[Senate Hearing 112-283]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 112-283

                     GROWING JOBS IN RURAL AMERICA

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                               __________

                             JULY 14, 2011

                               __________

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            Committee on Agriculture, Nutrition and Forestry










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            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

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

             Christopher J. Adamo, Majority Staff Director

              Jonathan W. Coppess, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Michael J. Seyfert, Minority Staff Director

                Anne C. Hazlett, Minority Chief Counsel

                                  (ii)












                            C O N T E N T S

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                                                                   Page

Hearing(s):

Growing Jobs in Rural America....................................    01

                              ----------                              

                        Thursday, July 14, 2011
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry...    01
Casey, Hon. Robert P., Jr., U.S. Senator from the State of 
  Pennsylvania...................................................    16
Bennet, Hon. Michael F., U.S. Senator from the State of Colorado.     5
Brown, Hon. Sherrod, U.S. Senator from the State of Ohio.........     6
Klobuchar, Hon. Amy, U.S. Senator from the State of Minnesota....     6
Lugar, Hon. Richard G., U.S. Senator from the State of Indiana...     3

                                Panel I

Bony, Paul, Director, Residential Market Development, Climate 
  Master, Oklahoma City, OK......................................    10
Graham, Bruce, CEO, Indiana Statewide Association of Rural 
  Electric Cooperatives, Inc., Indianapolis, IN..................     7
Sanders, Helen, Ph.D., Vice President, Technical Business 
  Development, SAGE Electrochromics, Inc., Faribault, MN.........    12
Stewart, Zac, Owner, Ambient, LLC, Ignacio, CO...................     9

                                Panel II

Hall, Dennis, Assistant Director, Ohio BioProducts Innovation 
  Center, Columbus, OH...........................................    27
McIntosh, John, Vice President of Sales and Marketing, Signature 
  Crypton Carpet, Dalton, GA.....................................    26
Peoples, Oliver P., Ph.D., Founder and Chief Scientific Officer, 
  Metabolix, Inc., Cambridge, MA.................................    23
Verbruggen, Marc, Ph.D., President and CEO, NatureWorks LLC, 
  Wayzata, MN....................................................    21
                              ----------                              

                                APPENDIX

Prepared Statements:
    Roberts, Hon. Pat............................................    36
    Casey, Hon. Robert P., Jr....................................    38
    Thune, Hon. John.............................................    39
    Bony, Paul...................................................    41
    Graham, Bruce................................................    44
    Hall, Dennis.................................................    49
    McIntosh, John...............................................    55
    Peoples, Oliver P............................................    57
    Sanders, Helen...............................................    63
    Stewart, Zac.................................................    67
    Verbruggen, Marc.............................................    68
Question and Answer:
Stabenow, Hon. Debbie:
    Written questions to Paul Bony...............................    74
    Written questions to Bruce Graham............................    76
    Written questions to Zac Stewart.............................    90
Roberts, Hon. Pat:
    Written questions to Paul Bony...............................    74
    Written questions to Bruce Graham............................    77
    Written questions to John McIntosh...........................    85
    Written questions to Oliver P. Peoples.......................    86
    Written questions to Helen Sanders...........................    88
    Written questions to Zac Stewart.............................    90
    Written questions to Marc Verbruggen.........................    93
Thune, Hon. John:
    Written questions to Paul Bony...............................    75
    Written questions to Bruce Graham............................    81
    Written questions to Dennis Hall.............................    83
    Written questions to John McIntosh...........................    85
    Written questions to Oliver P. Peoples.......................    86
    Written questions to Helen Sanders...........................    89
    Written questions to Zac Stewart.............................    92
    Written questions to Marc Verbruggen.........................    94
Bony, Paul:
    Written response to questions from Hon. Debbie Stabenow......    74
    Written response to questions from Hon. Pat Roberts..........    74
    Written response to questions from Hon. John Thune...........    75
Graham, Bruce:
    Written response to questions from Hon. Debbie Stabenow......    76
    Written response to questions from Hon. Pat Roberts..........    77
    Written response to questions from Hon. John Thune...........    81
Hall, Dennis:
    Written response to questions from Hon. John Thune...........    83
McIntosh, John:
    Written response to questions from Hon. Pat Roberts..........    85
    Written response to questions from Hon. John Thune...........    85
Peoples, Oliver P.:
    Written response to questions from Hon. Pat Roberts..........    86
    Written response to questions from Hon. John Thune...........    86
Sanders, Helen:
    Written response to questions from Hon. Pat Roberts..........    88
    Written response to questions from Hon. John Thune...........    89
Stewart, Zac:
    Written response to questions from Hon. Debbie Stabenow......    90
    Written response to questions from Hon. Pat Roberts..........    90
    Written response to questions from Hon. John Thune...........    92
Verbruggen, Marc:
    Written response to questions from Hon. Pat Roberts..........    93
    Written response to questions from Hon. John Thune...........    94


 
                     GROWING JOBS IN RURAL AMERICA

                              ----------                              


                        Thursday, July 14, 2011

                              United States Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The committee met, pursuant to notice, at 9:33 a.m., in 
Room G-50, Dirksen Senate Office Building, Hon. Debbie 
Stabenow, Chairwoman of the committee, presiding.
    Present or submitting a statement: Senators Stabenow, 
Brown, Casey, Klobuchar, Bennet, Lugar, and Thune.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
 OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION 
                          AND FORESTRY

    Chairwoman Stabenow. Well, good morning and thank you for 
being here at the Senate Committee on Agriculture, Nutrition, 
and Forestry. We will call the meeting to order.
    This is a day of multiple things happening at the same 
time, so we welcome all of our witnesses and hope you will 
understand as people are trying to be two or three places at 
once. Senator Roberts this morning is not able to join us, but 
welcomes you, as well, and we are very, very pleased to have 
Senator Lugar here as a great leader on these issues that we 
are talking about today. So we thank you for being here and 
being a part of this. At some point, I, as well, have a bill up 
in the Energy Committee that is going to be voted on and I am 
going to be running up and down between here and third floor in 
Dirksen at some point, so if I leave, it is not because of 
something you said. It is because I need to attempt to be two 
places at once myself this morning.
    But again, welcome. Today's hearing will focus on ways to 
grow jobs in rural America, and certainly we know the farm bill 
is a jobs bill and there are other ways in which we can 
leverage what we do, the strength of rural America to create 
jobs, and that is really what we are all about in this 
committee. There are 16 million Americans who have a job 
because of agriculture and there is even more that we can do. 
Even as we look at the challenges of the last decade, certainly 
in my State, agriculture continued to grow, and this is a very, 
very important part of our economy. Manufacturing accounts for 
roughly a quarter of rural private sector earnings and accounts 
for more than one in ten rural jobs, as well.
    I have a unique perspective as Chair of the Agriculture 
Committee, because in Michigan, as I always say, we grow things 
and make things, and you have an economy, I believe-- we have a 
middle class in this country because we grow things and make 
things. Agriculture and manufacturing are at the heart of any 
economy. They created the U.S. middle class and really are the 
life blood of rural America.
    All across Michigan, all across America, we have people in 
rural communities working to create jobs and compete just like 
people in every city in America. Today, we are highlighting 
some of the great work that is being done, promising 
opportunities to grow jobs in both agriculture and 
manufacturing sectors around the country.
    First, we will consider the possibility of developing a 
Rural Energy Savings Program which will enable the Rural 
Electric Co-Ops to assist their customers in making energy 
efficiency improvements to their homes and their businesses. 
Senator Lugar has included a similar provision in his practical 
energy plan, and I understand he continues to work on a stand-
alone proposal with Senator Merkley and we, again, thank you 
for your leadership.
    Further, I know that several other members of the committee 
expressed an interest in this concept last year when we had a 
subcommittee hearing to examine legislation at that time which 
Senator Merkley had introduced. This type of program is 
important because rural residents are more likely to live in 
older, less efficient, energy efficient homes and the USDA has 
found that our rural residents spend as much as $400 more a 
year on energy costs than those living in our cities.
    A rural energy savings program would not only lower energy 
costs for families, for farmers, for small businesses, but it 
would create opportunities for companies that manufacture 
energy efficient installation, heating and cooling systems, 
doors, windows, et cetera. So it is really about jobs.
    Our second panel will examine the link between agriculture 
and manufacturing in the rapidly expanding sector of bio-based 
products. We tend to think of America's dependence on foreign 
oil only in terms of the gas pump, but we also rely on imported 
petroleum for plastics, foams, and other materials that we use 
every day. For years, our best minds have been working to 
develop bio-based alternatives to those petroleum products.
    One of the foremost pioneers in this area was none other 
than Henry Ford, who experimented with ways that soy-based 
products could be used in automotive production. Today, we have 
cars rolling down assembly lines across America being built 
with parts being made from agricultural products--seats, 
interior panels, arm rests, sunshades, to soy wire coatings, 
carpets, and structural foam.
    In Michigan alone, we have over 80 companies manufacturing 
bio-based products and even more using bio-based materials in 
their products, and these products are not just for cars, as I 
said. They are cleaning products, soaps, insulation, plastics, 
foam products, and fabrics. At today's hearing, we will hear 
about a number of these exciting new opportunities to connect 
production agriculture with rural manufacturing, creating jobs 
and prosperity in our Main Street communities in rural America.
    So I am very pleased again to have my friend, Senator 
Lugar, here and would ask him for his opening remarks.

STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM THE STATE 
                           OF INDIANA

    Senator Lugar. Well, thank you very much, Madam Chairman. I 
appreciate you convening this hearing today and for the 
opportunity to discuss the big opportunities we all have for 
job creation for Hoosiers and for all other States, for that 
matter, to save money through rural energy savings.
    Rural energy efficiency has broad bipartisan support. 
Senator Merkley is a leader on this legislation. We also 
appreciate the partnerships of Senator Shaheen and Graham. 
Today's hearing gives us an opportunity to gather more views 
before we formally introduce and mark up the Rural Energy 
Savings Program proposal within this committee.
    I join the Chair in welcoming all of our witnesses, and in 
particular Bruce Graham of the Indiana Statewide Association of 
Rural Electric Cooperatives. The Rural Electric Co-Ops in 
Indiana not only provide essential services for our homes, 
farms, and small businesses they also invest heavily in rural 
community activities across the State. They are pioneering 
efficiency work and investment in new forms of power generation 
that will save Hoosiers money. Bruce has served as the Chief 
Executive Officer for the 39 member cooperative association for 
nearly five years and I thank him for his leadership in Indiana 
and for joining us today.
    Energy efficiency is gaining ground, from utilization of 
digital thermostats and better lighting at Warren Township 
schools in Indianapolis to energy savings contracts pioneered 
by Vectren Corporation Energy Systems Group in Newburgh. The 
potential savings from accelerating this trend can be a 
tremendous windfall for Hoosiers and all American families and 
small businesses. For example, a 2009 study by McKinsey and 
Company found that the end use energy efficiency measures using 
technologies already available can save us $1.2 trillion by the 
year 2020.
    Progress on energy efficiency is a particular need, an 
opportunity for our rural communities. More than 42 million 
Americans live in rural communities, and many of these 
Americans reside in homes that are significantly less efficient 
than those typically found in urban circumstances. In fact, the 
USDA has found that rural households spend $200 to $400 more, 
as you pointed out, Madam Chairman, per year on their utility 
bills than comparable urban households. This utility bill 
disparity is significant, especially given that rural 
households earn $10,000 less per year than the national 
average.
    The Rural Energy Savings Program proposal would permit 
rural families, farms, and other small businesses to receive 
low-interest loans to improve the energy efficiency of their 
properties. Opportunities for savings are abundant. A consumer 
might install better insulation, such as that manufactured in 
Shelbyville by Knauf, or replace drafty doors with a more 
energy efficiency variety like those made by Therma-Tru Doors, 
manufactured in Butler. Those are just two examples of the many 
Hoosier businesses that today manufacture innovative and 
affordable energy efficiency products. Not only will consumers 
save money, but more Hoosiers will be put to work to 
manufacture and install these efficiency upgrades.
    By providing loans, the proposal offers a fiscally 
responsible path toward energy savings. Loans would be issued 
through USDA's Rural Utility Service to qualified local 
entities, primarily nonprofit rural cooperatives, who would 
then issue loans to consumers to meet local needs. Loans issued 
under this program would be repaid within ten years through 
money saved on utility bills. The Rural Energy Savings Program 
proposal is projected to create nearly 26,000 jobs, spur 
retrofits in up to 1.6 million rural homes, save rural 
households hundreds of dollars a year after the loan is repaid, 
and eliminate the need for new generating capacity to power 
625,000 homes in our country.
    Madam Chairman, my recently introduced Practical Energy 
Plan, S. 1321, includes the Rural Energy Savings Program 
proposal we are discussing today. The broader bill will save 
Americans $33 billion each year in savings through energy 
efficiency and reduce the need for foreign oil by more than six 
million barrels per day by the year 2030, or well over half of 
our current imports.
    The costs of the proposals are fully offset, and with 
substantially increased Federal revenues through more oil 
production. In writing my bill, I focused on energy policies 
that are achievable, cost effective, and most importantly, that 
have American consumers saving money and businesses saving 
money. I appreciate very much the Agriculture Committee doing 
its part to take up this energy saving for all Americans.
    I thank the Chair.
    Chairwoman Stabenow. Thank you very much, Senator Lugar.
    We would ask our first panel to come to the table and we 
will introduce them. Welcome. I ask you to come and take a 
seat. We are very pleased to have each of you with us.
    Let me go ahead first and introduce our first panelist, Mr. 
Bruce Graham. Mr. Graham is the Chief Executive Officer, 
Indiana Statewide Association of Rural Electric Cooperatives 
based in Indianapolis, Indiana, so I am sure that Senator Lugar 
may want to say hello, as well. Prior to his current 
appointment, Mr. Graham worked for the Kansas Electric Power 
Cooperative as the Vice President of Member Services and 
External Affairs. So we are very pleased to have you with us.
    Our next panelist is Mr. Zac Stewart, and he will be 
introduced by his home State Senator--and I just want to note, 
Senator Bennet, this is at least two weeks in a row we have had 
people from Colorado with us, so I think you are getting more 
than your fair share of bragging about Colorado.
    Senator Bennet. Well, I was going to mention that, Madam 
Chair. This is a record for us. I think we had three panelists 
two weeks ago and two panelists this week, so thank you for 
recognizing the incorporable talent from the State of Colorado.
    Chairwoman Stabenow. Great. Well, we appreciate very much 
having Mr. Zac Stewart with us, the owner of Ambient, LLC, a 
building performance company in Durango, Colorado, that 
provides energy services, consulting, and construction, and I 
understand you have been in the energy efficiency field for 16 
years and have a very impressive background, so we welcome you.
    Also, Senator Bennet, I understand that our next witness, 
Mr. Paul Bony, who is actually from Oklahoma City, or your 
business is in Oklahoma City, but you also live in Colorado, so 
you are certainly welcome to make a comment on that, although I 
think you are running up against your limit on people from 
Colorado.

  STATEMENT OF HON. MICHAEL F. BENNET, U.S. SENATOR FROM THE 
                       STATE OF COLORADO

    Senator Bennet. Well, thank you, Madam Chair. If I could 
say, first, how much I appreciate your holding this hearing, 
and, Senator Lugar, your leadership on this issue has made a 
huge difference, as well. And if I could spend two seconds 
introducing the witnesses from Colorado, and then I want to 
apologize to them because I have got a Banking Committee 
hearing and Chairman Bernanke is testifying and you may have 
noticed that things are not going so well on that score, so I 
am going to have to go to that, but----
    Chairwoman Stabenow. That is because he is not from 
Colorado.
    Senator Bennet. That is right. I will try to come back.
    But I do want to say that we are happy to have Zac Stewart 
here, who is from Ignacio, Colorado, the home of Senator Ben 
Nighthorse Campbell, the beautiful Four Corners region of our 
State. Mr. Stewart is a native of nearby Durango and a graduate 
of Fort Lewis College. He has got broad experience working on 
these issues in State government agencies, both in Arizona's 
Department of Commerce and the Governor of Colorado's Energy 
Office. And as you mentioned, Madam Chair, he has recently 
started his own building performance company, Ambien, LLC, and 
we look forward to hearing of the work that Ambien is doing.
    Following Mr. Stewart, the committee will hear from Paul 
Bony, who is the Residential Market Developer for a company 
called ClimateMaster. ClimateMaster is the world's largest 
manufacturer of geothermal heat pumps, headquartered in 
Oklahoma City. However, while working for an Oklahoma company, 
I understand Mr. Bony has the distinct privilege of living in 
Montrose, Colorado, where he has worked on geothermal heat pump 
issues in several capacities over the years, including 
innovative financing efforts with the Delta-Montrose Electric 
Association, his local electric cooperative. Mr. Bony's energy 
efficiency and renewable energy market development efforts have 
earned the Association of Energy Services Professionals' 
Achievement in Energy Services Award, the U.S. EPA's Excellence 
in Energy Star Outreach Award, and recognition from the 
Alliance to Save Energy.
    So thank you, both of you, for coming here. You need to 
represent us well because next week we will have another 
hearing and we want to have at least two more Coloradans here, 
so let us not break our record.
    [Laughter.]
    Senator Bennet. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Our final witness on the panel is Dr. Helen Sanders, and 
Senator Klobuchar would like to introduce her.

STATEMENT OF HON. AMY KLOBUCHAR, U.S. SENATOR FROM THE STATE OF 
                           MINNESOTA

    Senator Klobuchar. Well, thank you very much, and I note, 
Senator Bennet, we have Dr. Sanders here from Minnesota. We 
also on our second panel have a witness, Marc Verbruggen, whose 
company is headquartered in Minnesota, but let us go on.
    Dr. Helen Sanders is the Vice President of Technical 
Business Development at SAGE, based out of Faribault, 
Minnesota. She has been involved with SAGE since 1999 and has 
been involved with nearly all aspects of the manufacturing 
business. SAGE manufacturers windows that use innovative high-
performance energy saving technology. They are really cool. I 
hope she describes them to you. It is really something, that 
can kind of change colors on a dime and is really an innovative 
technology.
    She is a unique witness on the panel because SAGE is a 
producer of energy efficient products and is also working with 
Rural Electric Co-Ops to put in place new energy efficient 
technologies at manufacturing facilities to reduce their energy 
bill. So this is just a great example.
    Our manufacturing is really on the upswing in Minnesota. I 
realized this back in January when I could start to visit all 
the companies on Saturdays because they were going 24/7 and we 
had one of our biggest export quarters of our State's history 
last quarter. Actually, I would add one good thing. Ag exports 
are up, Madam Chair, 22 percent in Minnesota. The whole rural 
area has really been holding our economy together, and SAGE is 
a great example from the manufacturing sector of how it can be 
done right. So I am pleased to have Dr. Sanders here.
    I would also mention Mr. Verbruggen, who is the President 
of NatureWorks, and he is going to be testifying on the second 
panel. NatureWorks is headquartered in Minnetonka, Minnesota. 
It produces new bio-based products and is reinvesting in rural 
America, creating jobs. Mr. Verbruggen is going to testify 
about the exciting bio-based products at NatureWorks.
    So thank you, both of you, for being here.
    Chairwoman Stabenow. Thank you very much, and I understand 
that Senator Brown will have to be being two places at once 
this morning, as well, and that you did want to bring hello and 
introduce someone that will be on our second panel. Senator 
Brown.

STATEMENT OF HON. SHERROD BROWN, U.S. SENATOR FROM THE STATE OF 
                              OHIO

    Senator Brown. Thanks, Madam Chair, and thanks for going 
out of the regular order. I preside over the Senate later this 
morning, so I cannot be here during the second panel, but 
wanted to welcome Dennis Hall from Columbus, Ohio. Dennis, whom 
I spoke with earlier today and walked over with, is a sixth 
generation farmer near Marysville, Ohio. His family many 
generations ago served as a stop on the Underground Railroad in 
northern and just outside of Columbus.
    He is an Assistant Director of the Ohio BioProducts 
Innovation Center at Ohio State. Not only does he bring decades 
of experience as a farmer, he has been at Ohio State in the 
Extension Service as professor for ten years, working with 
students and educators.
    And, Madam Chair, a couple of really brief comments in 
addition to introducing Dennis. Ohio is home to approximately 
130 companies that use agricultural products to make new 
products--the agricultural crops to make new products, ranging 
from pet foods to bio-based paint to soy ink and toner, and the 
passion that Dennis brings to this, you will see in a few 
moments. To date, the Federal Government has provided minimal 
support to these efforts and I think this discussion today and 
beyond will help to form some partnerships that can work for 
all of us.
    Mr. Hall, welcome. I appreciate that.
    Chairwoman Stabenow. Thank you very much.
    We will now turn to our witnesses, and Mr. Graham, welcome. 
We would ask each of our witnesses to take five minutes. We 
certainly want your written testimony, as well, but we would 
ask for you to give us five minutes of testimony, and then when 
we are finished, we will open it up for questions. Mr. Graham.

  STATEMENT OF BRUCE GRAHAM, CHIEF EXECUTIVE OFFICER, INDIANA 
  STATEWIDE ASSOCIATION OF RURAL ELECTRIC COOPERATIVES, INC., 
                     INDIANAPOLIS, INDIANA

    Mr. Graham. Thank you, Madam Chairwoman Stabenow and 
Senator Lugar and members of the committee. I appreciate the 
opportunity to express the views of the electric cooperatives 
on the Rural Energy Savings Program Act. It is a cost effective 
concept that can save energy and create jobs in rural America. 
It is an honor to be here before the committee.
    As mentioned, I am Chief Executive Officer of the Indiana 
Electric Cooperative Association, which is the first Electric 
Cooperative Association in the country. Our 39 electric 
cooperatives and two GNTs provide safe and affordable energy to 
more than half-a-million homes and businesses and farms, and we 
continue to be leaders in making energy efficiency manageable 
for our consumer members in the State.
    As also mentioned, I began my career with Kansas Electric 
Power Cooperative, and I mention that because as part of my 
responsibilities those 18 years, I managed our economic 
development, marketing, and our consumer efficiency programs at 
KEPCO.
    Just as a reminder, the electric cooperatives are nonprofit 
member-owned utilities that were created to provide affordable 
and reliable electricity, not to make a profit for 
shareholders. We have for many years provided information and 
advice to consumers to help them manage their energy bills. 
This includes programs and incentives for their member owners 
to use electricity in an efficient and cost effective manner. 
The wide range of assistance includes rebates for energy 
efficient appliances, installation of efficient lighting, and 
rate incentives to encourage off-peak usage. In addition, in 
Indiana, Hoosier Energy successfully utilized the Federal 
stimulus program to weatherize more than 2,000 homes, giving us 
an important experience in consumer home improvement 
initiatives.
    Just a couple of statistics from the electric cooperatives. 
As I said, we have been engaged in this for quite some time. In 
fact, 96 percent of the cooperatives in the country operate an 
efficiency program currently, and 70 percent of the 
cooperatives offer some kind of financial incentives already to 
promote efficiencies.
    We believe that a RESPA program would be another tool that 
electric cooperatives can use to enable their member owners to 
maximize energy efficiency. The RESPA program authorizes an on-
bill financing mechanism that allows co-op customers to borrow 
money from the cooperative for energy efficiency improvements 
at their homes and businesses and to pay back those loans 
through the monthly electric bill. This program was actually 
modeled in part on a successfully operating program developed 
by Midwest Energy in Hayes, Kansas, called House Smart.
    The RESPA program design is simple. Cooperatives would be 
authorized to borrow no-interest funds from the Federal 
Government acting through the RUS at USDA and, in turn, make 
loans to their residential or business customers for the sole 
purpose of improving the energy efficiencies of those 
residences and businesses. No loan funds would be approved 
until an energy audit is performed, an application for funds is 
approved by the RUS, and the project is completed in accordance 
with the plans included in the application.
    RESPA requires energy efficiency loans to have a pay-back 
period of no more than ten years. The savings to consumers 
related to the energy efficiency projects must be more than the 
amount of the loan. Customers will be able to repay the loan 
from those monthly energy savings through their electric bill. 
This rule means that energy efficiency projects that are not 
cost effective within a ten-year period will not be funded.
    Consumer loans would only cover structural improvements, 
such as blocking air infiltration, insulation, HVAC systems, 
windows, and other improvements that co-ops can demonstrate 
will provide sufficient savings. Loans will not be used for 
appliances that do not stay with the structure, such as 
refrigerators, window air conditioner units, et cetera.
    RESPA is designed to minimize the impact on the Federal 
budget because it is a loan program, not a grant program, and 
requires repayment of loans to the Federal Government.
    The RESPA program will use the existing infrastructure at 
the RUS and the RUS loan protocols to evaluate loan 
applications, obligate funds, and advance them to electric 
cooperatives. Most cooperatives already have the billing 
capabilities and consumer relationships that will enable them 
to deliver and administer the loans to their consumers.
    The program does have a jump-start loan component that 
enables co-ops to receive up to four percent of the loan amount 
in order to offset the up-front costs of initiating the 
program. Despite that, the loan funds provided by the 
government will not cover the entire cost of the program, so 
the individual cooperatives will likely still incur 
administrative costs. That being said, the program is voluntary 
and individual co-ops will be able to determine whether there 
is a need in their community that could be addressed with the 
funds from the RESPA program.
    It is important, also, to remember that co-ops are 
ultimately responsible for paying back the loans from the RUS 
and not the individual consumers. Therefore, co-ops have a 
strong incentive to make careful evaluations of potential 
projects that make sure the member owners get the value they 
expect and they have the ability to repay the loan. Rural 
Electric Cooperatives have an extraordinary track record of 
positive payment under the RUS and we look forward to 
continuing that trend using RESPA.
    The Indiana Co-Ops and the National Rural Electric 
Cooperatives Association support the Rural Energy Savings 
Program Act because we believe there are co-op members across 
the country that would benefit from energy efficiency 
improvements on their homes and businesses and cannot afford 
the up-front investment in those improvements. The RESPA bill 
would benefit rural Indiana by making homes and businesses more 
comfortable and energy efficient. Importantly, RESPA also has 
the potential to create much-needed jobs in rural America for 
energy auditors, contractors, installation crews, and thousands 
of jobs to manufacture the new windows and doors, insulation, 
heating and cooling systems, and other energy saving 
improvements.
    Chairwoman Stabenow. Mr. Graham, we would ask you to bring 
it to a close. Thank you.
    Mr. Graham. That is it. I thank you for the opportunity to 
be here this morning and that concludes my comments.
    [The prepared statement of Mr. Graham can be found on page 
44 in the appendix.]
    Chairwoman Stabenow. Thank you. We very much appreciate 
your input and being here today.
    Mr. Stewart.

    STATEMENT OF ZAC STEWART, OWNER, AMBIENT, LLC, IGNACIO, 
                            COLORADO

    Mr. Stewart. Chairwoman Stabenow, Senator Lugar, Senator 
Bennet--he left--and distinguished members of the subcommittee, 
thank you for allowing me to speak today regarding the 
potential Rural Energy Savings Program and the possible impact 
on job creation in rural America.
    I operate a small home energy retrofit business located in 
Southwest Colorado. We are a full-service home performance 
business, which means that we conduct the initial energy audit, 
generate a recommendations report based on potential energy 
savings, and then perform the repairs. So it is a one-stop shop 
for the homeowner. We install windows, insulation, other energy 
saving measures. I currently have three employees and all 
three, including myself, were previously employed in the 
residential home building industry prior to the downturn in the 
housing market.
    We are experiencing a steady demand for energy efficiency 
repairs in my region, but face the same challenges most markets 
face, which is access to capital. For home performance programs 
to work, a funding mechanism must be in place to meet the needs 
of the homeowners who want and need repairs but lack the money 
to proceed.
    In metropolitan areas, there are large national home 
performance contractors who have the capital to offer financing 
to homeowners. In rural areas like Southwest Colorado, we are 
made up of small businesses, small home performance contractors 
that do not have the ability to offer any financing options to 
customers.
    Financing options, coupled with existing energy efficiency 
initiatives, is the piece that we are missing, especially in 
the rural areas, and I believe this would propel many 
homeowners to move forward with repairs and, in turn, create 
more jobs for contractors like myself.
    The housing stock in the Southwest in general, and I would 
venture to say in the rest of the nation, is weathered and 
aged. Home repairs usually only take place when there is a good 
year or the furnace stops working and there is no other choice 
but to fix it. There is no shortage of homes that need to have 
energy efficiency upgrades. As a home performance contractor, 
our greatest challenge is converting the audit into repairs. I 
can perform an energy audit and have the most talented 
salesperson around, but if the homeowner does not have the 
money to implement those repairs, there is no savings for 
anyone. An audit has no realized savings unless the repairs 
take place.
    So I routinely encounter homeowners that are taking 
advantage of rebates that are available through the electric 
co-ops. However, they cannot proceed with any of the repairs 
because of funding issues. We are talking $3,000, $4,000, up to 
$8,000 repairs that they would like to have done, but that is a 
big chunk to come out of their pocket at that point.
    A rural energy savings program would benefit homeowners by 
making their homes safer, healthier, and more efficient, and it 
would definitely benefit rural contractors like myself by 
increasing our workload.
    It is a perfect piece. When I sit down with a homeowner and 
have the leveraging opportunities, it is a perfect sales tool 
for a contractor like myself in that there are existing rebates 
for audits. There are existing Federal tax credits and now a 
potential for loans. I believe it would increase--go from a 
$300 audit to a $4,000 repair would no doubt create jobs.
    Thank you. Thank you for your time. I appreciate it.
    [The prepared statement of Mr. Stewart can be found on page 
67 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Bony, welcome.

     STATEMENT OF PAUL BONY, DIRECTOR, RESIDENTIAL MARKET 
      DEVELOPMENT, CLIMATEMASTER, OKLAHOMA CITY, OKLAHOMA

    Mr. Bony. Thank you. Good morning, Chairwoman Stabenow, 
Senator Lugar, and distinguished members of the Senate. It is 
truly an honor and a pleasure to be here this morning to offer 
support for the Rural Energy Savings Program on behalf of my 
employer, ClimateMaster, which is based in Oklahoma. I was 
living in Colorado when they hired me and refused to leave, so 
I get on airplanes every week. ClimateMaster is based in 
Oklahoma, where our manufacturing facilities are, but we also 
have over 1,000 dealers and distributors across the United 
States, so our product goes into every State in the Union.
    I have 25 years of electric utility experience focused on 
energy efficiency, renewable energy, and demand management. I 
have worked for two electric cooperatives, including the one 
where my great uncle was the first elected board president, and 
I am a member of the Delta-Montrose Electric Co-Op where I 
worked until I took this job. And thanks to the Fifth Army, I 
am a native Hoosier. I have a degree in agriculture from Kansas 
State University. And I own a registered farm in Colorado, so I 
am a very bi-State kind of guy.
    But based on my utility energy efficiency experience, this 
pending legislation will provide many benefits to electric 
cooperatives and the members they serve. This legislation will 
save energy. Buildings use nearly 40 percent of the primary 
energy consumed by this nation, with heating, cooling, and 
water heating consuming nearly one-half of that usage, and in 
rural homes it can be as much as 70 percent of the energy used.
    Geothermal heat pumps, our product, can reduce this energy 
consumption by up to 50 percent. This legislation will save 
rural consumers money. Most rural areas do not have access to 
well-capitalized and organized energy efficiency retrofit 
companies. Rural areas also rely on a high proportion of 
expensive fossil fuels for heating and water heating. Customers 
can benefit greatly from energy efficiency upgrades, including 
geothermal heat pumps that provide energy bill reductions that 
can exceed the loan repayments under this proposed legislation.
    I conducted an extensive home energy retrofit project at 
the Delta-Montrose Electric that confirmed that homeowners can 
easily reduce their annual energy usage by 50 percent or more 
from efficiency measures that provide a positive cash flow 
after debt service. In a survey ClimateMaster recently 
completed, 53 percent of our potential customers would have 
purchased our system if they could have obtained financing that 
would provide them a payment lower than their energy savings, 
giving them a positive cash flow.
    Unfortunately, in today's tough economy, customers do not 
have ready access to affordable loan funds to implement energy 
efficiency measures. This legislation will be invaluable in 
breaking this financial barrier.
    This legislation will also create jobs. The energy 
efficiency upgrades financed by this legislation will generate 
employment for local labor. For geothermal heat pumps, the 
installation of the equipment and ground loop has to be done 
locally. We will never import ground loops from offshore. I 
started an installation company that focused exclusively on the 
installation of 50 to 70 of our systems annually. This company 
employed seven full-time people in good paying jobs with full 
benefits. We also hired other contractors to provide services, 
including energy audits, drilling the ground loops, and 
weatherizing homes.
    This legislation will improve the financial stability of 
the participating co-ops. Geothermal heat pumps offer 
cooperatives an excellent tool to obtain significant peak loads 
reduction and improve their system load factor. This allows a 
cooperative to provide energy efficiency to their members and 
reduce the need for expensive new generation without putting 
pressure on electric rates. These energy savings also provide 
four to ten metric tons of annual carbon savings per home.
    Electric co-ops are a great vehicle to administer the RES 
program. They have a long track record of providing member-
focused services and paying back their Federal loans. They are 
trusted by their members and they can collect payments on 
utility bills. And in the rural communities, they are often the 
only organization with the resources and talent to administer 
this type of effort.
    I recognized over 15 years ago that access to affordable 
financing was the key to customer participation in energy 
efficiency when I started a successful cooperative geothermal 
loop lease program that is still working today in California. 
In Colorado, I again proved that customers will respond to co-
op financing to make efficiency investments. While individual 
members in my loan portfolio experienced the misfortunes that 
can happen to any of us, it always generated a positive cash 
flow, and I can also assure you that my general manager and our 
board of directors paid very close attention to my monthly 
reports on how that loan portfolio was performing.
    However, in both programs, our ability to fund member 
efficiency was limited to internally generated funds, as the 
RUS was not able to finance these efforts. This legislation 
will close this large financing gap, and in my humble opinion, 
greatly accelerate the implementation of energy efficiency in 
co-op country.
    In conclusion, ClimateMaster is very supportive of this 
legislation. I am convinced that it will provide great benefits 
to the millions of members of electric cooperatives. It closes 
the financing gap that has prevented the greater adoption of 
energy efficiency in rural America and it leverages the 
resources and talent embedded in America's electric co-ops.
    Thank you for giving the opportunity to share my comments 
this morning.
    [The prepared statement of Mr. Bony can be found on page 41 
in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Dr. Sanders, welcome.

STATEMENT OF HELEN SANDERS, VICE PRESIDENT, TECHNICAL BUSINESS 
 DEVELOPMENT, SAGE ELECTROCHROMICS, INC., FARIBAULT, MINNESOTA

    Ms. Sanders. Thank you. Chairman Stabenow and Senator Lugar 
and members of the committee, I really want to thank you very 
much for the opportunity to come testify here today on the role 
SAGE Electrochromics is playing in creating economic 
opportunity and strengthening the green economy in rural 
America. In her absence, I would like to thank Senator 
Klobuchar for her kind introduction to me earlier.
    My name is Helen Sanders and I have a Doctorate from the 
University of Cambridge in surface science, and today I serve 
as the Vice President of Technical Business Development at SAGE 
Electrochromics, which is located in Faribault, Minnesota, in 
rural Rice County, where I have lived for the last 13 years.
    I want to tell you a little bit about SAGE. We are actually 
creating glass for windows that go beyond your traditional idea 
of the window being just simply a piece of glass in the wall. 
What is unique about our glass is that it uses a technology 
called electrochromics, which allows it to be made highly 
tinted or highly transparent or any tint level in between at 
the touch of a button. So in this way, you can actually manage 
the amount of light and heat that comes into your building 
depending on the exterior environment or the needs or the 
occupants. So you kind of have like a heat or light valve for 
your building. This reduces the load on the HVAC system and 
improves thermal and visual comfort for the occupants.
    At SAGE, we like to think of the window now as an appliance 
that allows occupants to actively manage the amount of sunlight 
entering their building, and it allows occupants to keep out 
excessive heat and glare without resorting to the use of shades 
and blinds, which block the view to the outside. So you get to 
maintain that view and connection with the outside and let 
natural daylight in-- which, of course, is the reason you put 
the window in in the first place.
    SAGE is the world's leader in the commercialization of this 
technology for buildings, and we supply electrochromic glass 
for commercial, institutional, and residential windows. The 
electrochromic glass provides both daylighting and energy 
management solutions for a wide variety of buildings, for 
example, commercial offices, museums, religious buildings, 
high-tech buildings, colleges, and health care facilities, 
anywhere you need heat and light control.
    And, in fact, Lawrence Berkeley National Laboratories found 
that by actively managing lighting and cooling, these smart 
windows could actually reduce peak electric demand loads by 20 
to 30 percent in many commercial buildings, and potentially 
enhance the human comfort and productivity by maintaining that 
access to natural daylight and that view and connection with 
the outdoors.
    The U.S. Department of Energy has determined that the use 
of electrochromic glass in windows can save up to 28 percent of 
energy in most climate zones through reduced air conditioning 
demand and increased use of natural daylighting. That makes it 
a huge part of the energy efficiency equation. And, in fact, 
what we call variable solar control that is provided by 
electrochromic glass is one of the key building envelope 
technologies cited on DOE's roadmap for achieving the zero 
energy commercial buildings goal in 2030.
    Now, SAGE has actually advanced this technology to a point 
where we are actually expanding our manufacturing facility in 
Minnesota. We are constructing a 300,000 square foot facility, 
manufacturing plant, in Faribault and it has already created 
over 200 construction jobs and will create about 160 permanent 
green manufacturing jobs.
    The project is in part financed by a loan guarantee from 
the Department of Energy, and Senator Klobuchar has been 
instrumental in helping secure that loan guarantee. Another 
element of our funding is coming from the local electric 
cooperative, which is funded through a USDA loan program which 
is similar to the RUS program under discussion here. And the 
USDA financing provides a valuable contribution to our project 
because it is supporting the cost of implementing energy 
efficiency enhancement in our factory, including the use of 
energy efficient lighting systems, dimmable lighting controls, 
which, when we combine that with the unusually large number of 
windows and skylights that we are putting into our 
manufacturing facility, is going to provide significant energy 
savings.
    We are also doing a number of other--implementing a number 
of other energy efficiency measures in this factory, and as a 
result of these and other energy savings, we project that our 
facility will be--the energy performance will be 28 percent 
better than the ASHRAE 90.1 baseline, which is the key national 
energy standards today. We are also going to be pursuing LEED 
certification for the building.
    So we expect to make significant energy savings to lower 
our operational costs, and as a result, we will be able to make 
further investments in our facility. The faster that we can 
reduce the cost of our product, the faster that we can build 
adoption in the marketplace and then the faster that we will be 
able to grow our business, increase the number of jobs, and 
also the faster that the nation will be able to capture the 
significant energy savings potential both in new construction 
and also in renovations of the existing building stock and the 
faster we will be able to get to the goal of low energy or zero 
energy buildings.
    I want to thank you very much for the opportunity that you 
have given me to testify today and I look forward to answering 
any questions you might have.
    [The prepared statement of Mr. Sanders can be found on page 
63 in the appendix.]
    Senator Lugar. [Presiding.] Thank you very much, Dr. 
Sanders.
    The Chairman has asked me to preside momentarily as she 
takes care of another committee emergency and will reemerge 
soon.
    Let me commence the questions to the panel by asking you, 
Mr. Graham. You have described the 39 co-ops that are a part of 
the co-op organization that you head. How many rural homes in 
Indiana, from your estimate, would be eligible for the program 
we are talking about today? What is the extent of the market, 
taking Indiana as a possible State for that?
    Mr. Graham. Well, I would hesitate to give you an actual 
number, but as some of the other testimony indicated, the 
challenges we have in rural Indiana and across rural America 
are oftentimes substandard housing. We found-- Hoosier Energy 
in the program that they just completed found that easy market 
for 2,000 homes to weatherize in that program alone, really 
without turning over too many rocks to find those homes. I 
mean, there is a lot of interest in these programs, and that 
was just the Southern part of Indiana. It was very easy to find 
eligible projects for that.
    I think there would be a great deal of interest. I do not 
know that I could tell you exactly how many, and, of course, 
that is going to depend upon how easy the rules are to comply 
with, how easy the program is to implement. The less red tape, 
the more aggressive our cooperatives can get with the program, 
and I think that is an important thing to remember.
    Senator Lugar. Mr. Stewart, just trying to think through 
how all this gets underway, let us say that there are thousands 
of rural houses that would be eligible, but why do you believe 
that homeowners in these houses are going to apply for the 
program? First of all, how will they ever find out there is 
such a program and call upon you or other panel members today 
to commence so-called audits of their situation, which I gather 
is an examination of the way that energy savings might occur in 
that particular dwelling. In other words, how do we get the 
momentum going, even if we make estimates of how many houses 
there are and how much energy might be saved in America?
    Mr. Stewart. Marketing.
    Senator Lugar. Yes.
    Mr. Stewart. We have got to get out and hit the streets, 
and we are doing that. We are hitting it. And additional 
funding to market, the electric co-ops being able to send out 
flyers with the bill every month. I mean, there are definitely 
ways to get the word out, ways that I cannot do, fellow 
contractors like myself cannot do. The county that I live in is 
all served by an electrical co-op. Every county around the area 
is. They have a unique opportunity to get the word out to their 
members.
    Senator Lugar. So the co-op or the organization Statewide 
has to, through circulars or through some type of 
advertisement, make this knowledge available. Even at that 
point, there must surely have been a lot of homeowners for 
years who knew down deep they could probably have a more 
efficient situation but never got around to it or this was not 
so obvious in terms of savings that they thought about it, 
quite apart from how it would be financed. What is going to 
bring about, not a revolution in rural America, but at least an 
awakening so that significant percentages of people say, ``Aha, 
this really is an opportunity for me. I would like to call 
somebody, a co-op or contractor, to get on with this.''
    Mr. Stewart. Well, as the prices of your utility goes up, I 
mean, that is going to sell itself. We battle with that every 
day. How do we get them on board? How do we convince this 
person that they need to have that happen? And it is really 
those case studies and their neighbors getting it done and 
getting into one neighborhood or area. Everybody is close knit, 
so if I can get into one house and then we can start rolling 
that around, then the word of mouth that I saved $150 on my 
utility bill a month during the winter because of these things 
that happened, I believe that is going to benefit and it is--
that is one way.
    Senator Lugar. Well, if somebody calls you and asks for an 
audit, how much would that cost? What would the cost of the 
audit be?
    Mr. Stewart. It definitely depends on how extensive they 
want it to be, but they generally run from $300 to $500, based 
on the square foot. I mean, if it is a huge home, obviously, 
there is more time into the house.
    Senator Lugar. So the homeowner up front spends $300 or 
$500----
    Mr. Stewart. Right.
    Senator Lugar. --to get the word as to what kind of 
changes----
    Mr. Stewart. Right.
    Senator Lugar. --as the basis for the loan, then, that is 
taken.
    Mr. Stewart. Absolutely. And I definitely--audits are a 
crucial point in this whole process and I really want to 
encourage any incentives for rebates on audits to be done only 
if they do select measures. If they do not choose to do 
anything, then they are going to have all their skin in the 
game, right, and pay for the whole audit. But when you can 
couple the incentives rebates from utility companies with 
actual measures being installed, I believe that is a very 
useful approach.
    Senator Lugar. Dr. Sanders, why would somebody come to you, 
even if you have these remarkable windows? How do people know 
of the 28 percent savings? Do you advertise this widely? Would 
it be likely that rural customers would say, I need those 
windows?
    Ms. Sanders. We do advertise. Mainly, you buy our glass 
through the standard window purchasing channels from some of 
the large wood and vinyl window manufacturers. Our testimony 
was primarily to look at the impact of the loans for small 
businesses in reducing our overhead and our operating costs 
and, therefore, being able to deliver our glass to customers at 
a lower cost. So the more that we can do that, the more 
accessible they are to the rural customers.
    Senator Lugar. But let us say an audit has been conducted 
by Mr. Stewart, so windows are a part of this situation. But 
how does this customer, who may not be sophisticated in terms 
of all the options, decide that he or she wants your windows?
    Ms. Sanders. I think it would, again, go back to marketing 
and the knowledge of the people doing the audit who are making 
recommendations about how--what is the best technology to be 
retrofit to solve their problem. I think it goes back to 
awareness with the people doing the audits.
    Senator Lugar. I appreciate your responses. I want to turn 
to my colleague now for his questions. Senator Casey.

 STATEMENT OF HON. ROBERT P. CASEY JR., U.S. SENATOR FROM THE 
                     STATE OF PENNSYLVANIA

    Senator Casey. Thank you, Senator Lugar.
    I apologize to the panel for being late. I missed most of, 
except the very last part of Mr. Graham's testimony. I heard 
the other testimony after that. But I am grateful for the 
opportunity, and Mr. Chairman, I will submit my statement for 
the record as part of this hearing. I will not read a 
statement.
    [The prepared statement of Senator Casey can be found on 
page 38 in the appendix.]
    Senator Lugar. It will be made a part of the record.
    Senator Casey. Thank you. I just wanted to ask a couple of 
basic questions about not just the topic that we are examining 
today, but also that topic within the context of what is 
happening here in Washington the last couple of days and 
certainly even over the last couple of weeks. There is an 
appropriate focus on deficit and debt, but all the time we are 
doing that, we seem to have lost our way or lost our focus on 
the question of job creation. So this hearing is particularly 
timely.
    I wanted to ask if you had to answer--you are not required 
to have an answer to this, but I will try--if you had to answer 
the following question, how do we create jobs in rural America 
in the next 12 months, or let us say six months to 12 months, 
either in the context of this legislation or more broadly, 
because I know in Pennsylvania, we have got a State of 
approaching 13 million people. We are about between 12-and-a-
half and 13, depending on what year you pick. Of those 12-and-
a-half-plus million people, we have got at least three-and-a-
half, if not more than that, who are living in so-called rural 
areas demographically. It is a huge rural population.
    And when I go across our State and see the unemployment 
rates, invariably, the highest percentages have been in rural 
areas, small towns, communities, rural counties where most of 
the county is considered rural. Some of the economic trauma has 
been focused on a particular sector or industry. Dairy farmers, 
of course, have lived through hell, if I can say that in a very 
dramatic way. Some have just been suffering through what a lot 
of other communities are, whether they are rural or urban or 
suburban. It is access to capital. It is energy costs. It is a 
whole range of impediments to job creation.
    So I would ask you, in the context of this legislation, and 
just based upon your own experience, you are in the trenches 
meeting budgets and creating jobs. What could we do here that 
would either have a direct impact on job creation in rural 
America or would be an incentive or a triggering mechanism to 
create jobs? And I am talking short-term. Maybe start with you, 
sir, Mr. Bony.
    Mr. Bony. Yes, thank you, Senator. By the way, Pennsylvania 
is the largest State for our equipment, so thank you for that. 
You are our number one market.
    Senator Casey. I cannot take credit for that, but I will.
    [Laughter.]
    Mr. Bony. Well, you are tied for first with New York, so we 
appreciate that.
    Senator Casey. Thank you.
    Mr. Bony. There is a precedent in the past, and it was the 
Rural Conservation Service, which was an energy audit program 
implemented in the Carter administration where utilities got to 
do energy audits, or actually--I hate to use the word--but were 
mandated to do energy audits for all of their members. The gas 
companies did the gas audits. The electric companies did 
propane and electric if it was the primary heating and cooling 
fuel. The flaw in RCS is the audits were mandatory, but there 
was no mechanism to get consumers to take action after the 
audit.
    What is being proposed in this potential legislation is now 
the utilities could do the audits. They would have, at least in 
co-op country, they would have the financing available then to 
connect the consumers with the contractors and any 
implementable measure that had a positive cash flow, it is a 
lot easier purchase decision for a consumer when it is a 
turnkey package.
    The other part of this bill that I do not want to be 
overlooked is the on-bill collection component, where the loan 
stays with the property through the electric meter or the gas 
meter. Now the consumer is not frozen up on, wait a minute, 
what happens if I want to sell? What happens if I have to move? 
The infrastructure investment stays with the meter so the 
consumer is not hung up on having the loan stay with them.
    Those are very powerful tools that did not exist when we 
had the RCS audit program, and so if you could have the 
utilities--you could say, utilities, we want you to go audit 
these homes. We want you to offer on-bill financing. And we 
want you to train and aggregate your contractors, and there 
is--I live in the second-highest unemployment county in 
Colorado. We are rapidly pushing to be number one, and that is 
very unfortunate. Most of my friends who are in the 
construction industry--I flew home last week. The guy who did 
my brick work was taking tickets at the airport to get out of 
the parking lot. That is very disconcerting to me.
    So have the utilities do the audits. Have the financing 
available. The utilities can put the contractors together and 
use on-bill as the mechanism to make sure the consumers can 
fund anything that has a positive cash flow in that audit 
report and I think you can put people to work in a hurry.
    Senator Casey. Thank you. I know we may only have time for 
one other response, but either Mr. Stewart or Dr. Sanders? It 
is a jump ball.
    Ms. Sanders. I guess from a small business perspective, to 
drive job creation in small businesses we need to think about 
trying to reduce operating costs, and the extent to which you 
can provide the ability to implement energy efficiency measures 
will help drive down operating costs which will give, or 
improve cash flow and enable people to put the money to work in 
building their businesses and creating more jobs.
    Senator Casey. Thank you.
    Chairwoman Stabenow. [Presiding.] Thank you very much, and 
I apologize for stepping out again to go to the Energy 
Committee, but we were successful there and I am now glad to be 
back.
    So let me ask each of you, specifically around jobs, 
because I appreciate the discussion in terms of rural America, 
but when we are discussing the possibility of the Rural Energy 
Savings Program, some of you have touched on it, each of you in 
some way, but from the outside, I am not sure people really 
understand exactly what we mean or the broad array of which 
jobs can be created from something like this. So I wondered if 
each of you might talk about the fact that--what would happen 
if the program was available and walk me through the process 
that each of you would use from your positions to make 
improvements in a home or business and how this, in fact, would 
create jobs on the ground. What kind of jobs are we talking 
about? Mr. Graham.
    Mr. Graham. Certainly. The job opportunities are diverse 
for a program like this. From the electric cooperatives' 
perspective, we are going to--it is going to be in our best 
interest to have an energy auditor on staff, I think, because 
the cooperatives are ultimately responsible for repaying the 
loan, and so that would probably be an immediate job creation 
opportunity for the cooperatives.
    We are going to have to--we would work with contractors 
that exist already, because you have heard about the important 
relationship we already have with contractors that exist. There 
would be a need to promote the program. There will probably be 
a need for somebody to track the costs of the program. There 
are going to be jobs that are created there.
    But we can demonstrate in the project that we had for the 
stimulus program that the immediate jobs are going to be for 
the installation and the contractors. The program that Hoosier 
Energy went through, the contractor that did that work created 
30 full-time jobs just to do that program. So that is just from 
the contractor's perspective. Then you had the wealth that is 
created by those jobs that has the downstream positive effect 
from all of those opportunities.
    Chairwoman Stabenow. Mr. Stewart.
    Mr. Stewart. At my level, I cannot install windows by 
myself. If the workload picks up, obviously, I have to hire 
people to do that. And what goes with that, obviously, is 
windows. I have to buy my windows. I have to go to Home Depot. 
That is the large supplier in the area. I mean, I have to buy 
those things. I have to hopefully hire another auditor and buy 
the equipment, the associated equipment that goes with it, the 
blower doors, the infrared cameras, whatever.
    That is the jobs that I would be creating, in addition to 
administrative positions just within my company. And then 
subcontractors. I do not install furnaces myself, so I 
subcontract it out to a HVAC contractor.
    Chairwoman Stabenow. So you are talking about actually 
purchasing equipment, which means other retailers, which means 
they have been getting equipment from the folks that make it. 
Then you are talking about hiring people to install it and so 
on.
    Mr. Stewart. Absolutely.
    Chairwoman Stabenow. Yes. Mr. Bony.
    Mr. Bony. Thank you, Madam Chair. I did a program called 
the Home Energy Makeover Contest, which is now run nationwide 
by the Electric-Gas Industry Association, the first one being 
done in Colorado, another testament to our great State, I 
guess. We wanted to know how bad the homes were and we wanted 
to know how much employment it would take to put them in order.
    We basically set out in our cooperative newsletter, if you 
think your bills are too high, let us know, and we looked up 
people's bills. We got several thousand folks who entered that 
contest. Now, that is on a meter base of about 40,000 total 
customers. So we had about a five percent response rate just to 
win this home energy makeover.
    So then we had to go through the steps. The first was we 
needed to do the home audit, like Mr. Stewart's company would 
do. So a fellow showed up with the blower door and the thermal 
camera, and I even crawled in a few attics and basements myself 
just to see if it was as bad as I remembered, and it was worse.
    [Laughter.]
    Mr. Bony. The next step is then you have to fix all the 
stuff that does not done right, correctly--disconnected 
ductwork, adding insulation, taking windows out if they have 
totally failed, that kind of thing.
    Then for the particular equipment that we represent, ground 
source heat pumps, somebody has to put the loop in, so that is 
either a fellow on a backhoe with a helper or two guys on a 
drill rig. We had to install the heating and air conditioning 
equipment. That is usually a two-man crew. There was always 
somebody in the back office to answer the phones and process 
the paperwork and do the purchasing. We hired other trades, 
which would include weatherization contractors, insulation 
blowers, electricians, carpenters, sheet rock workers if we had 
to tear out a wall.
    And then upstream, with the job I do now, we had to buy 
products from manufacturers. They had to get those products on 
trucks. Those trucks had to go to distribution warehouses and 
they had to get it to the field.
    So when you summarize all the folks that are involved, my 
personal math said five jobs per 100 homes that got a full 
workover. When I argue this with my friends, they say up to 
seven jobs per 100 homes, so the truth is probably somewhere in 
between that range.
    Chairwoman Stabenow. Very good. Very interesting. Thank 
you.
    Dr. Sanders?
    Ms. Sanders. From SAGE's perspective, we would be able to 
implement energy efficiency technologies into our buildings, 
which would reduce our operating costs, and obviously the 
implementation of those energy efficiency measures would create 
jobs by virtue of the fact they need to be installed.
    But on top of that, though, it is really as we reduce our 
manufacturing costs, it enables us to produce our product at 
lower cost and, therefore, offer it to the market at lower 
prices, which drives market adoption, which allows us to grow 
our business, which allows us to expand our manufacturing and 
hire more people. And it is like a virtual circle.
    On top of that, one of the benefits of energy efficiency 
and developing more sustainable design in your building is that 
you get to have a more comfortable and more productive 
workplace, and that also enables us to attract and retain top 
talent, which is really important for us to remain competitive, 
especially in the global environment.
    Chairwoman Stabenow. Thank you very much.
    And in closing, let me just ask, Mr. Graham, could you talk 
just for a moment and elaborate a little bit more about the 
difference between the existing program and the proposal for a 
Rural Energy Savings Program.
    Mr. Graham. The existing program and----
    Chairwoman Stabenow. What you have been doing and what the 
difference is, why it is good to have the kind of program that 
we are talking about.
    Mr. Graham. Well, the Rural Energy Savings--there are 
existing programs, but right now, they are few and far between. 
The value of this program would allow us to roll it out 
nationwide and there are a lot of efficiencies in that. Our 
national association or the government, if we create a model 
plan that everybody can adopt--there would be unique features 
to every State because every State has different needs weather-
wise and improvement-wise--but if we create a wider range of 
program, then I think we have a much stronger success rate 
opportunity from this. So this is really kind of rolling it out 
nationally rather than leaving it to the individual 
cooperatives to initiate this program.
    Chairwoman Stabenow. Great. Well, thank you very much for 
each of you coming today. This is an important discussion, 
certainly in terms of jobs, which is a major focus for us, as 
well as what we can do in terms of energy savings, and we look 
forward to continuing to work with you on this. Thank you.
    I am going to ask our second panel to come forward. I 
apologize again that we continue to have people coming in and 
out, but it does not negate the interest in the topic by any 
means. We are actually very excited about the opportunity to 
expand upon the great work that is being done, both around 
energy efficiency but also around bio-based products, and this 
is the beginning of that discussion as we look for ways that we 
can be supportive. Please come forward.
    [Pause.]
    Chairwoman Stabenow. Good morning. We are really pleased to 
have all of you here, and as I indicated, we expect colleagues 
coming back from other hearings to join us. We are very anxious 
to hear about the work that you are doing and how we might be 
supportive of that in partnership with you.
    Let me first start with our first panelist and introduce 
Dr. Marc Verbruggen, who is the President and Chief Executive 
Officer of NatureWorks. Prior to this appointment with 
NatureWorks, he was the President of Toho Tenax America and we 
are very, very pleased to have you with us today.
    Our next witness is Dr. Oliver Peoples. Dr. Peoples is the 
founder and Chief Scientific Officer for Metabolix, 
Incorporated, based in Cambridge, Massachusetts, and Dr. 
Peoples is a pioneer in the field of metabolic pathway 
engineering. He holds many patents related to genomics, 
including the first U.S. patent on the expression of PHA genes 
in crop plants, so we welcome you today.
    Our third panelist is Mr. John McIntosh. Mr. McIntosh is 
the Vice President of Sales and Marketing for Signature Crypton 
Carpet in Dalton, Georgia, and most recently was instrumental 
in forming a partnership with the Yellowstone Park Foundation 
which recycles all of Yellowstone National Park's plastics, 
remaking them into Signature's carpet backings. We are pleased 
to have you with us.
    Mr. Hall, who has already been introduced by Senator Brown, 
who we hope is going to be joining us, returning with us, as 
well, but we appreciate Mr. Dennis Hall, who is the Assistant 
Director of the Ohio BioProducts Innovation Center in Columbus, 
Ohio.
    So welcome to all of you and we will start with Mr. 
Verbruggen first.

  STATEMENT OF MARC VERBRUGGEN, PRESIDENT AND CHIEF EXECUTIVE 
          OFFICER, NATUREWORKS LLC, WAYZATA, MINNESOTA

    Mr. Verbruggen. Thank you, Chairwoman. My name is Marc 
Verbruggen. I am the CEO of NatureWorks located in the home 
State of committee member Senator Klobuchar.
    I would like to start with recognizing Senator Nelson. We 
have worked with Senator Nelson for a long time, even going 
back to the time when he was Governor. I also would like to 
thank Senator Johanns from Nebraska for all his great work he 
has done for us.
    We have a large manufacturing plant in Blair, Nebraska, 
where today we directly employ about 100 people and are 
presently investing tens of millions of dollars expanding the 
existing capacity, all because of the large global growth we 
see for our product.
    I would like to start out by talking about not the bio 
industry, but the regular chemical industry. Just some 
statistics. Between 1997 and 2003, the U.S. trade balance, if 
you think about chemicals, has plummeted from a $20 billion 
surplus to a $10 billion deficit. Over that same time period, 
the U.S. chemical industry lost about 100,000 jobs. If you 
wonder where those jobs went, you can look at any statistic and 
see that the Middle East plastic industry is growing by about 
20 percent per year.
    In contrast, if you look at bio-polymers, according to a 
recent jobs report issued about bio, this committee could help 
create about 250,000 direct U.S. jobs in the sustainable 
chemistry sector, which could capture about 19 percent of an 
estimated $1 trillion global bio-chemical market.
    With that broad context, I would like to talk a couple 
minutes about NatureWorks. We were the first company to 
commercialize a broad range of bio-polymers derived 100 percent 
from renewable resources. We engineered and built the first 
ever large-scale bio-polymer plant with the required economies 
of scale to compete head to head with traditional plastics. Our 
proprietary PLA polymer, marketed under the Ingeo brand name, 
can today be found in a wide variety of applications. By the 
way, we were able to put some of them on the desk over there. 
You can look at rigid and flexible disposable packaging, wipes, 
diapers, and in a blended form, an increasing range of semi-
durable products, such as gift cards, mobile phones, computer 
housing, and copier housing. Today, global brands and retailers 
such as Coke, Pepsi, Danone, Nestle-Purina, Toyota, Walmart, 
all have Ingeo products in their global portfolio.
    Beyond NatureWorks, this Ingeo demand is creating jobs and 
spurring new product growth for our customers. Just to name a 
couple, we have large customers in Ohio, like Clear Lam and 
PolyOne, and a large customer in Michigan, Fabrikal. Actually, 
Fabrikal today is one of our largest global customers for our 
product.
    NatureWorks is a typical representative of the broader bio-
polymer industry in that it creates a number of benefits, a 
carbon footprint typically half of traditional plastics. And 
since our products are 100 percent based on renewable 
resources, we have abundantly available feedstock in the United 
States. And based on present feedstock economics, so today's 
oil price versus today's corn price, PLA can compete very well 
with disposable oil-based plastics such as polystyrene or PET 
while creating value for upstream farmers and downstream 
customers.
    Just to put it in perspective, even during the global 
recession, NatureWorks grew about ten percent per year, and out 
of the global recession for the last two years, we have been 
growing by more than 30 percent year over year. Clearly, 
consumers around the world have been driving this demand for 
sustainable cost-effective plastics and global brands see the 
value in low-carbon product launches. Another piece of 
information is that we export more than 50 percent of our 
products outside the United States.
    Because of time, in my written testimony, I gave seven 
different policy principles which could really help driving our 
business forward. Because of time, I will not go into them.
    One thing to keep in mind, though, is that in a global 
economy, the importance of bio-plastics have now been 
understood globally, also. The U.S. today is by far the most 
efficient corn producer, which for us is our feedstock in 
Nebraska, but other feedstocks can also be used such as cane 
sugar or other starches. Therefore, other countries around the 
world are trying to get bio-plastic investment to their country 
to add value to their feedstocks and create jobs over there. 
Just as an example, there is one Southeast Asian country who is 
now providing an incentive package containing a 15-year tax 
abatement for investors in the bio-plastics industry.
    In the end, only the marketplace will decide which 
innovations will succeed. NatureWorks is a very firm believer 
that green plastics, which economics tied to renewable 
resources, will be one of the key growth drivers for the next 
decade, creating numerous green jobs tied to domestic 
feedstocks rather than imported oil.
    Where the U.S. Government can help is to support innovation 
through competitively awarded research funds, but most 
important at this point, to redouble their efforts through tax 
legislation to attract the manufacturing base, because we are 
ready to manufacture. We are not a start-up. We are not an 
emerging technology. We are ready to manufacture today. Other 
countries know that, as well, so there is a competition going 
on. It is very important over the next five years that the U.S. 
positions itself well.
    Thank you.
    [The prepared statement of Mr. Verbruggen can be found on 
page 68 in the appendix.]
    Chairwoman Stabenow. Thank you very much, and we want you 
making your items in America, no question about it, so thank 
you very much.
    Dr. Peoples, welcome.

 STATEMENT OF OLIVER P. PEOPLES, FOUNDER AND CHIEF SCIENTIFIC 
       OFFICER, METABOLIX, INC., CAMBRIDGE, MASSACHUSETTS

    Mr. Peoples. Well, thank you, Madam Chair, and thank you 
other distinguished members of the Senate.
    The creation of long-term sustainable jobs in rural America 
is something I consider to be a personal mission. I have been 
very fortunate to come to this country many years ago and this 
country has been very, very good to me. I have also found the 
creation of jobs in rural America to be one of the most 
rewarding aspects of my career.
    As a much younger scientist, I came to the U.S. from 
Scotland 27 years ago and I went to MIT in Cambridge, 
Massachusetts. One thing led to another and I was very 
fortunate to help found a new company with two of my 
colleagues. The company, Metabolix, will celebrate its 20th 
anniversary in June of next year.
    This company was formed with what was then a revolutionary 
vision and mission: To use the emerging tools of genetic 
engineering to create a new chemicals and materials industry 
based on renewable agricultural resources. This was always 
going to be about rural development. This concept stemmed from 
a basic science project funded by the Office of Naval Research, 
and at the time, the terms ``industrial,'' ``biotechnology,'' 
and ``synthetic biology'' had not been coined. Oil prices were 
under $20 a barrel. We were effectively pioneering in a very 
lonely way what is known today as the bio-based products and 
biochemicals industry.
    In thinking about the message I wanted to convey to today's 
hearing, given that this is not really my forte, I came up with 
three with respect to jobs in rural America. Bio-based products 
and chemicals, as my colleague has said, has the potential to 
revitalize U.S.-based manufacturing and create large numbers of 
sustainable jobs. Continued government investment in industrial 
biotech innovation and R&D providing value to agricultural 
feedstocks is also crucial to long-term sustainable job 
creation. The government can facilitate deployment of this 
emerging industry in the U.S. based on locally developed 
technology by creating demand, both through policy and also 
your purchasing power. You are a very large customer.
    To get back to my story, with the help of a few visionary 
investors, we worked on the technology in our labs in 
Cambridge, Massachusetts with Federal support in the form of 
grants, as we watched the bio-pharmaceutical industry emerge 
around us. When I first came to the U.S., companies like Amgen, 
Genentech, et cetera, were very small start-up companies. 
Today, if you look at Cambridge, it has been completely 
transformed and we have tens of thousands of very high-paying, 
high-quality jobs based in biotechnology.
    In Metabolix's case, given our focus, today we are pleased 
to see that our first production plant with a capacity of 
50,000 tons per year of new bio-plastic is in operation with 
our partner, ADM, in Clinton, Iowa. The Clinton polymer plant 
has over 100 employees with future expansion plans to quadruple 
this. I believe there were over 500 construction jobs during 
its development.
    Well, why Clinton, Iowa? Frankly, there is not too much 
corn in Massachusetts and ADM operates a very large corn wet 
mill in Clinton with enough infrastructure and sugar to supply 
future expanding demand. This speaks to a very fundamental 
advantage of rural areas in the emerging bio economy, which is 
the ability to supply the necessary feedstock for these new 
products and for new production facilities based on 
technological innovation.
    Jobs will always move to the center of competitive 
advantage. That is why the oil and gas is moving to the Middle 
East. In the case of the U.S. Midwest, we have that feedstock. 
We have that foundation. What we need is to get that industry 
going.
    The ADM polymer employees in Clinton are well trained, 
capable, and very hard working with a ``can do'' attitude so 
typical of rural America. Another plus in addition to having 
the feedstocks available for this new industry, we have the 
employment workforce ready to go.
    A compelling feature of bio-based products is the 
downstream job multiplier effect. Based on this new bio-
plastic, we have rejuvenated the plastics industry in 
Massachusetts, which is where, fondly enough, the plastics 
industry actually started before it started to move away. With 
our Telles Bioplastics Center headquartered in the revitalized 
industrial city of Lowell, a former big mill town, very big in 
basically the textile manufacturing before that migrated over 
the sea, as well. Telles is the name of the joint venture with 
ADM. So in this converted textile mill, we have 50 plastics 
scientists, engineers, and commercial staff working and 
processing applications and sales of Mirel Bioplastics. These 
jobs are further multiplied by end users or converters of the 
Mirel Bioplastics into products like bags, films, consumer 
goods, et cetera, et cetera.
    Globally, as my colleague has said, bio-plastics are 
growing very rapidly, over 20 percent per year, with an almost 
unlimited upside potential. The chemicals and plastics 
industries currently account for some ten percent of all 
petroleum used with the global production of plastics being 
around 500 billion pounds. The net value of this is around 400 
billion pounds, if you focus on the lower value end. Simply 
put, replacing a barrel of oil making higher value-added bio-
plastic products and chemicals is as effective at reducing 
dependence on imported oil as a gallon of bio-fuel.
    The technical innovation developed in the U.S. to make bio-
products is an opportunity for the U.S. to recapture its once 
dominant position in the plastics and chemicals markets. At its 
peak in the 1950s, the industry was responsible for over five 
million jobs and a $20 billion positive trade balance. My 
colleague has addressed what has happened in the last decade.
    So with respect to bio-based chemicals and plastics, they 
represent a historic opportunity to reverse these trends 
through the creation of a new generation of renewable, 
sustainable products developed and produced in the U.S. The 
U.S. and in particular rural America has a substantial 
competitive advantage in available arable land, advanced 
agriculture and infrastructure. We can couple this with leading 
innovative industrial biotech, an outstanding labor force, and 
excellence in manufacturing. In addition, we have the potential 
to use all of the infrastructure created for the existing 
petroleum industry to essentially take large volumes of bio-
plastics to market. We basically have the makings of a very 
powerful bio-based products industry to revitalize 
manufacturing in this country.
    Even in its early stages, the bio-based products industry 
accounts for several thousand direct jobs and likely tens of 
thousands economy-wide. Achieving the industry's full potential 
could create tens of thousands, bring jobs into the United 
States within the next five years, and the majority of these 
will be where the feedstock is, which is the rural areas. And 
when I say feedstock, it is not just corn. It is also trees. We 
have a very considerable forest industry in this country also 
in demise due to the lack of need for packaging, mainly because 
we have stopped making things to package.
    As I stated earlier, Federal funding of innovative R&D is 
also crucial to maintaining and building on our advantages. The 
technology behind the success of the Mirel Bioplastics and the 
two other commercial platforms being developed by Metabolix was 
based in part in Federal funding. Using only the bio-plastics 
case, Metabolix translated less than $5 million in Federal 
support into what is now over $300 million in private 
investment in the business. Economic development impacts will 
include the creation of high-valued green jobs, improved trade 
balance, reduction of CO2, and enhanced energy security through 
reduction of dependence on imported foreign oil.
    Chairwoman Stabenow. I have to ask you, Dr. Peoples, if you 
could wrap up. Thank you.
    Mr. Peoples. Thank you.
    [The prepared statement of Mr. Peoples can be found on page 
57 in the appendix.]
    Chairwoman Stabenow. Thank you very much. We very much 
appreciate your testimony.
    Mr. McIntosh?

    STATEMENT OF JOHN McINTOSH, VICE PRESIDENT OF SALES AND 
      MARKETING, SIGNATURE CRYPTON CARPET, DALTON, GEORGIA

    Mr. McIntosh. Thank you, Chairwoman Stabenow and the rest 
of the committee. It is an honor and we are very excited to 
share with you what we are doing in Northwest Georgia. On 
behalf of 1,100 employees of Textile Management Associates that 
include such brands as AstroTurf and SynLawn and Syntec, 
Universal Textiles Technology, and my company, Signature, we 
are excited to share with you how we are growing jobs by the 
utilization of bio-based products.
    Eight years ago, the leadership of our company, led by Tom 
Peeples and Larry Mashburn and Doug Giles of UTT began the 
exploration of bio-based technology to replace existing 
petrochemicals that had been used in polyurethane carpet 
backings for some 30 years. Through their exploration, they 
were led to the United States Soybean New Uses Committee and a 
new and dynamic partnership was made with American farmers.
    Through those efforts, the industry's first high-
performance carpet backing, BioCel, was introduced and has 
become a standard in the specified commercial market sector as 
we know it. Today, BioCel can be found in some of the most 
prestigious installations across the U.S., including the U.S. 
Department of Agriculture and U.S. Patent Offices, walk-off 
matting systems that have just been installed at the Pentagon, 
landscape turf all across the country by SynLawn, AstroTurf 
athletic fields that are found in professional stadiums like 
the St. Louis Rams and also most recently in the University of 
Cincinnati baseball field, and two home runs in Kansas at the 
Kansas Jayhawks baseball fields and the K State Wildcat 
football field will now all be scoring on soy in the future.
    All totaled, UTT and through its use of polyols extracted 
from American-grown soybeans have displaced literally millions 
of pounds of foreign-dependent petrochemicals each year. By 
depending on U.S. agriculture, we are depending on the U.S. 
chemists and chemistry. More importantly, the use of soy in our 
backing technologies has shown no increase in our cost, while 
in the manufacturing process improving performance resulting in 
a cost-neutral environmentally responsible solution for our 
customers.
    This has driven great demand for our product over the last 
three to four years, and that is very important, because over 
that time in Northwest Georgia, our economy, like many of the 
manufacturing places across the country, have been hit hard 
through the economic downturns, with our unemployment rates 
hovering around 11 and 12 percent. Through these tough times, 
Textile Management Associates and UTT and our brands, by 
utilizing bio-based technologies, have actually been able to 
grow our workforce by some ten percent, and we are currently 
investing around $3 million in creating our own plant to create 
our own polyols to expand into other markets, as well, 
continuing to lessen our industry's dependence upon foreign 
oils.
    One of the things that I have learned is that success draws 
success and innovation draws innovation. The USB introduced us 
to an incredible gentleman, Jim Evanoff, who is an 
environmental protection specialist at Yellowstone National 
Park where he had a little problem, where 43 tons of plastics 
were going overseas every year. This was not acceptable. We 
partnered with Yellowstone and Four Corners Recycling, CPE, in 
South Carolina and the USB to form a partnership where we now 
take all of these plastics back to Dalton, Georgia, and recycle 
them back into our products.
    My company, Signature Crypton Carpet, was so inspired by 
this, we created an entire line devoted specifically to the 
inspiration of the natural order of nature in Yellowstone 
National Park. We formed a partnership with Aquafil, a yarn 
provider that is now providing us with nylon yarns that are 100 
percent recycled content. Combined with the BioCel products, we 
now have the industry's leading 82 percent green by weight 
products. We have displaced 82 percent of either petrochemicals 
or virgin petrochemicals out of our products while increasing 
performance 30 percent.
    We are proud that the first installation went into the Snow 
Lodge just two months ago with plastics out of the Park.
    Having felt a need that the industry needs to adopt a more 
socially responsible position, as well, we partnered with the 
Foundation to say that 50 cents a square yard of every product 
sold out of that collection will go back into the Yellowstone 
Park Foundation that will help protect and preserve one of 
America's most pristine natural resources.
    We firmly believe that if you always do what you have 
always done, that you are always going to get what you have 
always gotten. It takes great courage to create change. Our 
leadership changed 30 years of a mindset on how to make a 
petrochemical product and other new innovations inspired by 
such products like this will increase awareness, develop 
strategic partnerships, and we will take back our leadership in 
the world by doing well by doing good.
    We thank you for this opportunity to share these stories 
with you and look forward to questions.
    [The prepared statement of Mr. McIntosh can be found on 
page 55 in the appendix.]
    Chairwoman Stabenow. Thank you very much for your terrific 
work.
    Mr. Hall, welcome.

STATEMENT OF DENNIS HALL, ASSISTANT DIRECTOR, OHIO BIOPRODUCTS 
               INNOVATION CENTER, COLUMBUS, OHIO

    Mr. Hall. Chairwoman Stabenow, members of the Senate 
Agriculture Committee, thank you for the opportunity to speak 
today. I would also like to especially thank Senator Sherrod 
Brown for inviting me and his very kind introduction. It is a 
privilege to come before you as a member of the Ohio State 
University, the Ohio BioProducts Innovation Center, and also as 
a farmer, to talk about the amazing potential of bio products 
and bio-based manufacturing.
    My history is to have been doing this in Ohio, where we 
have as our number one industry in the State agriculture. But 
we also are very fortunate to have the number one polymer State 
in the country in terms of polymer employment and a very strong 
specialty chemical industry. And so the Ohio BioProducts 
Innovation Center was really born out of the idea of helping 
our polymer and chemical companies innovate by using bio-based 
materials from Ohio farms.
    We have some amazing stories of companies that have been 
successful, some stories of products that we are just close to 
seeing the commercial scale, and a big line of entrepreneurs 
and small and medium-sized companies that are eager to get to 
that next level. So some of our stories.
    First is a young woman by the name of Cathy Horton who 
helped to create a company called Nutek. It is a line of 
cleaners and lubricants made from soybeans, the soybeans grown 
in Northwest Ohio, processed by Mercer Landmark and a farmer-
owned co-op and converted into a wide line of cleaners and 
lubricants.
    Another product that most people from farm country are 
familiar with but did not really know is a composite known as 
Envirez. It is manufactured by Ashland Specialty Chemicals, and 
where people see that product is if they see a John Deere 
combine or tractor. The green panels that are on those combines 
and that farm machinery is actually a product of Ashland 
Specialty Chemicals.
    A product that we are very excited about, think has great 
potential but is still in a very early start-up phase is a 
natural fiber composite. We work with a company called the 
Natural Fiber Composite Corporation that has a proprietary 
technology to infuse the fiber into the plastic and make a 
composite that competes very nicely with fiberglass, being 
lighter in weight, less abrasive for manufacturers, lower in 
cost, and comparable in performance.
    And then one of the other stories that I am so excited to 
share about is we have a company that is a start-up company 
that is converting swine manure into an asphalt substitute for 
roofing applications. Yes, we are making shingles from swine 
manure.
    So we do not need to put biomass in the ground and cook it 
for a couple thousand years in order for us to make products 
out of it. One of the reasons that I think this is such an 
incredible opportunity for the United States is this single key 
statistic. Three-point-four percent of all the oil we use today 
has a value as petrochemicals equal or closely equal to 70 
percent of the oil we use today for transportation fuels. In 
other words, only 3.4 percent of all of our U.S. oil is used to 
make plastics, adhesives, paints, coatings, cleaners, 
detergents, those kinds of high-value products, and those 
products are equal in value to the 70 percent of the oil we use 
today for transportation fuel.
    It is that key point, the value-added opportunity of taking 
our wonder biomass materials and converting them into specialty 
goods, specialty materials, much the kinds of things that my 
panelists here have already talked about, that I think is an 
incredible opportunity.
    There is great demand out in the Midwest and across the 
country for these kinds of businesses, but we find that many of 
our companies very much struggle with the opportunity to hit 
that scale-up phase. It is very easy for them to make a 
beaker's worth of quantity, but when they go to make a barrel's 
worth of quantity for product testing that they run into 
trouble.
    I have outlined in my testimony other suggestions that I 
think are appropriate, but I will just conclude with saying 
that I am very honored to be here today. Thank you, Senator 
Stabenow, for this opportunity and I look forward to doing 
anything I can to help advance jobs in rural America and really 
developing the supply chain that can provide up to a trillion 
dollars' worth of material for our country.
    [The prepared statement of Mr. Hall can be found on page 49 
in the appendix.]
    Chairwoman Stabenow. Thank you very much, and thank you to 
each of you. This is an area that I find very exciting, what 
you are already doing, and the question for our committee is 
what can we do to help take it to the next level. How can we be 
supportive, both in terms of supporting jobs for rural America 
and opportunities in terms of markets, continuing value-added 
processes, and so on for our farmers.
    Let me start, Mr. Hall, with what you were just saying as 
you were concluding your testimony in terms of being able to go 
to the next level and what happens in terms of 
commercialization. What has been the most effective tools and 
strategies that you have found, and are there things that we 
should be doing to help companies get through what is commonly 
called the ``valley of death,'' where new technologies struggle 
to get the financing to be able to commercialize and move 
forward.
    Mr. Hall. Yes. That is very common problem for small start-
up companies and there are several strategies for how we can 
help them, how we as a government can help them. First, I would 
say that one of the strategies that the Ohio BioProducts 
Innovation Center uses is to surround that start-up company 
with a cluster of other companies that both precede them in the 
supply chain and are interested in purchasing their products. 
In that economic ecosystem, we can help to create the 
relationships that can help them move forward.
    But many of these companies need assistance with that next 
phase, that pre-commercial quantities, being able to provide 
sufficient material that those customers can effectively 
evaluate that material and see if it is going to work for them. 
We think that in most cases, once they have had the chance to 
try out these bio-based products, they are going to find them 
superior and beneficial in many ways to their line of products. 
And so being able to access that is a very big deal.
    I am struck by the Biomass Research and Development 
Initiative Program that is a joint program between the U.S. 
Department of Agriculture and the Department of Energy. In 
2009, there were 800 pre-proposals submitted requesting funds 
for that program, of which there were 22 grants awarded. The 
next year, people saw that and said, well, do I take the effort 
to write these big proposals, submit them to the USDA or to 
this program, only to find out that I am one of a thousand and 
the chances of me winning this award are so slim? The next 
year, the number of pre-proposals fell to 320 and eight grants 
were awarded.
    The BRDI program is a model program. It is just 
underfunded. And it really would help so many companies to be 
able to get the sufficient quality and quantity of materials 
out to potential customers to address their opportunities.
    Chairwoman Stabenow. Thank you very much.
    Mr. Verbruggen, I noticed as you talk about Blair, 
Nebraska, that this is a population of about 7,500 people in a 
county seat which has a population of about 19,000. So this is 
a rural community. I also understand that you have--NatureWorks 
sources the field corn for the PLA plastic produced within 
about 300 miles of Blair. So from a jobs standpoint, again, 
today, could you talk about the advantage of--a little bit more 
about the advantage of putting the plant where you have in a 
rural community in terms of quality of workforce, access to 
feedstock, and so on. Why does this make sense in the context 
of rural communities?
    Mr. Verbruggen. From that point of view, we are actually 
not too different from your traditional petrochemical company. 
When I said earlier on that a lot of the traditional chemical 
jobs are moving to the Middle East, it is they just follow 
their feedstock. We are doing exactly the same. So if your 
feedstock is in Nebraska or Iowa, you are not going to build a 
plant in New York. I assume none of the New York Senators are 
here.
    So, truly, I think if you look at bio-plastics, 
biopolymers, you will see those plants very close to your 
feedstock, and the reason is very simple. Transporting 
feedstock is expensive. If you look at our variable cost, I 
would say well over 50 percent of our variable cost is 
feedstock. So it is to be expected that wherever you have 
vegetables oils or corn or any other feedstock, as my colleague 
here said, whatever feedstock you are going to use, that is 
where you are going to see the plants.
    And as I indicated before, it is important here to say that 
this is no longer technology development. It is no longer early 
innovation. We are way beyond that. So we are, indeed, ready to 
build plants wherever the feedstock is in North America.
    Chairwoman Stabenow. Thank you very much.
    Mr. McIntosh, could you talk a little bit about the 
partnership with the United Soybean Board to replace petroleum-
based products and develop the new technologies in bio-based 
materials.
    Mr. McIntosh. I will. A long time ago, I learned that those 
who say it cannot be done are usually interrupted by somebody 
doing it. The USB is one of those organizations. Our 
partnership with them has led to some pretty amazing 
advancements within our industry that was somewhat stuck in the 
status quo, and I think some of the most difficult things for 
manufacturing is moving the status quo. That requires 
investment. That requires vision. But most of all, it requires 
courage. And everyone that we have been associated with with 
the USB continues not to rest on, as our founder and owner, Mr. 
Peeples, has taught me, you cannot go pick yesterday's 
blackberries, and they go and they are constantly looking to 
what is next and what is next.
    One of the things that I have seen most about today, the 
infrastructure is in place. We now have to go execute and 
educate and inspire, because I genuinely believe, like they do, 
that everyone, given the opportunity to do the right thing, 
will choose that. If we can provide performance and value and 
environmental responsibility, that is a win-win and that is 
what everyone is looking for. And they have been a great 
inspiration for us.
    Chairwoman Stabenow. Thank you very much.
    Senator Thune?
    Senator Thune. Thank you, Madam Chairwoman, and I want to 
thank our panel for their insights.
    I am a big fan of science and technology and the advances 
that have been made there in terms of energy issues. I think it 
has dramatically changed and continues to change agriculture in 
rural America, and I think the question is how do we in this 
next farm bill utilize reduced dollars that are available to 
fund the necessary research to promote the increased 
development and utilization of bio-based products and ensure a 
continued role for agriculture in sustainably lessening our 
dependence on foreign oil. And that is going to be extremely 
difficult because of the budgetary constraints that we are 
facing, and that is a challenge that we are going to have to 
deal with.
    But it is pretty clear to me, Madam Chairwoman, that based 
on the testimony that we received from the witnesses today here 
that they are already moving rural America forward with a lot 
of these innovative, common sense approaches to growing 
America's potential and to securing its sustainability. Bio-
based products hold an exciting future for agriculture and 
potentially can help the United States to recapture chemicals 
and manufacturing jobs that we have been hemorrhaging to 
foreign countries.
    I just have a couple of questions, if I might, in that 
vein, and I would like to direct this one to Dr. Peoples. What 
do you think that the plastics and manufacturing industries in 
this country need to shift manufacturing back to the United 
States?
    Mr. Peoples. You know, fundamentally for the plastics 
manufacturing in this country, it is really about what is the 
opportunity and what is in it for them, quite frankly. And I 
think what is in it for them is really a whole new feedstock, 
which is basically the agricultural resource plus the 
technology that enables it to be converted into plastics that 
they can then use, as NatureWorks has ably demonstrated. And so 
I think it is really about them recognizing that there are 
materials coming along which can do the job, that they are bio-
based, that they are made in America based on American 
feedstocks, using American employees, and I think it is a 
matter of them just recognizing that that is the case.
    In terms of what the Federal Government can do, my own view 
is I think you can help to create the demand, the demand for 
bio-based content. There are rules in place at the USDA for 
that already in some areas and I think that is an area where 
you can be very effective in helping to deal with this industry 
in the United States.
    Senator Thune. Do any of the tax policies need to be 
changed?
    Mr. Peoples. I really do not--I am not really able to 
comment----
    Senator Thune. You do not dabble in that?
    Mr. Peoples. I do not dabble in that. I am a scientist and 
I like to----
    [Laughter.]
    Mr. Peoples. --to stay within my comfort zone, which is I 
am happy to talk about the next great discovery, but it is 
really not my place to talk about tax policy.
    Senator Thune. Right. Yes.
    Mr. Peoples. My colleague can perhaps comment.
    Mr. Verbruggen. Thankfully, I am not a scientist, so I can 
talk about it.
    [Laughter.]
    Mr. Verbruggen. No, I think what is very important right 
now is to get for the bio-plastics industry something like a 
production tax credit initiated for two reasons. If I look at 
some of my colleagues, which are early start-ups, a production 
tax credit can be the difference between being non-competitive 
compared to traditional plastics in that early stage of 
development, versus being more competitive and therefore 
quickly helping the industry displacing traditional plastics, 
traditional chemicals.
    For a company like myself, like ourselves, NatureWorks, 
having a U.S. tax credit in place will make the U.S. more 
competitive versus foreign governments. I mentioned in my 
testimony that in a Southeast Asian country today which I will 
not name, you get a 15-year tax abatement for bio-plastics 
investment. We are working in a global economy. We are working 
in a global business. So the U.S. for getting investments in 
the United States will compete with those types of countries.
    So it will do two things, the production tax credit. It 
will help companies like NatureWorks, who are established, who 
are selling around the world, investing in the United States 
rather than somewhere else. For start-ups, it will make them 
more competitive out of the gate and, therefore, will help them 
grow quicker.
    Senator Thune. Let me direct this question, if I might, to 
Mr. McIntosh. What commodity crop do you see as having the most 
potential to produce bio-based products?
    Mr. McIntosh. There are two within the carpet industry 
right now that are pliable for what we do in backings, that 
being soy and also corn, poly-light [phonetic] gasses out of 
corn. Our research has shown and our performance has shown that 
soy-based products are performing better in our backing 
systems. Being in the commercial end of our business, neither 
provide the tensile strength for a face fiber quite yet. The 
USB is funding and supporting a lot of research to be able to 
do that, because right now, the most embodied energy of a piece 
of carpet is in its fiber with nylon. So we are working hard to 
do that. But right now, it has been the soy-based products.
    Senator Thune. Do you see that changing?
    Mr. McIntosh. You know, I would need to check with our 
chemists, but I know everything that we are doing right now, 
our investment in our own plants to create polyols, I do not 
see it changing any time soon.
    Senator Thune. Thank you, Madam Chair. Thank you all very 
much.
    Chairwoman Stabenow. Thank you very much.
    Let me just conclude by asking each of you, and we have 
begun to really talk about it a bit in terms of a production 
tax credit, but if there was one thing that we could do to help 
move this forward so that we are really developing large-scale 
production of bio-based products, what would that be? Dr. 
Verbruggen.
    Mr. Verbruggen. Let me start with this comment. It is 
something very obvious. I think the USDA, about, I think, six 
months ago, it might be a little bit longer, came out with a 
``BioPreferred'' label, and I think for the first time, 
consumers all over America have now the option to choose 
between a traditional packaging material or a bio-plastic. And 
again, you see a lot of them around here. That by itself will 
create demand, because you could go in a Walmart a year ago and 
see our products everywhere, but often very difficult to 
recognize. Now, with that label on there, with the stamp of the 
U.S. Government on it, I think that will really spur demand. 
With demand come jobs, comes investment. So support for that 
particular program is going to be very important, for example, 
if you look at the next farm bill.
    Chairwoman Stabenow. Thank you very much, Dr. Peoples?
    Mr. Peoples. I would reiterate that and also indicate that 
I think there is a role in this for small businesses in terms 
of getting something similar to the set-aside program for small 
businesses so that small businesses can compete in this area. 
This is a very capital-intensive industry and it is very 
difficult for small businesses to participate in that way. So I 
would recommend that on top of what Marc said.
    Chairwoman Stabenow. Thank you, Mr. McIntosh?
    Mr. McIntosh. I think a purchase order for the 500,000 
buildings in the U.S. Government that represents three billion 
square feet would be a good start.
    Chairwoman Stabenow. A good place to start.
    Mr. McIntosh. Yes, ma'am. But seriously, I was going to 
mention the USDA BioPreferred program. What we are dealing with 
is education, is educating the consumer that there is a better 
alternative, a more not only environmentally responsible, but 
socially responsible, as well, that improves performance.
    So just the fact that I get to sit here from Dalton, 
Georgia, to be able to share with you these exciting things is 
somewhat overwhelming in itself. But our goal and I think where 
the government can help is in the GSA contracts which we are 
going to be taking the Yellowstone project to, the farm bill 
act that has already been placed. So all of these things are 
helping. But what I have learned is that it takes time. It is a 
crock pot, it is not a microwave fix. And it is going to take 
more and more people like Yellowstone that are in a leadership 
position, and everyone realizes that, the first national park 
and does incredible work.
    And so those are the type of things that will help because 
it starts all the way--our wellhead is a farmer's field and it 
goes to an end product that is never put in a landfill. And so 
throughout the entire chain, from installers to farmers to mill 
workers to whomever touches it, maintenance people and things 
of that nature, just the exposure and the education to be able 
to create demand.
    Chairwoman Stabenow. Thank you, Mr.Hall?
    Mr. Hall. The Federal Government does a lot of really good 
things right now, and the Hatch Act that provides for research 
funding, the Smith-Lever which provides for extension, outreach 
programs, are very important, and we would not have an Ohio 
BioProducts Innovation Center in Ohio if we had not had those 
funds.
    But I think the current farm bill has one excellent program 
that--one model program that misses the mark for bio products, 
and that is the Bio-Refinery Assistance Program, Section 9003. 
It misses the mark in two ways. The first is that its focus is 
solely on advanced bio-fuels and we are not able to use this 
kind of program to target these much more higher value-added 
products, the plastics and the advanced materials.
    And the second thing is the existing paradigm is that of 
rural development for that program, rural economic development, 
not agricultural economic development. We see great alliances, 
great opportunities to partner with major corporations that 
happen to be in the city, you know, and being able to more 
fully exploit that opportunity of connecting the agricultural 
resources to companies like a Goodyear or an Emery 
Oleochemicals would be very valuable, who happen to be in Akron 
and Cincinnati.
    Chairwoman Stabenow. Well, thank you very much to all of 
you. This is an area, I think, of really exciting opportunity 
for our country and certainly for rural America and we want to 
thank you for being here as a part of this.
    I would say that any additional questions for the record 
should be submitted to the Clerk five business days from today, 
which is Thursday the 21st of July at 5:00 p.m.
    Let me also say that we, at our very first hearing back in 
February, gave an overview of agricultural and rural economies 
and the importance of jobs. We started from the perspective of 
jobs, 16 million people working in rural America in 
agriculture. And some, I think, off this committee were 
actually surprised that our agricultural economy is leading the 
nation's economic recovery, which is, in fact, true, and we 
want to continue to stress that and continue to lead that. But 
agriculture will continue to lead the country in creating new 
opportunities in small towns in rural communities across 
America with all of our efforts.
    We heard today we can spur job growth, reduce our 
dependence on foreign oil, and add value to farmers' 
agricultural products by supporting innovations such as the 
emerging bio-based manufacturing sector and encouraging energy 
efficiency improvements through legislation like the Rural 
Energy Savings Program. We are going to continue in the weeks 
and months to focus on these and other issues that will 
strengthen our economies in rural America and ensure that 
American agriculture continues to thrive, and I think this is a 
great opportunity for us to work together to make sure that 
happens.
    So thank you very much and the meeting is adjourned.
    [Whereupon, at 11:26 a.m., the committee was adjourned.]
      
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