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



 
   OVERVIEW OF THE RENEWABLE FUEL STANDARD: STAKEHOLDER 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

                               __________

                           JULY 23 & 24, 2013

                               __________

                           Serial No. 113-73


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov




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                    COMMITTEE ON ENERGY AND COMMERCE

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

                             C O N T E N T S

                              ----------                              

                             JULY 23, 2013

                                                                   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...........................................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   205

                               Witnesses

Jack N. Gerard, President and CEO, American Petroleum Institute..     8
    Prepared statement...........................................    10
Bob Dinneen, President and CEO, Renewable Fuels Association......    13
    Prepared statement...........................................    15
Charles T. Drevna, President, American Fuel & Petrochemical 
  Manufacturers..................................................    29
    Prepared statement...........................................    31
Michael McAdams, President, Advanced Biofuels Association........    59
    Prepared statement...........................................    61
    Answers to submitted questions...............................   206
Jeremy I. Martin, Senior Scientist, Clean Vehicles Program, Union 
  of Concerned Scientists........................................    67
    Prepared statement...........................................    69
    Answers to submitted questions...............................   209
Tom Buis, CEO, Growth Energy.....................................   120
    Prepared statement...........................................   123
Joseph H. Petrowski, CEO, The Cumberland Gulf Group, On Behalf of 
  Society of Independent Gasoline Marketers of America and 
  National Association of Convenience Stores.....................   143
    Prepared statement...........................................   145
Shane Karr, Vice President, Federal Government Affairs, The 
  Alliance of Automobile Manufacturers...........................   154
    Prepared statement...........................................   156
Todd J. Teske, Chairman and CEO, Briggs & Stratton Corporation...   164
    Prepared statement...........................................   166
Robert Darbelnet, President and CEO, AAA.........................   174
    Prepared statement...........................................   176
Joe Jobe, CEO, National Biodiesel Board..........................   184
    Prepared statement...........................................   186

                             JULY 24, 2013
                               Witnesses

Pam Johnson, President, National Corn Growers Association........   218
    Prepared statement...........................................   220
Bill Roenigk, Senior Vice President, National Chicken Council....   233
    Prepared statement...........................................   235
Ed Anderson, CEO, Wen-Gap, LLC, On Behalf of National Council of 
  Chain Restaurants..............................................   239
    Prepared statement...........................................   241
Chris Hurt, Professor, Department of Agricultural Economics, 
  Purdue University..............................................   245
    Prepared statement...........................................   247
Scott Faber, Vice President of Government Affairs, Environmental 
  Working Group..................................................   262
    Prepared statement...........................................   264

                           Submitted Material

Article entitled, ``Ethanol Fails to Lower Gas Prices, Study 
  Finds,'' in Scientific American, dated July 18, 2012, submitted 
  by Mr. Matheson................................................   289
Letter of July 22, 2013, from the American Motorcycle Association 
  to the subcommittee, submitted by Mr. Whitfield................   294
Letters of support from various Oregon organizations, submitted 
  by Mr. Whitfield...............................................   298
Letter of July 23, 2013, from the American Cleaning Institute to 
  the subcommittee, submitted by Mr. Whitfield...................   311
Statement of Biotechnology Industry Organization, submitted by 
  Mr. Whitfield..................................................   312
Statement of the Iowa Cattlemen's Association, submitted by Mr. 
  Braley.........................................................   315


OVERVIEW OF THE RENEWABLE FUEL STANDARD: STAKEHOLDER PERSPECTIVES, DAY 
                                   1

                              ----------                              


                         TUESDAY, JULY 23, 2013

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:45 a.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Scalise, Hall, Shimkus, 
Pitts, Terry, Burgess, Latta, Cassidy, Olson, McKinley, 
Gardner, Pompeo, Kinzinger, Griffith, Barton, Upton (ex 
officio), Rush, McNerney, Tonko, Engel, Green, Capps, Barrow, 
Christensen, Castor, 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 and Power; Tom Hassenboehler, Chief 
Counsel, Energy and Power; Ben Lieberman, Counsel, Energy and 
Power; Brandon Mooney, Professional Staff Member; Andrew 
Powaleny, Deputy Press Secretary; Chris Sarley, Policy 
Coordinator, Environment and Economy; Phil Barnett, Minority 
Staff Director; Patrick Donovan, Minority FCC Detailee; 
Kristina Friedman, Minority EPA Detailee; Bruce Ho, Minority 
Counsel; Ryan Skukowski, Minority Staff Assistant; 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. The hearing will come to order. I will 
recognize myself for a 5-minute opening statement.
    Today we have our second hearing entitled, ``Overview of 
the Renewable Fuel Standard: Stakeholder Perspectives,'' and we 
continue our assessment of the Renewable Fuel Standard. Over 
the course of this year, we have taken a comprehensive and 
deliberate approach working with both staffs on both sides of 
the aisle and members on both sides of the aisle to review the 
RFS, beginning with a series of bipartisan white papers that 
solicited input from interested stakeholders on major aspects 
of the program. The response has really been overwhelmingly 
helpful to the process, and I certainly want to thank everyone 
for participating and helping us deal with this issue.
    Our first hearing on the subject was on June 26. We focused 
at that time on the government agencies chiefly responsible for 
implementing the RFS. EPA, EIA, and USDA all agree that many 
things have changed since the RFS was last revised in 2007. For 
example, as you all know, we are using a lot less gasoline 
today than we did then, yet the RFS is still based on the 
assumptions of 2007 and not the realities of 2013. We know that 
the RIN prices are going up. We know that cellulosic ethanol 
production is simply not there at this time. And all three 
agencies at that hearing on the 26th of June agreed that there 
were RFS implementation issues that warranted attention, 
especially as we look to 2014. And we certainly need to pay 
attention to those issues.
    Today and tomorrow, we take another important step in the 
review process by hearing from 16 stakeholder witnesses 
offering a wide range of perspectives on the RFS. Refiners, 
renewable fuel producers, environmentalists, automakers, small 
engine makers, fuel retailers, corn growers, poultry raisers, 
restaurant owners, consumers, and others will all explain where 
we are today with the RFS. And we expect that after the hearing 
today, everyone will be on the same page.
    I am pleased to welcome as a part of our second panel today 
Todd Teske of Briggs & Stratton. That plant manufactures small 
engines, not only in my district in Kentucky but throughout the 
country.
    Today's first panel is going to focus on the impact of the 
RFS on fuel production, while the second will focus on fuel 
sales and use. And then we are having another hearing tomorrow 
and that panel will address the impacts on the agricultural 
sector and the food supply.
    Despite the differing points of views from which 
stakeholders come to this issue, it is my hope that with 
today's hearing, we can at least start the process of consensus 
building on a path forward for the RFS. This includes potential 
adjustments to the RFS that align the program with current 
energy realities. Many businesses and many jobs are at stake 
from corn farmer to refinery worker to gas station employee to 
lawnmower maker to ethanol plant worker. And just as important, 
the interests of consumers are directly impacted by the RFS. 
The end goal of this process is an RFS that works effectively 
and does not distort the market. And with that, at this time, I 
would like to recognize the gentleman from Illinois Mr. Rush 
for a 5-minute opening statement.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    This morning's hearing is entitled ``Overview of the 
Renewable Fuel Standard: Stakeholder Perspectives,'' and 
continues our committee's assessment of the RFS. Over the 
course of this year, we have taken a comprehensive and 
deliberate approach to reviewing the RFS, which began with a 
series of bipartisan white papers that solicited input from 
interested stakeholders on major aspects of the program. The 
response has been overwhelming and very helpful to the process, 
and I would like to thank everyone who participated.
    We conducted our initial hearing on June 26, which focused 
on the government agencies chiefly responsible for implementing 
the RFS. The EPA, EIA, and USDA all agreed that many things 
have changed since the RFS was last revised in 2007. For 
example, we are using considerably less gasoline today than we 
did then. Yet the RFS is still based on the assumptions of 2007 
and not the realities of 2013.
    And all three agencies agreed that there are RFS 
implementation issues that warrant serious attention, 
especially as we look to 2014. We need to pay attention to 
these warnings.
    Today and tomorrow, we take another important step in the 
review process by hearing from 16 stakeholder witnesses 
offering a wide range of perspectives on the RFS. Refiners, 
renewable fuel producers, environmentalists, automakers, small 
engine makers, fuel retailers, corn growers, poultry raisers, 
restaurant owners, consumers, and others will all explain where 
we are today with the RFS and what the future may hold.
    And I am pleased to welcome, as part of the second panel, 
Todd Teske of Briggs & Stratton which manufactures small 
engines back in my district.
    Today's first panel will focus on the impact of the RFS on 
fuel production, while the second will focus on fuel sales and 
use. And tomorrow's panel will address the impact on the 
agricultural sector and the food supply.
    Despite the differing points of view from which 
stakeholders come to this issue, it is my hope that with 
today's hearing we can start a process of consensus building on 
a path forward for the RFS. This includes potential adjustments 
to the RFS that align the program with current energy 
realities.
    Many businesses and many jobs are at stake--from corn 
farmer to refinery worker to gas station employee to lawnmower 
maker to ethanol plant worker. And, just as important, the 
interests of consumers are directly impacted by the RFS. The 
end goal of this process is an RFS that works as best as 
possible for everyone.

                                #  #  #

 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 timely and important hearing on the overview of the 
Renewable Fuel Standard, where we will have the opportunity to 
hear from various stakeholders representing many different 
sectors of the economy. Over the course of the past year, my 
office has attended dozens of meetings on this critical topic. 
And for stakeholders from my home State of Illinois, there are 
few energy issues as important as the matter of the RFS.
    Mr. Chairman, 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, including 
helping to reduce U.S. dependency on foreign oil, enhancing 
energy security, bolstering the agriculture 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 
standards while also helping to drive job creation and economic 
investment.
    For instance, Mr. Chairman, the RFS has played a key role 
in helping America's ethanol industry support 400,000 jobs 
nationwide, including 64,000 jobs in Illinois alone. And it has 
also resulted in over $40 billion in economic activity. 
Additionally, as the summer driving season reaches its peak and 
gas prices skyrocket at the pump, Chicagoans are paying among 
the highest prices in the country, averaging $4.11 for regular 
gas last week, which is up from $3.84 just a week before that. 
So, one of the questions I would like to learn today more 
about, Mr. Chairman, is, how does diversifying the Nation's 
fuel sources, as the RFS does, impact gasoline prices for 
consumers? I also look forward to having the various 
stakeholders discuss some of the important issues surrounding 
the RFS in a public and transparent setting where they will 
have the opportunity to respond and rebut other witnesses so 
that the members of this subcommittee may gain a better idea of 
what is, indeed, fact and what is just mere fiction in regards 
to this debate.
    Mr. Chairman, in meeting after meeting, my office has 
received a host of competing and, in many instances, 
contrasting information on the RFS, especially in the areas of 
the gasoline ethanol blend wall, the rate of advanced biofuels 
development, issues associated with the renewable 
identification numbers, and the impact of the RFS on 
agriculture and food prices.
    So I am pleased, Mr. Chairman, with the diversity of the 
panelists and the different industry sectors they represent 
because I believe this will help lead them to a robust and 
comprehensive debate. And hopefully, it will help members on 
both sides of the aisle come to a sensible resolution of this 
very, very important issue.
    Mr. Chairman, I look forward to the public hearing today, 
the one tomorrow where we can lay out all of the facts, 
including both the opportunity and the challenges to 
implementing the RFS as currently drafted. And it is my hope 
that we can work to find bipartisan common ground on this issue 
as it moves forward. I want to thank you, and I yield back the 
balance of my time.
    Mr. Whitfield. Thank you Mr. Rush.
    At this time, I recognize the gentleman from Michigan, Mr. 
Upton, chairman of the full committee 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. As authorizers, it is 
our job to review the policies that we establish overseas. And 
it is a job that certainly I take very seriously as chairman of 
this committee, as do our members on both sides of the aisle. 
And since this is the committee where the RFS originated, we 
have the responsibility to assess how it is working and if it 
can be improved. And today's hearing continues our bipartisan 
review of the RFS. And I want to thank Ranking Member Waxman 
for his collaboration in this process.
    Much has changed since the RFS was last revised in 2007, 
including the exciting new developments that have led to 
unexpected increases in domestic oil and natural gas 
production. And while I believe this committee should do all it 
can to facilitate the domestic gas and natural oil revolution, 
I also see a continued role for renewable fuels and other 
alternatives. Reviewing the RFS and how it fits into the 
changing energy mix is what we are doing today.
    We began our assessment with a series of bipartisan white 
papers that explored key RFS topics, including the 
compatibility of fuels with the existing infrastructure and 
vehicle fleet and the impacts on the agriculture sector and the 
environment. The stakeholder response has been as extensive as 
it has been substantive. And the range of viewpoints expressed 
demonstrates the far-reaching effects of the RFS. On June 26, 
this subcommittee held its first RFS hearing and invited the 
Federal agencies most directly responsible for implementing the 
RFS. The Energy Information Administration, the EPA, and the 
Department of Ag all made similar diagnoses, that there are 
real issues with RFS that may come to the surface in 2014. In 
other words, our review is very timely.
    Today we invite stakeholders to continue that discussion. I 
welcome all of it. And of course, I am particularly interested 
in hearing from the automakers, knowing its importance to the 
Midwest and my State of Michigan. Fuels and vehicles operate as 
a system, and we need an RFS that works well within that 
system, given the changing dynamics of the current CAFE 
compliance obligations.
    But let me cut to the chase. In my view, the current system 
cannot stand. I hope that we can start a discussion that 
considers a host of potential modification and updates to the 
RFS with the end goal being a system that works best for the 
American people. And to do that, we need everyone, everyone to 
come to the table with a commitment to listen and be 
constructive. I welcome every proposal, all proposals to 
improve this system and look forward to hearing those ideas 
from today's witnesses.
    I am especially looking forward to hearing what each 
stakeholder is willing to bring to the table to fix and improve 
the current system. I am absolutely committed to ensuring that 
we deliver workable reforms.
    I yield back to the chairman.
    [The prepared statement of Mr. Upton follows:]


                 Prepared statement of Hon. Fred Upton

    As authorizers, it is our job to review the policies we 
establish and oversee. It's a job I take very seriously as 
chairman of this committee, as do our members on both sides of 
the aisle. And since this is the committee where the Renewable 
Fuel Standard originated, we have the responsibility to assess 
how it is working and if it can be improved. Today's hearing 
continues our bipartisan review of the RFS, and I would like to 
thank ranking member Waxman for his collaboration in this 
process.
    Much has changed since the RFS was last revised in 2007, 
including the exciting new developments that have led to 
unexpected increases in domestic oil and natural gas 
production. And while I believe this committee should do all it 
can to facilitate this domestic oil and natural gas revolution, 
I also see a continued role for renewable fuels and other 
alternatives. Reviewing the RFS and how it fits into the 
changing energy mix is what we are doing today.
    We began our assessment with a series of bipartisan white 
papers that explored key RFS topics, including the 
compatibility of fuels with the existing infrastructure and 
vehicle fleet, and the impacts on the agricultural sector and 
the environment. The stakeholder response has been as extensive 
as it has been substantive. And the range of viewpoints 
expressed demonstrates the far-reaching effects of the RFS.
    On June 26th, this subcommittee held its first RFS hearing, 
and invited the federal agencies most directly responsible for 
implementing the RFS. The Energy Information Administration, 
Environmental Protection Agency, and Department of Agriculture 
all made a similar diagnosis--that there are some real issues 
with the RFS that may come to the surface in 2014. In other 
words, our review is timely.
    Today, we invite stakeholders to continue the discussion. I 
welcome all of them, and of course am particularly interested 
in hearing from the automakers. Fuels and vehicles operate as a 
system, and we need an RFS that works well within that system, 
given the changing dynamics of the current CAFE compliance 
obligations.
    In my view, the current system cannot stand. I hope we can 
start a discussion that considers a host of potential 
modifications and updates to the RFS, with the end goal being a 
system that works best for the American people. To do that, we 
need everyone to come to the table with a commitment to listen 
and to be constructive. I welcome all proposals to improve the 
system and look forward to hearing ideas from today's 
witnesses. I am especially looking forward to hearing what each 
stakeholder is willing to bring to the table to fix the current 
system. I am absolutely committed to ensuring we deliver 
workable reforms.

                                #  #  #

    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.
    Last year, Americans consumed our lowest amount of oil 
since 1996.
    This is good news for the climate and for families' 
pocketbooks. We are relying less on fossil fuels and are using 
those fuels more efficiently. Thanks to President Obama, we 
have vehicle standards that will continue to make our cars and 
trucks more efficient and less carbon polluting than ever 
before.
    These standards are saving Americans money at the pump, 
enhancing our energy security, boosting our economy, and 
cutting carbon pollution.
    Yet as long as our transportation system relies almost 
entirely on fossil fuels, we will continue to pollute and drive 
dangerous climate change. Transportation is the second largest 
source of carbon pollution in the U.S. Further improvements in 
fuel efficiency are critical but will not achieve the 80 
percent reduction in climate pollution that we need by 2050 to 
avoid catastrophic climate change.
    In my district, scientists at UCLA recently predicted that 
if we fail to reduce carbon pollution, southern California snow 
packs will fall 42 percent by mid century and by more than two-
thirds by the end of the century. This is an impending crisis 
for the 18 million Californians who rely on the snow melt for 
drinking water, agriculture, and other economic activities. And 
with our interconnected economy, even these effects aren't 
limited to California. Reduced production on California farms 
introduces uncertainty into our food supply and means we will 
pay more for our fruits and vegetables.
    In recent years, we have seen historic droughts, fires, 
floods, heat waves, and hurricanes. Climate change is hurting 
Americans across the country.
    As President Obama recently emphasized, we must build a 
21st century transportation system to address climate change. 
There are several ways that we can reduce carbon pollution in 
the transportation system. Fuel efficiency is one, but so are 
better land use planning and investments in public 
transportation options that lower costs and protect the 
environment. Hybrid vehicles and electric vehicles charged with 
electricity from renewable sources are also key parts of the 
solution.
    In today's hearing, we will look at another: low carbon 
biofuel, which are being developed under the Renewable Fuel 
Standard, or RFS. For some transportation sectors, including 
aviation and shipping, low carbon liquid fuels may be the only 
option to reduce carbon pollution besides efficiency. However, 
as we will also explore today, not all biofuels are low carbon, 
and our biofuels policy must be implemented thoughtfully to 
achieve climate benefits.
    Today's hearing is the subcommittee's second look at the 
RFS, which is one of the few laws adopted by Congress that 
explicitly and directly aims to reduce carbon pollution.
    Last month, we heard from EIA, EPA, and the Department of 
Agriculture that the RFS has helped launch an entirely new 
advanced biofuels industry that has the potential to offer real 
climate benefits and grow our economy. But we also heard that 
development of this industry has taken longer than Congress had 
originally hoped and that other challenges have arisen, 
including the gasoline ethanol blend wall, which may be around 
the corner. And I look forward to hearing from our stakeholder 
witnesses today and tomorrow on these and other issues.
    In addition to these hearings, over the last few months, 
Chairman Upton and I have released a series of bipartisan white 
papers discussing the RFS and soliciting public comments on the 
law. This process has been helpful, and I appreciate the 
majority's efforts to work with the Democrats so that we can 
all better understand these issues.
    The RFS has serious issues, and I welcome the opportunity 
to take a careful look at this policy through the white papers 
and through these hearings.
    And as we move forward, we should continue to evaluate how 
the RFS could better contribute to a low carbon transportation 
system that benefits both our environment and our economy. As 
we consider any changes to the policy, we should ensure that 
the law's climate benefits are preserved and strengthened.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you, Mr. Waxman.
    And that concludes the opening statements for the day.
    So, at this time, I would like to introduce our witnesses 
on the first panel. First of all, I want to tell you, we 
appreciate you getting your testimony to us. We read the 
testimony. We appreciate you taking the time to give us your 
expertise on this very important issue. And our witnesses are 
Mr. Jack Gerard, who is the president and CEO of the American 
Petroleum Institute. We have Mr. Bob Dinneen, who is the 
president and CEO of Renewable Fuels Association. We have Mr. 
Charles Drevna, who is the president of the American Fuel & 
Petrochemical Manufacturers. We have Mr. Michael McAdams, who 
is the president of the Advanced Biofuels Association. And we 
have Dr. Jeremy Martin, senior scientist at the Clean Vehicles 
Program at the Union of Concerned Scientists.
    So thank you for being with us. Each one of you will be 
recognized for 5 minutes for an opening statement. And at the 
end of that time, then we will have questions for you.

   STATEMENTS OF JACK N. GERARD, PRESIDENT AND CEO, AMERICAN 
PETROLEUM INSTITUTE; BOB DINNEEN, PRESIDENT AND CEO, RENEWABLE 
FUELS ASSOCIATION; CHARLES T. DREVNA, PRESIDENT, AMERICAN FUEL 
  & PETROCHEMICAL MANUFACTURERS; MICHAEL MCADAMS, PRESIDENT, 
  ADVANCED BIOFUELS ASSOCIATION; AND JEREMY I. MARTIN, SENIOR 
     SCIENTIST, CLEAN VEHICLES PROGRAM, UNION OF CONCERNED 
                           SCIENTISTS

    Mr. Whitfield. So, Mr. Gerard, you are recognized for 5 
minutes.

                  STATEMENT OF JACK N. GERARD

    Mr. Gerard. Great.
    Thank you, Chairman Whitfield and Ranking Member Rush and 
Chairman Upton and Ranking Member Waxman. We appreciate the 
opportunity as API to testify today to express our concerns 
with the renewable fuels standard. API represents all sector of 
America's oil and natural gas industry. We support 9.2 million 
American jobs, 7.7 percent of the U.S. economy. We deliver more 
than $86 million a day to the Federal Government. And we are 
responsible for delivering most of the energy that drives our 
economy, a responsibility that we take very seriously, which is 
why we are extremely concerned about the risk the RFS poses to 
our economy and to millions of consumers.
    In 2007, when Congress created the RFS, the energy market 
and our Nation's energy landscape were very different than they 
are today. The RFS was designed to reduce greenhouse gas 
emissions, make our Nation more energy secure and provide a 
reliable domestic source of energy that would lessen energy 
imports from less stable regions around the world.
    Today we are much closer to achieving these important 
goals. Unfortunately, it is not because of the RFS. It is 
because of the oil and natural gas industry's technological 
advancements and vastly expanded energy resources. The 21st 
century energy renaissance has driven our Nation's 
CO2 emissions near a 20-year low, made us the number 
one producer of clean-burning natural gas, and put us on a 
track to become the world's largest oil producer in 7 short 
years. Put simply, the RFS, while well intentioned, is today 
completely untethered from reality and unless it is immediately 
halted will unnecessarily cost our economy and consumers 
billions of dollars.
    In fact, the RFS and its requirements are already beginning 
to drive up energy production costs. The best example is the 
price volatility in the renewable identification number or 
RINs, which refiners must obtain when blending renewable fuels 
into gasoline and diesel. RINs are becoming increasingly scarce 
through the impending E10 blend wall, which is the point at 
which the RFS mandate exceeds the safe limit of ethanol in 
America's fuel supply. These higher ethanol volumes in 
America's fuel supply would void millions of car warranties.
    Today, RIN prices are near an all-time high which, 
according to an editorial in Saturday's Wall Street Journal, 
translates into a 10 cent per gallon ethanol tax on consumers 
at a total cost of $14 billion to our economy. Other experts, 
such as the Energy Policy Research Foundation, EPRINC, 
estimates the program could increase the price of gasoline from 
20 cents per gallon to as much as $1 per gallon as early as 
next year. Further, according to a study conducted by NERA 
Economic Consulting, exceeding the blend wall could result in 
diesel fuel costs rising as much as 300 percent and a 30 
percent increase in gasoline cost by 2015. In broad economic 
terms, the RFS could cause a $770 billion decrease in U.S. GDP 
by 2015 and would reduce take-home pay for American workers by 
$580 billion.
    And in an ``only in Washington'' turn of events, the RFS 
also mandates the use of a fuel that simply doesn't exist. 
Currently, the amount of commercially available advanced 
cellulosic biofuels in the market doesn't come close to meeting 
the arbitrary requirements of the RFS. In other words, RFS 
mandates the use of phantom fuel that could cost American 
consumers millions.
    All of which leads to the inescapable fact, the RFS isn't 
just a relic of America's bygone era of energy scarcity. It is 
a grave economic threat and in our view should be stopped 
immediately. The real tragedy is that this can all be prevented 
and can be prevented right now.
    To that end, we again call on the administration to 
immediately waive down the volume requirements to below 10 
percent for 2013 and 2014 and for Congress to finally repeal 
this fundamentally broken law. Because the stakes are simply 
too high for inaction, which could cost consumers millions of 
dollars, place at risk small engines and automobiles, and 
ultimately cause severe damage to our domestic economy. Thank 
you for your time and attention today. And I look forward to 
answering your questions.

    Mr. Whitfield. Thank you, Mr. Gerard.

    [The prepared statement of Mr. Gerard follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. Mr. Dinneen, you are now recognized for 5 
minutes.

                    STATEMENT OF BOB DINNEEN

    Mr. Dinneen. Thank you, Mr. Chairman.
    Thank you Chairman Upton, Ranking Member Rush and Ranking 
Member Waxman.
    This is an important and timely hearing. And I want to 
thank you for having a balanced approach, not just with the 
hearing but with the white papers as well. This has been a 
process that has allowed all stakeholders an opportunity to get 
their views across, and we appreciate it.
    By virtually any measure, the RFS has been an unmitigated 
success. It has reduced our dependence on imported petroleum, 
stimulated investment in new technologies, reduced consumer 
gasoline prices, created jobs and economic opportunity across 
rural America, saved taxpayers' dollars by lowering foreign 
program payments, and is the only program we have that lowers 
greenhouse gas emissions.
    My written testimony and the RFA's responses to the 
committee's white papers describe many of the benefits of the 
RFS. Let me focus on one, the success of the RFS in enhancing 
energy security.
    Slide one, please.
    U.S. dependence on imported oil has fallen since the RFS 
was enacted, from 60 percent in 2005 to 40 percent today. But 
it is important to note that this measure includes net imports 
of both crude oil and all other petroleum products. If just 
crude oil is considered, import dependence was 57 percent in 
2012, meaning that the most significant reduction has been in 
petroleum products that is finished gasoline. That is the RFS 
at work. That is ethanol.
    Now Mr. Gerard suggests that our dependence on imported oil 
has fallen because of oil. And indeed, we are fracking more and 
producing more. But 62 percent of the new energy production 
since 2005 has been ethanol, 38 percent oil. It is ethanol that 
has driven that number down. Now my friends in the oil industry 
want you to repeal the RFS and have pointed to the blend wall 
as a major reason they can't meet the RFS obligation.
    So let's take a look at the blend wall.
    Slide two, please.
    The green bar is the RFS requirement. The 13.8 billion 
gallons of corn ethanol that has to be blended this year. We 
will sell close to 13.4 billion gallons of ethanol into E10 
markets, meeting the obligation for 133 billion gallons of 
fuel. We will also sell more than 150 million gallons of 
ethanol for E85 for flex-fuel vehicles, meaning that there is 
just 280 million gallons of gasoline above the blend wall. That 
is what the fuss is about.
    The requirement above the blend wall this year represents 
less than 0.2 of 1 percent of the U.S. Gasoline market. The 
3,000-plus E85 retail outlets in operation today would only 
need to sell an average of 15,000 gallons per month to scale 
the 2013 blend wall. With ethanol prices today about 60 cents 
less than gasoline, E85 sales are spiking. And some stations 
are reporting E85 sales close to 50,000 gallons a month. And 
with almost 16 million FFBs on the road today, there is enough 
potential E85 demand for 8 billion gallons of E85. What blend 
wall? All we need is market access for E85, E15, and other 
blends, access that is being denied today by an incumbent 
industry intent upon holding onto its monopoly.
    Well, they say ethanol, the RFS and RINs are driving up the 
price of gasoline. No.
    Slide three.
    Again, ethanol is less expensive than gasoline. The RFS is 
saving consumers at the pump. And there is absolutely no 
correlation between retail gas prices and ethanol RIN prices. 
RINs are free. Let me repeat. RINs are free. Ethanol producers 
are required to give RINs to refiners and gasoline marketers 
when they purchase a gallon of ethanol. Buy a gallon of 
ethanol, get a RIN for free. There is a rather thinly traded 
and opaque market for RINs as oil companies trade them amongst 
themselves. But if they don't like the price, they can always 
blend more ethanol and get more free RINs. They don't have to 
short the U.S. gasoline market. And if they do, shame on them.
    There is no truth to the notion that ethanol and the RFS 
are driving up food prices.
    Slide four.
    In fact, food prices have actually fallen as the RFS has 
been implemented, with the lowest food price inflation in the 
past 50 years, 1 percent occurring in 2010. There is no 
correlation between food prices and growing ethanol production.
    So what is driving food prices? It is the skyrocketing 
price of oil, of course.
    Slide five.
    Now there is a near perfect correlation. When oil prices 
spiked to $140 a barrel in 2008, so, too, did food prices. 
Energy drives the cost of all food items at the grocery store 
because of transportation, refrigeration, production, and 
marketing. That is why the RFS is so important. It is the only 
policy we have to moderate gasoline prices at the pump. 
Congress did an excellent job crafting the RFS, building in a 
great deal of administrative and market flexibility to deal 
with the issues as they arrive. As a result, there is nothing 
wrong with the RFS that can't be fixed with what is right with 
the RFS. And there is no need to legislate changes to a program 
that is working as designed, even if the incumbent industry 
bristles at losing market share. Thank you.

    Mr. Whitfield. Thank you, Mr. Dinneen.

    [The prepared statement of Mr. Dinneen follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. And Mr. Drevna, you are now recognized for a 
5 minutes opening statement.

                 STATEMENT OF CHARLES T. DREVNA

    Mr. Drevna. Thank you Chairman Whitfield, Ranking Member 
Rush, Chairman Upton, and Ranking Member Waxman of the full 
committee.
    In 2007, Congress enacted energy legislation which in 
essence delivered a contract with the American people that 
promised significant steps toward energy independence and 
national security and added environmental protections. A major 
component of that contract known as the RFS called for massive 
amounts of renewable fuels to be blended into the Nation's 
transportation fuel supply.
    In 2013, we now know that the RFS is a program based upon 
erroneous market assumptions, obstacles that prevent the safe 
consumption of ethanol at increasing mandated levels, and many 
other unintended negative consequences. These critical flaws in 
combination with the resurgence of domestic energy production 
have led us to one unquestionable conclusion. It is now 
abundantly clear that the RFS has systemic problems that 
Congress must address immediately and decisively to avoid 
severe economic harm to individual consumers and to our 
Nation's economy. Ironically in a free market, as opposed to a 
mandated market, which somehow we have a monopoly on, consumer 
choice and economics would drive the safe and efficient 
introduction of biofuels.
    However, mandates are not the free market, and the reality 
is the RFS will raise prices for virtually all consumer goods, 
possibly leading to a consumer backlash against renewables 
generally, just not the mandate. We believe this is not the 
result Congress wants to achieve. So, in short, Congress should 
declare the contract with the American people vis-a-vis the RFS 
null and void and repeal the RFS. The flaws of the RFS are 
numerous, and they are here now.
    First, perhaps the most pressing issue this year is the 
onset of the E10 blend wall. As opposed to previous statements, 
the E10 blend wall represents the maximum amount of ethanol 
that can be blended safely into existing infrastructure without 
damaging both vehicle and other engines. U.S. consumers are 
projected to use about 133 billion gallons of gasoline this 
year, meaning the E10 blend wall is at 13.3 billion gallons. 
The RFS requires 13.8 billion gallons of corn ethanol alone. As 
outlined in detail in my written statement, E15 and E85, in 
spite of dramatic protestations, are not viable due to vehicle 
infrastructure incompatibility and more importantly or just as 
importantly the lack of consumer acceptance.
    Complicating matters further, refiners are not the entities 
actually blending the ethanol into the fuel, meaning the 
refiner must go into the open market to purchase a compliance 
credit, known as a RIN, so when you purchase something, it is 
not free. When the fuel supply contains a maximum amount of 
fuel it can handle, no more RINs can be generated for the 
refiners to achieve compliance. When refiners are unable to 
purchase sufficient RINs for compliance, they are left with 
only bad options, which force them to reduce the fuel supply to 
the U.S. market.
    Likewise, importers of gasoline also look elsewhere to 
market their products. These economic consequences, also 
detailed in my written testimony, could be staggering. 
Meanwhile, the harmful impacts of the approaching blend wall 
have already begun. One example is the dramatic increase in the 
market price of ethanol RINs. Prior to the onset of the blend 
wall, RINs traded at 4 to 7 cents. However, as the market 
anticipates the scarcity, RIN prices rose to as much as $1.48 
just last week. A refiner that purchases all of its RINs now 
faces an implied 15 cent per gallon premium to sell fuel in the 
United States.
    Trade press is already reporting that importers are turning 
to gasoline imports to other countries to avoid this RIN tax. 
Much of my time has been spent talking about the impact of the 
blend wall. By doing so, I do not want to underemphasize the 
other negative impacts, including that on food and feed supply. 
And as we also know, from EPA's own data, the RFS is actually 
undermining its environmental goals. There are many additional 
problems created by the RFS, which are detailed in my written 
statement. Before concluding, however, let me be clear, AFPM is 
not anti-ethanol or anti-biofuels. Both can and will play a 
significant role in the fuel mix. But they must be safely 
integrated into the fuel supply and accepted by consumers. AFPM 
does oppose mandates and subsidies because they limit consumer 
choice, stifle innovation, and in the case of the RFS, are 
ultimately harmful to the consumer. In short, this unworkable 
law should be repealed. Thank you for your attention, and I 
look forward to fielding any questions you may have.
    Mr. Whitfield. Thank you, Mr. Drevna.

    [The prepared statement of Mr. Drevna follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. And Mr. McAdams you are recognized for 5 
minutes.

                  STATEMENT OF MICHAEL MCADAMS

    Mr. McAdams. Thank you, Mr. Chairman, Chairman Upton, 
Ranking Minority Rush, Ranking Minority Member Waxman, and 
members of the committee. It is an honor to be with you today 
on behalf of the Advanced Biofuels Association.
    The Advanced Biofuels Association represents more than 40 
of the leading technology innovators in the advanced and 
cellulosic biofuels space as well as a number of the 
agriculture biomass to energy feedstock producers. In the past 
3 months, the Advanced Biofuels Association has responded to 
four of your white papers and is currently preparing a fifth. 
We congratulate the committee and your staff for this 
bipartisan, thoughtful, and substantive approach. Given that 
ABFA has provided the committee detailed answers on the RFS, I 
would like to take a step back this morning and try to 
accomplish three things.
    First, I would like to set a context around the RFS. 
Second, I would like to call the impacts of the debate into 
focus. And lastly, I would like to offer a solution set for 
your consideration. Congress expanded the RFS to stimulate an 
advance in cellulosic biofuels industry to encourage larger 
greenhouse gas reductions and to develop more energy dense 
drop-in fuels. Many of these new advanced biofuels are 
hydrocarbons, and they are compatible with the existing 
pipelines, refineries, planes, trains, and automobiles. ABF 
members are delivering on that vision today. Today's hearing is 
largely about concerns surrounding the blend wall. Simply 
stated, it is the mismatch between the number of gallons of 
gasoline the U.S. market is demanding and the number of gallons 
of ethanol the RFS calls to be mixed into that gasoline.
    With a 10 percent limit on the ethanol to gasoline ratio, 
there is a mismatch this year of roughly 500 million gallons. 
However, the RIN bank carryover provisions in the law allow the 
RINs from 2012 to meet the proposed targets in 2013. And they 
are enough this year to easily achieve the proposed mandate. 
The RIN market makers, however, they question whether this will 
be the case in 2014 and 2015. This year, the United States of 
America will use 213 billion gallons of fuel. And of that, 
about 15 billion gallons will be renewable fuel. The 500 
million gallon mismatch represents 1/30th or 3.3 percent of the 
entire production of renewable fuels in the United States and 
0.2 percent of 1 percent of the amount of fuel we use in 
America.
    Additionally, much has been made about the shortfall of the 
cellulosic gallons. I would argue that the recent court case 
that my colleagues on the panel here were victorious in has 
adequately addressed the phantom fuel issue. And this year, we 
will see significant gallons in the cellulosic pool, which 
began to be placed on the EMTS system last month. Calling for 
the full repeal of the RFS over a short-term issue impacting 
less than 1 percent of all the fuels we use in America doesn't 
make a lot of sense as a public policy solution.
    For ABFA's members, the debate over repealing the RFS is 
having a chilling impact on the investment community and is 
restraining the growth and ability of our members to move 
forward. Despite this, many of them are making real gallons of 
cellulosic gasoline and diesel today as well as renewable 
diesel and other RFS approved fuels. In the last 6 years, U.S. 
businesses in the private sector have spent $14.72 billion in 
pursuit of the policy goal you collectively laid down in this 
committee. According to Bloomberg New Energy Finance, $33 
billion has been invested worldwide in this sector. That means 
we are almost half of the world's investment.
    These numbers represent people and jobs all over America, 
jobs in rural America planting and cultivating the best new 
energy crops, jobs building and operating biorefineries, 
technology and engineering jobs and laboratory jobs researching 
new feedstocks and enzymes and many more. To repeal the RFS 
would pull the rug right out from under them and change the 
rules in the first half of the game. This confusing policy 
signal is a benefit to the incumbent players in the fuels 
market and is a significant disadvantage to those trying to 
finance and build new innovative technologies.
    A potential short-term solution can be found in EPA. When 
Congress passed the RFS II in 2007, it provided EPA with 
significant flexibility and authority to address issues which 
could arise from hurricanes, droughts, and unforeseen economic 
factors. Much of what is difficult about the RFS today is the 
uncertainty surrounding the obligations on a yearly basis. ABFA 
and others on this panel and panels after this one have called 
for EPA to release the renewable volumes obligations for 2013 
and 2014 as quickly as possible. Providing an additional year 
of clarity with a framework for the 2015 RDOs would help 
rapidly diffuse much of the economic pressure those of us on 
this side of the table are feeling.
    The committee should encourage EPA to explore a combined 
2014-2015 framework. A clear signal from EPA given to the 
stakeholders in advance would be a huge step forward in 
adjusting EPA's procedure to help all the markets work more 
smoothly. Thank you for the opportunity to testify with you 
today. And I look forward to your questions.
    Mr. Whitfield. Thank you, Mr. McAdams.
    [The prepared statement of Mr. McAdams follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. And Dr. Martin, you are recognized for 5 
minutes.

                 STATEMENT OF JEREMY I. MARTIN

    Mr. Martin. Thank you very much, Chairman Whitfield, 
Ranking Member Rush, Chairman Upton, Ranking Member Waxman, and 
members of the subcommittee.
    Thank you for the opportunity to testify about the 
Renewable Fuel Standard. My name is Jeremy Martin. I am a 
senior scientist working on biofuels policy at the Union of 
Concerned Scientists. USC is the Nation's leading science-based 
nonprofit, putting rigorous independent science to work to 
solve our most pressing problems. I have been asked to address 
the environmental impacts of the RFS. But we need to start with 
the challenge the RFS was designed to address, cutting U.S. oil 
use.
    Despite increased domestic production and new 
unconventional oil resources, the problems caused by our oil 
use continues to mount. Oil prices remain high and unstable. 
Oil-producing regions remain critical security threats. Oil 
spills continue, as do extreme weather events made more 
damaging by climate change. The need to reduce oil use remains 
just as important today as it was 5 years ago. The RFS is an 
oil saving policy based on smart goals, not just more biofuels 
but better biofuels and biofuels that go beyond food. The RFS 
supports increased domestic production of clean, low carbon 
biofuels.
    Together with improved efficiency, electric vehicles, and 
other innovative technologies, biofuels can cut our projected 
oil use in half over the next 20 years and reduce the problems 
oil use causes to our economy, to our security, and to our 
climate. But despite having smart goals, neither the RFS nor 
its implementation to date have been perfect, and there are 
significant challenges that need to be addressed.
    The rapid expansion of food-based biofuels over the last 
few years is unsustainable. It is putting pressure on other 
users of corn, affecting global food markets, increasing water 
pollution caused by corn farming, and accelerating 
deforestation.
    In contrast to the problems of the food-based fuels, the 
opportunities to expand production of cellulosic biofuels are 
substantial. Based on our analysis, the $16 billion target for 
cellulosic biofuels in the RFS is definitely achievable. And 
because cellulosic biofuels have low fossil fuel inputs and low 
lifecycle emissions, the potential greenhouse gas mitigation is 
large. But while the resources to make cellulosic biofuels are 
substantial, converting them into clean fuel requires a massive 
scale-up of biorefineries. The first commercial scale 
cellulosic biorefineries are starting up now in Florida and 
Mississippi. Several more are under construction in Iowa and 
Kansas. And this is a major milestone. And it wouldn't happen 
without the RFS.
    But clearly, it is behind the schedule laid out in 2007. It 
will take time to scale up a new fuel industry, as it did for 
both the oil and corn ethanol industries. However, the mismatch 
between the schedule laid out in 2007 and the actual scale up 
creates some ambiguity about the road ahead which needs to be 
thoughtfully resolved. Fortunately, the RFS was designed with a 
great deal of flexibility, especially with regard to the second 
phase of the policy that shifts from food-based fuels to 
nonfood-based cellulosic biofuels. Many critical analyses of 
the RFS are based on an assumption that the EPA will ignore 
this flexibility, ignore the flexibility that Congress provided 
them and will expand mandates from just over 15 billion gallons 
in 2012 to 20 in 2015 and 36 in 2022.
    But this assumption defies common sense. EPA has a clear 
authority to cut the rate of mandate growth in half between now 
and 2015 and to reduce the 2022 target from 20 billion gallons 
to what--from 36 billion gallons to 20 billion, plus whatever 
quantity cellulosic biofuels produce. Adopting a more gradual 
approach will substantially reduce the challenges facing RFS 
implementation in coming years. I have provided more detail on 
our advice in this regard in comments to the EPA and in my 
written testimony. EPA needs to seize this opportunity and 
reset expectations for the next phase of the policy from now 
until 2022 and develop a roadmap that delivers on the important 
goals of the RFS but is realistic about the competing uses of 
agricultural commodities and the rate at which cellulosic 
production can scale up and the constraints in our vehicle and 
fueling infrastructure. But making legislative changes to the 
Renewable Fuel Standard at this time would not reverse the 
problems caused by the rapid scale up of corn ethanol over the 
last 10 years. Instead, it would lock in place the status quo 
of 90 percent gasoline and 10 percent corn ethanol and chill 
investments in cellulosic biofuels, just as the first 
commercial facilities are starting up.
    For this reason, we do not support legislative changes and 
suggest that making course corrections through an 
administrative process will do more to realize the oil savings 
and refinement goals of the RFS.
    We are not moving forward as fast as we hoped to be in 
2007. But the RFS is still pointing us in the right direction. 
To keep moving forward, we need to provide the regulatory 
stability that will protect early investments in the advanced 
biofuels industry and support further investment to bring the 
technology to larger scale.
    Thank you again for the opportunity to be here today. I 
would like to request that the USC reports that I alluded to on 
biomass resources and the comments we submitted to EPA on the 
2013 rulemaking be submitted for the record. And I look forward 
to any questions that you may have.
    Mr. Whitfield. Without objection, they will be entered into 
the record. \*\
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    Mr. Martin. Thank you.

    [The prepared statement of Mr. Martin follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. I thank you all very much for your 
testimony. At this time, I recognize myself for 5 minutes.
    As I am sure all of you know, the American Petroleum 
Institute filed a lawsuit in Federal court against the EPA on 
the 2012 cellulosic number mandate.
    And, Mr. Gerard, you all won that lawsuit. Is there anyone 
on the panel that would disagree with the principle that if EPA 
sets a mandated number for, like, cellulosic ethanol, and it 
cannot be produced, that refiners should be forced to buy the 
RINs anyway? Do any of you disagree with what the API did in 
that situation? In following the lawsuit.
    Mr. McAdams. Mr. Chairman, I would say that the lawsuit was 
very specific in the way the opinion was written. What the 
lawsuit specifically said, which Mr. Gerard and Mr. Drevna 
should have enjoyed hearing, was specifically EPA could no 
longer put its thumb on the scale. And so to the extent anyone 
could make the assertion previously that what EPA was trying to 
do was stimulate our industry, by driving a number that was 
unrealistic, that lawsuit makes it directly clear that they can 
no longer do that. In terms of talking to the folks that run 
the program at EPA last night, I am confident that what we will 
see is a revision in the 2013 cellulosic number which takes 
into account the court direction to more closely align what the 
actual number is with the actual gallons that would be made.
    Mr. Whitfield. And all of you would certainly agree with 
that principle, I am assuming.
    Mr. Drevna?
    Mr. Drevna. Chairman Whitfield, we absolutely agree. 
However, we have to look at what the reality is as compared to 
the rhetoric. EIA projects by 2022, that there will be 0.5 
billion gallons of cellulosic. Mr. Chairman, with all due 
respect, I have been sitting in these hearings on both sides of 
the of Congress since February of 2008, short 2 months after 
this bill was passed. And I have been hearing for 7 years now 
that cellulosic ethanol is just around the corner and all we 
need is another mandate and people will invest. Well, people 
will invest. But you know if the technology doesn't work, it 
doesn't work.
    Mr. Gerard. Mr. Chairman, I would just add, part of the 
dysfunction of this particular statute is that within a week or 
10 days after we prevailed in that lawsuit, the EPA came out 
with their renewable volume requirement for 2013 and added back 
a number higher than the one they had the previous year that we 
prevailed on in the lawsuit. Now if you are concerned about 
what the market is seeing out there, again, the judge said, You 
can't put your hand on the scale, as Mr. McAdams said. But the 
EPA immediately turned around and raised it from 8 million to 
over 11 million. And once again, there is not that in the 
market. Our expectation, our understanding to date is we have 
got about 5,000 gallons so far this year. We are halfway 
through the year. And the mandate in the statute is a billion. 
They narrowed that down to about 11 to 14, depending upon how 
you interpret that. But once again, the market sees this as no 
action being taken. That is why this is so important on the 
part of this committee and the EPA. They send a signal to the 
market, you are going to correct this problem.
    Mr. Dinneen. Mr. Chairman, if I could, two quick points. 
One, this actually demonstrates that there is incredible 
flexibility within the program, within the statute for EPA to 
do the right thing. They have reduced the cellulosic number 
more than 98 percent in each of the 3 years that the RFS has 
been in place with the cellulosic requirement. That is because 
of the flexibility that this Congress, this committee gave to 
the agency to do the right thing.
    Now the court said, You can't be aspirational. And we all 
agree with that. They all ought not have their thumb on the 
scale. But they do need to be accurate with how much cellulosic 
and other advanced biofuels are going to be produced.
    And that is my second point. The fact of the matter is 
cellulose and advanced biofuels are here today. If you wouldn't 
mind, I would like to introduce into the record a pamphlet that 
was put together by the Advanced Ethanol Council that 
demonstrates exactly where cellulosic investments are being 
made today.
    Mr. Whitfield. Without objection. \*\
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    Mr. Dinneen. And you do have commercial sized facilities 
being built in Kansas in Florida, in California, all across the 
country. And if we pull the rug out from under these facilities 
today, none of that investment moves forward. And my friends on 
either side of me get what they want, and that is a continued 
stranglehold on the U.S. gasoline marketplace.
    Mr. Whitfield. Dr. Martin, do you all have any figure in 
mind for cellulosic production in the future? Right now, total 
gasoline is about 213 billion. I mean, do you all have a number 
you are looking at?
    Mr. Martin. Well, certainly in terms of--I mean, we have 
been looking at the impacts of the different choices more 
broadly. And I would say what we have learned over the last few 
years is that impacts on the underlying feedstocks, on whether 
it is corn or vegetable oil or biomass, it is important. And 
there is plenty of biomass to meet the 16 billion gallon 
target. I think it is clear that that is not going to happen in 
2022. And it is likely to take us closer to 2030. The date that 
that happens is not an external factor. It depends a great deal 
on the policies that are set here, which will determine how 
quickly people make investments and what that date is finally.
    Mr. Whitfield. Thank you very much.
    Mr. Rush you are recognized for 5 minutes.
    Mr. Rush. Thank you, Mr. Chairman.
    I have a question that I would like to have all of the 
panelists respond to. I would like you to be brief in your 
response. I only have 5 minutes. I need some initial questions 
to be answered.
    The U.S. has globally compared electricity prices in large 
part because we have diverse fuel choices--nuclear, coal, gas, 
wind, solar, hydro, geothermal, and biomass all used to 
generate power. However, in the area of transportation, we are 
almost entirely reliant on petroleum. What more diversity in 
the transportation fuel sources such as renewable fuels also 
provide consumers and the economy more protection from price 
shocks?
    I will start with you, Mr. Gerard. Please be brief.
    Mr. Gerard. OK. I will. Thank you very much for the 
question.
    In the broader context, diversity is good. We see that 
natural gas has become a major player in electricity 
generation, as you know, in helping drive down the carbon 
emissions in this country. The important thing to remember 
though and the thing we will emphasize here is you have to look 
at the costs related to consumers. We have been using gasoline 
for many years in this country. It is affordable, reliable in 
the context competing other fuels. So diversity is good. But 
always look at it in the context of what it actually costs the 
consumer.
    Mr. Rush. Mr. Dinneen.
    Mr. Dinneen. I absolutely agree with the premise. I think 
diversity is critical to driving down cost. I would suggest 
that my friends in the oil industry believe diversity means we 
get oil both from the Gulf of Mexico and the Baakens. But that 
is not diversity. And that is not going to help consumer 
gasoline costs. In fact, if gasoline or oil were to fall below 
$90 a barrel, none of those investments in the Baakens make any 
sense economically. So the only way you are going to help 
consumers and drive down the cost of gasoline is with domestic 
renewable alternatives and renewables.
    Mr. Rush. Mr. Drevna.
    Mr. Drevna. I will agree that we can have a diversified 
fuel supply, but a couple items, Mr. Ranking Member.
    One, the oil and refining industry does not control the 
transportation infrastructure to get the product to the 
consumer; 95 percent of those service stations are owned by 
private individuals.
    Number two, the idea that we--that the refiners and those 
relying--you know, producing a product that is efficient, 
reliable and abundant to the American consumer is somehow 
detrimental to the economy boggles my mind.
    Number three, when the cable industry looked around and saw 
there were only three options for television viewers, they 
bellied up to the bar, they invested lots of money, and right 
now, over 60 percent of the households in this country have 
cable TV.
    I ask my colleagues to the left and right of me, if it is 
so good, invest. You don't need a mandate.
    Mr. Rush. Thank you.
    Mr. McAdams.
    Mr. McAdams. I agree with your assertion, Congressman.
    Mr. Rush. All right.
    Mr. Martin. I think the best way to protect the consumers 
from the price of oil and gasoline is to use less, and biofuels 
are a part of the diverse set of strategies to accomplish that, 
and, of course, there is a great diversity of biofuels that 
contribute to that.
    Mr. Rush. Thank you, Dr. Martin.
    And you get an A for the diverseness of your answer, and 
because you were so great, I want to give you another question.
    Mr. Martin. Wonderful.
    Mr. Rush. In your testimony, you acknowledged the RFS is 
not perfect. Is it your opinion that EPA has the tools and the 
authority to deal with challenges as they arise, or does the 
Congress need to actually modify the law?
    Mr. Martin. After having studied this at some length, it is 
my belief that the EPA has the tools it needs in the statute as 
it is written to address the immediate challenges and to set a 
long-term path. I think it is important that EPA be aggressive 
about demonstrating its intention to use that flexibility and 
in convening a stakeholder process. And I agree with Mr. 
McAdams that not just doing one year at a time, but really 
looking further down the road and laying out how these 
decisions will be made over a multi-year time frame will 
provide all the players the support, the certainty and the 
anticipation they need to make smart investments.
    Mr. Rush. Well, I thank you, Mr. Chairman. I have 10 
seconds left, and I want to reserve my 10 seconds.
    Mr. Whitfield. The gentleman reserves his 10 seconds.
    At this time, I recognize the gentleman from Louisiana, Mr. 
Scalise, for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman.
    I appreciate you having this important hearing and all of 
our panelists, both the first and second panel that are going 
to be testifying, because there are a lot of important 
components of the RFS that need to be brought to light, and 
consumers are starting to have a lot of serious questions, as 
they should. I think when you look at the assumptions that were 
made back in 2007, many of those predictions didn't come true 
and we are starting to see the problems that that creates.
    One of the reasons that I support full repeal of the RFS is 
because, number one, it is not workable. And we have had many 
hearings, including people within the Obama administration, 
EPA, EIA, USDA and others that talk about all of the problems 
that are coming both near term and long-term, and so when you 
look at these problems, they are very real problems, you can't 
just gloss over it, but when you look at the fuel projections 
alone, the usage is down and the revolution that some of you 
have talked about that has brought so many more forms of 
American energy to market to bear have not been recognized.
    And so I want to start off, if I may, when you look at Mr. 
Gerard and Mr. Dinneen and Mr. Drevna on the panel and hearing 
each of you, very, very conflicting testimonies that have been 
given, so I want to give you an opportunity to expand a little 
further on some of the things that you have all said.
    I will start with you, Mr. Dinneen. You said RINs are free. 
And anytime somebody's talking about something from the 
government being free, you usually check your pocket book first 
and start getting real concerned. When you talk to people about 
the RINs and the dramatic fluctuations in the price, this was 
something that was sold as a stability force. And the RINs are 
in fact not free. They started off at a very low price and have 
gone dramatically higher. Can you address the fluctuations in 
the price of RINs, which are not free, but in fact are much 
more expensive today than when this legislation was passed in 
2007?
    Mr. Dinneen. Sure, Congressman, but understand my point is 
the ethanol industry, when we produce a gallon of gasoline, we 
by statute and by regulation have to give that credit to the 
oil companies. They get them from us for free, without any 
question. Now, there is a--as I said----
    Mr. Scalise. But is it just them that are getting them? 
Because one of the questions is, do you have some of these 
Enron-type players that are getting into the marketplace buying 
up RINs to help jack up the price to help make it an Enron 
trading commodity instead of something that was established to 
bring stability to fuel?
    Mr. Dinneen. The oil companies wanted the RIN system, 
wanted a credit trading program to bring flexibility to the 
RFS, which I believe it has done, but as they raised----
    Mr. Scalise. Is it just the oil companies that have these 
RINs?
    Mr. Dinneen. I am sorry?
    Mr. Scalise. Is it just the oil companies that have these 
RINs?
    Mr. Dinneen. No. They----
    Mr. Scalise. They have some----
    Mr. Dinneen [continuing]. Marketers.
    Mr. Scalise. And I apologize. My time is very limited. Mr. 
Gerard, if you could touch on this as well.
    Mr. Gerard. Yes, as refiners, we are the obligated parties, 
so we are the ones that have to produce the RINs. We don't get 
all the RINs, and we certainly don't get them for free, because 
in many instances whoever is blending that fuel and gets that 
RIN, we have got to go buy that RIN to meet our obligation, 
because we are the obligated party.
    The more fundamental issue here, as you know, Congressman, 
is the E10 blend wall. The market sees it coming, it sees it 
head-on, there is pressure out there from those of the 
obligated parties to make sure they have got enough to meet 
their requirements under the RFS. That is what is driving that 
cost, that is what the experts say the problem is. That is that 
we have got to deal with that blend law.
    Mr. Scalise. And you mentioned on the--I know Mr. Dinneen 
talked about the EPA having flexibility in the law to address 
the numbers. I agree EPA has the flexibility. They have not 
exercised it. We sure haven't seen them doing the things they 
ought to be doing in the short term. In the long term, I agree, 
though, that Congress does have to address it for the long 
term.
    Mr. Drevna, you had something?
    Mr. Drevna. The essence of the problems with the RINs 
emanated with the EPA, when the first EPAct 2005 was written, 
and it was only seven and a half billion gallons by then. Of 
course, before the ink was dry, it went up to 36 billion in 
years.
    We suggested to EPA that we should be able to trade freely 
with the credits. They said, No, we want a free market. Our 
response was, it is a mandate, folks, so there is no free 
market. They didn't buy that.
    Then they said, OK. Refiners and importers, you are the 
obligated party. And we said, Wait a minute, if we can't trade 
the RINs among ourselves, how are you going to--how are you 
going to have this market work? And we said, It wouldn't work.
    And right now, not only are there RINs that are expensive 
and not free, there are 140 million fraudulent RINs out there 
that we still have to deal with, and who knows how many more, 
because--and I understand the FBI is still investigating some 
of the biodiesel folks.
    Mr. Scalise. Absolutely. And I know I am out of time, and I 
have more questions I will reserve for the second panel, but I 
appreciate that, Mr. Chairman. I will be happy to yield back.
    Mr. Dinneen. If I could just--one quick point, because I 
think you are going to like it, because I will acknowledge that 
there is an issue here, and that is we need to have more 
transparency with the RIN market. And I do think EPA could help 
this situation by letting us know who is making the trades, how 
many trades, what the price is. Right now, there is no 
transparency whatsoever.
    Mr. Scalise. All right. And unfortunately, they have not 
been willing to do that either. Thank you. I appreciate it.
    Mr. Whitfield. At this time, I recognize the gentleman from 
California, Mr. McNerney, for 5 minutes.
    Mr. McNerney. Well, I thank the chairman. Wow, what a 
diverse set of testimony, and I want to thank you all for your 
passion on this issue. It is an important issue, and it is a--
it should be a bipartisan issue. So, again, thank you for 
testifying.
    Dr. Martin, you suggested that the EPA should produce a 
realistic roadmap for introducing biofuels into the market--I 
see Mr. McAdams was shaking his head yes--using the flexibility 
that is built into the statute. What do you think are the 
chances that the EPA will do that? I mean, how likely is it 
that they are going to come through with something like that?
    Mr. Martin. Oh, well, I am quite optimistic about that. I 
mean, it is a challenging process to--especially to do a 
multiyear process, and I think they have been going through one 
year at a time, and it has been quite a lot of work, but I 
think all the parties would be better served by providing at 
least a framework for multiple years.
    Mr. McNerney. Well, they have the flexibility to do that, 
but last year's drought caused real problems, there were 150 
Members of Congress and Governors that asked them to waive the 
ethanol mandates, and they didn't. How do you feel that that 
came about and what is your response?
    Mr. Martin. Sure. Well, we supported making adjustments 
last year to the mandate in light of the drought, but I would 
say that the kind of flexibility in the second phase of the 
policy, and in particular how quickly we get to 36 billion 
gallons, this isn't the same waiver process with a real 
relatively high bar. It is an entirely different process, and 
really, it is--it is just a discretionary matter. So, in some 
respects, I think it actually makes more sense to describe the 
2022 target as 20 billion plus, sort of 20 billion gallons plus 
however much cellulosic gets produced, and EPA has discretion 
to go higher, but they have no obligation to go higher, and so 
I think, in some respects, analyses which are based on the 
assumption that we get to 36 billion in 9 years are flawed, 
because that assumption is just not a realistic assumption 
anymore.
    Mr. McNerney. OK. So you think they are showing flexibility 
in some ways and not in others?
    Mr. Martin. Well, they haven't shown flexibility up to now. 
And so, as I said, we encouraged them to do that last year. 
Last year, the circumstances were very different, as has been 
alluded to several times. I mean, when there were petitioned 
last year, RIN prices were very low, and that, you know, 
without any fancy economics is a demonstration that obligated 
parties were not trying to buy their way out of complying with 
the standard. And so EPA's analysis said, look, if we reduce 
the standard, not much is going to happen. And I think you have 
other panelists later who will address this in more detail. 
Obviously, with RIN prices where they now, the circumstances 
are quite different, and so what I understood from EPA is that 
they don't view those past decisions as providing the framework 
for future decisions, and they recognize the need to be 
flexible.
    Mr. McNerney. Well, thank you. You also mentioned in your 
testimony that the--or you acknowledged anyway the cellulosic 
biofuels have not lived up to their potential. Do you see that 
happening? I mean, how do you see that happening, or what has 
been the roadblock so far?
    Mr. Martin. Well, certainly the law was passed at the end 
of 2007 and based on some presumptions about how quickly 
capital could be raised. And 2008 and 2009 were tough years for 
raising capital in all industries, and that was certainly a 
setback.
    I think a case can be made that the numbers were always 
optimistic. And, frankly, the structure of the law, which 
essentially says that this is the maximum, not the minimum 
level for the standard, reflected an understanding that this 
wasn't something that could be counted on, but was an 
aspirational----
    Mr. McNerney. So, with the current trajectory, you believe 
that we can meet--what I think you said, we can cut our oil by 
50 percent in 20 years. Do you think that is realistic, then?
    Mr. Martin. Yes. Not solely on the basis of biofuels. I 
mean, if we look at cutting our oil use, efficiency has a big 
role, electrification, we need to do all of these things to 
make those kind of deep reductions, but biofuels definitely 
have a key role in a kind of comprehensive strategy like that.
    Mr. McNerney. Thanks.
    Mr. Dinneen, you had some pretty striking data that you 
showed on your graphics, and I think--and I didn't--I am not 
sure I got the numbers exactly right, but 60 percent of new 
oil--or new fuel production is from ethanol and only 38 percent 
is from oil? Were those the numbers?
    Mr. Dinneen. 62,005, correct, 62 percent of 38 percent, 
because you got to remember through 2005, 2006, 2007 and 2008, 
oil production in this country, it continued to fall. It wasn't 
until 2009 that oil production had begun to increase, which is 
a good thing, and we are happy about that. I am just pointing 
out that you can't say that the reduction in energy dependence 
that has occurred since 2005 is because of oil. It is not--68 
percent of it--I am sorry. Sixty-two percent of it is because 
of a growing ethanol market.
    Mr. McNerney. Well, I have run out of time, Mr. Chairman.
    Mr. Gerard. Mr. McNerney, if I could just comment. We would 
strongly----
    Mr. McNerney. If the chairman will allow it.
    Mr. Whitfield. The gentleman's time has expired, but I will 
let you all briefly respond; not very long, so----
    Mr. Gerard. I will be very brief. Thank you. We would say 
that clearly our import reliance has gone down considerably 
because we increased oil production. We have increased over 2 
million barrels a day in our production the last 4 years at the 
same time ethanol production has increased about 250,000 
gallons per year, so there is a big disparity. It is a very 
different equation.
    Mr. Whitfield. Mr. Dverna, did you want to make one 
comment?
    Mr. Drevna. It is not the oil industry saying it, it is the 
Energy Information Administration saying in testimony before 
the Senate last week that the impact of ethanol production on 
oil imports is minimal.
    Mr. Whitfield. OK. Mr. Barton is recognized for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman.
    You know, it is too bad you couldn't get a few more 
witnesses for this hearing. We are certainly going to have the 
most comprehensive hearing record.
    Mr. Whitfield. If anybody in the audience wants to testify.
    Mr. Barton. Yes. I have been on both sides of this issue. 
Obviously, in 2005, the original mandate was in the Energy 
Policy Act, which I was one of the chief authors of. I voted 
against the 2007 act, which took what we did in 2005 and 
basically increased it by order of magnitude five times.
    We are in a situation now where what appeared to be a good 
political compromise and maybe even a market compromise, you 
know, 8, 9 years ago, doesn't appear to be working, not because 
of its good intentions, but because the marketplace has 
changed. We thought that gasoline consumption in the United 
States was going to continue to go up. Well, it has not. It has 
gone down considerably. And while I don't have the exact 
number, I believe this year the difference between the 
projection and what we think is going to be reality is 30 to 40 
billion gallons of gasoline. That is a significant discrepancy.
    So the question before the committee is, what do we do? And 
you have got three options: One is do nothing, which Congress 
is very good at. Just let the mess keep going. The second 
option is to repeal the renewable fuel standards, and that is 
where I am. I think with all the good intentions in the past, 
basic principle is when all else fails, go back to basic 
principles, which is let the market operate. And then the third 
option be to modify the renewable fuel standards. And my guess 
is a majority of the committee is probably at that option, 
modification, take the middle road, but I am for full repeal.
    So my first question would be to my friend from the 
renewable fuels association, who has I think done a fairly 
eloquent job of putting the best face on this, what would 
happen if we repealed the renewable fuel standard to the 
ethanol industry? Would it go away, would it continue to 
flourish, or would it be somewhere in between?
    Mr. Dinneen. Thank you, Congressman.
    First of all, let me compliment you again on crafting the 
2005 RFS, because you really did craft a good piece of 
legislation with lots of flexibility for EPA to address the 
situations, and it has.
    If the RFS were repealed, though, Congressman, I think that 
you would first of all devastate investments that are being 
made in next generation biofuels. All of the progress that is 
being made today would go away, and I think that would be a 
terrible thing.
    Mr. Barton. It would--the harm would be to Mr. McAdams' 
group, not necessarily to the pure corn-based ethanol.
    Mr. Dinneen. Actually, that would be the first impact. 
There absolutely would be an impact to the existing industry as 
well, however. Back in 2007, when we were holding hearings on 
the RFS, there was a member of the oil industry that was asked, 
if we didn't have this program, how much ethanol would you use? 
And that person had indicated, well, you know, we would still 
want to use ethanol for its octane, but we would probably use 
about 5 billion gallons of ethanol. That was a candid moment, 
and I think that is what you would see. You would see a 
dramatic reduction in the use of ethanol in fuel as they 
replaced it with their own petroleum. These folks are in the 
business of through-putting hydrocarbons, not----
    Mr. Barton. My time is about to expire, and I do want to 
give the other side a chance, since I am actually with the 
other side.
    Mr. Dinneen. But you were with us at one time, Congressman.
    Mr. Barton. No. I am not against you, not against you.
    But, Mr. Martin or Mr. Gerard, if we repealed the ethanol 
mandate, if we repealed the renewable fuel standard mandate, 
since ethanol right now does cost less per gallon than 
gasoline, wouldn't the oil industry continue to use ethanol and 
blend it in because it is less expensive?
    Mr. Gerard. Well, a couple things. First, we are pleased 
with your conversion.
    The second thing is ethanol, let me just say this, on a BTU 
basis, does not cost less than gasoline.
    Mr. Barton. OK. On a BTU basis.
    Mr. Gerard. So that is an important consideration, because 
you have to compare energy to energy, not gallons.
    Mr. Barton. OK.
    Mr. Gerard. First thing. EIA testified last week, as did 
the Department of Agriculture, that it is likely that where 
current production isn't, current blending would remain. In 
fact, they believe there would be very little change, because 
of the octane values and other things that are part of the 
blending process.
    Mr. Barton. And, Mr. Chairman, could I ask Mr. McAdams a 
question, or I would be happy to yield back, because I know my 
time has expired?
    Mr. Whitfield. Yes. Did Mr. McAdams want to make a comment 
or----
    Mr. Waxman. I ask unanimous consent that our former chair--
--
    Mr. Whitfield. Mr. Waxman asks unanimous consent that you 
ask one additional question.
    Mr. Barton. Well, I appreciate Mr. Waxman for being nice to 
me for--I almost said for a change, but that would be not cool.
    But cellulosic has always been portrayed as the great hope, 
that we knew that ethanol from corn was somewhat inefficient, 
but we were told that if we could ever get to the cellulosic 
era, that it would be very efficient and very cheap. It hasn't 
happened yet. What is the realistic expectation of the ability 
to get ethanol from cellulosic--cellulosic sources? Is that 
still 10 years down the road or are we close to----
    Mr. McAdams. No, sir. While I sit in front of you--thank 
you for the question, Mr. Chairman. I appreciate the 
opportunity to answer this.
    As I sit in front of you today, there is a facility in 
Mississippi, in rural Mississippi, by the name of KiOR. It is a 
pyrolysis facility. It is crushing pine trees. And it is not 
making ethanol; it is making gasoline and diesel. And Mr. 
Gerard's and Mr. Drevna's clients, Chevron, and Hunt Petroleum 
have made 100 percent of the off-take purchases of that fuel. 
That plant came online in March. It is a new innovative plant. 
It is now a full capacity, running flat out and the RINs have 
gone on the market, effective this month for July. There are 
other plants, Dupont has one in Iowa. POET has another one.
    There is a range of cellulosic technologies that are coming 
into being now on a commercial basis. They are being funded 
commercially. There are about five or six of them that is in 
the book that Bob has put onto the record.
    The other thing I want to say is, don't overlook the 
advanced biofuels technology. I had the opportunity to witness 
the F-18's fly off the deck USS Nimitz using a hydro-processing 
technology in Louisiana, making 45 million gallons of renewable 
diesel.
    So you are seeing both advanced biofuels and cellulosic 
biofuels come. And I agree with your assertion. If you repeal 
the RFS, the guys that get hurt the most are the members that I 
represent.
    Mr. Barton. OK. Thank you very much, Mr. Chairman.
    Mr. Whitfield. At this time, I recognize the gentleman from 
California, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman. I would like to 
explore how the RFS aims to reduce carbon pollution, how well 
it is working and whether there are ways to strengthen its 
climate benefits.
    Mr. McAdams and Mr. Dinneen, do you agree that reducing 
carbon pollution through the use of low-carbon renewable fuels 
is a critical goal of the RFS?
    Mr. McAdams. Absolutely. As we move to 9 billion people on 
the world and other--other places around the world other than 
America increase their use of energy demand----
    Mr. Waxman. You agree.
    Mr. McAdams [continuing]. Having sustainable fuels--yes, 
sir.
    Mr. Waxman. You agree.
    Mr. Dinneen. Without a doubt. Absolutely it is. And, in 
fact, the amount of carbon removed as a consequence of ethanol 
production last year is the equivalent of taking about 9 
million vehicles completely off the road. The program is 
working.
    Mr. Waxman. Dr. Martin, how does the RFS derive climate 
benefits?
    Mr. Martin. Well, my colleagues here have spoken to the 
current status. I would like to look to the future and say that 
the largest potential source of benefits from the RFS comes 
from the next generation of biofuels, where we have the 
opportunity to substantially--I mean, first of all, to see 
fuels with very low greenhouse gas impacts, including very good 
integration with agricultural systems so that we see less 
competition with food crops, but also it is both the reduction 
per gallon and the number of potential gallons, and because the 
scale that is available to make cellulosic biofuels is very 
large, the greenhouse gas mitigation potential is also very 
large.
    Mr. Waxman. Mr. McAdams and Mr. Dinneen, without the RFS, 
are we likely to see the investments we need to develop new 
low-carbon renewable fuels in this country?
    Mr. Dinneen. Sadly, no, you will not. And the consequences 
is without the RFS, you are going to see more oil production in 
this country and the----
    Mr. Waxman. The----
    Mr. Dinneen [continuing]. Profile of oil is getting worse 
while biofuels is getting better.
    Mr. Waxman. OK.
    Mr. McAdams. It is the main driver for our industry.
    Mr. Waxman. There are concerns, however, that the RFS has 
some unintended consequences that may significantly reduce its 
climate benefits. For example, ramping up production of 
biodiesel may boost palm oil production.
    Dr. Martin, could you please explain how large increases in 
the demand for advanced biodiesel could drive further 
production of palm oil, and what are the concerns about palm 
oil production?
    Mr. Martin. Yes. Thank you. So the--I think RFS allocates a 
different bucket with regard to--with some consideration of, 
you know, what is available underneath them. And the--you know, 
biodiesel is--you know, there are some sources of biodiesel 
that are very low carbon, but the scale that those resources 
are available are limited. So, for instance, when you make a 
biodiesel or a renewable diesel or renewable jet fuel out of 
waste animal fat, then this seems like a very good low-carbon 
fuel, but there are other users for that, and so if the scale 
of those mandates exceeds what is available in that market, 
people aren't going to produce more chickens, because of that 
demand, and so you will end up driving more demand for 
vegetable oils. And the lowest-cost source of vegetable oil 
coming into the global market is palm oil, and so that is the 
basic concern.
    Mr. Waxman. And palm oil production is linked to severe 
deforestation, land degradation and habitat destruction abroad 
and increases carbon pollution. Is that right?
    Mr. Martin. Yes, that is absolutely right.
    Mr. Waxman. I would like to enter into the record a 
statement from the Clean Air Task Force on this point, Mr. 
Chairman.
    Mr. Whitfield. Without objection. \*\
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also available at http://docs.house.gov/Committee/Calendar/
ByEvent.aspx?EventID=101184.
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    Mr. Waxman. As we consider any changes to the RFS, we need 
to think about how to minimize unintended consequences and 
assure that we are actually getting the promised climate 
benefits. And there may be ways to structure the RFS to provide 
incentives for additional reductions in carbon pollution.
    When the RFS was amended in 2007, existing corn ethanol 
plants were grandfathered, exempting them from the law's 
greenhouse gas requirements. These facilities produce most of 
the ethanol, and overall, the net effect of their fuel may be 
to increase carbon pollution, rather than reduce it. Some 
grandfathered facilities have reduced their carbon pollution 
through operational changes, such as fuel switching from coal 
to natural gas, but there is no requirement for such 
improvements.
    Dr. Martin, do you think it would make sense to require all 
grandfathered facilities to improve their operations and reduce 
carbon pollution over time?
    Mr. Martin. Yes. Absolutely. And if----
    Mr. Waxman. I only have a few seconds left. Even for the 
newer facilities that were not grandfathered, the standards to 
reduce carbon pollution are fairly limited. Once a facility 
produces a biofuel that meets the greenhouse gas requirements, 
the RFS does not give that facility any incentives to do 
better.
    Dr. Martin, would it also make sense for the RFS to 
encourage additional improvements, such as by giving additional 
credit to fuel producers that exceed the minimum emission 
requirements? Yes or no?
    Mr. Martin. Yes.
    Mr. Waxman. The renewable fuel standard is critical in 
developing next-generation low-carbon biofuels, but it appears 
that it could be improved to better achieve the intended 
climate benefits.
    Thank you, Mr. Chairman.
    Mr. Whitfield. The gentleman's time has expired. At this 
time, I recognize the gentleman from Illinois, Mr. Shimkus, for 
5 minutes.
    Mr. Shimkus. Thank you. I think we lost the mike on this 
side.
    Mr. Whitfield. Do we have anyone that is technically 
attuned?
    Mr. Terry. Barton's works.
    Mr. Shimkus. Imagine that. Oh, the irony. And I was all 
organized. So--he is a munchkin, too.
    All right. Thanks, gang. It is great to--it is great to be 
with you. So palm oil. That is a new one on me. Our diesel 
production is mostly soybeans, beef tallow and the like.
    And I think we will talk about biodiesel in the next panel, 
but other than the RIN fraud, which is being investigated, 
biodiesel really isn't part of this debate. I think most 
people, it is dropped in, it is--there is no retail issues, it 
is across the market, and I just want to put that on the table. 
And that was kind of testified in the last hearing.
    So, folks, we could have had this hearing in January, and I 
would have gotten the same freaking answers out of you all in 
January that I got today. And so the point is, as Chairman 
Upton said, listen and be constructive. Maybe we are getting--
we got your sides. We know what they are. That is not really 
being constructive, because we have some issues we have to 
address, and so we would respectfully request that you come in 
and be constructive, because I think if--as you are learning, 
as much as we are, because you are hearing the members ask 
questions; you don't have enough for repeal. You do have enough 
for some reforms. So we better get in the room and get it done, 
which will help everyone. It will send the market signals to 
the next generation. It will keep the regular guys in. And it 
will address the price disparity, or I call it the risk 
premiums on the RINs, based upon producing something that is 
really not available or accessible at this time.
    You all represent associations. And the members of your 
associations are not in line with your opening statements when 
they come in individually and talk to us. So, good for you guys 
for toeing the party line. We have to find, and we are 
committed to move on a fix, and it would be helpful for you all 
to start negotiating in good faith to get this done, because as 
the media was successful in reporting last time, I have got two 
refineries in and around my district. I have got ethanol 
refineries all over southern Illinois. I have got as much corn 
as you want. I have got crude oil production. I have got 
fracking. I have got it all, and I am standing squarely with a 
foot in both bodies, and it is my goal and desire to get to a 
solution that benefits us all, not one side over the other.
    So let me go to the crux of the--and I think I lost it when 
I moved over here--the--so we have advocation of the repeal of 
the RFS. I think that has been clearly stated today. Obviously, 
my friends in the RFS are saying don't do anything.
    Can I get you all to commit to at least exploring something 
that is in between, in between full repeal and keeping as in 
with no change? Can I get you all to say, we are going to meet 
with you and try to make this happen? You can do yes or no or 
answer a question, but I would like to go down the table. I 
would like to start with Mr. Gerard.
    Mr. Gerard. Mr. Shimkus, I think you know we will work with 
you always, and we are happy to have those conversations. Let 
me make one brief point, if I can.
    Mr. Shimkus. Be brief. I have got a minute left.
    Mr. Gerard. I will hurry. First is, though, the reason we 
call for repeal first and foremost is this statute is 
fundamentally broken. It is not working. It is----
    Mr. Shimkus. OK. We are back to the same thing, because now 
Bob is going to say it is perfect.
    So, Bob, would you work with us? Jack, I don't--no.
    Mr. Gerard. We will work with you----
    Mr. Shimkus. No. Jack----
    Mr. Gerard [continuing]. But let's address the question----
    Mr. Shimkus. No, Jack.
    All right. Bob?
    Mr. Dinneen. I believe to the extent that there are issues 
associated with the RFS, and I will acknowledge that there are 
some concerns that need to be addressed, they can be addressed 
administratively, but I would like to work with you to 
determine how we can make that happen.
    Mr. Shimkus. OK. Charlie.
    Mr. Drevna. Absolutely, Congressman. If we all agree what 
the facts are and not what the bombast is.
    Mr. Shimkus. Well, that is----
    Mr. Terry. That means no.
    Mr. Shimkus. OK.
    Mr. McAdams.
    Mr. McAdams. We recognize our--maybe if they recognize it 
is the committee's jurisdiction and legislative authority, we 
would welcome the opportunity to work with you.
    Mr. Shimkus. And, Dr. Martin, I don't have to--I mean, you 
can chime in if you want. I mean, you would be willing to help, 
I am sure.
    Mr. Martin. Absolutely. Happy to help.
    Mr. Shimkus. OK. But let me end on this premise, the 
government has established by law, and you have all heard me 
say this before, procedures to refine either traditional or 
next generation. We have moved, because of our Federal law 
position, have moved capital into these positions.
    You all can't advocate us repealing a thing that 
shareholders would lose billions of dollars and that the 
promise of the investment made by Mr. McAdams in future 
cellulosic, that we walk away from a government-mandated law 
that moved capital in these refineries.
    You are not advocating that we walk away from that and 
cause them to lose their private sector investment? Would--
Jack, you wouldn't want us to do that to the refinery sector.
    Mr. Gerard. No, we wouldn't, but what I would suggest, the 
second part of what I was going to say earlier is we need to 
define what it is we are trying to accomplish.
    For example, when Mr. Waxman was asking questions about 
carbon emissions, he asked the future, particularly from the 
people that Mr. McAdams represents, they are much less carbon-
intensive than some of the other fuels. However, the National 
Academy of Science points out that the current corn-based 
ethanol we are producing is more greenhouse gas----
    Mr. Shimkus. All right. Let me stop you. My time's expired. 
Let me just go back to say you all need to come to the room, 
because if you keep these positions, no one is going to be 
happy and nothing's going to get done.
    I yield back my time.
    Mr. Whitfield. The gentleman's time has expired.
    And we are happy to know that all of you are going to 
graciously come and work with us on this issue.
    At this time, I recognize the gentlelady from California, 
Ms. Capps, for 5 minutes. Not you? OK. Who is it? Who is it?
    Mr. Green. Me.
    Mr. Whitfield. OK. Mr. Green from Texas, you are recognized 
for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    Although I would defer to my colleague from California, but 
I just love following my colleague from Illinois. Congressman 
Shimkus and I are good friends and over the years, but we also 
understand we come from different geographical locations.
    And I am frustrated as anybody else with the RFS, and I 
voted for it in 2007. A number of us from my part of the 
country did, but what we have seen in the last number of years 
is, whether either with the RINs fraud, the gaming of the 
system, and I think some of us have gotten to the point where 
if we are going to have an RFS, it only should deal with things 
that are not edible. And I know that is some concern with Bob 
and your group. Corn and soybeans, obviously, you can raise the 
prices for everything. And coming from Texas, I first realized 
the problem was back in 2007 or 2008, and I got calls from all 
my neighbors saying our deer corn went up, whey they were 
buying it in October to fill up their deer feeders.
    So there needs to be--and I agree with my colleague from 
Illinois. I would probably vote for repeal of the RFS, but I 
just don't see where we are going to get there, but we need to 
see what we can do to make sure it is quality.
    And a lot of people know I represent a lot of oil-based 
refineries, but I also have some biofuel facilities that are 
relatively small. And we actually have one that reopened 
because of market conditions and things like that, but I would 
like to sit down with that group in the room and see what we 
could do to make it workable.
    But let me ask a few questions before my time runs out.
    Mr. Gerard, can you tell me more about the Coordinating 
Research Council on the E15?
    Mr. Gerard. Yes. The Coordinating Research Council is an 
institution, collaboration, if you will, research, to retest 
fuels, particularly in automobiles. It has been around since 
1942. And we have come together over time, collaborated with 
government, particularly DOE and EPA, to test the potential 
impacts on the fleet, if you will, from bringing new fuels into 
the marketplace.
    Most recently, and the reason this probably came up, is we 
have tested the E15. And what it concluded after testing on a 
few models, after designing the test program with EPA and DOE, 
I might add at their direction originally, we have found that 
it has significant impact. And as all the auto makers have now 
indicated, they will not warranty their cars under E15 and the 
current existing fleet.
    Mr. Green. The EPA and the DOE were aware of this research?
    Mr. Gerard. They participated in it. In fact, in about 2006 
and 2007, they helped us devise it. And the testing that we did 
was actually--part of the creation came from the EPA and what 
they felt needed to be tested to look at these questions.
    Mr. Green. OK.
    Mr. Dinneen. Congressman, might I suggest----
    Mr. Green. Well, let me ask you a question, and you might 
be able to answer it any way you want. You stated in the public 
documents that oil companies have blatantly ignored the law and 
refused for more than 5 years to make any meaningful 
investments in infrastructure would allow the sales of E85 or 
blends above E10. Can you respond to the type of investments in 
renewable fuels that oil and natural gas has made?
    Mr. Dinneen. Sure. But, first, on the CRC test, I would ask 
that DOE's critique of that test be included in the record, 
because they had a great number of problems with the test fuels 
that we used. They were not indicative of what is out in the 
marketplace. And, in fact, one of the vehicles that failed 
actually failed on nothing but straight gasoline. So if you are 
going to live by that test, maybe we ought not be using 
gasoline in this country.
    Mr. Green. OK.
    Mr. Dinneen. With respect to the investments that the oil 
companies have made, frankly, they have made precious little, 
but more importantly, they have prevented gasoline marketers 
from making those investments and offering fuels to consumers. 
For example, Phillips 66 has a franchise in Kansas, ARCO 66, 
that for years had been offering E85, and Phillips 66 was OK 
with that, and it was an important part of his business. He 
then wanted to offer E15 and did. He was the very first E15 
marketer in the country.
    Mr. Green. OK.
    Mr. Dinneen. And Phillips wasn't OK with that.
    Mr. Green. I am going to run out of time unless I get a 
chance----
    Mr. Dinneen. So what they did is they changed their 
franchise agreement----
    Mr. Green. Let me ask a question.
    Mr. Dinneen [continuing]. To prevent that from happening.
    Mr. Green. Let me ask, Mr. Gerard, if Congress were to cap 
ethanol blending at 10 percent and match the cellulosic 
requirement with the progress of the technology, how would you 
respond and API respond?
    Mr. Gerard. Well, we would have to look at how you do that 
in order to the fuel mix across the country. We are happy to 
work with you on that.
    If I could respond quickly, the oil and natural gas 
industry are the leading investors in zero-carbon-emitting and 
low-carbon-emitting technologies. From 2000 to 2010, the 
Federal Government spent $43 billion in this area. We spent $71 
billion. The rest of all the private sector spent 74. We are 
leaders. We are trying to find the breakthrough in 
technologies. What the RFS attempts to do is mandate 
technological change, and it has now demonstrated that you 
can't do that with statute.
    Mr. Green. Well, Mr. Chairman, I know I am out of time, and 
I wish I had more time for the whole panel, because we have a 
bunch of questions.
    Mr. Whitfield. The gentleman's time has expired. At this 
time, I will recognize the gentleman from Nebraska, Mr. Terry, 
for 5 minutes.
    Mr. Terry. Thank you, Mr. Chairman.
    And I want to associate myself with Mr. Shimkus's 
statement. It has been frustrating to just hear the same old 
entrenched, ``you are either in or you are out,'' ``nothing 
needs to be fixed,'' ``it is either totally right or totally 
wrong.'' So it doesn't leave us a lot of options here for this 
committee to look at if that is where we are.
    Now, I am interested in some of the more advanced biofuels. 
And, Mr. McAdams, I have been informed or told for over the 
last several months about exciting new advanced projects going 
to commercial state now. Could you give an update here?
    Mr. McAdams. Sure. Be happy to do that.
    Mr. Terry. There are comments that there haven't been any 
going commercial from pilot projects. So have there been?
    Mr. McAdams. I am happy to do that. Let me just take a myth 
off the table here. We have been able to hit the advanced 
biofuels numbers in 2011, in 2012, and we will hit them in 
2013. It took the ethanol industry 20 years to produce the 
first 2 billion gallons, and in 2012, we delivered 2.25 billion 
gallons of advanced biofuels to the American public. Now, the 
largest portion of that 2.25 billion came from America's 
biodiesel industry. That was 1.1 billion. And the way the 
statute works, it receives a 1.5 to 1 energy dense multiplier. 
So if you can do the math, that is about 1.6 billion gallons 
that goes towards the 2.25 billion gallon target.
    Second myth I would like to take off the table is that 
Brazilian ethanol fills the bulk of the advanced biofuels pool. 
That is simply not correct. Because of the nesting requirements 
in the RFS, you have biodiesel and renewable diesel, its new 
little brother, coming online filling the bulk of that target.
    Just so the members understand the difference, renewable 
diesel is a pure hydrocarbon that hits the same exact ASTM spec 
as if you made it from a barrel of oil. That is what we flew 
the F-18's on; that is the F-76 we put in the USS----
    Mr. Terry. Let me interrupt you there, because that was the 
next question I have. I have also read stories about aviation 
fuel as an advanced biofuel, that it is not just being used as 
an experimental fuel within the Navy or Air Force, but also in 
commercial. Can you update me?
    Mr. McAdams. I have had--I actually got to fly on the first 
flight from Seattle to Washington, D.C., last year. The first 
flight in the United States was a United flight from Houston to 
Chicago. One of my members has flown over 1,100 flights in 
Europe on a renewable jet fuel.
    We have a number of technologies that have given the 
gallons to the military and have been certified on most of the 
military air frames. And then we have the hope of alcohol-to-
jet, which is now moving through the process.
    So, again, it is not just about cellulosic, it is about a 
whole variety of advanced technologies. We have one, two 
renewable diesel facilities in the State of Louisiana now that 
are running. We have several other smaller----
    Mr. Terry. Well, if you could submit the rest for the 
record, I would appreciate that.
    Mr. McAdams. Sure. I would be glad to do that.
    Mr. Terry. So with my last minute 20, I want to ask, 
starting with Jack going to my right, I have been a supporter 
of biofuels, not just because I am from the Cornhusker State 
and that is economically important to Nebraska, but been a 
rabid supporter of a variety of fuels to offset imports.
    So, Mr. Gerard, Jack, if you could start, do we need 
diversity in our fuel portfolio?
    Mr. Gerard. Diversity is always good, as I mentioned to Mr. 
Rush.
    I would say what is happening today, of course, is we are 
providing more and more domestically, which is getting us off 
the foreign import question.
    Mr. Terry. Is that a yes or a no?
    Mr. Gerard. Yes. Diversity is always good.
    Mr. Terry. Sorry.
    Mr. Dinneen. Yes, Congressman, it is critically important. 
And thank you for your leadership on this issue over the past 
several years.
    Mr. Drevna. Diversity is always good as long as ago it has 
a positive impact on the consumer, including costs.
    Mr. McAdams. I practice it in my 401 every day.
    Mr. Martin. Yes. Absolutely.
    Mr. Terry. Thank you.
    I yield my time, yield back my 5 seconds.
    Mr. Whitfield. The gentleman's time has expired.
    At this time I am recognize the gentlelady from California, 
Ms. Capps, for 5 minutes.
    Mrs. Capps. Thank you, Mr. Chairman, for holding this 
hearing. And I appreciate the witnesses' testimony today. We 
all have a range of perspectives on RFS, but I hope we can 
agree on the importance of the policy's primary goal to develop 
a cleaner, more sustainable fuel supply. Developing reliable 
renewable fuels were reduce our dependence on oil, much of it 
foreign, strengthen national security and create quality local 
jobs.
    There are a variety of Federal policies to help us move in 
that direction. Some are direct investments like tax incentives 
and research funding, and some, like the RFS, set public policy 
goals for private industry to work toward. I think both 
approaches play an important role of fostering growth of 
renewable fuels, but the RFS in particular is vital to creating 
some stability in an otherwise uncertain and volatile 
marketplace.
    As we know, some are calling for the complete repeal of RFS 
due to concerns about the ethanol blend wall. I agree there are 
some issues with RFS that do need to be addressed, but a 
complete repeal would have far-reaching negative impacts, going 
far beyond the blend wall.
    So I am going to ask Dr. Martin a couple of questions. You 
point out in your testimony that repealing RFS would lock in 
the status quo by more or less ending the development of 
advanced cellulosic biofuels. Can you elaborate on this? How 
would repealing the RFS impact our ability to develop viable 
new advanced fuel resources?
    Mr. Martin. Yes. Thank you very much. I think it has been 
mentioned several times that the investment in the next 
generation of biofuels really does rest on understanding what 
the goals of the fuel policy are and the objectives that we are 
trying to meet. The RFS sets those goals and the companies have 
made investments and are starting to produce fuel.
    I think something that sometimes gets lost in the sense of 
how much progress have we made, isn't this a failure already, 
is that we have moved from laboratories to commercial 
production, and we have done that in a relatively short amount 
of time, but the fuel industry is enormous, and so the amount 
of time to go from one commercial facility to 16 billion 
gallons is, of necessity, will take some time.
    Mrs. Capps. Thank you. To continue, a key part of the RFS 
process is evaluating the total reductions in life cycle, 
greenhouse gas emissions for a given biofuel. In your 
testimony, you also state that the--and this is a quote from 
your testimony, the implementation of the RFS to date has had 
at best a limited positive impact on greenhouse gas emissions.
    Can you explain why this is the case and how increasing the 
use of cellulosic biofuels would impact this assessment?
    Mr. Martin. Right. Absolutely. We are very much looking to 
the RFS as a policy to reduce greenhouse gas emissions from the 
transportation sector and from fuels, but we think the biggest 
opportunity there is in the cellulosic biofuels and because of 
the competition with food in particular. And so I think it 
makes a lot of sense that the RFS, after scaling up the 
biofuels that were available in the beginning of the policy, is 
shifting to other resources and we think that--and that is 
where the big opportunities are going forward.
    Mrs. Capps. One final question. I have a little time. And I 
see some others nodding, so if there is time to get a comment 
from others as well, but the RFS has played and will continue 
to play a critical role in accelerating the development and 
integration of advanced biofuels that we need in order to 
reduce our dependence on oil, but there is so much more that we 
can and should be doing. That is maybe the subject for another 
hearing.
    Dr. Martin, other than the RFS, what more could Congress be 
doing to accelerate the development of a cleaner, more 
sustainable fuel supply?
    Mr. Martin. Yes. Absolutely. I think there are a lot of 
opportunities outside of this policy, in particular in the Tax 
Code, because the delay in cellulosic has been all about 
investment, and certainly there are policies that could support 
more rapid investment.
    Mrs. Capps. Mr. McAdams or others, would you like to 
comment as well?
    Mr. McAdams. I wholly agree. The Tax Code has several 
options that would be very helpful. That is an area to look at.
    Mr. Drevna. Congresswoman Capps, the advanced biofuels, I 
think we have to differentiate on the cellulosic. What is--what 
is cellulosic ethanol, we are still going to have the 10 
percent blend wall, with cellulosic drop-in biofuels that my 
industry is doing a lot of research on, so we are having this 
cross-section of definitions here, but all cellulosic is not 
cellulosic. The ethanol, we are still going to have the 10 
percent blend wall, the cellulosic drop in biofuels are still 
years away.
    Mrs. Capps. Any other comment?
    Mr. McAdams. Ms. Capps, I am going to send Mr. Drevna some 
of the drop in gasoline made from pine trees so he has got 
some.
    Mrs. Capps. There you go.
    Mr. Gerard. Ms. Capps, I would suggest maybe this might be 
a way--an area that you might look at for those who are looking 
for the middle ground. As Mr. McAdams said, cellulosic and 
advanced in those areas, which are less greenhouse intensive, 
versus what we have today. If you look at the E10 blend wall we 
have today, driven heavily by corn ethanol, which is driving us 
to that brink, that is why we argue we should repeal that, and 
then if we want to look at another agenda or another policy 
down the road, those are the areas we should look at.
    I think, as Mr. McAdams said, when you look at the advanced 
fuels that are still way down the road, there might be a better 
way to do this than have a mandate like the RFS that brings us 
to the point of crisis and has very adverse impacts on 
consumers.
    Mr. Whitfield. The gentlelady's time has expired. At this 
time, I recognize the gentleman from Texas, Mr. Olson, for 5 
minutes.
    Mr. Olson. I thank the chair and I thank the panelists for 
joining us this morning. This issue is slightly controversial, 
with some passion. That is a little attempt at some humor, 
something I learned from the ultimate Texas humorist, William 
Philip Graham, otherwise known as United States Senator Phil 
Graham, who I worked for 4 years. And Phil Graham always taught 
me to seek the truth, and he said, by something very simply, 
Boy, facts are a little persistent ``thangs.'' And that is a 
crummy Georgia-Texas, accent, but that is what I am here to do 
today, is find out the facts.
    Here are the facts I took away from the discussion of last 
month's hearing before this committee. The RFS was designed for 
a U.S. energy future that no longer exists, that of a peak oil 
and increasing gas demand. The mandate will be met this year by 
using most of the older excess credits in the system. In future 
years, if unchanged, will be much more difficult. Compliance 
costs are spiking, especially for small refiners who don't 
blend fuels and generate their own credits.
    The RFS has helped increase corn prices, and that has hit 
consumers back home, at Kroger's, at Safeway and HEB, and, yes, 
at Wendy's and even Whataburger. With all due respect to some 
of the panelists who said that there is not an impact on food 
prices, RFS does have that impact. Wendy's came into my office 
a month ago, wanted to talk about Federal issues. You think 
they want to talk about Obamacare, increasing taxes, all sorts 
of things? No. They wanted to talk about RFS corn-based ethanol 
and how it has increased their cost of doing business.
    And I want to have a disclaimer, too. I am not, not opposed 
to corn farmers or ethanol. I have gotten blisters on my hands 
throwing a hoe in my uncle's farm there in south central 
Wisconsin cutting down the weeds in his corn fields, so I know 
how important corn is in that part of the country.
    I do have some questions. I want to dig deeper on the RINs 
issue, so I have some questions for Mr. Gerard and Mr. Drevna, 
on its impact on small refineries. Large refineries, as we have 
seen, are able to generate many of their own RINs, however, 
many small refineries lack the distribution network and 
blending operations to do that. Can you please explain what 
this has meant for small refineries as RINs prices rise?
    Mr. Gerard. Well, thank you. Go ahead.
    Mr. Drevna. OK. I am sorry. First of all, thank you, 
Congressman Olson, but I think that the issue is just--it 
transcends all refineries whether you are large or small, 
because not all refineries blend, not all refiners own blending 
facilities. Most do not. But it is a great question, because in 
response to your question, I can also comment on Mr. Shimkus' 
thought about not wanting to take away investment and have 
people suffer in the marketplace. Back in--when the RIN prices 
first skyrocketed, when the market saw that there wouldn't be 
enough RINs either for 2013 or 2014, they shot up at that time 
to a modest 60 cents. Huh. The refiners, the independent 
refiners lost $2.5 million of market capitalization in one day. 
So that is what this RIN thing has done. And that is over and 
above them having to pay for the cost.
    Last week, Bill Klesse, chairman and CEO of Valero, 
testified on the Senate side that Valero, a very large 
independent refinery, is going to be spending between $500 
million and $700 million on RINs. And, oh, by the way, they are 
the third largest ethanol producer in the country. They produce 
more ethanol than 97 percent of the above-the-knees members. So 
that is the reality. This is a market-skewering, economically 
disastrous kind of policy that needs to be addressed.
    Mr. Olson. Mr. Gerard?
    Mr. Gerard. Mr. Olson, the impact on whether they are small 
or large is fundamentally the same. Let me bring us back to the 
focus. The real culprit here is the E10 blend wall. Charlie and 
others have mentioned for many years, those RINs were in the 2 
cent to 3 cent range, and it wasn't a concern.
    What has happened is the markets are seeing the mandate 
under the renewable fuel standard and say, we are going to 
force you or mandate you through to essentially where we have 
options to either create an unsafe fuel, but the auto 
manufacturers say, we are not going to warranty our cars if you 
do that, or go to fuels like E85, where consumers are already 
telling us they don't want to buy the fuel. Why? Because it has 
less energy content in it. There is about one-third less energy 
in a gallon of ethanol than there is in a gallon of gas.
    So when you look at the price differentials, the cost of 
pure ethanol has always been higher than a gallon of gasoline. 
Consumers are figuring this out. That is why even with flex-
fuel vehicles, they are not buying E85, even though it is 
available. Minnesota is a good example. They have actually 
increased the number of filling stations in Minnesota, and the 
demand for E85 is going down. Consumers understand it is all 
about energy; it is what you have to pay for to get from point 
A to point B.
    Mr. Whitfield. The gentleman's time has expired.
    Mr. Olson. Yes. I am sorry, Mr. Dinneen. My time----
    Mr. Dinneen. I thought the search for the truth would 
include both sides.
    Mr. Olson. Well, I mean, the chairman's got the gavel 
there, so----
    Mr. Whitfield. At this time, I recognize the gentlelady 
from Florida, Ms. Castor, for 5 minutes.
    Ms. Castor. Well, thank you, Mr. Chairman.
    And thank you to all the witnesses for your testimony 
today.
    I am certainly open to some reform of the RFS, but there 
are some overriding issues that I think have to keep in mind. 
In 2007, the Congress updated the RFS with the explicit purpose 
of reducing carbon pollution from the transportation sectors. 
The Congress at that time was looking for different strategy 
among different sectors of the American economy. The Congress 
said, here in the transportation sector, we have got to reduce 
greenhouse gases being generated in the sector and also to help 
Americans across the country avoid the impending high costs 
that are being brought about by climate change.
    So the two primary ways in which the RFS aims to deliver 
these reductions are in the mandate for advanced biofuels, 
which must cut carbon pollution by at least 50 percent on a 
lifecycle basis, compared to petroleum fuels, and the mandate 
for cellulosic biofuels, which must cut carbon pollution by at 
least 60 percent. I know Congresswoman Capps was able to ask 
Dr. Martin about the greenhouse gases.
    Mr. McAdams, what role do you see--how is it going? Are we 
really achieving the targets that we have set? You represent 
many of the companies that are developing and producing these 
advanced and cellulosic biofuels. What kind of greenhouse gas 
reductions are we actually seeing?
    Mr. McAdams. Well, by law, all of my members have to 
deliver a 50 percent greenhouse gas reduction over a 2005 
baseline gasoline or diesel standard. And we delivered 2.25 
billion gallons last year. And when you think about that--and 
the rules of the RFS were not even implemented until July of 
2010. I defy anybody to say to stand up an entire industry in 
less than 3 years is a pretty decent performance, and we are 
probably going to be at 2.75 billion this year or above and 
over 3 next year. So we have done very well in the diversity of 
technologies that are coming online. These were all new, 
innovative technologies. This is--unlike the oil industry, who 
has depreciated their refineries, because they haven't built 
one in the last 40 years, my members have built three new 
refineries in the last 18 months. That is a heck of an 
accomplishment for America, and that diversifies our portfolio. 
So I am proud of the progress we are making, and you will see a 
lot more between now and 2016.
    Ms. Castor. Well, I do believe they are replacing a 
significant quantity of petroleum with these low-carbon 
biofuels could result in climate change benefits and help. And 
the cost equation, you have to think about it on both sides. 
And coming from the State of Florida, I am particularly 
sensitive to this, because we are asking local taxpayers now to 
fund plans to address sea level rise, what is happening to our 
infrastructure along the coast. And unless we have some 
provable, evidence-based strategies going forward, we are just 
going to flail around and probably waste a lot more money.
    The development of cellulosic biofuels, however, hasn't 
been as quick as Congress wanted. We are impatient. Plus corn 
is problematic. Is it raising food costs? Based upon what I am 
hearing from folks back home, they certainly believe so and 
they are providing evidence to back that up.
    Last year, however, we saw the first cellulosic gallons 
produced in the U.S. The Energy Information Administration 
predicts the sector will grow substantially in the coming 
years.
    Mr. McAdams, as I said, we are impatient. What else can we 
do? What else constructively in the RFS can we do to move this 
along? I know you talked about tax benefits, but this is the 
Energy and Commerce Committee and not Ways and Means. And if we 
are going to draft any legislation, what should it include?
    Mr. McAdams. Well, one of the things I would encourage you 
to consider is the point that Dr. Martin referred to, which is, 
from a performance-based standard, we have many companies that 
build a fuel now that exceed the 50 percent threshold. Yet, 
under the RFS, it is just a 55-mile-per-hour line. They don't 
get any extra credit for it. You could actually see companies 
that have facilities that are less than the 50 percent 
threshold that might be encouraged to make further upgrades, 
like combined heat and power or switch their fuel sources to 
natural gas, that would actually increase their GHG coefficient 
if they were to get something for it, which would encourage 
them to do that. That is not currently in the RFS.
    Ms. Castor. OK. And, Dr. Martin, I think you mentioned a 
new Florida company that has come online. Could you reference 
that for me, please?
    Mr. Martin. Absolutely. I had a chance last year to visit 
the INEOS refinery in Vero Beach. And they are starting up a 
process using vegetative waste that would otherwise be headed 
to the landfill to make not just biofuel but also renewable 
energy. So it is really exciting to see these commercial 
facilities come up. And when you understand the time frame that 
that went from a laboratory to a pilot plant to commercial 
production, I think it is hard for them sometimes to 
understand--if you only look at the number, like how quickly is 
it going to be half of gasoline production, you miss these huge 
improvements as you go from, you know, milliliters to gallons 
to 1,000 gallons to 1 million gallons to 10 million gallons. We 
need to get to 10 billion or more gallons. But we have made 
tremendous progress to get to where we are now.
    Ms. Castor. Thank you very much.
    Mr. Whitfield. The gentlelady's time has expired.
    At this time, I recognize the gentleman from Colorado, Mr. 
Gardner, for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman. And thank you for 
convening this hearing on a very important issue for my 
congressional district.
    The Fourth Congressional District of Colorado is the 11th 
leading agricultural district out of the 435 districts in 
Congress. We have corn growers. In fact, my home county has in 
the not-too-distant past been the number two or number three 
corn-producing county in the United States. And we produce 
livestock, the fifth largest cow calf operation in the country. 
We boast thriving oil and gas production. In fact, the State of 
Colorado ranks fifth in the United States in terms of natural 
gas production. Many of the groups who are represented here 
today and tomorrow do have different opinions regarding the 
Renewable Fuel Standard. And I thank the committee for what is 
a deliberative and systematic process in this debate. And I 
appreciate the witnesses for being here today.
    So I will first direct my questions to Mr. McAdams. You 
discussed a need for certainty for investors and makers of 
advanced biofuels. I have an ethanol plant currently in my 
district that is looking to make cellulosic ethanol from bark 
beetle-killed wood. How would the development of this project 
be impacted if Congress made changes to the RFS?
    Mr. McAdams. I addressed that directly, Congressman, in my 
opening statement. The largest single problem we have is 
certainty. Both in the Tax Code, where the provisions are on 
one year and off another year and now in the debate as to 
whether we are going to repeal the RFS or not repeal the RFS.
    Mr. Gardner. Affecting your investors?
    Mr. McAdams. It is the number one concern of the CEOs that 
I represent.
    Mr. Gardner. In your testimony, you discuss short-term 
solutions to issues raised today that would give EPA more 
flexibility. Do you believe Congress can fix this problem and 
give the EPA the flexibility it needs?
    Mr. McAdams. I am unclear as to whether they can. But I 
know that the EPA, because I have spoken to them on a 
consistent basis, is trying to deal with this RVO issue in the 
short term.
    Mr. Gardner. Do you think they have the authority make 
changes within the RFS currently?
    Mr. McAdams. Yes, sir, I do.
    Mr. Gardner. To Mr. Dinneen, we are going to hear tomorrow 
from representatives--and I will give you a little time to 
respond to the comments made earlier. We are going to hear 
tomorrow from representatives of the livestock industry. As 
someone who hails from an agricultural district, I represent 
both the farm side and the ranching side. Can you discuss how 
the coproduct from ethanol production distiller's grain, how 
they impact livestock operations?
    Mr. Dinneen. Thank you very much, Congressman. Absolutely. 
We are only using the starch in the production of ethanol. What 
is left behind is a very high-protein, high-quality feed that 
is then going to poultry and livestock markets across this 
country and, indeed, across the globe. In fact, the amount of 
DDG, distillers' dry grains, that our industry produced last 
year is enough to produce the hamburgers to give everybody a 
quarter pounder a day for the next 8 months.
    Mr. Gardner. And I will ask a similar question at 
tomorrow's hearing with that panel because we have got group 
that is on the opposite side of that question tomorrow. How 
would you respond to the issue of higher feed and operating 
costs?
    Mr. Dinneen. Well, look, one of the reasons that the RFS 
was passed was to stimulate economic opportunity across rural 
America; $2 corn was not sustainable. And the Congress was 
having to pay farmers not to grow. What they wanted was a 
value-added market for farmers. One of the purposes of the RFS 
was to increase farm income, increase the price of corn. And it 
has done that. And as a consequence, this Congress can now 
contemplate a farm program that is significantly different than 
what you otherwise would do. And farmers are getting more of 
their income from the marketplace, not from the mailbox. And 
that is a good thing. But even so, our industry is using less 
than 3 percent of the world's grain supplies and none of its 
food grains--like rice or wheat. So we think that the impact on 
food is negligible to nothing.
    Mr. Gardner. I will give you a couple additional seconds if 
you want to respond to comments made earlier because I do have 
some questions for Mr. Gerard.
    Mr. Dinneen. I appreciate that.
    Earlier, the issue was whether or not small refiners or 
large refiners that don't have downstream blending opportunity, 
they can't get the ranch. Well, we sell a lot of ethanol to 
major refiners. But regardless, these companies have more 
market power than anybody in the universe. And in their 
contract negotiations, they can make sure that the RINs are 
returned to them for ethanol that is blended with gallons that 
they are providing. And for Valero in particular, the third-
largest RIN producer in the country, if they can't find RINs, 
they have got a problem. But that problem is not with the RFS. 
That problem is with their own internal operations. It isn't 
doing what it can to capture the RINs that it is producing.
    Mr. Gardner. Thank you, Mr. Dinneen.
    Mr. Gerard, I am going to ask two quick questions. We may 
not have time to get to them. Can you discuss how you believe 
RINs translate to consumer costs. And number two, outline the 
risks you see associated as you have done so with blending 
higher volumes of ethanol in your opinion.
    Mr. Gerard. Great question. I will try to be brief here, 
but I would like to provide you a lot of material.
    EPRINC just did a study and released it a couple of days 
ago which pointed out that they believe because of the E10 
blend wall--keep in mind that is the culprit here that drives 
the RIN price increase. Because of the E10 blend wall, when 
companies like ours, obligated parties, now try to comply with 
the Renewable Fuel Standard, it is arbitrarily and 
unfortunately driving up those costs. So when we try to comply, 
we have very few options. We can go out and quit producing, 
which we are trying to avoid doing. We can produce the fuel if 
the auto manufacturer says don't put it in our cars; and by the 
way, we have liability if we do for not having the appropriate 
product. Or we can try to push a larger blend, an E85 blend 
which the market has already shown won't take. What this report 
concluded is it shows over the next couple of years this will 
drive the cost of gasoline from 20 cents to $1 a gallon. That 
is just one of three reports we have. The Wall Street Journal 
editorial last Saturday said, they expect it will drive the 
cost of gasoline at least 10 cents a gallon and will cost the 
economy $14 billion.
    The real injustice here, this is all avoidable. We can 
address this question if we will deal with the E10 blend wall 
and make sure that mandate is taken away. And that is why we 
support repeal. This law is fundamentally broken. And it is 
driving us to the brink of crisis for no reason other than the 
fact that we just haven't dealt with it.
    Mr. Gardner. Thank you, Mr. Chairman.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentleman from New York, Mr. 
Engel, for 5 minutes.
    Mr. Engel. Thank you very much, Mr. Chairman.
    I am very pleased that we are holding these hearings on the 
Renewable Fuel Standard. A program as important as this should 
be reviewed by Congress and any possible issues addressed. I 
believe that the Renewable Fuel Standard is an important tool 
in promoting U.S. energy security, an issue that I have been 
promoting for several years. When it comes to the RFS, much has 
been said, both good and bad during the last hearing and in 
testimony today. However, I believe, it is important to 
remember that this program reduces our greenhouse emissions and 
reduces our dependence on foreign oil. And both of those are 
very important. I believe that the EPA has the authority to 
deal with issues discussed today, such as the so-called blend 
wall. And the levels of advanced biofuels that are mandated. It 
is also important to remember that many of these new 
technologies aren't exactly new. So it is premature to judge 
their success or failure. There are things we can do to 
strengthen the RFS. I have recently introduced the Open Fuels 
Standard Act, which I believe is a complement to the RFS with 
my colleague from Florida Representative Ros-Lehtinen. This 
legislation would require auto manufacturers to build cars that 
can run on alternative fuels. In addition to gasoline, it could 
include ethanol, methanol, natural gas, electricity, biodiesel, 
hydrogen, or some new technology. It would empower our 
consumers to make a choice about what fuel is best for them. I 
urge this panel to take up the Open Fuels Standard Act.
    Let me ask, Dr. Martin, in your statement, you spoke about 
the motivation behind the expansion of the RFS which was to cut 
U.S. oil consumption. I believe that the evidence shows it has 
moved the U.S. toward that goal. Can you speak to how adoption 
of the Open Fuels Act might help us toward furthering that 
goal?
    Mr. Martin. Certainly. I think reducing the use of oil is 
good for the country. And I guess I have heard in today's 
discussion some comments that the predictions in 2007 were 
wrong. And because we are using less oil now than we were in 
2007, I think it is important to note that that is a positive 
sign. That is good for the country. Using less oil is the 
solution to the problems that oil causes to our economy. With 
respect to the open fuels standard, I think we have had some 
discussions in the past with your staff, and we have some 
detailed concerns about the best way to provide incentives for 
vehicles that use more--that they use cleaner alternatives. And 
so I think we definitely support those goals. And I think our 
approach to cutting oil use is not just a biofuels approach but 
relies on, as the open fuels standard emphasizes, reducing oil 
use with better biofuels but also with electric vehicles and a 
later variety of technologies.
    So while we are happy to continue to work on details and 
the best way to implement that, I think is moving forward with 
oil-saving solutions across the economy is the right way to 
address the problems that oil causes.
    Mr. Engel. Thank you. I might also add that in the various 
Appropriations bills, I have gotten amendments in those bills 
which would implement the President's executive order that in 
the Federal fleet of cars that they would all be flex-fuel 
cars.
    Let me ask you again, Mr.----
    Well, let me ask Mr. McAdams or Mr. Dinneen, would either 
of you comment on how the increased ability of consumers to 
choose their fuel as they would with the adoption of the OFS 
would affect the so-called blend wall? And can either of you 
address how more consumer demand of biofuels would help the 
industry grow more quickly?
    Mr. McAdams. Well let me just make one comment, and I then 
will defer to Bob.
    A number of my members--in fact, the majority of my members 
actually make a drop in hydrocarbon molecules which doesn't 
need an open fuel standard. It can compete directly with the 
hydrocarbon fuels today. So I will let Bob pick up the other 
piece.
    Mr. Dinneen. Thank you, Congressman.
    We do support the open fuels standard, and we appreciate 
your leadership over the years on that issue.
    I will tell you that greater E85 sales is absolutely a way 
around the blend wall. The blend wall this year, as I testified 
to earlier, is less than tow-tenths of 1 percent of the U.S. 
gasoline market. You can meet that with greater E85 sales. If 
the 3,000-plus E85 stations today were offering E85 and selling 
just 50,000 gallons a month, we would meet that standard. And 
you can most certainly do that.
    Certainly, as the price of gasoline has increased and 
ethanol prices have been coming down, consumer use of E85 is 
increasing specifically. And I can give you some specific data 
from the State of Minnesota that has shown since May there has 
been a spike in E85 use because the economics today are just 
compelling. And that is ultimately what is going to move this 
market.
    Mr. Engel. Thank you. If you could get that to me, I would 
appreciate it.
    Thank you, Mr. Chairman.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentleman from Kansas, Mr. 
Pompeo, for 5 minutes.
    Mr. Pompeo. Thank you, Mr. Chairman. Thank you all for 
being here today. There has been a lot of discussion about the 
RFS protecting investments or being good for a particular 
industry, corn growers, bad for cattle guys. It seems to me 
those are the wrong discussions. It seems to me this is about 
consumers, providing them the independent energy at the source 
that they demand and that they want. It seems like that ought 
to be everybody's focus. A lot of nodding heads, but I haven't 
heard much talk about it today. So I want to try to get to 
that.
    Mr. Gerard, a moment ago you said--but I will ask everyone 
to try to give me a yes or no. Yes or no, does the RFS today 
impact the cost of transportation energy for consumers in the 
marketplace today?
    Mr. Gerard.
    Mr. Gerard. It does. It clearly impacts it, but it is not 
in a downward fashion.
    Mr. Pompeo. You think it goes up.
    Mr. Dinneen.
    Mr. Dinneen. Yes, it impacts it.
    And because ethanol is less expensive than gasoline, it is 
helping consumers today.
    Mr. Drevna. I respond in the affirmative to what Jack said. 

    Mr. McAdams. I think it is helping consumers because it is 
giving them a diversity of choice.
    Mr. Martin. It is having a limited but positive benefit at 
the present time.
    Mr. Pompeo. So you think it makes a gallon of gas cheaper?
    Mr. Martin. It is hard to say. I don't have actually a 
specific analysis.
    Mr. Pompeo. And Mr. McAdams, you think it makes it more 
expensive. But you think it is worth it because of the 
diversity?
    Mr. McAdams. I think, over the long haul, the return on the 
investment is good.
    Mr. Pompeo. My question is today. If you drive up to a 
pump, is it costing you money----
    Mr. McAdams [continuing]. Compete with today's market. And 
my members are doing that.
    Mr. Pompeo. Mr. Drevna, one of the responses to the RFS 
potentially is that refiners will export products to solve this 
challenge that they perceive, at least, with respect to RINs. 
Is there evidence of that happening already today?
    Mr. Drevna. I am sorry. I didn't catch the last part of the 
question.
    Mr. Pompeo. The question is about exports. The question is, 
is there evidence that refiners are exporting refined products 
today as a result of the RFS, that they would not have absent 
that?
    Mr. Drevna. Right today, I can't say definitively yes. But 
I can guarantee you, if this blend wall product isn't solved, 
refiners are going to--they have a couple of options to address 
the RIN in a blend wall. One is to cut runs, which will limit 
the supply of gasoline and diesel overall; and two is to export 
more, which would also limit their obligation. Another thing 
you have to take into consideration is the import of either 
gasoline or gasoline product to be blended here in the United 
States. There is evidence that shipments of gasoline and 
gasoline components have made a u-turn to go somewhere else 
because of the high cost of those free RINs.
    Mr. Pompeo. Mr. McAdams, you talked about an F-18 you saw 
flying off the deck with this new and improved product. What 
did that cost compared to what it would have cost the taxpayer?
    Mr. McAdams. I am not familiar with the exact price. I 
would be happy to try to find out for you.
    Mr. Pompeo. If I am saying it is 10 or 15 times as much, 
would you dispute that?
    Mr. McAdams. I just don't have the information.
    Mr. Pompeo. Thank you.
    If it was 10 or 15 times, would you still think it was a 
good idea?
    Mr. McAdams. Over the long frame and depending on the 
number of gallons, it might be a great bet.
    Mr. Pompeo. Mr. Dinneen, you talked about RINs being free. 
The gentleman who runs Valero said its RINs are going to cost 
$500 million. Why is he wrong?
    Mr. Dinneen. Because he is the third largest ethanol----
    Mr. Pompeo. But why is he wrong? I understand what he does. 
Why is he factually wrong? It is about facts. We are trying to 
create policy from facts. Tell me why he is wrong about what he 
is going to have to report under Sarbanes-Oxley next year for 
the cost of his RINs.
    Mr. Dinneen. By regulation, ethanol producers have to give 
a RIN to the purchaser of the ethanol. So they are free. If 
they are out on the marketplace looking for RINs, looking for 
credits, it is because they have made a decision not to invest 
in E85 infrastructure, not to allow more ethanol to be used, 
and to go to the marketplace elsewhere.
    Mr. Pompeo. I want to get to that. I appreciate that. You 
said, it is because they hadn't invested. Is there any lawful 
requirement for these companies to invest in this 
infrastructure? You posted on your blog--and I want to make 
sure I get the language exactly right, quote, ``oil companies 
have blatantly ignored the law, refusing more than 5 years to 
make any meaningful investment in infrastructure that would 
allow the sale of E85 or blends above E10.'' What law is it 
that they were violating in not making those investments?
    Mr. Dinneen. Well, what they are ignoring----
    Mr. Pompeo. No, no. What law? I am just trying to figure 
out what statute, what U.S. Code. I assume it was a Federal 
law. What law did they violate?
    Mr. Dinneen. The point is they are ignoring the RFS, which 
sent a very clear signal to everybody that we are going to be 
using more renewable fuels. The auto companies responded by 
producing more FFVs. Our ethanol responded by investing in new 
technologies. The oil companies responded by deciding not to 
allow consumers access to these other fuels.
    Mr. Pompeo. So many more questions, but Mr. Drevna, go. I 
will see if the chairman will bear with me.
    Mr. Drevna. I have to respectfully disagree with Mr. 
Dinneen. We have no control over what the 95 percent of the 
independent gasoline operators do. It is up to them. It is up 
to them. If they want to make the investment to sell E85, which 
the consumers don't want, have at it. If Mr. Dinneen's members 
want to invest in E85 stations, my members would be more than 
willing to sell him the 15 percent gasoline.
    Mr. Dinneen. The franchise agreements is how they control 
what is sold. And in Kansas, in particular, we have seen what 
they do.
    Mr. Pompeo. I know the story very well. Did any of those 
franchise agreements under penalty of death? Or did they enter 
those franchise agreements voluntarily, do you know?
    Mr. Dinneen. I am not privy to the franchise agreements, 
but I wouldn't say no to anything. All right? That is all I am 
saying.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentleman from Texas Mr. Hall 
for 5 minutes.
    Mr. Hall. I knew when Barton turned it off on Shimkus it 
would come back. And your suggestion that they instruct or 
inform and help us reform, Mr. Shimkus, is probably one reason 
he whacked it off.
    I am going to take a chance on that and ask some of the 
same questions that have been asked because just about 
everything has been covered.
    Mr. Drevna, in your talking points, I guess American Fuel & 
Petrochemical Manufacturers' white paper is a good bit about 
the advanced biofuel shuffle. And I am told there is no 
difference between corn ethanol and sugarcane ethanol for fuel 
blending. The shuffle occurs only because of the RFS advanced 
biofuel requirement. So let me maybe go to Mr. McAdams if I 
might. And first, I want to thank the chairman for the hearing 
because I haven't attended a more important hearing, a more 
divisive hearing, or a hearing where men like you five could 
get together and really give us some good work if you could get 
together in the future. There ought to be some answer to this 
other than the Congress having to make an answer.
    And how to proceed with RFS and issues with blend wall are 
very important to our energy future. I am not sure what our 
best path is right now where all of you come in. Hopefully, by 
the end of this hearing, we will have a better idea of how to 
move forward in the future.
    So, Mr. McAdams, the blend wall, probably the most pressing 
concern to the renewable fuel standards and specifically an 
ethanol issue. But the RFS is designed to include advanced 
biofuels other than ethanol, including so-called, as some of 
you mentioned, the drop-in fuels that don't contribute to the 
blend walls and, in fact, may be the solution to it.
    Mr. McAdams, are there currently any fuels being made that 
avoid the blend wall and take pressure off the use of ethanol? 
And are you concerned that unless the blend wall is addressed, 
it could sink the entire RFS, including the advanced biofuel 
provisions? Do you have that figure?
    Mr. McAdams. Thank you Chairman Hall.
    Let me first answer the question about the biofuels. Yes, 
there are a number of fuels that are drop-in biofuels that are 
currently being used in the D6 or the conventional pool. When 
you originally designed the RFS, I don't think most of the 
folks in the committee understood that other fuels could be 
compliant with the D6 pool, which was originally set up for the 
ethanol industry. With the advent of the rise in the RIN price 
for the D6 pool, we have seen a number of renewable diesel 
gasolines and some biodiesels actually come into the D6 pool. 
If you take Mr. Dinneen's testimony at his word that there is a 
280 million gallon gap in terms of the number of gallons of 
gasoline to put the ethanol in, we may actually see 100 million 
gallons of renewable diesel this year used in the State of 
California because the State of California wanted the enhanced 
greenhouse gas reduction of those fuels back out the blend wall 
issue to some degree. Now I am not suggesting to the committee 
it is the panacea moving forward as the size of the cellulosic 
number grows.
    But I do want everyone to be aware that there are a variety 
of flexible drop-in fuels that are now helping take the 
pressure off the blend wall. And yes, the blend wall issue has 
created a great firestorm, as you have witnessed today. And it 
is had a negative impact on my guys being able to build these 
innovative plants to find financing.
    Mr. Hall. Mr. Gerard, would you like to comment?
    Mr. Gerard. Yes, I would, Mr. Chairman. Thank you.
    What Mr. McAdams says is probably true and important. Let 
me just add, though, and I think we talked about this before 
the issue. It is an incremental pressure. And what I mean by 
that, it still doesn't resolve the entire problem. Keep in mind 
the challenge we have with the blend wall today is only for 
this year. Next year, the volume goes up. The following year, 
the volume goes up yet again. And so this continues to escalate 
into the future. So while we are getting some incremental 
improvement in some biofuels and others, diesel, that is 
terrific. It is assisting, but none of it is sufficient to 
offset the pressure and the crisis we have in the blend wall. 
That is why we have got to come back and address the blend wall 
issue.
    Mr. Hall. Thank you for that.
    Mr. Drevna, I wish you would address the advanced biofuel 
shuffle, the import of sugarcane ethanol from Brazil and the 
exporting of corn ethanol from the U.S. to Brazil. What is 
happening and what ought to be done to fix this? And let me 
just say this because I think my time is probably almost gone. 
I know most of you there that have invested and have built 
companies and are relying on a reasonable well-thought-out 
answer to this problem. You might feel like the button people 
felt when the zipper guy came along. But for your knowledge, 
the button companies are still going, and the zipper companies 
are all going together. So we need to work something that is 
satisfactory to all five of the folks you all represent there. 
That is a big job.
    And I will yield back my time.
    Mr. Whitfield. The gentleman yields back the balance of his 
time.
    It is time to recognize the gentleman from Louisiana, Dr. 
Cassidy, for 5 minutes.
    Mr. Cassidy. Thank you. One of the advantages of going last 
is that you get to hear your colleagues and get a sense of 
where they are going. Some of you I know would like to totally 
repeal the RFS. But if Mr. Hall from Texas is saying that the 
buttons and the zippers are going to list, I am a little bit of 
a vote counter, and I don't think that there are, frankly, 
votes to repeal it. It is not--because I have been kind of 
sounding my colleagues as they walk out to get a sense of it.
    Now, Mr. Gerard, you just suggested that--I am not 
committing you to searching for--I am a practical guy. So if we 
have got to come up with something that is going to keep the 
most deleterious effect of this from happening and if even Mr. 
Hall from Texas is going to say that we have to coexist, then I 
am going to kind of accept his lead and ask you guys, if there 
was something that we could do to at least ameliorate the 
negative effects. I gather we would start with the blend wall. 
Keep it from escalating. Can I just go down the line and ask 
each of you, if you can concede that there would be something 
that we could work on, what would that be?
    Mr. Gerard. Clearly, the blend wall is the crisis right 
now. I would suggest, Mr. Cassidy, that the first thing we have 
got to do is to define what we are trying to accomplish. What I 
mean by that, I hear conversations about greenhouse gases. I 
hear import reliance. I hear a variety of other things 
involved. I think we need to define it because fundamentally 
today, the market is very different than it was in 2007.
    Mr. Cassidy. I accept that. As I listen to everybody and 
have read your testimony, it seems like the major concern that 
will keep all those guys voting against repeal would be 
greenhouse gases. Now I gather there is a confusion of experts 
on that. There just is. But also gather that for some folks, it 
is something which is going to be accepted as holy scripture, 
and they are not agnostic.
    Mr. Gerard. Well, if you look at the panel today, there 
might be a distinction between Mr. Dinneen and Mr. McAdams 
because the National Academy of Sciences has concluded that the 
corn-based ethanol----
    Mr. Cassidy. I accept that. I am a practical guy. And they 
are going to believe it no matter what. And there are going to 
be some others who, for some other reason, decide they want to 
stay with the renewable fuels standard. I am not arguing either 
side. I am just telling what you I have observed. So when we 
start with the blend wall, perhaps prevent the escalating sort 
of demands of it, is there anything else that you would 
suggest, Mr. Gerard?
    Mr. Gerard. Well, I think we need to do that first, and 
then again, I would suggest we go back and look at the 
foundation of the fundamentals. What are we trying to do?
    Mr. Cassidy. So walk down the aisle.
    Mr. Dinneen. Congressman, as I indicated before, I will 
acknowledge that there are issues that need to be addressed. 
But I do believe strongly that EPA has the authority to address 
some of those issues. I, for example, believe that the agency 
ought to be looking at transparency in the RIN market.
    Mr. Cassidy. Let me first say, our side doesn't trust EPA, 
OK? And I think if there is some legislative vehicle that could 
give assurance to both, that might be preferable. We can argue 
for the world view which we would like to have. I am just 
listening to my colleagues and getting a sense of what the 
world view is up here. So aside from relying upon the 
beneficence of the EPA, what else would you suggest?
    Mr. Dinneen. Well, the suggestion was that this blend wall 
is creating a crisis. I am a practical guy, too, Congressman. I 
just happen to believe that two-tenths of 1 percent of the U.S. 
gasoline market that is represented by the blend wall this year 
is not a crisis. And it can be addressed.
    Mr. Cassidy. But it escalates, as the other panel has said. 
So even though we may be able to mitigate it this year, in 
subsequent years, it will become more difficult. And as your 
neighbor just pointed out, there may be tanks of gasoline going 
elsewhere.
    Mr. Dinneen. The ethanol requirement increases by 600 
million gallons----
    Mr. Cassidy. I feel like we are battling----
    Let's work down the aisle.
    Mr. Drevna. Congressman, thank you. I think you have to 
look at what was anticipated, what were the directives, how 
they have played out, and a lot that hasn't been talked about 
today and we tried to bring it up, what is the ultimate impact 
on the consumer? What is the ultimate impact on the overall 
American economy, not this segment or this segment or this 
segment. Look at the thing holistically. Is, has it worked? 
Where has it failed?
    Mr. Cassidy. I accept that. I totally accept that. I think 
you have very compelling testimony. That said, I don't think 
that we are going to repeal the RFS. And so, keeping in mind 
that our primary thing should be the working family of the 
United States of America, is there anything incrementally that 
we could do that could improve that?
    Mr. Drevna. Well, incrementally, I don't think if a problem 
is unworkable at its core or at its nucleus, that tinkering on 
the outer electrons isn't going to get the job done. And that 
is why we are for repeal. And as Jack said earlier, you repeal 
it, we are still going to use 10 percent ethanol. Mike's gang 
is still going to get advanced biofuels. We are we will 
progress, not digress. I have maintained, Congressman, if we 
keep this law as it is, we are going to digress.
    Mr. Cassidy. Next?
    Mr. McAdams. I would say immediately the committee should 
in a bipartisan way send a letter to the EPA because it is of 
no loss to you. And call on them to immediately release the 
2013 RVO. And I think you will be surprised you will actually 
see a decrease in the cellulosic number from the preproposed 
rule. And ask them whether or not they could do the 2014 and 
2015 framework by November 31. I would do that irrespective of 
what your decision is with respect to legislation. I think you 
should do both.
    Mr. Cassidy. Dr. Martin?
    Mr. Martin. I think moving forward with flexibility and 
also recognizing that the pace of expansion of biofuels over 
the next few years is going to be lower but putting a complete 
halt to it or trying to put it in reverse is going to have a 
very negative consequence. So moving forward at a deliberate 
but not excessive rate is the best solution.
    Mr. Cassidy. I yield back. Thank you.
    Mr. Whitfield. The gentleman's time has expired. And there 
are no further questions for this panel. So I want to thank you 
all very much for----
    I know it is frustrating for all of to you listen to the 
other side of the issue. But we look forward to working with 
you as we move forward to make some determination.
    Mr. Rush. Mr. Chairman, I have one question that has been 
kind of percolating in my head.
    Can't we all just get along?
    Mr. Whitfield. Why are you asking me that question?
    Well, listen, thank you all. And we do look forward to 
working with you. We appreciate your testimony.
    I would like to call up the second panel at this time: Mr. 
Tom Buis, who is CEO of Growth Energy; Mr. Joseph Petrowski, 
who is CEO of the Cumberland Group, on behalf of the Society of 
Independent Gasoline Marketers of America and the National 
Association of Convenient Stores. We have Mr. Shane Karr, vice 
president of Federal Government affairs, the Alliance of 
Automobile Manufacturers. We have Mr. Todd Teske, who is 
chairman and CEO of Briggs & Stratton. We have Mr. Robert 
Darbelnet, who is president and CEO of AAA. And we have Mr. Joe 
Jobe, who is the CEO of the National Biodiesel Board.
    So if you would all have a seat. We thank you for being 
with us today. Thank you all for joining us today. And we do 
look forward to your testimony because many of you are quite 
affected by this renewable fuels standard. And I am sure you 
have some practical thoughts and ideas about it.

     STATEMENTS OF TOM BUIS, CEO, GROWTH ENERGY; JOSEPH H. 
PETROWSKI, CEO, THE CUMBERLAND GULF GROUP, ON BEHALF OF SOCIETY 
   OF INDEPENDENT GASOLINE MARKETERS OF AMERICA AND NATIONAL 
ASSOCIATION OF CONVENIENCE STORES; SHANE KARR, VICE PRESIDENT, 
    FEDERAL GOVERNMENT AFFAIRS, THE ALLIANCE OF AUTOMOBILE 
   MANUFACTURERS; TODD J. TESKE, CHAIRMAN AND CEO, BRIGGS & 
STRATTON CORPORATION; ROBERT DARBELNET, PRESIDENT AND CEO, AAA; 
          AND JOE JOBE, CEO, NATIONAL BIODIESEL BOARD

    Mr. Whitfield. So Mr. Buis, we will recognize you first.
    Each one of you will be given 5 minutes. And on the table, 
there are a couple of boxes that will turn red when your 5 
minutes is up. So if you can stay within the time limit, we 
would appreciate it. We do have your testimony though.
    So, Mr. Buis, you are recognized for an opening statement 
for 5 minutes.

                     STATEMENT OF TOM BUIS

    Mr. Buis. Thank you, Mr. Chairman. I appreciate the 
opportunity to testify, and I do appreciate----
    Mr. Whitfield. Do you have your microphone on?
    Mr. Buis. There we go. Thank you, Mr. Chairman and members 
of the subcommittee. I appreciate this opportunity to testify 
today. And I would ask that my written testimony and the charts 
and data that we have submitted be submitted into the record.
    Mr. Whitfield. So ordered.
    Mr. Buis. Thank you very much. I am Tom Buis. I am CEO of 
Growth Energy. We represent 79 ethanol plants and 81 associate 
members and about 40,000 grassroots supporters at Growth 
Energy. Our plant members utilize grain, corn, and sorghum to 
make biofuels. But they have also invested very heavily in what 
we call next generation production, both cellulose. We have a 
plant that is currently under construction in Iowa that will 
use farm waste, corn stover to produce cellulosic ethanol that 
should be online the first of next year.
    We have another plant in Iowa that is actually capturing 
carbon from the corn ethanol plant and feeding it to algae 
bioreactors. That is about a 20-acre bioreactor process that 
can be seen there. And we have others that have invested in the 
use of woody biomass.
    So the first generation of ethanol producers, which we 
primarily represent, are all invested in next generation, both 
to meet the greenhouse gas emissions targets and the targets of 
the RFS. The RFS, in our opinion, is an overwhelming success. 
You know, it has injected much needed competition and consumer 
choice into the fuel markets. We are only a little over 5 years 
since the passage of that law and only 3 years since the rules 
were finalized.
    And already we are producing 10 percent of our Nation's 
gasoline supply. It has lowered the price at the pump. It has 
created American jobs. It has revitalized rural America, 
including farm income. It has improved the environment and made 
our Nation more energy independent.
    Some want to see this policy fail, as we have heard today 
and elsewhere. But keep in mind not only are we producing 10 
percent today in a very short period of time because of the RFS 
but we can do more in the future. With oil approaching $110 a 
barrel and gasoline nearing $4 a gallon, does anyone believe we 
don't need a less expensive competitive alternative to oil? 
That was one of the purposes of the RFS originally. We have 
that competitive product today.
    And despite what some on the first panel have said, ethanol 
is the cheapest fuel in the world. We are 67 cents a gallon 
cheaper than clear gasoline. And even when they challenge or 
come back with the BTU unit, they are not counting the value of 
octane in the refining of that fuel. And our efficiency keeps 
improving. Energy use and water use keep declining while yield 
and productivity is increasing from every pound of feedstock we 
use.
    Despite this data, some are trying to blame biofuels for 
driving up gas prices. It is just another scare tactic to try 
to eliminate what I consider the best energy law passed by 
Congress in the last 40 years. RIN prices are not the cause of 
higher gas prices. There are 2.6 billion surplus RINs that can 
be used in the marketplace for this year.
    We are going to produce about 13 billion gallons of ethanol 
and biofuels. Last year, the same situation with a short crop 
and a short production, RIN prices were 2 or 3 cents a gallon. 
And we still had high gasoline prices. So all this doesn't 
square. The real cause of higher gasoline prices and RIN prices 
is self-inflicted by the obligated parties who refuse to blend 
higher levels of ethanol. The real cause of higher gas prices 
is unrest in the Middle East, refinery outages, speculation, 
and increased demand.
    Ethanol's competitive price is why Growth Energy led the 
way in asking the EPA to approve the use up to 15 percent 
ethanol fuel. That is how you break the blend law. That is how 
you solve all the controversy that we were hearing today. We 
could see it coming, Mr. Chairman. One of the reasons to go on 
to E15 is, even with the rosy scenario laid out in 2007 on fuel 
consumption, we were going to have to go to higher blends. That 
is why we filed it. That will allow the marketplace plenty of 
space for next generation biofuels.
    The RFS and the E15, as I just mentioned, go hand in hand. 
E15 is the most tested fuel in the history of fuel changes. DOE 
performed a comprehensive test, using 86 different vehicles a 
total of 6 million miles. They found no harm to emissions 
equipment and no issues with engine durability, the two 
requirements for granting a waiver under the Energy 
Independence and Security Act.
    By contrast, the CRC study that gets mentioned by our 
critics only tested eight vehicles, two of which had known 
engine issues. They did not test these engines on E10 and only 
tested three of the eight on ethanol-free gasoline and even one 
of those failed. It was a flawed test designed to make a 
political point to eliminate the cracking of the Berlin Wall. 
The E15 waiver is only approved for light duty vehicles built 
after 2001 and flex-fuel vehicles. It is not approved for off-
road vehicles, small engines, motorcycles, or marine engines. 
In fact, it is illegal for those vehicles to use it, and it is 
stated so on the label that must be acquired on any station 
offering E15. The stations that have been offering E15, the 
results are pretty amazing. One of the myths that is 
perpetuated by the oil industry is that consumers don't want 
higher blends. Well, how do they know if they have never been 
offered them? Where they have been offered them, we are seeing 
volumes go up significantly. In one case from a retailer that 
testified at a congressional briefing last week, his volumes 
quadrupled in a year. They have not had access to that 
marketplace. So let's let the consumer have a choice.
    I would also add that over the past 2 and a half seasons, 
NASCAR, which has quite a bit of its reputation staked on the 
durability and performance of its race cars has put 4 million 
miles on those cars without a problem. They got increased 
horsepower and increased performance.
    Mr. Whitfield. Mr. Buis, I have let you go over about 2 
minutes. If you could summarize, please.
    Mr. Buis. All right. I would like to summarize, Mr. 
Chairman, by saying that to repeal the RFS to me is 
unnecessary. To reform it is also unnecessary. We feel that 
there is enough flexibility within the law that all of these 
issues can be addressed. And if we want to get beyond the 
problem, let's crack that blend wall.
    Mr. Whitfield. Thank you.

    [The prepared statement of Mr. Buis follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. Mr. Petrowski, you are recognized for 5 
minutes.

                STATEMENT OF JOSEPH H. PETROWSKI

    Mr. Petrowski. Thank you, Mr. Chairman.
    I am Joe Petrowski, the CEO of the Cumberland Farms Gulf 
Oil Group. We deliver gas to 3,000 locations over 29 states. We 
operate almost 900 company owned and operated convenient stores 
in 13 states. We are not a refiner. We are not a producer. We 
don't have any investments in ethanol. We are out there dealing 
with the customers. We have over a million transactions a day 
selling fuel. All we want to do is sell the fuel that our 
customers want in a legal and lawful manner. And we do believe 
that it is demand that generates supply. We will sell what our 
customers want.
    Now I, too, don't believe the RFS should be repealed. I 
think it has achieved much of what Congress intended which was 
a diversity of supply, a domestic source of fuel, and has, I 
believe, on balance brought down the price of fuel to the 
consumer. With RINs trading at $1.50, for a blender that is 
almost picking up 15 cents a gallon on a 10 percent blend and 
with ethanol at 60 cents under, that is another 6 cents; that 
is 20 cents a gallon. But with RINs at $1.50, we are 
subsidizing exports and taxing imports, which has an effect of 
increasing prices. Just recently, a refiner who bought a 
refinery in Hawaii announced that when they invested in the 
refinery and got product up to levels, they would export to 
China rather than California or use it locally really to 
generate the RINs because an exporter get that RIN and an 
importer has to pay that RIN. So there are some deficiencies in 
the RFS, which Congress could never have anticipated. Driving 
is down, which is somewhat a demographic--online shopping, an 
older population. CAFE standards are up, which was mandated by 
Congress and was done effectively. But we are using less fuel 
than we did when the law was first put in. You cannot mandate 
to pour 14 ounces of fluid into a 12-ounce cup, which is 
essentially what we have done. Our suggestion is that the EPA 
in concert with the DOE set the standards of what should be 
blended forward, taking the realities of the marketplace. We 
think that is the right solution.
    We are also going forward going to have more alternate fuel 
vehicles. So we do believe--there are other things I would like 
to see Congress--and maybe this is discussion for another day. 
It is cheaper because of the 1920 Jones Act for product in 
Louisiana to be shipped to Venezuela and Mexico than it is to 
Boston or New Jersey. Along with getting the RIN for being an 
exporter, that is giving a great incentive as we ramp up 
domestic production and ethanol production that we are 
exporting the product rather than using it domestically to 
lower costs for consumers.
    If we have a bias at Cumberland Farms and Gulf Oil is we 
want lower energy prices for our customers because we have just 
noticed the discretionary spending in our stores is just much 
higher when the consumer is not spending it on fuel. So we 
might be rare among oil companies that we like lower oil 
prices. Now that is not altruism. It is the simple fact that we 
are not a producer or a refiner. We are a retailer.
    That is it, Mr. Chairman. I have used my time.
    Mr. Whitfield. Thank you very much.

    [The prepared statement of Mr. Petrowski follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. Mr. Karr, you are recognized for 5 minutes.

                    STATEMENT OF SHANE KARR

    Mr. Karr. Thank you, Chairman Whitfield, Ranking Member 
Rush, and members of the subcommittee.
    I really appreciate the opportunity to testify here today 
on behalf of the alliance and our 12 member companies. We 
represent companies headquartered all over the world that make 
roughly three out of every four new vehicles purchased each 
year, so a broad breadth of manufacturers representing a very 
sizable portion of the marketplace.
    We, first of all, want to say we appreciate the thoughtful 
review of the RFS, and we have responded to several of the 
white papers, as other stakeholders have, and think that this 
has been a great process. The alliance didn't take a position 
on RFS II in 2007. And frankly, I can't tell you how many 
gallons of renewables the market is going to produce by a date 
certain. Of course, neither can any of the other 15 witnesses 
that you are hearing from over the course of these 2 days.
    Frankly, we are all here because a number of the 
assumptions that were made in 2007 have proven inaccurate in 
2013. And the first panel spent a lot of time talking about the 
decline in overall fuel use and the slow emergence of 
cellulosic biofuel. So I am not going to spend time on those. 
Rather, I would like to talk about another faulty assumption, 
if you will, and one that is actually embedded in the name of 
the standard. The assumption was that renewables would, in 
sufficient quantities, become a stand-alone alternative fuel. 
And it kind of went like this: Renewable producers would make 
billions of gallons and auto companies would make FFVs capable 
of running on fuel that was composed of 85 percent renewables 
and be sort of done and done. No blend wall issues, no 
compatibility problems. In the right vehicle, gasoline is 
largely displaced by a competitor that is almost all biofuel 
based, right?
    It was a great vision. It has proved to be totally wrong.
    Instead, the better way to think about biofuels might be as 
an additive. And that is not pejorative. It is just an attempt 
at an accurate description. It is effectively the tack that 
Growth Energy took when it petitioned EPA to increase the 
national blend from E10 to E15. To their credit, the producers 
were among the earliest to attempt to address the issue.
    But the fact is that even as an additive, implementation 
has turned out to be very complicated and problematic, as the 
witnesses at the table will attest. We can make vehicles that 
can run on virtually any fuel. So I want to emphasize that. But 
there are a lot of competing policy priorities that we have to 
navigate.
    So taking seriously Chairman Upton and Chairman Shimkus and 
Chairman Terry's--there are a lot of chairmen--admonition to 
come to the table with something, I will say to you that these 
would be our key watch words for moving forward, how we should 
look at biofuels policy:
    One, prospectively, prospective, not retroactive policies 
with appropriate lead time for manufacturers.
    Two, definitively, we need certainty about the fuel specs. 
The more precise the spec, the better we will be able to 
optimize all aspects of vehicle performance.
    Three, comprehensively. Making the fuels important and 
having vehicles that can use the fuel is important. But it 
turns out distribution is absolutely critical as well, and we 
seem to have forgotten about distribution in 2007.
    And finally, holistically. There are a number of ways to 
achieve energy security and our environmental goals. Biofuels 
are an important path, but they are just one. My members are 
giving consumers choices, and ultimately, the market will 
decide which one works.
    If there is a lesson in the last 5 years, it is that we 
should be humble about our ability to see the future and 
committed to working together to overcome the challenges that 
arise. We appreciate the opportunity to appear. And again, I 
want to reemphasize we are committed to working with the 
committee going forward.
    Mr. Whitfield. Thank you Mr. Karr.

    [The prepared statement of Mr. Karr follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. Mr. Teske, you are recognized for 5 minutes.

                   STATEMENT OF TODD J. TESKE

    Mr. Teske. Chairman Whitfield, Ranking Member Rush, and the 
distinguished members of the committee, thank you very much for 
soliciting our viewpoint on this. This is a very important 
issue for Briggs & Stratton. Briggs & Stratton is located in 
Milwaukee, Wisconsin. We are the world's largest manufacturer 
of air-cooled gasoline engines that are used in outdoor power 
equipment. We also manufacture the same equipment. So we have 
knowledge, obviously, on the engine side and the application 
side under various brand names. We operate in about 100 
countries. So we are global. We have 6,200 employees throughout 
the world, of which, most of them, 5,300, are here in the U.S. 
We are primarily a U.S.-based manufacturer. We have 85 percent 
of our manufacturing is done here in the U.S. And we are really 
proud to be celebrating our 105th anniversary this year.
    I would like to first take the opportunity to commend the 
committee on their workmanlike efforts in terms of these 
issues. There are a lot of different issues we have been 
following. Obviously, the white papers that the committee has 
put out through the Outdoor Power Equipment Institute. I am 
currently chair of that group. But I really am here today on 
behalf of Briggs & Stratton to give you an idea of small engine 
manufacturers. And the issue isn't just unique to Briggs. It 
applies to others in the industry as well, the issues that we 
have with the RFS and specifically with E15.
    I would also like to recognize the EPA. We have over the 
years worked an awful lot with the EPA in terms of emissions 
regulations. Their career employees are just very professional 
people, and we have found them to be fair and balanced as we go 
through finding regulations that both protect, obviously, the 
environment but also make sure that the consumer is protected 
along the way.
    So let me talk a little bit about the affect of ethanol on 
our engines. Our engines are currently designed to run on 
blends of E0, so zero percent ethanol, all the way up to E10. 
They are calibrated as such. The materials that we use will 
withstand E10. And when the partial waiver came out with 
regards to the EPA introducing E15 into the marketplace, they 
excluded offroad engines, which were excluded. So the EPA 
really recognizes that there is an issue with regards to our 
types of equipment. The problem is, it introduces the fuel into 
the marketplace. Part of the partial waiver also included a 
misfueling mandate that was out there to make sure that people 
don't misfuel. Because I think the EPA recognized that, in 
fact, there will be misfueling. That can and will occur.
    So the issue along the way is when you get to E15--let me 
just give you a little bit of background when you get above 
E10. It degrades the engine components very quickly. And the 
engine itself will achieve premature failure. So our concern is 
really those consumers. There are 80 million engines out there 
in the U.S. today that Briggs & Stratton has made. And we want 
to make sure that those consumers get the value they deserve as 
we go along. So it is really the legacy equipment and also 
moving forward.
    So the misfueling, we anticipate--and there are a lot of 
studies that have been done that misfueling will occur. 
Currently, the misfueling mandate really calls for a label on a 
pump. And we have all been to the pump and filled up our cars. 
There is a lot of information there and this small very small 
label is not going to deter someone from basically putting fuel 
in their 5 gallon can or the 2.5 gallon can and taking it home 
and putting it in their piece of equipment, small engine. Also, 
when you look at it, studies have shown that because the cost, 
as we talked earlier today, the cost of ethanol, higher blends 
of ethanol is cheaper. People will migrate towards that fuel. 
There is also just simply a lack of knowledge out in the 
marketplace. Just yesterday I was talking with a CEO friend of 
mine in Milwaukee, and he was telling me about his boat. And I 
said you don't put even E10 in your engine. He said E what? He 
doesn't understand. The fact is, people don't understand these 
things. They will misfuel. And it will lead to premature 
failure with regards to their engines. They will not get the 
value they need.
    So we at Briggs, we are not against renewable fuels at all. 
We believe renewable fuels are important. We want to make sure 
that there are renewable fuels that can be used in not only 
equipment that we make into the future but also equipment that 
we have made in the past that is out in the field, the legacy 
equipment. We are really very much for a drop-in fuels. We have 
tested isobutanol at our own expense. We have worked 
extensively with a company named Gevo in the past. We have 
found that the isobutanol as an example is a fuel that could be 
used as a drop-in fuel for our equipment, again, both legacy 
and going forward.
    We would suggest that the committee rescind E15, the 
partial waiver because there will be misfueling that will 
occur.
    And finally we would recommend at a minimum that the amount 
of ethanol that is blended into the national fuel supply be 
capped at 10 percent ethanol. So our engines can handle 10 
percent. We would suggest you cap it at 10 percent.
    So, again, thank you very much for allowing us to be here. 
And we look forward to your questions.
    Mr. Whitfield. Mr. Teske, thanks very much for your 
testimony.
    [The prepared statement of Mr. Teske follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. Mr. Darbelnet, you are recognized for 5 
minutes.

                 STATEMENT OF ROBERT DARBELNET

    Mr. Darbelnet. Thank you. My name is Bob Darbelnet. I am 
president and CEO of AAA.
    Mr. Whitfield. Would you move it a little closer to you, 
Mr. Darbelnet?
    Thank you.
    Mr. Darbelnet. We represent 54 million motorists in North 
America and appreciate this opportunity to share with you our 
concerns both relative to the premature introduction of E15 and 
what I think, in due course, you are going to be required to 
do, and that is to adjust the RFS standard.
    But dealing with E15 first, we have--in our view, there are 
three prerequisites for the introduction of the new fuel. And 
the first one is that there be adequate testing to ensure 
safety. And in our view, that has not occurred. Granted, the 
EPA did extensive testing. But it was focused predominantly on 
emission controls. Industry testing, however, revealed real 
concerns, some of which have already been mentioned relative to 
premature engine wear and fuel pump failures. For that matter, 
even the Renewable Fuels Association, which is a great advocate 
for ethanol, advises retailers to be aware of the damage to 
their underground fuel systems that can be caused by E15. So if 
it is not safe for their tanks, it makes us wonder why it would 
be safe for our members' tanks.
    The second requirement is that there be coordination 
between regulators, fuel retailers, and auto manufacturers. In 
our view, that has not occurred either. A number of the 
retailers are opposed to the sale of E15, and virtually all the 
significant auto manufacturers in this country have advised 
that E15 is incompatible with 95 percent of the vehicles that 
are on America's roads today.
    And then, the third requirement is that there be outreach 
to consumers to mitigate the risk of misfueling. And that has 
not occurred either. We did some polling recently that 
indicated, much to the point that Mr. Teske made, 95 percent of 
Americans don't know what E15 is, let alone whether they ought 
to put it in their vehicle. And the EPA ceded to pressures to 
tone down that very small label that is required on pumps, such 
that it reads ``attention'' rather than ``warning,'' which 
might have been the more advisable term, albeit, as noted, it 
is unlikely that that small label--by about 3 inches by 3 
inches--is going to be detected in all the other messages that 
are on today's pumps. If you pump your own gas, you know what I 
am referring to.
    But let me be clear, AAA is not opposed to the use of 
ethanol for automobiles. E15 is compatible with most vehicles, 
and it would allow for the reduction of our dependency on 
fossil fuel and offer motorists a choice as to what they 
purchase. So we are not opposed to ethanol. We are comfortable 
with E10. But we are certainly opposed to E15 under the current 
circumstances.
    Allowing it to continue to be sold is irresponsible, and in 
our view, it should cease until adequate testing allows for the 
regulators, the retailers, and the people who manufacture the 
cars to reconcile their views, agree on which vehicles it can 
safely be used for, and adequately inform consumers.
    Now as to the issue, which I know you are quite interested 
in, which is what to do with the RFS, for the moment, we are 
not calling on you to revoke or even modify the RFS 
requirement. We do believe that you are going to find 
yourselves confronted with the obligation to make some 
adjustment. And we certainly believe that it should be adjusted 
if we find ourselves in a situation where the only way to 
achieve it is to allow the continued sale of E15. If that were 
the only way to meet the requirement for 2014, it would 
definitely need to be adjusted, and I commend you for 
addressing this issue before it becomes much larger than it 
already is.
    Thank you very much.
    Mr. Whitfield. Thank you.
    [The prepared statement of Mr. Darblenet follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. Mr. Jobe, you are recognized for 5 minutes. 
Turn your microphone on.

                     STATEMENT OF JOE JOBE

    Mr. Jobe. Thank you, Chairman Whitfield, Ranking Member 
Rush, and members of the committee.
    It is good to see you again. I want to thank you for the 
opportunity to come and testify on behalf of the U.S. Biodiesel 
Industry.
    My name is Joe Jobe. I am the CEO of the National Biodiesel 
Board. And I hope to leave you today with two important 
messages. First, under the RFS, the advanced biofuel and the 
biomass-based diesel categories programs are working. And 
second, with the help of the RFS, biodiesel is reducing 
consumer prices at the pump.
    As a brief background, biodiesel is a renewable low-carbon 
diesel alternative made from an increasingly diverse mix of 
resources, including agricultural oils, recycled cooking oil, 
and animal fats. It is the first and currently the only EPA-
designated advanced biofuel that is produced on a commercial 
scale with plants in virtually every State and was the first to 
reach a billion gallons of annual production.
    NBB is the national trade association representing the 
biodiesel and renewable diesel industries. Our 200-plus member 
companies have produced the vast majority of the advanced by 
biofuel pool under the RFS, and we are pleased to be welcoming 
a new 137 million gallon renewable diesel member located in St. 
Charles, Louisiana.
    Our industry has exceeded the biomass diesel category in 
every single year of the program, and we are on track to do so 
again this year. This is a tremendous success story. It has 
created over 50,000 jobs. It is diversifying and actually 
improving the domestic fuel supply, and it is reducing 
pollution.
    A few positive things about biodiesel to point out. Our 
industry has added decentralized renewable refining capacity. 
It is diversifying the transportation fuel supply, which will 
ultimately help stabilize prices to the consumer. It is 
actually improving the quality of the nation's diesel fuel 
supply. Biodiesel blends have premium diesel characteristics. 
It is an oxygenated fuel, has high cetane, high lubricity, zero 
sulfur, and there is no fuel economy or horse power penalty. In 
fact, the diesel land speed record was set using B20. Biodiesel 
significantly reduces virtually all regulated emissions, 
including 57 to 86 percent carbon reductions.
    One of our main feed stocks is recycled cooking oil. It 
helps keep waste out of the sewer systems, landfills, waterways 
and prevents costly infrastructure repairs.
    Another important feed stock is animal fats, which means 
biodiesel is giving livestock producers new markets for waste, 
fats, and oils, increasing the value of cattle by $10 a head, 
$1.25 for hogs, and 30 cents for poultry.
    Additionally biodiesel is saving consumers money at the 
pump. With the help of the RFS, fuel distributors are 
purchasing wholesale biodiesel and offering it to consumers at 
a discount to diesel fuel. The mayor of Gadsden, Alabama, 
recently announced that his city is saving $100,000 annually by 
using 20 percent biodiesel in his fleet. Additionally, Navy 
Secretary Ray Mabus, stated in testimony in April that the Navy 
is saving an estimated $0.13 per gallon currently by use B20.
    Now, the biomass-based diesel category is structurally 
different than the other sections of the RFS. Primarily there 
is no automatic mandate on the annual volume requirement. There 
is an EPA rulemaking each year to determine the appropriate 
volume for the following year. This is a robust and 
comprehensive process that is open to all stakeholders. Last 
year, that process resulted in a very conservative increase 
from 1 billion to 1.28 billion gallons, and we estimate that we 
are on track to exceed 1.5 billion gallons this year.
    Before I close, I want to discuss briefly the issue of 
fraudulent RINs. In 2010 and 2011, the biodiesel industry 
experienced a few cases of criminals generating and trading 
fraudulent RINs. Our industry took very aggressive measures 
working closely with EPA and the petroleum industry to address 
the fraud head on. We developed and deployed a robust and 
comprehensive RIN integrity program that has effectively 
addressed the problem. This was a private sector solution that 
we developed and deployed. Two of the three cases of fraud were 
resolved in court and two criminals are sitting in jail. The 
third case is pending.
    We also worked with the EPA and the petroleum industry to 
put in place a new regulatory framework that defines quality 
assurance plans, which gives obligated parties the opportunity 
for an affirmative defense. With these measures in place, we 
are confident that the issue of RIN fraud for biodiesel has 
been effectively addressed.
    In conclusion, we believe that the RFS was the right policy 
when President Bush signed it in 2005 and again in 2007 with 
overwhelming bipartisan support, and it remains a sound policy 
today. My industry is fully committed to working diligently 
with this committee, with the EPA, our partners in petroleum 
and anyone else willing to work with us to make the RFS an 
unqualified success.
    Thank you for inviting me to testify, and I look forward to 
answering your questions.
    Mr. Whitfield. Mr. Jobe, thank you.

    [The prepared statement of Mr. Jobe follows:]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. And thank all of you for your testimony. And 
I will recognize myself for 5 minutes of questions.
    I think all of us have appreciated the additional capital 
investment that has gone in for ethanol and has gone in for 
biofuels and other technology, so that we know that we can 
produce these fuels. And those people who are most concerned 
about climate change, they are very excited about it as well. 
And I am really glad that Mr. Petrowski, Mr. Karr, Mr. Teske, 
Mr. Darbelnet are testifying today, not that I am not pleased 
to hear from Mr. Jobe and Mr. Buis, because we hear from those 
people frequently, but the one group of people out in the 
country that really do not have a voice is the consumer. And 
frequently, we don't focus on the consumer because we know that 
the overall policy is supposed to be a good policy, everyone is 
supposed to benefit from it, but the reality is when you get 
down to the independently-owned gas station, the automobile 
manufacturers, the small engine manufacturer, representative of 
millions of drivers, you do run into liability issues, you do 
run into expenses for putting in the new equipment that is 
compatible with what the government is mandating, and I am 
assuming you also are exposed to liability issues, because 
somebody's going to be sued if something goes wrong.
    So, to the four of you, I would just ask, on a scale of 1 
to 10, 10 being you are most concerned about it, how concerned 
are you about the cost to your consumers, the cost to you 
personally in your business, the liability issues, how 
concerned are you that there really will be problems if there 
is not some adjustment made in some way to this? So 10 being, I 
am really very much concerned; or 1, I am not really concerned 
about it at all. You can just let it go. We think it'll be OK.
    So can we start with you, Mr. Petrowski?
    Mr. Petrowski. I would say ten, Mr. Chairman.
    Price is the number one driver for consumers at all times, 
but especially in hard economic times that we have been in. So 
I would say 10. Price is the driver for our business.
    Mr. Whitfield. So you are saying by this that if we don't 
do something, you are as concerned about it as you can be?
    Mr. Petrowski. Well, I would not scrap the RFS. Today I 
would----
    Mr. Whitfield. Yes. I am not talking about scrapping. I am 
talking about adjusting.
    Mr. Petrowski. Yes, I would be concerned if we don't 
address it, bringing the price of RINs down to something 
cheaper that we are going to translate to higher pricing, even 
though today I would just love to blend more ethanol. 5 percent 
ethanol with a 60 cent discount earns me 3 cents more, which I 
either can keep as profit or put--lower the price 3 cents on 
the street, which increases traffic to my facility, but I 
cannot put 15 percent in if we do not have liability relief on 
the automobiles, if we don't have the right labeling, if my 
equipment is not insured for 15 percent, pumps, dispensers, and 
tanks, so I would love to lower the--anything I can do to lower 
the price to my consumer is wonderful. But $1.50 RINs is 
subsidizing exports and taxing imports, which in the long run 
will lead to higher energy prices in the U.S., which I don't 
want to see.
    Mr. Whitfield. OK. Thank you.
    Mr. Karr.
    Mr. Karr. It is a little bit difficult to pick the right 
number, but I am going to go with eight. I think, look, we have 
very serious concerns about the potential problems with E15 and 
the legacy fleet. Having said that, there are F50s out there. 
We--some of my companies are already certifying and warranting 
vehicles to E15, so, we are--again, we are committed to, we are 
able to adjust, but we have these issues with the legacy fleet, 
and we need to think about how we transition going forward.
    Mr. Whitfield. Mr. Teske.
    Mr. Teske. Ten. And I would go higher if you'd let me.
    Mr. Whitfield. OK.
    Mr. Teske. Yes. The fact is, is there is going to be 
misfueling, and it will cause premature failure of these 
engines, and whether somebody bought their engine 20 years ago 
or 20 weeks ago or 2 weeks ago, they are not going to get what 
they expected, and it is going to come right back at us.
    Mr. Whitfield. OK. Thank you. Mr. Darbelnet.
    Mr. Darbelnet. I would say, for our organization, so for us 
or our company, if you will, it is probably a two, because 
while we have thousands of vehicles on the road, I think we can 
educate our drivers to make sure that they don't put E15 in the 
tank that shouldn't absorb it, but thinking about our 54 
million members, I would say it is a 10, because there is a 
great likelihood that they will damage their vehicles.
    Mr. Whitfield. Right. OK. Thank you all so much. My time 
has expired.
    Mr. Rush, you are recognized for 5 minutes.
    Mr. Rush. I want to thank you, Mr. Chairman.
    You probably have noticed that there are a lot of cameras 
in the hearing room today. And there are many Americans who are 
at home today, and some of them are probably viewing this 
hearing, and they are hearing all the testimony and all the 
questions, and I am sure that there are--far too many of them 
are at home watching this because they are out of a job. And 
they have not heard any commentary on jobs and the impact of 
the RFS on jobs.
    I think that it would be really a shame, really, if we had 
this 3-hour hearing and did not even utter the word ``jobs'' 
and--so I just want to ask each of you, if you would, what is 
the impact of the RFS on jobs, and what do you see the future 
of jobs in relation to RFS? Mr. Buis?
    Mr. Buis. Thank you very much, Congressman Rush.
    The impact currently of the number of jobs that the ethanol 
industry has created, both direct and indirect, is around 
400,000 jobs. When we filed what we called the green jobs 
waiver to EPA to increase the blend rate from 10 percent to 15 
percent, the job assessment that was included with that waiver 
request says moving to E15 would create 136,000 new jobs, jobs 
here in America, jobs that can't be outsourced.
    Mr. Rush. Mr. Petrowski?
    Mr. Petrowski. Thank you, Congressman Rush.
    I feel very passionately about the solution of jobs is to 
lower overall energy prices in this country. And it is not 
about jobs in the ethanol industry or jobs laying pipe. It is 
about manufacturing jobs, lowering the cost of energy. The 
average consumer, both in their heating bills and driving, uses 
about 1,500 gallons a year, so if we can lower the price by a 
dollar, we have put that back into the consumer's pocket. And 
discretionary consumer spending is a driver to the economy and 
jobs, so I think the focus of Congress should be on lowering 
energy prices however we can do it, domestic production, having 
the right facilities to move product from where it is to where 
it isn't. And I think the RFS has been very helpful in creating 
an additional motor pool supply of fuel and a diverse supply of 
fuel, so I think it has been very positive.
    But I am not looking at ethanol jobs or pipeline laying 
jobs; I am looking at low energy prices and more consumer 
spending, and that is where I think we will pick up the jobs.
    Mr. Rush. Thank you very much.
    Mr. Karr, do you have anything you want to add?
    Mr. Karr. I am not an expert. I have no reason to dispute 
Mr. Buis' numbers.
    Mr. Rush. All right.
    Mr. Karr. I assume they are probably accurate.
    Mr. Rush. Mr. Teske?
    Mr. Teske. Thank you, Congressman Rush. The RFS itself, 
obviously, we are not against renewable fuels, and so to the 
extent that there are drop-in fuels and they can create jobs, 
that is great.
    The one comment I would make, though, is there are 5,300 
people that work in our U.S. facilities.
    Chairman Whitfield, there are 1,000 jobs in Murray, 
Kentucky.
    Congressman Barrow, there are 1,500 plus jobs in Georgia.
    The fact is that if there are negative effects that result 
from E15 and we get blamed, those people are going to be 
hindered, because we are going to get--it will come right back 
at us, and our brand will be impacted.
    And although there is not--I can't quote the kind of jobs 
that others on the panel can, the fact is those jobs are really 
important to those people, and those jobs are really important 
to those communities in which they operate, and so we want to 
make sure that we are not only protecting the consumers, but we 
are protecting our employees that are in our factories today.
    Mr. Rush. Mr. Darbelnet?
    Mr. Darbelnet. Thank you, Mr. Rush.
    We would agree that the domestic production of ethanol has 
increased the number of jobs in this country, which we dearly 
need and support. However, we are concerned that we should not 
be introducing a product which can be harmful to consumers for 
the purpose of increasing the number of employed individuals. 
So we support the positive results that have been achieved, but 
we are concerned about the further risk that we are putting the 
consumer at by not dealing with the E15 issue.
    Mr. Rush. OK.
    Mr. Jobe. Thank you, Mr. Rush.
    Our industry--I will speak for the advanced biofuel 
category. Our industry accounts for about 85 to 90 percent of 
the advanced biofuel category. And I have been very proud to be 
a part of what is going on in the biodiesel industry. We have 
added 50,000 direct jobs. And many of our members have said 
that they look for soldiers that are coming home from Iraq and 
Afghanistan, because these are guys that are experienced in 
using fuels and dealing with equipment, and it is--that is kind 
of a success story there.
    But one thing that--two quick things I want to point out is 
that it is not just about the direct jobs. In the last 6 or 7 
years, our industry has built more than 200 plants. There has 
been a lot of investment, and that has been a lot of indirect 
jobs that have gone into that in building renewable refinery 
capacity, and it is all happened not at the expense of the 
petroleum industry. The petroleum industry, as you will notice, 
is doing fine. And it is really just helping to diversify the 
transportation fuel supply.
    And that is really what the goal of the RFS is, because if 
we can diversify the transportation fuel supply, as you pointed 
out in the first panel, if we can make the transportation fuel 
supply look more like the power generation supply, make it more 
diverse, more domestically abundant, then we can really bring 
transportation fuel prices down. And as Mr. Petrowski said, 
that is going to have the biggest impact on the economy.
    Mr. Rush. Thank you.
    Mr. Whitfield. 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.
    Again, appreciate the hearing.
    Mr. Jobe, can you--Mr. Waxman talked about palm oil. So, 
obviously, I am from the Midwest. We were very involved, 
obviously, in getting biodiesel into the market and mine 
soybeans, reformulated cooking oil, beef tallow. And also I 
made a statement in the opening statement that the issues that 
you are or may not be involved with in this whole debate on 
blend wall; you really are kind of a subset of this whole 
debate. I don't know if anyone's raising concerns. Can you talk 
briefly about a couple of those provisions, the palm oil thing 
and how else you are related to this sector?
    Mr. Jobe. Thank you, Congressman.
    I was really hoping you would ask me about that question. 
Very simply put, palm oil does not qualify for the RFS, so the 
concern that palm oil will be coming in to fill the advanced 
biofuel is not a concern at this time. Furthermore, the concern 
stated by the gentleman from Union of Concerned Scientists is 
not a concern either, and here is the reason: It is based on 
the structural difference built into the advanced biofuel 
category. In order for the biodiesel industry to grow our 
category, the biomass-based diesel category, we have to go to 
EPA every year; it is just baselined at a billion gallons, a 
minimum of a billion gallons. And we have to go to the EPA 
every single year and we have to demonstrate them through very 
substantial and robust data development how much we can 
produce, how much our growers can produce, how much domestic 
supply we have without disrupting other markets, imports, 
exports and all of those other things.
    We have been very, very conservative with our target goals, 
and so you are very right. Biodiesel is made from a very, very 
diverse range of domestic materials, from all types of animal 
fats from livestock production, all types of oil seeds, and 
that has been a real strength to our industry.
    Mr. Shimkus. And we wouldn't have passed the original piece 
of legislation back in 1998 had we not really expanded the 
ability for a lot of different commodity products to get in 
there, because it needed a big coalition. If it was just 
soybeans, we wouldn't have enough votes, but by bringing in a 
whole new coalition, that helped.
    And the poignant thing about your explanation of how the 
system works is really what we are kind of demanding, Mr. 
Chairman, on part of this ethanol debate, is, what is the real 
production limits? There are four different categories in this 
whole calculation now. What are we actually producing, and what 
can get into the market versus what theoretically do we think 
we should have and why aren't we there, and that is--I would 
say that is the whole risk premium on the RINs, because we just 
don't know. We have got an arbitrary number set in statute 
versus what are we continuing to ask to do?
    I want to raise to Mr. Petrowski this question: Mr. 
Dinneen, and I had to leave, but he mentioned on the first 
panel, he asked about contractual agreements that may prevent 
retailers from offering E15 and E85. Is that an issue that you 
are aware of? And, of course, that would be a retail chain, I 
guess, vertically integrated might be versus an independent. 
Can you speak to that?
    Mr. Petrowski. Yes. Thank you, Mr. Shimkus. I think what he 
was referring to is our equipment, the dispensers, the tanks, 
plus the fear of mislabeling, that someone is going to pull up 
with an older car that can't take the ethanol, keeps us from--
--
    Mr. Shimkus. No, I don't think that is what he is referring 
to.
    Mr. Petrowski. No.
    Mr. Shimkus. I think he is referring to actual contractual 
limitation on a retail location from placing these things in 
their retail location. Do you want to--go ahead.
    Mr. Petrowski. No, not at all. We make agreements to buy 
product all the time, and we can either buy it in bulk and do 
the blending ourselves. We are fortunate enough to have our own 
terminal----
    Mr. Shimkus. Let me ask Tom to answer this question.
    Mr. Buis. Thank you, Congressman. That has been an issue in 
some areas. The contractual arrangements, I think, is what Bob 
was referring to. And with an E15 retailer, it came to head--
once he started offering E15 and he was told he was in 
violation. We have also seen, I think, the State of South 
Dakota and most recently Iowa have passed provisions that 
prevent contracts that prohibit higher blends under the same 
canopy. And, you know, if you guys want to look at some 
suggestions into the future, that might be something you look 
at, because----
    Mr. Shimkus. You mean, you are going to offer a possible 
solution to some of this----
    Mr. Buis. I am.
    Mr. Shimkus [continuing]. These challenges?
    Mr. Buis. I just did.
    Mr. Shimkus. Great. Thank you. And we would hope you all 
would do that. Let me just end on this.
    My time has expired. But I just pulled up E85prices.com, 
and I do drive a flex-fuel vehicle. In Illinois, we have 
multiple locations. And you would be surprised a--now, there is 
a BTU fall-off, but if you are saving 80 cents, 85 cents a 
gallon, it can pay, and so if we can get them into the retail 
locations, we can address the blend wall and we can solve a lot 
of problems.
    Thank you, Mr. Chairman.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentleman from California, 
Mr. McNerney, for 5 minutes.
    Mr. McNerney. Thank you, Mr. Chairman.
    You know, I didn't hear anyone in this panel say do away 
with the RFS. There was some comment about there--it needs 
tweaking, maybe the E15 ought to be scaled back to E10 for 
reasons, and I appreciate that.
    Mr. Teske, I just want to say, I have loved my Briggs & 
Stratton motors over the years, so they are an American icon. 
And I appreciate your remark on the professionalism of the EPA. 
That is something I truly believe is the case, and it is 
something we need to get the word out a little bit more about. 
The question I have for you is what causes, what specific 
mechanism causes the failures of the Briggs & Stratton motors 
when they use blends higher than E10?
    Mr. Teske. Yes. First off, thanks for being a customer. I 
really appreciate it.
    What happens, there are a couple of things that go on. 
There are a number of things, but a couple of things in 
particular. Basically, the materials that we use are rated for 
certain temperatures, and so when you have blends that are 
higher than E10, the alcohol will burn at a higher rate, a 
higher temperature. And basically what happens is, like, valve 
seats and other materials that are in the engine will degrade 
prematurely, because it can't handle the heat that it was 
intended to handle. And so, basically, then when that fails, 
all of a sudden a lot of the emissions regular--the emission 
control things that are in the engine will fail, and then, 
ultimately, it will lead to engine failure.
    Also, when you get--not to take you back to high school 
history, but basically, when you have water and alcohol, 
obviously, there is an attraction that goes on, and so what 
happens is a lot of our seals and other things in the engine 
will absorb the alcohol, which will cause warping and 
disforming, if you will, and therefore the engine will not 
operate in the same manner that it was intended to operate with 
lower blends of ethanol.
    Mr. McNerney. So can these engines be protected proactively 
or is that too expensive for the average legacy customer?
    Mr. Teske. For the legacy customer, it can't--it won't--it 
can't be done. Going forward prospectively, certainly we can 
design engines that will operate. They operate on a plus or 
minus 5 percent of whatever the target is, and when that 
happens, obviously, one of the concerns we have is as we get to 
E15, and then we ultimately probably get to E20 and then E25, 
all of a sudden, it becomes very confusing. It is difficult to 
design a cost-effective engine that will handle a multitude 
beyond plus or minus 5 percent.
    Mr. McNerney. So when did Briggs & Stratton begin designing 
for E10, or did it have to do any design for E10?
    Mr. Teske. We have seen--we have had to change some 
materials over time. Years ago, when basically ethanol started 
to be introduced, we have added--what has been interesting here 
is of late is over the last year or so, we have seen more 
carburetor issues, for example, have occurred throughout the 
country. The calibration and the materials basically don't 
handle ethanol all that well, although they will handle E10. 
When ethanol was pretty much in the Midwest, we didn't see a 
whole lot of issues on the coast. Now E10 is throughout, 
because we were--we test about E5 for certification purposes 
with the EPA. As you start to see the E10 go throughout the 
country, we do on occasion see fuel problems generally because 
as ethanol, higher blends of ethanol sit in the engine, it will 
gel up and will cause issues with starting and other things, 
which is why we have introduced fuel additives to make sure 
that consumers are protected from that.
    Mr. McNerney. OK.
    Mr. Buis, I had a question.
    Mr. Buis. Yes.
    Mr. McNerney. I was going to ask you, continuing from the 
first panel, what has caused the delay of the success of 
cellulosic biofuels from the initial projections?
    Mr. Buis. That is a great question.
    You know, the RFS didn't pass through the Energy 
Independence Security Act till late of 2007. In 2008, we had 
the biggest economic downturn that any of us have seen in our 
lifetime, not just here, but around the world, so you had a lot 
of investors and lenders that went to the sideline. They have 
started to slowly come out over the past year or so, and you 
started to see more investment into biofuels, but the second 
issue is market space. When you are going to produce a product 
that is already limited to 10 percent, and it costs a quarter 
to a half a billion dollars to build a cellulosic commercial 
bio refinery, you are probably not going to pull that plug and 
make a lot of investment. That is why we filed the waiver to 
move to higher blends. And despite all the--I think a lot of 
people think it is just E15. The waiver was actually approved 
for up to E15, but there are some, I am not saying this panel, 
that have this feeling, we are not going one ounce, one gallon 
above E10, because we want to kill the RFS.
    Mr. McNerney. OK. Go ahead and answer, if the chairman will 
allow that, Mr. Petrowski.
    Mr. Petrowski. Yes. I would say as a retailer, if--
cellulosic doesn't need to be mandated, remember, the import is 
going to be silage, grass, biomass, which is much cheaper than 
corn. We are processing 3 billion bushels, I believe that is 
the right number, of corn into the ethanol business at $4 or $5 
a bushel. Any manufacturer who could substitute biomass for 
corn would do so in a heartbeat, because that would just all 
flow to the bottom line. So I think the limitations on 
cellulosic have been technological. And believe me, if I--
ethanol today is 60 cents cheaper than gasoline. If somebody 
were to offer me cellulosic or any ethanol cheaper than that, I 
would buy it in a heartbeat if I could sell it.
    Mr. McNerney. OK. Thank you, Mr. Chairman, for your 
indulgence.
    Mr. Whitfield. The gentlemen's time has expired.
    At this time, I recognize the gentleman from Nebraska, Mr. 
Terry, for 5 minutes.
    Mr. Terry. Thank you, Mr. Chairman.
    Mr. Buis, I missed earlier discussions, but I want to know 
what your feel is about whether the blend wall is a real issue 
or real concern.
    Mr. Buis. Thank you.
    Thank you, Congressman. We have referred to it as a so-
called blend wall. And it is so-called because the resistance 
by those who control the infrastructure, the fueling 
infrastructure, the refining, the obligated parties have not 
done, and oftentimes erected hurdles to move into higher 
blends.
    When the RFS was enacted in 2007, it was always intended to 
get to 36 billion gallons by 2022. We were going to have to 
have higher blends. It has been 4 and a half years ago since we 
filed that waiver for the higher blends. Every regulatory, 
legal, PR and now legislative hurdles that they can erect, they 
have tried to erect instead of moving to a higher blend.
    It could be solved real easy. There is not that much above 
the blend wall for 2013. For 2014, it could go up. You could 
use E15. You can use up to E15. You can use the 85, E30. Those 
are popular brands that sell extremely well, and consumers, 
despite what the first panel said, actually want them, they are 
buying them.
    Mr. Terry. All right. Appreciate that.
    Mr. Karr, the EPA said, or it came out when they said--or 
was approving E15, but said it shouldn't be used for 
automobiles that were manufactured before 2001. Now, average 
life expectancy of a car today is 11 years. I am just 
wondering, do you know offhand how many are left for 2011 and 
below?
    Mr. Karr. I should probably get you that number for the 
record rather than give you a bad number here.
    Mr. Terry. That is fine. I wasn't going to pin you down for 
an exact. I was just curious.
    Mr. Karr. I would say the average age of a car on the road 
today is 11 years. So that tells you that is kind of the 
middle. We have got a lot that are a lot older than that.
    Mr. Terry. So it could be significant.
    Mr. Karr. But, yes, I can get you the precise number for 
the record.
    Mr. Terry. So a lot of the arguments, and Mr. Teske was 
kind of hinting at this, but what some engines, EPA said that 
E15 and what can be appropriate for Briggs & Stratton, for lawn 
mowers or for boat motors or--so I guess the question here is 
that you are not--or Mr. Teske, that you are not here saying no 
E15 anywhere, are you?
    Mr. Teske. Well, what we are concerned about is misfueling. 
And there needs to be measures taken other than just a very 
small label on top.
    Mr. Terry. Well, that is what I wanted to kind of dive down 
into deeper, is OK, so are there methods that we can use to 
make sure that the consumer is informed? I mean, I can pull up 
to the pump right now and know which one is the E10 and the E85 
and the no-ethanol blend, or unblended, I guess. Do you have 
enough confidence in the consumer to read those on the pump?
    Mr. Teske. While I have a tremendous amount of respect for 
consumers and consumer knowledge, what studies have shown is 
that when consumers are very comfortable with what they have 
had, they don't pay as much attention as they would when there 
is something new and different. And so if you pull up to the 
pump and you basically have your red can, that 5-gallon can, 
and you want to fill it up and you have always filled it up for 
the last 20 years at the same gas station, you are not going to 
pay as much attention to the fact that there are issues. And 
that is really our concern, is that we will try to educate the 
consumer, definitely, and consumers are very smart, but studies 
have shown that when they are comfortable----
    Mr. Terry. Well, let me ask Mr. Petrowski, then, not to cut 
you off, but do you think there is a way of communicating at 
the pump so that consumers aren't mistakenly putting in E15 
when it should be E10?
    Mr. Petrowski. I think we can label very well, but I was 
told, and I am not old enough to remember this, I worked at a 
gas station in the 1970s, but I was told that when leaded and 
unleaded first came out and people were offering leaded at a 
much cheaper price, there were people, even though the nozzles 
were mandated to be different, who would bring a screwdriver 
and actually gerrymander their fill pipe so they could take the 
cheaper product.
    Mr. Terry. Yes. That is not a mistake. That is intent.
    Mr. Petrowski. No, no. That is not a mistake, but not 
always--I have great respect for the consumers, but they are 
not always paying attention at the pump.
    Mr. Terry. All right. Thank you.
    Mr. Whitfield. I would like to just get one clarification 
here, Mr. Buis, something that you had indicated, and someone 
on the first panel made this comment, too, that market access 
was being limited by the obligators. And factually, is it true 
that retail service stations are primarily owned by large oil 
companies or not?
    Mr. Petrowski. No, Mr. Chairman. Can I answer that?
    Mr. Whitfield. Yes.
    Mr. Petrowski. In fact, I think that is part of the reason 
the obligated parties are now feeling the strain, is at one 
time, that was true, but the Exxons of the world, the Mobils of 
the world. We bought a lot of stations from Mobil, have gotten 
out of the downstream, so they are selling their product in 
bulk rather than blended to the consumer, so their obligations 
are greater. So I think that has been part of the problem, but 
most of the gas stations in the United States today at the 
retail level are owned and operated by small business people or 
people who have aggregated, like ourselves. We have 900 
stations that we operate. But major oil diversified out of 
integrating and get rid of their downstream, so they are facing 
an obligation where they are selling in bulk and are obligated, 
and they are not selling as much what we say the parlance in 
the trade is over the rack or at the nozzle.
    Mr. Whitfield. Thank you. I am sorry.
    Mr. Olson, you are recognized for 5 minutes.
    Mr. Olson. I thank the chairman. And thank you to the 
witnesses for coming back. Our previous panel helped us get a 
better sense of where things stand on the RFS from the upstream 
view. This panel represents a shift, where the rubber meets the 
road and the impacts of RFS on families and businesses. It 
helps us get our hands on one of the most controversial issues 
related to ethanol: how it impacts engines in vehicles. And I 
apologize if my questions have been repetitive, but duty 
called, and I had to run away for a bit, but my first question 
is for you, Mr. Petrowski. Increased use of E15 is one of the 
ways in which the ethanol industry sees a path to meeting the 
RFS. What would it take in terms of infrastructure for E15 to 
be more widely available with your member companies?
    Mr. Petrowski. Thank you, Mr. Olson.
    What I would like to see is us get some waiver from 
liability for misfueling. I would like to see us--when they 
talk about the average age of the cars, every new station we 
put in, we are putting in equipment that is compatible with the 
higher blend. The problem is we have 135,000 stations in the 
United States, and there are probably only 10,000 that get 
their tanks and pumps done every year, but, yes, we ourselves 
have done 150 of our own stations, 600, over new mainly for the 
inside to sell more food products, because there has been a 
shift in this country from tobacco, which has been a good 
shift, to food and beverages inside, but when we do it, we also 
change our pumps out to be more compatible with higher blends, 
but we could get there faster. As I said, because ethanol is 60 
cents cheaper, we would rush to there--if I can save 3 cents to 
4 cents a gallon by blending more ethanol, which at 60 cents 
discount, a 5 percent more blend will save me 3 cents. I sell 4 
billion gallons a year, so you can work the math on that. The 
Federal Government would be very happy with the taxes, I would 
be very happy with my paycheck. Everybody--and the consumer, if 
I posted a 4 cent lower price on the pump, the consumer would 
be very happy.
    Mr. Olson. Yes, sir. And that is a real issue, because if 
the Secret Service could make a mistake of filling up the 
President's limousine in Israel with diesel fuel in a gasoline 
vehicle, then people that come into Tex 22 could probably make 
that same mistake with E10 and E15.
    I have one more question for you, sir. How much do you hear 
from consumers about a ban for E15, your clients, the people 
that make your industry go? Are they clamoring for it? Just a 
little murmur?
    Mr. Petrowski. Again, I would say our consumers would say 
if you can get me a fuel that is cheaper that isn't going to do 
damage to my engine, I am with you all the way. Again, demand 
pulls supply; supply does not create demand. And so we have no 
objections.
    We had 20 E85 stations throughout our system. We have 
actually switched them over to diesel, not because we have 
anything against ethanol, but we weren't selling it. For 
example, on the Massachusetts turnpike, our E--we sold 12 
million gallons of gasoline last year and 1 million gallons of 
E85. Now, maybe there is more SUV's and flex-fuel vehicles in 
Minnesota or Illinois than there is in Massachusetts, but we 
switched a lot of our E85 tanks over to diesel because we saw 
our customers say to us, as the new diesels were coming in, the 
high-mileage diesels, they wanted more and more access. So we 
respond to the consumer.
    Mr. Olson. And thank you, Mr. Petrowski.
    Final question for you, Mr. Teske, on not just automobile 
engines, but the engines you make from Briggs & Stratton. And 
in deference to the truth, I must admit that I have a lawnmower 
in my garage, but it is not powered by a Briggs & Stratton 
engine. But if I had a lawnmower in my garage powered by a 
Briggs & Stratton engine and I misfueled it with E15, who would 
be responsible for the damages? Any idea?
    Mr. Teske. Yes. And you are a prospective customer, so 
perhaps later we can chat. Basically, if you use E15 in your 
engine, your small engine, we void the warranty, the warranty. 
So, basically, theoretically, we are not responsible. It is 
really the consumer who would be responsible. But the consumer 
will not--they will not look at it and say, oh, I put ethanol 
in, they will look it in and they will see the diamond bar logo 
on the top, and they will say, boy, what happened to my Briggs 
engine.
    Mr. Olson. How could I have prevented that? What could I 
have done to mitigate the damage by putting E15 in there? 
Anything? I just reach in my wallet and pay it?
    Mr. Teske. No. I mean, once E15 in, right, it is in there 
and it is--unless you--if you start it up, it will start to 
cause issues.
    Mr. Olson. We have a name for that, but I will leave that 
at the side.
    Mr. Whitfield. The gentleman's time has expired.
    At this time, I recognize the gentlemen from Texas, Mr. 
Hall, for 5 minutes.
    Mr. Hall. Mr. Buis, in your opening statement, I think the 
chairman and I were the only ones that heard it, but ethanol's 
cheaper than any other fuel? Was that your statement?
    Mr. Buis. I am sorry. I couldn't hear the question. I did 
make the statement ethanol is cheaper than any other 
transportation fuel.
    Mr. Hall. And----
    Mr. Buis. We are 67 cents today under unblended gasoline.
    Mr. Hall. Let me ask you, is the blend wall a real concern? 
Just yes or no.
    Mr. Buis. Yes.
    Mr. Hall. Your organization led the efforts to secure EPA 
approval in E15?
    Mr. Buis. Correct.
    Mr. Hall. And do you now think E15 is a viable option for 
gas stations to sell and vehicle owners to use?
    Mr. Buis. I do.
    Mr. Hall. E15 was approved for 2001 and new vehicles but 
not for older vehicles, was it?
    Mr. Buis. Well, not for older vehicles was much to our 
chagrin, because when we filed----
    Mr. Hall. Well, much to your chagrin, but it is a fact.
    Mr. Buis. Yes, it is.
    Mr. Hall. OK. Let me go on. Why do you think vehicle and 
equipment makers are concerned about E15?
    Mr. Buis. I didn't hear the first part of it, sir.
    Mr. Hall. Why do you think most gas stations have shown 
little interest in carrying E15?
    Mr. Buis. I think there has been enough controversy raised 
by those who don't want to see us move to higher blends that it 
has caused some resistance. We are slowly breaking through it, 
but there was also legal challenges filed to E15. The U.S. 
District Court of Appeals ruled two to one in favor of EPA, and 
the Supreme Court refused to hear an appeal of the case.
    Mr. Hall. Well, let's get back to ethanol, then. For small 
and marine engines and any other gasoline engine other than 
2001 and newer passenger cars and light duty vehicles, the law 
explicitly prohibits E15. Further, EPA has issued a specific 
rule to mitigate consumer mis-fueling, including a label 
specific to E15. In fact, ethanol is the only fuel that 
requires a warning label at the pump.
    Mr. Buis. Yes, sir.
    Mr. Hall. Is that true? And ethanol is the only ingredient 
labeled in gasoline, even though gasoline is a chemical which 
contains approximately 200 different components----
    Mr. Buis. Correct.
    Mr. Hall [continuing]. And that is not even listed. So it 
may be cheaper to buy, but is it cheaper to use in the long 
run? If I would fill my tank up with high ethanol, how far 
could I get from the service station in the country?
    Mr. Buis. With pure ethanol?
    Mr. Hall. Yes.
    Mr. Buis. That is not available. You can go up to 85 
percent. Oftentimes 85 percent is not even 85 percent, 
depending upon the season. It can be----
    Mr. Hall. Well, how far would my car go if you filled it up 
with ethanol? Just----
    Mr. Buis. If you filled up your regular car----
    Mr. Hall. I wouldn't get out of the station, would it?
    Mr. Buis [continuing]. With E15, the mileage drag is going 
to be less than 2 percent.
    Mr. Petrowski. Congressman Hall, could I interject on 
retailers and stations?
    Mr. Hall. Not right now.
    Mr. Petrowski. No? OK.
    Mr. Hall. And you say there is no reason to repeal or to 
reform RFS. That is your opinion, isn't it?
    Mr. Buis. It is, yes, sir.
    Mr. Hall. And if the RFS is repealed, would anybody still 
be using ethanol?
    Mr. Buis. I think would be----
    Mr. Hall. In this country? You use it overseas and in South 
America, but would they be using it in this country----
    Mr. Buis. Yes, sir, they would.
    Mr. Hall [continuing]. With gasoline?
    Mr. Buis. Yes, sir, they would. Ethanol is the cheapest 
source of octane available to produce gasoline from.
    Mr. Hall. So did you--I think that--40 percent of corn's 
going to fuel. I am thinking about ethanol being the cheapest 
of all fuels and what it is used for. Ethanol is used with 
gasoline, or it has to be mixed with something to be sold, does 
it not?
    Mr. Buis. Yes. Yes, sir.
    Mr. Hall. And 40 percent of the corn going to fuel, but it 
can be eaten or it can be fed to livestock, or Jack Daniel 
might buy it or the vodka people or Jose Cuervo might want to 
bid on it, but absolutely unless it is mixed with gasoline, it 
has very little use, does it?
    Mr. Buis. Well, yes. There is industrial uses also for 
ethanol.
    But I have to challenge this 40 percent. Everybody gets--
when they get a paycheck, you have a gross salary and you have 
a net, and what the critics use on corn ethanol is the gross. 
They say we use 40----
    Mr. Hall. But don't you use 40 percent? How about using----
    Mr. Buis. Pardon me?
    Mr. Hall [continuing]. Thirty-nine percent?
    Mr. Buis. No, it is not 39 percent, sir.
    Mr. Hall. Or 20 percent.
    Mr. Buis. It is about 18 percent of the corn crop, 
because----
    Mr. Hall. If you use 17 percent of the corn crop? That is a 
lot more than ethanol.
    Mr. Buis. Pardon me?
    Mr. Hall. If you use 17 percent of corn, that is going to 
fuel.
    Mr. Buis. There is residual value. We create a co-product.
    Mr. Whitfield. I am sorry to interrupt this. We have got 
the Health Subcommittee that wants to come in here for a 
hearing at 1:30.
    And Mr. Petrowski, I am going to give you 1 minute to 
reply. You were trying to make a comment.
    Mr. Petrowski. Thank you, Mr. Chairman. Here is the problem 
for retailers today. I would love to have a higher blend than 
E10, and as I have said before, but my in-ground tank 
equipment, my pumps, my dispensers are warrantied for nothing 
higher than E10. And my insurance company has also said that if 
I put any product in that voids a warranty on this equipment, I 
am not insured for any residual spills or leaks. So short term, 
if I put in a greater amount, I would make a lot of money, but 
long term, the expense of putting a liability on that would 
make me----
    Mr. Whitfield. Yes. That is a serious--it is a very serious 
issue.
    Mr. Petrowski. It would make me an ex-CEO.
    Mr. Whitfield. Yes.
    Mr. Shimkus. Mr. Chairman, what Mr. Petrowski should have 
done is made sure he mentioned the liability relief bill that 
we have before the Chamber, which would be very helpful in his 
sector.
    Mr. Petrowski. Yes. I----
    Mr. Whitfield. Mr. Shimkus can take care of your liability 
for you.
    OK. That concludes today's hearing. We will have another 
hearing tomorrow. And I want to thank all of you for coming. We 
appreciate your testimony. We look forward to working with you 
as we explore further options.
    And with that, the hearing will be adjourned, but I do ask 
unanimous consent that we enter into the record comments by the 
climate--it has been accepted.
    Mr. Whitfield. The record will remain open for 10 days.
    The hearing is adjourned.
    [Whereupon, at 1:36 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

               Prepared statement of Hon. John D. Dingell

    Mr. Chairman, I would first like to commend you, Chairman 
Upton, and Ranking Members Waxman and Rush for holding this 
hearing. The way that the Committee has gathered stakeholder 
input through whitepapers and extensive witness testimony 
reflects the complexity of the issues surrounding the Renewable 
Fuel Standard and I commend our committee leaders for dealing 
with this in a bipartisan manner.
    The use of renewable fuels can help us reduce our use of 
foreign sources of oil however there are also other arguments 
against biofuels. There is differing information on the effect 
renewable fuels have on the food supply chain, the life-cycle 
air emissions, and the cost-benefit of adding biofuel to 
gasoline. Shortly after passage of the Energy Independence and 
Security Act of 2007, I said changes to the RFS would likely 
need to be made based on changing market predictions. Perhaps 
now is the time and I look forward to working with Committee 
leadership to determine what changes merit further discussion 
based on the factual record the committee is now gathering.
    We have already heard testimony from the Department of 
Agriculture that feed costs are over half of dairy cattle 
expenses and over 40 percent for hogs. This in turn may drive 
up costs for the food and restaurant industry. We also heard 
from the Energy Information Administration about ethanol's 
lower energy content could be driving consumers away from 
purchasing E85. Also, our innovative automotive manufacturers 
can make vehicles that can run on any number of types of fuels 
but if we don't have the refueling infrastructure in place, 
where will consumers fuel up?
    Today we will hear from stakeholders who deal with the 
requirements of the RFS on a daily basis. Arguments will be 
made about the effect on food prices within the restaurant 
industry and the fact that so little E85 is sold at stations. 
Other arguments will be made regarding the benefits to the 
agriculture industry and securing America's energy 
independence. Some will advocate for a full repeal of the RFS 
and other will want it remain as it is. I will continue to 
listen to stakeholders about what action makes the most sense 
and I remain encouraged by the bipartisan work to this point by 
both Republicans and Democrats and encourage them to continue 
their work.
    We need to keep fighting to put policies in place that 
create domestic demand for clean energy so that we can regain 
our leadership position in the clean energy race. I believe 
that good environmental policy and good economic policy go hand 
in hand. I look forward to today's testimony and examining what 
proposals the committee determines warrant further examination.


[GRAPHIC] [TIFF OMITTED] 


OVERVIEW OF THE RENEWABLE FUEL STANDARD: STAKEHOLDER 

PERSPECTIVES, DAY 
                                   2

                              ----------                              


                        WEDNESDAY, JULY 24, 2013

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:35 p.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Scalise, Shimkus, 
Terry, Latta, Cassidy, Olson, Gardner, Griffith, Barton, Upton 
(ex officio), Rush, Barrow, and Christensen.
    Also Present: Representatives Matheson, Braley, and Welch.
    Staff Present: Nick Abraham, Legislative Clerk; Gary 
Andres, Staff Director; 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 and Power; Chris Sarley, Policy Coordinator, 
Environment and Economy; Tom Wilbur, Digital Media Advisor; 
Kristina Friedman, Minority EPA Detailee; Bruce Ho, Minority 
Counsel; Ryan Skukowski, Minority Staff Assistant; and 
Alexandra Teitz, Minority Senior Counsel, Environment and 
Energy.
    Mr. Whitfield. I am going to call the hearing to order. As 
you know, yesterday was our second hearing on Renewable Fuel 
Standards. We had two panels of witnesses yesterday and we have 
our third panel of witnesses today. So I want to thank all of 
you for joining us today. And I will be introducing the members 
of the panel. But I would like to recognize the distinguished 
gentleman from Iowa, Mr. Braley, for the purpose of an 
introduction.
    Mr. Braley. I want to thank you, Mr. Chairman, for holding 
the hearing and extending me the courtesy of introducing a 
friend of mine, a very distinguished Iowan, who is the first 
woman to be president of the National Corn Growers Association, 
Pam Johnson from Floyd, Iowa. Pam is a sixth generation farmer, 
who raises corn and soybeans with her husband, their two sons, 
and their young families. They also manage a seed business. And 
the thing that I noted most about her is she describes herself 
as coming from a long line of very strong men and women who 
have farmed for hundreds of years. And I think that says a lot 
about you. Welcome to the committee.
    Mr. Whitfield. Well, thank you very much. And, Ms. Johnson, 
I thank you for being with us today. We do look forward to your 
testimony.
    And at this time, I will introduce the other members of the 
panel. We are glad to have all of you. Mr. Bill Roenigk, who is 
the senior vice president of the National Chicken Council; we 
have Mr. Ed Anderson, who is CEO of Wen-Gap. And he is 
testifying on behalf of the National Council of Chain 
Restaurants; we have Mr. Chris Hurt, who is a professor at the 
Department of Agricultural Economics from Purdue University; 
and then we have Mr. Scott Faber, who is Vice President of 
Government Affairs for the Environmental Working Group.
    And as you know, this is one of those issues where there is 
not a lot of complete agreement on. So we have heard a lot of 
different views. And we do look forward to hearing your views 
today. Each one of you will be given 5 minutes for an opening 
statement. And you will notice there are a couple of boxes on 
the table. And actually when the light turns red, that means 
stop. But if you are in the middle of a sentence, feel free to 
go ahead and complete it.
    So, at this time, Ms. Johnson, we will start with you. And 
you are recognized for 5 minutes for your opening statement.

  STATEMENTS OF PAM JOHNSON, PRESIDENT, NATIONAL CORN GROWERS 
  ASSOCIATION; BILL ROENIGK, SENIOR VICE PRESIDENT, NATIONAL 
 CHICKEN COUNCIL; ED ANDERSON, CEO, WEN-GAP, LLC, ON BEHALF OF 
 NATIONAL COUNCIL OF CHAIN RESTAURANTS; CHRIS HURT, PROFESSOR, 
 DEPARTMENT OF AGRICULTURAL ECONOMICS, PURDUE UNIVERSITY; AND 
      SCOTT FABER, VICE PRESIDENT OF GOVERNMENT AFFAIRS, 
                  ENVIRONMENTAL WORKING GROUP

                    STATEMENT OF PAM JOHNSON

    Ms. Johnson. Thank you, Chairman Whitfield, and members of 
the subcommittee, thank you for the opportunity to testify 
about the impacts of the Renewable Fuel Standard on the 
Agricultural Sector. My name is Pam Johnson. I am a sixth 
generation farmer for Floyd, Iowa, where I raise corn and 
soybeans with my husband and two sons, and we raised hogs for 
38 years. I currently serve as the president of the National 
Corn Growers Association. And here today I am the voice of the 
family farmer and give the perspective of the rural community 
to this panel.
    NCJ was founded in 1957, and represents over 39,000 dues-
paying corn farmers. And corn is possibly the most versatile 
crop in the world, and demand is at an all-time high. The RFS 
is a critical piece of our Nation's energy policy. It has 
created jobs, lessened our dependence on foreign oil, and 
improved the environmental footprint of our Nation's 
transportation fuels. In 2012, the RFS supported more than 
300,000 jobs, displaced 465 million barrels of imported oil, 
and lowered gas prices by at least 89 cents per gallon. It 
spurred the development of advanced in cellulosic biofuels. In 
short, it is doing exactly what it was designed to do.
    When the RFS was initially conceived, corn producers were 
facing significantly depressed prices, averaging $2 per bushel. 
Between 1990 and 2006, producing corn was a losing business. As 
a result, grain farmers became reliant on government payments 
as a source of income and as a means of survival. This dynamic 
changed in part to the emergence of the ethanol industry and 
the certainty provided by the RFS. Now all commodity prices 
across the board have risen, and without the RFS, it is likely 
that the entire farm economy would be in a deep recession. 
There is opportunity once again in rural America. Our two sons 
and a growing number of young farmers have returned to the farm 
after college. Corn production has allowed our livestock 
industry, ethanol industry, and our communities to grow. Due to 
the tax revenues and job security that the RFS enables, my 
small community has a new fire station, a remodeled hospital, 
and my grandson's kindergarten class is large enough to need 
another teacher.
    Much of the criticism that the RFS faces regarding food 
prices, food availability, and its environmental footprint, are 
exaggerated at best and blatantly false at worst. Because of 
the farm value of commodities represent such a small share of 
retail food prices, the impact of the RFS on food prices is 
indiscernible. Higher energy prices as a result of increased 
petroleum costs play much larger role. The World Bank found 
nearly two-thirds of the increases in food price since 2004 are 
the result of the increased price of crude oil. According to 
USDA, the farm share of the food dollar is 15.5 cents for 2011, 
this is below the average of 16.1 cents for the prior 18 years. 
The farmer is getting a smaller percentage of the food dollar, 
therefore, it is unlikely that commodities prices or the RFS 
are large contributors to food price inflation.
    Corn farmers have responded to demand by producing more 
corn on roughly the same amount of land. In the last 30 years, 
corn production has improved all measures of resource 
efficiency, land use, oil erosion, irrigation, energy use, and 
greenhouse gas emissions. I am proud to say that corn farmers 
work hard to be good stewards of the land and the environment. 
Our farmers continue to produce enough to meet increased demand 
for corn as food, feed, fuel, and fiber. We know the importance 
of seeking and embracing practices that will sustain the soil, 
to produce crops in the future.
    Farmers have increased yields, produced more food, and 
avoided clearing additional acres of land. This has curbed 
greenhouse gases equal to a third of the total emissions since 
the industrial revolution. No other industry can claim to have 
done more. Not only has the RFS enabled our Nation to be more 
energy secure, some consumers have been given better and lower 
options at the pump. Last Friday, I filled my car at a station 
in Iowa with E-85. It was $1.34 cheaper than E-10, as pictured 
on the screen. The RFS is enabling families to choose a gas 
that is cleaner for future generations at a fraction of the 
price. NCGA appreciates the subcommittee's work to understand 
our perspective. We strongly believe that the RFS is doing 
exactly what it was intended to do. It is successfully driving 
adoption of renewable-fuel alternatives to petroleum, 
supporting jobs across the country, and ensuring we remain a 
global leader in developing new energy sources here at home. I 
look forward to hearing the testimony from the other witnesses 
and answering your questions. Thank you.
    Mr. Whitfield. Ms. Johnson, thank you very much.

    [The prepared statement of Ms. Johnson follows:]

    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. And, Mr. Roenigk, you are recognized for 5 
minutes.

                   STATEMENT OF BILL ROENIGK

    Mr. Roenigk. Good afternoon, Chairman Whitfield, members of 
the subcommittee. Thank you for this opportunity to participate 
in this critically important and most timely hearing on the 
Renewable Fuel Standard. I am Bill Roenigk, and I am speaking 
on behalf of the National Chicken Council. The National Chicken 
Council represents companies that produce, process, and market 
over 95 percent of the chicken in the United States. About 40 
vertically-integrated chicken companies that are federally 
inspected comprise the U.S. industry. Since 2007, all these 
companies, at times, have struggled financially. Some have 
struggled longer and more severely than others. Chicken 
companies have been economically squeezed for much of the past 
6 years. Rising feed costs for much of the past 6 years have 
outpaced the ability of these companies to pass on the higher 
cost of feed.
    At least a dozen chicken companies have succumbed to this 
severe cost price squeeze by ceasing operations or having to 
sell their assets at basically fire-sale values, in some cases, 
to foreign owners. The business disruptions directly affects 
over 25,000 family farms and more than 300,000 employees that 
are directly working for the chicken companies. Since the RFS 
was implemented in October 2006, the feed costs for chicken, 
turkeys, and eggs have gone up over $50 billion. And that is 
not the total farm--or feed cost, that is the additional feed 
costs that we have had to incur, and it has been an 
understatement to say that we have had a difficult time passing 
on that $50 billion cost. More troubling than the higher costs 
actually is the volatility in trying to outguess the market. If 
you buy corn at $8 and it goes to $6 and your competitor buys 
at $6, you are at a tremendous disadvantage in trying to 
compete in the marketplace.
    The RFS statute and the Energy Independence Security Act of 
2007 is not just broad and complex, as the chairman has 
indicated in his comments about the hearing, it is also a 
statute that has outlived its usefulness if in fact the 
conventional fuels component of the RFS ever did have any 
usefulness. The actual experience of implementing the RFS has, 
unfortunately, been very much as those of us in animal 
agriculture expected. Our negative expectations have for the 
most part been exceeded and exacerbated by the impact of 
shortfalls of the corn crops of the past 3 years.
    The RFS clearly lacks flexibility when the corn crop falls 
short. The unintended consequences of forcing a move too far 
and too fast with corn-based ethanol have become overly clear 
and overly painful. It has also become overly clear and 
apparent that there is no workable or reasonable provision in 
the RFS to provide flexibility when the corn crop is severely 
inadequate to meet all the needs.
    I also would like to point out that the ``renewable'' part 
of the Renewable Fuel Standard term is a misnomer. That is, 
``renewable'' implies there is abundance of some natural 
resource that provides an unending supply of some product. 
Having to apply over 200 pounds of commercial nitrogen 
fertilizer to achieve a corn yield of 160 bushels an acre does 
not qualify in our estimation as being a renewable resource. If 
you did not apply that fertilizer, your yields would be cut in 
half; if you didn't apply them again the next year, you would 
be cut in half again. In short, the Renewable Fuel Standard, at 
least for the conventional biofuels part of it is broken beyond 
repair.
    It is imperative and important at this time that Congress 
take action to take a hard, critical look at the RFS. If 
Congress concludes as we do, the RFS cannot be fixed because it 
is broken beyond repair, then Congress must do the right thing. 
And I would recommend those who are interested in more 
information about the National Chicken Council's position that 
you go on the committee's Web site and look for our white paper 
we submitted in response to your call for the impact on 
agriculture. The National Chicken Council looks forward to 
working with the ask subcommittee and others in Congress to 
fix, if possible, this very broken legislation.
    Thank you, Chairman Whitfield, and members of the committee 
for this opportunity. And we look forward to your questions.
    Mr. Whitfield. Thank you very much.
    [The prepared statement of Mr. Roenigk follows: ]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. And Mr. Anderson, appreciate you and your 
family being here, and you are recognized for 5 minutes.


                    STATEMENT OF ED ANDERSON

    Mr. Anderson. Thank you. Good afternoon, Chairman.
    Mr. Whitfield. Be sure and turn your microphone on.
    Mr. Anderson. Good afternoon, Chairman Whitfield, Ranking 
Member Rush, and members of the committee. My name is Ed 
Anderson. My wife Judy and I, with our son, Eddie, own a small 
Wendy's franchise with four restaurants in Virginia. We have 
138 employees. I was also elected to the board of Wendy's 
Quality Supply Chain Coop, QSCC, a not-for-profit purchasing 
coop owned by Wendy's restaurant operators like me. QSCC 
purchases the food for Wendy's and is staffed by experts who 
understand and help us interpret commodity markets. The 
National Council of Chain Restaurants asked me to be here to 
represent our industry. I have never done anything like this in 
my life, but I do have a responsibility to my employees, fellow 
franchisees, customers, the food service industry, and my 
family to make sure Congress knows a well-intended idea has 
turned out to be a very serious problem, and it is getting 
worse.
    Judy and I are the face of American small businessmen and 
women. We have worked hard to build our business. But when 
Congress passed the Renewable Fuel Standard, it created a new 
burden for businesses like ours. Now restaurant owners and 
employees like us are being hit at a time when our economy 
can't afford it. I doubt many restaurant operators or our 
customers know that an EPA mandate on corn ethanol is at the 
root of food cost increases.
    Based on several analyses, we are asking Congress to repeal 
the RFS because it is estimated to be costing us up to $30,000 
more per restaurant than we would normally pay. For our family 
business, that is up to $120,000 a year in additional costs. 
That might not be a lot of money in Washington, D.C., but for 
me and many others in the restaurant business, that is a lot of 
money. If Congress repealed the RFS, it would level the playing 
field and over time, return normalcy to the food supply chain 
so everyone competes fairly and food becomes more affordable.
    Last year, RFS proponents blamed the drought for high corn 
prices. This year, they are blaming it on oil prices. But a 
2012 report by PricewaterhouseCoopers confirms what our 
analysis at QSCC already thoroughly studied. It is the RFS that 
distorts food commodity costs so much that restaurants, our 
suppliers, and consumers are forced to pay more than we 
normally would under market conditions.
    Please understand we are not anti-ethanol. We know if it 
wasn't for American farmers and ranchers, we wouldn't be here, 
and we support American agriculture. We get all of our beef and 
chicken from here in North America. But this mandate is making 
food so expensive that it is harder to continue investing in 
new or remodeled restaurants, which would create badly needed 
construction and restaurant jobs. I believe with all my heart 
that we live in the greatest country in the world. This country 
was built on the hard work and the ingenuity of those who were 
willing to risk it all to build something. Removing the mandate 
for ethanol allows to stand on its own. Capitalism allows us 
all to adjust and be successful.
    Let the natural market dictate the cost of ethanol, not a 
mandate. We can't pass these costs on to our customers. They 
are already struggling in this economy, and their own food 
costs at grocery stores have also gone up because of the RFS.
    We are appealing to Congress to thoroughly study the issue 
like we have. Please listen to all sides and consider all 
implications. Then you will understand why repeal is the best 
solution. Recently, an educational campaign was launched called 
``Feed Food Fairness, Take RFS Off the Menu.'' It is led by the 
National Council of Chain Restaurants and supported by a 
coalition of small business owners, operators, franchisees, and 
many others in the food supply chain to urge Congress to repeal 
the RFS.
    We believe the RFS must be repealed because we are 
concerned that if, for example, just the corn ethanol mandate 
is eliminated from the RFS, it would simply be replaced with 
some other food crop, and we would be right back where we are 
today. What sounded like a good idea has had serious 
consequences and artificially driven up the price for food both 
at home and in our restaurants.
    Judy and I are the kind of people that make up much of the 
chain restaurant industry. We are here as small business 
owners, as employers, and as a family to bring attention to 
this issue and ask Congress to take action for all of us. Thank 
you.
    Mr. Whitfield. Thank you, Mr. Anderson.
    [The prepared statement of Mr. Anderson follows: ]

    [GRAPHIC] [TIFF OMITTED] 

    Mr. Whitfield. And Professor Hurt, you are recognized for 5 
minutes.

                    STATEMENT OF CHRIS HURT

    Mr. Hurt. Thank you for the opportunity to provide some 
comments on the impacts of the RFS to date and to discuss the 
future direction of the RFS and its implementation. Out in the 
Midwest, we view what happens to the RFS as one of the most 
important drivers of the entire farm economy. The RFS really 
does matter to U.S. agriculture. I am here today as an 
agricultural economist from Purdue University. That is the land 
grant college of Indiana. And I am here to represent U.S. 
agriculture broadly and not to have any advocacy position on 
the RFS.
    Some call the current high farm commodity price period the 
``biofuels era.'' I think it is a little bit of a mistake to 
believe that the RFS was the sole factor that caused the amount 
of changes in prices we have had. And those have had major 
impacts as you have already heard on different sectors.
    We really have had two major things that changed that drove 
the demand so much higher for agricultural grains. One of those 
was clearly the biofuels. There we saw the massive increase in 
acreage, a lot of new demand for acreage, for corn, that 
increased about 16 million acres in the United States. That was 
a very large surge in demand. But there was a second very rapid 
surge since 2005, and that has been the growth of incomes in 
China and resulted in purchases of soybeans here in the United 
States, the additional purchases required about 13 million 
additional acres. All these factors have been built into higher 
grain prices. If we just look at the acreage impact, 16 million 
acres on corn driven by RFS. And 13 million on soybeans, it is 
about 55 percent of the acreage, higher acreage was driven by 
the--directed by the RFS.
    So in some way, I think the RFS did have increased--the 
increase for corn ethanol was very rapid, maybe a little more 
rapid than U.S. farmers could supply. And clearly, we have had 
supply problems, as was mentioned already. But the soybean 
purchases from China are also part of this explosive price 
period.
    Certainly, RFS has, as you have already heard, provided 
positive benefits for some sectors, the grain producers and 
farm landowners, especially. And it has been negative for 
people who are end-users and obviously the animal producers we 
have heard from, food consumers we have heard from, and those 
that are involved like restaurant industry. In the farm sector, 
U.S. farm incomes shot from $79 billion in 2005 to a record 128 
billion estimated by USDA this year. Even more startling is 
farm land values have risen about 150 percent during this time 
period, since 2005, and that is, really, a very large number, 
approaching $1 trillion of extra real estate value in farmland. 
$866 billion higher land value, real estate value for farms in 
2013 versus 2005.
    The downside, of course, was felt by those users of grains. 
Prices of feed shot higher for the animal industry, as you have 
heard. And the animal industry cannot immediately pass that on. 
The prices are determined by their supply that year; when they 
had much higher feed prices, they can't pass it on. They 
absorbed that in losses in their margins, as you have already 
heard. And then eventually those losses discouraged some 
people. We have then a reduction in the amount of food 
available.
    I looked at some of the meat sector. Per capita 
availability of meat has gone down, since grain prices went up 
at about 5 percent this year, per capita supplies of chicken 
and turkey; pork availability is 6 percent lower, and beef 
supplies in the United States are down 14 percent since we had 
that cheap corn.
    So, clearly, we look at that. Consumers have less food 
availability to choose from at higher prices. They are 
definitely losers. Retail food prices have been mentioned. They 
have risen about--food has risen about 1 percent faster than 
the core inflation rate. And again, as is mentioned, it is the 
commodity portion of the food that we would relate to, the RFS, 
so it is a smaller portion.
    Certainly the RFS has some major issues coming up. The 
blend wall I am sure you have talked about. We have a really 
slow start towards E-15 and E-85. We have tiny cellulose 
production, which was supposed to be the direction we were 
going at this point. And other issues.
    Let me conclude then by saying crop farmers, I think, would 
like to maintain conventional ethanol levels about where they 
are today. I think they can reach the 15-billion gallon level 
that is slated. Our problems really are over on the cellulosic 
side.
    And in terms of oil seeds, we can see some further increase 
in oil seeds. This might be like soybean oil. But I think the 
bottom line is what we would like the agricultural sector is to 
see some stability, as corn growers have indicated. We would 
really like to see, from the end-user side, we would like to 
see that there not be legislative mandates that increase the 
demand beyond the ability to supply that. So that we look at 
the supply, how quickly can supply grow. And if we are going to 
have mandates that those mandates, not increase demand quicker 
than supply. I look forward to any questions you have. Thank 
you.
    Mr. Whitfield. Thank you.
    [The prepared statement of Mr. Hurt follows:]

    [GRAPHIC] [TIFF OMITTED]     

    Mr. Whitfield. And Mr. Faber, you are recognized for 5 
minutes.


                    STATEMENT OF SCOTT FABER

    Mr. Faber. Thank you, Mr. Chairman, Ranking Member Rush. 
And thank you, members of the committee. I am the last witness 
on the last panel. So I will be brief, and I will take to heart 
Mr. Shimkus's command to listen and be constructive. I think 
that is exactly the right mindset to bring to this issue.
    Mr. Whitfield. Would you mind just taking your microphone a 
little closer.
    Mr. Faber. Absolutely. I will do whatever Mr. Shimkus says.
    So I do think it is time to--and we have heard this over 
the last 2 days--it is time to recognize that the RFS is 
producing too many biofuels that increase greenhouse gas 
emissions, that increase food prices, that pollute our air and 
water, and not enough of the good biofuels that really help 
hold the promise of not pitting our energy needs against our 
food security and environmental needs. And it is important to 
look back and remember that the RFS was once heralded as a way 
to combat climate change. But according to EPA's own analysis 
in their 2010 Regulatory Impact Analysis, the RFS has actually 
increased greenhouse gas emission by encouraging farmers for 
plow up millions of acres of land, releasing carbon into the 
atmosphere and releasing nitrous oxide emissions into the 
atmosphere.
    Again, according to EPA's own analysis, the rapid expansion 
of corn ethanol increased greenhouse gas emissions in 2012, and 
will continue to increase greenhouse gas emissions for years to 
come. And that is because most corn ethanol is either produced 
in a natural gas fire dry mill ethanol plant, which, according 
to EPA, increases lifecycle greenhouse gas emissions by 33 
percent when compared to gasoline, or in a coal fire dry mill 
ethanol plant, which increases greenhouse gas emissions, again, 
according to EPA, by 66 percent when compared to gasoline. But 
that is not all. As farmers have applied more fertilizer to 
millions of acres of new crop land, the RFS has also increased 
the amount of fertilizer that winds up in our rivers and 
streams that, in turn, increases the cost of treating our 
drinking water. It has increased the amount of water that is 
used in many drought-stricken States. It has increased 
emissions of air pollutants, like particulate matter and ozone, 
and, as we have heard on this panel, increased food prices for 
consumers.
    That is the bad news. I think the good news is that many 
second-generation biofuels hold real promise because many of 
these fuels convert wastes, not food crops, into fuel. 
Unfortunately, as you heard yesterday, the marketplace is 
saturated by corn ethanol, blocking the commercial development 
of these much more promising fuels. And so we believe that in 
order to allow second-generation fuels to gain a foothold in 
the marketplace, Congress must reform RFS to phase out the corn 
ethanol mandate. There is simply no reason to think that RFS as 
currently designed is providing sufficiently powerful incentive 
to develop these new fuels. In fact, all of the evidence 
suggests that RFS is failing to deliver on that promise. Over 
the last year alone, EIA has, on three separate occasions, 
revised downward its estimates for cellulosic ethanol 
production in 2022.
    At a minimum, Congress should level the playing field for 
these second-generation biofuels by making corn ethanol subject 
to the same high greenhouse gas reduction standards as second-
generation biofuels. Right now, as I mentioned, most corn 
ethanol production is completely exempt from any of these 
greenhouse gas reduction standards. So they are, again, 
completely exempt from meeting these greenhouse gas reduction 
standards under the 2007 Act. And according to EPA's 2010 
Regulatory Impact Analysis, increasing greenhouse gas 
emissions.
    What is more, phasing out these food-to-fuel mandates 
would, as you have just heard, create a level playing field for 
livestock operators, for food manufacturers, for restaurant 
owners, who are paying more for food and feed.
    I would like to just close by thanking you for reviewing 
these issue. We have now had many years of experience with the 
RFS. I applaud you all for recognizing that now is the time for 
reform, and we do look forward to working with you to come up 
with constructive ways to help bring these promising second-
generation fuels to the marketplace. Thank you.
    Mr. Whitfield. Mr. Faber, thanks very much. And thank all 
of you for your testimony. We appreciate your taking the time 
to be here.
    [The prepared statement of Mr. Faber follows:]
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    Mr. Whitfield. I am going to recognize myself for 5 minutes 
of questions. We actually have votes on the floor. And, 
unfortunately, there is like eight or nine amendments. It is 
going to take some time. So I know members are interested, have 
a lot of questions. I will go and ask mine now and maybe we 
will get to Mr. Rush. And then hopefully, you all can go down 
to the cafeteria and have a sandwich or something for an hour. 
But I do apologize in advance for this inconvenience.
    As I said, we have had a number of hearings on this. And it 
is a complex topic. Initially, when the Renewable Fuel Standard 
was adopted, there were three basic reasons for doing so. One 
was less reliance on foreign oil, the second was to revitalize 
the rural areas, and the third reason was to reduce greenhouse 
gas emissions. And so the question I would like to ask each one 
of you is, if those were the three primary reasons given for 
the adoption of Renewable Fuel Standard, the International 
Energy Agency recently said that within a short period of time, 
5, 6 years, America will be the number one oil producing 
country in the world because of recent finds in new fields like 
the Bakken Field, which means that one of the reasons for this 
standard, being less dependent on foreign oil, seems to be less 
important.
    The second reason is that we reduce greenhouse gases. Well, 
Mr. Faber, in his testimony, points to studies. And I will just 
read from a few of them here. ``Researchers found that the 
cumulative greenhouse gas emissions caused by corn ethanol for 
the period between 2015 and 2044 will be about 1.4 billion 
tons, or 300 million tons more than emissions from an energy 
equivalent of gasoline.'' And they say that actually EPA's 
original research was wrong. And then it says, ``The National 
Academy of Sciences found that overall production and use of 
ethanol was projected to result in increases in the pollutant 
concentration. Those projected air quality effects from ethanol 
fuel would be more damaging to human health than those from 
gasoline use.'' And I could go on from there.
    Now, I am from a rural area. And I could tell what you 
what, every time I go home, our corn growers, our soybean 
growers there are thrilled because great yields, good prices, 
and the economy is going strong. But if the validity of doing a 
program like this, as complex as it is, only one reason given 
initially still appears to be out there, I would ask each one 
of you if you could just give me your view on, since we are 
only fulfilling now it looks like maybe one of the original 
intents of the standard, of why should we continue it? And, Ms. 
Johnson, if you wouldn't mind responding, I would appreciate 
it.
    Ms. Johnson. Thank you for that question. Several things. 
We have data to prove that corn production alone has reduced 
greenhouse gas emissions by 36 percent. And we are doing that 
with new technologies and farming smarter and putting nutrients 
into the crop precisely using GPS and computers so that those 
techniques are helping on that end. And in the end, on the corn 
to ethanol, the EPA asked that corn ethanol reduced greenhouse 
gas emissions by 20 percent by 2022, and the corn ethanol 
business has already met that.
    Mr. Whitfield. So, Ms. Johnson, sorry for interrupting. I 
have a minute and 24 seconds left. But basically what you are 
saying is that your studies indicate that there has been a 
reduction?
    Ms. Johnson. Correct.
    Mr. Whitfield. And what about the oil independence issue, 
as we produce more and more oil, what would you say to that?
    Ms. Johnson. The amount of gallons of ethanol added to the 
fuel supply has reduced it. Yes, we are using less gas here. 
Yes, we have more gas here, but it is harder to get that kind 
of gas out of the ground, and the carbon footprint of that will 
be bigger also. So I think we have to look at going forward in 
the future these--these products are still fossil fuels, and 
they are still, at some point, finite and we need to develop 
renewable fuels.
    Mr. Whitfield. Mr. Roenigk, do you have a comment?
    Mr. Roenigk. I would just observe what Dr. Hurt set about 
almost a trillion dollars increase in land values. That is 
great for the people who own that land, wanted to sell it. But 
if you are a young farmer trying to get into agriculture, and 
we do need some young farmers out there, we have raised a very 
high hurdle for them to overcome to continue to be in animal 
agriculture,
    Mr. Whitfield. But is it still your position it should be 
repealed?
    Mr. Roenigk. Our position, there needs--if we cannot put 
flexibility into the program, then we need to fix it. And if we 
can't fix it, then we need to repeal it.
    Mr. Whitfield. Mr. Anderson.
    Mr. Anderson. Thank you. I am just a small businessman. So 
when we talk about these other things, it is very difficult for 
me. But on a daily basis, the thing I can speak about is I have 
a responsibility to my 130-plus employees. And I know that the 
rising of the food commodity prices has put a severe impact on 
us, not only at the restaurant, but even in the grocery stores. 
And that has made it very difficult for everybody to pay higher 
prices for gas and for food at this time.
    Mr. Whitfield. Mr. Hurt.
    Mr. Hurt. Yes, I think there has been enough change that we 
need--Congress should look at the Renewable Fuel Standard, and 
implementation is going to be very difficult given the high 
amounts of additional biofuels that are to be produced.
    Mr. Whitfield. Mr. Faber.
    Ms. Faber. I would just add that it is not EWG's view, it 
is both EPA's view and the National Academy of Sciences' view 
that the corn ethanol mandate has increased greenhouse gases. 
They wrote in 2011 that, ``regardless of whether the co-product 
is sold wet or dry, corn grain ethanol has life cycle 
greenhouse gas emissions higher than gasoline in 2012 and 
2017.'' So I think we don't need to get into this fight of 
dueling studies. The experts, EPA and the National Academy of 
Sciences, have already drawn the conclusion that especially in 
the short run when we need greenhouse gas reduction the most, 
corn ethanol is increasing emissions by increasing the amount 
of carbon that is released into the atmosphere.
    Mr. Whitfield. Thank you very much. And now, Mr. Rush, 
would you like to ask questions now or do you want to come 
back?
    Mr. Rush. I think it would be appropriate given the fact 
that we have got, like, seven votes left.
    Mr. Whitfield. OK. I know a number of members have 
questions for you all. And I do apologize. But if you don't 
mind, we do need to go vote. There is going to be seven or 
eight votes. It may take 50 minutes, 55 minutes. So if you all 
would come back at about hour from now, we would genuinely 
appreciate it. With that, we will recess the hearing for one 
hour. Thank you.
    [Recess.]
    Mr. Whitfield. At this time, I will recognize the gentleman 
from Colorado for 5 minutes of questions.
    Mr. Gardner. Thank you, Mr. Chairman, and I appreciate the 
witnesses' time and their time for being here. Yesterday, the 
witnesses were able to provide entertainment, insight, 
arguments, and a lot of good information on the impact of 
renewable fuel standards on fuel production sales and usage.
    Today, I thank you for the opportunity to talk about the 
impact it has on agriculture, on food prices around the 
country. And I mentioned yesterday about my district's strong 
agricultural sector, not only some of the Nation's leading corn 
producers on the county basis in the country as well as farmers 
and ranchers throughout Colorado, and the 4th congressional 
district, the 11th largest ag district out of the 435 districts 
here in Congress.
    And to William Roenigk, is that Mr. Roenigk?
    Mr. Roenigk. Yes.
    Mr. Gardner. Of the National Chicken Council. I asked a 
similar question yesterday to Bob Dinneen, president of the 
RFA. Could you talk about the coke product from ethanol product 
to distill his grains, how they impact livestock operators that 
you represent?
    Mr. Roenigk. Yes, thank you. Great question. You are 
referring to DDGs?
    Mr. Gardner. Yes.
    Mr. Roenigk. It is a great product if you are ruminant. If 
you are a chicken cattle, dairy cattle, but if you are single 
stomach animal like poultry and hogs, doesn't work so well, and 
even works less today than it did a few years ago. Now the 
technology is such that they are able to take the oil out of 
the DDG. So, before there was some energy from the oil, but now 
that energy is gone, and so for poultry, very difficult to 
really get much benefit from DDGs, and so we use a very limited 
amount, in most cases, less that 5 percent. Having said that, 
it is good that the--our competitors in large animals can use 
it and take some of the pressure off the corn market.
    Mr. Gardner. And your conversation as livestock operators, 
they believe that DDGs have actually helped with their 
profitability; is that correct?
    Mr. Roenigk. Yes, I would agree.
    Mr. Gardner. Ms. Johnson, to you, I got my start in 
Congress actually as an intern working in the Corn Growers 
Office, which right now represents the 24th highest producing 
corn district in Congress. In your testimony you talk about how 
the RFS has benefited rural communities. Can you elaborate on 
what has happened to farm income in the United States since we 
adopted the RFS in 2005?
    Ms. Johnson. Sure. As I say in my written testimony, before 
the days of the RFS, farmers were facing prices of $2 corn and 
below, and so actually, as corn growers, we got together with 
other entrepreneurs and decided what we had to do to develop 
markets, and ethanol looked like it was promising growth 
because we were fulfilling our needs to the domestic livestock 
industry and our exports, and so we needed a new market. So, it 
has been very important to us to help work with that and 
develop it.
    Mr. Gardner. Thank you. Talk a little bit again about what 
has happened with government payments to farmers in that same 
time period.
    Ms. Johnson. Sure. Well, at that time, unfortunately, we 
had to get half of our income from the government just to be 
able to survive, and some of us that are old enough like me 
have been through the 1980s and we have seen what that can do 
to farms and farm families. So, now we are able to get our 
income from the marketplace.
    Mr. Gardner. And, in your testimony, you talk about RFS 
impact on food prices. Mr. Hurt has made some comments about 
that as well. Would you further elaborate on that a little bit?
    Ms. Johnson. Sure. As the Secretary of Agriculture, Tom 
Vilsack has said it, at this time, the American consumer can 
leave the grocery store with more money in their pocket even 
with food prices today the way they are, and have more 
disposable income to spend on other things. And corn gets $0.03 
out of the food dollar that the consumer has to spend.
    Mr. Gardner. And can you talk about that a little bit. I 
think in your testimony, you talk about how it was $0.16 of 
every dollar spent, the farm share being $0.15 now lower. Can 
you talk a little bit about that impact?
    Ms. Johnson. Sure. So, for the food dollar, 84.5 cents goes 
into marketing, or the petroleum cost to get that food product 
to market, and of that dollar, then the 15.5 cents, as you say, 
goes to the farm, and of that, only $0.03 can be attributed to 
what the corn price is in that product, whether it is hamburger 
or chicken or beef or pork.
    Mr. Gardner. And you know, there are various biometric 
requirements within the renewable fuel standard, and do corn 
growers, your organization supportive of new biofuels and 
cellulosic ethanol coming to the market?
    Ms. Johnson. We do. As was said earlier that we are 
blocking cellulosic and new biofuels coming in, that couldn't 
be further from the truth. We welcome them, and we think that 
corn ethanol is the basis and the foundation of that happening, 
and with the RFS, that provides the incentive that there is 
certainty, just like when corn ethanol started out, that those 
industries can build on that and have innovation and technology 
coming to improve and start the next generation.
    Mr. Gardner. Thank you. And Mr. Chairman, I yield back.
    Mr. Whitfield. Gentleman yields back. At this time, I 
recognize the gentleman from Illinois, Mr. Rush, for 5 minutes.
    Mr. Rush. Thank you, Mr. Chairman. Following up on my 
friend from Colorado's line of questioning. The issue of 
providing food costs is an issue that I am extremely sensitive 
to. I represent a district with some of the highest rates of 
both poverty and unemployment in the Nation, and making sure 
that my constituents can afford to put food on the table is of 
the highest concern for myself.
    In various meetings regarding the RFS, my office has 
received some conflicting information on the impact that this 
policy has had on food prices. Some have insisted that the RFS 
has helped to raise food prices due to the use of corn ethanol, 
while others have stated in writing, energy costs have played a 
much larger role in raising food prices.
    During today's panel discussion, in fact, Mr. Dinneen 
stated and showed a pretty convincing slide--yesterday's panel, 
rather. Mr Dinneen showed a pretty convincing slide 
demonstration that the year end global food prices and global 
fuel oil prices rose and fell almost simultaneously between the 
years 2000 to the present.
    And I want to ask all the panelists today, as I understand 
it, as many witnesses confirmed yesterday, the RFS has actually 
helped to reduce fuel costs, at least in the transportation 
sector. I want to learn more about the impact that repealing 
the RFS would have on food costs, if any?
    So I want to go down the line and ask each of you to 
briefly share your views on what has been the greatest impact 
on food costs, the RFS or rising energy costs?
    Separate question. What impact would repealing the RFS have 
on the price, the price that Americans pay for food?
    So I am going to go down the line, beginning with you, Ms. 
Johnson. Can you answer those questions?
    Ms. Johnson. Thank you very much. We believe that it is the 
rising cost of fuel that is costing people more for their food 
dollar. There is a high correlation between the price of a 
barrel of oil and what people pay for food because as 
transportation costs go up, and we believe that the impact of 
removing that would be deleterious to your constituents also, 
because the average family saves $1,200 a year out of their 
family budget by reduced fuel prices because of having ethanol 
at the pump, $1.09 per gallon on the average to save. And I buy 
both food at the--groceries and fuel for my family, and as corn 
prices have gone down this year 30 percent, I have yet to see 
food prices come down 30 percent. So, we will see if they do, 
and then we will decide if there is a correlation between the 
two.
    Mr. Rush. Mr. Roenigk.
    Mr. Roenigk. Yes, thank you for the question. With all due 
respect to Ms. Johnson, I would like to suggest the following 
example. She is making so much per acre on growing corn, but 
let's say Green Giant came to her and said, OK, I would like 
you to grow green beans for us. I suggest that Ms. Johnson 
would say, I am making this much on corn. If you want me to 
grow green beans, I need to make at least that much on green 
beans.
    So when corn says we only increase food a little bit 
because we are only so much of the market, it is not just one 
boat in the harbor. It is raising all the boats in the harbor. 
So you have to look at all the food costs. Corn competes with 
all the other crops. If you are a farmer, you are going to 
produce what is most profitable, and if somebody else wants you 
to produce something other than corn, it has got to be least as 
profitable, or more so. So the argument needs to be much 
broader than just what is the cost of corn.
    Mr. Rush. Mr. Anderson, do you have anything that you want 
to add to this?
    Mr. Anderson. Yes, sir, Congressman. There are a couple of 
things.
    One, when we talk about the increase in food, I can tell 
you that the Bureau of Labor Statistics states that from 2005 
to 2012, that food has outpaced core inflation during that 
time, 25 percent to 16 percent. When we talk about the price of 
higher food, I can tell you that I come here and can tell you 
that, in my restaurants, food has increased for the last 5 
years. In a QSCC, which is the Quality Supply Chain Coop at 
Wendy's, they study it every day, and that is a fact as far as 
we are concerned.
    Additionally, it impacts everybody because, as was just 
stated, whether it is too much corn being planted, then it 
takes away from soy beans, so then the soy bean price go up. 
So, the cost to consumers has gone up significantly and the 
cost for us in the restaurants has gone up significantly for 
the same reasons. Thank you.
    Mr. Rush. Thank you. Mr. Hurt.
    Mr. Hurt. My evaluation would be that there has been a 
direct correlation. RFS has raised food prices. There is always 
a question of what is the magnitude. I think the direction is 
on the upside. We have seen food inflation be about a percent 
higher than the core inflation per year on average. Our 
evaluation is about half of 1 percent a year as related to the 
commodity food portion of that, kind of the farm value of that.
    As we work that through, that ends up being about $7 
billion a year on our food system. We have a very large food 
system and that there are some additional higher costs. Energy 
is also very important in that, and splitting those out, 
exactly which one is the bigger contributor, I am not well 
qualified, but I think they both have been positive.
    I would also mention that food inflation, I would expect to 
now drop below the core inflation. We have a good crop in the 
United States finally here in 2013. We are going to see 
moderation in some of these basic food prices like our corn, 
soybeans, wheat. That is going to help to begin the process of 
moderating food price inflation even more.
    Mr. Rush. Thank you. Mr. Faber. Thank you, Mr. Chairman.
    Mr. Faber. I would just add that there are many factors 
that are contributing to food inflation. When USDA chief 
economist Joe Glauber was here a month ago, he attributed about 
a 30 percent of the increased price of corn to the RFS, but 
there are many factors that are contributing to higher corn 
prices and ultimately higher food prices, including energy 
prices, strong global demand for our commodities.
    The RFS is one of the factors that Congress can control. So 
of all the things that impact the price of corn and ultimately 
the price of food, energy prices, the weather, strong global 
demand, the amount of ethanol that we blend into gasoline is 
one of the factors that we can actually change.
    Mr. Whitfield. Thank you. 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. I think, since we are 
getting close to the ending of the whole panels, I think it 
would be instructive just to talk about ethanol and how it 
actually got developed. And everybody talked about 2005, but it 
wasn't in 2005 that developed ethanol into the markets. It was 
the Clean Air Act of 1992 because it caused the fuel to burn 
cleaner, it was tailpipe emissions, and that was the entry. It 
was also the entry with another product called MTBE, which 
eventually became a persona non grata because of some odor and 
discoloration, not toxicity but--so MTBE got left, ethanol 
started going into that market for the Clean Air Act. So then 
it was 2005 that we made the transition of energy security, 
decreased our reliance on imported crude oil by having 
renewable fuels.
    The environment has shifted quite a bit with our own 
ability to produce fracking and going through our depleted 
wells using new technology and getting more oil out of them, 
and that is kind of what stirred up this debate again.
    But I think the basic premise is that in any business, and 
as the government has sent a signal, and you have made capital 
investment to respond to that Federal law, I think no one would 
be supportive of the government changing the rules to bankrupt 
those who invested private capital to meet the law of the 
national government. Is there anyone? No.
    So, that is part of this debate, that we made promises, 
investment, private capital to build refineries. Ethanol 
refineries, a lot of times in rural America where they have 
nothing but fields, now they have got a little refinery there, 
it is paying taxes, as Pam has mentioned. So that is why we are 
trying to find the sweet spot in this.
    Scott and I appreciate your acknowledging that. We didn't 
get much of that yesterday, but we think we will as we move 
forward. But Scott, let me ask you, we understand the new world 
of cellulosic. There will be many of us who, and I think even 
my friends on the other side, it is going to be built on the 
foundation of corn-based ethanol. So I would hope that, if that 
is the future you-all want to go----
    Mr. Faber. Yes.
    Mr. Shimkus. Your testimony says reduce. I don't think that 
is going to pass the political scrutiny, but if it is, build on 
that future, then we have got an area we can work together.
    Mr. Faber. Here is the challenge, and I think--we see this 
problem the same way, and one of your witnesses made this point 
yesterday that I can't pour this jug of water in this cup, and 
that is fundamentally the problem with the RFS we have today.
    Mr. Shimkus. But that is why we are having this hearing. 
That is exactly why we are here.
    Mr. Faber. But, and I think one of the things that was not 
said explicitly, but we all know, is that we will be in an E10 
environment because of the engine and infrastructure hurdles 
for some time.
    Mr. Shimkus. All right. My time is expiring, but you can't 
put 14 ounces in a 12-ounce cup.
    Mr. Faber. Right.
    Mr. Shimkus. But that is where we need your help. How do we 
make these changes? And I want to go to Pam real quick, because 
I want to ask this question.
    Can you, representing National Corn Growers, a lot of my 
friends, can you envision a modified RFS that avoids the near 
term pitfalls that would be acceptable to American corn 
farmers?
    Ms. Johnson. Yes, I can.
    Mr. Shimkus. OK.
    Ms. Johnson. And I think some of the problems that we are 
encountering now could have been avoided because when the law 
was written in 2005, we knew that one of the goals was to 
increase the level of blending renewable fuels. So part of that 
problem is a willingness to make sure that those renewable 
fuels are available.
    So it comes as no surprise to me in 2013 that now--it does 
not come as a surprise to me that we need to blend those fuels.
    Mr. Shimkus. Right. And let me go to Mr. Roenigk real 
quick, because I want to get--because I am from livestock 
sector, not chicken, we have the other white meat, which we are 
very proud of, and of course, DDGs are a big part of what they 
have done to offset their cost. Can you and the Chicken Council 
see a way in which, kind of the same question, and modify RFS 
that avoids some of these near term pitfalls?
    Mr. Roenigk. We need flexibility. It is clear that the 
current RFS doesn't have flexibility, and so we are open to 
reasonable alternatives that would provide for those situations 
where there is not enough corn and we can all share in that 
situation.
    Mr. Shimkus. And let me finish on this, and just because my 
time is very close. Two articles when I was flying out talked 
about the high price of gas. Gas is going up again for a lot of 
reasons, and in both these articles, there was not a single 
mention of ethanol RINs. When you take the--when you take this 
policy paper from the World Bank, May 2013, I read it here 
numerous times, it says this, it concludes that the most of the 
price increases--this is about food increases, prices of food 
increases from the World Bank. It concludes that most of the 
price increases are accounted for by crude oil prices, more 
than 50 percent, followed by stock-to-use ratios and exchange 
rate movements which are estimated about 15 percent. Crude oil 
prices mattered most during the most recent boom period because 
they experienced the largest increase.
    So, we can have this food-fuel fight all the time. It is 
transportation costs, it is crude oil, it is the barrel, and it 
is the truth.
    So, Mr. Chairperson, thank you, and I yield back my time.
    Mr. Whitfield. The gentleman yields back. At this time, I 
recognize the gentleman from Virginia, Mr. Griffith for 5 
minutes.
    Mr. Griffith. Thank you, Mr. Chairman. I appreciate it, and 
start with Mr. Faber.
    Mr. Faber. Yes, sir.
    Mr. Griffith. In your testimony you state that the EPA's 
own analysis has since shown that the lifecycle greenhouse gas 
emissions of corn ethanol were higher than gasoline last year, 
2012, and will be higher in 2017. So, the RFS was intended to 
introduce cleaner, more efficient fuels, and the largest 
existing component, by far, corn ethanol is less efficient and 
dirtier than gasoline, question mark; is that true?
    Mr. Faber. That is correct. That is according not only to 
EPA's analysis, but the National Research Council's 2011 report 
as well as other studies that have looked at--that have 
compared the greenhouse gas emissions associated with corn 
ethanol to the energy equivalent amount of gasoline.
    Mr. Griffith. And that deals with the production costs and 
so forth, correct? Not just the burning of the----
    Mr. Faber. In part, because of the carbon debt created by 
corn ethanol. When we encouraged farmers to plow up millions of 
acres of land to produce more corn, we released an 
extraordinary amount of carbon into the atmosphere. We applied 
a lot more fertilizer that went into the atmosphere in the form 
of nitrous oxide, which is 300 times more potent greenhouse gas 
than carbon dioxide.
    And in combination, that has increased in the short run the 
lifecycle greenhouse gas emissions associated with corn 
ethanol.
    Mr. Griffith. All right. And so should corn ethanol 
continue to be a part of the RFS from an environmental 
perspective? I understand there is always a balance.
    Mr. Faber. If our goal is to reduce greenhouse gas 
emissions, and I think this goes back to Mr. Shimkus' point, we 
have to find room in the E10 pool for these promising 
cellulosic biofuels. If I produced a cellulosic ethanol today 
that got a 50 or 60 percent reduction in greenhouse gas 
emissions, there simply would be no place in the pool because 
the pool is only 13.4 billion gallons and the corn ethanol 
industry has the capacity to produce 14.7 billion gallons. So I 
think we just need to create a foothold in the existing E10 
pool for these new biofuels that really promise to deliver on 
greenhouse gas reductions.
    Mr. Griffith. All right. Thank you.
    Mr. Roenigk, last year we had a drought across a big chunk 
of the country, bad weather scenario. I was one of those who 
asked the EPA to grant a waiver from the RFS. What, in your 
opinion, would it take for the EPA to recognize severe economic 
harm and waive the mandate? What kind of conditions do you 
think they would have to have?
    Mr. Roenigk. I can't speak for EPA what it would take for 
them to do that, but it is difficult to imagine a scenario, 
short of a, whatever definition of a crisis is, but they have 
demonstrated that the current regulations, it is basically 
impossible to rise to that level.
    Mr. Griffith. From your opinion, last year probably would 
have met the test; is that correct?
    Mr. Roenigk. I think it came very close. It didn't go over 
that hurdle and EPA felt that wasn't enough, so I'm not sure 
what the situation is. I was pleased to hear Dr. Hurt, I won't 
say guaranteed, but basically say the corn is in the crib or in 
the bin, but those of us in the chicken industry have learned 
not to count the chickens till they are hatched.
    And so I am hoping the corn is in the crib this fall and we 
can all perhaps breathe a little easier, but to go back to your 
question, I can't speak for the EPA, but it is difficult to 
imagine under current rules what it would take for them to 
recognize that.
    Mr. Griffith. All right. And Mr. Anderson, your restaurant 
group has been vocal about repealing the RFS. You were asked 
what factors were out there, you listed that one. Of course, 
transportation is a big one too, but would I be wrong in saying 
that another cost driver, not only at your restaurants, but in 
the grocery field is the refrigeration of the food, and that is 
usually electric and the jump in electric prices has also been 
one of the concerns that are cost drivers for you-all?
    Mr. Anderson. It would be difficult for me to speak on that 
as far as specifics.
    Mr. Griffith. Sure.
    Mr. Anderson. What I can tell you is that, again, the cost 
of corn has impacted the proteins, which we use. You have 
cattle, you have dairy cattle, you have got chickens, you have 
got the hogs, all of them use corn. You also, we use buns. All 
of these things have the food in it and it has impacted us 
dramatically in the cost of the products.
    Mr. Griffith. And somebody mentioned earlier, and it may 
have been you. I apologize because I don't remember, but you 
know, if you raise the cost of corn, the soybeans--it might 
have been you, Mr. Roenigk, but if you are producing more corn, 
then the price of soybeans goes up, that would be true for the 
wheat, too, when you referenced the buns, that is what you are 
talking about?
    Mr. Anderson. Exactly. Because what would happen is, as 
corn goes up, more people want to plant corn. Well, if you 
plant more corn and there is only so many acres that can be 
planted, then there is less soybean and then less wheat, and so 
we have seen significant increases in soybean, and we use that 
to make our chili and other products, and obviously, our buns, 
which we sell quite a few of those also.
    Mr. Griffith. All right. Thank you very much, and I see my 
time is up, and I yield back, Mr. Chairman.
    Mr. Whitfield. The gentleman's time is expired, and at this 
time, I recognize the gentleman from Louisiana, Mr. Scalise for 
5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman. And again, thank you 
for having this series of hearings. This is the third panel 
that we have heard from, and a lot of really good interesting 
perspectives on the renewable fuel standard. I wasn't here in 
Congress when it passed and was updated, but I have seen and 
heard a lot of firsthand stories of the problems that it is 
causing, whether intended or unintended, but serious 
consequences that we are seeing throughout many parts of our 
economy, and again, it is still in the early stages as we are 
approaching the blend wall, by all estimates, by next year, or 
at the latest at the end of next year, we would be hitting that 
blend wall, and then you have even deeper problems.
    And so that is why we are here is to talk about what those 
problems are and then solve this problem. And I know I support 
legislation that would solve it by repealing the mandate 
because clearly it is not working the way it was intended. But 
when we get to some of the points that have come up in some of 
our earlier panels, we had, in our first panel yesterday, we 
had a gentleman who talked about the impact on the price of 
food, and I know some of our panelists here testified about how 
RFS, one of its intended or unintended consequences, and an 
increase in food prices that you are experiencing, one of our 
panelists said that the--I think his quote was the impact of 
the renewable fuel standard itself on food prices is 
indiscernible. And I would like to, Ms. Johnson, get your take 
on it, and then also ask Mr. Roenigk and Mr. Anderson as well, 
because I know you each have different perspectives on it, but 
that was one of the panelists yesterday.
    Ms. Johnson. Thank you for the question, and we can get you 
more information from the consumer price index, but some of the 
data that we have, if corn is $6 a bushel, the corn equivalent 
is $0.27 for a pound of beef, $0.38 for a pound of pork, $0.27 
for chicken, if it drops down to $4, which it is heading there, 
we had rain across the midwest, as Dr. Hurt said, and we are 
below----
    Mr. Scalise. Would you agree or disagree when he said that 
the renewable fuel standard itself had no impact or an 
indiscernible impact on the price of food?
    Ms. Johnson. It had some impact, but the greater impact is 
from the price of a barrel of oil and energy prices, and we can 
get you the data on hamburgers, chicken, pork, milk, eggs.
    Mr. Scalise. Well, let me ask the chicken--the chicken man, 
Mr. Roenigk. I apologize if that's----
    Mr. Roenigk. That is fine. I appreciate that.
    Mr. Scalise. If you can give me kind of your perspective on 
what you have seen.
    Mr. Roenigk. Sure. The rule of thumb is, if a bushel of 
corn goes up $0.30 a bushel, you have added one penny to the 
cost of producing a live weight chicken. And the same way on 
soybean meal. Of a ton of soybean meals goes up $30 a ton, you 
have added $0.01 to the increased cost production of producing 
a live chicken, so that is the rule of thumb. It is a pretty 
direct correlation, and there is not a whole lot of 
substitutes, and you--if you want to produce chickens and you 
got them in the field, you got to feed them and you absorb the 
cost or try and pass it on.
    Mr. Scalise. Let me ask you, Mr. Anderson, because in your 
testimony, I think it is the closest thing I have seen to an 
exact number, to a rough estimate of a dollar figure that has 
been attached to increase in the cost of food to consumers by 
the renewable fuel standard. Taking out fuel, and you know, 
there are all other factors going in, but the renewable fuel 
standard is one of those factors. I don't see a lot of people 
disputing that it is, and so, you know, if it is, then there 
has got to be an amount attached to it.
    What you are saying is the amount that you are seeing at 
your stores is $30,000 more expense of food due to the 
renewable fuel standard; is that right?
    Mr. Anderson. That is correct. And just to tag on right 
there, it takes 8 pounds of corn to make 1 pound of beef, so 
you can imagine as the price goes up, what that does to the 
cost of beef.
    Additionally, it wasn't just us that came up with the 
$30,000, you know. We would be happy to provide the 2012 report 
by PricewaterhouseCoopers that confirmed what our analysis at 
QSCC was already thoroughly studying, and that is the fact that 
the RFS does distort food commodity prices so much, that 
whether you are a restaurateur, a supplier, or a consumer, that 
you are forced to pay more for the price of food.
    Mr. Scalise. Thank you. And I mean, this is passed on to 
consumers. I would imagine it is not just like, OK, it is 
another 30 per store, 30,000 per store, and that is just money 
that comes out of the sky. I mean, that is money that somebody 
let goes, and goes to a restaurant, they are going to have to 
be paying more money, in essence, $30,000 per store more that 
is going to cost consumers, every store, and these are real 
prices that are affecting people.
    One last thing I want to mention is, we had somebody 
testify yesterday about the impact on--from Briggs & Stratton, 
impact on motors, one of the many other detriments that are 
coming if you get to E15. There are many tests that have been 
run by not third parties, but the actual companies that make 
some of these motors and engines that have seen and experienced 
tremendous damage to engines, and I don't know if anybody wants 
to comment on it, dispute it. I have heard nobody dispute that, 
but that is a serious consequence that has been out there, real 
testing that has been done that is a detriment that many 
consumers are facing, and frankly, are very concerned about 
when they see this coming down the road.
    Mr. Anderson. Congressman, may I respond to the price 
increase piece. The fact is that we can't pass these costs, 
these additional costs onto our consumers right now. And there 
is two reasons right now: One, they are already strapped by 
paying a higher price for food and for gas.
    Mr. Scalise. Because they are paying it, too, at the 
grocery.
    Mr. Anderson. Exactly. Secondly, we are in an extremely 
competitive market, and people will vote with their feet on 
price increases. So this is something that has been very 
difficult for us, and we have just had to absorb this increase, 
a significant portion of it.
    Mr. Faber. Congressman, we carefully looked at these engine 
effects issues, and clearly, most of the engines for boats, 
lawnmowers, augers, chainsaws, small engines are simply aren't 
equipped to run on higher blends, and the cost of having to 
convert all of those engines would be enormous. So, it seems to 
me that our focus ought to be how do we--how do we bring more 
advanced biofuels to a market that can compete fairly for that 
pool of E10, that E10 pool and not try to force every consumer 
and every car owner in America to switch engines in order to 
meet the needs of one particular industry.
    Mr. Scalise. Why we need to stop. Thank you. Mr. Chairman, 
thank you, I yield back the balance of my time.
    Mr. Whitfield. The gentleman's time has expired. At this 
time, Mr. Braley and Mr. Matheson are on the Energy and 
Commerce Committee. They do not happen to be on this 
subcommittee, but both of them have been so focused on the 
renewable fuel standard that they come to these hearings, and 
we give them an opportunity to ask questions, so I recognize 
Mr. Braley for 5 minutes.
    Mr. Braley. Thank you, Mr. Chairman. Is anyone on the panel 
a history buff, by chance?
    All right. Mr. Faber, Mr. Anderson, have you heard of 
something called ``The Whiskey Rebellion''? I am going to pit 
the chairman against Mr. Scalise with this question, so I want 
you to pay close attention.
    Isn't it true that we have been refining corn in this 
country a lot longer than we have been refining petroleum?
    Mr. Faber. People have been refining corn to produce 
ethanol since the Persians, absolutely.
    Mr. Braley. So, when we talk about some of these issues, 
and we are talking about these trade-offs, I think it is 
important to keep that in perspective, because when you talk 
about the trade-off, Mr. Roenigk, between growing green beans 
in Iowa and corn in Iowa, you are talking about a false choice, 
because people grew corn in Iowa for over 150 years before 
ethanol plants started appearing on the prairies. You knew 
that. And they grow corn in Iowa because the climate and the 
soil conditions make it very conducive to growing corn, and it 
is much more conducive than growing green beans. And one of the 
things that we have to focus on in this hearing is the actual 
trade-offs that make a difference to the people in this 
country.
    One of the things that you talked about in your testimony, 
Ms. Johnson, is how the National Corn Growers are not opposed 
to new generation biofuels that can take us beyond corn-based 
ethanol, and in fact, one of the things that we have been 
talking about is the demand that corn ethanol production places 
on the cost of food for livestock, and yet one of the 
byproducts of ethanol production is distiller's grains, which 
are used by many livestock producers as a feed source.
    So, that is one of the benefits that comes from ethanol 
production, and another thing that can happen is, as we move to 
cellulosic ethanol, when in fact there are two ethanol plants 
in Iowa that are cellulosic-based, then you use corn stover and 
the byproducts of the corn stock to generate biofuels as well, 
correct?
    Ms. Johnson. Right.
    Mr. Braley. One of the things that you mentioned was this 
photograph that was up on the screen showing the prices for E85 
ethanol in St. Ansgar, Iowa, which is in my congressional 
district, 2.24 a gallon, which is a clear benefit to consumers 
who are interested in using advanced biofuels. And I just 
happened to check, in addition to that price in St. Ansgar, you 
can buy E85 for 2.39 in Westside, for 2.49 in Riverside and 
Neal and Urbandale, Iowa, so this is a product that is already 
reducing the cost of fuel for consumers in our state, correct?
    Now, one of the things that we talked about was the trade-
offs that are impacting the price of food. And Mr. Anderson, 
you grew up in the Garden State of New Jersey?
    Mr. Anderson. Yes, I did.
    Mr. Braley. You did. And you talked about the impact of 
rising corn acres on soybean planting and the loss of acres to 
soybeans. Do you remember that?
    Mr. Anderson. Yes.
    Mr. Braley. Have you ever been a farmer?
    Mr. Anderson. No, I have not.
    Mr. Braley. Worked on a farm? Do you understand the concept 
of crop rotation in States like Iowa and Illinois where Mr. 
Shimkus lives, and Nebraska. They call themselves the Corn 
Husker State, but nobody is husking corn there anymore that I 
know. Do you know what crop rotation is and why farmers 
alternate between corn and soybeans?
    Mr. Anderson. Yes, sir.
    Mr. Braley. It is to replenish the soil by putting nitrogen 
back in if it is taken out by the corn crop, and that is why in 
States like ours you see large acres of production of corn and 
soybeans. And one of the things we know about soybeans is that 
they are used to also generate a renewable fuel called 
biodiesel. You are aware of that?
    Mr. Anderson. Yes, sir.
    Mr. Braley. And in fact, many restaurants in this country 
have gotten into the renewable fuels business by using their 
waste fats to deliver to companies that are using it to convert 
it into biofuels, correct?
    Mr. Anderson. Correct.
    Mr. Braley. So some of the members of your restaurant 
association are also generating income from the biofuels 
industry to help reduce the cost of operating their businesses.
    Mr. Anderson. I can assure you that the income from that 
grease comes nowhere near the $30,000 impact from the increase 
in the RFS.
    Mr. Braley. Well, you talked about the fact that some of 
the restaurants are faced with the risk of closure because of 
the RFS. Do you remember saying that in your opening statement?
    Mr. Anderson. No, I don't.
    Mr. Braley. OK. My recollection is that when you were 
describing the impact of the RFS on restaurants in the United 
States, you suggested that some of them could be faced with 
closure if we don't do something about the RFS. So you are not 
suggesting that.
    Mr. Anderson. No, I did not suggest that.
    Mr. Braley. All right. With that then, I would yield back, 
and I thank the chairman for extending me this courtesy.
    Mr. Whitfield. Well, thank you, Mr. Braley. At this time, I 
recognize the gentleman from Nebraska, Mr. Terry, for 5 
minutes.
    Mr. Terry. Well, I appreciate that. I appreciate this, and 
so my first question is to Mr. Roenigk. And you talked about 
the expansion of the corn crop and the additional millions of 
acres that have been used in the fertilizer, and that helps the 
production of our crops, and that they are producing twice as 
much now, and I just want to make clear what you were trying to 
get at, because I am sure you are not saying that we should 
stay at a process where our corn crops and soybean crops should 
be cut in half.
    Mr. Roenigk. Absolutely not.
    Mr. Terry. If you are advocating that we cut our corn crops 
in half as it sounded like you were doing, what would that 
effect be on corn and soybean prices?
    Mr. Roenigk. If I could clarify. What I tried to say is the 
term ``renewable'' implies, suggests that this is a resource in 
a natural basis continues to be more or less unlimited in terms 
of being available. If you want to produce corn, at least 
commercially, you need to apply commercial nitrogen which comes 
from a source that Congress considers not to be renewable. So 
that is all I was saying. If you don't use commercial nitrogen 
fertilizer to produce corn, I don't think you are going to get 
160 bushels or per acre.
    Mr. Terry. Well, I have never heard that argument before 
that if you use fertilizer, it is not a renewable crop. I can't 
tell you how adamantly I oppose that position. I think it is 
just silly, frankly, because we have used fertilizer on crops 
for hundreds of years.
    Mr. Roenigk. I think you should use fertilizer on crops.
    Mr. Terry. Well, nitrogen is a fertilizer on----
    Mr. Roenigk. Is it organic fertilizer or commercial 
fertilizer or----
    Mr. Terry. Oh, so it can all be pig crap that we can put on 
there and then it is renewable under your standards?
    Mr. Roenigk. I am sorry?
    Mr. Terry. I said ``pig crap,'' you should be waste. And 
then it is renewable, but only if it is from animal waste.
    I am going to move on. Well, I do want to ask you one thing 
because--does the chicken industry use distiller grains in 
their feed? Do you mix that up?
    Mr. Roenigk. Yes. We used to use more, but since the oil 
has come out of the DDGs, we use less of it because the energy 
is out, but yes, we still use a small amount. Some companies 
use up to 5 percent, but it is not a preferred feed ingredient.
    Mr. Terry. OK. So what percentage of it would be mixed in, 
5 percent?
    Mr. Roenigk. Up to 5 percent. I would suggest the current 
usage is probably something in the 2 to 3 percent range when we 
look across the industry.
    Mr. Terry. All right. Mr. Hurt, I have two--or Dr. Hurt. It 
should say ``Dr.'' Up there, and I appreciate that you are 
taking no position in this repeal RFS.
    Mr. Hurt. That is safe or unsafe.
    Mr. Terry. That means supposedly you are neutral. So I want 
ask you a couple of questions, and I have read your testimony, 
and I want to follow up on some concepts that weren't, I think, 
taken to conclusion.
    So, Mr. Anderson and Mr. Roenigk and Mr. Faber argue just 
repeal the RFS, do it today, it is the cause of all the world's 
problems, and if we repeal it today, what are the consequences? 
Does that have an effect on corn prices and does it have an 
effect on the land prices?
    Mr. Hurt. Nobody knows for sure. We will just start with 
that statement. But we think repeal of the RFS does away from 
cellulose altogether. It is gone.
    Mr. Terry. Well, if you repeal the total, yes, you will. 
You will repeal advanced----
    Mr. Hurt. Let's start with the things that----
    Mr. Terry [continuing]. Biofuels, ethanol, advanced, 
cellulosic whatever, it is all gone.
    Mr. Hurt. Probably goes away if the subsidy, the dollar 
subsidy goes away, biodiesel goes away. Actually, as we look at 
conventional ethanol, what we have today is an oil industry 
that has as their mixture, their chemistry, they have ethanol 
in that blend. They have ethanol in the blend for two primary 
reasons, one is oxygenate, that is replacement of MTBE; the 
second is as an octane booster, and they have it because it is 
economic to have it in their mix for octane. They--we 
understand from the oil industry that they refined to about 84-
octane now. That is a lower level than they would normally, to 
get 87-octane, they then blend 10 percent ethanol. Ethanol is 
about 113- to 115-octane. That brings that gasoline up to 87.
    Now, what we don't know is because of the renewable fuel 
standard, the oil industry knew that they were going to have to 
blend 10 percent ethanol, so this, given the fact they have to 
blend 10 percent ethanol, this is economic. If we assume that 
economics continues, then maybe there would not be a collapse 
in corn use for ethanol. Maybe.
    On the other hand, 5 years from now, the oil industry might 
find other ways to oxygenate and octane, so I think it doesn't 
say it would all go away. In the short run, we don't think a 
lot would go away.
    Mr. Terry. I think that is a fair analysis, but Mr. 
Anderson and Mr. Roenigk have advocated no use anymore, so we 
couldn't use corn-based ethanol for an oxygenate or to increase 
the octane.
    Mr. Hurt. Yes. And again, I think your question was if you 
take away RFS.
    Mr. Terry. I did. I changed the question on you.
    Mr. Hurt. You take away the RFS, the market, the market 
determines, and then what we are saying is the market would 
still buy some for awhile until the oil industry, perhaps, 
totally reformulated it.
    Mr. Terry. Mr. Anderson, wouldn't you be frustrated if the 
market still allowed 10 percent blend and it was ubiquitous 
because of octane needs? I mean, you would still would then 
have Armageddon occurring in the fast food industry.
    Mr. Anderson. What I would say to you is that, first of 
all, we are not anti-ethanol. What we are saying is take the 
mandate away and let free enterprise and free market conditions 
determine the cost of the product.
    That way the government is not picking winners and losers. 
All we are doing----
    Mr. Terry. You can't have it both ways.
    Mr. Anderson. I am sorry.
    Mr. Terry. You can't say eliminate the mandate because the 
mandate for the--that essentially gets you to the 10 percent is 
wrong, but then when Mr.--Dr. Hurt was saying, well, there may 
not be any displacement because the market was pretty much 
built off of that 10 percent, well, you are still going to have 
Armageddon then. So, it sounds to me like you are just against 
corn ethanol, not just market.
    Mr. Whitfield. The gentleman's time is expired.
    I would like to remind all the members that not to change 
the question in the middle of the question.
    Mr. Olson, you are recognized for 5 minutes.
    Mr. Olson. I thank the chairman. There will be no change in 
the middle of the question from this Congressman from Texas. I 
would like to thank the witnesses for coming this afternoon. I 
appreciate your time and patience with the votes.
    As we were hearing yesterday on this issue, a little 
different group here, but as I said in the hearing, I am not 
opposed to corn farmers, I am not opposed to ethanol, corn-
based ethanol. I have got some corn production in Texas 22, 
small, but the western part of the county produces corn. Uncle 
Gus had a farm, corn farm in South Central Wisconsin. Every 
summer he would go up there. Guess who worked in the corn field 
with a hoe whacking the weeds? P. Olson getting paid $5 a week. 
Yay, thank you so much, Uncle Gus.
    Mr. Terry. He had machinery for that.
    Mr. Olson. Just to make sure, you know, it seems very clear 
to me that the renewable fuel standard is on a path right now 
with some very negative consequences for our economy. One of 
those consequences is related to the impact on families trying 
to put food on the table.
    Last month we had the Department of Agriculture before this 
committee. I asked about the impact of RFS on food prices. 
Their economists say most of these point to about 30 percent of 
recent spikes in corn prices being due to RFS.
    These corn prices trickle into every aspect of our economy. 
The USA Report this spring predicted that high-priced corn and 
other commodities will ``permeate supermarkets,'' and that, 
``stressful inflation for beef and pork will intensify.'' That 
hurts families and that hurts businesses.
    So my first question is for you, Mr. Roenigk, I hope I 
pronounced that correctly, sir, and I apologize if this 
question was answered while I was off there counting my votes, 
but we routinely hear from supporters of the RFS that it boosts 
employment for corn farmers that, of course, you remember, are 
heavily present in rural America as well, and you point to 
negative impacts of the RFS. Would you argue that the RFS has 
hurt hiring for employment in your industry, and are you able 
to put a number on that impact?
    Mr. Roenigk. Thank you for the question. If I understand 
correctly, we need corn farmers, corn farmers need us, and to 
give you a specific number as to what that balance should be, I 
would like to get back to you if I could on that.
    Mr. Olson. That works for me, sir. Thank you very much.
    I would like to talk to you, Mr. Anderson, next question, 
please, sir. And my question for you, sir. I had a Wendy's 
franchise owner from back home in Texas come to my house about 
a month ago, and I thought we would talk about Obamacare, 
impact on small businesses, tax policy, none of that. We talked 
about the RFS in corn-based ethanol.
    And they agreed, he agreed with your testimony, each of the 
restaurants loses roughly $20- to $30,000 per year because of 
commodity prices in the RFS. So my question is, what does 
$30,000 mean to your stores? Where are some things you would 
otherwise be able to do with that money?
    Mr. Anderson. Thank you, Congressman. That $30,000 per 
store means a lot, and I will give you two examples. With that 
additional money, I can reinvest in my restaurants. If I 
reinvest in my restaurants, then not only am I maintaining the 
jobs that I have in my restaurant with the employees that I 
have, but also it helps to create or sustain other jobs.
    When we build new restaurants or remodel, I will give you 
two specific examples. The person who does the landscaping in 
my Wendy's, for my four Wendy's, he started just as a person 
cutting a couple of lawns. He came to me and asked for an 
opportunity to present his case to take care of that. I agreed. 
That person now hires over 35 people. He has created 35 jobs 
along with the sustainability of his because of that. That is a 
trickle-down effect of jobs.
    Additionally, my window cleaner, same thing. This gentleman 
was just cleaning a couple of windows. He came in and asked me 
if he could have the opportunity to quote cleaning our windows. 
I agreed to do that. He now hires 7 to 10 people to help clean 
windows. So there is a trickle-down effect when I can have 
money to invest in my restaurants.
    If I build a new restaurant, I create 30 more jobs on 
average, I create four to six more management positions, and I 
have created work for construction which we all know is badly 
needed in this country. While they build the restaurant, the 
equipment to supply that restaurant, and then there is the food 
that has got to be there to supply it, and again, it is more 
job security for those that are cutting my landscaping and 
cleaning my windows.
    Mr. Olson. Washing windows. Yes, I am out of time. One 
suggestion, sir, get the first Whataburger franchise here in 
the Washington, DC Area. You will be booming. That is the Texas 
national restaurant, a hamburger restaurant, Whataburger, 
Whataburger, Whataburger.
    Mr. Whitfield. What is the name of it?
    Mr. Olson. Whataburger.
    Mr. Whitfield. Oh, Whataburger. Thank you.
    Mr. Olson. I yield back.
    Mr. Whitfield. At this time I would like to recognize Mr. 
Matheson for 5 minutes. He has been sitting here very 
patiently.
    Mr. Matheson. Thanks, Mr. Chairman. Thanks for doing these 
hearings. I am sorry my conflict prevented me from being here 
for the first two panels, and I assume we can send some written 
questions in for them, if we can. Appreciate your patience with 
that.
    Couple of questions I wanted to ask. Ms. Johnson, you 
mentioned a savings on fuel cost, $1.09 a gallon. I think that 
was a study by the Renewable Fuels Association that came up 
with that number; is that correct?
    Ms. Johnson. Yes.
    Mr. Matheson. Are you familiar with the article in 
Scientific American this week, the study out of MIT that says 
that that study was flawed and that that number is actually not 
true and that there is no discernible effect on fuel costs from 
ethanol?
    Ms. Johnson. I am not.
    Mr. Matheson. OK. Mr. Chairman, I wish I had a paper copy 
of that study, but if it is permissible, I think that ought to 
be part of the hearing record. This is an article in Scientific 
American.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. Without objection.
    Mr. Matheson. Thank you. I think also, the issue that is 
interesting now compared to a couple of years ago is the impact 
of RINs. Didn't I hear they are a buck thirty-four or something 
like that? It is a lot more. So I think the effect on fuel 
costs is a relevant topic for us to look at, and we ought to 
talk about things have changed. Whatever study said it was in 
2009 or 2010 or 2011, I just know in 2013, the cost of RINs has 
gone up a lot, and it has got to be having an impact on price 
at the pump.
    Another question I wanted to ask you, Ms. Johnson. Last 
month, during the first RFS hearing, we heard testimony from 
government witnesses. We had someone from the Energy 
Information Administration. We had someone from the U.S. 
Department of Agriculture. They indicated that as long as 
ethanol continues to be economical, which I believe in your 
testimony you indicate is true, this issue about using it as an 
oxygenator, as an octane booster, that they estimate, the EIA 
estimates that if you get rid of the RFS altogether, it would 
result in roughly about a 10 percent reduction in the amount of 
ethanol that is used in the supply chain today.
    Do you agree with that or do you have a sense if that would 
be the case or not?
    Ms. Johnson. I do not agree with that statement because the 
oil industry needs an incentive to blend renewable fuels; 
otherwise, there is no incentive to blend those fuels. And you 
know, we have talked in other panels, too, about battling over 
different studies, so you know, we have got the numbers that 
say that consumers saved $1.09 a gallon at the pump and that 
saved families $1,200 last year.
    Mr. Matheson. I hear you. You are right. In our business, 
we hear about different studies and different statistics all 
the time. Sometimes it is good to see who it is coming from if 
they have an interest in what that study says.
    Ms. Johnson. Congressman, if I can just say we have got a 
short-term problem. The drought did cause a lot of damage last 
year, a lot of tough issues for all of us, and so the short-
term answer to a short-term problem is we are looking at 
producing a very abundant corn crop for this year, which will 
answer short-term problems. We have to start looking at what 
the long-term big picture is for fuels in America and what it 
means for the three things that the RFS was originally set out 
to do.
    Mr. Matheson. I couldn't agree more.
    Mr. Faber, do you have a thought about the statement from 
the Energy Information Administration that indicates that if 
the mandate goes away, it will result in a drop of about 10 
percent on the overall use of ethanol in our fuel supply chain?
    Mr. Faber. I think it is incredibly important question and 
it goes back to something that Mr. Terry was alluding to as 
well. What happens if you got rid of RFS? And when you, I think 
some of your witnesses yesterday alluded to this, and EIA has 
confirmed it, that in the short run, not much. That because we 
have more than 14 billion gallons of ethanol production 
capacity and because the gasoline refiners are now routinely 
blending ethanol, in part because of Mr. Braley's picture, in 
part because in some time--at some points in the year it helps 
water the scotch (phonetic). It is a little bit cheaper than 
the RBOB in gasoline. There is plenty of incentive for gasoline 
refineries to continue to blend ethanol. To Professor Hurt's 
point, in the absence of the floor, in the absence of mandate 
that some day there may be other ways for blenders to improve 
octane or to provide an oxygenate, and that is the trade-off.
    The benefit to consumers of phasing out the corn mandate, 
not repealing the entire mandate but phasing out the corn 
mandate is you are providing more room in that 13.4-gallon 
E10--13.4 billion gallon E10 pool for these cellulosic biofuels 
that have the potential to really reduce greenhouse emissions.
    Mr. Matheson. Well, I would concur with that. I would also 
say the other benefit would be that you would get rid of the 
need for the RINs that are, I think, increasing and distorting 
markets.
    Mr. Faber. Absolutely.
    Mr. Matheson. And I think that that would be helpful.
    Mr. Chairman, I think that weraised an issue that may be 
interesting for this committee to look at which is, in the 
short run, it appears that ethanol is a good way to pursue 
oxygenating fuels or octane boosters. There is a concern in the 
longer run there may be alternative choices that the refining 
industry could use. Maybe we could have a hearing to talk about 
what the likelihood or viability is of those alternative 
choices. That might make us a little more informed as we look 
at the impacts of the renewable fuel standard. With that, I 
really appreciate your patience, and I will yield back my time.
    Mr. Whitfield. Well, thank you, Mr. Matheson, and thanks 
for that suggestion. The RINs were certainly discussed a lot 
yesterday, and the RIN prices yesterday, and I want to thank 
all of you for taking time from your busy schedules to come and 
join us and to give us your views.
    As we all know, it is a rather complex issue, and we are--
we have had a lot of hearings, and we have read a lot of 
responses to the White Paper invitations, and it is an 
important issue, so we are going to proceed cautiously. I think 
most people agree that there are some inequities that need to 
be addressed, and I don't know precisely where we are going to 
end up, but that is what the political process is all about.
    And so with that, I would thank you-all again and that--I 
would ask unanimous consent to enter into the record letters 
from various groups, including the American Motorcyclist 
Association, the American--the Oregon Dairy Association, the 
Oregon Cattleman's Association, the Oregon Petroleum 
Association and the American Cleaning Institute. So, if you 
would enter that into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Braley. Mr. Chairman.
    Mr. Whitfield. Yes.
    Mr. Braley. Would you also allow unanimous consent request 
to enter a similar statement from the Iowa's Cattleman's 
Association?
    Mr. Whitfield. Absolutely.
    Mr. Braley. In support of maintaining the RFS.
    Mr. Whitfield. Absolutely. Absolutely. Without objection, 
so entered.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. Hey, I had heard about the Iowa Cattleman's 
Association. So that concludes today's hearing. The record will 
remain open for 10 days, and thank you-all once again.

    [Whereupon, at 4:10 p.m., the subcommittee was adjourned.]

    [Material submitted for inclusion in the record follows:]

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