[Senate Hearing 112-912]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-912
 
    OVERSIGHT ON DOMESTIC RENEWABLE FUELS: FROM ETHANOL TO ADVANCED 

                                BIOFUELS
=======================================================================


                                HEARING

                               BEFORE THE

                              COMMITTEE ON

                      ENVIRONMENT AND PUBLIC WORKS

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 13, 2011

                               __________

  Printed for the use of the Committee on Environment and Public Works




       Available via the World Wide Web: http://www.fdsys.gpo.gov

                               __________




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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                      ONE HUNDRED TWELFTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware           DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey      JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland         JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island     LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico                MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York

       Bettina Poirier, Majority Staff Director and Chief Counsel
                 Ruth Van Mark, Minority Staff Director



                            C O N T E N T S

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                                                                   Page

                             APRIL 13, 2011
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Inhofe, James M., U.S. Senator from the State of Oklahoma........     2
Johanns, Hon. Mike, U.S. Senator from the State of Nebraska......     3
Lautenberg, Hon. Frank R., U.S. Senator from the State of New 
  Jersey.........................................................     5
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware, 
  prepared statement.............................................   132

                               WITNESSES

Vilsack, Thomas, Secretary of Agriculture, U.S. Department of 
  Agriculture....................................................     6
    Prepared statement...........................................     9
    Responses to additional questions from:
        Senator Carper...........................................    26
        Senator Inhofe...........................................    28
McCarthy, Gina, Assistant Administrator, Office of Air and 
  Radiation, U.S. Environmental Protection Agency................    35
    Prepared statement...........................................    38
    Responses to additional questions from:
        Senator Inhofe...........................................    44
        Senator Carper...........................................    45
Kelly, Henry, Acting Assistant Secretary for Energy Efficiency, 
  Office of Energy Efficiency and Renewable Energy, U.S. 
  Department of Energy...........................................    46
    Prepared statement...........................................    48
    Responses to additional questions from:
        Senator Inhofe...........................................    52
        Senator Carper...........................................    53
McAdams, Michael J., president, Advanced Biofuels Association....    64
    Prepared statement...........................................    66
    Responses to additional questions from:
        Senator Carper...........................................    74
        Senator Inhofe...........................................    74
Koninckx, Jan, global business director, Biofuels, Dupont Applied 
  Biosciences, E.I. Dupont De Nemours and Company, Inc...........    76
    Prepared statement...........................................    78
    Responses to additional questions from Senator Carper........    83
Kiser, Kris, executive vice president, The Outdoor Power 
  Equipment Institute............................................    86
    Prepared statement...........................................    88
    Responses to additional questions from:
        Senator Inhofe...........................................    99
        Senator Carper...........................................   101
Faber, Scott, vice president of Federal Affairs, Grocery 
  Manufacturers Association......................................   103
    Prepared statement...........................................   105
    Responses to additional questions from:
        Senator Carper...........................................   108
        Senator Inhofe...........................................   109
Coleman, Brooke, executive director, Advanced Ethanol Council....   111
    Prepared statement...........................................   113
    Response to an additional questions from Senator Carper......   125

                          ADDITIONAL MATERIAL

Overview, Impacts of Mid-Level Ethanol On-road and Non-road 
  Engines and Equipment, prepared by Dr. Ron Sahu, May 15, 2009..   133
Letters:
    Several organizations regarding Petition for Rulemaking Under 
      the Clean Air Act to Require the Continued Availability of 
      Gasoline Blends of Less Than or Equal to 10 percent Ethanol   155
    Simonsen, Gerald, chairman, Board of Directors, National 
      Sorghum Products...........................................   161
Statements:
    Cox, Craig, senior vice president for Agriculture and Natural 
      Resources, Environmental Working Group.....................   164
    Gilligan, Dan, Petroleum Marketers Association of America 
      (PMAA).....................................................   169
    National Association of Convenience Stores (NACS)............   171
    Feraci, Manning, vice president of Federal Affairs, National 
      Biodiesel Board............................................   178
    Elam, Thomas, president, FarmEcon LLC, on behalf of the 
      National Turkey Federation.................................   183


    OVERSIGHT ON DOMESTIC RENEWABLE FUELS: FROM ETHANOL TO ADVANCED 
                                BIOFUELS

                              ----------                              


                       WEDNESDAY, APRIL 13, 2011

                                       U.S. Senate,
                 Committee on Environment and Public Works,
                                                    Washington, DC.
    The full committee met, pursuant to notice, at 10:05 a.m. 
in room 406, Dirksen Senate Office Building, Hon. Barbara Boxer 
(chairman of the committee) presiding.
    Present: Senators Boxer, Inhofe, Lautenberg, Whitehouse, 
Udall, Merkley, Johanns and Boozman.

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

    Senator Boxer. Welcome to this important hearing.
    This hearing will focus on the Federal Government's efforts 
to increase our Nation's energy independence by expanding our 
Nation's production of renewable fuels. President Richard Nixon 
recognized the need to reduce our dependence on foreign energy 
when he created Project Independence. That was in 1973. We are 
still working at it. It goes on.
    In 2005, Congress set goals of production of renewable 
fuels and in 2007 Congress expanded the goals. Congress also 
called for the increased use of fuels such as cellulosic 
ethanol and advanced biofuels which can turn waste into fuel.
    Just this March, President Obama redoubled the Federal 
Government's commitment to energy independence and the use of 
renewable fuels when he issued the blueprint for a secure 
energy future. When he released this study, he emphasized our 
Nation must discover and produce cleaner renewable sources of 
energy that also produce less carbon pollution which is 
threatening our climate. That is his quote.
    The President also highlighted the support that our armed 
forces have for the use of biofuels. The Air Force has the 
Raptor 22, a jet that flies faster than the speed of sound 
using a fuel blended with biofuels. The Air Force has a goal of 
getting half of its domestic jet fuel from alternative sources.
    I support the use of advanced and cellulosic biofuels and 
believe the Federal Government should be developing stronger 
initiatives to promote their use.
    Today's oversight hearing on the Renewable Fuels Standard 
will help us better understand the current status of these 
critical issues and I look forward to hearing from our 
witnesses.
    I am also happy to call on my friend, my Ranking Member.

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

    Senator Inhofe. Thank you, Madam Chairman. This is one of 
the times when I can just say I agree with you and then not 
have an opening statement.
    Senator Boxer. Could you say that again? Could you say that 
again?
    [Laughter.]
    Senator Boxer. Because it sounds so great.
    Senator Inhofe. Do not get your hopes up.
    [Laughter.]
    Senator Inhofe. First of all, Secretary Vilsack, I am very 
happy to have you here. I am also from Iowa, so I know of the 
background. I know that the subject here today is going to be 
pretty much, it is not partisan, but it is geography, and so we 
understand that.
    First of all, I want to mention that there is a lot of 
discussion on the corn-based ethanol. I have legislation that 
I, we have not started trying to get co-sponsors and all that, 
but it is to opt out. What it does, to opt out a State has to 
pass a bill, signed by the Governor, stating its choice.
    It does not mean that they cannot use, if they want to use, 
all the corn ethanol or anything else they want to use. But it 
means, as is in the case of my State of Oklahoma today, not in 
Virginia, not in Maryland, not in the District, but in 
Oklahoma, that if you want to use clear gas, as it is called, 
without any of the corn ethanol, you can do it.
    So, it does not, it would be very hard to argue against it 
because you are giving people the choice. You can either have 
it or you do not have to have it.
    I think with the passage of the 2007 Energy Bill that 
Congress blundered in pushing too much of the corn ethanol too 
fast, and the ethanol has serious problems including its 
compatibility with existing engines and its environmental 
sustainability as well as its transportation infrastructure 
needs.
    I think we have some witnesses that we are going to be able 
to get some answers from on the next panel, and you may want to 
address this also, that the overly aggressive ethanol mandate 
has led to a particularly pronounced consumer backlash, not 
just in my home State, but I suspect all around. You have a lot 
of these engines, small engines, farm engines, that can run on, 
they can make it on maybe E10 but not on anything more than 
that. So, that is a problem that we have.
    I recognize people like my very good friend, Senator 
Johanns, is from a corn State. Oddly enough, I am from a corn 
State, too. But I would like to have the people in my State of 
Oklahoma have that choice. So, we are going to be having a 
chance to talk about this as opposed to just doing away with 
subsidies, just offering the choice.
    Now, I think that we are for all of the above. We have to 
do it. I do not talk about this in terms of our dependence on 
foreign countries for our ability to produce energy because our 
problem is we have all the energy we need in America, but 
politically we cannot get at our energy. But that is not really 
the subject of this thing today.
    So, I look forward to the hearing and I think we will find 
a lot of agreement.
    [The prepared statement of Senator Inhofe follows:]

       Statement of Hon. James M. Inhofe, U.S. Senator from the 
                           State of Oklahoma
    I'd first like to thank the Chairman for holding this timely 
hearing. I'm working on introducing a simple bill that responds to the 
increasing call for more consumer choice to purchase ethanol-free 
gasoline. Simply put, my bill is a compromise that allows a State to 
opt out of the corn ethanol portions of the renewable fuel standard--if 
you want to use ethanol you can use it.
    To opt out, a State must pass a bill, signed by the Governor, 
stating its choice. The opt-out would be recognized by the 
Administrator of the EPA, who would then reduce the amount of the 
national corn ethanol mandate by the percentage amount approved by the 
State in question.
    This legislation would allow a State to opt-out of only the corn 
ethanol mandate. It would not affect other portions of the renewable 
fuel standard, such as the cellulosic or advanced biofuels volumetric 
requirements.
    With the passage of the 2007 energy bill, I believe Congress 
blundered in pushing too much corn ethanol too fast. Ethanol has 
serious problems, including its compatibility with existing engines, 
its environmental sustainability, as well as its transportation and 
infrastructure needs. These problems have galvanized an unusual 
coalition against corn-based ethanol. Opponents range from Friends of 
the Earth and the Environmental Working Group to the National Marine 
Manufacturers Association and the National Petrochemical and Refiners 
Association.
    This overly aggressive ethanol mandate has also led to a 
particularly pronounced consumer backlash in my home State of Oklahoma, 
where one convenience store chain experienced a 30 percent drop in fuel 
sales once they began selling fuel blended at E-10 levels.
    Despite the drawbacks of today's corn-based ethanol mandates, I do 
support a role for ethanol and other biofuels. The idea that we can 
grow and produce biofuels all over the country_not just in the Midwest_
is something worth pursuing_and that's why I support research into a 
variety of advanced feedstocks and alternatives such as algae, bio-
butanol, cellulosic, natural gas, and other options.
    I believe America's energy supply should be stable, clean, diverse, 
and affordable. Continued development of home-grown biofuels translates 
into energy security and creates jobs and economic growth in America.
    On that note, I look forward to working with each of you to explore 
the unintended consequences of this mandate and how we can improve the 
Renewable Fuel Standard.

    Senator Boxer. Well, that is good.
    Senator Johanns, welcome.

STATEMENT OF HON. MIKE JOHANNS, U.S. SENATOR FROM THE STATE OF 
                            NEBRASKA

    Senator Johanns. Madam Chair, thank you very much.
    Mr. Secretary, it is good to see you again.
    I appreciate the opportunity to just offer a few words 
before we get started today. I think, as everybody knows, I 
have long been a supporter of renewable energy sources, 
including ethanol specifically. As a former Governor, I worked 
to create new incentives for ethanol production, did all I 
could to increase the ethanol blend in gasoline to address the 
environmental concerns which we oftentimes forget related to 
MTBE use. As Secretary of Agriculture, I worked with others in 
the Cabinet to promote renewable energy.
    Agriculture is a part of the solution, not only for the 
short-term, but for the long-term domestic energy needs. 
Renewable fuel production increases our energy security and 
decreases our dependence on foreign oil.
    Currently, around 60 percent of our oil is imported from 
other countries. We are very energy dependent. We all agree 
that we have to take steps to become less reliant on other 
nations, for our energy needs. Renewable fuel production, 
including ethanol, can play a role.
    The production and use of 10.6 billion gallons of ethanol 
in 2010 displaced about 445 million barrels of oil and it kept 
$34 billion in the United States' economy. We have invested in 
domestic renewable fuels, we have built the infrastructure, we 
have hired good people and it has been a boost to our rural 
economy.
    In 2010, the ethanol industry supported more than 400,000 
jobs in the United States. It contributed $53.6 billion to the 
National Gross Domestic Product and generated $11 billion in 
tax revenues.
    Nebraska is the second largest producer of ethanol in the 
United States. Currently, the State has 24 plants with a 
combined production capacity of over 1.8 billion gallons 
annually. These plants represent $1.4 billion in capital 
investment and employment of roughly 1,000 Nebraskans. While 
ethanol production helps sustain profitability for corn 
producers, its byproduct, distiller grains, adds value to our 
livestock sector.
    Today, the renewable fuels industry is at a critical point. 
That is why I appreciate this hearing, Madam Chair. We need to 
do everything we can to look at the whole picture here because 
I think that we all agree that what we are doing here can have 
a profound impact on our energy dependence on other countries 
in the future.
    With that, I will look forward to the hearing and the 
opportunity to ask questions.
    Thank you.
    [The prepared statement of Senator Johanns follows:]

Statement of Hon. Mike Johanns, U.S. Senator from the State of Nebraska
    Thank you, Chairman Boxer, for calling this important hearing 
today. Today's hearing focuses on a topic which is important to many in 
my home State and across our country. I have long been a supporter of 
renewable energy sources, including ethanol.
    As Governor, I worked to create new incentives for ethanol 
production and increase the ethanol blend in gasoline to address 
environmental concerns from MTBE use.
    As Secretary of Agriculture, I worked with others in the Cabinet to 
promote renewable energy as a way to reduce our dependence on foreign 
oil. Agriculture is part of the solution not only for the short-term 
but for our long-term domestic energy needs. Renewable fuel production 
increases our energy security and decreases our dependence on foreign 
oil. Currently, around 60 percent of our oil is imported from other 
countries, many with which do not share our values. We have to take 
steps to become less reliant on these nations for our energy needs and 
more reliant on domestic sources.
    Renewable fuel production, including ethanol, can play a role. The 
production and use of 10.6 billion gallons of ethanol in 2010 displaced 
over 445 million barrels of oil and kept $34 billion in the U.S. 
economy. We've invested in a domestic renewable fuels industry. We've 
built infrastructure. We've hired good people.
    Ethanol production boosts rural economies. In 2010, the ethanol 
industry supported more than 400,000 jobs in the United States, 
contributed $53.6 billion to the national Gross Domestic Product, and 
generated $11 billion in tax revenues. Nebraska is the second-largest 
producer of ethanol in the country. Currently, the State has 24 
operational ethanol plants, with a combined production capacity of over 
1.8 billion gallons annually. These plants represent over $1.4 billion 
in capital investment and provide employment for roughly 1,000 
Nebraskans. While ethanol production helps sustain profitability for 
corn producers, its byproduct--distillers grains--also adds value to 
the livestock sector, particularly Nebraska's beef producers.
    Today, the renewable fuels industry is at a pivotal point--tax 
credits expire at the end of this year; some have concerns about using 
potential food or feed sources for fuel; we are seeing increases in 
energy costs across the board. And, at this point, three key factors 
come to mind:
    (1) The increased productivity of American agriculture continues to 
amaze me. Farmers are growing more corn per acre every year. In 1980, 
U.S. farmers produced about 6.6 billion bushels of corn. By 2010, that 
number had nearly doubled to 12.4 billion bushels. And, due to 
significant advances in efficiency, that production increase was 
accomplished on almost exactly the same amount of land--about 85 
million acres.
    (2) Ethanol has been and will continue to be part of our domestic 
energy solution. We've built the infrastructure. We have industry 
investing in next generation technologies. We cannot turn our backs on 
this good work.
    (3) Renewable fuels are not some faceless adversary. This industry 
represents thousands of jobs in rural communities. When we are looking 
at employment numbers across the country, renewable fuels jobs in my 
State and elsewhere have been key in weathering our economic challenges 
in recent years.
    I think everyone on this panel can agree that these issues are 
complex and abrupt changes in policy could have real impacts on 
domestic energy sources, jobs, and local economies. As such, I look 
forward to engaging in a thoughtful discussion of renewable fuels 
policy with my colleagues on this committee and others in the Senate in 
the weeks and months ahead.
    I look forward to hearing from our witnesses today and learning 
from their perspectives on an industry that is very important to the 
State of Nebraska and the lives of many others across our Nation.

    Senator Boxer. Thank you so very much. Do you want us to 
put your full statement in the record?
    Senator Johanns. Yes, that would be great.
    Senator Boxer. We will do that, as with everyone.
    Senator Lautenberg, we have gone down to just 3 minutes per 
person because we have three panels. So, you are recognized.

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

    Senator Lautenberg. Thanks, Madam Chairman.
    Next week marks the first anniversary of the oil spill 
disaster in the Gulf of Mexico, our country's worst 
environmental catastrophe and a harsh reminder about our 
addiction to oil.
    Under President Obama's leadership, we are finally taking 
steps to kick this dangerous addiction by investing in better 
and smarter ways of moving people and goods. This includes 
creating a national high speed rail network, which I was 
disappointed to learn today has been on the chopping block for 
the naysayers. This includes creating a national high speed 
rail network and expanding the number of electric cars on 
America's roads.
    Of course, bullet trains and plug-in vehicles alone will 
not break our addiction. We must also invest in cleaner, 
cheaper fuels to power the Nation's automobiles.
    But I have serious concerns about corn ethanol's ability to 
serve as one of the leading alternatives. The fact is corn 
ethanol is only slightly better for the environment than 
gasoline. Sometimes corn ethanol is more harmful.
    To make room for corn crops, forests are cut down, 
grasslands are plowed, the equipment that farmers use to grow, 
harvest and ship corn is powered by burning fuel which produces 
more emissions. Growing corn requires enormous amounts of 
fertilizers and pesticides which can runoff in the rivers and 
seriously damage marine ecosystems, including creating so-
called dead zones in the water.
    Additionally, using corn for fuel instead of food drives up 
prices for people already struggling to put food on the table. 
Economists agree that steady growth and demand for ethanol has 
helped raise food prices including costs in the United States 
where almost 40 percent of the corn crop is grown for fuel, not 
food.
    Corn ethanol also increases our deficit because the 
industry receives billions of dollars in wasteful subsidies. 
For every gallon of ethanol produced in the United States, 
taxpayers have to pay 45 percent. I will call it a ransom.
    Last year alone, the tax credit deprived the Treasury of 
more than $5 billion in revenues, according to an audit by the 
Government Accountability Office, which determined the industry 
is mature enough to stand on its own two feet.
    The Wall Street Journal editorial page agrees. They urged 
Congress, 2 weeks ago, to end ethanol subsidies that are 
driving up the cost of food and fuel with no benefit for the 
environment or American energy security.
    Instead of making taxpayers support this industry, we 
should invest in cleaner fuels such as cellulosic ethanol which 
is made from waste products and non-food crops. Cellulosic 
ethanol will not drive up the cost of food, it will not drive 
up the planet's temperature by generating carbon pollution or 
other greenhouse gases.
    Madam Chairman, I ask for unanimous consent that my full 
statement be included in the record.
    Senator Boxer. Without objection. Thank you.
    [The prepared statement of Senator Lautenberg was not 
available at time of print.]
    Well, welcome, Mr. Secretary. We are very happy to see you 
here and just the press of business today is major. We have 
three panels. So, we are going to ask you to start. If you 
could keep to 5 minutes and then answer our questions.

  STATEMENT OF THOMAS VILSACK, SECRETARY OF AGRICULTURE, U.S. 
                   DEPARTMENT OF AGRICULTURE

    Secretary Vilsack. Thank you, Madam Chair. Thank you very 
much for the opportunity and I will stay within the 5-minute 
time period.
    I would ask that our statement that we provided be put in 
the record, and I would like to speak from the heart for just a 
few minutes about renewable fuels.
    Senator Boxer. Yes, without objection.
    Secretary Vilsack. Let me put it in context. Ninety percent 
of the persistent poverty counties in this country are located 
in rural America. Rural Americans earn $11,000 per capita less 
than their urban and suburban counterparts. More than half of 
the rural counties in this country have lost population in the 
last census. The reality is that there has been a history of 
unemployment and poverty at higher levels in rural America.
    The ethanol industry and the renewable fuel industry now 
has 400 biorefineries located in 46 States which, according to 
a report commissioned by the Renewable Fuels Association titled 
``Contribution of the Ethanol Industry to the Economy of the 
United States,'' is helping to produce more than the 400,000 
jobs that Senator Johanns referred to. One point nine million 
of the 2.1 million farmers in this country simply do not make, 
on average, enough money from their farming operation to 
support their families, which is why it is important and 
necessary for us to look for alternative ways for farmers to 
succeed.
    We continue to import far too much oil from other 
countries. Seventeen percent of our imported oil comes from the 
Persian Gulf, a very unstable place today.
    When the Congress established the Renewable Fuels Standard 
goals, what you did is created the opportunity for over $100 
billion of capital investment in rural communities, the 
opportunity and the chance to produce more than 1 million jobs 
in rural America, increased income opportunities for farmers, 
and reducing our dependence on that foreign oil from unstable 
sources.
    At USDA, we have continued the work of then-Secretary 
Johanns and others to meet the challenge of that Renewable 
Fuels Standard. We have established five regional feedstock 
research development centers focused on feedstock development, 
sustainable production systems, and biorefining. We are looking 
for alternative ways in addition to corn-based ethanol to be 
able to produce 36 billion gallons of renewable fuel.
    We have provided five commitments to biorefineries that are 
located in parts of the country other than the Midwest, and we 
look forward to meeting the President's challenge of breaking 
ground on four additional biorefinery plants in the very near 
future. These plants will focus on feedstocks other than corn-
based ethanol.
    We continue to provide assistance and help to biorefinery 
producers who are using advanced biofuel production mechanisms. 
There are now 30 pilots in operation around the country.
    We just recently announced an effort to expand a more 
convenient ethanol supply for consumers by using some of our 
REAP funding to permit and to incentivize blender pumps 
throughout the country.
    We are continuing to operate the Biomass Crop Assistance 
Program (BCAP) program notwithstanding the reductions that 
occurred as a result of the budget deal that was recently 
announced.
    Let me respond, in the minute and a half that I have left, 
to some of the frequent arguments about ethanol.
    First of all, the issue of food prices. It is important to 
point out that farmers only get 16 cents of every food dollar. 
Eighty-four cents goes someplace else. I think, based on the 
2008 study of what happened when food prices went up the last 
time, we saw that ethanol production was responsible for one-
tenth of the increase. I suggest that perhaps the issues of 
energy costs today are more responsible for increasing food 
costs than ethanol production.
    Some have suggested that ethanol is not efficient from an 
energy producing and utilization perspective. Today's ethanol 
production systems generate 2.3 BTUs for every BTU used, which 
is actually a better ratio than oil. When we reach the 36 
billion gallon threshold, 138 metric tons of CO2 
equivalent will be reduced from the atmosphere, the equivalent 
of taking 27 million cars off the road.
    The most important point I can make today is that we need 
to redefine this debate. Instead of trying to limit America's 
opportunities, particularly in rural areas, we need to look for 
ways in which we can expand opportunities. We should not doubt 
the capacity of American farmers and ranchers to be able to 
produce the feedstocks, beyond corn-based ethanol, to be able 
to meet the 36 billion gallon requirement.
    I realize there is work to do and we have to accelerate our 
pace. But we are committed to making that happen at USDA.
    Thank you, Madam Chairman.
    [The prepared statement of Secretary Vilsack follows:]
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    Senator Boxer. Thank you.
    I have decided to ask Senator Inhofe to go first and I will 
close. So, we will go from Senator Inhofe to Senator Lautenberg 
to Senator Johanns and then I will close.
    Senator Inhofe. OK. Well, thank you, Madam Chairman.
    I listened carefully and I happened to tune in on a, I know 
this huge corn ethanol lobby that is out there. There is a 
program on National Public Radio I happened to hear on Sunday 
and they went into all of this detail arguing, refuting 
everything that my people in Oklahoma tell me. Because I did 
not have a dog in this fight. But I ended up, because of 
choice, objecting to even the initial mandates.
    Now, I guess you are saying, you are trying to overcome the 
arguments that the, a high percentage of corn ethanol is not 
good on engines and the top one on the marine manufacturers, 
the small engine manufacturers, that is their No. 1 issue right 
now. They say that some of these engines can operate on E10 but 
nothing more than that, it is damaging to those even then. So I 
want you to respond to that.
    But also, on April 8, you announced a plan to install, let 
us start with this one, 10,000 flexible fuel pumps nationwide 
within 5 years. Now, I would ask you, do you have any estimate 
how much this will increase corn ethanol production and what 
kind of budget would there be for this?
    As I understand, these flexible fuel pumps give you a 
range, I guess the dollars are adjusted with it, all the way 
from clear gas to what is the highest level of, E85? Yes, E85. 
Well, what do you think about, if that is a possibility, the 
bill that I have, I am going to pull it because we will not 
need it anymore.
    Secretary Vilsack. Well, Senator, first of all I think it 
is important to point out that the utilization of corn-based 
ethanol to meet the 36 billion gallon threshold is capped by 
Congress at 15 billion gallons and we are very close to getting 
to that cap.
    It is also very clear that our attention needs to be 
focused on alternative sources, alternative feedstocks. We are 
looking at algae, woody biomass.
    Senator Inhofe. Yes, I agree.
    Secretary Vilsack. So, the other 21 billion gallons is 
going to be from sources other than corn-based ethanol. Corn-
based ethanol is still going to be a viable mechanism for 
getting to that 36 billion gallons, but it is capped.
    As far as the flexible fuel pumps are concerned, this 
basically provides a more convenient ethanol supply and should 
increase the use of renewable fuels, not necessarily corn-based 
ethanol, because, again, it is capped.
    Senator Inhofe. But they would start with what we refer to 
as clear gas then on a flexible pump? Is that what you 
envision?
    Secretary Vilsack. As I understand it, what it would be is 
you would have a pump that would give you the appropriate blend 
of ethanol. I am not sure that it would necessarily be zero 
blend----
    Senator Inhofe. Oh, I see. OK.
    Secretary Vilsack. Because of the nature of the pumping and 
distribution systems, it would be 10 percent ethanol, 15 
percent ethanol, in some cases 20 percent ethanol, and some 
States have that mandate 85 percent ethanol. It would make it 
more convenient to get the level of ethanol that you need for 
your vehicle and hopefully it would encourage the development 
of more flexible fuel vehicles.
    Senator Inhofe. OK. If that is the case and you stated that 
we are near the cap anyway, what would be the objection to 
passing a bill, like my legislation, that does not reduce what 
you want to have if you want to have corn ethanol or any other 
type of ethanol, but merely says that you have a choice within 
a State if the State legislature asks you to do it so that if 
you want to have clear gas you can. The choice is there.
    Now, if we are already close to the cap, why, what would be 
the argument against that?
    Secretary Vilsack. Well, we still have a long way to go to 
meet the 36 billion gallon threshold that Congress has set. We 
have to figure out ways in which to produce that 21 billion 
gallons of different type of fuel, cellulosic----
    Senator Inhofe. But right now that would have to be corn 
ethanol though, would it not, where technology is?
    Secretary Vilsack. No. No. Right now, once we hit the 15 
billion gallon threshold, we have to go to a different approach 
to producing renewable fuel. We have to go to cellulosic 
ethanol that could be using corn stover, not the kernel but the 
husk or the cob. It could be biofuel made from algae. It could 
be woody biomass. It could be landfill waste. It could be 
animal waste. All of those, and many other ways of producing--
--
    Senator Inhofe. The technology is coming. I understand 
that. We, actually in my State of Oklahoma, we are 
experimenting with that. In fact, I went up to California in 
2008 where they are talking about the algae and the successes 
already. That is all great.
    I am talking about where technology is today, and even when 
the time comes, why would it not be a good idea to have it 
market-based so that if somebody like my wife, who will not put 
corn ethanol in her car, would not have to do it? In other 
words, we would have the choice.
    Secretary Vilsack. Well, some States currently provide that 
choice, No. 1, and 87 percent of the gas that is produced today 
is an ethanol blend. So, I mean, consumers have made a choice. 
I know in my State we gave folks a choice and we see close to 
80 percent of consumers opting to use ethanol and they like it 
for a multitude of reasons, not the least of which it helps 
American farmers and ranchers.
    Senator Inhofe. Well, I would say, I could make the same, 
you are making my case for me because in my State, just the 
reverse is true and the farmers and ranchers' concern there is 
the cost of feedstock, and our cattle people, our poultry 
people. Anyway, that makes the case for a choice, I believe.
    Senator Vilsack. Well, the other problem is whether or not 
the choice can be an environmentally equivalent choice, and I 
am not sure that that is necessarily the case with the clean--
--
    Senator Inhofe. Well, the environmentalists support my 
legislation, so I do not think you ought to use that argument.
    Secretary Vilsack. Well, I am deeply concerned about water 
quality which is what led us into this, the beginning of this 
conversation, many, many years ago.
    Senator Inhofe. OK. Thank you, Madam Chairman.
    Senator Boxer. Senator Lautenberg, I am going to ask you to 
go next. I am going to wait.
    Senator Lautenberg. Thanks, Madam Chairman.
    Thanks, Mr. Secretary, for your presentation. When, as you 
make the case, one cannot help but be sympathetic to what might 
develop as job loss, or opportunity, especially when the people 
who are growing that corn for ethanol believe that they were 
doing the country a favor by doing that. As it turns out, we 
learn as we go and it is not dissimilar from the coal dilemma 
where it is available, abundant, and yet it brings on terrific 
environmental problems.
    The one thing that came up now, as a result of our 
discussions, a New York Times article yesterday said, it is 
entitled ``High Prices Sow Seeds of Erosion'' and they say long 
and defined erosion is once again rearing as a threat because 
of an aggressive push to plant on more land, changing weather 
patterns and inadequate enforcement of protections, scientists 
and environmentalists say.
    So, what, where do we go from here in terms of satisfying 
the need for the country to have a better environmental 
response to its energy use and job losses? When we look at 
this, American taxpayers give more than $7 billion in subsidies 
to biofuels every year, with most of that going to corn 
ethanol. Given that Federal law already mandates an increasing 
amount of biofuels to be used every year until 2022, what is 
the net gain for our taxpayers?
    Secretary Vilsack. Well, Senator, 400,000 people are 
employed according to the Renewable Fuels Association. We found 
out when Congress did not continue the biodiesel tax credit 
that the impact of that was, for a period of time, 50 percent 
of the production went down immediately and, according to the 
National Biodiesel Board, 12,000 jobs were lost immediately.
    Our view, and my view, is that I think we ought to be 
asking a different question about those incentives, whether or 
not they could be used for this maturing industry in a more 
effective way to grow the industry. I do not think there is any 
question that you all will over time, and should over time, 
reduce those incentives, but I think if you create a cliff, you 
are going to create a significant job loss in rural America at 
a time when we are just now beginning to turn the corner in 
terms of the economy. No. 1.
    No. 2, you could use those incentives effectively to 
produce greater, more convenient supply and to encourage more 
flexible fuel vehicle production and purchase, which would be 
beneficial in terms of creating more jobs and more opportunity.
    No. 3, if I can, I just want to comment on the issue of the 
New York Times article. I think the New York Times article 
failed to realize that we are investing a substantial amount of 
money, particularly in the Upper Mississippi River Basin, on 
conservation practices.
    We have just announced another general sign up for the 
Conservation Reserve Program (CRP) and we have received a 
number of inquiries from farmers across the country in that 
program. We are very cognizant of our need for continued 
commitment to conservation and you are going to continue to see 
a commitment.
    In fact, we are also gauging the impact of that 
conservation. Our recent assessment in the Upper Mississippi 
River shows that there is a substantial commitment to 
conservation by producers and that it is actually reducing 
phosphorous and nitrogen going into our rivers and streams and, 
ultimately, into the Mississippi River.
    So, there is a significant commitment there.
    Senator Lautenberg. Well, I appreciate that and I believe 
it is well intentioned. The problem is that we are now in the 
State where erosion, other violations of a better environment, 
continues to exacerbate the problem. The question is, how do we 
catch up?
    Mr. Secretary, one thing that ran through my mind as I was 
listening to you, was whether or not there ought to be a 
transfer of funds as we reduce these subsidies, perhaps to give 
farmers a chance to find other purposes for their product.
    Now, with food shortages, and there are food shortages, 
that is demonstrated by higher prices, that may give them a 
chance to convert back to something that is less harmful in 
terms of the environment but keeps them producing for 
themselves and their families.
    I think something like that has to be examined, whether or 
not we penalize the car driver now, the user, and a result of 
trying to keep, just looking at the focus on jobs is kind of a 
difficult equation and I think we have to work with it. But I 
do not think we can afford to stop looking for that change.
    Secretary Vilsack. Senator, if I can just respond? I think 
you are headed in the right direction in terms of the right 
question to ask. Rather than trying to suggest that American 
farmers and ranchers are limited in their capacity, we ought to 
be looking for ways in which we can expand their capacity.
    There is an interesting study from Michigan State and Penn 
State about the possibility of double cropping which would 
essentially create more feedstock opportunities on corn and 
soybean land. It would create additional income opportunities 
for farmers. It would be better for the environment. It would 
address the erosion issue, although we have seen a 69 percent 
reduction in soil erosion as a result of our investment in 
conservation programs in the Upper Mississippi River Basin.
    So, I think there are ways in which we can look at a 
different, redesigned agricultural production system that 
addresses some of your concerns.
    I would say that there are many reasons why there are food 
shortages globally, but none of them have to do with American 
farmers and ranchers in the sense that we continued to be 
extraordinarily productive. We have seen a 300 percent increase 
in corn production in my lifetime, a 200 percent increase in 
production of soybeans.
    Storms, drought, floods in other parts of the world, export 
controls that were imposed by other countries, the currency 
issues, there are a multitude of reasons why we have some of 
the shortages that we see today in other parts of the globe.
    Senator Lautenberg. Madam Chairman, the one thing that I 
think that we have to consider is having, reducing the punitive 
tariff on imported ethanol, sugar, reduce that and let the 
competitive marketplace decide where they want to go, and 
advertise what the damage does or does not do to the 
environment.
    Thanks very much, Mr. Secretary.
    Senator Boxer. Thank you very much. Senator?
    Senator Johanns. Madam Chair, thank you.
    Mr. Secretary, remembering the days when you and I were 
both Governors, the year 2000, tough, tough time in our States, 
we had a situation where agriculture was really, really 
struggling. If I remember correctly, and I am drawing this off 
from memory, I think the Ag subsidies in the year 2000 were 
like $30 billion. It was a historic amount. Congress doubled 
the AMPTA and just a whole bunch of things going on.
    Compare those days to the support, if you will, relative to 
ethanol. I would just like to get a frame of reference as to 
how we have reduced those subsidies over the last decade.
    Secretary Vilsack. Well, we have reduced the per gallon 
credit, tax credit, to ethanol by a significant amount 
recently. In terms of overall Ag subsidies, many of them are 
not even being utilized, in large part because the Ag economy 
is healthier than it was in 2000. One of the reasons that it is 
healthier is, in part, because of the opportunities that 
biofuels and renewable fuels present.
    As you well know from your days as Secretary, many farmers 
are required to have off farm income in order to keep the farm. 
Those 400,000 jobs supported by biofuels production are 
extraordinarily important in those rural communities. When you 
have the opportunity to produce another 400 or 500 
biorefineries and an opportunity to use a waste product that no 
longer has value, that too can result for a lack of need for 
that safety net that it important.
    We all, in a sense, benefit from that safety net. It is not 
just the farmers. It is all of us because we are, in a sense, 
self-sufficient from a food perspective in this country and we 
pay less for our food than most other people on this globe, 
which gives our citizens a lot more flexibility with their 
paycheck than anyplace else.
    Senator Johanns. Mr. Secretary, speaking specifically of 
food, in the USDA, studies on the price of food on an ongoing 
basis, primarily because the USDA is very definitely in the 
food business, there is always this rap against ethanol when 
food prices increase that, oh, it is because of ethanol.
    Recently, in the Financial Times, you said something that 
caught my attention: ``The production of corn-based ethanol 
does not deserve the scapegoat reputation it has too often 
assumed in this conversation.'' I would like you to explain 
what you mean by that. What are thinking of in terms of the 
relationship of ethanol to other costs in food production?
    Secretary Vilsack. Well, first of all, I think it is 
important to recognize that, as I said, American farmers are 
the most productive in the world and they continue to be 
productive. They have embraced innovation. We are going to 
continue to see yields increase and continue to see production 
increase because of American ingenuity.
    I would expect and anticipate this year you are going to 
see higher yields in part because of decisions that folks are 
making, but not necessarily resulting in any more environmental 
damage. No. 1.
    No. 2, we did a study in 2008 when food prices went up and 
we asked the question, how much of this is a result of ethanol? 
I was surprised, and I think you might have been surprised as 
well, to find that when food prices went up 45 percent, one 
one-tenth of that increase was from ethanol.
    That stands to reason when you recognize that farmers only 
get 16 cents of every food dollar. Eighty-four cents goes 
someplace else. It goes to the folks who refrigerate, package, 
process, truck, shelve, and all of that relates to energy 
costs. So, when oils go up, that is obviously a reason and a 
driver.
    No. 3, there are a lot of reasons why, globally, we are 
faced with potential shortages that have nothing to do with 
ethanol. They have to do with drought in some parts of the 
world, they have to do with export controls imposed by some 
countries like Russia, they have to do with the fact that 
technology has not been embraced in some parts of the world as 
it has in the United States and so people are not as productive 
as they potentially could be. So, there are a multitude of 
reasons here.
    But to suggest that ethanol is the reason when you have 
increased productivity of American farmers, when you have so 
little of the food dollar going to the farmer, when you have 
multiple reasons outside of the United States that are 
responsible for any shortages that might exist, it just does 
not, to me it is just not fair.
    Senator Johanns. Thank you, Mr. Secretary. Thank you, Madam 
Chair.
    Senator Boxer. Thank you.
    Mr. Secretary, you said we are nearing the 15 billion 
gallons? You said we are nearing the 15 billion gallons where 
you get the subsidy?
    Secretary Vilsack. Right. We have plant capacity today, 
online, of roughly 14.2 billion gallons of ethanol production. 
We will produce somewhere in the neighborhood of 13 to 14 
billion gallons this year. So, we are very close to reaching 
the cap.
    Senator Boxer. OK. Then, under the law, what happens to 
that subsidy at that point?
    Secretary Vilsack. What happens, I am sorry, what?
    Senator Boxer. To the subsidy.
    Secretary Vilsack. Well, that subsidy continues. Part of 
that subsidy is also encouraging cellulosic ethanol production 
and what we hope to be able to do with the pilot projects, with 
the biorefineries that we are going to provide resources to. We 
hope to be able to identify alternative feedstocks.
    Our goal here is to have a renewable fuel industry that is 
operating in all parts of the country. We have programs in the 
Northwest looking at woody biomass. We have programs in the 
Southwest looking at algae. We have programs in the Southeast 
looking at perennial grasses and landfill waste. I mean, there 
is a multitude of opportunities here.
    That is what is exciting about this future, that we can 
wean ourselves off an over-dependence on foreign oil. We can 
create jobs and a revitalized rural economy with this industry. 
This is a linchpin to really turn the situation around in rural 
America.
    Senator Boxer. Well, the thing that I like about cellulosic 
is that you do not destroy food product.
    Secretary Vilsack. Well, so little of the corn, in a sense 
it is not that we are growing corn that folks eat. The corn is 
obviously fed to livestock. Most of what we grow is fed to 
livestock. It is not----
    Senator Boxer. That is important.
    Secretary Vilsack. Well, it is important. But a lot of 
folks fail to realize the point that Senator Johanns made 
earlier, which is when ethanol is produced, it is not just 
ethanol that is produced. There are a number of co or 
byproducts that are produced, one of which is a distiller's 
dried grain that is a feed supplement that is significant, so 
significant that it is now also not only feeding our livestock 
but also is a great export opportunity for us to bring 
additional wealth into the country. That creates more jobs.
    Senator Boxer. OK. My last question. So, when we reach this 
15 billion of corn ethanol, we will then shift our focus to 
these other kinds of cellulosic. Is that right?
    Secretary Vilsack. In a sense, we have shifted our focus in 
the sense that we are focusing our commitments and our time and 
our research on identifying feedstocks and alternatives so we 
can grow out this industry.
    Senator Boxer. But unless there is action taken, the corn 
subsidy would continue?
    Secretary Vilsack. Well, you have actually, I think, time 
limited it to this year. It expires at the end of this year. My 
hope is that you think not about creating a cliff but creating 
a glide path, phasing this out over a period of time, and, 
frankly, phasing out the tariff over a period of time, but 
utilizing those incentives to grow this industry, to make the 
supply more convenient with more blender pumps, to figure out 
ways in which we can----
    Senator Boxer. What industry?
    Secretary Vilsack. The renewable fuel industry, which would 
include cellulosic, advanced biofuels and the like.
    Senator Boxer. OK, thank you.
    We are going to move to our next panel and I am going to 
call on Senator Whitehouse to lead the questions on that panel. 
Because we have to move along.
    We are going to call on our panel two, Hon. Gina McCarthy, 
Assistant Administrator for the Office of Air and Radiation, 
U.S. Environmental Protection Agency, and Dr. Henry Kelly, 
Acting Assistant Secretary for Energy Efficiency and Renewable 
Energy, U.S. Department of Energy.
    Because of our press for time, we are going to see if you 
can do your statement in 4 minutes and then we will keep our 
questions to 4 minutes each.
    So, Hon. Gina McCarthy, welcome. It is nice to see you.

STATEMEMT OF GINA McCARTHY, ASSISTANT ADMINISTRATOR, OFFICE OF 
    AIR AND RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY

    Ms. McCarthy. Thank you, Senator, it is nice to see you as 
well. Should I begin?
    Senator Boxer. Please.
    Ms. McCarthy. OK. Chairman Boxer, Ranking Member Inhofe, 
members of the committee, I appreciate the opportunity to 
testify. I will try to be very quick.
    Biomass can play an important role in reducing our 
dependence on foreign oil, decreasing greenhouse gas emissions 
and improving our rural economies.
    A year ago, in compliance with the directives of the Energy 
Independence and Security Act, EPA finalized revisions to the 
national Renewable Fuels Standard Program, which we commonly 
call RFS.
    These provisions established new annual volume standards 
for renewable fuels, reaching a total of 36 billon gallons in 
2022. This includes a total of 21 billion gallons of advanced 
fuels including 16 billion gallons of cellulosic fuel, 4 
billion gallons of other advanced biofuels, and a minimum of 1 
billion gallons of biofuel-based diesel.
    The greater volumes of biofuels required by the RFS will 
displace about 13.6 billion gallons of petroleum-based gasoline 
and diesel, about 7 percent of expected annual gasoline and 
diesel consumption in 2022.
    EPA strongly supports expanded use of advanced biofuels, in 
particular, cellulosic biofuels. When Congress enacted EISA, it 
recognized that cellulosic targets were very aggressive. It 
included provisions directing EPA to reduce the mandated levels 
set in the statute if cellulosic ethanol production were lower 
than the statutory mandates. Simply put, Congress did not want 
us to require refiners to use more cellulosic ethanol than 
would be produced.
    Unfortunately, the cellulosic industry did not develop as 
quickly as Congress anticipated and we had to lower the 
cellulosic ethanol mandate. For 2010 and 2011, we set 
cellulosic standards at about 6.5 million gallons, 
substantially below the EISA targets of 100 and 250 million 
gallons for these years.
    Although EPA then had the discretion to reduce the total 
advanced and total renewable fuel standards, we did not do so 
because we fully expected sufficient volumes of other advanced 
biofuels would be available.
    We set these standards in a transparent rulemaking process. 
Before we even proposed the annual standard, we conducted a 
thorough review of the cellulosic industry, including one-on-
one discussions with each of the producers. We worked with the 
Department of Agriculture. We worked with the Department of 
Energy and the Energy Information Administration in an open and 
transparent process. That is how the standards are set.
    We intend to propose a 2012 standard early this summer and 
to finalize them by the end of November 2011.
    The biofuel sector is a dynamic one. We frequently hear 
from companies who are developing using innovative, new 
production techniques or different types of feedstock. We 
recognize the importance of evaluating and qualifying such new 
biofuels and, where possible, to input them as quickly as we 
can into the RFS Program.
    Current advances in cellulosic biofuels approved for RFS 
include biodiesel and renewable diesel from certain feedstocks, 
ethanol from sugarcane, diesel and renewable diesel from algal 
oil, ethanol and diesel from approved cellulosic feedstocks, 
jet fuel and heating oil from certain feedstocks.
    We also have a process that has been put in place to 
evaluate new biofuels and it is exciting to see that last year 
we approved canola-based biodiesel and we have a number of new 
technologies in the queue that seem very promising.
    So in closing, EPA is currently working successfully to 
implement the RFS Program, both by following the specific 
direction in the statute, as well as by working with the 
companies to understand what technologies are available and how 
we can get those into market to achieve the requirements under 
the statute.
    The program today contains several innovative elements that 
together provide incentives for the advanced and cellulosic 
biofuels sector, and we recognize that the current cellulosic 
production is not in line with the volumes established under 
EISA, but we will continue to closely monitor it and the 
progress of the sector, and set standards as the statute 
instructs.
    Thank you very much.
    [The prepared statement of Ms. McCarthy follows:]
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    Senator Boxer. Thank you, so much.
    Mr. Kelly, we welcome you. Acting Assistant Secretary for 
Energy Efficiency and Renewable Energy, Department of Energy.

STATEMENT OF HENRY KELLY, ACTING ASSISTANT SECRETARY FOR ENERGY 
 EFFICIENCY, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, 
                   U.S. DEPARTMENT OF ENERGY

    Mr. Kelly. Thank you, Chairman Boxer, Ranking Member Inhofe 
and members of the committee. I am happy to be here to discuss 
the Department of Energy's biofuels programs.
    The transportation sector accounts for about two-thirds of 
the U.S.' oil consumption and contributes about one-third of 
the Nation's greenhouses gases. After housing, transportation 
is the second biggest monthly expense for American families. As 
the President said in his recent speech, ``In an economy that 
relies so heavily on oil, rising prices at the pump affect 
everybody.''
    But emphasizing that ``there are no quick fixes,'' the 
President outlined a series of actions which, taken together, 
could cut U.S. oil imports by one-third by 2025. These include 
programs that would increase the efficiency of vehicles as well 
as increase the use of new sources of fuel for the 
transportation sector. Home-grown biomass that can create jobs 
in the United States is clearly a part of the solution to this 
problem.
    My office in the Department of Energy, the Office of Energy 
Efficiency and Renewable Energy, works very closely with EPA, 
the Department of Agriculture and other Federal organizations 
to accelerate the use of biomass. We do two things. One, we try 
to put forward programs that will accelerate the use of current 
biomass technologies. Then we support research and development 
and demonstration on the next generation of biomass technology.
    We are making very rapid progress. Domestic biofuels 
production increased from less than 4 billion gallons a year in 
2005 to nearly 13 billion gallons a year today. But there is a 
lot more work to be done.
    We have worked closely with EPA to get the data needed to 
understand the potential impact of gasoline containing up to 15 
percent ethanol by volume on compliance with the vehicle and 
emissions standards established under the Clean Air Act. 
Gasoline containing up to 10 percent ethanol by volume is 
allowed today. Using DOE and other test procedure test data, 
the EPA ultimately determined that E15 may be introduced into 
commerce for use in Model Year 2001 and newer vehicles once 
several other conditions are met.
    DOE is also working with auto manufacturers to assess the 
viability of making new vehicles compatible with the higher 
ethanol blends, and working to ensure that fuel pumps and 
underground fuel storage tanks are compatible with these fuels.
    But DOE is also making investments in the next generation 
of biofuel technology and this includes technologies that 
convert a variety of feedstocks, such as corn stover, wood 
waste and other cellulosic materials, into a variety of fuels. 
We are also exploring ways of converting corn and cellulose to 
cost-competitive, drop-in substitutes for gasoline, diesel and 
jet fuel.
    Drop-in fuels would remove many of the barriers to 
commercial adoption of biomass fuels since they would be 
compatible with existing vehicles and delivery systems. There 
is substantial demand in the aviation industry for drop-in 
fuels and we are supporting the FAA and the commercial aviation 
sector in developing jet biofuels as participants in the 
Commercial Aviation Alternative Fuels Initiative.
    DOE is supporting two main pathways to produce these 
advanced fuels, thermo-chemical, based on pyrolysis and 
gasification, and biochemical, using enzymes, fermentation and 
other mechanisms.
    We are also working on cutting the costs of collecting, 
transporting and storing cellulosic materials. Algae may be a 
long-term strategy for biomass as well, and we are supporting 
programs in all of these areas using Recovery Act Funding.
    Many of the research projects are rapidly leading to 
technologies that can be deployed at a commercial scale and we 
have very ambitious goals, as has been discussed, for these 
advanced fuels. We have a target of 21 billion gallons a year 
from advanced biofuels.
    The President recently set a goal on breaking ground on at 
least four commercial scale cellulosic or advanced 
biorefineries over the next 2 years. The Navy has set a goal 
for renewable fuels to comprise 50 percent of its 
transportation fuels by 2020.
    Senator Boxer. OK, you are going to have to wrap it up in a 
sentence.
    Mr. Kelly. Yes. So, our 2012 budget request will buy you 
all of this. We think we have a good program in place and we 
are confident that we can meet our goals.
    [The prepared statement of Mr. Kelly follows:]
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    Senator Boxer. Thank you.
    Because I failed to call on him at the last panel, Senator 
Whitehouse, you start it off for us.
    Senator Whitehouse. Thanks very much, Chairman.
    This is an exciting week for a Rhode Island company because 
on Friday in Shenandoah, Iowa, they will be opening a very 
significant bioprocess algae plant that is a, creates kind of a 
wonderful tableau.
    It begins with the corn in the field, then goes to the old 
fashioned barn in which the corn is put up, and then it goes to 
the modern steel ethanol producing facility, and then it will 
go to these towers, glowing green towers that the carbon 
effluent from the ethanol process will be bubbled through. They 
have done a very good job of figuring out how the algae can be 
kept separate and can be encouraged to feed aggressively off of 
the carbon that would otherwise be out polluting our 
atmosphere. Then of course the algae grown successfully off it 
can make lipids that make oil. Off you go.
    So, it is a big day for BioProcess Algae of Portsmouth, 
Rhode Island that has a lot of the technology behind this Iowa 
project. That happens all on Friday.
    In the light of that, I just wanted to get your thoughts on 
what you thought the obstacles were to further growth in the 
algae fuel area and how important a landmark you felt this was.
    Mr. Kelly. Well, we have supported a number of algae 
projects as part of our Recovery Act Funding and are optimistic 
that many of these projects are going to lead to cost-
competitive fuels.
    Algae can do two things. It can produce the cellulosic, 
biomass feedstock itself, but it can also be used, as I believe 
is the case in the Rhode Island plant, as a conversion unit so 
that it converts sugars into lipids that can be converted 
directly into fuel.
    But we are trying to support a portfolio of ideas. The 
scientists have developed a number of different approaches, 
many of which are going to be, we hope, commercially 
competitive with today's fuel prices in the next few years.
    Senator Whitehouse. Good. Well, thank you very much. 
Friday, all eyes on Shenandoah.
    Mr. Kelly. Yes. Congratulations.
    Senator Boxer. All right. Very good.
    Senator Inhofe.
    Senator Inhofe. Well, every time we get into these 
discussions I always have to get on the record that if people 
are serious about lessening our dependence on foreign 
countries, the Middle East, it is very easy to do. All we have 
to do is exploit our own resources. As I think we have said 
many, many times, no one will argue with the fact that the CRS 
has reported that the United States has more of the reserves, 
recoverable reserves, in coal, gas and oil of any country. So 
all you have to is produce and exploit our own resources as 
every other country in the world does. But, having said that, 
let us talk about a couple of the things that are of interest.
    First of all, I would agree, and I think that the Chairman 
and I agree on this, that we are looking to the time when we 
have cellulosic ethanol. It is coming. It is exciting. I have 
been to a lot of places where they are using it.
    It is my understanding that right now, to put this in 
context, only 6 million gallons of cellulosic non-corn ethanol 
were produced last year as opposed to 13 billion gallons of 
corn ethanol. Is that somewhat accurate?
    Mr. Kelly. Yes, I believe that is true.
    Senator Inhofe. Yes. That is just amazing. Less than 1 
billion. Well, anyway, that being the case, when the Secretary 
of Agriculture testified, and we are talking about my bill. 
See, I still think that is the answer. You give people an 
option. He said, well, 80 percent of the people in Iowa want to 
use corn ethanol. That is fine. If they have an opt out, they 
can use all, they can use all, they can use 100 percent corn 
ethanol. But also, in States where they do not believe that, 
they can use something else. That is the reason that I hope 
that people seriously consider that as an approach.
    Now, Mr. Kelly, can you discuss the impact of E10 and 
potentially higher level blends have on non-road, small and 
older vehicle engines and materials durability? Could you?
    Mr. Kelly. Well, we are, we have not done extensive 
testing. We have done a little testing. We have worked with EPA 
on the specific issue of what automobiles are compatible with 
E15 and the decision was made that, based on our testing, that 
2001 and newer vehicles would not have any damage to the 
emission control system.
    Senator Inhofe. We are talking about the smaller engines 
now. I think you know that the marine manufacturers have this 
as their highest goal right now is to be able to offer a 
choice. Do you want to comment on that, Ms. McCarthy?
    Ms. McCarthy. The only thing I would add to what Mr. Kelly 
has said is to indicate to you that in our decision on E15, we 
tried to be very clear about where testing was adequate and 
where we had verified, scientifically credible data to indicate 
that E15 could be used.
    We did raise concerns. I am no just saying that data was 
not readily available on those smaller engines, but also 
raising concerns based on our engineering assessment that there 
could be potential problems with E15 usage in those engines and 
we did not approve that for use in those engines for that 
reason.
    Senator Inhofe. OK. Well, I want to, I would encourage you 
to continue with these studies so that people will be informed 
and can look back to the Environmental Protection Agency as 
their source.
    Now, we have talked about E10, we have talked about E15, 
they are even talking about E85. I know this is something that 
has been discussed up in Iowa. The EPA has done some studies on 
this. Ethanol at 67 percent of the BTU content in gasoline, 
according to the EPA, and I think I am accurate on this, tell 
me if I am not, and I am quoting now, operating on E85 usually 
experience a 20 to 30 percent in miles per gallon due to 
ethanol's lower energy content. These results were seconded by 
the Consumer Report study that found E85 resulted in a 27 
percent drop in fuel efficiency.
    Is that accurate?
    Ms. McCarthy. I believe that is. We have done some studies 
on fuel efficiency related to E85. I think Mr. Kelly has worked 
with us on those issues from DOE's perspective. There are 
tradeoffs here, and we balance those issues, and EPA is looking 
at, obviously, at other venues to increase fuel efficiency in 
vehicles. Here, we are just looking at what the impact is of 
different fuel usage on air quality. Certainly E85 is an 
allowable use. It does not create a problem for the emission 
systems in these vehicles, and for that reason it is allowable.
    Senator Inhofe. [presiding.] Well, it is going to have to 
be a lot of makeup if you talking about 27 percent. Thank you.
    Madam Chairwoman has gone. Who is next? Senator Merkley? 
Did she give me the gavel?
    Let me announce here that when Senator Boxer left she gave 
me the gavel and I assume that is a permanent gift.
    [Laughter.]
    Senator Inhofe. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chair. Do not let 
go of it. Hold tight.
    I wanted to followup a little bit on the corn ethanol 
front. In the past, it was often observed, or argued, that 
there was a ratio that was somewhere close to one to one in 
terms of the energy input and the output. I have seen recent 
reports and show that the industry has revolved and that has 
changed substantially and that perhaps the ratio of energy in, 
energy out is as high as 2.3 to 1.
    How do you all evaluate that change in the industry and the 
amount of energy consumed versus that produced?
    Mr. Kelly. Well, the fact is that the industry has gotten 
much more efficient over recent years. The one thing that has 
been quite controversial is that industry has to use mostly 
natural gas and other energy sources to produce this ethanol. 
So one of the most controversial issues has been whether corn 
ethanol reduces CO2 production. Recent studies have 
shown that it does reduce CO2 production in 
comparison with standard petroleum-base fuels. Not as much as 
cellulosic ethanol, certainly.
    Senator Merkley. So, must my specific question is, is the 
ratio of 2.3 units of energy out for one energy unit in a fair 
assessment of the technology?
    Mr. Kelly. I am going to have to get back to you on that. I 
do not have that number in my head right now.
    [The information follows:]

    The energy ratio of corn ethanol (energy in ethanol divided by the 
fossil energy used to produce the ethanol) has increased in recent 
years due to a reduction in fertilizer use per bushel of corn harvested 
in farms and energy use per gallon of ethanol produced in ethanol 
plants. According to the Greenhouse gases, Regulated Emissions, and 
energy use in Transportation (GREET) model developed by Argonne 
National Laboratories, the energy ratio in 2009 was 1.64 for corn 
ethanol; that is, for every Btu of fossil energy used to manufacture 
corn ethanol, 1.64 Btus of ethanol were produced.
    Other studies that use different methods of considering ethanol co-
product (namely distillers' grains and solubles [DGS], which is used 
for livestock feed) in their life-cycle analyses (LCAs) have yielded 
higher energy ratios for corn ethanol. GREET considers DGS using the 
displacement method (which accounts for the input energy requirement of 
the conventional feed product DGS displaces) while some other studies 
have used other methods such as process-based allocation of energy 
expenditure in ethanol plants (which allocate the energy and 
environmental burdens of ethanol plants between ethanol and DGS). A 
process-based allocation method, which yields somewhat higher energy 
ratios for corn ethanol, was used to calculate the energy ratio of 2.3.
    EPA and California use the displacement method in their examination 
of corn ethanol life-cycle energy and environmental effects, since that 
is the default co-product method in the GREET model. The GREET results 
are documented in a recent journal article published in ``Biomass and 
Bioenergy'' (Vol 35, Issue 5, May 2011, pages 1885-1896).

    Senator Merkley. If you could, that would be helpful. One 
of the ethanol producers noted that their fuel has the lowest 
carbon intensity of any commercially available transportation 
fuel and lifecycle, looking at all the inputs and getting it to 
market. Does that fit, then, with the point that you were just 
making about carbon dioxide production, if you will, carbon 
dioxide footprint?
    Mr. Kelly. Well, clearly we want to go toward a fuel that 
has extremely low carbon dioxide output namely a cellulosic 
fuel input and a very, very efficient conversion technology. 
So, we are optimistic that we have technologies, possibly 
including the one that you are describing, that will achieve 
that goal very quickly.
    Senator Merkley. That is kind of a different answer than 
the question I was asking though, in terms of comparing it to 
our other generally available transportation fuels at this 
point, whether it is carbon, I recognize that we have over the 
horizon, and I will speak to one of those in just a moment, but 
in terms of the current options, is it fair to describe it as 
the lowest carbon footprint?
    Mr. Kelly. Well, I would say of the current options, if you 
can go directly from a cellulosic input to a fuel, that is 
probably the lowest CO2 per mile driven that you are 
going to get. If you can get electricity from a renewable 
source, an electrical vehicle would be comparable. But right 
now, that is not the average for electricity.
    Senator Merkley. Ms. McCarthy.
    Ms. McCarthy. The only thing I was going to add, Senator, 
is that what we are finding is that the refineries themselves 
are getting more and more efficient which is part of, I think, 
the answer to the question. It is also very exciting that we 
right now have a petition to qualify ethanol from algae. So, 
there are some really exciting ways in which you cannot only 
make the plants more efficient, and they are getting more 
efficient in terms of their CO2 output, but looking 
at the upstream and full life cycle analysis as well.
    Senator Merkley. Thank you. I certainly wanted to note that 
ZeaChem in Oregon expects to start limited production this fall 
and that is a straight from popular tree cellulosic process, 
with a chain of products that I believe involves vinegar, paint 
thinner and then ethanol. They can interrupt it to sell at the 
right point. But it has a dramatically substantial high ratio 
for energy in and energy out and very low carbon footprint.
    Senator Boxer. [presiding.] Thank you.
    Senator Johanns.
    Senator Johanns. Thank you, Madam Chair. Thank you for 
being here.
    Senator Inhofe asked you about the efficiency of ethanol 
versus gasoline and studies do indicate that there just simply 
is less gas mileage if you are burning ethanol versus burning 
gasoline.
    But that tradeoff exists with any energy source. I mean, 
you can power an 18 wheeler today on electricity. You probably 
are not going to power an 18 wheeler on natural gas. Diesel 
operates differently than unleaded gasoline. Would that not be 
the case across the entire energy specter?
    Mr. Kelly. Well, you have to be a little careful about how 
you state fuel efficiency. We try to use miles per gallon with 
gasoline equivalent to make sure that we are comparing the 
energy content of different fuels consistently. Because alcohol 
has about 60 percent of the energy density of gasoline. So that 
is just inherent in the product.
    Now, there are ways of converting the corn with new 
technologies to other fuels that have a much higher energy 
density and we are working on those and are optimistic about 
them. For diesel and for aircraft, the Defense Department needs 
something with high energy density and a number of these 
products that we are developing right now and that should be 
available in a few years will be able to be direct drop-in 
replacements.
    Senator Johanns. Which kind of leads me to the next 
observation or question that I wanted to ask, and that is that 
I happened to be on the Cabinet when the RFS was being 
discussed and there was a lot of debate at what level and a lot 
of effort to try to understand the science and the development 
and glimpse into the future.
    But I think at the end of the day, really what Congress was 
attempting to do was to send a stable signal to the marketplace 
that investment in the research, the development, existing 
plants for corn-based ethanol, was going to be supported, much 
like we support many industries, the oil industry, etcetera. 
Would you agree with that assessment?
    Mr. Kelly. Well, obviously I cannot speak for the intent of 
Congress. But certainly the result has been to create a stable 
market for this new technology and we hope that we will find a 
way to create a stable market for the next generation of 
technologies that follow.
    Senator Johanns. What happens if the rug is just pulled out 
and all of a sudden it ends tomorrow, no blenders' credit, 
somebody is successful in altering the tariff, somebody is 
successful in changing the RFS. What happens to the industry, 
in your judgment?
    Mr. Kelly. Well, we certainly want to be careful in how we 
make this adjustment. The President has said that he wants to 
work with Congress on ways of making the subsidies adapt to the 
current technical situation while still respecting the 
taxpayers.
    So, we look forward to working with you to make sure that 
we transition to support this next generation of technology 
without a major disruption.
    Senator Johanns. Ms. McCarthy, I did not mean to ignore 
you. I am sorry. Is there anything in that, I have about 30 
seconds left, is there anything that you wanted to offer in any 
of those questions?
    Ms. McCarthy. No, Senator. The only thing I would add is 
that this is a very young program and the exciting thing is the 
number of new feedstocks that we are looking at right now. All 
I can tell you is that those are, those are small, growing 
companies that are really looking for investors and want the 
stability to know that we can make the decisions about their 
feedstocks quickly and they will have an ability to get up and 
running.
    So, from my perspective, what they tell us is that this 
program is very important for their business and the innovation 
that they are trying to grow in our economy.
    Senator Johanns. Thank you, Madam Chair.
    Senator Boxer. Senator Udall.
    Senator Udall. Thank you, Madam Chair.
    First, I would like to thank the Department of Energy and 
the Department of Agriculture for the combined support of over 
$100 million in grants and loans for the first integrated algae 
biorefinery to be constructed by Sapphire Energy in Luna 
County, New Mexico. We are very proud of that.
    On the topic of algae, testimony from the second panel, 
from the Advanced Biofuels Association and DuPont, discuss how 
our biofuel policies, both tax incentives and Renewable Fuels 
Standard, treat different feedstocks differently. They 
indicated a technology neutral approach would be both fair and 
more successful.
    Do you support efforts to level the playing field so that 
advanced biofuels qualify for the same tax incentives and 
treatment under the Renewable Fuels Standard regardless of 
feedstock?
    Mr. Kelly. Well, as I said earlier, we are committed to 
finding ways of updating the incentive system now in place to 
include the variety of different products and the variety of 
different feedstocks and the variety of different fuels we can 
produce. We would be happy to work you on that.
    Senator Udall. Ms. Assistant Administrator McCarthy, can 
you answer that?
    Ms. McCarthy. Senator, all I will tell you is that at this 
point in time we have a program up and running. We are able to 
look at these feedstocks. We will do whatever Congress asks us 
to do in terms of looking at different standards that they 
believe will move the most and the best products into the 
market as quickly as possible.
    Senator Udall. I hope that you both have the benefit of 
hearing the next panel and their testimony and their advocacy 
on that particular issue.
    Assistant Administrator McCarthy, one just off-topic 
question. We have an air quality issue in New Mexico on the San 
Juan Generating Station. Apparently Region 6 EPA in Dallas is 
operating under a deadline to issue a Federal implement plan 
very soon.
    The State of New Mexico's Environment Department sent a 
letter back in March asking for a 90-day extension so that they 
can finalize an alternative State implementation plan. I hope, 
I am not aware that EPA Region 6 has answered that letter, so I 
was hoping that you would keep us in the loop. I do not know if 
you know that right now off the top of your head.
    Ms. McCarthy. Senator, I am familiar with that issue. I met 
with the folks from New Mexico and we had the Region plugged in 
on the phone. I probably met 2 weeks ago with them. I think 
that New Mexico is absolutely on the right track. They are 
really interested in doing their own plan. We are always 
interested in deferring to them. I will make sure that they 
have the correct signals if they did not when we met.
    I do not know whether we actually need to go to a formal 
extension because they can do that at any time. But I will make 
sure that I keep abreast of that and we give them every 
opportunity.
    Senator Udall. Great. Thank you very much. I am sorry that 
I am going to miss some of the other testimony here. I have 
several other commitments. I appreciate your being here today. 
Thank you.
    Senator Boxer. Thank you.
    Senator Boozman.
    Senator Boozman. Thank you, Madam Chair.
    Dr. Kelly, as you know, the Energy and Independent Security 
Act contains a Renewable Fuels Standard that severely limits 
the ability for wood biomass to participate. The current 
definition limits biomass utilization to just 10 percent of 
America's forest. This is a problem for Arkansas as well as 
many other States which are rich in biomass.
    In the past, Secretary Vilsack has noted that the 
definition from the 2008 Farm bill, to quote, is a common sense 
and practical approach that enables market participation while 
simultaneously considering the sustainability of our lands.
    I hope that the Administration will express support for the 
biomass definition used in the 2008 Farm bill. Can you all 
comment as to where you are at on that?
    Mr. Kelly. I am afraid that I am not familiar with the Farm 
bill. I would defer to my colleagues.
    But what I can say is that we have very aggressive programs 
to convert wood into useful fuels and the ultimate goal here is 
to have something that is fully competitive on a price basis 
with gasoline, and of course the mark keeps changing.
    But we are very optimistic that there are ways of taking 
forest waste products and other intentionally grown crops and 
converting it into diesel jet fuel and other materials that are 
fully competitive. That is the real home run.
    We think the market will make these decisions because these 
will be simply the best fuels available and we are convinced we 
will get there certainly within this decade.
    But we will certainly talk to our colleagues about that 
provision.
    Senator Boozman. OK. That would be very helpful. The other 
thing is, does it make any sense to have the subsidized 
American ethanol that is ultimately exported? How does that 
accomplish the goals that we are intending? Is that a wise use 
of taxpayer money?
    Mr. Kelly. Well, as we said, these subsidies undoubtedly do 
need to be revisited. There has been a lot that has changed 
since the program was put in place. I think the producers 
themselves recognize that and we are working with them and 
would be happy to work with you on the appropriate revisions.
    Senator Boozman. So, do you think that is something that 
needs to be revisited?
    Mr. Kelly. We think that, yes, the current system plainly 
needs to be revisited. The goal is to create jobs here in the 
United States as well as find energy supports for imported 
petroleum. We need to honor both of those objectives in 
whatever new program----
    Senator Boozman. So, do you agree that that really does not 
make a lot of sense?
    Mr. Kelly. Well, we do try to help exporters in other 
areas, creating jobs here in the United States. So, I would 
like to discuss that with you at greater length. But the goal 
of job creation, particularly job creation in rural area, is 
the part of the program that we should maintain. One of the 
things that we are hoping to do is increase U.S. exports.
    Senator Boozman. But that could be true of any industry. If 
you heavily subsidize any industry, you are going to increase 
the exports.
    Mr. Kelly. I am not arguing that we should not revise it.
    Senator Boozman. That, to me, just makes no sense because 
the program was not set up on that basis. I mean, that does not 
help our energy independence at all. If we are creating an 
export program, then I would argue that we need to get other 
industries in line that could vie for the same dollars. We have 
all kinds of industries that are desperately in need of help 
for their survival.
    Mr. Kelly. Oh, I completely agree. We are anxious to take 
all of these considerations into account if we are trying to 
create the right incentives.
    Senator Boozman. Thank you, Madam Chair. Thank you for 
being here. I have enjoyed the testimony.
    Senator Boxer. Senator, I thought that was an interesting 
line of questioning because I remember once I had an amendment 
that would have stopped certain subsidies for Big Oil that was 
exploiting from Alaska. But it lost by a hair. But maybe we can 
team up. Because I agree with you.
    Senator Inhofe. We need to talk before the team sets up.
    [Laughter.]
    Senator Boxer. OK, moving right along.
    Senator Boozman. I will team up with you and Senator 
Inhofe.
    Senator Boxer. Oh, yes, you will protect yourself that way 
for sure.
    [Laughter.]
    Senator Boxer. Dr. Kelly, in your testimony you talked 
about 18 research and development demonstration projects for 
innovative biorefineries. Could you just give us in my 
remaining time, very briefly here, one or two of those that are 
real, live?
    Mr. Kelly. Well, we are able to support something like 29 
different pilot projects and commercial projects because of 
Recovery Act Funding. A number of those are reaching a 
commercial scale, they are fully ready to go forward. One of 
them is called BOET. They are all converting various kinds of 
feedstocks----
    Senator Boxer. Would you describe that one that you just 
mentioned? POET, did you say?
    Mr. Kelly. I am afraid I am going to have to get help on 
that one.
    BOET is what feed? But what is the input?
    Senator Boxer. The input?
    Mr. Kelly. It is corn stover to ethanol. It is in Iowa.
    Senator Boxer. What is stover?
    Mr. Kelly. Corn stover is what is left over when you take 
the seed out. So, the good thing is, it is available with no 
additional inputs. It has already been produced. So, you do not 
have to put additional water----
    Senator Boxer. Very interesting. Well, that is good.
    Mr. Kelly. The reason I am confused is that there are so 
many different permutations and combinations that have been----
    Senator Boxer. I know. I have seen a lot of these projects 
in my home State. It is very exciting. I mean, the potential 
here is just enormous and it is, as I think Hon. Gina McCarthy 
said, that it is slower than we would like. But it is just 
there, and you just know we are going to have a breakthrough 
and it is going to change our world. That is important.
    Well, I want to thank both of you very much and call up our 
last panel. Michael McAdams, president of Advanced Biofuels 
Association, Jan Koninckx, global business director for 
Biofuels, DuPont, Kris Kiser, executive vice president, Outdoor 
Power Equipment Institute, Scott Faber, vice president, Federal 
Affairs, Grocery Manufacturing Association, and Mr. Brooke 
Coleman, executive director, Advanced Ethanol Council.
    We welcome all of you. We also thank you for your patience. 
We are happy to start with you, Mr. McAdams, president of 
Advanced Biofuels Association.
    Mr. McAdams. Madam Chairman, could I ask permission to have 
my full----
    Senator Boxer. All of your statements will be placed in the 
record. If you could summarize them for us.
    Mr. McAdams. I have a new statement. I made some changes 
and I wanted to have the new statement----
    Senator Boxer. Absolutely, yes.
    Mr. McAdams. Thank you, Madam Chairman.

 STATEMENT OF MICHAEL J. McADAMS, PRESIDENT, ADVANCED BIOFUELS 
                          ASSOCIATION

    Mr. McAdams. Madam Chairman, Ranking Minority Member 
Inhofe, members of the committee, I am honored to be here this 
morning to speak on behalf of the Advanced Biofuels 
Association, a collection of 31 of our Nation and world's top 
advanced biofuels and bioproducts companies.
    Two years ago, the ABFA appeared before this very committee 
to discuss the opportunities for advanced and cellulosic 
biofuels. Since that time, advanced and cellulosic biofuels 
have seen some positive developments and some disappointments.
    On the positive side, I am delighted to report to you that 
as a result of your work on EISA, we now have several new 
plants operating both in the United States and around the world 
which are producing advanced drop-in biofuels. These plants are 
making renewable fuels for the first time that can be used 
without changes to the transportation fleet or requiring any 
infrastructure changes to deliver them.
    For example, Tyson Foods, in combination with Syntroleum of 
Oklahoma, is currently producing 75 million gallons in 
Louisiana of a jet fuel from animal fats and food greases. 
These fuels, which are being produced as we speak, are 
identical to those produced in refineries across America from 
traditional barrels of oil. The initial sales of this plant 
have been to the U.S. Air Force and major U.S. oil refineries.
    As a result of its recent successful Initial Public 
Offering, Gevo has begun its plans to retrofit a traditional 
corn ethanol plant to produce 18 million gallons of isobutanol 
in June of next year. Additionally, they have announced plans 
to develop over 350 million gallons of isobutanol production by 
2015. If successful, this could ease some of the pressure with 
existing blend wall restrictions.
    These developments would simply not be occurring if it were 
not for the vision of this committee and the Congress from 2005 
to date to enact the Renewable Fuels Standard.
    I urge you to reject the naysayers on advanced biofuels. 
They are simply not telling you the truth. The fuels are real, 
some are here today, and many more are on the way.
    Our Association and member companies strongly believe the 
current RFS is the most important Federal policy in supporting 
for the development of the biofuels industry in this country. 
We would specifically urge this committee, and Congress, not to 
tinker with the statute at this time. Since the rules were only 
final last July, we strongly urge the Congress to allow the 
markets and the players in the market to work within the 
current framework and see how much progress we can make toward 
reaching the overarching goals of the original legislation in 
the short term.
    As far as the specifics of the RFS, we want to compliment 
the EPA on bringing forward the energy density and equivalency 
provisions from the original RFS I program. In addition, we 
support the manner in which EPA has allowed the advanced 
biofuels mandates to continue as mandated despite shortfalls in 
some categories.
    One concern we would call to the attention of the committee 
today is the overall intent of Congress to back out foreign oil 
with as wide a range of products as possible. This is why you 
expanded the statute, to include other product lines, not just 
gasoline.
    Currently, the EPA, in their RIN certification process, is 
showing a tendency to be very prescriptive and narrow in 
allowing some of the determinations for new qualified pathways 
as well as qualifying some significant potential feedstocks. We 
would urge the Congress to stay closely engaged with the agency 
on these determinations. Many are moving forward at this time 
and could have a significant chilling effect if the existing 
commercial delivery chains are not approved.
    We should take full advantage of the ability to back out 
all the various components of the market. As most of you are 
aware, the chief challenge of the advanced biofuels and 
cellulosic industry has been to achieve necessary funding to 
build new generation facilities. The primary reason has been 
the Tax Code and its lack of consistency, parity and 
applicability for those in a manner those companies could use 
it.
    I thank you for the opportunity to be here with you today 
and I will look forward to your questions.
    [The prepared statement of Mr. McAdams follows:]
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    Senator Boxer. Thank you so much.
    Mr. Jan Koninckx, global business director for Biofuels, 
DuPont.

STATEMENT OF JAN KONINCKX, GLOBAL BUSINESS DIRECTOR, BIOFUELS, 
DUPONT APPLIED BIOSCIENCES, E.I. DUPONT DE NEMOURS AND COMPANY, 
                              INC.

    Mr. Koninckx. Good morning Chairman Boxer, Ranking Member 
Inhofe and members of the committee.
    I am Global Business Director for Biofuels at DuPont. In my 
testimony, I will provide our views on the future of biofuels 
and the role of the Renewable Fuels Standard in that future.
    I have two key messages for you. First, advanced biofuels 
are a technological reality. They will soon be a commercial 
reality. Second, the single most important thing that Congress 
can do for advanced biofuels is to provide a stable policy 
environment. Keep the RFS and advanced biofuels tax policies as 
they are. We simply ask that you do no harm. With a stable 
policy and access to the fuel pool, we will succeed.
    DuPont brings a uniquely broad perspective to bear on 
biofuels issues. Our seed business, Pioneer Hi-Bred, has 
enabled steadily rising production per acre for over 80 years. 
We have 208 years of demonstrated commercialization success of 
technical innovation and manufacturing expertise. We bring 
significant biotechnology, process engineering, plant 
operations and agricultural to bear to this endeavor.
    When the U.S. Government called on the private sector to 
step forward in advanced biofuels technologies and production, 
we responded with 10 years of work, hundreds of millions of R&D 
dollars and investment dollars, and our brightest minds. We are 
confident of our capabilities to cost-effectively produce 
advanced biofuels.
    What have we done? What are we working on? First, with our 
partner, BP, we have developed and demonstrated biobutanol, a 
higher alcohol with excellent fuel properties. We are on track 
to commercialize this in the United States by 2013. This drop-
in fuel is the first biofuel specifically developed for its 
fuel performance characteristics in that it behaves very 
similarly to gasoline.
    Second, our other biofuel joint venture, DuPont Danisco 
Cellulosic Ethanol, will shortly announce the construction of a 
commercial-scale cellulosic ethanol facility based on corn 
stover, with production, again, in the 2013 timeframe. We are 
currently demonstrating this technology on corn stover and on 
the energy crop switchgrass, providing the opportunity to 
produce biofuels both inside and well outside of the Midwest.
    We recognize a variety of ramifications of our dependence 
on oil. They are becoming more acute. Biofuels are making solid 
progress in that problem. Biofuels' production in the United 
States offsets about 10 billion gallons of petroleum each year, 
10 billion of very expensive gallons that we do not have to 
import. That alternative fuel supply has been built by the 
first generation corn grain ethanol industry.
    The RFS has helped now to move the biofuels market in the 
direction of multiple feedstocks and production technologies as 
well as desirable fuel attributes. There are multiple 
technology developers preparing to produce cellulosic ethanol, 
biobutanol and other drop-in fuels in demonstration or 
commercial quantities over the next 24 months. The economics 
and carbon performance of grain ethanol continues to improve, 
agriculture productivity is strong, remains strong, and will 
grow.
    These trends suggest that while the RFS targets are 
aggressive, as they should be, they are not out of reach. 
Advanced biofuels are delayed versus the annual RFS targets, 
but we are confident that they are on track to meet the overall 
goals. EPA has all the authority it needs to adjust annual 
targets on the way to meeting the overall goal.
    The RFS does not need to, nor should it be, reopened. In 
fact, reopening the RFS would seriously undermine the market 
predictability that is allowing us to move forward with 
significant investments in these businesses.
    I thank you for the opportunity to speak with you today on 
this important topic. I have tried to illustrate in my remarks 
biofuels technologies are demonstrated and implementable. We 
are poised to see commercial-scale production from multiple 
companies producing various fuels just as it should in a 
competitive market. We are confident that several of these 
technologies will prove out at commercial scale.
    Congress has done an effective job of creating a policy 
framework that has allowed this to happen, especially the RFS. 
Your job now is simply to maintain that policy so that we have 
the predictability to move forward.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Koninckx follows:]
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    Senator Boxer. Thank you very much.
    Mr. Kiser, executive vice president, Outdoor Power 
Equipment Institute.

STATEMENT OF KRIS KISER, EXECUTIVE VICE PRESIDENT, THE OUTDOOR 
                   POWER EQUIPMENT INSTITUTE

    Mr. Kiser. Thank you, Chairman Boxer and members.
    Our 80 member companies make small engines and put them on 
vehicles and products. These are working machines. Typically, 
when one of our machines operates, someone is doing a job.
    We have some 200 million units in use today throughout the 
United States. Their uses are too numerous to mention. We have 
900 engine families that are regulated by the EPA and 
California Air Resources Board for emissions. A transition to 
any new fuel presents a challenge to us.
    Our members understand and appreciate the work Congress has 
done on reducing our dependence on foreign oil and energy 
dependence in the use of biofuels. We support that.
    Our members make a wide range of product, diesel electric 
hybrids, propane, compressed natural gas, battery, electric, 
etcetera. Moving to a different gasoline-based fuel presents an 
enormous challenge for our industry. None of our product, none 
of engines, none of our product, no marine product, no ATV, not 
snowmobile, etcetera is designed, built or warranted to run on 
any gasoline fuel containing more than 10 percent ethanol.
    The EPA did not make a sub sim declaration on E-15. They 
did not approve its use for any of our products. A sub sim 
declaration is a substantially similar. What they are saying 
is, this is a different fuel.
    We are not anti-ethanol. Our members can design a product 
to run on anything. We can design a product to run on E-10, E-
20, E-30. It does not matter. The products we have designed and 
built and put into the marketplace were not designed for E-15.
    EPA has approved E-15 for use in model 2001 and newer 
automobiles. Again, it has not approved it for our use. But 
they are going to move that fuel into the marketplace. How are 
you going to put it into the marketplace? For 50 years you have 
been able to drive to a gasoline station and what goes in the 
car goes in the can. What goes in the can goes in the bass 
boat, lawn mower, ATV, snow machine, et cetera. You are 
changing that paradigm.
    It is especially true for seasonal uses. When you add 
alcohol to a petroleum-based product, you change the fuel. You 
destabilize the fuel. So, if a product is seasonal use, like a 
boat, landscapers' equipment, consumers need to know about its 
storage, that storage capabilities have changed. The marine 
environment is particularly challenged. Ethanol absorbs water. 
Once it absorbs enough water, it phase separates and the 
product fails.
    The EPA has said they are going to put a label on E-15 at 
the pump, at retail. This is to educate the consumers about its 
use, what to put it in, not to put it in. We are concerned that 
a label is inadequate to provide this knowledge to the user.
    DOE did test our equipment. We have 900 engine families 
regulated. They tested 28 engines in four families. We do not 
disagree with their findings. What they found was it gives you 
increased heat, performance irregularities, failure and 
unintentional clutch engagement. Unintentional clutch 
engagement is a fancy word for saying the blades engage when 
the machines are in neutral. This is a problem. Failure is a 
problem.
    Again, we are not opposed to ethanol. But what we are 
opposed to is bringing this fuel to the marketplace in a way 
that does not put our users' economic interests or safety at 
risk. We would encourage those in the ethanol industry to work 
cooperatively to find a way to bring this fuel to the 
marketplace that does not place people at risk.
    Secretary Vilsack talked about blender pumps into the 
marketplace. That allows you, or any user, to choose your level 
of ethanol. It may be cheaper. It is less energy dense. You 
might be incentivized to purchase E-30 for all of your 
products. You might legally fuel your flex fuel product but 
illegally fuel everything else.
    Ethanol damage is permanent. It is irreversible. If you are 
a landscape operator and you destroy all of your equipment, you 
have hurt your business.
    We want to work with Congress and believe the partial 
waiver is a challenge where they have approved it for a subset 
of the auto fleet. All engine makers, autos, and ourselves, and 
the marine industry and others are challenging that in court.
    As that works it way through the system, we would like to 
work with Congress in finding meaningful alternatives to bring 
biofuels to market.
    Thank you.
    [The prepared statement of Mr. Kiser follows:]
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    Senator Boxer. Thank you very much. Other than that, you 
love it, right?
    [Laughter.]
    Senator Boxer. Mr. Scott Faber, and let me say, vice 
president, Federal Affairs, Grocery Manufacturers Association. 
Welcome.

 STATEMENT OF SCOTT FABER, VICE PRESIDENT OF FEDERAL AFFAIRS, 
               GROCERY MANUFACTURERS ASSOCIATION

    Mr. Faber. Thank you, Madam Chair.
    My name again is Scott Faber. The Grocery Manufacturers 
Association represents more than 300 food, beverage and 
consumer product companies. We directly employ 1.7 million 
Americans in more than 30,000 communities, many rural 
communities.
    When I appeared before this committee in July 2008, 
tightening supplies of basic commodities and rising and 
volatile food prices was contributing to unrest in more than 30 
countries and food inflation at home.
    Unfortunately, tightening supplies of basic commodities are 
once again contributing to high food prices. Overall, food at 
home prices are expected to increase by 3.5 to 4.5 percent in 
2011 with even higher prices expected for basic staples like 
milk, meat and eggs.
    The same factors that caused a perfect storm in 2008 are 
once again contributing to rising food and food ingredient 
prices including strong global demand, poor weather, rising 
energy costs, commodities speculation and trade restrictions. 
But one very significant difference between 2008 and 2011 is 
that even more of our food, and primarily feed, is being 
diverted to produce fuel.
    In 2008, one-quarter of our corn crop was diverted from 
food and feed to fuel. Today, nearly 40 percent of U.S. corn 
production is diverted from feed and fuel to produce more than 
13 billion gallons of corn ethanol. During the same period, 
corn yields increased by less than 6 percent and as a result, 
corn stocks are at or near record lows, contributing to high 
prices and extreme volatility.
    Unfortunately, rather than allowing the market to ration 
these tightening supplies, our mandates and subsidies continue 
to automatically divert more and more food and feed to our fuel 
supplies and trade barriers continue to limit the importation 
of less costly fuel alternatives.
    As we heard from Secretary Vilsack this morning, the price 
of food, especially the price of meat, poultry, dairy and eggs, 
is closely linked to the price of feed and food ingredients. On 
average, in particular feed costs, represent about 70 percent 
of the cost of producing meat and poultry and a smaller but 
significant share of processed foods.
    While food manufacturers are reluctant to pass these costs 
of production on to consumers, higher commodity prices often 
result in higher retail food prices, especially for basic 
staples. Many experts have confirmed the link between our food-
to-fuel policies and higher food prices.
    The CBO, in fact, reported in 2009 that corn ethanol 
production contributed 10 to 15 percent of the increase in food 
prices that we saw between April 2007 and 2008.
    So, let me just take a minute to provide some 
recommendations.
    We believe now is the time to revisit and reform these 
policies to accelerate the development of advanced biofuels and 
to freeze the amount of food and feed that is being diverted to 
our fuel supplies. In particularly, we urge Congress to freeze 
the amount of corn ethanol that must be blended into gasoline 
in order to provide advanced biofuels more time to reach 
commercial scale, to permit changes to engines unable to safely 
operate with higher ethanol blends, to complete assessments of 
the impacts of higher blends on engines and on the environment, 
and to allow corn yields to catch up with the artificial demand 
that has been created by the RFS.
    Congress should also immediately end the Volumetric Ethanol 
Excise Tax Credit, or VEETC, and instead invest in advanced 
biofuels. Immediately ending the VEETC would save taxpayers 
$4.8 billion and would have virtually no impact on corn ethanol 
production. Economists at CBO, GAO and leading universities 
have concluded that the VEETC is a costly redundancy to the 
corn ethanol mandate.
    Congress should also reject proposals to redirect the VEETC 
to corn ethanol infrastructure until advanced fuels reach 
commercial scale, investments and policies designed to bring 
higher ethanol blends to the marketplace will divert even more 
of the U.S. corn crop to our fuel supply.
    So, let me conclude by saying that we strongly support 
policies that will help bring advanced biofuels to the 
marketplace.
    Thank you.
    [The prepared statement of Mr. Faber follows:]
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    Senator Boxer. Thank you so much.
    Well, this has been really interesting so far.
    Last, but not least, Mr. Brooke Coleman, Executive 
Director, Advanced Ethanol Council.
    Before we begin, because of an 11:30 issue I have, I am 
going to turn the gavel over to Senator Whitehouse.
    Senator Whitehouse. Oh, come on.
    Senator Boxer. I know.
    [Laughter.]
    Senator Boxer. We almost had a deal here, but Senator 
Inhofe said he could not promise me that he would not overturn 
any laws dealing with climate change. So, I had to call on my 
pal over here.
    [Laughter.]
    Senator Boxer. Just kidding.
    So, Mr. Brooke Coleman, if you could conclude.

   STATEMENT OF BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED 
                        ETHANOL COUNCIL

    Mr. Coleman. Chairman Boxer, thank you. Ranking Member 
Inhofe, members of the committee, I appreciate the opportunity 
to speak here today.
    My name is Brooke Coleman. I am the executive director of 
the Advanced Ethanol Council. The Advanced Ethanol Council 
represents worldwide leaders in the effort to develop and 
commercialize the next generation of ethanol fuels ranging from 
cellulosic ethanol fuels from switchgrass, agriculture waste, 
and wood chips to advanced ethanol fuels from energy crops, 
municipal solid waste and algae.
    I want to start quickly with the big picture. When people 
talk about biofuels, and particularly ethanol, there is this 
spatial amnesia that seems to kick in and we focus solely on 
what is wrong with what we have today and not so much on where 
we have come from and where we are headed. I want to pull the 
lens back a little bit.
    We talked a little bit this morning with Secretary Vilsack 
about the benefits of the ethanol industry in rural America and 
he talked about the job creation, etcetera. What we did not 
talk about was the baseline. The baseline was, people seem to 
think that $1.80 per bushel of corn was good for farmers, good 
for the American taxpayer, that there was this nice balance 
between supply and demand.
    The reality was that grains were overproduced, farmers were 
going belly up, and the taxpayer was footing that bill and 
paying for that bill. So, when we think about, well, I am just 
opposed to this corn ethanol stuff, I think we have to keep 
that in perspective.
    The other thing is that they built 200 biorefineries at a 
time when we were exporting jobs and capital at an alarming 
rate to China and India. Two hundred biorefineries.
    The third thing, and this is what is most important to our 
industry, is they are proving out the effectiveness of the 
ethanol chemical in the marketplace. That is tremendous if you 
are trying to produce it from a different set of feedstock 
because investors, that reduces risk and investors know that 
that chemical works.
    The second big lens issue is foreign oil dependence and, 
whether you like corn ethanol or not, they are displacing a lot 
of foreign oil. Last year, the U.S. ethanol industry alone 
displaced more oil than we import from Saudi Arabia every 
single year. So, I think the second charge for the renewable 
fuels industry with the Energy Independence and Act was to 
reduce foreign oil.
    But that brings, and there is a critical reason, of course. 
People talk about the dangers of foreign oil all the time and I 
would like to just focus on one issue. In 2008, Scott mentioned 
that prices went up. During that period, American taxpayers 
transferred almost $1 trillion to OPEC in wealth. So, when we 
hear in the advanced biofuels industry, and that was over 6 
months, so when we hear we cannot get $1.5 billion, $2 billion 
in loan guaranty money, what we cannot afford is the status 
quo.
    Moving on to the third and most important issue, and that 
is the advanced biofuels industry. I stand united with my 
colleagues when I say that we have been asked to innovate, we 
have been asked to put a lot of the gallons in the marketplace, 
and we have stepped up. We have about 50 projects nationally in 
various stages of development. We have attracted in the 
vicinity of $1.5 billion in private sector investment.
    I want to make clear as well that we have a proven 
technology. So, step one is proving that you can produce the 
fuel. Step two is showing that you can produce the fuel at the 
ranges of fuel today, so $2.60, $2.70 a gallon. Our companies 
have shown that. I am sure a lot of Mike's companies have shown 
that. The next step of course is commercialization.
    So why do we need this policy? Here is the most important 
part. The marketplace is not competitive. It is monolithic. Our 
cars are not FFVs like they are in Brazil. There is no choice 
at the pump. The incumbent oil companies, who had subsidies for 
100 years, continue to get subsidies. The blend wall, which 
people talk about as a corn ethanol problem, is really a 
problem for us because our investors are looking out 5 years 
and seeing questionable demand. That creates a reverse domino 
effect where they are looking and they are saying, the risk is 
too high, we are not going to invest. And, of course, that 
exacerbates plant finance problems.
    So what are we going to do about it? The most important 
thing, bar none, is no backsliding. We have to keep the RFS. 
Even the perception that it might be overturned is bad for 
advanced ethanol.
    The second is we have to open up the marketplace. We need 
the opportunity to compete. Everybody wants to see a free 
marketplace, but it is not as easy as showing up with a cost-
competitive, cheaper fuel in this marketplace when it is this 
vertically integrated.
    Third, and this is very, very important as well, we need a 
tax policy that reflects 2011 and the commitment that Congress 
has made in the RFS instead of tax policy that is oriented 100 
years ago when it was very important at that time to produce 
more oil and to mitigate the risk of drilling in case there was 
nothing found. So we really have to have the tax policy catch 
up with the RFS to get this done.
    So we stand ready to produce these gallons and what we need 
more than anything else is certainty over time.
    Thank you very much.
    [The prepared statement of Mr. Coleman follows:]
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    Senator Whitehouse. [presiding.] Thank you very much.
    This has been a very helpful and instructive panel. Because 
we are coming up on this April 15th moment in Shenandoah, IA 
where we are doing the expansion of the plant to grow algae off 
of the exhaust of the ethanol plant, I am interested in asking 
each of you what role you see algae biofuels as playing in the 
advanced biofuel mix.
    Why don't I start with you, Mr. McAdams?
    Mr. McAdams. It is a very important role. I would, I want 
to point out to the committee there are various, different ways 
in which algae can be used to make a biofuel. There are some 
that not so elegantly describe it as the squish, which is where 
you grow as efficiently as you can a lipid with high 
concentrations of oil, and then you remove the oil and then put 
it through a secondary process to make a traditional drop-in 
fuel. There are other heterotrophic algae processes which do 
not use sunlight or CO2, but use it as a mechanism 
in a fermentation process.
    We represent both types. We have Sapphire, who is going to 
deploy in New Mexico, and we have Solazyme, who has just gone 
out with their IPO. So, these are very promising technologies 
and they certainly have a place in backing out foreign oil in 
the future.
    Senator Whitehouse. Thank you.
    Mr. Koninckx.
    Mr. Koninckx. We do some work in algae. We focus on 
cellulosic ethanol and on butanol because the cellulosic 
ethanol, of course, on corn stover, where we see a feedstock 
that exists today and that is accessible today and that we can 
grow immediately. Butanol, butanol is a technology that we can 
apply in the existing ethanol industry, converting the industry 
to a more valuable product.-
    So, obviously there is long-term potential for algae and we 
do some research work in it. But we focus right now on 
cellulosic ethanol and butanol which we, as I stated before, 
expect to commercialize in the near term.
    Mr. Kiser. Senator, we are happy to build an engine to run 
on anything. Give us the appropriate lead time, your make sure 
the certification fuel of the EPA matches and the fuel is in 
the marketplace, we are happy to do it. We are currently 
testing isobutanol with a couple of our engine manufacturers. 
It does not act as an alcohol. The challenge with ethanol, you 
are burning it with gasoline, and it is a challenge.
    So, there are biofuels that thus far show tremendous 
promise. But----
    Senator Whitehouse. The lipid technology that Michael 
McAdams was talking about comes through just as oil, not as 
ethanol.
    Mr. Kiser. We do not have a problem with it.
    Senator Whitehouse. Mr. Faber.
    Mr. Faber. Senator, all I will say is that we support any 
of these fuels that do not pit our food security needs against 
our energy security needs. So, anything that can accelerate the 
development of fuel feedstocks that do not divert food and feed 
into our fuel supplies would be a terrific development.
    Senator Whitehouse. Mr. Coleman, if you could add, since 
you are here on behalf of the ethanol folks. It seems to me 
that there is a fairly healthy relationship between the algae 
industry and the ethanol industry and that the algae industry 
is able to absorb and put to use what would otherwise be carbon 
dioxide emissions produced in the course of the development of 
the ethanol. Correct?
    Mr. Coleman. That is true.
    Senator Whitehouse. It is symbiotic.
    Mr. Coleman. Yes. You are hitting on a couple of points. I 
am a great believer in the continuum theory, that this 
renewable fuels industry will continue to evolve. Someone 
producing ethanol from corn, when corn goes to, if there is one 
thing I have in common with Scott it is that high corn prices 
can be a problem at the production level, right? So, corn 
ethanol folks see $7 corn they look for alternative feedstocks. 
So they have an interest in not only sequestering carbon, but 
also figuring out other ways to produce their product.
    When you grow algae, you can produce oil and you can 
produce ethanol from the biomass that you are producing. So 
that is a huge benefit. The other one, and this is the most 
important one for your company, is that it is tricky to finance 
a plant no matter what type of energy source you are.
    When you develop your technology, it is tremendously 
helpful to reach out to people that have already that steel in 
the ground and say, we have an option, we have a bolt on 
solution that will help you in three different ways.
    So, that is a huge issue for us.
    Senator Whitehouse. Very good.
    Senator Inhofe.
    Senator Inhofe. Thank you, Mr. Chairman.
    You now, I was the guy who requested this hearing and this 
has been actually better than I thought it would be. We have 
gotten some great responses.
    Now, I want to give you, I do not think I need Mr. McAdams 
and Mr. Koninckx to tell you that I am a strong supporter of 
cellulosic. My only thing, in the legislation that I have, is 
purely corn ethanol, it does not reflect anything else.
    Look at our State of Oklahoma. Switchgrass. Look what the 
Noble Foundation is doing. Look at Oklahoma State University. 
We are a big player in this. So, I want to make sure everyone 
understands that I am on your side on that.
    I think you did a good job, Mr. Faber, in talking about the 
costs. We quite often, and you specifically talked about the 
CBO and their numbers as to what it is going to cost in terms 
of increased fuel costs.
    One thing that was not discussed, and I will go back to 
you, Mr. Kiser, on this, that concerns me, I suspect that of 
all of the 100 Senators, I use chainsaws more than anybody else 
does. I pride myself every weekend in doing something that I 
know that no other U.S. Senator is doing. So, I cut down the 
trees and I split all the woods for all 20 of my kids and 
grandkids. So, I know something about that.
    Now, we know what can happen in terms of damage, let us 
say, in a chainsaw. Someone is putting in a blend that is 
damaging it, causes it to stick, it stays on, and with today's 
tort laws and all of that, have you ever looked at how this is 
going to affect people in terms of safety but then, connected 
to that, the lawsuits that could come up? I mean, with a 
chainsaw, it is easy to lose your life. You know what the tort 
system is out there.
    Any thoughts about that?
    Mr. Kiser. Certainly. Senator, we are acutely aware of this 
problem. We are consumer products companies. Our names are on 
those things. We care about our customers' safety. In 
particular, a chainsaw, and any open clutch-to-blade equipment, 
you have hit it right on the head, is alcohol advances the 
RPMs. The machine thinks it is throttling up and the blade will 
move, simply move, when it is in neutral.
    So this presents a very real safety problem for any user, 
whether it is seated, I mean, if you have ever watched a 
professional forester, they throw these things around like 
handbags. They carry them up and down trees and hang them on 
themselves.
    So it is a huge problem. It is a warranty issue as well. 
But when the warranty expires, our liability does not go away.
    Senator Inhofe. Exactly.
    Mr. Kiser. You also potentially face a recall. These are 
company-crushing endeavors. If this fuel is in the marketplace, 
and it is x dollars, and EPA knows what those numbers are that 
trigger misfueling, and if you can foresee that the product 
might be misfueled and an injury may result, you may have to 
recall the product.
    Senator Inhofe. Well, not just recall the products, but if 
something happens, everyone is talking about it and you made 
the statement, you can produce anything to burn on anything.
    Mr. Kiser. That is right.
    Senator Inhofe. But those things are still out there. In 
1994, I was the, I guess, the reason that we passed the 18-year 
repos on aviation products and that put America back into an 
exporting position instead of importing on airplanes and 
airplane products. Well, that was great. It was 18 year repos.
    Now, you might say, wait a minute, something has been 
running fine for 18 years, it should not go beyond that. 
However, if you find somebody that does run on something that 
you are forced to buy, there are still going to be thousands 
and thousands of those out there that are going to come back to 
you, your manufacturer, long after, years after they have been 
performing well, just due to the blend that they are----
    Mr. Kiser. Yes, sir.
    Senator Inhofe. Am I off base on that? Am I missing 
something?
    Mr. Kiser. It is in the millions. In the marine industry, 
if your machine, if your engine fails and you are 30 miles 
offshore, this is a huge problem. If you are on a snow machine 
and it fails in the wilderness, this is a huge problem.
    So, again, we are not anti-ethanol. We are not opposed to 
these fuels. But we want to educate that if this fuel is going 
to be in the marketplace, you have to educate the folks about 
how, what fuel goes in what and, in particular, a blender pump.
    Senator Inhofe. Yes, I would only correct you in saying you 
can educate them all they want, but if they end up losing their 
lives, all the education in the world is not going to help 
that.
    In Oklahoma we still now, it may not last long, but as it 
is now we have a choice. In Oklahoma there are big signs on 
every major filling station, we sell no ethanol, no corn in our 
gas. That is all over the place. So while the supply and demand 
varies from State to State, I can assure you in Oklahoma what 
it is.
    So, I would assume then, if we had an opportunity to opt 
out, keeping in mind now, I say to our friends on the left side 
here, this only affects corn ethanol, nothing else. If there is 
an opportunity to opt out of this, and I would say the same 
thing to you, Mr. Faber, would that not pretty much solve this 
problem? It is choice. If you want any kind of ethanol you can 
have it, but if you want clear gas you can have that, too.
    Mr. Faber. I think to your point, and to the question that 
Senator Johanns asked, FAPRI, which is in some respects the 
final word on agricultural economics, has looked at this 
question of what if you change the mandate, eliminate the 
mandate, eliminate the tariff, eliminate the tax credit, and 
what would happen to ethanol production?
    There would still be a significant amount of ethanol 
production, depending on the year, but there would not be as 
much. The price of ethanol would be lower. The price of corn, 
and ultimately the price of food and feed, would be lower. So, 
you would continue to have a mature industry that would be 
competitive with other makers of fuels. You just would not be 
spending $6 billion a year in subsidies and limiting consumer 
choice.
    Senator Inhofe. Americans can have the choice. This is the 
thing that has been different in America than in any other 
country.
    Thank you, Mr. Chairman.
    Senator Whitehouse. Thank you.
    I just wanted, before I, do you want to do another round or 
are you ready to conclude?
    Senator Inhofe. I am ready to conclude.
    Senator Whitehouse. OK. Let me just ask one last question 
of Mr. Kiser. I take the prerogative of the Chair, since I am 
also Senator from the Ocean State, and give you the opportunity 
to elaborate just a little bit on your remarks with regard to 
marine use of the fuel and what your recommendations are with 
respect to the particular issues that marine use and saltwater 
use of the fuel raise.
    Mr. Kiser. I would note that the National Marine 
Manufacturers is a co-participant with OPEI on both the 
petition to ask EPA to make a formal rulemaking on misfueling, 
to look at misfueling mechanisms beyond the label to help 
educate folks. The National Marine Manufacturers Association 
was also one of the petitioners with us in challenging the 
decision. I note that the Coast Guard weighed in in opposition 
to the E-15 waiver because of its potential effect in the 
marine industry.
    Their engines, like our own, are simply not designed for 
the product. They can design a product for it. Now, they are a 
little more challenged because alcohol absorbs water. You bring 
water into the engine, a, it is corrosive, but it also phase 
separates. So, they are uniquely challenged. Probably of all 
the non-road community, marine has a very tough road here and 
certainly maybe in the marina environment or in ocean 
environments, a legacy fuel or an easy or neat fuel should be 
made available for the foreseeable future.
    They also have a very long lifetime span. Legacy products 
in my field, maybe 10 or 20 years. You have boats, 30, 40, 50 
years old, same thing with automobiles, legacy automobiles, 
that are collectibles. None of this stuff is designed for, and 
especially a fiberglass tanked boat. You simply cannot run E-10 
in it. It will break up the resin. So, the marine folks are 
genuinely challenged here.
    Mr. Coleman. Mr. Chair, could I comment on that before you 
finish?
    Senator Whitehouse. Sure.
    Mr. Coleman. From the perspective, just quickly on this 
choice thing, from the perspective of the advanced ethanol 
industry with regard to opt out, I think the common ground here 
is we want to give consumers a choice. We want to give them a 
choice not just to opt out, but to opt in, because if you give 
them a choice just to opt out, you are going to have a 
situation where you weaken the existing industry.
    There is a plant in Southwestern Kansas right on the border 
on Oklahoma, they are going to do a cellulosic ethanol biofuels 
plant. It is an integrated plant but it is financed on the back 
of a company that is healthy because they are selling corn 
ethanol. So we do not want to weaken the ethanol industry while 
we move toward choice.
    I think the ultimate situation is where the consumer can 
dial it up to 30 or 40, but then they can dial it down for zero 
if they want to go offshore. I am a boat owner and I can 
certainly sympathize with that. But we need to work on opt up 
and opt down.
    Senator Inhofe. Well, that sounds good. The only problem 
with that is we are right up against the blend wall in my State 
of Oklahoma today. I mean you can always opt up. The point is 
what you cannot get is clear gas. You can now. But as we get 
closer to that wall, we see that time coming to an end.
    I am not going to subject my farmers, some people do not 
realize, you commented you are a coastal State. Oklahoma has 
more miles of freshwater shoreline than any State of all 50 
States. Not many people realize that. So, it is a huge industry 
there.
    Well, anyway, thank you, Mr. Chairman.
    Mr. McAdams. Mr. Chairman, I just wanted to make one 
comment in the other direction. That is as you see these new 
molecules and the advances in cellulosic coming into the 
market, they are different than the molecules we have used in 
the past.
    So what you have, the oversight function in this committee 
is attached to the Clean Air Act. EPA, moving forward, is going 
to have to prove, under Tier 1 and Tier 2, the gasoline 
molecules that come into the market. They are also going to 
have to approve, under the RIN certification procedures, 
whether the feedstocks, processes or products fit under the 
definitions of the RFS II.
    So, through your oversight, you need to be very careful 
because our regulatory structure, driven by the Clean Air Act 
for gasoline and diesels, has predominantly been skewed for 
ethanol and biodiesel up to this point because that is where 
the volumes have been. We need to have a regulatory framework 
harmonized with the intention of the RFS II, moving forward, so 
we can deploy these new molecules.
    Thank you.
    Senator Whitehouse. All right. Well, I thank the witnesses 
very much.
    I want to thank the Ranking Member for his leadership and 
pulling this hearing together. I agree with him that it has 
been very helpful and instructive.
    Once again, I thank all of the witnesses.
    I think we will leave the record of the hearing open for an 
additional week in case anybody wishes to add anything. But 
subject to that 1-week for the record, the hearing is hereby 
adjourned.
    [Whereupon, at 11:55 a.m., the committee was adjourned.]
    [Additional statements submitted for the record follow.]
       Statement of Hon. Thomas R. Carper, U.S. Senator from the 
                           State of Delaware
    As many of you know, next week is the 41st anniversary of Earth 
Day, a day that is near and dear to my heart. Next week is also another 
anniversary--one that is far more tragic--the 1-year anniversary of the 
BP/Deepwater Horizon oil spill. I think that today, more than ever, 
Americans understand the need to develop domestic sources of renewable 
energy, and the need for us to become energy independent. Energy 
independence is something that we have talked about in this country for 
a long time.
    Today's hearing provides us with an opportunity to assess if we are 
indeed meeting some of the key time-tables and targets that were 
established in 2007 to put us on a path toward energy independence. 
Appropriately named, the Energy Independence and Security Act of 2007 
established a second phase in the EPA's Renewable Fuel Standards 
program that increased the demand for second generation biofuels. These 
new biofuels were to be cleaner in emissions and were to be made from 
renewable materials other than food stocks such as corn. I supported 
this effort because I believe biofuels done right are a good thing. 
Biofuels can give us an environmentally friendly option to move away 
from foreign fossil fuels and safeguard our energy security.
    However, since 2007 we've not seen the increases in next generation 
biofuels as we had hoped. This country continues to depend on biofuels 
that compete with our food supply and may be impacting our air quality. 
Many of you here have heard me say that I believe the role of 
government is to steer the boat, not row the boat. Today, we will be 
grading our driving skills to see, are we steering in the right 
direction toward energy independence? Today, we will ask if the 
government is providing the right incentives to spur investment and 
production of the next generation of biofuels. Are we providing the 
certainty businesses need to invest in the new technology that we lead 
us to these new fuels?
    I look forward to hearing from our witnesses to see what advances 
have been made and what the government could do better to help our 
companies develop better biofuels. I'm also interested in learning how 
our current renewable fuel standard has impacted all-aspects of our 
economy and our air quality.
    In closing, I believe the Renewable Fuels Standard must be 
implemented in a manner that positively impacts energy security, the 
environment and the economy. I look forward to working with my 
colleagues on this committee to make sure this happens. Madame Chair, 
thank you. And, to our witnesses today, welcome.

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