for the season?
    Mr. Tanton. No, I would not, and I think we need to keep in 
mind that people keep their lawn mowers longer than they keep 
their cars.
    Mr. Bilbray. Well, how much I use my lawn.
    Mr. Chairman, I appreciate that. Can I ask for one thing? 
This is a hearing but I would ask that we have a hearing about 
the fact that we don't even talk about natural gas being the 
alternative to traditional oil for the next 10 to 20 years that 
consumers could have. And we totally--both sides ignore that 
natural gas option, and I will say it again. In 1992, I drove a 
natural gas car. It is compatible with the use of traditional 
fuels, or renewable fuels, and it is the orphan child of energy 
options out there, and it is the one thing that can break the 
monopoly of oil companies of the solid oil companies where we 
get into it. And I wish both sides of the aisle would finally 
admit it, but we need to have a hearing separate on that issue, 
because they have been left out in most of these hearings.
    I yield back.
    Mr. Shimkus [presiding]. And I think my colleague looks at 
the Open Fuel Standard, and that would address some of the 
concerns of being able to use and not let the market--let the 
competition dictate the fuel.
    So I would like to ask unanimous consent--and Mr. Cassidy 
be recognized for 5 minutes. Before I give him that time, there 
are votes called. It is a vote to adjourn. I am willing to miss 
it. It is a stupid vote. So if we can get someone back from the 
Minority, I will try to keep moving on. But Mr. Cassidy, 
without objection, you are recognized for 5 minutes.
    Mr. Cassidy. Thank you. First, for my colleague, Mr. 
Bilbray, actually House--my bill, 1712, promotes the use of 
natural gas as a transportation fuel, so I hope to see you as a 
cosponsor.
    Mr. Tanton, I really enjoyed your testimony. I always 
figure that California is the cutting edge of Democratic 
policy, and I see how poorly you all have done. I say, ``Well, 
what a tremendous State, how you can screw up even 
California?'' I also say I really like your attachment, your 
excerpt from Prop 87: ``Energy security should come from 
shifting to a system of manageable risks.'' That is a great 
quote. Now Mr.----
    Mr. Tanton. Feel free to use it.
    Mr. Cassidy. I will. I will steal it and from henceforth 
not attribute it.
    Mr. Engel mentioned in the Open Fuel Standard bill, what is 
your feeling--because you are little bit kind of annalistic 
about the ability of government to be positive. On the other 
hand, what do you think about the Open Fuel Standard bill?
    Mr. Tanton. I think the Open Fuel Standard bill is a good 
idea, but perhaps not implemented very well. I would be glad to 
work with the authors to improve it. It is, in many ways, 
identical to programs we have had in California over the past 4 
decades. There is no consumer perspective. While it aims to 
allow for competition on the fuel side, it does so by 
denigrating competition on the vehicle side.
    Mr. Cassidy. Now let me ask you, because there is a little 
bit of a chicken and egg. If you don't create the potential to 
use an Open Fuel Standard, then you can never have an Open Fuel 
Standard.
    Mr. Tanton. Certainly, but every one of the vehicles that 
are called out in the Open Fuel Standard bill, have been or are 
available today. I mean----
    Mr. Cassidy. Now let me ask you----
    Mr. Tanton. There was an earlier question about natural 
gas.
    Mr. Cassidy. Yes, let me go there.
    Mr. Tanton. OK.
    Mr. Cassidy. Again, I am not challenging, again, you and--
because of California's issues.
    Mr. Tanton. OK.
    Mr. Cassidy. Now in Idaho--I believe it is Idaho, they 
actually have a disseminated way to distribute natural gas. A 
utility has it and regular customer can go up and pump natural 
gas.
    Mr. Tanton. OK.
    Mr. Cassidy. I am told they are shipping natural gas 
vehicles from around the country to be resold in Idaho because 
there is actually a market for them. If you will, the 
infrastructure was there so now people purchase cars, so you 
have to have one or the other lead the way and then the other 
follows. It makes sense to me that you would at least--that 
somehow you have to break ground and allow one to lead the way.
    Mr. Tanton. OK.
    Mr. Cassidy. Now so with that said, you agree to that it 
sounds, but you would still take issue with the Open Fuel 
Standard, what seems to me is just a way to break ground and 
help it lead the way?
    Mr. Tanton. I agree that a portfolio is important. 
Achieving the portfolio needs to recognize that consumers have 
diverse needs, diverse wants, have different risk perspectives. 
What is in the best interest of my retirement portfolio may not 
be in the best interest of Dr. Bajura's retirement portfolio. 
Everybody's portfolio is different. I find that when government 
subsidizes or mandates, which is, in effect, the same thing, a 
particular technology, even if it a menu of technologies, 
something goes awry.
    Mr. Cassidy. OK, I think I have your point and I am running 
short on time, so let me go to Mr. Gerard.
    Mr. Tanton. I will try to make my answers shorter next 
time.
    Mr. Cassidy. OK. Mr. Gerard, I actually met with folks from 
a major oil company regarding the use of methanol, because 
obviously produced from natural gas, a way to domestically 
supplement. We have the experience from California where E85 
cars can run. I was told by one of their engineers--they are 
very nice. They brought somebody in from their testing 
facility--that EPA will not approve the use of the chemicals 
required to make methanol immiscible in gasoline. So sure, 
methanol itself is environmentally OK, but the chemicals used 
to make it mixable or miscible with the gasoline is not. Is it 
your understanding, this man's understanding, that EPA is a 
major roadblock in using products such as E85?
    Mr. Gerard. I would have to check on that specific case, 
Congressman. I would be happy to do so, but clearly, EPA is 
driving a lot of the energy policies I talked about earlier on 
cellulosic mandates and others. There is a lot of discretion, 
and that is one of the reasons we think the RFS needs to be 
open so we can deal with some of that discretion so you, as 
those elected officials, drive the policy and not the 
regulators. But I will look at the specifics of that case. I 
don't have an answer for you right now.
    Mr. Cassidy. OK. Ms. Stadler, would you approve--would you 
agree with the Open Fuel Standard?
    Ms. Stadler. Right now we have not--the organization has 
not taken a formal position on the Open Fuel Standard. We 
firmly believe that we need to look at shifting investments to 
getting sustainable, renewable fuels into the marketplace, but 
specifically with respect to that piece of legislation we have 
not taken a position.
    Mr. Cassidy. I yield back. Thank you for your generosity, 
Mr. Chairman.
    Mr. Shimkus. You are more than welcome. We really thank the 
panel. We really need to have more hearings like this. Of 
course, I was bouncing between two, just to make sure the 
debate is out there so we can ask these questions, hopefully 
eventually get to some consensus, and as far as I am concerned, 
we are all friends and allies here, even our friend from the 
far right, as I am looking at Ms. Stadler, because of the 
positive things she said about ethanol. So I was happy with 
that.
    So we will just keep working together. We do want energy 
security. We want to decrease our reliance on imported crude 
oil. There are a lot of options to go to, our own natural 
resources and things. But the plan now is to dismiss the first 
panel, and if my colleague is going to stay, we are going to 
empanel the second panel and try to move through opening 
statements while the other members come back from the vote.
    Just an announcement while we are doing this, there is 
going to be another series of votes at 1:30, so that is why we 
are trying to expeditiously get through the second panel.
    We would like to call the second panel in the hearing room 
to order, and welcome you all for coming. You have sat through 
a pretty extensive first panel, so that might encourage more 
questions. Hopefully my colleagues come back. Obviously for 
full disclosure, we are in a vote series so--but hopefully they 
will get back in time to participate.
    So on the second panel we have--and the way I like to 
operate, I will introduce you all first and then we will go 
from left to right and have your 5-minute opening statement. 
And remember that your full testimony is submitted for the 
record.
    So joining us on the second panel is Mr. Gregory Dolan, 
Executive Director, Americas/Europe Methanol Institute. We 
welcome you. Next is Mr. Donald Althoff, Chief Executive 
Officer, Flex Fuel U.S. I don't know if you were there for my 
introductory comments, but we do appreciate the bouncing around 
and being able to make it. Mr. Shane Karr, Vice President of 
Federal Government Affairs, the Alliance of Automobile 
Manufacturers; Mr. Thomas Hassenboehler, Vice President of 
Policy Development and Legislative Affairs for America's 
Natural Gas Alliance; and Ms. Mary Ann Wright, Vice President 
of Global Technology Innovation, and the Chair of the Electric 
Drive Transportation Association, Johnson Controls, 
Incorporated. Again, your full statements are in the record. 
You are going to be recognized each for 5 minutes, and we will 
start with Mr. Dolan.

STATEMENTS OF GREGORY A. DOLAN, ACITNG CHIEF EXECUTIVE OFFICER, 
METHANOL INSTITUTE; DON ALTHOFF, CHIEF EXECUTIVE OFFICER, FLEX 
   FUEL U.S.; SHANE KARR, VICE PRESIDENT, FEDERAL GOVERNMENT 
      AFFAIRS, ALLIANCE OF AUTOMOBILE MANUFACTURERS; TOM 
    HASSENBOEHLER, VICE PRESIDENT OF POLICY DEVELOPMENT AND 
 LEGISLATIVE AFFAIRS, AMERICA'S NATURAL GAS ALLIANCE; AND MARY 
 ANN WRIGHT, VICE PRESIDENT, GLOBAL TECHNOLOGY AND INNOVATION, 
 POWER SOLUTIONS DIVISION, JOHNSON CONTROLS, INC., AND CHAIR, 
           ELECTRIC DRIVE TRANSPORTATION ASSOCIATION

                 STATEMENT OF GREGORY A. DOLAN

    Mr. Dolan. Thank you. It is a pleasure to be here today, 
and thank you for inviting me to testify on behalf of the 
Methanol Institute, representing methanol producers, 
distributors, and related technology companies from around the 
world. I am here today to talk about the global experience of 
methanol fuels and offer some insight into how the U.S. can 
once again regain its position as a leader in transportation 
innovation.
    In the late 1970s, when high gasoline prices driven by 
instability in the Middle East led to long lines at the pump, 
our country began to explore new alternatives in earnest. At 
that time, the State of California looked at the range of 
alternative fuels that can reduce the economic burden of oil, 
and also provide environmental benefits for consumers. 
California at that time determined that methanol offered the 
best range of benefits. California launched the Nation's first 
large scale alternative fuel demonstration program, placing 
nearly 18,000 methanol-fueled vehicles on the roads and 
establishing a network of 100 methanol fueling stations. 
America was leading the way in transportation innovation with 
the methanol experiment.
    Methanol is the most basic form of alcohol, and is 
naturally occurring in the environment. Methanol is readily 
biodegradable and it is much more environmentally benign than 
gasoline. Commercially, methanol can be made from anything that 
is or ever was a plant. It can be made from natural gas and 
coal. It can also be made from forest thinnings, biomass, 
municipal solid waste, even CO2 itself. We have members at our 
trade association around the globe that are actively producing 
these second generation biofuels at the commercial scale today. 
Worldwide, methanol demand exceeds 15 billion gallons per year, 
while generating $35 billion in economic activity and 100,000 
jobs.
    California not only chose methanol for the wide 
availability of different feedstocks to produce it, they also 
selected methanol for its low cost and excellent performance. 
With its high octane rating and efficient burning performance, 
methanol is most often associated with racing fuels.
    But the low cost of methanol is its most impressive 
feature. For the past 5 years, the wholesale cost of methanol 
has ranged from $1.05 a gallon to $1.15 per gallon. If you were 
to sell methanol fuel as M85 at the pump today, adding 
distribution, retail taxes and markup, plus 15 percent 
gasoline, and accounting for the difference in energy content 
of methanol, consumers would still pay just $3 a gallon at the 
pump without any incentives, almost 40 cents a gallon cheaper 
than the national average of gasoline, which today is $3.38 a 
gallon.
    Alcohol fuels also have the lowest cost fuel 
infrastructure, with pumps costing just 20 to $60,000, and 
because you can get significant margins from selling methanol 
at the pump, there is room for investment for retail fueling 
infrastructure.
    California's experiment continued for a number of years, 
but ultimately prices for gasoline were brought back down 
towards historic norms and consumers and governments quickly 
forgot about the stinging pains of high prices and continued 
business as usual.
    The question on everyone's mind as we gather here today is 
ultimately, How do we implement meaningful, long-term change 
that will have a significant impact on our dependence on 
foreign oil, help reduce costs at the pump, and be a bridge to 
the next generation of energy innovation? Other countries are 
answering that question by taking on methanol. In China, a 
methanol mix of about 8 percent of their transportation fuel 
pool and they use domestic feedstocks to meet that demand. The 
Chinese have buses, taxis, trucks, and passenger vehicles on 
the road that are running on a wide range of methanol fuels. 
China's powerful National Development Reform Commission 
considers coal-based methanol to be a strategic transportation 
fuel. Between 2005 and 2011, China increased its methanol 
production capacity from 1.5 billion gallons a year to 15.5 
billion gallons.
    There are no technical hurdles to the use of methanol as an 
alternative fuel. We know what materials to use in the cars. We 
know how to make those cars run efficiently. The first flexible 
fuel vehicles that Ford built ran on both ethanol and methanol. 
Lotus Engineering has been building tri-fuel engines. We also 
know that the cost to add a flex fuel capability to a new car 
is just $150.
    A recent study by MIT noted that methanol was the liquid 
fuel most efficiently inexpensively produced from natural gas. 
The U.S. is currently experiencing a boom in natural gas 
production, and then is creating a resurgence in the domestic 
methanol industry. We have seen--right now a plant is being 
reopened in Beaumont, Texas, that had been mothballed for years 
because of the lower natural gas costs. LyondellBassell has 
announced it is reopening a plant in Texas; so is Celanese. 
Methanex is moving a plant from Chile to Louisiana to take 
advantage of the lower natural gas prices.
    Now Congressman Shimkus and Congressman Engel have 
introduced legislation would take the first step in our path 
away from oil dependency. They have developed the Open Fuel 
Standard Act, H.R. 1687. The legislation would require that an 
increasing percentage of vehicles sold in the U.S. be capable 
of running on alternative fuels and technologies, in addition 
to or replacement of gasoline. This means that electric 
vehicles, natural gas vehicles, fuel cell vehicles, biodiesel, 
and of course, alcohol FFVs will all qualify under this 
standard. The bill is about competition and economics. It is 
not about dictating what alternatives should move forward. The 
Open Fuel Standard Act would ensure that new vehicles on the 
road are no longer dependent on oil-derived gasoline. By 
embracing choices offered by the Open Fuel Standard Act, 
Congress has a chance to take action that will help serve as a 
bridge to new technologies and new solutions at no cost to the 
Federal Government. The Open Fuel Standard Act is an all of the 
above strategy for our passenger car fleet.
    Thank you for your attention.
    [The prepared statement of Mr. Dolan follows:]

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    Mr. Shimkus. And thank you. Now Mr. Althoff, you are 
recognized for 5 minutes.

                    STATEMENT OF DON ALTHOFF

    Mr. Althoff. Thank you, Mr. Chairman, and thanks for 
continuing to invite me back. We think this is an important 
dialogue and we have lots to contribute.
    Most people probably weren't aware, but actually today 
there is an EPA-certified street legal E85 flex fuel conversion 
kit on the market today. Flex Fuel U.S. LLC has developed the 
first Federal EPA-certified product which legally converts 
existing cars and light duty trucks to run on any combination 
of ethanol and gasoline, up to E85. The conversion system is 
low cost, it is easy to install, factory warranties are 
maintained. We have had successful pilots in some of the most 
demanding testing done on any vehicles in the country at DOE 
and at the EPA.
    While we are a new company, we have hundreds of these 
vehicles converted. We have got millions of miles running. They 
have delivered trouble-free and exceptional performance, and 
with the average vehicle life lasting longer than 15 years, it 
would take way too long to reach economies of scale if we only 
relied on new vehicle technology to get us where we want to go. 
So we see retrofitting as a bridge, a bridge that helps us 
achieve our ultimate fuel solution faster. Existing retrofit 
systems are cost effective and should be a serious 
consideration today.
    We support the Open Fuel Standard because the new 
legislation would have a significant impact on what I believe 
is the most critical area in building a sustainable, economic 
alternate fuel marketplace, which is creating economies of 
scale. For any alternate fuel approach to be economically 
competitive against gasoline, a large percentage of the 
vehicles on the road must be alternate fuel, the fuel supply 
chain must be large, efficient, and competitive. In most 
alternate fuel policy debates, the old ``chicken or the egg'' 
dilemma surfaces. If there were enough vehicles available, the 
retailers would add fuel, or if the retailer would just add 
fuel, the car companies would build more alternative vehicles. 
This has been true for all the alternative technologies coming 
forward. This legislation resolves this dilemma by creating a 
large flex fuel fleet, or alternate fuel fleet in the 
marketplace.
    We also support the standard because the legislation can 
create scale in the marketplace at very low cost, versus other 
alternative fuels, that is, for flex fuel. The incremental cost 
to produce alternate fuel vehicles is very low. Several 
credible studies conclude that the incremental cost is less 
than $100 a vehicle. Retrofitting existing vehicles with our 
EPA-certified system can also be accomplished at a very low 
price. With scale, the retrofit can be done for under $500 a 
vehicle, and is available for tens of millions of vehicles on 
the road today.
    Another advantage, as the number of flex fuel vehicles on 
the road grows, we will also see more competition to build 
better flex fuel vehicles and to see more aggressive pricing at 
the retail sites. These are subtle but important aspects. 
Today, most flex fuel vehicles are built without an ethanol 
sensor, which reduces the cost for the builder but has done--
was done so at the expense to performance. So when we think 
that there is high demand for the product, that the product 
will be engineered to a higher quality and a higher standard.
    I would also like to emphasize that the economics work for 
ethanol blends today. The payback on the investment to build or 
convert a flex fuel vehicle could be as short as 1 year, in 
some markets. This may surprise some people, but the facts bear 
it out. In Chicago, the average spot price differential for E85 
has averaged 22 percent less than gasoline for the last 4 
years. It has been 20 percent lower in 2012, even when the 
blender credit has been taken away. A properly designed flex 
fuel vehicle should have a fuel economy loss of 15 to 20 
percent. We did a major test in the city of Chicago on 26 
police vehicles with millions of miles driven that had a fuel 
economy loss of 18 percent. So in this example, you are saving 
somewhere between 4 to 6 percent on your fuel costs every year 
on every vehicle. So the economics work.
    Now although we see a lot of advantages for it, we do 
believe there are some areas where the legislation could be 
enhanced, or new policies created. We think they are simple and 
pragmatic, but they would enable us to achieve our goals in a 
faster pace.
    First, we believe that retrofitting existing vehicles is 
critical for the overall program. As I said earlier, with the 
average life of 15 years, it simply will take too long to get 
there. The other thing that retrofitting provides is it allows 
you to target where you convert. One of the interesting things 
today is demand of vehicles tends to say where the flex fuel 
vehicles end up. There are more flex fuel vehicles in 
California and it has the fewest number of E85 pumps in the 
country. So this method of allocating isn't very--doesn't 
create economies of scale and make the system work.
    The last piece that we would like to see is we believe that 
there needs to be some incentives for marketing and promoting 
the fuel. We believe that there is not strong public and 
consumer perception today, but that is mostly based on 
inaccurate data around the quality of the fuel, the fuel 
economy that is out there, and the pricing for the product.
    So we believe with those two simple enhancements, the fuel 
can go even further to make a big difference in the market. 
Thank you.
    [The prepared statement of Mr. Althoff follows:]

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    Mr. Shimkus. Thank you. Now the chair recognizes Mr. Karr 
for 5 minutes.

                    STATEMENT OF SHANE KARR

    Mr. Karr. Thank you, Mr. Chairman.
    Mr. Shimkus. Sometimes they just have to be pulled closer. 
That is the problem.
    Mr. Karr. My name is Shane Karr, and I am representing the 
Alliance of Automobile Manufacturers today. We are a trade 
association of 12 light duty vehicle manufacturers, OEMs, 
representing roughly 3/4 of the market, the new car market by 
volume every year. I appreciate the opportunity to offer our 
views on the challenges and opportunities with alternative 
fuels.
    I want to start by saying that auto makers have invested 
$200 billion over the last decade in R&D on fuel efficiency and 
other features. We are perennially back and forth with 
pharmaceuticals for the largest R&D investors on an annual 
basis.
    Today, consumers have more than 270 models that get over 30 
miles per gallon, and we are working on, as you all know, a 
variety of additional technologies that will improve fuel 
economy and reduce gasoline consumption.
    But the fact is that none of us have a crystal ball. None 
of my members have a crystal ball. And ultimately, consumers 
over a long period of time with their vehicle purchase choices 
are going to decide which technologies are the right ones for 
them.
    Given that fact, while we agree that alternative fuels are 
an important component of an energy security and independence 
strategy, we strongly believe that legislation mandating a 
particular vehicle technology or fuel or set of fuels would be 
a mistake. Vehicle production mandates--there are two problems 
with vehicle production mandates. They divert resources that 
could otherwise be used on other fuel-saving technologies, and 
they reduce the incentive for manufacturers to innovate.
    I do want to say that we agree with you, Mr. Shimkus and 
Mr. Engel, that E85 FFVs are an important and worthwhile 
technology. As you know, my guys make them. We sell a little 
over a million a year. There are approaching 12 million on the 
roads today. They are clearly a piece of the puzzle, but their 
effectiveness in actually displacing gasoline consumption, 
which I understand is the goal of the Open Fuel Standards Act, 
has been relatively small thus far, and it--frankly, it is a 
function of fuel price, availability, and consumers' 
willingness to use the fuel.
    We hear all kinds of different numbers about the cost to 
manufacture FFVs, but--and everyone talks about a per car cost. 
I would just remind folks that we are selling about hopefully 
14 million vehicles in the U.S. this year, so even $100 a car 
quickly gets you over $1 billion in costs to consumers for this 
technology. The other thing that is particularly relevant to 
this committee is to know that emission standards in 
approximately 40 percent of the United States, California and 
the States that follow California, are about to be increased, 
and that increase in emissions standards is somewhat 
problematic with FFV technology. It is not insurmountable, but 
it is likely to make FFV technology more expensive.
    The other important point to note is that the Open Fuel 
Standard, as Mr. Dolan has highlighted, requires vehicles to 
run on E85, which is ethanol, and M85, which is methanol. You 
know, while we certainly have built vehicles that can run on 
methanol in the past and we could do it again, the fact is 
there are no production facilities in the U.S. making methanol 
in commercial--you know, for transportation use in commercial 
quantities right now. There are a number of other significant 
issues that would have to be further studied and addressed if 
we were going to go in that direction.
    What we are open to are prospective policies that, you 
know, reflect a comprehensive commitment to make new fuel 
successful in the marketplace, and those are policies that 
address production and distribution equally with vehicles and 
consumer acceptance. There, you know, we are looking at the 
timing and availability of new fuels coinciding with the 
availability of vehicles that can run on them. This really is a 
far preferable approach to introducing fuels and then trying to 
retroactively fit them in the marketplace. Above all, we would 
want the opportunity to build vehicles that deliver the best 
fuel economy, performance, and most cost effective compliance 
to improve the value proposition for our customers.
    I will just close by saying, you know, it is worth 
stressing again that competition is the best driver for 
technology innovations. My guys are placing bets on a variety 
of advanced technologies in alternative fuels. Ultimately, 
consumers will have the final say in determining which 
technologies and fuels will succeed or fail in the marketplace, 
and that is how it should be.
    [The prepared statement of Mr. Karr follows:]

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    Mr. Shimkus. Thank you very much. Now I would like to 
recognize Mr. Hassenboehler for 5 minutes.

                 STATEMENT OF TOM HASSENBOEHLER

    Mr. Hassenboehler. Thank you, Mr. Shimkus, members of the 
subcommittee. My name is Tom Hassenboehler, and I am here on 
behalf of America's Natural Gas Alliance. ANGA is an 
educational and advocacy organization dedicated to increasing 
appreciation for the environmental, economic, and national 
security benefits of North American natural gas. ANGA's 30 
members include many leading North American independent natural 
gas exploration and production companies.
    As has been discussed with the advent of new technologies 
and the advancement of shale gas production, the recoverable 
natural gas resource base in the U.S. has increased 
dramatically in recent years, and the U.S. has now surpassed 
Russia as the world's top producer of natural gas. In addition, 
crude oil and natural gas prices in the U.S. have diverged 
since about 2009. The EIA projects this trend to continue and 
the gap to widen through 2035. These developments present a 
tremendous energy security and environmental opportunity for 
the U.S. to increase its use of natural gas as a transportation 
fuel.
    ANGA works to promote a policy environment that increases 
market-driven use of natural gas as a transportation fuel. We 
support efforts to encourage a substantial transition of fleet 
vehicle to natural gas through policies that encourage natural 
gas vehicle conversions and original equipment manufacturer 
production. ANGA also supports significant expansion of natural 
gas fueling infrastructure along key transportation corridors 
throughout North America.
    These targeted efforts represent the most prudent and 
efficient means to encourage the development of economies of 
scale within this market, while decreasing emissions, 
dramatically reducing exportation of domestic capital, and 
advancing U.S. energy security. Similarly, ANGA is aware of the 
current challenges in this economic climate and the 
responsibility at all levels of government to be conservative 
in its expenditure of public funds. ANGA's efforts emphasize 
the importance to maintain parity among alternative 
transportation fuel policies, as has been discussed.
    One region where ANGA has had recent success is the Texas 
Clean Transportation Triangle, or the CTT. The goal of the CTT 
is to develop sufficient natural gas stations and initial fleet 
users to transform heavy duty trucking in Texas. On July 15, 
2011, Texas Governor Rick Perry signed into law Senate bill 
385, a first of its kind legislation designed to help create a 
sustainable network of natural gas refueling stations along the 
interstate highways connecting Houston, San Antonio, Austin, 
and Dallas/Ft. Worth. The legislation allocates funding from 
the Texas Emissions Reduction Plan, as well as private sources, 
to support the development of new stations and the deployment 
of NGVs. Similar broad stakeholder efforts are now underway in 
other parts of the country, especially in areas of shale gas 
production like the Marcellus or Rocky Mountain regions.
    Another example of NGV momentum is the bipartisan effort 
underway by Oklahoma governor Mary Fallin and Colorado governor 
John Hickenlooper. Last fall, they announced a high level 
initiative to use NGVs in State fleets by aggregating vehicle 
purchase numbers. Since then, the governors of 11 additional 
States have signed the NGV MOU. The governors recently sent a 
letter to 19 auto manufacturers with plants in the U.S., 
pushing for the increased production of more affordable 
compressed natural gas vehicles. As an incentive, the governors 
reaffirmed their commitment to buy CNG vehicles for their 
respective State fleets.
    While these efforts are encouraging, still less than .1 
percent of domestic natural gas in 2010 fueled our Nation's 
vehicles, and this remains true, despite the fact that there 
are over 12 million NGVs worldwide today in other parts of the 
world, and that number continues to grow. Only about 1 percent 
of those 12 million vehicles are here in the U.S., despite our 
resources.
    At the Federal level, ANGA supports efforts to cerate a 
level playing field among alternative fuel policies. We agree 
that it takes all of the above alternative fuels to enhance our 
energy security. However, current levels of support for NGVs 
are not on par with other alternatives. We encourage the 
committee to take a comprehensive technology and feedstock-
neutral approach when evaluating current levels of Federal 
support for alternative fuels among all areas of the Federal 
Government, including Executive Branch, Federal fleet 
performance, Federal agency regulatory programs such as CAFE 
and EPA greenhouse gas standards, existing mandates such as the 
RFS, and research and development programs.
    ANGA appreciates the efforts of Congressmen Shimkus and 
Engel, and the other cosponsors of the Open Fuel Standard Act. 
While we are encouraged by this discussion the legislation is 
helping to create, we are concerned that this mandate on auto 
makers will not create the level playing field for fuels that 
is paramount to ANGA. We do look forward to continuing to work 
with Mr. Shimkus and the committee on constructive policies 
that do help to level the playing field and contribute to 
greater energy security through the increased use of natural 
gas.
    Thank you.
    [The prepared statement of Mr. Hassenboehler follows:]

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    Mr. Shimkus. Thank you. Now we would like to ask Ms. 
Wright, you are recognized for 5 minutes.

                  STATEMENT OF MARY ANN WRIGHT

    Ms. Wright. Thank you. On behalf of the over 25,000 Johnson 
Controls employees who live in work in your States, and the 115 
Electric Drive Transportation Association members really 
appreciate the opportunity to be here today. I am going to 
focus on three things. One is just an overview of the 
powertrains available in the marketplace. Number two is where 
are we in the advanced battery space in the United States, and 
number three, where do we go next in terms of establishing the 
U.S. as a competitor in clean vehicle technology.
    I would turn your attention to the slide that I put in your 
deck to just give you an overview--and I think we are going to 
put it up on the screen, to give you the spectrum of powertrain 
technologies. I can do----
    Mr. Shimkus. She is trying. She is getting there. She was 
sleeping.
    [The first slide appears after Ms. Wright's prepared 
statement.]
    Ms. Wright. The powertrain technologies, you go from the 
left to the right, you see the internal combustion engine, 
which we have had around for over 100 years, burns gasoline, 
diesel, and some of the ethanol fuels that we have talked about 
today, getting more and more efficient. Really interesting 
space called the start/stop, and what this does is combine a 
more robust battery with that efficient gas engine to deliver 5 
to 20 percent fuel efficiency at a much more attractive value 
equation. And then, of course, we have the hybrids like the 
Prius, the plug-ins like the Volt, and the all electric 
vehicles like the Leaf, that compliment this spectrum, and two 
important things that you need to take away from this, one is 
this spectrum of portfolio--powertrain portfolios gives 
consumers a choice while delivering fuel efficiency, and number 
two, all of them need batteries.
    Which brings me to my next point, and that is where are we 
in our advanced battery industry? If we think about staying 
competitive with advanced vehicle technologies, the U.S. needs 
to continue to develop its manufacturing and technology 
capabilities in advanced batteries. We have laid the foundation 
over the last couple of years, but we are really catching up to 
the Pacific Rims, which have for decades been making 
significant investments in R&D manufacturing and supply chain 
development. As a result, they dominate the market for consumer 
electronics and advanced batteries for vehicles.
    In the fall of 2010, Johnson Controls opened the first high 
volume domestic lithium ion battery manufacturing plant in 
Holland, Michigan. This plant was established with the help of 
the ARA matching grant, and I will tell you, this plant would 
not have been built in the United States had it not been for 
that program. By the end of this year, we will transfer the 
production from our French manufacturing facility to the U.S. 
to support our global customers. These batteries will be made 
in Michigan and exported to Europe for assembly and 
distribution throughout the world.
    If we could turn to the next graphic, please?
    [The second slide appears after Ms. Wright's prepared 
statement.]
    Johnson Controls is also investing hundreds of millions of 
its own dollars to establish an advanced battery industry in 
the United States. We have shored up many existing domestic 
suppliers and have brought Pacific Rim suppliers to the U.S., 
who are providing Johnson Controls as well as other 
manufacturers with equipment and materials. When we built the 
manufacturing facility in Michigan, over 85 percent of the 
equipment and the infrastructure was sourced through U.S. 
companies, and the map on the screen shows the locations of our 
suppliers, many of whom are in your States, for our lithium ion 
battery industry, which is also creating additional U.S. jobs.
    When we think about where we need to go from here, we need 
to develop a viable and competitive domestic advanced vehicle 
technology industry, which includes not only batteries, but 
also electric motors, drives, controls, and software. It is 
critical for the long-term health of the U.S. economy that our 
national energy security and continue the position as source of 
global technology leadership. The Electric Drive Transportation 
Association, along with its membership, brings together the 
entire value chain of electric drive to speed technology and 
infrastructure advancements, and are helping to shape the 
market through consumer education, public outreach, and 
productive policy shaping.
    Well, what role does the government play? It is critically 
important of continued Federal support for research, 
development, and deployment for these technologies. The 
Department of Energy is successfully promoting innovation in 
transportation through public-private partnerships, leveraging 
private sector investments to accelerate technology 
breakthroughs, manufacturing capability, and deployment of 
electric vehicles and infrastructure. They are helping to fund 
bioresearch and development activities to advance vehicle 
electrification, bring down electric vehicle costs, and 
increase range and fast charging capabilities.
    The bottom line is that global competition in this industry 
will continue to be incredibly intense, particularly from the 
Pacific Rim, and we have to make sure that we are effectively 
competing with long-term commitment, focused investments, and 
continued public-private cooperation and collaboration across 
the industry.
    In conclusion, clean technology is about implementing 
proven technologies that large number of consumers are willing 
to purchase to improve fuel efficiency and reduce emissions 
across many types of vehicles. Our collective challenge is 
whether we make the right investments and decisions to 
domestically provide the advanced technologies and systems for 
these vehicles. As a country, we can make the choice to pursue 
energy security and build a domestic industry for advanced 
vehicle technology, or we can watch our current dependence for 
energy resources shift from the Middle East to Asia.
    Thank you.
    [The prepared statement of Ms. Wright follows:]

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    Mr. Shimkus. Thank you very much, and I thank the second 
panel for your statements. I would now like to recognize myself 
for 5 minutes.
    You know--and Eliot is still here. I think the main focus 
of the Open Fuels Standard was to be technology and feedstock 
neutral. I mean, I think that is the whole focus. We can bring 
in electric vehicles and hybrid operations, and you see that 
quite a bit, what better option--and the start and stop option. 
So you have a start and stop option with a diversified liquid 
transportation fuel mix that is compatible in internal 
combustion engines, but also is hybrid so that you can go to 
electric. I mean, you talk about the overall savings and 
changing the dynamics. I thin, Mr. Karr, that addresses your 
concern on R&D in the future, but we are all in this together. 
I think we all can benefit if we can move forward, and so my--I 
have got a couple of questions I am going to ask, and then we 
will see how the rest of the--my colleagues, and you can see 
they are starting to come back, which is all good.
    Mr. Dolan, what is the cost of methanol today, relative to 
gasoline?
    Mr. Dolan. Well, the wholesale cost of methanol today in 
the Gulf Coast is about $1.08 a gallon. Now when you look at 
methanol, it does have a lower energy content than gasoline so 
it takes roughly 1.7 gallons of methanol as N85, which is 85 
percent methanol and 15 percent gasoline, to give you the same 
energy content or range as a gallon of gasoline. So even 
accounting for the lower energy content, adding distribution 
and retail markup and taxes, we are still looking at a pump 
price to the consumer of about $3 a gallon. So you have got a 
margin today of about 38 cents a gallon that could be used for 
investment and infrastructure.
    Mr. Shimkus. Would these come down if we moved on a public 
policy and there was a possibility of the economies of scale? 
Would you imagine that would happen?
    Mr. Dolan. Yes, and we are already seeing some of that take 
place today. Right now, there is about 280 million gallons of 
methanol production in the U.S. Most of that production is used 
for the chemical industry as a feedstock for hundreds of 
products that touch our daily lives, but within the next 3 
years, we are going to see that number increase to a billion 
gallons.
    Mr. Shimkus. Let me go quickly. What about consumer 
acceptance issues, do you think that will be of concern?
    Mr. Dolan. Well, when methanol was used in the past as N85 
and a lot of fleet experiences, not only in California and 
other parts of the world, there were surveys that were done by 
fleet administrators. And they said uniformly that the methanol 
fuel operated very well for their consumers and their members.
    Mr. Shimkus. Thank you. Mr. Althoff, what is the typical 
cost for you to convert a vehicle to flex fuel?
    Mr. Althoff. Today it is about $800 a vehicle, but as we 
grow in scale we think we can get it down to about $500.
    Mr. Shimkus. And you made--and I was distracted when you 
talked about--what did the EPA decide or announce today? In 
your opening statement I think you talked something about the 
EPA?
    Mr. Althoff. Oh, I was saying that the technology is EPA 
certified. The technology can be placed on any light--any car 
or light truck that is street legal, maintains the warranty----
    Mr. Shimkus. And for full disclosure, Mr. Engel has been 
pushing me on the Open Fuel Standard, but you all came down and 
drove, what is it, a Doge Hemi--a big Dodge Charger came down 
and with the technology involved with the sensor read and the 
oxygen content, and it was very impressive and not overly 
engineered with it right on the engine.
    Mr. Althoff. And today Chrysler doesn't make a flex fuel 
Dodge, so this is the only way you can get--and we created this 
model for law enforcement, so we have got Dodge Chargers that 
in flex fuel service today in Illinois and Iowa.
    Mr. Shimkus. And let me move to Mr. Karr. It is my 
understanding dealerships will often charge the same amount for 
a flex fuel vehicle as they do a standard model. Ford, for 
example, has mass produced FFVs in the past. Given this 
demonstrated ability in the past to produce and do so at 
similar costs, what hurdles or technological barriers do you 
believe are out there?
    Mr. Karr. One thing I definitely want to make clear is 
that, you know, from a technological standpoint we can do it 
and we are doing it. And today, anybody who wants to buy a flex 
fuel vehicle can buy a flex fuel vehicle.
    Mr. Shimkus. But the point of the question is the 
automobile manufacturers and retailers are selling vehicles 
that the consumer may not even know are flex fuel. The 
capability is there, and not even this prepared question, but 
my new GMC Terrain, I knew it because I could recognize the 
signal, but they didn't market it. When they sold the vehicle 
then they went through you could use this. But our point is, 
this is something we think we could do.
    I guess if the deadlines in the Open Fuel Standard cannot 
be met, what do you believe is a realistic deadline?
    Mr. Karr. I think the question is less one about deadlines 
than about, you know, where do you want to go?
    Mr. Shimkus. We know where we want to go, so yes. Let me 
move to--and I am burdening my colleagues. Let me move to Tom 
for a second. Talk about liquid versus dry natural gas and 
using liquid in internal combustion engines. Can you?
    Mr. Hassenboehler. Well, I mean, there really are no 
differences in dry natural gas in an internal combustion 
engine. The same performance enhancements that can be done for 
liquid fuels can be done for natural gas vehicles. In fact, in 
the new CAFE regs that are currently pending, we make some of 
those same arguments that fuel economy--it is all about 
optimizing performance for the particular fuel, and if it is a 
dedicated fuel, it can be optimized on a similar level.
    Mr. Shimkus. Great, I appreciate it.
    Now I would like to turn to my colleague from Illinois, Mr. 
Rush, for 5 minutes.
    Mr. Rush. To each of you, in regards to alternative fuels 
and our ability to realistically meet new demands for the 
alternative fuels safely, what is the status of our 
infrastructure? Are we on track, and if not, what will it take 
for us to be on track? Are we--as we move forward in 
supplementing initial fuels--alternative fuels? Do each one of 
you want to take a stab at it?
    Mr. Dolan. Sure, I can jump in. On the methanol side, we 
have had not only the experience in California where they had 
100 fueling stations, but we now have a lot of experience in 
China where they are using, by last count, about 2 billion 
gallons of methanol was used in transportation fuel in fuel 
dispensers selling M85, M100, and M15. So the technology is 
there. We know how to do it. We know the materials to use in 
those pumps that cost about $20,000 to $60,000 per pump for 
methanol, similar to the cost for an ethanol fueling facility.
    Mr. Althoff. On the ethanol side, it is growing, especially 
in the Midwest, but is still not as robust as it needs to be. 
The good news is a large piece of the supply chain is in good 
shape, so most of the gasoline retailers can haul ethanol 
around in their trucks, 100 percent compatible there. Retail 
gas stations are relatively low cost to convert, typically the 
traditional three tank retail outlet can add E85 or a blender 
pump for $75,000. So I think what is missing is either the 
support to put the infrastructure in place, or a way to build 
scale on the vehicles so that there is demand for it.
    Mr. Karr. Your question is a very good one, and I think the 
important context is to remember we use about 130-odd billion 
gallons of gasoline a year. So when you are talking about 
making significant shifts to alternative fuels, you are talking 
about very significant investments, both in resources and time. 
It has taken us over 30 years to get to 10 percent with 
ethanol, and so you know, we just need to go into that. It is 
not that we can't do it, it is just that we need to go into 
that with kind of eyes open understanding with the broader 
context of, you know, the U.S.--the fuel pool and the motor 
vehicle pool situation.
    Mr. Hassenboehler. I would agree on the natural gas side. 
While there is momentum, the challenges are still enormous, so 
competing with over 120,000 gasoline stations. There are 
currently 1,000 CNG stations in the U.S. with about 94 that are 
currently planned all over the country, and we are trying to 
develop corridors around that. And then on the LNG side, we 
have got 53 LNG fueling stations with another 100 that are in 
the planning stages as well.
    Ms. Wright. And on the battery side, it is really beautiful 
because we are very fuel agnostic. You mentioned start-stop, 
which is complimentary to a gas or a diesel engine, or natural 
gas or any other fuel that you want to build, but as you think 
about higher levels of electrification where electricity is 
your fuel, 80 percent of all the charging is done at home 
today, and there is over 4,000 fueling infrastructures in place 
now. The technology--this is an area where the technology is 
really progressing quite quickly to help be able to recharge in 
a timeframe that is acceptable to a customer, similar to what 
they do in a gas station today.
    Mr. Rush. So what I am seeing from each of you is that we 
have a long way to go, except in the battery area. We have a 
long way to go in terms of helping to bring the infrastructure 
on par with what we think the future of alternative fuels is, 
and should be. What do you suggest that we in Congress do in 
relation to that?
    Mr. Dolan. I think one solution is the Open Fuel Standard 
Act. We have got the chicken and the egg conundrum here where 
the retailers aren't going to be putting any infrastructure 
until the vehicles are capable of using alternative fuel. The 
Open Fuel Standard Act would break that by having the cars 
capable of running on something other than gasoline, and then 
you have the ability with the free market competition to 
determine which fuels and which technologies can really make it 
in the marketplace. We think methanol would offer some real 
economic advantages to the consumer.
    Mr. Althoff. Yes, I would double down on the Open Fuel 
Standard as well, and also talk about some focus in where it 
goes. So although the gasoline market is huge, and to take a 
big piece of it into alternate fuels would be significant, 85 
percent of the ethanol that the U.S. consumes is made in the 
Midwest. I mean, that all can move around the U.S., you just 
need to change the retail sites to be able to accommodate it. 
And that is a relatively low cost, compared to other components 
in it, and it also creates another revenue stream for the 
retailers. So you know, if the focus were to start in the 
Midwest where the fuel is abundantly available, the big 
transportation pieces are in place, and we could get the 
vehicles out there to create demand. So the retailers put it on 
their lots and they price it competitively, I think the 
competition will take over and it will grow itself.
    Mr. Shimkus. The gentleman's time is getting close.
    Mr. Rush. My time isn't up. Thank you.
    Mr. Shimkus. Thank you. Now the chair recognizes the 
gentleman from Texas, Mr. Olson, for 5 minutes.
    Mr. Olson. I thank the chair and would like to welcome the 
second panel. Thank you for your patience, your persistence 
through the votes.
    My initial question is going to be for you, Mr. Karr, and 
you, Mr. Hassenboehler. I hope I pronounced that correctly, 
sir. I apologize if I didn't. But you both in your testimony 
seem concerned about government mandates, like the RFS 
standards replacing market driven policies, and I assure you, I 
share your concerns. I have an example of a market driven use 
of natural gas for transportation which works. It is my home 
school district, Clear Creek Independent School District there 
in the--right around the NASA and the Johnson Space Center. 
With a generous private sector donation from BP, they purchased 
43 school buses powered by compressed natural gas, CNG. And to 
add to this, they had their own refilling facility right there, 
so the buses go out with the bus driver during the day, make 
their runs, come back at night, park it up. Nobody is on-site 
there. They get out, open the door, plug the thing in, shut it 
off, go home, come up the next day, take it out and do it 
again. What it has done for the school district, you can 
imagine the price of natural gas now, they are saving $300,000 
a year because they are converting compressed natural gas. That 
is money that is not being spent on transportation for diesel 
fuel or fossil fuels. That is money that is now being spent in 
the classroom.
    So there are private sector examples out there, and I just 
want to talk about, you know, what are some of the lessons 
learned from the RFS that we can use as we can look for ways to 
encourage use of domestic natural gas for transportation, like 
the Clear Creek Independent School District has done? Mr. 
Hassenboehler, you first, sir.
    Mr. Hassenboehler. Some of the lessons from the RFS, you 
know, I think looking back from 2005 when natural gas supply 
and demand was in a much different state than it is now, you 
have the advent of shale gas production, hydraulic fracturing 
which has really revolutionized the natural gas industry in 
this country. You have got a much more robust industry that can 
actually meet some of this new demand from transportation; 
however, you have got existing mandates and existing policies 
that favor one fuel over the other. They aren't technology 
neutral. You know, what we would recommend is going through the 
entire Federal Government, looking at all the different 
pathways to--that the government incentivizes alternative fuel 
use and just strike it when it says one over the other, and 
just put alternative fuels. Let everyone compete and then if 
you want to send a policy signal to get off foreign oil or use 
more domestic resources, let that be the real driving signal, 
not pushing one over the other.
    Mr. Olson. Mr. Karr?
    Mr. Karr. I think the primary lesson that we have learned 
is that we have to pay attention to implementation. You know, 
at the time I think we thought that large part of the renewable 
fuel pool would go into the E10 and the national, and the rest 
would be picked up in E85, and that obviously did not develop. 
So now, even the first panel spent a lot of time talking about 
the blend wall. I will tell you all, you know, we ran the 
numbers really just this past week in preparation for this 
hearing. If the flex fuel vehicles that are already on the road 
today, if the owners of those vehicles were using E85 once out 
of every three times that they go to the pump, so 1/3 of the 
time that they go to the pump, we wouldn't be having a 
conversation about the blend wall. With E10, not even with E15, 
with E10.
    So, you know, I don't necessarily know the answer, you 
know, exactly why the E85 uptake hasn't been what we expected 
in 2005 and '06 and '07. A lot of my guys expected it to be 
more significant than it has been. But it is definitely an 
issue that, you know, we have to look at going forward.
    Mr. Olson. Thank you. One more question. Is our country 
globally competitive in the manufacturing of natural gas 
vehicles? Do you think other countries do a better job? 
Anybody?
    Mr. Hassenboehler. I would defer to the Auto Alliance 
there, but certainly most of the auto manufacturers who operate 
in the U.S. produce natural gas vehicles overseas. There are 
some that have shown renewed interest in doing so going 
forward, and so I would leave it at that and defer to the Auto 
Alliance on anything else.
    Mr. Karr. Yes, I think he is right, you know, most of the 
production has been focused overseas, based on the markets. But 
as others have indicated, you know, a lot of my guys are taking 
a second look at the U.S. market on the basis of all the 
natural gas here. I am certain the heavy duty guys are moving 
quickly and the light duty guys are looking to expand their 
offerings as well.
    Mr. Olson. Thank you. That is my last question, but Clear 
Creek Independent School District is a great example of private 
sector money to utilize compressed natural gas. One thing to 
mention, my home State of Texas now is building what they call 
the energy corridor or natural gas corridor with--Houston to my 
region where I live, up to San Antonio/Austin, up to Dallas/Ft. 
Worth, building the CNG facility, so maybe if we can get some 
long haul trucks going on there and eventually get passenger 
vehicles and build it out. That is our future. Natural gas will 
be the transportation fuel for our future.
    Thanks for the time, and I yield back.
    Mr. Shimkus. The gentleman yields back his time. The 
gentleman will be proud to hear that I drove a natural gas big 
Ram pickup just in the last 2 weeks ago here. If you missed 
that opportunity, that was a great experienced produced. So we 
are just for all of the above and for energy security.
    Mr. Olson. If you drive a pickup truck, Mr. Chairman, you 
are welcome in Texas.
    Mr. Shimkus. It was a big one, so--it wasn't even a baby 
one.
    Chair now recognizes the other gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. Feedstocks for 
alternative fuels are weather dependent and subject to weather 
conditions. Just look at the current drought plaguing the 
Midwest. The news reports nightly show how the price of corn is 
going to go up and affect food prices and other industrial 
feedstocks. That is why I am a huge supporter, like my 
colleague and neighbor from Texas, of natural gas. Natural gas 
vehicles are currently most widely used alternative fuels 
incorporated in government fleets, and given the continued 
discovery of natural gas plays around our country, I think we 
seriously need to look at how we can support these vehicles.
    Mr. Hassenboehler, I would like to ask you some questions. 
Last summer Texas Governor Rick Perry signed into law the first 
of its kind legislation designed to help create a sustainable 
network of natural gas refueling stations along interstate 
highways connecting Houston, San Antonio, Austin, and Dallas. 
We may not be able to get our fast train from--in the Texas 
triangle, but we might be able to get natural gas facilities on 
those. Can you briefly describe the program?
    Mr. Hassenboehler. Yes, I had it in my testimony but I can 
just briefly say that it is----
    Mr. Green. Repetition means that we learn.
    Mr. Hassenboehler. It is based on--it is a sustainable 
network of fueling stations that connects the four major 
corridors. The legislation allocates funding from the Texas 
Emissions Reduction Plan to support the development of new 
stations and deployment of NGVs. It was a broad stakeholder 
effort. It is a combination of State dollars, highway dollars, 
congestion mitigation dollars, and private funding to really 
take and transform, plan a few areas of real development of 
real stations across--you know, near access for the highways. 
And this is really designed to get the LNG and the CNG trucks 
on the road, that will eventually lead to more medium duty and 
light duty vehicles to penetrate as well.
    So right now, we are working through it. They just had a 
grant from--a grant program that actually--I believe there was 
about 100 applicants that actually signed up for some of these 
stations, and so we are going to wait and see how they develop, 
but we are very optimistic and it is a very successful program 
so far.
    Mr. Green. Given the initial success so far of the program, 
what would a greater effort like the Natural Gas Act mean for 
expanding use of natural gas vehicles, not just in Texas but 
around the country?
    Mr. Hassenboehler. Well certainly if we had consistency 
within Washington with the tax code generally on what 
alternative fuels are going to be extended, which incentives 
are going to be extended, that would allow for greater planning 
for some of these end users to invest in their alternative 
fuels. Similar efforts can be looked at recently in the highway 
bill, the Congestion Air Mitigation Air Quality Program, 
allocated funding towards natural gas and electric vehicle 
charging infrastructure. Those are great ways to help 
incentivize and move forward the program. So it is not just the 
tax code or cost saving issues, there are other ways of doing 
it besides costing money.
    Mr. Green. Well, and it seems like--I know my colleague 
from Illinois has a preponderance of E85 stations in his 
district. I think I have one that is not in our district, but I 
only know of one in the Houston area. So are we going to end up 
being location emphasis, I guess, because obviously in the 
Midwest you are going to see more corn-based ethanol with E85, 
whereas in an oil and gas area you will see more options for 
natural gas. Those stations that the State envisions along 
those corridors, that is both for over-the-road trucking but 
also for individual vehicles.
    Mr. Hassenboehler. Yes, they are opening--they are 
prioritizing public access stations and yes, especially in 
areas of shale gas production and along the Marcellus, the 
Rocky Mountain regions, they are doing similar initiatives to 
really--it is a great way for the public to see the tangible 
benefits of the increased natural gas production is it touches 
everyone to be able to fuel their vehicle with natural gas.
    Mr. Green. Well, in the air emissions I know that is why 
some of the funding has come from the air reduction emissions 
from natural gas vehicles. We are talking about reinventing the 
wheel. I know in the 1960s I had an electrical contract with 
three trucks who used CNG in his trucks and obviously his 
maintenance went down and, you know, but he was doing it just 
for the savings because at that time gas was pretty low, too, 
as we are seeing now that with the discoveries in natural gas.
    Can you discuss how current levels of Federal support for 
natural vehicles are not on par with the other alternatives?
    Mr. Hassenboehler. Well, the Nat Gas Act certainly brought 
that debate up, you know, and that was focused on the tax code 
and whether tax policy--currently there are still incentives 
for some other alternatives over NGVs, but beyond that, you 
have got programs--you got R&D programs, you have got CAFE 
credits, you have got, you know--you can look at the Renewable 
Fuel Standard as another example. Many of these programs--it 
depends on how you define a mandate, depends on how you define 
a program, but if one were to take a look at a technology 
neutral, feedstock neutral approach across the Federal 
Government's programs, both from the R&D side to the grant side 
to the mandate side, the Clean Air Act side, I think you could 
do better than what is currently existing now.
    Mr. Green. One last question, I know I am over my time, Mr. 
Chairman. What do you think the Open Fuel Standard mandate on 
auto makers would not create a level playing field for natural 
gas?
    Mr. Hassenboehler. The main concern with that, I mean, ANGA 
is not supporting mandates, but we--the main concern that we 
share is with the Auto Alliance is the timeframes are not on 
par. It is the lowest cost option for compliance would likely 
lead to flex fuel and compliance, and that isn't something that 
would cerate a level playing field, in our opinion.
    Mr. Green. OK. Thank you, Mr. Chairman.
    Mr. Shimkus. Thank you. Now the chair recognizes the 
gentleman from New York, Mr. Engel, for 5 minutes.
    Mr. Engel. Well thank you, Mr. Chairman.
    First of all, let me say what a pleasure it has been 
working with you on our Open Fuel Standards bill. I have been 
pushing this for many, many years and I must say that I feel 
progress is being made, and much of it is through your good 
work, so I want to thank you for that.
    You know, some are criticizing the Open Fuel Standard as a 
mandate, when it reality it is just the opposite. It is opening 
the market up to competition, in contrast, doing nothing to--is 
equivalent to mandating a monopoly by a single fuel whose price 
is set by a foreign cartel. OPEC and the car manufacturers have 
essentially told us that we have no choice. We will drive on 
oil. The object is to break that.
    I must tell you, Mr. Karr, I am really infuriated over the 
automobile manufacturers. When Democrats were in the Majority, 
we passed a bill in this committee and on the floor that the 
comprehensive bill--which we tried to put an Open Fuel Standard 
in the bill and were fought tooth and nail. This was the so-
called Cap and Trade bill. Tooth and nail by the automobile 
industry--I mean, given the way that we bailed out the 
automobile industry, I would think that there should be a 
little bit more of an open mind from the automobile industry 
about the Open Fuel Standard. I think Mr. Shimkus's point about 
how people are buying flex fuel cars, but it is not being 
marketed as it. So people have it, they don't know that they 
have it really. It hasn't been a factor in them buying it 
because it is sort of the best kept secret in town.
    You talked about estimates of what it would cost to 
manufacture cars at the beginning with flex fuel cars. 
Massachusetts Institute of Technology says $90 per car. Former 
Director of the CIA Jim Woolsey cites General Motors as saying 
it is $70 per car. One expert, Dr. Robert Zugren, who has run 
extensive tests, has concluded it is 41 cents per car. In any 
case, we are talking about $100 or less. I do not understand 
why there is opposition, and quite frankly, I think the 
automobile industry is being quite ungrateful in terms of that 
they would have been gone if we didn't bail them out. I 
supported the bailout. I voted for it. I was criticized for it, 
because I think it is important to have a vibrant and strong 
American automobile industry. But frankly, I do not understand 
the opposition. If you worked with us, if you don't like the 
dates, if you think it is mandating too much, I can tell you 
Mr. Shimkus and I will adjust those dates. We are not looking 
to penalize the automobile industry, but on the other hand, the 
arguments that you are using and to some degree that I have 
heard today from Mr. Hassenboehler, are arguments that anybody 
uses to oppose any kind of change or anything that is new. If 
you worked with us, we would work with you. We would modify our 
bill. The goal here is not to penalize you guys. The goal here 
is to make--give Americans choices, so the choices are bring 
down cost and if the American consumer, you know, can do more.
    We talk about, you know, China was mentioned before by Mr. 
Dolan. I agree with Mr. Dolan's testimony, obviously. China is 
taking notice. It is already blending 15 percent methanol in 
its automotive fuel, and auto makers there, like Sherry Dealing 
and Shanghai Maple, have all introduced vehicles that are 
capable of running on methanol. And methanol is so much less 
costly per mile than gasoline that illegal fuel blending is 
rampant in China. The Chinese have buses, taxis, fleets, and 
passenger vehicles on the road that are running on M15, M85, 
and even M100 fuel. That is, of course, a concern for me.
    So Mr. Karr, I would like you to answer this. I hope you 
don't think I am attacking you personally. By the way, you have 
a great name for your position. But I am just really 
frustrated.
    Mr. Karr. Sure. Let me start by saying that, you know, I 
admire you and the place that you come from, and the fact that, 
as you say, you have been on this for multiple Congresses, and 
I know that your intentions are pure and I know that your goal 
is to, again, reduce the dependence on oil. Fair. Let us take 
that as a starting premise.
    The question is if we mandate, you know, E85 and M85 
capable vehicles, does that get you to your goal, and the 
experience to date is no. Again, we don't even produce methanol 
as a transportation fuel in the United States, so literally if 
every vehicle today was capable of running on methanol and gas 
prices shot to $10 a gallon, there is no methanol for people to 
switch to.
    Mr. Engel. But let me just tell you, that is like what came 
first, the chicken or the egg? It is like on our side 
sometimes, we argue against drilling in Alaska because we say 
well, we are not going to get that oil for another 10 years, so 
why should we even bother with that? Well, 10 years has passed. 
If we had done it 10 years ago, we would have the oil. So those 
arguments don't really cut water in my estimation.
    Mr. Karr. The thing about--I mean, I think it was OK to 
make the chicken and the egg argument, you know, 7 or 8 years 
ago, but the fact is we do have States in the Midwest, like 
Minnesota, where there are more than 400 E85 pumps. You know, 
Mr. Shimkus can hit one any place in his district. We are still 
seeing E85 usage at basically the equivalent of one tank full 
per year. So again, I don't have all the answers. I don't know 
necessarily why the E85 uptake hasn't been better, hasn't been 
even what we as manufacturers projected it would be, but we are 
kind of past the chicken and the egg argument----
    Mr. Engel. But let me just ask you this. I know my time is 
up. Hasn't hydrofracking changed the game here in the United 
States? We are now producing more natural gas than we can use.
    Mr. Karr. We talked to natural gas manufacturers. 
Obviously, my guys want to know what to build and they want to 
know what direction the market is going, and what we hear is 
what you are hearing here and what you are seeing in 
legislation in terms of the Nat Gas Act. The focus is all on 
LNG and CNG, and not making natural gas into methanol. I don't 
know why that is, necessarily, but--well, I suppose LNG and CNG 
are significantly cheaper, even than methanol from natural 
gas----
    Mr. Engel. I will stop, I promise. MIT, there was a study 
called ``The Future of Natural Gas,'' and it determined that 
the most economic way to utilize natural gas in transportation 
is to convert it to the liquid fuel methanol. We should stop 
fighting it and we should go with the flow. It will be better 
for the American consumer, and it will reduce a U.S. need for 
foreign oil.
    Mr. Shimkus. I want to thank my colleague for his passion, 
and I am glad he is on my team. I will just segue real quick 
and say on the retail locations, if you listen to SIGMA, their 
folks, recertification of the--and liability issues are one of 
the inhibiting reasons for that.
    So I would like to turn to my colleague from California, 
Mr. Bilbray, for 5 minutes.
    Mr. Bilbray. Thank you, Mr. Chairman, and thank you for 
giving the lead-in. I hope my colleague on the other side of 
the aisle, both of them recognize that government 
obstructionism is a major challenge to innovative technology. 
The gentleman from New York was talking about methanol. 
Methanol has been outlawed in my home State of California. It 
was outlawed for environmental reasons. In fact, I have the 
latest greenhouse gas regulation, AB 32, is going to outlaw 
domestic ethanol from being brought into California. They are 
going to import the ethanol from Brazil. So there is this 
issue.
    Mr. Karr, what is the largest automobile market in the 
United States?
    Mr. Karr. California is roughly 10 percent of the total 
U.S. market.
    Mr. Bilbray. OK. And my--I just want to point out that we 
need to look at what we are doing for obstruction. I mean, and 
this goes way back to a lot of stuff. I mean, California has 
some of the most restrictive environmental regulations, has--
the air is twice as clean now as it was in the '60s with twice 
the population. We also have the highest gas prices in America, 
with the environmental regulation. But when someone sits here 
and says that available domestic supply doesn't affect price, 
let me remind everybody, we have--we import more in California 
from overseas than any other State, and it is reflected in the 
price of gasoline.
    So I want to go back over to the natural gas issue. In '92, 
I was driving a natural gas vehicle, and unlike electric, when 
I ran out of natural gas I didn't have to stop and recharge, I 
flipped a switch and went to gasoline. One of the government 
barriers I saw at the time in the '90s was that the public 
utilities commissions were not allowing the public utilities to 
rate base the home dispensing pumps. And I bring this up, in 
California, 85 percent of the homes are plumbed with natural 
gas. People park their cars 3 feet from their water heater in 
their garage, but we have not figured out how to allow the 
consumer to fill up at home.
    With that barrier that people couldn't lease the home 
dispensing pump--what was the price of the home dispensing 
pump--do you know what the price was around before the company 
went under?
    Mr. Hassenboehler. Three thousand, roughly.
    Mr. Bilbray. Yes, so my frustration is while we spend half 
a billion dollars subsidizing thin film photovoltaic 
technology, we ignored the fact that we had a 3-foot gap that 
not 20 years from now, 30 years from now, but could give the 
consumer the choice today to either fill up at home while they 
are sleeping with 100 miles range of natural gas, or go to the 
gas station. But we have sort of taken natural gas and it has 
been the orphan fuel out there, and that flexibility was a 
Federal--I mean, a local or a State government regulatory 
obstructionism. And oh God, I hear about the safety of it being 
at home, and I always say we will burn a candle next to the 
pump so it will be just like a water heater.
    I just want to raise that issue that the government 
barriers to the next--giving consumers choices is a major 
problem, even in California where my scientists developed the 
algae strains to produce true gasoline, true diesel, the State 
employees who developed that technology have to leave 
California to go into production, because they couldn't get the 
permits under--for 7 to 10 years. That is the kind of urgency. 
There is no urgency at us changing government regs to be able 
to get into it.
    The electric car issue, what percentage of future vehicles, 
efficient electric vehicles do you think are going to be using 
rare earth brushless motors?
    Ms. Wright. So I want to be sure that I understand your 
question, you want to know what percent----
    Mr. Bilbray. What percentage do you think is--you know, are 
we dependent on that cutting edge technology for efficiency?
    Ms. Wright. Well, today's motors depend upon the rare earth 
and for the magnetic motors. There is significant research 
going into alternative materials to allow us to get away from 
these rare earth----
    Mr. Bilbray. Right, isn't it true that Toyota, because of 
the embargo, is now thinking of going over to the traditional 
AC, which doesn't have the efficiency, loses efficiency 
substantially?
    Ms. Wright. Yes, the AC brushless type of a motor.
    Mr. Bilbray. Mr. Chairman, this is another issue where I 
say that if we want to have wind generation, if we want to have 
electric cars, then both sides of the aisle have got to be 
willing to say we need to open up our public lands for mining 
so this country has the resource to be able to do the 
environmentally responsible thing. If there is one slogan that 
I want this committee to know why I wanted to come back here, 
as an environmental regulator, both sides have to understand 
that environmental regulations are standing in the way of 
environmental options, and we both should take the 
responsibility. This is something that we can't point fingers 
at the auto industry or the oil industry or the electric car 
industry. We should look at what are we doing, more than just 
writing checks and subsidizing, what are we doing to make our 
regulatory system compatible with innovative technology, rather 
than opposing it?
    And I will leave you with one example. You had an 
automobile that was designed to get 110 miles to 115 miles per 
gallon. The Federal Government would not give them a grant or a 
loan guarantee because it had three wheels, not four, and the 
government regulation said it is not a car if it doesn't have 
four, even though it carried two persons, two golf clubs, and 
two surfboards--in California, which is important. I just hope 
that all of us on both sides of the aisle look at this of what 
isn't government doing to make--give the consumer the choice? I 
don't blame the Federal Government--I mean, don't blame the 
private sector for not giving the choices if we are not willing 
to meet--you know, change the way we operate. That is why we 
need the rare earth, we need to allow natural gas to be an 
option. We need to be able to have the technologies being 
available before we start mandating more. Maybe we should 
mandate ourselves.
    Ms. Wright. So you raise a really important point, and that 
is not just on the rare earth, but it is just the materials we 
are using for any of our advanced technologies. And I think 
this is where the Department of Energy should be getting some 
credit in terms of engaging the universities and national labs 
and the private industry to come together to collaborate on 
what are the scientific breakthroughs that we need in order to 
ensure that we don't become dependent upon materials that are 
in places where it may not be friendly to U.S. interest.
    Mr. Bilbray. Mr. Chairman, let me point out, too, that 
every study that we did at AR Resources Board show that it was 
better to burn the natural gas in the car than it was to burn 
it at the power plant, generate electricity, and transform--I 
think even the electric car people understand that. And so we 
really have missed not just an economic opportunity, but an 
environmental one that if you are going to generate 
electricity, to generate--to run the electric, you want a zero 
emission generator and use natural gas at onsite, which is very 
low technology, as the auto industry knows, but that home 
dispensing is absolutely an essential part. I yield back.
    Mr. Shimkus. Gentleman's time is expired. Previously we 
asked unanimous consent for Mr. Cassidy to have questions in 
the first panel. I ask that again. Hearing no objections, Mr. 
Cassidy, you are recognized for 5 minutes.
    Mr. Cassidy. I want to thank Mr. Engel to the oil state 
caucus. Thank you all for being here. Great, great committee. 
Let me just first promote a bill I have, 1712, which actually 
seeks to promote the use of natural gas as a transportation 
fuel. In this bill, we say that the independents who are 
currently finding the natural gas will not lose their 
independent tax status if they were to invest in the 
infrastructure to use natural gas as a transportation fuel. It 
is agnostic how they do that. It can be methanol, it can be 
gas-to-liquids, it can be methanol. But nonetheless, I would 
encourage you all to look at that, and if you support it, let 
us know.
    Mr. Karr, I am kind of a methanol guy. I do look at this, 
and so--and there is actually a question of fact here. Frankly, 
I am hearing different things from you than your fellow 
panelists. So let me just kind of go through some stuff where I 
think--first we heard that FFVs were being produced at the same 
cost as non-flexible fuel vehicles, and yet you mentioned it 
will cost $1 billion more, and yet Shimkus tells us that his 
FFV cost no more than a non-FFV. So where is the discrepancy 
between----
    Mr. Karr. Not produced--and I don't think Mr. Shimkus 
produced either, he said sold, which is true in a lot of cases. 
Manufacturers are essentially eating the difference or dealers 
are eating the difference. The--as I say, the numbers kind of 
range--and the numbers are going to vary a little bit for very 
large manufacturers who are going to be able to produce a 
little more cheaply.
    Mr. Cassidy. So economy of scale begins to work, so 
theoretically it is $1 billion, but in reality that may come 
down to either negligible or something the industry would find 
acceptable?
    Mr. Karr. You know, even if you are talking about $50 on a 
per vehicle basis, at 15 million vehicles, you know, you get up 
to----
    Mr. Cassidy. I understand that, but it also helps you meet 
your CAFE standards, so there are some benefits.
    Let me ask you as well. You also mentioned--I think this is 
a little disingenuous as a guy from Louisiana, there is no 
production facilities in the U.S. making methanol for use as a 
transportation fuel. I will say, by 2014 there will be a plant 
in Louisiana making large scale methanol, and I have a friend 
who actually takes petrochemical plants and moves them overseas 
or back here, dependent upon the price of natural gas. I think 
the market would quickly respond. I just mention that not as a 
question, but an observation.
    Mr. Karr. Out of curiosity, because I did see that 
announcement, and you know, a lot of this is--Greg and I have 
had multiple conversations about kind of where they are going, 
and I just wasn't clear whether they--that company intends to 
actually make methanol as a transportation fuel or whether they 
were going to----
    Mr. Cassidy. I think they are going to make it for the 
market. Yes, they are going to make it for the market. I mean, 
they are not owned by some vertically integrated plastic maker, 
are they going to sell it to the highest bidder, but I also 
know my friend Rotenberg, you give him a plant someplace else 
to move back here, he will do so and all of a sudden our cheap 
natural gas as an input is going to change that.
    You mentioned the environmental issues regarding methanol. 
What I read previously about methanol in California is that--
first of all, methanol is that if it gets into water, it 
typically dissolves. It is CO, water is H20. It quickly 
disperses and is not an environmental risk. Then you also 
mentioned the formaldehyde, so I found a Web site, whatever it 
is worth, that on the whole, methanol is actually a better, 
cleaner burning fuel. Greenhouse gas is comparable to gasoline, 
nitrogen oxide, usually comparable or less, particulate matter, 
significantly less than diesel, formaldehyde, much higher but 
still low. So although it is much higher, it is still low. And 
then it goes on about these other things, which it is either 
the same or a little bit less, relative to ground level ozone, 
for example. Now do you feel as if the environmental hazards of 
methanol would be so damning that we could not consider its 
use, or do you have different facts than what this----
    Mr. Karr. No, no, and to be clear, you know, I am not 
necessarily making a representation about the environmental 
benefits or not of methanol; rather, we have a practical 
problem, which is that we have emission standards that we have 
to certify to, and that is where the formaldehyde----
    Mr. Cassidy. So then let me go to my next question----
    Mr. Karr. Sure.
    Mr. Cassidy [continuing]. Because this I kind of open up to 
the panel. You may have heard my previous question to the 
previous panel. I was told by a fellow from the major oil and 
gas company exactly what you wrote in your testimony, Mr. Karr, 
that the testing required to get this through EPA is so onerous 
and long, hoops to jump, et cetera, that he was just like--it 
was like existentialism, like he couldn't live until tomorrow 
if he had to face, you know, having to go through EPA's hoops 
on this issue, saying that they are still testing the E85 and 
they have been doing that for 15 years.
    Now I see a lot of heads nodding. Would we say we have met 
the enemy and it is EPA, or what would we say about that? Mr. 
Karr, start with you and then work down towards Mr. Dolan.
    Mr. Karr. Mr. Althoff can speak kind from even more 
personal experience. Again, we have made tremendous 
environmental strides in terms of emissions from vehicles, and 
that is a good thing. So I am, you know, not going to say that 
that is a bad thing. The fact is that we as auto makers have to 
certify our emissions systems to last for what would be the 
effective life of the vehicle. It is a very long time and we 
are, these days, certifying extremely low emissions levels. And 
yes, that is a difficult thing and you do have to do it, you 
know, with each different fuel.
    Mr. Cassidy. And with each different engine, or can you say 
this engine is only tweaked, so therefore, it is OK? Mr. 
Althoff?
    Mr. Althoff. So it can be a challenge. Our experience was 
that they weren't very flexible, so we--the EPA's first flex 
fuel vehicle they ever tested in their own labs was our 
retrofit kit. They had never, at that point, tested any of the 
major auto maker's vehicles. We ran it at an independent lab, 
it ran great. We sent it to the EPA and it failed. We brought 
it back, we worked on it. About 9 months later we figured out 
the problem, and the problem was that they never made the fuel 
before, so what they did was they took mead alcohol and mixed 
it with 85 percent gasoline and ended up with an off-spec fuel 
that didn't actually start very well. That was 9 months of 
working with the EPA to get to that point.
    I mean, I think that if they were more flexible and more 
open to it, I think that would be a big advantage. One of the 
studies that talked about $100 per vehicle--and now I am in Mr. 
Karr's territory--said that $80 of it was for the EPA 
certification cost, even though the auto industry self-
certifies to get the certificate from the EPA, they pay a fee 
per car. And then the one study I read said that $80 out of the 
100 was the EPA's fee to certify the car, even though they 
never tested the car, never made it into their labs.
    So I think that in this space, it would behoove them to 
figure out a new pricing mechanism to really help with the cost 
side of it.
    Mr. Cassidy. Mr. Chairman, could I indulge and have Mr. 
Dolan respond, and I will be through?
    Mr. Dolan. I just wanted to suggest one other potential 
environmental benefit of legislation like the Open Fuel 
Standard Act. The OFS calls for the introduction, among other 
technologies, vehicles that can operate in alcohols up to 85 
percent. A recent paper published by Ford indicated that, you 
know, in the U.S. we haven't increased our octane for our 
transportation fuel in 30 years, and they suggested one way of 
doing that is to going to higher levels or mid-levels of 
alcohol, going from E10 to 20 or 30 percent alcohol. What that 
will do is increase the octane of the fuel. Once you increase 
the octane of the fuel, the auto makers can increase the 
compression ratio of the vehicles, they can take greater 
advantage of turbo charging, and significantly increase the 
fuel economy of today's vehicles. That will not only help them 
meet the CAFE requirements, but will also help introduce more 
alcohol fuels in the marketplace to meet the RFS requirements 
as well.
    Mr. Cassidy. Thank you. You all have been a great panel. I 
appreciate it. Thank you for your indulgence.
    Mr. Shimkus. Thank you very much. We want to thank the 
second panel. We also want to ask unanimous consent that three 
letters that have already been viewed by the Minority, one from 
Growth Energy, one from American Fuel and Petrochemical 
Manufacturers, another one from Celanese, be submitted for the 
record. Without objection, so ordered.
    [The information follows:]

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    Mr. Shimkus. Again, thank you very much. The hearing is 
adjourned.
    [Whereupon, at 2:07 p.m., the subcommittee was adjourned.]

                                 
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