[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                       OVERVIEW OF THE RENEWABLE FUEL STANDARD: 
                               GOVERNMENT PERSPECTIVES
=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 26, 2013

                               __________

                           Serial No. 113-61



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                      COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
RALPH M. HALL, Texas                 JERRY McNERNEY, California
JOHN SHIMKUS, Illinois               PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania        EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas            GENE GREEN, Texas
ROBERT E. LATTA, Ohio                LOIS CAPPS, California
BILL CASSIDY, Louisiana              MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas                    JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia     DORIS O. MATSUI, California
CORY GARDNER, Colorado               DONNA M. CHRISTENSEN, Virgin 
MIKE POMPEO, Kansas                      Islands
ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     2
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     3
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     4
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6

                               Witnesses

Adam Sieminski, Administrator, U.S. Energy Information 
  Administration.................................................     8
    Prepared statement...........................................    11
Christopher Grundler, Director, Office of Transportation and Air 
  Quality, Office of Air and Radiation, U.S. Environmental 
  Protection Agency..............................................    22
    Prepared statement...........................................    24
    Answers to submitted questions...............................    94
Joseph Glauber, Chief Economist, U.S. Department of Agriculture..    30
    Prepared statement...........................................    32


    OVERVIEW OF THE RENEWABLE FUEL STANDARD: GOVERNMENT PERSPECTIVES

                              ----------                              


                        WEDNESDAY, JUNE 26, 2013

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:34 p.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Scalise, Hall, Shimkus, 
Terry, Burgess, Latta, Cassidy, Olson, Pompeo, Kinzinger, 
Griffith, Barton, Upton (ex officio), Rush, McNerney, Tonko, 
Engel, Green, Doyle, Barrow, Castor, Matheson, Welch, and 
Waxman (ex officio).
    Staff Present: Nick Abraham, Legislative Clerk; Charlotte 
Baker, Press Secretary; Sean Bonyun, Communications Director; 
Matt Bravo, Professional Staff Member; Allison Busbee, Policy 
Coordinator, Energy & Power; Tom Hassenboehler, Chief Counsel, 
Energy & Power; Ben Lieberman, Counsel, Energy & Power; Nick 
Magallanes, Policy Coordinator, CMT; Mary Neumayr, Senior 
Energy Counsel; Chris Sarley, Policy Coordinator, Environment & 
Economy; Greg Dotson, Minority Staff Director, Energy and 
Environment; Kristina Friedman, Minority EPA Detailee; Caitlin 
Haberman, Minority Policy Analyst; Bruce Ho, Minority Counsel; 
Elizabeth Letter, Minority Assistant Press Secretary; and 
Alexandra Teitz, Minority Senior Counsel, Environment and 
Energy.

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

    Mr. Whitfield. I would like to call the hearing to order. 
The topic of today's hearing is an ``Overview of the Renewable 
Fuel Standard: Government Perspectives.'' As you know, this is 
one of those issues where we have a lot of different viewpoints 
on this important issue. And we have not really revisited the 
Renewable Fuel Standard since it was last expanded in 2007. And 
so we began these hearings, I don't think we have any 
preconceived thoughts. We know that there are some areas of 
concern, and it is time for us to simply revisit and re-explore 
and look at the original expectations of this program.
    I think we would all acknowledge that the landscape has 
changed significantly since the RFS was revised in 2007. And 
there was a long list of energy policy assumptions back then 
that differ significantly from the realities of 2013. Perhaps 
the biggest unexpected development has been the decline in 
gasoline usage over the last 5 years. Certainly automobiles are 
more efficient. We have had a slow economy. And this has led to 
a number of issues we will address today, including the so-
called blend wall and the approval of E15.
    We have also learned firsthand how the RFS implementation 
would be affected by drought that reduced corn yields, ha 
occurred last summer.
    So we have a unique opportunity looking back on several 
years now of practical experience with the RFS and it is time 
to ask what that experience has taught us. It is also time to 
project what the future might hold for the RFS as we continue 
to implement the stringent and increasing targets.
    We began this process, as many of you know, many of you 
participated in it, by issuing a series of bipartisan white 
papers on the major topics associated with the RFS--the blend 
wall and fuel compatibility issues, agriculture sector issues, 
environmental concerns, energy policy considerations--and we 
are set to release the final white paper that deals with 
implementation and enforcement issues.
    The wide-ranging stakeholder responses to the questions 
posed in these white papers attest to the fact that many people 
have been affected by the RFS and that we need to be mindful of 
all of its direct and indirect impacts.
    We have a distinguished panel of witnesses with us today, 
and I am going to introduce them after the opening statements. 
And at this time, I would like to yield as much time as he may 
consume the gentleman from Texas, Mr. Barton, for the purposes 
of an opening statement.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    As many of you know, the renewable fuel standard, or RFS, 
was created by Congress in 2005, and was greatly expanded in 
2007. The RFS is a policy that originated in this committee, 
which is why I believe we now have an obligation to assess how 
it is going. That is the reason for today's hearing, and we are 
pleased to be joined by three agencies that have a hand in 
implementing the RFS and in studying its impacts--the 
Environmental Protection Agency, the Energy Information 
Administration, and the Department of Agriculture.
    I've met with stakeholders on all sides of the issues, and 
I think it's time to take a hard look at the RFS and compare 
our original expectations for the program with the actual 
experience. I think we'll find that in some respects the RFS is 
going well, but in others there are emerging issues and room 
for improvement.
    The landscape has changed significantly since the RFS was 
last revised in 2007. Indeed, there is a long list of energy 
policy assumptions back then that differ greatly from the 
realities of 2013.
    Perhaps the biggest unexpected development has been the 
decline in gasoline usage over that past 5 years. As a result, 
we are facing the challenge of mixing the specified volumes of 
renewable fuels into a significantly smaller pool of gasoline. 
This has led to a number of issues we will address today, 
including the so-called blend wall and the approval of E-15.
    We have also learned, first hand, how the RFS 
implementation would be affected by a drought that reduced corn 
yields, as occurred last summer.
    In other words, we can now look back on several years of 
practical experience with the RFS, and it is time to ask what 
that experience has taught us. It is also time to project what 
the future might hold for the RFS as we continue to implement 
its stringent and increasing targets.
    We began this process by issuing a series of bipartisan 
white papers on the major topics associated with the RFS--the 
blend wall and fuel compatibility issues, agricultural sector 
issues, environmental concerns, energy policy considerations, 
and we are set to release the final white paper that deals with 
implementation and enforcement issues. The wide-ranging 
stakeholder responses to the questions posed in these white 
papers attests to the fact that many people have been affected 
by the RFS, and that we need to be mindful of all of its direct 
and indirect impacts.
    And today, we are initiating our first hearing on the RFS, 
beginning with the agencies most knowledgeable about the 
program's implementation.
    The end result that we want is an RFS that can work for 
everyone involved, be it farmers, renewable fuel producers, 
refiners, and automakers. And most importantly, we want a 
policy that benefits the American driving public. The first 
step is to assess where we are with the program, and I look 
forward to learning more from our witnesses.

                                #  #  #

    Mr. Barton. Thank you, Mr. Chairman.
    In 2005, I was chairman of the committee and chairman of 
the conference committee that passed the Energy Policy Act, and 
I supported the inclusion of Renewable Fuel Standard in that 
bill. In 2007, I was the ranking member on the committee, and I 
strongly opposed the bill in 2007 that greatly expanded it. So 
I guess you could say I am 50-50 and I have been on that both 
sides of the issue.
    I don't want there to be any misunderstanding today, 
however: The current law, as it is, is unworkable and 
unsustainable, and I support total and full repeal. I think it 
has outlived its usefulness.
    I want to quote from the first line of the Energy 
Information Administration's written testimony: ``The RFS 
program is not projected to come close to achievement of the 
legislated target.'' End quote.
    So I welcome this hearing. I encourage the subcommittee and 
the full committee under the leadership of Chairman Upton to 
take a serious look at this. And I am hopeful that at some time 
this year we can move a repeal bill.
    And with that, I still have a minute to go, so I am happy 
to yield to whoever the chairman would like for me to yield to.
    Mr. Whitfield. Does anybody want the last 40 seconds?
    OK. I yield back balance of my time. At this time, 
recognize the gentleman from Illinois, Mr. Rush, for a 5-minute 
opening statement.

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

    Mr. Rush. I want to thank you, Mr. Chairman, for holding 
this important hearing on the RFS.
    Over the course of the past year my office has literally 
taken dozens of meetings on this critical topic, most from 
proponents who support the RFS as it is, as well as some of the 
opponents who would like to see the RFS either modified or 
repealed altogether.
    Mr. Chairman, for stakeholders from my home State of 
Illinois there are few energy issues as important as the matter 
of the RFS. I have always been very supportive of this policy 
because I believe since its inception it has achieved many of 
the goals that it was first enacted to do.
    During the debate on the Energy and Policy Act of 2005, 
when the RFS was first established, and subsequently in the 
Energy Independence and Security Act of 2007, when the policy 
was significantly modified and expanded, there was always 
strong bipartisan support for the RFS. Members of both sides of 
the aisle touted the potential benefits of enacting a Renewable 
Fuel Standard, which included reducing U.S. dependence on oil, 
enhancing energy security, bolstering the agricultural economy, 
and addressing the challenges of climate change by reducing 
greenhouse gas emissions from the transportation sector.
    Today, I believe the RFS has been successful in meeting 
each of these objectives while also helping to drive job 
creation and economic investment. For instance, the RFS has 
played a key role in helping the American ethanol industry 
support 400,000 jobs nationwide, including 54,000 jobs in my 
State of Illinois alone, and it has resulted in over $40 
million in economic activity.
    Mr. Chairman, the RFS has indeed helped to make us more 
energy secure with America's ethanol industry now producing 10 
percent of the Nation's vehicle fuel supply, helping to reduce 
our independence on foreign oil by 25 percent since 2005. 
Additionally, the octane from ethanol will also be a key 
component in helping auto manufacturers meet their CAFE 
standards as they turn towards downsized, turbocharged engines 
with increased combustion rations that will need higher octane 
fuel, such as ethanol, to meet new mileage standards.
    Mr. Chairman, as President Obama stated yesterday, we 
cannot continue to overlook the fact that over the past year 
and a half alone all across our Nation we are seeing more 
frequent record-breaking temperatures and history-making 
extreme weather events, including severe wildfires, hurricanes, 
tornadoes, and flooding, events that scientists tell us all are 
associated with manmade climate change.
    So today, more than ever, it is essential to move towards 
an energy policy that requires an even greater reliance on 
renewable sources of energy and alternative fuels, as the RFS 
mandates, and away from carbon-intense fossil fuels that emit 
dangerous levels of greenhouse gases and contribute to climate 
change.
    Mr. Chairman, I am glad that we are having this hearing 
today, one of several, where we can lay out all the facts, 
including both the opportunities and the challenges to 
implementing the RFS as currently drafted, and we can work to 
find common ground on this issue moving forward.
    Thank you, I yield back the balance of my time.
    Mr. Whitfield. The gentleman yields back.
    At this time recognize the chairman of the full committee, 
Mr. Upton, for a 5-minute opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    It is an exciting time for energy policy and for the 
possibilities created by our domestic energy abundance. Last 
week, this subcommittee held two hearings, one on the Nation's 
potential for increased energy exports, and the other on the 
benefits of affordable energy to the domestic manufacturing 
sector.
    Just a few short years ago, many would have scoffed at the 
suggestion that America could produce enough domestic energy to 
expands its exports or that low natural gas prices would induce 
a manufacturing renaissance, but it is happening, and it can 
continue to happen if we have the right policies in place. And 
while we strive to make good use of the Nation's coal, oil, and 
natural gas, we also have to allow for renewable energy to be 
part of that mix. But we need to make sure that it is done 
right, and that is why we are undertaking our deliberate review 
of the Renewable Fuel Standard.
    The committee started the review process with a series of 
bipartisan white papers on the RFS. Each white paper 
highlighted a particular subtopic and solicited input from 
stakeholders. And as you can imagine, the response has been 
overwhelming, and I thank Ranking Member Waxman and his staff 
for working cooperatively with us and the commenters for their 
participation as well. And I can assure them that their input 
will, in fact, help us inform our process.
    And now we move on to our first hearing, which is going to 
be the committee's first hearing specifically devoted to the 
RFS since the program was last revised in 2007. The purpose of 
this initial hearing is essentially to perform a checkup on the 
RFS: What has gone according to plan and what has not. No 
policy is certainly perfect, especially one that is now more 
than 5 years old. It is time to assess the RFS in light of what 
we now know.
    Today, we commence our effort with three Federal agencies 
that play a role in putting the RFS into action. Congress gave 
the reins of the program to EPA, and the Agency's 
responsibilities are indeed extensive. Several of these 
responsibilities require input from other agencies, including 
the Energy Information Administration as well as the Department 
of Agriculture.
    This hearing is going to cover a number of issues. I am 
particularly mindful of the impact of the RFS on the auto 
industry and on our car owners. Fuels and vehicles operate as a 
system, and we need to make sure that provisions in the RFS are 
compatible with existing vehicles as well as the new cars and 
trucks that are going to be manufactured and sold in the years 
ahead.
    One of the things that Congress could not have anticipated 
back in 2007 is the very ambitious CAFE/GHG standards that are 
going to require a near doubling of the fuel economy by 2025. 
Harmonizing these rules with the requirements of the RFS is 
just one issue for which a constructive debate is needed.
    The white papers and having today's hearing have gotten the 
discussion off to a positive start. I look forward to working 
with every one of our members on this committee in the coming 
weeks as we continue to weigh our work in oversight towards 
addressing the very real issues that implementation of the RFS 
presents going forward.
    And I don't know if there are other Republican members on 
my side that wish the balance of my time. But seeing none, I 
yield back.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    This is an exciting time for energy policy and for the 
possibilities created by our growing domestic energy abundance. 
Last week, this subcommittee held two hearings, one on the 
nation's potential for increased energy exports and the other 
on the benefits of affordable energy to the domestic 
manufacturing sector. Just a few short years ago, many would 
have scoffed at the suggestion that America could produce 
enough domestic energy to expand its exports, or that low 
natural gas prices would induce a manufacturing renaissance. 
But it is happening, and can continue to happen if we have the 
right policies in place.
    And while we strive to make good use of the nation's coal, 
oil, and natural gas, we also need to allow renewable energy to 
be a part of the mix. But we need to make sure that it is done 
right, and that is why we are undertaking our deliberate review 
of the renewable fuel standard (RFS).
    The committee started this review process with a series of 
bipartisan white papers on the RFS. Each white paper 
highlighted a particular subtopic and solicited input from 
stakeholders. As you can imagine, the response has been 
overwhelming, and I thank Ranking Member Waxman and his staff 
for working cooperatively with us and the commenters for their 
participation--I can assure them that their input will help 
inform our process.
    And now, we move on to our first hearing, which will be 
this committee's first hearing specifically devoted to the RFS 
since the program was last revised in 2007. The purpose of this 
initial hearing is essentially to perform a check-up on the 
RFS--what has gone according to plan and what has not. No 
policy is perfect, especially one that is now more than 5 years 
old. It's time to assess the RFS in light of what we now know.
    Today we commence our effort with three federal agencies 
that play a role in putting the RFS into action. Congress gave 
the reins of this program to EPA, and the agency's 
responsibilities are extensive. Several of these 
responsibilities require input from other agencies, including 
the Energy Information Administration and the Department of 
Agriculture.
    This hearing will cover a number of issues, but I am 
particularly mindful of the impact of the RFS on the auto 
industry and on car owners. Fuels and vehicles operate as a 
system, and we need to ensure that provisions in the RFS are 
compatible with existing vehicles as well as the new cars and 
trucks that will be manufactured and sold in the years ahead.
    One thing Congress could not have anticipated back in 2007 
is the very ambitious new CAFE/GHG standards that will require 
a near doubling of fuel economy by 2025. Harmonizing these 
rules with the requirements of the RFS is just one issue for 
which a constructive debate is needed.
    The white papers and having today's hearing have gotten the 
discussion off to a positive start. I look forward to working 
with all of the members of this committee in the coming weeks 
as we continue our oversight and work toward addressing the 
very real issues that implementation of the RFS presents going 
forward.

                                #  #  #

    Mr. Whitfield. The gentleman yields back.
    At this time I recognize the gentleman from California, Mr. 
Waxman, for a 5-minute opening statement.

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

    Mr. Waxman. Thank you, Mr. Chairman. Yesterday, President 
Obama laid out a plan to cut carbon pollution, fight climate 
change, and protect the health and future of America's 
children. The plan sets us on the path to reduce carbon 
pollution by 17 percent by 2020, which is what we need to do in 
the near term.
    In his speech, the President talked about the moral 
imperative for action on climate change. As he told the college 
students in the audience, quote, ``The question now is whether 
we have the courage to act before it is too late. How we answer 
will have a profound impact on the world that we leave behind, 
not just to you, but to your children and to your 
grandchildren,'' end quote.
    As the President's plan recognizes, there is no silver 
bullet. Success will require sustained action across multiple 
fronts. One of the most critical fronts is transportation. The 
transportation sector is our country's largest consumer of oil 
and the second-largest emitter of carbon pollution. Thanks to 
President Obama, we already have new standards to make vehicles 
far more efficient and less carbon polluting. Those standards 
are saving Americans money at the pump, enhancing our energy 
security, and boosting our economy, as well as cutting carbon 
pollution.
    But as long as our transportation system relies exclusively 
on fossil fuels, we will continue to make climate change worse. 
Fuel efficiency alone will not achieve the 80 percent reduction 
in climate pollution that we need by 2050 to avoid catastrophic 
climate change.
    The shift to hybrids and electric vehicles is a big part of 
the solution. But low-carbon renewable fuels can also 
contribute significantly. And for some transportation sectors, 
such as aviation and shipping, low-carbon liquid fuels are the 
only option, besides efficiency.
    Today, we are examining a law, the Renewable Fuel Standard, 
or RFS, that is driving development of those new low-carbon 
renewable fuels. The RFS is one of the few laws adopted by 
Congress that explicitly and directly reduces carbon pollution. 
Under this law, U.S. companies last year produced 20,000 
gallons of an advanced renewable fuel called cellulosic 
ethanol, which is made from materials such as crop residues and 
switch grass. That may sound like a small volume until you 
understand that last year was the first time that cellulosic 
ethanol has ever been produced commercially in this country.
    The Energy Information Administration estimates that 
production will grow to 5 million gallons this year and reach 
250 million gallons by 2015. And the RFS requires that every 
gallon of cellulosic ethanol reduce carbon pollution by at 
least 60 percent compared to gasoline.
    American companies are also producing large volumes of 
biodiesel, another advanced renewable fuel, which reduces 
carbon pollution by at least 50 percent compared to the diesel 
it replaces. The RFS is incubating an advanced renewable fuel 
industry that has the potential to offer tremendous climate 
benefits and grow our economy.
    But the RFS is not without flaws. As our gasoline 
consumption goes down and the renewable fuel mandates increase, 
we could reach the blend wall where adding more ethanol to the 
fuel supply could damage some engines. Drop-in biofuels offers 
one solution, but they are still being developed.
    Over the last few weeks, Chairman Upton and I have released 
a series of white papers discussing the RFS and soliciting 
public comments on the law. This process has been bipartisan, 
and I commend the majority for working together with Democrats. 
Commenters highlighted both benefits of the RFS and concerns, 
and they have a variety of recommendations for this committee, 
which we should consider carefully.
    This hearing gives us a further opportunity to take a 
careful look at the RFS. As we move forward the key question we 
need to ask is, what will the effects be on our climate? If we 
consider changes to the RFS, they should preserve and 
strengthen the law's climate benefits. As the President stated 
so forcefully yesterday, quote, ``Someday our children and our 
children's children will look at us in the eye and they will 
ask us did we do all that we could when we had the chance to 
deal with this problem and leave them a cleaner, safer, more 
stable world,'' end quote. I encourage all members to 
contemplate this question. We won't get a second chance.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you, Mr. Waxman.
    At this time we have concluded opening statements. And 
today we have only one panel of witnesses. And as I had 
indicated earlier, we have representatives from agencies that 
are responsible for implementing and studying the RFS.
    And so I want to welcome all of you to this hearing. We do 
look forward to your testimony and listening to your expertise 
and observations.
    And today we have Mr. Adam Sieminski, who is Administrator 
of the United States Energy Information Administration. We have 
Mr. Christopher Grundler, who is the Director of the Office of 
Transportation and Air Quality at the United States 
Environmental Protection Agency. And we have Mr. Joseph 
Glauber, who is Chief Economist at the United States Department 
of Agriculture.
    So welcome. And each one of you will be recognized for 5 
minutes. All of you have testified here before. And there are 
two boxes, and when the red light goes on your 5 minutes is up. 
But we do look forward to your testimony.
    And, Mr. Sieminski, I will recognize you first for 5 
minutes for your opening statement.

   STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY 
  INFORMATION ADMINISTRATION; CHRISTOPHER GRUNDLER, DIRECTOR, 
  OFFICE OF TRANSPORTATION AND AIR QUALITY, OFFICE OF AIR AND 
  RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND JOSEPH 
    GLAUBER, CHIEF ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE

                  STATEMENT OF ADAM SIEMINSKI

    Mr. Sieminski. Chairman Whitfield, thank you. Ranking 
Member Rush, members of the subcommittee, thank you all for the 
opportunity to appear before you today to discuss the Renewable 
Fuel Standards program. EIA, as you know, is the statistical 
and analytical agency within the Department of Energy. And by 
law, EIA's data, analysis, and forecasts are independent of 
approval by any other officer, employee of the U.S. government. 
I would like to make nine points in summarizing my testimony.
    One, the RFS program is not projected to come close to 
achieving the legislated target of 36 billion gallons of 
renewable motor fuels by 2022. This is not a new finding. All 
of EIA's Annual Energy Outlook Reference case projections since 
the targets were enacted in 2007 have indicated that EPA would 
need to apply the law's flexibility to reduce requirements for 
cellulosic, advanced, and total biofuels. In the AEO2010, EIA 
projected a shortfall of over 10 billion gallons of RFS credits 
relative to the target for 2022. And in our most recent 
AEO2013, that shortfall is now projected to be 17 billion 
credits. So basically only about half of the legislated $36 
billion target.
    Two, substantially increasing the use of biofuels can only 
occur in forms other than the low-percentage blends of ethanol 
and biodiesel that account for nearly all of their current use. 
Of the potential alternative pathways--one, increased use of 
higher ethanol blends; two, the advent of drop-in biofuels; or 
three, the development of compatible renewable fuel components 
such as biobutanol--of those, so far none have achieved a 
significant market role.
    Three, the implicit premise that cellulosic and other 
advanced biofuels would be available in significant quantities 
at reasonable costs within 5 to 10 years following adoption of 
the 2007 targets has not been borne out. The AEO Reference case 
projections do not assume breakthroughs in transformational 
technologies.
    Four, ethanol potentially has three distinct roles in motor 
fuels markets: one, as an octane source; two, as a volume 
enhancer; and three, as a provider of energy content. So an 
important behavioral question arises with the use of higher 
percentage blends, such as E15 and E85, and that is whether the 
shorter range provided by a tankful of fuel due to ethanol's 
lower energy content per gallon will affect consumers' buying 
decisions. In Brazil, where a high percentage of ethanol fuels 
are sold, consumers do indeed consider energy content pricing 
rather than simply buying the cheapest fuel.
    Five, ethanol faces some major demand and distribution 
system challenges that make it difficult to increase its use as 
a motor fuel regardless of its source. Although the use of E15 
in model year 2001 and newer light-duty vehicles is now 
allowed, very few gasoline retailers offer it out of concerns 
related to automobile warranties, potential liability for 
misfueling, infrastructure costs, and consumer acceptance. 
Ethanol blends above 15 percent, E85, are more widely available 
but can only be used in flex-fuel vehicles, which make up only 
about 5 percent of the light-duty fleet.
    Six, the projected declining trend in motor gasoline in the 
AEO2013 reflects a significant change from the growth 
projections from 2007. Since 2007, fuel economy standards, 
together with slower economic growth, higher gasoline prices, 
and possible changes in consumer behavior have changed the 
outlook. But lower gasoline demand is not at the root of the 
past or projected shortfalls in achieving legislated RFS 
targets.
    Seven, projected reliance on oil imports in the AEO2013 is 
significantly lower than in 2007 due primarily to lower 
projected petroleum demand growth, coupled with a significantly 
more robust outlook for domestic petroleum production. 
Incremental biofuel volumes under the RFS program play only a 
small part in reducing projected net import dependence. As a 
result, among other things, there is a likely continuing use of 
ethanol as an octane enhancer, even in the absence of a 
Renewable Fuel Standard.
    Eight, as discussed in my written testimony, the challenges 
facing renewable fuels program are reflected in the value of 
RINs, Renewable Identification Numbers, that are used by EPA to 
implement the program.
    Nine, and finally, I want you to know that EIA remains 
actively engaged in monitoring and reporting on matters related 
to the RFS program. We collect monthly data on biodiesel and 
ethanol production, as well as weekly and monthly data on 
ethanol blending.
    The complexity of refined product markets, of which 
biofuels are an important part, has led to a growing number of 
requests for EIA analysis. Last fall, we published a report, 
``Biofuels Issues and Trends''--it is attached to my 
testimony--to provide an overview of the dynamics of 
production, consumption, trade in ethanol, biodiesel, and 
cellulosic fuels. We also hold regular workshops to solicit 
feedback on a variety of these subjects.
    Mr. Chairman, thank you for the opportunity to testify 
today, and I look forward to answering your questions.
    Mr. Whitfield. Thank you, Mr. Sieminski.
    [The prepared statement of Mr. Sieminski follows:]
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    And, Mr. Grundler, you are recognized for 5 minutes.

               STATEMENT OF CHRISTOPHER GRUNDLER

    Mr. Grundler. Thank you, Chairman Whitfield, Ranking Member 
Rush, and other members of the committee. I appreciate the 
opportunity to testify on the renewable fuels program today.
    The RFS program began in 2006 under the Energy Policy Act 
of 2005. The statute requirements for the RFS program were then 
modified by the Energy Independence and Security Act of 2007, 
or EISA. EISA established new volume standards for renewable 
fuel, reaching a total of 36 billion gallons by 2022, including 
21 billion gallons of advanced biofuels. The revised 
requirements also included new greenhouse gas emission 
thresholds and a number of other provisions.
    After an extensive notice and comment process, EPA 
finalized regulations to implement EISA requirements, which 
went into effect on July 1, 2010. EISA requires EPA to publish 
annual standards for use of total, advanced, biomass-based 
diesel, and cellulosic renewable fuels. These standards apply 
to obligated parties, typically refiners and fuel importers. 
The statute directs EPA to determine the projected volume of 
cellulosic biofuel production for the following year. If that 
number is less than the statutory volume, EPA must lower the 
standard accordingly.
    Congress also provided EPA the discretion to lower the 
advanced biofuel and total renewable mandate up to that same 
amount. Before proposing annual volume standards, EPA conducts 
a thorough review of the cellulosic industry to determine the 
total production capacity. We consult with the USDA, the Energy 
Information Administration, and the Department of Energy. We 
propose the annual standards through a transparent process, 
allowing for public review and comment.
    We proposed the 2013 RFS standards in 2013, and we are 
proposing to maintain the statutory level for total renewable 
fuel of 16.55 billion gallons. We had a public hearing on this 
rule on March 8, 2013, and we are currently in the midst of 
reviewing the public comments, which were extensive, to prepare 
the final rule.
    Congress also tasked the EPA with evaluating and qualifying 
new biofuels for use in the RFS program. We have already 
approved a significant list of advanced and cellulosic biofuels 
and pathways. We have a number of additional evaluations 
underway for new ones.
    EPA continues to expand the number of approved pathways, 
including the recent finalization of a rule that includes 
certain renewable fuels from camelina oils, ethanol from energy 
cane, and renewable gasoline from various feedstocks. In 
addition, just a few weeks ago, we proposed a rule that 
included additional new advanced biofuels, which included 
cellulosic fuels from landfill biogas and advanced biobutanol 
from corn.
    EPA is working with stakeholders to improve the 
implementation of this program. Compliance under the RFS 
program is demonstrated through the use of Renewable 
Identification Numbers. These document the production and 
distribution of renewable fuel. Obligated parties supported the 
use of this approach to provide them added flexibility in 
meeting the RFS standards.
    This past February, we proposed to establish a voluntary 
quality assurance program for verifying the validity of these 
RINs. This voluntary program was proposed after receiving 
extensive input from oil and renewable fuels industries, with a 
goal of improving the liquidity of this marketplace and 
allowing renewable fuel producers to sell their RINs. Again, we 
are in the process of reviewing public comments on this 
proposal and hope to finalize it by the end of this year.
    Although both ethanol and non-ethanol biofuels can be used 
to meet the RFS, ethanol has and will likely continue to be the 
predominant renewable fuel on the market for the foreseeable 
future. As the statutory volume requirements of the RFS program 
increase, it becomes more likely that the volume of ethanol 
projected to meet those requirements will exceed the volume 
that can be consumed in the common blend of 10 percent ethanol 
and 90 percent gasoline, referred to as E10.
    Additional volume of ethanol would then need to be used at 
higher blend levels, such as E15 or E85, or significant volumes 
of non-ethanol would be needed to meet the targets. As a 
result, to the extent that ethanol is likely to be used to meet 
RFS volume requirements, the volume of ethanol that can be 
legally and practically consumed is a limiting factor in 
meeting the statutory volumes. This is commonly known as the 
blend wall.
    For 2013, we expect compliance with the RFS standard 
through the use of RINs generated in 2013 as well as carryover 
RINs that were generated in 2012 by overcompliance with the 
standards. However, in 2014 the situation could be different. 
First, the advanced biofuel and total renewable fuel 
requirements rise substantially under the law to 3.75 billion 
gallons and 18.15 billion gallons, respectively. While non-
ethanol biofuels are anticipated to continue to grow, an 
estimated 16 billion gallons or more of ethanol might still be 
needed to comply with the 2014 statutory target.
    Second, the number of carryover RINs from 2013 will also be 
a critical factor to consider. We will continue to look at the 
potential impacts of this blend wall over the near and longer 
term. We are currently reviewing comments submitted in response 
to the agency's proposed rulemaking for the 2013 RFS volume 
standards and are carefully considering this input. EPA will 
also engage with stakeholders on this issue as we move to 
propose the RFS volume requirements for 2014.
    We are continuing to work with our partners, our 
stakeholders, and the public to implement this program, as 
directed by the Congress. EPA will also further evaluate and 
consider whether any further action under the authorities 
established by Congress is appropriate to help ensure an 
orderly implementation of this program.
    Thank you for this opportunity to be here today.
    Mr. Whitfield. Thank you, Mr. Grundler.
    [The prepared statement of Mr. Grundler follows:]
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    Mr. Whitfield. And, Mr. Glauber, you are recognized for 5 
minutes.

                  STATEMENT OF JOSEPH GLAUBER

    Mr. Glauber. Chairman Whitfield, Ranking Member Rush, and 
members of the subcommittee, thank you for the opportunity to 
be at today's hearing to address the question of how the 
Renewable Fuel Standard has affected U.S. Agriculture.
    Corn ethanol production increased dramatically over the 
past decade from just over 2 billion gallons in 2002 to almost 
14 billion gallons in 2011. Driven by favorable market forces 
and encouraged by government biofuel policies, including the 
RFS, that increase has spurred corn production and corn use for 
ethanol and has been a factor in the recent grain price boom 
and overall improvement in farm balance sheets, including 
record farm incomes over the past few years.
    This boom has not been shared equally by all segments of 
the ag sector, however. Livestock, dairy, and poultry producers 
have faced tighter margins due to higher feed costs.
    Rapid expansion of corn-based ethanol production has had 
significant impacts on U.S. Corn production and use. From 2006 
to 2011, corn use for ethanol increased by about 700 million 
bushels per year, rising to about 5 billion bushels. The sharp 
increase in the demand for corn for ethanol was a major factor 
behind the increase in prices over that period. From January 
2000 to December 2005, the monthly average price paid to corn 
producers averaged $2.10 per bushel. Over the period January 
2006 to December 2010, corn prices averaged $3.61 per bushel, a 
72 percent increase.
    Higher prices encourage producers to plant more corn to 
meet the increased demand. Corn-planted acreage, which had 
averaged 79 million acres between 2000 and 2006, averaged over 
90 million acres between 2007 and 2012. Increased plantings 
combined with increased yields resulted in corn production of 
13.1 billion bushels in 2009, a record, an increase of 2.8 
billion bushels over average production levels over the period 
2000 to 2006.
    Despite the increase in corn production since 2006, other 
uses for corn have declined as more corn has been diverted to 
ethanol production. Corn feed and residual disappearance 
declined by 26 percent from the marketing year 2005/2006 to 
2011/2012 while corn exports declined by 28 percent over the 
same period.
    The decline in corn use for feed has been partially offset 
by the increased availability of protein feeds, such as 
distillers' dried grains, a co-product of the dry milling 
process. Nearly one-third of a bushel of corn used for ethanol 
production is returned in the form of DDGs.
    The decline in U.S. Corn exports have been offset in world 
markets by increased exports from foreign suppliers, 
principally Brazil. Over the years 2000 to 2005, the U.S. 
exported on average 1.9 billion bushels of corn and accounted 
for about 60 percent of total world corn exports. By 2011/2012, 
U.S. corn exports had fallen to 1.5 billion bushels and 
accounted for 37 percent of total world exports. With drought-
related reduced supplies in 2012/2013, U.S. corn exports are 
projected to fall to 700 million bushels, less than 20 percent 
of total world exports. U.S. corn exports are projected to 
recover to 1.3 billion bushels in 2013/2014, but they are 
projected to account for about a third of total world exports.
    In general, high commodity prices over the past few years 
have strengthened the farm balance sheets by raising farm 
receipts and produced record farm incomes. Over the period from 
2000 to 2006, cash receipts for the farm sector averaged $217 
billion. However, over the period 2007 to 2013, cash receipts 
are projected to average about $339 billion, an increase of 56 
percent. Net cash income increased from an average $68.7 
billion per year over 2000 to 2006. That increased to a 
projected $105 billion over 2007 to 2013, an increase of 53 
percent.
    Based on analysis of farm business data, net cash income 
for grain and oilseed producers have shown significant 
increases since 2006, with net cash income levels up by more 
than 78 percent for corn, wheat, and soybean producers. By 
contrast, livestock, dairy, and poultry producers have faced 
more uneven, in some cases declining returns since 2006. In 
general, higher feed grain prices have helped net cash income 
for row crop producers, but have also raised feed costs at 
lowered profit margins for livestock, dairy, and poultry 
producers.
    Feed costs make up about 51 percent of expenses for dairy, 
19 percent for beef cattle, and 42 percent for hogs, and 35 
percent for poultry farm business. Price-feed rations for most 
species show a decline throughout most of the period since 
2006.
    Looking forward, increases in demand for corn to produce 
ethanol are expected to slow due to constraints on domestic 
ethanol consumption--as has been mentioned previous here, the 
so-called blend wall--increases in blending efficiency, and 
nearing the 15 billion gallon cap on conventional ethanol in 
the RFS, and finally, due to increased supply of ethanol from 
other feedstocks. Those will mitigate pressures on corn prices.
    In addition, there are projections of potentially record 
corn and soybean harvests this fall, rising stock levels, and 
subsequent moderation of prices. This should support stronger 
profits in the livestock and dairy and poultry industries.
    The outlook over the next 10 years calls for moderate 
productivity growth and flat, declining real prices for 
agricultural commodities. However, as we have seen over the 
past 7 years, an unexpected shortfall due to adverse weather 
could precipitate higher prices.
    Mr. Chairman, that completes my testimony.
    Mr. Whitfield. Well, Dr. Glauber, thank you.
    [The prepared statement of Mr. Glauber follows:]
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    Mr. Whitfield. And thank all of you. We appreciate your 
testimony. And at this time, we would like to ask questions of 
the panel, and I would recognize myself for 5 minutes to begin.
    Mr. Grundler, States have on three different occasions 
petitioned the EPA to grant waivers from the RFS, and it is my 
understanding that EPA denied all of those waivers. And I would 
like to know, what is the criteria that you use in making a 
decision to grant a waiver or not?
    Mr. Grundler. You are correct, Mr. Chairman. We have 
received two separate requests, one in 2008 from the State of 
Texas, and then one again last year by a numerous number of 
States, as well as other petitioners.
    The criteria in the statute are severe economic harm. So 
the Administrator was provided the discretion by the Congress 
to waive the standard in the event he or she determines that 
implementing that standard would create severe economic harm 
for a State or region or the United States.
    Mr. Whitfield. And how would you go about defining severe 
economic harm?
    Mr. Grundler. As you know, Mr. Chairman, Congress typically 
provides the Agency across numerous environmental statutes 
different waiver authorities to deal with unanticipated 
circumstances. And it is pretty typical that the Administrator 
is given discretion to view these on a case-by-case basis and 
looking at the economic conditions at the time.
    In the case of last year's situation, where we had this 
devastating drought, which was creating very harmful conditions 
across many parts of our country, for sure, we determined that 
the RFS, in fact, was not having an impact. So the first 
question that the agency had to answer was, is the RFS causing 
this harm? And after extensive modeling and consultation with 
other parts and experts in the government, some of which are 
sitting right here, and something like 500 different model 
scenarios, we found that the most likely result is that the RFS 
was not having impact. In other words, the RFS was not binding.
    And the reason for that is over the last many years, the 
transportation fuel system has optimized around the use of 
ethanol. As my colleague from the EIA has noted in his written 
testimony, ethanol has a strong economic value to refiners. And 
so what we determined was that if we had waived the standard it 
would not have changed the demand for ethanol because refiners 
were still demanding this to blend in their products for octane 
and for volume enhancement. So that is why we felt that the 
statutory criteria for issuing a waiver were not met, and we 
had to deny it.
    Mr. Whitfield. But you all did have consultations with the 
Department of Agriculture before the decision was made and EIA?
    Mr. Grundler. Oh, absolutely. And we saw public comment. 
What we did was we did the analysis to determine if the RFS was 
binding. And then we relied on the Ag Department and the DOE 
department to give us estimates in those small number of cases 
where it was binding, what would be the impact on food prices 
and energy prices.
    Mr. Whitfield. And you all had also made the decision that 
model years 2001 and newer, that E15 could be used, but if it 
was older than 2001 could not be used in those vehicles. How 
did you decide that?
    Mr. Grundler. That was based, again, on extensive analysis 
and testing programs. The Department of Energy did an 
extensive, statistically based testing program using a 
statistical sample of many vehicles, both newer vehicles and 
older vehicles.
    Mr. Whitfield. But was it primarily based on your concern 
about damage to engines in those older vehicles?
    Mr. Grundler. Again, the Congress has given us very 
specific guidance as to when we need to grant a waiver. And we 
look at whether or not a new fuel would create the situation 
where emission standards would be violated if this fuel was 
used. So that was based on not only extensive DOE test program, 
but also consulting with many different stakeholders and 
reviewing over 30 different studies in the literature with 
respect to the impacts of ethanol on engine systems.
    Mr. Whitfield. Would you expect that E15 would ever be 
approved for these older vehicles?
    Mr. Grundler. Our engineering judgment wouldn't suggest, 
and the available information would suggest that that would not 
be a good idea.
    Mr. Whitfield. Dr. Glauber, you touched on this in your 
testimony, but we have some groups come and say, boy, this 
raising, the prices of corn going up, it is affecting 
feedstocks, whatever, whatever, in price, and other groups say, 
well, it has no impact at all. Just from your analysis, your 
experience, what would your view be on that?
    Mr. Glauber. Well, I think, you know, it is clear that, as 
I said in my opening statement, that increased ethanol 
production has precipitated a large increase in corn production 
and a large increase in corn demand. With that, you see 
increased prices.
    Now, a lot of other factors are out there in the world that 
affect prices. There is a whole list of things that people 
typically talk about. But things like we had some fairly 
serious droughts over the period. We have had, you know, 
increase in foreign demand, a number of things have affected 
price.
    But most of the studies that we have looked at show that 
ethanol has contributed to some share of that increase. And I 
think my own study showed about 30 percent. That is similar to 
a lot of other studies that have been out there.
    Mr. Whitfield. Thank you.
    Mr. Glauber. I am sorry.
    Mr. Whitfield. I am sorry. My time has expired. But thank 
you for answering.
    And at this time recognize the gentleman from Illinois, Mr. 
Rush, for 5 minutes.
    Mr. Rush. Mr. Grundler, has the RFS failed to meet the 
overall gallon amount of the RFS in any year so far? Yes or no?
    Mr. Grundler. The total RFS standard has been met so far, 
yes.
    Mr. Rush. Mr. Sieminski, in your estimation, what would 
happen to domestic energy prices if ethanol was removed from 
the vehicle fuel system?
    Mr. Sieminski. We think that the use of ethanol would not 
change very much if the Renewable Fuel Standards were 
eliminated because of the use by the industry of ethanol as an 
octane enhancer and a volume enhancer. It is cheap enough, they 
are quite happy to add it to gasoline. The key thing is its use 
as an octane and oxygenate enhancer.
    Mr. Rush. Thank you.
    Mr. Grundler, I am going to come back to you again. There 
has been a tremendous amount of peer-reviewed research and 
modeling conducted to estimate the reduced greenhouse gas 
emissions realized with conventional biofuels, which would help 
show that the RFS is working. These new numbers show that some 
conventional biofuels are 50 percent less than the CO2 
emissions of the 2005-based gasoline. When will EPA update 
their numbers on the carbon index for conventional biofuels?
    Mr. Grundler. Sir, right now, we have no plans to update 
our basic methodology for doing lifecycle analytical work. That 
is a pretty serious undertaking. But we do update our models as 
we get new information. But right now we have no plans to 
revise our basic lifecycle analytical methodology.
    Mr. Rush. So because it is a serious undertaking, is that 
the reason why you would not?
    Mr. Grundler. Well, not only that it is an enormous amount 
of work but many people have made plans based on the results 
that we have already promulgated, and it would be fairly 
disruptive for us to redo all of that work. But we are very 
serious about keeping up with the science and are incorporating 
new information as we get it through our pathway petition 
process when we approve new fuels, when we do our lifecycle 
work.
    Mr. Rush. Dr. Glauber, can you discuss what has happened to 
farm income in the U.S. since we adopted RFS in 2005? And, 
conversely, can you discuss what is happening with government 
payments to farmers?
    Mr. Glauber. Yes. Thanks. It is a great point. As I 
mentioned in my opening statement, both cash receipts are up by 
over 50 percent, and net cash income, you know, that is, after 
subtracting out all the expenses and adding in the government 
payments, they are up about 53 percent or so. So a very large 
increase.
    Government payments have gone down. Understand that by 
2005, for the most part, we weren't making--we have a lot of 
government programs under the farm legislation that pay 
producers when prices fall below certain legislated levels. And 
prices have been above those levels for most commodities since 
about the mid-2000 period. Now, again not all that was due to 
the Renewable Fuel Standard, but there has been, as I 
mentioned, a large increase in corn prices, a large increase in 
soybean prices and others.
    Mr. Rush. Thank you.
    Mr. Sieminski, has the RFS reduced the need for foreign 
oil?
    Mr. Sieminski. I am sorry, could you repeat that?
    Mr. Rush. Has the RFS reduced the need for foreign oil?
    Mr. Sieminski. For foreign oil. The Renewable Fuel Standard 
itself, where it is really having an impact at the margin is in 
the advanced areas. So not the corn ethanol. And that number at 
this point is very small. Probably 300,000----
    Mr. Rush. Thank you so much.
    Mr. Sieminski. Not so much.
    Mr. Rush. Thank you.
    Mr. Grundler, how will the development of advanced and 
cellulosic ethanol projects be impacted if Congress were to 
make changes to the RFS?
    Mr. Grundler. I would really hate to speculate on that 
matter. What Congress has told us is each year to make an 
estimate of what the future production year would look like. So 
long as we are following that process and establishing that 
number based on good data and good science, I would think that 
the cellulosic marketplace would have a steady signal.
    Mr. Whitfield. Gentleman's time has expired.
    At this time recognize the gentleman from Texas Mr. Barton 
for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Grundler, you, in your written testimony, if I 
understood you correctly, indicated that you don't, EPA doesn't 
plan to do anything to revise the volumetric requirement for 
RFS blending this year. Is that correct?
    Mr. Grundler. Mr. Barton, what we have done is we have 
proposed a 2013 standard that reflects the statutory volumes. 
We are right now taking comment on that. We asked for comments 
specifically for an adjustment of 200 million gallons, and we 
are reviewing those comments right now.
    Mr. Barton. What happens this year if, in spite of the rosy 
scenario estimates, it is just not there? Is the EPA prepared 
to waive the fines or come back later in the year and lower the 
estimate, the requirement? Because in my conversations with 
knowledgeable experts, they indicate that this year the blend 
wall is going to be hit and they are just not going to be able 
to meet the requirement unless they export gasoline, which 
seems to me kind of a silly way to meet it.
    Mr. Grundler. Congressman, we are quite confident in our 
estimate of the number of excess RINs that are in the 
marketplace to achieve compliance. And while we do believe that 
there are some refiners who are facing this blend wall, there 
are others who have not. And so each refiner is in a slightly 
different market position. But they all have different 
compliance options to meet their obligation. They can use these 
carryover RINs, they can go to the market to buy RINs, they can 
carry over a deficit into the next year. We really think the 
blend wall and what we are seeing in the RIN market is 
reflecting concerns about shortfall looking forward in 2014.
    Mr. Barton. So for this year the EPA policy is basically 
going to be cross your fingers and pray. What about next year? 
Is there any doubt that next year, in spite of RIN carryforward 
and everything else, it is not going to be met?
    Mr. Grundler. Sir, we noted in our proposal for 2013--which 
we haven't finalized yet, I want to again restate--we said that 
2014 looks much more challenging. And we are seeking comment, 
and we have gotten a lot of comment on----
    Mr. Barton. You have been well briefed to testify before 
Congress. It is much more challenging, like impossible, but I 
will let that go.
    Mr. Sieminski, do you care to speculate on, when the blend 
wall is finally hit, which is going to happen this year or next 
year, the expectation of refineries, if they are not given some 
relief, having to export gasoline simply because they don't 
have the ability to create the RINs?
    Mr. Sieminski. Some refiners have said that in addition to 
the possibility that they would just export to avoid the 
problem, there is also the possibility of simply cutting back 
on domestic production. The EIA kind of looks at that, and our 
conclusion is that that is not really a viable long-term 
strategy for refiners in a competitive market.
    Another possibility would be that we end up with lower 
retail prices to stimulate demand for E15 and E85. And how that 
would happen is under the RINs program, the RINs themselves 
would end up making it attractive for people to use more E85 
and E15. But the cost of doing that or buying that down has to 
come from the greater gasoline pool, or the E10 pool. That is 
one way to get around this problem, but I am not sure. That is 
a policy issue that Congress would have to look at to decide if 
that is how they wanted to proceed.
    Mr. Barton. Now, if I understood you, I think in response 
to Mr. Rush, you indicated that if we repealed the RFS mandate 
approximately the same amount of ethanol would be used to blend 
in the gasoline because it makes economic sense for a number of 
reasons. Is that fair----
    Mr. Sieminski. Roughly speaking, yes, it might be a little 
bit less but correct.
    Mr. Barton. Dr. Glauber, do you agree with what Mr. 
Sieminski just said that, absent a mandate you would still have 
approximately the same amount of ethanol consumed and put into 
gasoline?
    Mr. Glauber. I think it depends on two factors and one was 
mentioned, the octane enhancer, and I think that is a very 
powerful thing to continue to blend ethanol at least in the 
short run. Over the longer run, there may be other potentially 
cheaper sources that they can move to, but the big thing will 
be just that basic equation of the price of corn versus the 
price of oil. And if corn is cheap relative to that, then they 
will continue to make it. Understand with the blend, while you 
kind of have an upper bound and I presume a lower bound at, you 
know, the Clean Air Act reformulated gas pool, which is about 4 
billion or so.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Whitfield. At this time, I recognize the gentleman from 
California, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Mr. Sieminski, the climate scientists tell us 
that to avoid dangerous climate change, the U.S. must reduce 
greenhouse gas emissions by at least 80 percent by 2050. Based 
on EIA's projections, is the U.S. currently on track to reduce 
our greenhouse gas emissions by 80 percent by 2050.
    Mr. Sieminski. No, sir, we are not. We are making quite a 
bit of progress. The 1990 level that that target was based 
against was about 5 billion metric tons of carbon dioxide 
emissions from energy-related activity. We hit about 6 billion 
metric tons in 2005. We are down now to about 5.3 but to get to 
that level you would have to be down close to 1 billion metric 
tons----
    Mr. Waxman. Clearly, we are going to need to do a lot more.
    Mr. Sieminski. You would have to do a whole lot more. There 
would have to be policy----
    Mr. Waxman. And a cleaner transportation system would be 
part of the solution.
    The renewable fuel standard is one policy that is designed 
to achieve this goal. When Congress amended the RFS in 2007, we 
specifically required that renewable fuel and in particular 
advance biofuels, such as cellulosic biofuel and biodiesel, 
reduced greenhouse gases compared to gasoline.
    And Mr. Grundler, what aspects of the RFS produce climate 
benefits? Do advanced biofuels reduce significantly less carbon 
pollution than gasoline.
    Mr. Grundler. Yes. There is no question about that. Our 
detailed analysis looking at both the direct and the indirect 
impacts of the advanced biofuels, clearly, the majority of the 
benefits from the RFS will come from the advanced pool.
    Mr. Waxman. Last year, American companies produced more 
than 20,000 gallons of cellulosic biofuels. This is the first 
time that such levels were produced commercially in the United 
States, and both EPA and EIA expect production to grow. EPA 
anticipates a production will reach 14 million gallons in 2013. 
Earlier this year, EIA projected that we could reach 250 
million gallons by 2015.
    Mr. Grundler and Administrator Sieminski, would the 
cellulosic biofuels industry be expected to grow this rapidly 
without the advanced biofuels policy in the RFS?
    Mr. Grundler. In my opinion, sir, there is no question that 
the RFS policy has produced an enormous amount of private 
investment in this advanced fuel sector.
    Mr. Waxman. And is that your view, Mr. Sieminski?
    Mr. Sieminski. It has, factually, it is just not moving 
fast enough to come anywhere close to the targets that were set 
in 2007.
    Mr. Waxman. So it appears that we are at a critical 
juncture in this industry. Companies report that they are 
poised to scale up production of cellulosic biofuels 
dramatically, but the next few years will be important to 
achieve and solidify these gains.
    Mr. Grundler, if Congress weakened or eliminated the RFS 
requirements for advanced biofuels, do you think that would 
undermine the development and growth of this industry?
    Mr. Grundler. Well, of course, it would really depend on 
how Congress went about that. The cellulosic standard right now 
is a nested standard within the total and the advanced pool.
    So if Congress chose to reduce both the cellulosic target 
and the advanced target, the logical impact of that would be 
considerable uncertainty and presumably financing issues for 
the industry.
    Mr. Waxman. And without an advanced biofuel industry, it is 
clear, is it clear how to substantially reduce carbon pollution 
from liquid transportation fuels?
    Mr. Grundler. Sir, the RFS, as written by Congress, clearly 
anticipated that that is where the growth would come from. 
These are the lowest carbon liquid fuels, based on our 
analysis.
    Mr. Waxman. Mr. Chairman, I commend you for undertaking 
this examination of the renewable fuels standard.
    Stakeholders have raised a number of concerns with the RFS. 
I am interested in understanding these concerns and working 
with our colleagues to determine an appropriate course of 
action. However, cutting carbon pollution to address climate 
change must remain a priority for Federal fuels policies, and 
the renewable fuels standard appears to be playing a key role 
in supporting and encouraging innovation in low carbon advanced 
biofuels. I think it is important to foster this innovation, 
even as we continue to evaluate the law. Thank you very much.
    I yield back.
    Mr. Whitman. The gentleman's time has expired. At this 
time, I recognize the gentleman from Louisiana, Mr. Scalise for 
5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman.
    I appreciate your having this hearing. I want to thank our 
panelists for being here. We are starting to get a lot more 
questions from constituents, as they recognize the impact of 
the renewable fuel standards, not only how it would impact 
refiners, how it may impact people that own older cars that are 
concerned about warranties being violated, but also how 
ultimately it will affect the price of gasoline at the pump, 
which is already higher than it should be, too high for many 
people, and getting higher.
    But especially when you look at the fact that a lot of the 
assumptions that were made in 2007, many of which were used to 
pass this law, many of those assumptions just don't exist in 
today's marketplace based on, number one, technologies that we 
have today but also in economic conditions. I know when some of 
our panelists talk about the problems that we are facing with 
why these numbers were so off, some of it was based on 
assumptions in ethanol and corn production, and we are seeing 
now maybe higher food prices because of that. But we also are 
seeing because of both efficiencies, as well as economic 
conditions, people using less fuel. If somebody doesn't have a 
job, they are not driving to work every day. That was not 
anticipated back in 2007, yet that is part of the economic 
reality we are dealing in today, and yet none of that is 
factored into when we look at some of the rules coming out from 
EPA.
    So I am a strong supporter of repeal of the renewable fuel 
standard; I cosponsored legislation to do that. But I think it 
is important to get some of these facts out there about the 
marketplace we are living in today.
    I want to ask you, Mr. Grundler, when you were answering 
one of the questions that Chairman Whitfield had brought up 
about significant economic harm, and there is some discretion 
you have in coming up with that definition, can you share with 
this committee the models that you used because we don't have 
that information, when you all are running these models to 
determine significant economic harm, I think it would be 
important for us to know what models you are actually using. 
Could you share with the committee that information?
    Mr. Grundler. I would be happy to.
    Mr. Scalise. Thank you.
    Regarding E15 engine testing, is it--what exactly kind of 
vehicles did you use? Did you just look at emission failure? 
Did you look at engine failure?
    Mr. Grundler. First of all, we looked at a number of 
different studies in the literature that looked at fuel effects 
on across a variety of vehicles. The testing was actually done 
and managed by the Department of Energy, and they looked at a 
wide range of impacts, the priority, of course, was based on 
the statutory criteria as to what is the impact of higher 
ethanol blends on emission control systems, and would they lead 
to violating the emissions standards. But they also looked at 
materials compatibility about engine durability. They tore down 
a number of engines----
    Mr. Scalise. Would you share with the committee all of that 
information that you used in coming up with those tests?
    Mr. Grundler. Absolutely. All that was all shared with the 
public. We can provide all that information to you from the 
waiver.
    Mr. Scalise. Thank you when you were answering one of 
Barton's questions regarding RVOs, he was asking about the 
timing, and I think under the law, you are supposed to, by 
November 30th, come up with those standards for the following 
year. And of course, we don't have those for 2013. And you said 
you are still in the development process, getting information, 
and of course, that creates uncertainty in the marketplace, I 
hope you understand that. But then looking forward to 2014, can 
we be assured, can you give us assurance that by November 30th, 
we would have those rules available for 2014?
    Mr. Grundler. The priority right now, frankly, for me, Mr. 
Congressman, is to get 2013 done, and we are working very hard 
to do that, and I hope we will get that final by this summer.
    Mr. Scalise. You are like a year--a half year late already.
    Mr. Grundler. I understand that.
    Mr. Scalise. Maybe you are overwhelmed. Maybe another 
argument for repealing RFS is that you are too overloaded to do 
the things you are currently tasked with all these other things 
that are coming down that are creating so much uncertainty with 
waivers.
    I think, Mr. Sieminski, you have touched on some of these 
waivers, and I think, in your testimony, you talked about the 
importance of EPA exercising that waiver ability, because just 
the marketplace isn't going to be ready for what is coming. I 
don't know if you want to expand on what you talked about in 
your testimony regarding that.
    Mr. Sieminski. In terms of your commentary, I would say 
that shifts in demand that we have seen have played a part in 
the blend wall problem, that the biggest problem post 2014 has 
been in the slow development of the advanced technology and 
that that is what is leading to the issues associated with 
meeting the high targets that were set in 2007.
    Mr. Scalise. I appreciate that. I look forward to hearing 
more testimony.
    And I yield back the balance of my time.
    Mr. Whitman. At this time, I recognize the gentleman, Mr. 
McNerney from California for 5 minutes.
    Mr. McNerney. Thank you, Mr. Chairman.
    Former Chairman Barton's opening statement indicated the 
good intentions that went into the 2005 law and how the 
changing technology and market conditions present significant 
challenges to the RFS. However, one thing to me is quite clear, 
the RFS has spurred innovation, and given the threat of climate 
change, innovation is going to be a critical factor in moving 
forward.
    So my first question is to Mr. Grundler from the EPA, does 
the agency have the necessary technical advances? Do you see 
the necessary technical advances emerging to meet the projected 
targets?
    Mr. Grundler. Every year, as we go through this annual 
process, particularly with respect to the cellulosic target, we 
meet with the producers so we get detailed information about 
where they are in scaling up their technology and from the 
laboratory to a commercial scale facility. That takes a, that 
is not an easy task and that, obviously, if you look at this 
historical record, it has taken longer than the Congress 
expected. But when we go through this process every year, we 
get up-to-date information on where they are, on new ideas. We 
get new petitions every year for new pathways and new processes 
and new technologies. So there is--it is clear to me that there 
is a lot of innovation. There is a lot of invention that is 
going on, and the reality is that this takes time to scale up 
to commercial production levels.
    Mr. McNerney. Good, well as the EIA mentioned, we are now 
on a path to meet the RSF targets by 2022, do you feel that 
your agency has sufficient flexibility under current law to 
meet the challenges of the changing technology and marketplace?
    Mr. Grundler. Yes. The Congress gave us a number of 
different kinds of authorities to adjust these standards as 
well as the, actually, the nondiscretionary duty if we do 
adjust the standard as we have now with cellulosic to reset the 
statutory volumes beginning in calendar year 2016. We are not 
ready to undertake that work we are focusing more on 2013 and 
2014, but the Congress did provide the agency with a number of 
tools to--for an orderly implementation of these standards.
    Mr. McNerney. So you can say, we don't really need to 
repeal the law; you have sufficient flexibilities if you are 
given the resources to meet the changing marketplace?
    Mr. Grundler. I am not here today to give you a 
recommendation on legislation, but we are focused on using as 
much common sense as we can muster to address the facts and 
address the reality. And we are doing a lot of listening, we 
are getting a lot of different advice from different 
stakeholders on how to use those authorities, and we are 
contemplating all these issues right now.
    Mr. McNerney. Thank you.
    Mr. Glauber, what steps are the USDA taking in helping 
producers throughout the country develop the feedstocks 
necessary to meet the future by biofuel demands.
    Mr. Glauber. I think there is no question, as far as corn 
is concerned, there hasn't been an issue. The farmers have 
increased production. We are currently producing enough corn 
certainly to meet the demands for corn use for ethanol.
    Insofar as advanced biofuels are concerned, I think that 
has been some of the discussion here about the underlying 
economics of that. We have USDA, in association with other 
departments, like the Department of Energy, have put forward 
development of, say, drop-in fuels. We have a program right now 
with the Navy for that. We have been talking to FAA about 
looking at potential for drop in fuels for airplanes. We have 
helped develop crop insurance products for things like for some 
biodiesel feedstocks and things like that. So we are limited in 
terms of programs we have for these, but we have been trying to 
orient research and other things toward development of advanced 
biofuels.
    Mr. McNerney. Thank you, Mr. Chairman.
    I will yield back.
    Mr. Whitman. The gentleman yields back.
    At this time, I recognize the gentleman from Texas, Mr. 
Hall, for 5 minutes.
    Mr. Hall. I thank you, Mr. Chairman, and I thank you for 
this very important hearing today.
    The renewable fuel standard has been successful in bringing 
biofuels into the transportation fuel supply here in the U.S., 
but the approaching, quote, ``blend wall,'' unquote, raises a 
lot of unanswered questions, and we need to be careful and 
thoughtful about how we go forward and how we manage the 
renewable fuel standards.
    Mr. Sieminski, can you give us an overview of the changed 
energy landscape today compared to 2007 and particularly speak 
of gasoline demands and future projections and their effect?
    Mr. Sieminski. Certainly, Mr. Hall, as I discussed in my 
testimony, the outlook for gasoline demand is a lot lower, 
while projected domestic oil production is significantly 
higher. Lower gasoline demand projections reflect higher 
vehicle efficiency standards, slower economic growth, higher 
gasoline prices. Production is primarily reflecting the role of 
tight oil in places like Eagle Ford in Texas and the Bakken in 
North Dakota. That was not really foreseen in 2007, or if it 
was, it was at the far end of the optimistic range.
    Together those changes have resulted in a significantly 
reduced projection for net dependence on imported oil, so that 
is the biggest impact of the demand and supply shift since 2007 
is the impact on imported oil has been dramatic.
    Mr. Hall. And what has brought about that dramatic 
situation? With regard to the Arabs that we have relied on I 
think at one time in the last, 4 or 5 years, maybe the last 2 
years, for 50 or 55 percent of our energy, and it is down to 
about what percent is that relying on?
    Mr. Sieminski. It was at 60 percent in 2005, and 2012, 
2011, we got it down to about 40 percent, and right now, it is 
just a little over 30 percent. So a lot of progress has been 
made in doing that.
    That is a net dependence on imported oil.
    Mr. Hall. Do you think we are nearing the E10 blend wall?
    Mr. Sieminski. It is going to be very difficult, given the 
constraints on vehicle warranties and infrastructure issues and 
just in terms of how you can sell at above 10 percent ethanol 
mix at the pump, it is going to be very difficult, so, yes, I 
think that that is an issue. The way around that is you have to 
sell more E15 and E85, and the problem there is only about 5 
percent of the vehicles are capable of using E85 and less than 
2 percent of the gasoline stations of the ability to sell it.
    Mr. Hall. Either of you other two gentlemen have any 
improvement on that answer or criticism of it?
    Mr. Glauber. I would just say I agree. I think that that is 
the key thing is penetration of higher blends that you just 
don't have the pumps and the, at least currently, those higher 
blends are not being priced competitively enough on an energy 
basis with gasoline.
    Mr. Hall. And Mr. Scalise asked you about any doubts you 
had about the approval of E15 in the face of overwhelming 
skepticism from automobile makers, I didn't really get your 
answer to them.
    Can you describe the test at EPA and DOE undertook before 
approving E15, and did you take into consideration things like 
engine durability or fuel pumps or anything like that?
    Mr. Grundler. The testing really was very extensive.
    Mr. Hall. Was very what?
    Mr. Grundler. Extensive DOE ran a lot of vehicles and ran a 
lot of miles, up to 120,000 miles, to test the impact over the 
full useful life of this vehicle. They tore down engines to 
look at engine wear. They looked at components. So the answer 
to your question is yes. I don't have any doubts that we made 
that decision given the best information that we had at the 
time.
    Mr. Hall. And I didn't fully you understand your answer to 
why you didn't grant the waiver that we sought. I wrote you a 
letter back in 2012 and in response Texas and other States 
talking about relief of the drought, and Mr. Barton got into 
that a little bit. And I understood you to say, well, your 
answer wouldn't have made any difference anyway; it wouldn't 
have changed anything. Isn't it a fact that the reason we 
requested that relief was a 2012 drought that reduced corn 
yields and temporarily increased corn prices?
    Mr. Grundler. There is no doubt that the drought had those 
effects. The question in front of the agency under the law is, 
did we think that--could we make a determination that 
implementing the RFS would create severe economic harm to the 
State of Texas or other parts of the United States? And we 
could not make that determination.
    Mr. Hall. Well, how you made that determination I would 
like to get into that some time when we have a lot more time, 
but I don't have much respect for the good data and the good 
science that you say EPA has handled up to this time.
    But I think I am near the end of my time. I will yield back 
my time.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentleman from New York, Mr. 
Tonko, for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chairman.
    Mr. Grundler, EPA has proposed to maintain the RFS volume 
standard for 2013. In light of current conditions and EIA's 
projections, many would ask why? I would think the current 
conditions of the market would lead EPA to use the flexibility 
under the law and adjust the required volume somewhat? Your 
opinion on all of that.
    Mr. Grundler. You are right that we did propose not to 
adjust the volumes in 2013, although we did request comment on 
making an adjustment, and we are taking those comments right 
now. But in the proposal, and we laid out an explanation of 
why, we do think that there is not going to be a difficulty in 
2013 to comply because of the large amount of excess credits 
that are available to meet the refiners' obligation.
    But we are quite clear that, with respect to 2014, again 
based on EIA's estimates as well, that the challenge becomes 
much greater because the statutory volumes increase 
substantially, and we have asked for the public to give us some 
comments and some advice on whether or not we should consider 
adjustments going forward, how to use our authorities to do so, 
and we are looking at those comments very carefully right now.
    Mr. Tonko. And when will you provide any sort of assessment 
of that?
    Mr. Grundler. We intend to finalize the 2013 standard very 
soon, before the summer is over, and my goal is to propose a 
2014 standard shortly thereafter.
    Mr. Tonko. Thank you.
    What does USDA predict would happen to corn acreage if we 
were to reduce the target volumes for RFS?
    Mr. Glauber. Well, first, I think it is instructive to know 
what we are projecting if we maintain the standards, and that 
is for corn area to fall a little bit, just because 
productivity in corn yields were currently--this year, we will 
have numbers out on Friday--but in the mid 90 range for corn 
acreage. We anticipate that to fall to closer to 90, 91 million 
acres over the next 10 years just because of improvements in 
yields, and so more production off the current area.
    If the RFS were to be removed, then the real question is, 
obviously, does one continue to make ethanol out of corn? And I 
think that we tried to address that in the earlier question and 
that a lot will depend on the price of corn relative to oil. 
Right now, given the projections, it is assumed that producers 
would still or that ethanol producers would still have 
incentives to make ethanol, but understand that that is very 
sensitive now. Absent mandates, it would be very sensitive to 
price disruption, so higher corn prices, for example, and you 
could expect a reduction. And if indeed over the longer period 
that were to cause a significantly lower area of ethanol from 
corn being produced, then you would expect that to have some 
impact on corn area.
    Mr. Tonko. And if you repealed the RFS?
    Mr. Glauber. I am sorry. That was the scenario I was 
discussing.
    Mr. Tonko. OK, I just wanted to make certain that is what 
we were addressing. And the EPA, and for any of our witnesses 
here, EPA has proposed designating biobutanol derived from corn 
as an advanced biofuel. Does that move us away from using a 
food crop for fuel? And I am not certain this would help with 
food and feed prices, what benefit would this have, if any, in 
addressing some of the other problems with current RFS program 
anything from infrastructure to the blend wall and beyond?
    Mr. Grundler. First of all, we estimate that it does 
qualify for as an advanced biofuel, so it would provide 
greenhouse gas reductions, and it would provide an easier way 
to move this fuel into the transportation system.
    Mr. Tonko. In some conversations that I have had with 
individuals concerned about some smaller engines, those in 
boats or motorcycles and other specialty vehicles, they have 
had trouble running on even blends with 10 percent ethanol. Are 
fuels with lower ethanol blends becoming more scarce? And are 
they higher price than, what has the info feed your way been on 
some of these smaller specialty engines?
    Mr. Grundler. My understanding is practically the entire 
fuel supply now is at a 10 percent blend. Marinas will often 
provide E0 for their customers who may have older boat engines 
who weren't designed for the 10 percent blend, but 10 percent 
blends have been around for 30 years or so, so all the modern 
boat engines are designed to operate well on E10.
    Mr. Tonko. Is that true, too, with the motorcycle engines?
    Mr. Grundler. Yes.
    Mr. Whitman. The gentleman's time has expired.
    At this time, I recognize the gentleman from Illinois, Mr. 
Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Too many questions, too little time. It is great to have 
you all here. Let me start with just a couple statements in 
response. Mr. Sieminski, I would say that no one wants to be a 
prognosticator, especially after the fact. I don't want to do 
it in sports, and I don't want to do it in politics, but just 
for the record, in 2011, you said there would be 2.79 billion 
gallons of ethanol, and production actually was 13.93 billion 
gallons. So projections are great. They are projections. We 
shouldn't take those to the bank as what will happen as things 
will change.
    I also have to respond to Mr. Waxman. I am glad the 
President talked to college students. I would rather he come 
talk to my coal miners, who won't be able to afford to send 
their kids to college because of what his announcement did 
yesterday, so I think you have to pick your audience, and I 
think the President did and he just didn't pick the audience 
that are in my district.
    And so as many people in this room know that I have more 
desire to get this fixed than anybody. I have two refineries in 
my district. I have got the largest corn-producing district. I 
have got the biggest high play of oil now because of the 
fracking in my district. I have got coal mines. I have got 
power-generating plants, so we are working hard to go through 
this dilemma and walk away standing up, which I think we are 
going to be able to do.
    So let me go to a question. No one has mentioned, and Mr. 
Grundler really because it really is part about the 
requirements by law, no one has mentioned so far biodiesel and 
no one has mentioned the fact that actually it has exceeded its 
blending capabilities so it actually is helpful in this, is 
that correct?
    Mr. Grundler. That is correct the country----
    Mr. Shimkus. And there is no blending debate. There is no 
fueling debate. There is no engine debate, et cetera, et 
cetera, et cetera.
    Mr. Grundler. Not at current blends no.
    Mr. Shimkus. That is kind of a success story that is kind 
of getting lost. There is some success in this debate. And as I 
think was said earlier, if you are a climate person, there is 
reduction in the carbon emissions on that.
    Mr. Grundler. That is true.
    Mr. Shimkus. So there is biodiesel is part of the success 
story that we just we have to keep in part of this debate.
    I also want to talk about the greenhouse gas threshold a 
little bit. We export corn-based ethanol is that correct 
overseas?
    Mr. Grundler. That is correct.
    Mr. Shimkus. We import a cane-based advanced biofuels, 
correct?
    Mr. Grundler. That is correct.
    Mr. Shimkus. Do we calculate the transportation cost of 
these two ethanol products that are, in essence, no different 
in a greenhouse gas calculation?
    Mr. Grundler. Yes, we do.
    Mr. Shimkus. You do. I would like to see that. I would 
argue that, maybe, well, I would like to see how you calculate 
that, but I would argue that that doesn't make a lot of sense 
if you want to reduce greenhouse gasses and we are sending 
ethanol outside and importing ethanol in and that is not a net 
increase, versus a status quo or a decrease.
    Let me go on.
    Mr. Grundler. Can I clarify my answer, sir?
    Mr. Shimkus. Go ahead.
    Mr. Grundler. When we do the lifecycle determination as to 
whether or not sugar cane ethanol qualifies as an advanced 
fuel, we take into account the transportation emissions from 
Brazil to the United States.
    Mr. Shimkus. But not the refilling of sending of an equal 
amount of ethanol and corn-based overseas to another country?
    Mr. Grundler. Correct.
    Mr. Shimkus. And that is maybe----
    Mr. Grundler. But it is not an equal amount. It is not--the 
trade relationship is not a direct one for one.
    Mr. Shimkus. Let me go, what do you attribute--going back 
to Mr. Grundler again, this 2013 and not having the standards 
is a major problem because you can't expect refineries to meet 
goals and objectives if we don't have that. Now I applaud your 
most recent response on the shortly following, 2014 numbers 
will be approved because that could ease a lot of our stress 
and strain based upon the fact that you all have to set the 
blending, you have to, you set the standards.
    Mr. Grundler. Correct.
    Mr. Shimkus. And my colleagues are right; we are 6 months 
into a year, and we don't know what the 2013 standards are. 
That is why people are crazy out there.
    Mr. Grundler. I understand.
    Mr. Shimkus. So I would say move rapidly on 2013 and 
quickly follow 2014. That could help ease a lot of pressure 
here. And I know my time has almost expired.
    What do you attribute the increase in the RIN prices that 
occurred earlier this year to?
    Mr. Grundler. Most observers, EPA included, believe that 
the market is reflecting the coming situation in 2014 and 2015, 
as these statutory volumes go up, and they are anticipating a 
scarcity of RINs or a higher cost in terms of moving higher 
blends of ethanol.
    Mr. Shimkus. So there is a risk and uncertainty premium 
based upon the unknown----
    Mr. Grundler. That is right.
    Mr. Shimkus. Which is why giving some----
    Mr. Grundler. I get it.
    Mr. Shimkus. Data might be helpful to ease that risk.
    Mr. Whitman. At this time, I recognize the gentleman from 
Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I have a habit of following my colleague from Illinois, I 
guess.
    Director Grundler, some have advocated E85 and E15 as 
solutions to the E10 blend wall. What do you see as the major 
barriers of these fuels as solution to the E10 blends wall?
    Mr. Grundler. There are significant infrastructure barriers 
at the moment, as has been referenced in some of my colleagues' 
testimony. There are only roughly 3,000 E85 stations at the 
moment selling 85 and roughly 11.5 million vehicles that are 
capable of using it, and that is a significant challenge to 
moving more volumes of E85. With respect to E15, there are very 
stations today that are offering that product.
    Mr. Green. I heard that there are only a few stations as 
you said selling E15 in our country, and while E85 may be 
popular in the Midwest, it is not in most regions. I understand 
there was only one E85 station. I think in the Houston area, I 
think I found the one, but so it is not very widely spread, 
except in the Midwest.
    Mr. Grundler. My understanding is that we have roughly 
3,000 retail stations that are selling versus over 150,000 
stations that sell gasoline.
    Mr. Green. Do you believe the EPA has the tools available 
to relieve the pressure on the blend wall in the short term? 
And if so, will EPA exercise this authority in the coming 
months?
    Mr. Grundler. Sir, clearly, the Congress provided us with a 
number of tools to adjust these standards. And right now, we 
are in the midst of getting a lot of advice. We are doing a lot 
of listening. And we are focusing on this very, very carefully. 
And I am just not in a position today to forecast where we are 
going to come out in 2013 and 2014.
    Mr. Green. On Monday, the EPA won a victory when the 
Supreme Court declined to hear three separate lawsuits on E15. 
It seems, however, that the consumer will actually lose though. 
Automakers with limited exemptions are warning consumers that 
their automobiles will not be warranted for E15. How do you not 
have doubts about the approval of E15 in the face of skepticism 
by our automakers?
    Mr. Grundler. Sir, that is a very good question. I guess 
the way I would answer it is that we did do an enormous amount 
of listening. We did an enormous amount of testing. We did all 
the testing. We looked at all the data that was available, and 
it simply did not show that there was going to be an impact on 
emission control systems by E15. We are not mandating the use 
of it, sir, and we are not advocates for E15. We are not 
opponents of E15. We simply made a determination under the law 
that it met the waiver criteria, and it will be up to the 
marketplace as to whether or not people will be offering that 
to their customers.
    As to the warranties, I would have to defer to the 
automakers why they make those sorts of decisions.
    Mr. Green. I guess just alcohol and oil sometimes just 
doesn't mix. I understand EPA and DOE has for years used the 
Coordinated Research Council to conduct vehicle emissions 
studies in research products likes the national surveys of E85 
fuel quality, the advanced collaborative vehicle emission study 
and the nonroad vehicle emission study.
    Can you explain why you think the coordinated council of 
research is valuable in these instances but discounts their E15 
test results when it appeared that EPA and DOE played 
significant roles directly through the National Renewable 
Energy Lab and CRC's mid-level ethanol blends research program?
    Mr. Grundler. You are correct, sir. We have a long history 
of working with the CRC and cooperating on a whole variety of 
test programs.
    Frankly, we regret that we weren't given the kind of role 
that we ordinarily have in their latest work on E15. We were 
unable to, even though we asked, to be much more involved in 
selecting the vehicles and selecting the criteria, and 
regretfully, we were not allowed to do that. But we look 
forward to continuing our historical relationship with the CRC 
in the future.
    DOE has also commented pretty extensively on the 
shortcomings of the latest E15 work that you are referring to, 
including that it hadn't been peer reviewed, that the criteria 
that they chose as a failure criteria seemed arbitrary, that 
there were no control vehicles chosen, and so on, and I would 
be happy to provide to you their review of the scientific 
shortcoming.
    Mr. Green. I would be glad to see it. I appreciate it.
    Administrator Sieminski, your 2013 annual energy outlook 
early released presented a much dimmer picture for the growth 
of E85 sales compared with last year. Can you discuss the 
reasons why these projections are so much lower?
    Mr. Sieminski. Well, the basic reason is that the projects 
that were underway to produce cellulosic and advanced biofuels 
just simply haven't materialized in the timeframe that we 
believed that they would. There is consequence; our projections 
for how much of these fuels can be produced just keep slipping.
    As Mr. Grundler said earlier, at the end of last year, we 
thought there would be 9.6 billion gallons of these fuels, and 
we are now down to 4 to 5--excuse me, million gallons. And 
these are, we only have two plants that are in the running at 
this point. One of them is up and operating. At one point, it 
appeared that there were as many as 10 or 12 plants to produce 
these fuels. And so the inability of the technology to advance 
as quickly as was expected in the years between 2007 and 2012 
is the main factor.
    Mr. Green. Well, obviously, it could cause a substantial 
volatility in the market if the technology is not there that we 
thought would be there and so that may be why we're having this 
hearing today I hope.
    Mr. Grundler, can you please describe the misfueling 
mitigation measures EPA has in place and why EPA believes they 
are adequate?
    Mr. Grundler. I would be happy to Congressman. We required 
anyone who wishes to market E15 to submit to us a misfuel 
mitigation plan. That plan includes labeling the E15 pumps with 
warning labels to make sure that customers don't improperly use 
the fuel in vehicles that can't tolerate or small engines. We 
require a survey and tracking and reporting so that we know 
that E15 is being tracked carefully and is being used properly 
and a number of other details in the mitigation. I would be 
happy to get you the----
    Mr. Green. If you could get that. The last question is, why 
does EPA believe that 14 million gallons of cellulosic biofuels 
is appropriate for 2013? How much is produced so far during the 
first 5 months, 6 months?
    Mr. Grundler. 8,332 RIN. I want to clarify that when we 
came out with proposal, that was our best estimate at the time. 
We are now updating that estimate based on the latest 
information from both producers, and we are consulting with our 
colleagues at EIA, and the final number will be based on that 
most recent information.
    Mr. Green. Thank you very much, Mr. Chairman.
    I appreciate your courtesy.
    Mr. Whitfield. The gentleman from Nebraska, Mr. Terry, is 
recognized for 5 minutes.
    Mr. Terry. Thank you, and I am not in the same position as 
Mr. Shimkus; we only have corn. We don't have quite the 
diversity of resources in Nebraska as Illinois.
    But I want to focus on the waiver because I am just not 
grasping the full extent of the waiver. When the RFS was 
written, it included provisions for the administrator to issue 
waivers if the requirements of the program would impose 
economic harm or impose harm on the economy.
    And I am very interested in better understanding to what 
extent can the agency use this waiver authority? And do you 
agree that there is a waiver authority?
    Mr. Grundler. Indeed, sir, and there is more than one. If 
we determine, as we have for the last 3 years, that there is 
not the cellulosic volume to meet the Congressional standard, 
we adjust it, and we can also, we have chosen not to in the 
past, but we could also adjust the total and the advanced by 
that same amount. In the past, we have chosen not to because we 
determined that there was sufficient other advanced fuel to 
meet that target.
    The other waiver authority, which you referenced, is a 
general waiver authority, where if the administrator can either 
be petitioned by a party or can on her own determine that the 
RFS implementation would create a severe economic harm to a 
region or a State and that the previous conversation we have 
been petitioned a couple of times and determined that, again, 
because of market dynamics and the demand that the refining 
industry has for ethanol that the statutory test simply was not 
met, and we are not allowed to grant that waiver.
    Mr. Terry. All right. Then, again, helping me grasp this, 
so because cellulosic hasn't really gotten out of the pilot to 
mass production yet, you were able to just waive that portion 
that was designated for this cellulosic growth?
    Mr. Grundler. That is correct. We adjusted the volume down 
something like 98, 99 percent, based on our estimate about what 
that volume would be in the forthcoming year.
    Mr. Terry. So, then, the amount that could be done, normal 
ethanol, corn-based ethanol, you increased though, still 
increased the volume or number of gallons from 2011 to 2012, 
and are you looking to do that again in 2013? I realize you 
haven't finalized that, but you said you are working on it 
diligently.
    Mr. Grundler. The proposal would have us adopt the 
statutory volumes for total and advanced, and then we are 
proposing to waive the cellulosic portion of the standard, but 
not, we are not----
    Mr. Terry. Just the cellulosic, but there are still 
advanced fuels that are on top of the regular ethanol.
    Mr. Shimkus. Would the gentleman yield quickly?
    Mr. Terry. Yes, I will yield.
    Mr. Shimkus. But you reduce the one point of the advanced, 
but you didn't reduce the overall level commensurate with the 
loss of production. Is that true?
    Mr. Grundler. That is correct.
    Mr. Shimkus. And I think that is a problem.
    Mr. Terry. Part of the confusion here I think as well.
    So you do the estimates on the 2013 crop, and how much 
advanced? What is your--any of your early thoughts of how much 
cellulosic is going to be on the market this year?
    Mr. Grundler. Our original estimate that was in the 
proposal was 14 million gallons, and we are now updating that 
based on the comments we received.
    Mr. Terry. That is the totality.
    Mr. Grundler. That is correct, and if I could just respond 
to Congressman Shimkus, the reason we didn't make the 
coincident adjustment in the advanced is because we determined 
that there are many other fuels, including biodiesel, that can 
make up that advanced pool, as well as in other advanced, 
domestic advanced ethanol, as well as projected imports from 
Brazil.
    Mr. Terry. You mentioned with E15 or greater, there are 
infrastructure problems. Could you state maybe at the gas 
station level what the specific problems would be?
    Mr. Grundler. With respect to E15, again, based on all the 
people that we have been talking to and listening to, we 
understand that there are both market barriers for the 
widespread adoption of E15, as well as remaining regulatory 
barriers. There are numerous kind of State and local 
requirements that would need to be met to sell E15. Many States 
still have a cap of E10 for sales in their States. There are 
underground storage tank and dispenser requirements that need 
to be met. So these all contribute to barriers to more E15 
sales.
    My own opinion is that these liability concerns are the 
predominant challenge at the moment.
    Mr. Whitman. The gentleman's time has expired.
    At this time, I recognize the gentleman from Pennsylvania, 
Mr. Doyle, for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman, and thank you to the 
panelists.
    Dr. Grundler, I see the President's Council of Economic 
Advisers is warning us that increasing production of food-based 
fuel, such as ethanol, not only increases the demand for 
agricultural feedstocks but may also make demand less elastic, 
through such measures as biofuel blending requirements, and as 
such, the integration of food and energy markets can cause 
shocks in one market that get transmitted to the other. We have 
seen the expansion of corn ethanol increase corn prices by 36 
percent from 2000 to 2009.
    CBO estimated that the use of ethanol for fuel accounted 
for about a 28 to 47 increase in the price of corn and a 10 to 
15 percent increase in food prices. And it is important to note 
that these increases occurred during a time when the U.S. 
harvested a record 13.1 billion bushels of corn.
    Grocery bills have been rising 3 to 4 percent every year, 
and they will rise by the same margin in 2013. In 2011, retail 
food costs rose 3.7 percent according to the USDA. After 
increasing corn ethanol mandate in 2007, the consumer price 
index for meat, poultry, fish, and eggs accelerated by 79 
percent. The doubling of the ethanol mandate in 2007 caused a 
30 percent increase in the price of corn from 2006 to 2010, 
according to economists. And the USDA is warning us that corn 
shortages, caused in part by the ethanol mandate, will drive up 
U.S. food prices by another 3 to 4 percent in 2013.
    In light of your comments and your written testimony on the 
E10 blend wall, what tools does the EPA have to ensure that 
higher blends of ethanol into gasoline will be filled by 
cellulosic and advanced biofuels? As we are moving from E10 to 
E15, what can you do to make sure that that space is not 
entirely filed by corn ethanol that can negatively affect feed 
prices and for farmers and food prices for consumers?
    Mr. Grundler. As we have been discussing, the agency has a 
number of tools, including its responsibilities on an annual 
basis to set these different standards, these four different 
standards. With respect to what will ultimately be the mix of 
these different fuels is really something that is going to be a 
market choice. We will be establishing, again, what our best 
estimate of what the cellulosic volume will be. And with 
respect to the total and advanced, we will also be setting 
those targets. But how that gets sorted out in the marketplace 
in terms of the mix will be left to the market.
    Mr. Doyle. And also, I understand your testimony, you said 
that EPA is recently proposing to broaden the specific fuels 
that will qualify under the RFS program, can you tell me a 
little bit more about that proposal, and what you are doing to 
make this program as flexible as possible?
    Mr. Grundler. Thank you. Yes, we have been very busy 
evaluating these different feedstock and pathway petitions that 
people submit to us and doing the necessary lifecycle analysis 
to determine what their overall emissions would be and whether 
or not they qualify for these advanced categories.
    The reason this is important work and why it is important 
that we continue to find ways to streamline this process and 
make decisions faster is because this gives the marketplace 
many different options and choices in terms of complying with 
their obligations, as well as has been discussed fostering 
innovation and invention in lower cost ways to meet the 
standard as well as provide the greenhouse gas benefits.
    So we have--and I would be happy to give you the details of 
this--approved quite a number of advanced pathways that are 
sourced domestically from these different feedstocks and using 
these advanced technologies that will provide these benefits.
    Mr. Doyle. Good, I will look forward to that detail. Mr. 
Chairman, that is all I have.
    Mr. Whitman. Thank you. At this time, I recognize the 
gentleman from Ohio, Mr. Latta, for 5 minutes.
    Mr. Latta. Well, thank you, Mr. Chairman, I appreciate it. 
And thank you very much for our panel. And if I could ask Mr. 
Grundler, thanks very much for your testimony today.
    And one of the things I have been hearing, oh, in the last 
year really deals with the renewable identification number, 
RINs, and a company was out there and some others that were 
selling fake RINs for the fuel credits. How is it, for one 
thing, that these companies were doing that and they weren't 
caught and that took so long?
    Mr. Grundler. Well, sadly in addition to all the 
innovations that the RFS policy has inspired in terms of new 
technology, it has also inspired a lot of innovation in the 
criminal mind. And we have discovered what can only be called 
as counterfeiters, and we discovered this through our 
enforcement arm at the agency, through hotlines and tip lines. 
And as I hope you can appreciate, it takes a while to build a 
criminal case and to gather the evidence to make the 
prosecution.
    But the good news is that the United States achieved 
several convictions already with extended jail time, prison 
time for these counterfeiters as well as very high fines and 
confiscated private jets and luxury automobiles in the process.
    So I think that is a good result. The bad result that you 
are no doubt alluding to is this did create a chill in the 
marketplace because of concern about the validity of RINs that 
obligated parties were buying.
    Mr. Latta. Could I just ask, and you are probably ready to 
answer that, but what steps have the agency taken to prevent 
this from happening in the future?
    Mr. Grundler. I was just about to get to that. Again, we 
did a lot of listening. We worked with the oil industry and the 
producers and third party validators and proposed earlier this 
year a voluntary quality assurance program that would provide 
for an affirmative defense, so if you are an obligated party 
and you utilize one of these quality assurance programs in 
purchasing these RINs, and they later turn out to be 
fraudulent, the government is going to hold you harmless from 
penalizing you for that purchase. This is public comment, we 
have got a number of different options we have proposed, and we 
are going through those comments right now, and we will be 
finalizing this at the end of the year. But I think it has been 
successful, sir, in opening up this RIN market, and the 
evidence there is we have got more biodiesel producers this 
year than we did last year. And that was our concern, that 
these small producers would be frozen out of the market because 
people would only buy from large producers that they know that 
have deep pockets.
    Mr. Latta. Let me ask this, you say you have an affirmative 
defense out there. Some of the information I have had, maybe 
this is the affirmative defense is since that time, is there 
still a buyer beware along with that affirmative defense?
    Mr. Grundler. Yes.
    Mr. Latta. May I ask this, this agency, is there a due 
diligence that has to be exercised by that buyer of that RIN?
    Mr. Grundler. We do expect some due diligence. But, again, 
if they do that due diligence, if that RIN has been through 
this quality assurance program, then the affirmative defense 
would apply.
    Mr. Latta. Could I just ask, what is your definition of due 
diligence then that a company would have to exercise?
    Mr. Grundler. Can I get back to you on the record on that? 
This is a legal question that I would like to consult with my 
enforcement.
    Mr. Latta. Because I think, again, if there is an 
affirmative defense on the one side, but then you are supposed 
to be exercising due diligence and the two have to come 
together at some point, I think it is pretty important that 
folks know exactly what that is because you might think, well, 
I have gone to the Web site, this is what the EPA says that 
this company or this RIN is a good one, and I think, OK, even 
if something goes wrong, I have got an affirmative defense, but 
then if the question is then for that person or that company, I 
should say is what happens with the definition of the due 
diligence, and we will----
    Mr. Grundler. We will be very clear on that.
    Mr. Shimkus. I was----
    Mr. Latta. I will yield to the gentleman.
    Mr. Shimkus. I just wanted to--I just want to put from the 
World Bank May 20, 2013, on this food fuel debate, the World 
Bank says in the final paragraph, it concludes that most of the 
price increases are accounted for--I am talking about food 
prices--are accounted for by crude oil prices, more than 50 
percent, followed by stock to use rations and exchange rate 
movements, which are estimated about 15 percent each. Crude oil 
prices mattered most during the recent boom period because they 
experienced a large increase. So that was in reference to the 
food fuel debate and escalation of prices mostly on energy 
costs.
    Mr. Latta. Thank you very much, Mr. Chairman.
    My time has expired, and I yield back.
    Mr. Whitman. At this time, I recognize the gentleman from 
Kansas, Mr. Pompeo, 5 minutes.
    Mr. Pompeo. Great. Thank you, Mr. Chairman.
    Like Mr. Shimkus, I have got a lot of questions, too. It is 
no secret to anybody here that I have a deep skepticism of 
energy subsidies and mandates. This skepticism extends to the 
RFS as well. I represent Kansas. We have got some of the 
largest ethanol producers in the world, but we are past the 
time when parochial interests can set policy for the country.
    RFS is a bad policy. I think today's testimony bears it 
out. Folks back home are listening to RINs and blend walls and 
cellulosic mandates and RIN waivers and confiscation of 
airplanes associated with a market, right, consumers trying to 
buy gasoline at the pump and fuels to drive their trucks 
around. I think their head would spin with a set of Rube 
Goldberg device like the RFS that we have ended up with.
    I hope we can move away from that. I expect we can't undo 
it just yet, and I hope this hearing will lead us to a 
thoughtful path forward on how we get how out of this mess.
    Mr. Grundler, you talked about a minute ago a question I 
think it was Mr. Terry's question, you talked about innovation 
that has resulted from the RFS. I would tell you I think mostly 
what has happened is rent seeking. So tell me what innovation 
the RFS has lead to over the I guess we are between 2005 and 
2007 and now.
    Mr. Grundler. Thank you for that question, Congressman.
    The innovation I was referring to was coming up with new 
ways to make transportation fuel from a whole variety of 
different feedstocks, from wastes, to switch grass to crop 
residues in a way to power America's cars and vehicles.
    Mr. Pompeo. And in spite of all that information, where, 
according to Mr. Shimkus, if I understood it right, about half 
the way to the 36 billion gallon target. Is that right?
    Mr. Grundler. That is correct.
    Mr. Pompeo. So we have got less than half of the innovation 
that Members here who voted for this bill half a decade ago, 
almost a decade ago, supposed we might get as a result of this 
set of mandates.
    Mr. Grundler, you have got a difficult challenge. You have 
got to implement not only this RFS but the CAFE and GHG 
standards for cars and trucks. The RFS last revised in 2007, we 
have got new CAFE and GHG rules. Have the CAFE and GHG rules 
affected compliance with the RFS in a material way?
    Mr. Grundler. What they have done is reduced the demand for 
gasoline in the country as my colleague, Mr. Sieminski, has 
pointed out, and that makes the blending challenge that much 
harder. So with respect to that, I don't think it has affected 
it yet, but it has certainly accelerated this blend wall 
phenomena faster than anyone expected in 2007.
    Mr. Pompeo. So we have got two sets of rules and we are now 
trying to mix too many renewable fuels into too little 
gasoline, that is the mathematical challenge you face is that 
correct?
    Mr. Grundler. Essentially.
    Mr. Pompeo. I have heard from Kansas refiners, pretty small 
refiners, 130,000 barrels a day in some cases, I heard some 
folks in Pennsylvania have the same problem, they are not 
integrated merchant refiners, and there is no relief for them 
specifically today. What I wanted to know I guess, Mr. 
Grundler, do you think you have the authority to grant some 
sort of relief to these nonmerchants smaller, although not 
small by regulation, refiners?
    Mr. Grundler. They are not eligible for the small refiner 
provision under the law, which is the definition of 75,000, so 
with respect to a particular facility, a specific relief, they 
would not be eligible, no.
    Mr. Pompeo. So you don't think you have the authority to 
grant them relief or a waiver in any way under the statute as 
currently drafted?
    Mr. Grundler. I do not.
    Mr. Pompeo. Thanks.
    I guess the last question, and this is really both to Mr. 
Grundler and Mr. Glauber, you both referred to that the 
challenge of higher blends.
    And you, I think, Mr. Glauber, said you called it a price 
disruption as impacting how much is blended if we remove the 
RFS.
    I guess I don't think of markets creating price 
disruptions. I think of mandates as creating market 
disruptions. I am interested in what a price disruption is when 
we have willing consumers and willing sellers trying to come to 
an agreement to price and purchasing.
    Mr. Glauber. Yes, let me clarify. All I am talking about is 
price variability, and I am just saying when prices move the 
opposite way, the market will respond, either by producing or 
not producing.
    Mr. Pompeo. Fair enough. And then you have both also 
referred to absence of infrastructure pumps and the like. Isn't 
that just price, too? When you talk about liability concerns, 
isn't that just a price term, as well? Isn't what we really 
face here, we just have consumers don't want this stuff because 
they are not willing to pay for it. You can build 
infrastructure; it is just money. You can buy insurance to take 
your liability risk away. It is just money. Isn't it the case 
it is just a price issue, and we have got an RFS that is trying 
to artificially intervene to solve this lack of consumer demand 
for this product? Do either of you agree with that or disagree 
with it?
    Mr. Grundler. There is no doubt that consumers have not 
demanded high amounts of E85, and it is likely because of the 
way the product is priced. It is not today priced consistent 
with its energy content and I think consumers, some consumers 
have figured that out.
    And I would just say you are right, no one is going to put 
in infrastructure unless they have--are going to make those 
investments themselves unless they can see recouping those 
investments.
    Mr. Pompeo. Thank you, Mr. Chairman. I yield back.
    Mr. Whitfield. Gentleman's time has expired.
    At this time recognize the gentleman from Texas, Dr. 
Burgess, for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Grundler, let me ask you a question, because I guess 
back in the summer of 2010, the soon-to-be-departed Ed Markey 
had a briefing where your agency, the EPA, the Department of 
Energy were brought into this room, and it wasn't a hearing, so 
there was no official transcript. It was a briefing. But I 
asked the question of both the EPA and Department of Energy 
about the testing being done on vehicles, automobiles, to allow 
the introduction of E15 in a safe manner. And what I got from 
both the Department of Energy and the Environmental Protection 
Agency was the other guy is doing the testing.
    Well, that was unsatisfactory. I really had a lot of 
difficulty actually getting the testing data from either 
Department of Energy or the EPA. But now you cite this 
afternoon, in response to I think Mr. Barton's question, you 
cite extensive vehicular testing. Can you give me a figure of 
the number of vehicles in which this was tested?
    Mr. Grundler. I don't want to give you a misleading figure, 
so I would like to respond for the record.
    But my recollection is that the DOE tested on the order of 
80, 89 somewhere in that order of magnitude. But I would like 
to respond for the record specifically.
    And I would also like to, if you are interested, provide 
you with any other technical information or reports as a result 
of that testing. I can state with 100 percent confidence that 
DOE did have the lead and did conduct this testing.
    Mr. Burgess. Right. And that was the testing conducted out 
at Sandia Labs.
    Mr. Grundler. In part I believe it was in Sandia, but I was 
not involved at the time. But I can certainly find out.
    Mr. Burgess. Well, according to the USA Today from about a 
year ago, May of 2012, the engine durability study took 
duplicates of eight different vehicle models, spanning the 2001 
to 2009 model years. All 16 vehicles were tested over a 500-
hour durability cycle corresponding to about 100,000 miles of 
vehicle usage. A range of engine operating parameters were 
monitored during the test, including cylinder compression, 
valve wear, valve leakage, emissions, and emission control, 
system diagnostics. Two of the engines tested on E15 had 
mechanical damage, another engine showed increased tailpipe 
emissions beyond the allowable limit.
    So that is three out of the eight in this admittedly 
limited, but I am given to understand, I mean, this was the 
study upon which the agencies are relying to provide us with 
this information.
    Now, the question comes up for the retailer, for the mom-
and-pop store, the 7-Eleven that is selling gasoline, what 
limit of liability do they have if someone doesn't read the 
fine print on the little stick-on label that is going to be 
affixed to the tank that ``don't put this in your car if your 
vehicle model is earlier than 2001''? What limit of liability 
does the retailer have in that situation?
    Mr. Grundler. Congressman, I would like to respond for the 
record with respect to the liability question, because I don't 
feel I am qualified to answer that aspect of the question.
    I do want to clarify that with respect to the testing that 
you referenced, that is only part of the information that the 
Agency relied on to make its determination. And I would like to 
respond more fully for the record to describe the bulk of the 
work that DOE conducted, as well as the other studies that EPA 
looked at with respect to E15 and its impacts on emission 
control systems.
    Mr. Burgess. Well, I just have to tell you, I have got a 
radio show, ``Car Guy,'' on Saturday mornings back in the 
Dallas-Forth Worth market, Ed Wallace. And he has written about 
this extensively in his own column in the Fort Worth Star-
Telegram and Businessweek. I just want to quote from an article 
that he wrote in Businessweek in 2010: ``The older cars owned 
by those less financially secure will likely be the first to 
go. In fact, that has already happened in thousands of cases 
nationwide.'' He is talking about the introduction of E15 of 
these vehicles. ``Maybe when it starts happening to some of 
those on more solid financial ground then someone will listen. 
Adding an expensive, harmful, useless filler to gasoline is not 
remotely the same thing as having a legitimate national energy 
policy.''
    Mr. Chairman, I thank you----
    Mr. Shimkus. Will the gentleman yield for just 10 seconds?
    Mr. Burgess. I will yield for 14 seconds.
    Mr. Shimkus. Just a point. There is legislation that I have 
introduced on liability protection, both for the retailer and 
for the refiner, on selling an approved fuel----
    Mr. Burgess. Reclaiming my time. I will also mention that I 
have introduced legislation that would actually take us back to 
the pre-2007 days, when the inadvised increase in the ethanol 
mandate was passed by the House in 2007 and signed by President 
Bush in that year. It is H.R. 1469, if members want to take a 
look at the legislation.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Whitfield. The gentleman's time has expired.
    At this time I will recognize the gentleman from Texas, Mr. 
Olson, for 5 minutes.
    Mr. Olson. I thank the chair. And welcome to our witnesses. 
This clearly is a very passionate issue that crosses party 
lines. But we owe the American people a thorough review of the 
RFS for one simple reason: The American energy outlook that 
drove the creation of ethanol tax subsidies in RFS is in the 
dustbin of history. Tax preferences for corn-based ethanol were 
created last century and mutated into RFS this century.
    Why the spur of government activity? Because we thought we 
hit peak gas. Meaning that to feed our ever-growing demand for 
gasoline we had to buy more and more oil from foreign sources 
that weren't reliable. Our production was going down every 
single day.
    But the American innovator, with new technology, has pushed 
peak oil back to the next century. And while I think the best 
solution to this problem is to repeal RFS, my mind is not 
closed. But it is not empty either.
    Mr. Sieminski, it seems to me that the only way that RFS 
could be viable in years ahead, without any modifications, 
would be if market conditions dramatically change. And 
following former Chairman Dingell's lead, I will ask you to 
answer yes or no.
    Yes or no: Does EIA expect a dramatic spike in gasoline 
demand over the next few years?
    Mr. Sieminski. Does EIA expect what?
    Mr. Olson. A dramatic spike in gasoline----
    Mr. Sieminski. No, sir, we do not.
    Mr. Olson. Absolutely not.
    Yes or no: Does the EIA expect a spike in the use of either 
E15 or E85? Spike E15, E85, next couple years.
    Mr. Sieminski. In production volumes?
    Mr. Olson. Production volume, use in automobiles, 
transportation.
    Mr. Sieminski. No, we are seeing a lot of difficulty in 
producing those fuels.
    Mr. Olson. So I think that is a no; no spike there.
    Yes or no: Does EIA expect sudden widespread production of 
advanced biofuels in the next few years?
    Mr. Sieminski. Not without a technological breakthrough.
    Mr. Olson. There we go. So in your opinion, these facts 
bode well for compliance with the RFS as it stands today?
    Mr. Sieminski. As my testimony said, the RFS as it is 
currently constituted simply can't be met.
    Mr. Olson. OK. So my next question for you, sir, if it 
doesn't match the standards, if all those answers were no, can 
RFS be saved or is it easier to end it and start over making a 
product and policy that reflects new U.S. energy reality? Think 
so? Good idea?
    Mr. Sieminski. That is a policy issue.
    Mr. Olson. OK. Appreciate that.
    And my next question is for Dr. Glauber.
    Sir, in your opening remarks you touched on how corn-based 
ethanol has increased the price of commodities. Conclusions 
vary, but you cited several studies discussing ethanol 
contributing to over 30 percent of the increase in corn prices. 
And I have a copy of the USDA research piece that was put out 
earlier this year by Dr. Richard Volpe, Ph.D., from the Food 
Markets Branch.
    [Slide shown.]
    Mr. Olson. And the first panel is the outlook for 2013. And 
I quote, ``But high-priced corn, soybeans, and wheat will 
permeate supermarkets. Structural inflation for beef, pork will 
intensify. Overall, inflation higher than the historical 
average.''
    Next slide.
    [Slide shown.]
    Mr. Olson. ``What does this mean for consumers? Food prices 
increase.''
    I heard from Wendy's restaurants last week. And they said 
very publicly that their average retail location lost nearly 
30,000 per store last year because of commodity price 
increases. Restaurants have a tight profit margin. That is 
money that doesn't go towards expansion and doesn't go towards 
a new employee. Briefly, what are the ways in which commodity 
prices increase have negatively impacted nonfarm businesses?
    Mr. Glauber. Well, Congressman, understand last year most 
of this is due to the fact that we had a very extreme drought 
in the Midwest that sharply reduced corn and soybean yields and 
pushing those crops' crop prices up substantially. I think what 
is the surprising thing--that piece was written a while back--I 
think the surprising thing is the fact that thus far we haven't 
seen much increase in the overall retail price of food.
    Now, this isn't saying that Wendy's or other businesses 
that you have talked about haven't faced higher costs. I 
understand that. But at least as measured by BLS, Bureau of 
Labor Statistics, just the most recent report said prices for 
food at home were about 0.8 percent higher than they were at 
this time last year.
    Now, to understand how inflation works, when you see higher 
corn prices, it doesn't make itself known right away. And that 
is largely because one of the major uses for corn is for cattle 
feed and for livestock feed. So that takes time. You see 
shorter, you know, smaller margins, and some producers 
liquidate herds. That drives up the price of livestock 
products, which then shows up in retail foods.
    That effect is much, much, much smaller than the overall 
effect on commodities. So corn prices can go up a lot, retail 
prices go up much, much smaller percent. And that is largely 
because the farm gate price in a retail food dollar is only 
about 14 percent or so. You have transportation of it, you have 
distribution.
    But it is an impact on inflation. When ERS just put out new 
numbers--the Economic Research Service, of which you were 
quoting from there, they just put out new numbers yesterday. 
They are talking about food inflation being on the average of 
2.5 to 3.5 percent this year, which is certainly higher than it 
was last year, but in line more or less with where we have been 
over the last 10 years. It is not denying that these things 
have inflationary pressure, because they do. But understand 
again the main part was because of the drought that we saw.
    Mr. Whitfield. Gentleman's time has expired.
    At this time, recognize the gentleman from Virginia, Mr. 
Griffith, for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman.
    Mr. Grundler, let me ask you this question, and here is the 
concern. Our retail gas folks--and you have heard the questions 
earlier, and I am not going to go back through the history 
about E15. And we heard about the question on, you know, legal 
liability for the person if they put the wrong fuel into the 
engine for a car that is pre-2001. Of course, I am driving a 
2003, and I don't know if that will impact them a little bit or 
not. But for these older cars we have heard about that, and you 
are going to get us an answer, and I appreciate that.
    But one of the concerns that a lot of the folks who sell 
the gas, the convenience stores and the gas stations, is quite 
frankly they are also concerned that, you know, if they decide 
that they are going to sell the E15 alongside E10, what is the 
risk to them that your agency will hit them with a violation of 
the Clean Air Act? And there is some concern, they gave me some 
history on it, because apparently when they were switching 
from, you know, unleaded fuel to leaded fuel, if the gas 
station owner didn't go out and physically say, no, you can't 
buy, that is the wrong car for that leaded gas, they got fined, 
and it appears the fines that can be assessed are up to 
$37,500.
    So what I am asking you is, is that there have been some 
indications that certainly your agency wouldn't go in that 
direction, but we have nothing in writing to assure these 
folks. I am asking you, can you get us something in writing 
that will assure the convenience store operators,the gas 
station operators that, you know, if they are trying to do what 
is right, they are not going to be fined when a consumer comes 
up and puts the wrong kind of gas into the vehicle.
    Mr. Grundler. Just to clarify, sir, the question is will 
they be fined by----
    Mr. Griffith. For a CAA violation.
    Mr. Grundler. --the government----
    Mr. Griffith. By the government, yes.
    Mr. Grundler. --if a consumer ignores the label and----
    Mr. Griffith. That is the question, sir.
    Mr. Grundler. I would be happy to take that back and talk 
to my counsel and see what our response would be.
    Mr. Griffith. It would seem to me, you know, we heard 
testimony it is going to be difficult to get the E15, it is 
going to be difficult to use, that there are going to be some 
problems, we have got a question about legal liability, would 
seem to me at the very least that is something that the 
government ought to be able do, is to reassure these folks that 
on top of all the other headaches in trying to move forward 
with this program that they don't have to worry about the 
government coming in and hitting them with a pretty hefty fine. 
Because if you are a small retailer, not a big chain--maybe the 
big chains can handle it, but the small retailer, that is a lot 
of money, particularly in a district like mine where the 
average household income is only $36,000 a year. That is, you 
know, annual salary for somebody.
    Mr. Grundler. I understand. In fact, this issue was just 
brought to my attention yesterday by the head of the 
association of these kinds of businesses.
    Mr. Griffith. Sure.
    Mr. Grundler. So we are listening very carefully. And if 
there are any kind of barriers that EPA is putting in the way, 
we would like to address those.
    Mr. Griffith. I appreciate that.
    Dr. Glauber, you have talked a little bit about the corn 
costs going up affecting the cost of food. But don't we also 
have a situation where it affects those livestock dealers? And 
I think you just mentioned that some of them are liquidating 
their herds. And isn't it maybe the unintentional consequence 
that we have helped the row farmers but we have hurt all these 
other farmers? And it is certainly not the intent of the 
government to hurt the livestock, poultry, and dairy farmers, 
is it?
    Mr. Glauber. Well, it is certainly the case that if you 
look from 2005 to current that profits in those industries have 
declined. And it is no mystery, it is due to the higher feed 
costs. It is been exacerbated and particularly over the last 
year exacerbated by the drought, which not only shot up feed 
prices, but also reduced pasture conditions in most of the U.S.
    Mr. Griffith. Right. And wouldn't we expect at some point 
on the food inflation, I mean, not only because the feed costs 
went up, but because the liquidation of some of those herds, 
that at some point there may be pressure upward on the price of 
beef, particularly?
    Mr. Glauber. Well, again, that is how inflation typically 
occurs in those industries. I would just point out that one 
thing----
    Mr. Griffith. Got to be quick, because I am running out of 
time. I have got another question.
    Mr. Glauber. I am sorry.
    Mr. Griffith. I will get the rest of it from you at a later 
time because it is important----
    Mr. Glauber. I am a talkative guy. I apologize.
    Mr. Griffith. That is all right. We are trying to get some 
information here.
    And the problem is these industries I think should factor 
in on a decision when you are hurting these industries on the 
waivers. But last year I one was of the Congressmen that wrote 
a letter asking for a waiver--and this is coming back to you, 
Mr. Grundler. The Governor of Virginia asked for a waiver 
trying to help our farmers out. Do you need new legislation--
because the waiver wasn't granted in a time when I think it 
probably screamed to be granted--do you need new legislation or 
do you think that the EPA can actually look at these waivers in 
an unbiased manner and grant some of these waivers? When, like 
last year, we had a drought, it is affecting the farmers in my 
district. And I have an agriculture and coal district. It is 
two of my big industries. And we are under attack on coal now. 
Seems like agriculture is not getting any help when it needs 
it. Isn't there some waiver process or do you want me to put it 
in a bill?
    Mr. Grundler. Of course, it is completely up to Congress in 
terms of how you would like the EPA to administer these 
authorities. You gave us a pretty stringent test, which was 
severe economic harm, and that the RFS is responsible for that. 
Again, based on all the information and the objective analysis 
we did in response to the Governor of Virginia's request, we 
determined that the demand for ethanol is such that waiving the 
RFS would not have influenced that demand, would not have 
influenced feed prices, would not have influenced corn prices 
at all.
    Mr. Griffith. I would just say that my farmers in my 
district, I can't speak to the rest of the country, disagree.
    And I yield back.
    Mr. Whitfield. Gentleman yields back. Gentleman's time has 
expired.
    At this time, recognize the gentleman from New York, Mr. 
Engel, for 5 minutes.
    Mr. Engel. Thank you, very much, Mr. Chairman. I appreciate 
it.
    And I first want to say that there has been a lot said, 
both good and bad, obviously, regarding the Renewable Fuel 
Standard. And the most important information I think to 
remember is that the RFS reduces our dependence on foreign oil 
and reduces our carbon emissions. And we will have to see 
whether or not it will be a success or a failure.
    But I think there are things we can do now to help 
strengthen the RFS, decrease our reliance on foreign oil, and 
improve our national security. For many years, and I just 
recently introduced the bill for this Congress, I call it the 
Open Fuel Standard Act, which I believe is a complement to the 
RFS. I introduced it in a bipartisan way, as I always have, 
with Congresswoman Ileana Ros-Lehtinen as my cosponsor.
    And what the legislation essentially does is requires auto 
manufacturers to build cars that can run on alternative fuels 
in addition to gasoline. Mr. Shimkus and I have in previous 
Congresses teamed together to push this. This could include 
ethanol, methanol, natural gas, electricity, biodiesel, 
hydrogen, or a new technology. It would empower consumers to 
make a choice about which fuel was best for them. And I hope 
that we would take up this legislation.
    Got the idea for it many years ago when I was the chair of 
the Western Hemisphere Subcommittee in the Foreign Affairs 
Committee and I drove into a gasoline station in Brazil and saw 
that there were many blends, many mixes, many choices that 
consumers had. And since I believe that choice helps keep costs 
down, it seemed to me that it was foolish for us not to do it 
in this country.
    And when I learned more in those years about what it would 
cost to manufacture flex-fuel cars in America, no one told me 
it would ever be more than $100 a car to manufacture them. In 
fact, some experts said it was as low as $35 a car. The most 
anyone told me was $100. And so for such a little amount of 
money, it seemed to me almost criminal that we weren't doing 
it.
    So let me ask Mr. Grundler, one of the major concerns with 
the RFS is the so-called blend wall. And can you comment on how 
adoption of my Open Fuels Act and the adoption of more flex-
fuel vehicles might affect the blend wall?
    Mr. Grundler. That is hard to answer, sir. Currently, as 
has been stated, I think there are somewhere between 10 and 12 
million flex-fuel vehicles on the road right now. But it 
appears, based on the evidence, that consumers are not using 
them to buy E85. I think roughly 100 million gallons of E85 was 
sold last year. Perhaps Mr. Sieminski has got a better number.
    And it is likely that is due to a number of factors. Some 
owners don't know they have got a flex-fuel vehicle. Some 
owners have these flex-fuel vehicles but they may live in Texas 
where, I learned earlier, that there might be one station 
selling E85. And some are discouraged by the price of E85.
    So your question, if there were more flex-fuel vehicles 
available would that change this pricing dynamic, and I don't 
know if it would. Today, I think Ford is roughly making 40 
percent of their vehicles as flex-fuel; General Motors is 40, 
maybe, slightly above; Chrysler is making a significant 
percentage. So they are on track to meet their commitment of 50 
percent of production. And yet the evidence to date shows that 
consumers have not been choosing to use the higher blend 
ethanols.
    Now, that condition may change if the pricing structure for 
E85 changes. But that remains to be seen.
    Mr. Engel. Yes. I believe that it would increase consumer 
demand. But I do agree with your thinking that a lot of people 
right now are not aware of it. It is not something that we 
promote or we push. And if people don't see it is going to 
bring them any kind of benefit at the pump, everyone likes to 
think they care about the environment, but they care more about 
their pockets, I think. I think that is part of it.
    Let me ask Administrator Sieminski, would you agree, what 
would be your opinion, do you think that adoption of the Open 
Fuel Act would increase consumer demand for ethanol and other 
alternative fuels?
    Mr. Sieminski. I have to ask our people to take a look at 
it. I think the market itself is driving some alternative 
fuels. I just heard today from Ford that there is a very high 
demand. They can't even meet the demand for heavy pickup trucks 
that use compressed natural gas, for example.
    So I think that there is some consumer demand out there for 
these fuels. And as Mr. Grundler said, a lot of it has to do 
with consumer behavior and what the price of the fuels is. If 
we had, either through a regulatory system or through the 
market itself, lower prices for these advanced fuels, then I 
think that there would be a lot less consumer resistance.
    Mr. Whitfield. The gentleman's time----
    Mr. Engel. Well, let me say--I see my time is up-- but I 
just want to say I believe with all my heart that if it works 
in Brazil it can work here if we wish it to work. But I thank 
you both for your comments.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Now, some of you in the audience may noticed 
that these two gentlemen on the left, Mr. Welch and Mr. 
Matheson, have been here the entire hearing. And some of you, 
when I stopped rotating, looked quizzically at me. And I want 
you to know I have great admiration and respect for both of 
these gentlemen, and I am not discriminating against them. But 
we have a rule in the Energy and Commerce Committee that if you 
are not a member the subcommittee you have to wait until every 
member of the subcommittee has asked a question. So while they 
are a member of other subcommittees on the Energy and Commerce, 
and they are valuable members of the Energy and Commerce, that 
is why we waited for that. So I didn't want you all to boo and 
hiss at me when I left this afternoon.
    But I am delighted to recognize them now. And I recognize 
Mr. Matheson for 5 minutes.
    Mr. Matheson. Well, thank you, Mr. Chairman. And I would 
not boo or hiss you. I can tell you that. And I appreciate the 
witnesses being here today.
    I have a lot of questions. I assume maybe if we can't get 
them all in, we can ask for written questions after. That would 
be great.
    Dr. Glauber, you have talked in response to a few different 
questioners about RFS, the RFS impact on increasing corn prices 
and how that translated into the broader issue of raising food 
price. You mentioned that the drought may have been a more 
significant factor in that 1 particular year. Has the 
Department of Agriculture really tried to analyze this where 
they normalize that 1 year where there was a severe drought?
    I mean, this is something that has been around for a long 
time. We are increasing the cost of corn over time, it has been 
going up. In your testimony you mentioned that. I just think it 
would be helpful to this committee to understand what the 
impact is on food or if the Department has had a chance to 
analyze that, taking out the factor of the significant drought 
impact.
    Mr. Glauber. Yes. And it is a great question and an obvious 
one. We did actually look at this back in 2008. I believe I 
testified before an Energy Committee over in the Senate. And 
there, if I remember correctly, and I can get this to you in 
writing and get the study to you.
    Mr. Matheson. I appreciate that.
    Mr. Glauber. But there the impact on corn again in the 
order of 30 or so percent impact, on soybeans in the order of 
40, 45 percent, as high as that, and how that translated in, in 
terms of a percentage impact on retail food prices was actually 
pretty small, like in the order of a percentage point increase 
on CPI. Again, I want to be very careful here.
    Mr. Matheson. I understand.
    Mr. Glauber. But again the point is, is the transmission is 
a little bit smaller----
    Mr. Matheson. I would be interested to see how are going, 
going forward, too. That was 2008.
    Mr. Glauber. Happy to answer that.
    Mr. Matheson. Mr. Grundler, we talked earlier, in response 
to an earlier question, somebody was talking about the carbon 
emission benefits of advanced biofuels. Can you speak briefly 
to the carbon emissions from corn-based ethanol on a lifecycle 
basis?
    Mr. Grundler. I would be happy to. As you probably know, 
Congress, in developing the RFS, came up with basically two 
different categories of fuels and chose to grandfather any 
facility that hadn't commenced construction at the time of 
passage. So corn-based ethanol, most of that volume is, in 
fact, grandfathered, and so it is not required by law to meet 
the 20 percent greenhouse gas reduction threshold.
    Now, we know over time that there are a number of economic 
incentives to improve the efficiency of your operation to look 
for cheaper crops, seek higher yield feedstocks. So we expect 
that that efficiency will improve. And, in fact, in our 
analysis of new plants and future plants out in 2022, when we 
did the impact analysis, did determine that those new plants 
would achieve the 20 percent reduction.
    Mr. Matheson. But the current plants, because they are 
grandfathered, are not.
    Mr. Grundler. Well, it depends. It was going to be a plant-
specific thing. For example, those plants that may have 
switched from coal to natural gas would be more efficient.
    Mr. Matheson. Let me ask you, you have had a few questions 
also from folks about how you undertook the testing for impact 
on automobiles from going to E15. You may have answered this, 
but I just want to clarify this. Did it just focus on emission 
controls or did the tests include specific tests to evaluate 
engine and fuel system durability?
    Mr. Grundler. There has been a lot of confusion on that, 
sir. And I would be happy to give you the details. But the 
answer is that the Department of Energy looked at both, and in 
fact did tear down a number of vehicles and did a number of 
different types of testing to evaluate not just the emission 
control catalyst durability question, but also these other 
questions.
    Mr. Matheson. OK. So you will submit that for the record?
    Mr. Grundler. Be delighted to.
    Mr. Matheson. Great.
    Mr. Sieminski, I wanted to ask you a question about RINs. 
Before 2013 they were selling for just a few cents. Beginning 
of this year, we have the price skyrocket. It was over a dollar 
at one point. I hear right now it is in the 80 to 90 cent range 
for a RIN. What caused the huge jump in RIN prices? And will 
rising RIN prices--what is its impact on the price of gasoline 
for consumers?
    Mr. Sieminski. I think we heard earlier from Mr. Glauber 
that the RIN price increases probably had a lot--the increases 
in the first quarter of this year had an awful lot to do with 
the uncertainties in meeting the program targets. So RINs would 
be very valuable if you thought that you weren't going to be 
able to produce the right amount of fuel.
    As far as we can tell, and we have tried to look at this at 
EIA, we can't really see a big impact in the price of gasoline 
from what happened with RINs in the first quarter of this year. 
I do think that there might have been some impact in the diesel 
prices because of the way the program works. Going forward, if 
there aren't changes in the program, we would expect it to 
begin to impact----
    Mr. Matheson. Have you projected where you think RIN prices 
are going to be in the next couple years? Have you projected 
that out.
    Mr. Sieminski. We haven't because it is extremely difficult 
to do that without understanding what decisions ultimately are 
going to be made by the EPA.
    Mr. Matheson. Mr. Chairman, my time has expired. I will 
submit other questions for the record. Thank you so much.
    Mr. Whitfield. Well, thank you.
    And, Mr. Welch, you are recognized for 5 minutes.
    Mr. Welch. Thank you very much, Mr. Chairman. I appreciate 
being here and I have enjoyed the hearing.
    And I want to thank the witnesses for all the work that do 
you on behalf of our country.
    I have sat through this hearing because I have come to the 
conclusion that corn ethanol is bad for the--it is a bad 
environmental policy, bad energy policy, bad food policy. And 
that is largely because of two things that I have been hearing 
over and over again from everyday Vermonters, first farmers, 
who have just been hammered with the increase in the feed cost 
that is associated in part with the corn-based ethanol. And 
then, secondly, a lot of the small engine repair people are 
absolutely convinced that the ethanol is detrimental to these 
engines. And if I didn't believe it, my own chain saw got 
wrecked, and I am pretty upset about it, let me tell you.
    So this is serious business for our farmers and for our 
recreation industry, anybody using a small engine. And Congress 
did it. So, you know, you are implementing it. But I just do 
have a few questions about it.
    One is, you know, we did provide a safety valve. And last 
year when we had the worst drought in 50 years, more than 70 
percent of the cattle country was impacted. Ten Governors, 156 
Members of Congress, including me, in a broad coalition of farm 
and food groups requested an EPA waiver. And that was denied--
on the RFS--that was denied. But in denying the waiver, the EPA 
appears to have created a stricter standard than Congress had, 
at least that is how I read it, rejecting harm to States or 
regions and instead determining that the agency needed to show 
that RFS implementation would severely harm the entire U.S. 
Economy.
    So I need some clarification on that, because the spike in 
feed prices certainly hurt us. It hurt every agricultural 
activity associated with livestock. So I am wondering what it 
would take from the perspective of where you sit for a waiver 
to have a valid factual basis for you to act. And I think I 
will address that to Mr. Grundler.
    Mr. Grundler. Thank you, sir.
    There is no doubt that the drought had devastating effects, 
and where I am from in the Midwest I have seen it. Again, but 
the question before the agency was, was implementing the RFS 
responsible for these severe economic conditions? And we 
determined after extensive analysis and consultation and using 
a probabilistic statistic modeling framework to look at all 
these different variables in terms of corn yields and oil 
prices, that the RFS itself wasn't driving this demand. And it 
is because of the way our refining system has----
    Mr. Welch. So does that mean that if you have--the RFS 
standard requires more corn, obviously, to be going into the 
ethanol production, and that means less corn going into feed. 
And you have a drought. So the two probably work together. I 
don't know how you can precisely attribute how much of it is to 
the RFS and how much of it is to the drought. But obviously RFS 
becomes more difficult when there is a drought impact. So you 
are saying----
    Mr. Grundler. We ask ourselves the question, if we waived 
the RFS what would be the ethanol demand in the country? Which 
was, again, the ethanol demand, which is getting the corn and 
changing the commodity markets. And the answer was, in 89 
percent of the scenarios that we ran, is that it would not 
change that demand. The refiners are demanding this ethanol for 
the reasons Mr. Sieminski mentioned, it is because they want 
the octane. It has economic value because it is cheap, cheaper 
than the other alternatives. And so we could have waived the 
whole RFS and they would still have demanded that product.
    So it is a case-by-case situation. So in 2012, and looking 
at that year and looking at the price of oil and corn yields 
and all the other variables, that was the determination that we 
made. But that doesn't mean that if we were looking at the 
situation this year or next year with different market 
conditions that different result----
    Mr. Welch. My time is almost up. Thank you. But, you know, 
it sort of reinforces my concern about this demand that is 
created for corn for ethanol as opposed to food, because as 
many of my colleagues have pointed out, both sides of the 
aisle, it is having a real impact on food prices and certainly 
really wicked on these dairy farmers that are hanging on by 
their fingernails.
    Mr. Chairman, I really appreciate you having this hearing. 
I think both sides of the aisle here share some concerns about 
this policy. So thank you.
    Mr. Whitfield. Thank you, Mr. Welch.
    And I want to thank the witnesses. We appreciate your being 
with us. And I hope that everyone in the audience enjoyed it as 
much as we did. And we intend to have a couple more hearings on 
this as well.
    So that will conclude today's hearing. We will keep the 
record open for 10 days.
    And we look forward to working with all of you as we move 
forward.
    With that, the hearing is adjourned.
    [Whereupon, at 5:05 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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