[Senate Hearing 113-556]
[From the U.S. Government Publishing Office]
S. Hrg. 113-556
ADVANCED BIOFUELS:
CREATING JOBS AND LOWER
PRICES AT THE PUMP
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
APRIL 8, 2014
__________
Printed for the use of the
Committee on Agriculture, Nutrition and Forestry
Available via the World Wide Web: http://www.fdsys.gov/
______
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93-027 PDF WASHINGTON : 2015
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COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY
DEBBIE STABENOW, Michigan, Chairwoman
PATRICK J. LEAHY, Vermont THAD COCHRAN, Mississippi
TOM HARKIN, Iowa MITCH McCONNELL, Kentucky
SHERROD BROWN, OHIO PAT ROBERTS, Kansas
AMY KLOBUCHAR, MINNESOTA SAXBY CHAMBLISS, Georgia
MICHAEL BENNET, COLORADO JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, NEW YORK JOHN HOEVEN, North Dakota
JOE DONNELLY, INDIANA MIKE JOHANNS, Nebraska
HEIDI HEITKAMP, NORTH DAKOTA CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, PENNSYLVANIA JOHN THUNE, South Dakota
JOHN WALSH, MONTANA
Christopher J. Adamo, Majority Staff Director
Jonathan J. Cordone, Majority Chief Counsel
Jessica L. Williams, Chief Clerk
Thomas Allen Hawks, Minority Staff Director
Anne C. Hazlett, Minority Chief Counsel and Senior Advisor
(ii)
C O N T E N T S
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Page
Hearing(s):
Advanced Biofuels: Creating Jobs and Lower Prices at the Pump.... 1
----------
Tuesday April 8, 2014
STATEMENTS PRESENTED BY SENATORS
Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan,
Chairwoman, Committee on Agriculture, Nutrition and Forestry... 1
Cochran, Hon. Thad, U.S. Senator from the State of Mississippi... 3
Panel I
Childress, Richard, President and Chief Executive Officer,
Richard Childress Racing, LLC, Welcome, North Carolina......... 4
Koninckx, Jan, Ph.D., Global Business Director for Biorefineries,
Dupont Industrial Biosciences, Wilmington, Delaware............ 6
Coleman, Brooke, Executive Director, Advanced Ethanol Council,
Boston, Massachusetts.......................................... 7
Arora, Sumesh M., Ph.D., Vice President, Innovate Mississippi,
and Director, Strategic Biomass Solutions, Ridgeland,
Mississippi.................................................... 9
Young, Nancy N., Vice President, Environmental Affairs, Airlines
for America, Washington, DC.................................... 11
----------
APPENDIX
Prepared Statements:
Cochran, Hon. Thad........................................... 30
Arora, Sumesh M.............................................. 31
Childress, Richard........................................... 37
Coleman, Brooke.............................................. 43
Koninckx, Jan................................................ 58
Young, Nancy N............................................... 64
Document(s) Submitted for the Record:
Arora, Sumesh M.:
Supporting Testimony for the Record.......................... 78
Question and Answer:
Arora, Sumesh M.:
Written response to questions from Hon. Debbie Stabenow...... 106
Written response to questions from Hon. Thad Cochran......... 109
Childress, Richard:
Written response to questions from Hon. Debbie Stabenow...... 113
Written response to questions from Hon. Thad Cochran......... 113
Written response to questions from Hon. Tom Harkin........... 113
Coleman, Brooke:
Written response to questions from Hon. Debbie Stabenow...... 116
Written response to questions from Hon. Thad Cochran......... 117
Written response to questions from Hon. Joe Donnelly......... 118
Koninckx, Jan:
Written response to questions from Hon. Debbie Stabenow...... 121
Written response to questions from Hon. Thad Cochran......... 123
Young, Nancy N.:
Written response to questions from Hon. Debbie Stabenow...... 125
ADVANCED BIOFUELS:
CREATING JOBS AND LOWER
PRICES AT THE PUMP
----------
Tuesday, April 8, 2014
United States Senate,
Committee on Agriculture, Nutrition and Forestry,
Washington, DC
The Committee met, pursuant to other business, at 9:58
a.m., in Room 328A, Russell Senate Office Building, Hon. Debbie
Stabenow, Chairwoman of the Committee, presiding.
Present: Senators Stabenow, Harkin, Brown, Klobuchar,
Bennet, Gillibrand, Donnelly, Heitkamp, Casey, Cochran,
Chambliss, Boozman, Hoeven, Grassley, and Thune.
STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE
OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION
AND FORESTRY
Chairwoman Stabenow. So we would invite our witnesses to
join us today. We are very, very pleased to have this hearing
on Advanced Biofuels: Creating Jobs and Lower Prices at the
Pump. I think, a really important group of people representing
many, many different sectors that are involved with biofuels.
So we will take just a moment to welcome you to come up to the
table.
[Pause.]
Chairwoman Stabenow. Well, good morning again. We are
moving to the second portion of our hearing, and again, we will
pause for a business meeting as soon as we have a quorum. We
expect to have a quorum in just a few moments, so thanks to all
the members for coming, I know, as close to 10 o'clock as we
could to do the business portion. I want to thank all of you
for being here.
We have heard for years that advanced biofuels are just
around the corner. Well, we are here. We are at the point where
it is actually happening instead of having one more hearing
where we hear, ``Five years from now, we will have cellulosic
ethanol.'' We are excited to have people here today that will
be able to touch on some of the success stories that are out
there. I want to just highlight a few.
INEOS Bio has announced it is producing cellulosic ethanol
at a commercial scale. Sapphire Energy announced that it had
paid off its entire $54 million USDA Energy Title loan and will
be producing 100 barrels of green crude per day from algae by
2015.
POET's Project Liberty broke ground last spring and is on
pace to begin producing cellulosic ethanol from corn stover
this year.
DuPont, which is represented on our panel today--very
pleased--is expected to produce cellulosic ethanol from stover
in Iowa later this year.
As I have said before, as we all know, the farm bill is a
jobs bill, and that is why I am so proud of the work that we
all did together in developing a robust energy title. The
Energy Title funds critical programs to help our farmers
produce energy from non-food sources and helps companies get
low interest loans for those facilities. And, of course, all of
that creates jobs.
We are going to hear from representatives of companies that
are out there doing just that: creating jobs and growing rural
economies while producing advanced biofuels, which ultimately
help us become more energy independent and lower our gas prices
at the pump.
Some of you may be surprised to learn that my home State of
Michigan was actually an early adopter of ethanol in 1896. I
was not there at the time, but in 1896, Henry Ford designed his
first car, the Quadricycle, which we all know as the
``horseless carriage,'' to run on pure ethanol. When it was
released in 1908, Ford's Model T was able to run on gasoline,
ethanol, or a combination of the two.
Henry Ford continued to advocate for ethanol as a fuel, but
the lower price and abundance of oil made it more attractive to
consumers at that time. Interesting how our policies have
affected all of that.
Yet today we are still working to make ethanol more
competitive in the U.S. We would love the same tax policies for
ethanol that we have had for oil, I would say as an editorial
comment, and we do know, though, that in other countries we are
seeing a different mix and competitiveness.
I was in Brazil with Secretary Vilsack last summer.
Brazil's gasoline is blended with ethanol at a nearly 30-
percent rate. In fact, they have lower gas prices because of
the higher blends. Meanwhile, here in the United States,
ethanol makes up 10 percent of our fuel supply.
An Iowa State University study found that, in 2010, using
ethanol reduced the cost of gas by 89 cents a gallon across the
country, and by as much as $1.37 in the Midwest. These are
enormous savings for American families.
In the U.S. we consumed about 138 billion gallons of
gasoline in 2010. That comes out to about 446 gallons per
person or 892 gallons for a family of four, and when you think
about that, well, what do those numbers mean, 892 gallons?
Well, you could drive from D.C. to Los Angeles and back four
times on 892 gallons. That family could have saved $794 in 2010
because of biofuels. According to USDA numbers, that $794 comes
to up to 5 weeks' worth of groceries.
Biofuels are making a difference and could make an even
bigger difference, and that is what we are here to talk about
today. It is our goal to make sure we move to non-food-based
advanced biofuels, and it is happening, and in places that some
may not be aware of.
As we will hear today, some of our airlines have undertaken
their own biofuels initiatives because it makes good business
sense for them to do so. But to continue growing this industry,
we need policies that support it.
This Committee and Congress took an important step forward
passing the farm bill with the funding for the Energy Title.
Now we need to provide certainty through a strong, Renewable
Fuel Standard and tax credits to support long-term investments
in our energy future. Getting off foreign oil is in our
strategic interest, and doing so, we will be saving money and
be saving lives.
So we thank all of you for being here, and I would turn now
to Senator Cochran for his opening statement.
STATEMENT OF HON. THAD COCHRAN, U.S. SENATOR FROM THE STATE OF
MISSISSIPPI
Senator Cochran. Madam Chair, thank you very much. I am
pleased to join you in welcoming our distinguished panel of
witnesses, one of whom is from my State of Mississippi. Dr.
Arora is here. He is involved in an initiative for the
commercialization of advanced biofuel technologies through the
so-called Strategic Biomass Solution Initiative. I am anxious
to hear more about this and to learn more about the questions
that confront the policymakers, both in the administration and
in Congress, to examine these alternatives to traditional
sources of energy and enterprise.
Thank you very much.
Chairwoman Stabenow. Thank you very much.
I understand that we will have two more members that we
need for a quorum in just a moment, so I am going to proceed to
introduce our panel, and at that point I think we will be in a
place where we can stop for our business meeting and then
proceed with the panel. We are so pleased to have all of you
with us today.
Our first witness on the panel is Mr. Richard Childress,
the president and CEO of Richard Childress Racing. It is always
good to see you, Richard. He serves on the Board of Directors
at Growth Energy. As a driver, Mr. Childress earned 76 top ten
finishes in 285 races, and his racing team has logged 200
overall NASCAR victories and 14 NASCAR championships, and I can
say as a NASCAR fan, it is always good to see you at the races.
I know you will be coming to Michigan in just a bit, so I look
forward to seeing you.
Our second witness today is Mr. Brooke Coleman--we are so
pleased you are here--executive director of the Advanced
Ethanol Council. Mr. Coleman has been involved in the energy
and environmental sectors at the regulatory and policy level
since 1997. He has founded or co-founded several organizations
or projects, including the Advanced Ethanol Council, the New
Fuels Alliance, the California Renewable Fuels Partnership, the
Northeast Biofuels Collaborative, and the Renewable Energy
Action Project.
Our third witness is Dr. Jan Koninckx, global business
director for biorefineries at DuPont Industrial Biosciences.
Dr. Koninckx oversees the development and commercialization of
advanced biofuel technologies like cellulosic ethanol and
biobutanol. Dr. Koninckx has worked for DuPont for over 20
years, has served as chair of the board for Butamax Advanced
Biofuels LLC since its inception in 2009, and is also a member
of the Board of Directors of Vivergo Fuels. Welcome. Good to
have you.
Our fourth witness is Dr. Sumesh Arora, and Senator Cochran
has already mentioned him, and I will give just a little bit
more information. We are so pleased that you are here. Vice
president and director of Strategic Biomass Solutions at
Innovate Mississippi, a nonprofit organization focused on
creating technology-based economic development in Mississippi.
He launched the Renewable Energy Venture Startup Academy in
2010 and has served as Mississippi's representative to the
Governor's Biofuels Coalition since 2006.
Our fifth and final witness is Nancy Young, vice president
of environmental affairs at Airlines for America, the oldest
and largest airline trade association. Ms. Young is an
environmental attorney with more than 20 years of experience.
At A4A, Ms. Young directs environmental programs, provides
counsel on environmental issues, and represents A4A in
international negotiations. She also participates in several
airline environmental initiatives, including the Farm to Fly
initiative--I need to know more about that; Farm to Fly, that
is very interesting--Commercial Aviation Alternative Fuels
Initiative, and Advisory Committee to the Aviation
Sustainability Center.
So we are pleased to have such a distinguished panel with
us, and we are waiting for one more member before we can do our
votes.
So we are going to proceed with Mr. Childress. We are so
glad that you are here today. Welcome.
Mr. Childress. Thank you.
Chairwoman Stabenow. We would like you to go ahead.
Mr. Childress. Oh, okay.
Chairwoman Stabenow. We would like you to share with us 5
minutes' worth of remarks. You can watch the buttons on there,
and then anything that you would like to give us further in
writing we would be happy to accept as well. So good morning.
STATEMENT OF RICHARD CHILDRESS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, RICHARD CHILDRESS RACING, LLC, WELCOME, NORTH CAROLINA
Mr. Childress. Thank you. I have sent in written testimony,
but I will. Thank you, Chairman Stabenow, Ranking Member
Cochran, and members of the Senate Agriculture Committee. Thank
you for allowing me this opportunity today to tell you about
all of the things that 15-percent ethanol is doing in NASCAR
racing today.
I was raised on a tobacco farm. As a kid, I know how tough
it was to see farmers and live as a farm kid. But once it is in
your blood, it is in your blood, so today I am in the farming
business, been in it for 30 years. I have vineyard, Angus
cattle. We raise our own hay, wheat, corn, soybeans. So I know
what it is like for the farmers today, and ethanol is
definitely a great plus for our farmers in America today.
I am also an avid sportsman and conservationist. I am on
the Board of Directors for the NRA. I served 6 years with the
Congressional Sportsmen's Foundation. Also, as you said
earlier, I am on the Board of Directors for Growth Energy.
Growth Energy is the country's leading trade association of
ethanol and renewable fuel products.
I have been involved in NASCAR for 45 years both as a
driver and owner. I have seen a lot of changes. For those that
don't understand NASCAR, we have over 70 million race fans. We
rank second only to the NFL in TV viewing and audiences.
NASCAR always looks at what the manufacturers are doing.
When we were running leaded fuel back years ago, NASCAR was
running leaded fuel. When they went to unleaded fuel, we went
along with them with unleaded fuel. When they decided to go
with an ethanol blend of fuel, in 2010 NASCAR started looking
at ways and what was the right, correct blend to use. They came
up with--after many tests, they came up with E15 was the fuel
to use in our race cars.
As RCR, we did our own testing. We did a lot of testing. We
tested all the way up to E30. I wish we were here today talking
about how we were all running E30 in our cars.
Nothing but positive results came out of our tests. Our
engines ran cooler. We made more horsepower. Ethanol makes more
octane, so it makes more horsepower; less carbon buildup;
better emissions; and our parts, when we tore the engines down,
looked much better.
Since 2011, NASCAR has raced more than 5 million miles, put
5 million miles on E15. That is some of the most toughest
racing, toughest demand on an engine you could get. We turn
those engines over 9500 RPMs week in and week out for 4 and 5
hours.
From a consumer's standpoint--and I better hurry. From a
consumer's standpoint, more testing was done on E15, more than
any other fuel approved by the EPA. The Department of Energy
tested 86 vehicles for more than 6 million miles. With the
Department of Energy's testing results, the EPA approved a
waiver for E15 in all vehicles 2001 and newer, which is more
than 80 percent of the vehicles on the highway today. Studies
show by moving America to E15 blends or better, we would create
136,000 jobs, limit greenhouse emissions, and reduce the demand
for foreign oil.
The economic impact of ethanol today to America is in
billions. It creates jobs, farm equipment sales. If ethanol is
the future for America--I feel ethanol is the future for
America. The challenges we have today with our security, we
cannot depend on foreign oils. We cannot keep sending our
dollars overseas to maybe used against us someday. The main
thing is our children and grandchildren, we have got to think
about them for the future and the energy sources that they will
have in the future.
With that said, thank you for letting me testify, and God
bless America.
[The prepared statement of Mr. Childress can be found on
page 37 in the appendix.]
Chairwoman Stabenow. Thank you so much, Mr. Childress. We
are so pleased to have you here and wish you luck with your
vehicles racing.
Mr. Childress. Thank you.
[Whereupon at 10:14 a.m., the Committee proceeded to other
business and reconvened at 10:18 a.m.]
Chairwoman Stabenow. We want to continue with our very
important testimony. We thank all of you for your patience as
we stopped, but let us proceed right now. Dr. Koninckx,
welcome.
STATEMENT OF JAN KONINCKX, PH.D., GLOBAL BUSINESS DIRECTOR FOR
BIOREFINERIES, DUPONT INDUSTRIAL BIOSCIENCES, WILMINGTON,
DELAWARE
Mr. Koninckx. Thank you, and good morning, Chairman
Stabenow and members of the Committee. As a responsible member
of a large public company that commercializes technology all
the time, it is my pleasure to be here with you today and share
my personal knowledge of the incredible advances that companies
like DuPont are making in this field of biofuels.
Science companies like ourselves share the credit for these
achievements with the entrepreneurial farmers across the
heartland. These growers work with us every day to realize the
vision of the Renewable Fuel Standard. It is because of their
courage and because of their dedication that I am able to sit
here today and confirm that ethanol, cellulosic ethanol, is
viable and growing as a new industry in 2014.
How did we get there?
Chairwoman Stabenow. Let me ask, is the microphone on? You
may want to speak a little bit more directly into it if the red
light is not on.
Mr. Koninckx. Okay. I will come closer. The red light is--
okay. Sorry.
How did we get there? Allow me to give you a brief recap of
DuPont's role in the development of this technology and an
update of exactly where we stand today.
DuPont began its research into cellulosic ethanol a decade
ago, and over those years we have collaborated with public
institutions, with academia, with private entities, to overcome
the tremendous technical and practical obstacles we face. Our
challenge outlined in the RFS was to bring advanced renewable
fuels like cellulosic, a technology that was yet to be created,
and put the U.S. on a path towards improved energy security,
lowered greenhouse gases, and economic opportunities for rural
economies in America.
This was no small feat. We had to unlock the sugars trapped
in biomass, biochemically convert them into advanced fuel, and
create an entirely new supply chain. Step by step, with our
partners, we knocked out these technical challenges, and in
2009 we opened a one-of-a-kind demonstration facility
Tennessee. Today this facility continues to churn out data and
know-how on how to process and convert all different types of
biomass to fuel.
The first feedstock we worked on was corn stover, and it is
that feedstock that we will be using in our commercial-scale
cellulosic ethanol facility that is currently under
construction in Nevada, Iowa.
For the past 4 years, DuPont has been out in the fields
with farmers working together to devise an entirely new supply
chain that will feed this 30 million gallon per year
biorefinery, and that supply chain and the biorefinery are
fully sustainable. Remember, this is a supply chain that was
never before attempted.
For some perspective, the bales, the stover bales that we
will be using are taller than I am at 8 feet, and certainly
weigh much more at half a ton each. We will harvest these, bale
them, store them, and transport them--in total, more than
700,000 of these bales each year. We will do this in a way that
is fully sustainable, and that is an achievement we are
particularly proud of and one that our fossil fuel competitors
cannot even contemplate achieving. We share that credit with
partners like the USDA, with whom we developed standards for
biomass harvest and land management.
The bottom line here is that, driven by the RFS, we have
completely reinvented how we fuel our vehicles using renewable
fuel, and we do so without adding additional CO2 into the
atmosphere. DuPont has more than 210 years of experience of
bringing scientific innovation to market, and in my estimation,
we have never delivered this type of disruptive technology this
fast.
It is not the end of the story. It is actually the
beginning. We start with unlocking the sugars in cellulose for
biofuels. Tomorrow these same sugars and supply chains will
enable a whole new world of bio-based chemicals and materials,
delivering on the promise of an economy that is in part
resourced by renewable agriculture.
DuPont is already working on it. Since 2006, we have been
delivering plant starch-based product, which is used in
carpeting, in automobile parts, in de-icing fluids, and other
personal and industrial applications. Many more of these
advances will be possible when the supply chains that I have
just described mature, enabling lower costs and higher
efficiencies.
In closing, I emphasize that the Renewable Fuel Standard
works as intended. Seven years ago, this Congress set the
country on a course to change its energy destiny, and DuPont, a
historic American company, answered that call. This year, we
are going to be bringing biomass into our refinery fit for the
21st century, one fueled not by what is drilled up from the
ground, but what actually is grown from it, a modern technical
marvel that is a model on how to create jobs in rural
communities, work with our environment not against it, and give
consumers an opportunity to choose homegrown renewable fuels at
the pump.
DuPont is proud to be part of this success story, and we
thank the Committee for your continued interest and support for
this innovative field. Thank you.
[The prepared statement of Dr. Koninckx can be found on
page 58 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Mr. Coleman, welcome.
STATEMENT OF BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED
ETHANOL COUNCIL, BOSTON, MASSACHUSETTS
Mr. Coleman. Thank you. I will get this microphone just
right here. Good morning, Chairwoman Stabenow, Ranking Member
Cochran, and members of the Committee. My name is Brooke
Coleman. I am the executive director of the Advanced Ethanol
Council. The AEC represents worldwide leaders in the effort to
develop and commercialize the next generation of ethanol fuels
and products made from wood chips, agriculture residue, energy
crops, municipal solid waste, and algae. My chairman, of
course, is Bill Brady of Mascoma, which is in Michigan.
I have submitted a fairly substantial written testimony
that you will be happy I am not going to try to rehash here,
but I want to touch on a few points.
I think it is safe to say that the biofuel issue can be
volatile. The question is: Why? I think if you look at the
trajectory of the biofuels industry and who is being forced to
change, you will have your answer. In just 10 years, fledgling
industries like ethanol and biodiesel have emerged to create
hundreds of thousands of jobs and displaced the need for
billions of gallons of petroleum imports annually.
If you look at perhaps the most controversial biofuel,
ethanol, you will find that it is also the most disruptive to
the status quo. The ethanol industry now supports hundreds of
thousands of jobs in the U.S. all by itself and wants to create
consumer choice at the pump with fuels like E15 and E85. They
are a target for a reason.
Now the industry, I am happy to say, is evolving. While the
Wall Street Journal editorial page insists that the advanced
biofuel industry is underperforming, our production capacity
actually exceeded the RFS targets last year by 250 million
gallons.
From an investment perspective, a recent analysis found
that the United States ranks number one for advanced biofuel
development among 69 countries, attracting almost 70 percent of
global ventures in advanced biofuels.
The news is also good when it comes to cellulosic biofuels.
It is easy to say we are finally breaking through at commercial
scale, but the truth is we are just 6 years past the signing of
RFS2, and financial markets were frozen for much of this
period. Yet DuPont's plant in Nevada, Iowa, Abengoa's plant in
Hugoton, Kansas, and POET-DSM's plant in Emmetsburg, Iowa, are
all scheduled to start up this year. Each of these plants is
creating new multi-million-dollar markets for local farmers
making cellulosic ethanol out of agricultural residue.
Some of the numbers are very interesting. DuPont's
feedstock network is around 500 farmers strong. At one point
during construction, Abengoa had roughly 1,000 workers and
engineers on site in a town of 1,400. POET-DSM's facility will
produce enough renewable electricity as a co-product to power
itself and the grain ethanol facility next door. That is the
good news.
The bad news is--and I think I have said this before--the
oil industry has enough money to make it seem like it is
raining on a sunny day. The very programs that put us ahead of
Brazil and China, like the Energy Title in the farm bill and
the Federal RFS, are under fire from big industries that do not
want to see value-added agriculture in rural America and do not
want to see consumer choice at the pump.
The target is not the three projects that I mentioned but,
rather, the next three dozen projects in the cellulosic ethanol
biofuel pipeline that I have not mentioned.
While my time is limited, I think it is also important to
refute some of the common arguments made against us to correct
the record.
The oil industry claims we do not need biofuels anymore
because we have this boom in domestic oil production. We do not
have anything against the oil industry. While it is true that
we produce marginally more oil than we used to, up from about 7
to 10 percent of the world's supply, we consume more than 20
percent of the world's oil at steadily increasing prices. So
foreign oil dependence is sort of like a gambling addiction. We
are gambling one fewer night per week but at more expensive
tables and calling it progress. With fiscal responsibility in
mind, there is simply no bigger drain on the U.S. economy and
revenues than foreign oil dependence.
On the issue of pump prices, oil industry executives have
the tendency to be quite forthcoming after they retire. For
example, former Shell Oil President John Hofmeister recently
stated, ``[w]e need a competitor for oil. We need to open the
market to replacement fuels. Competition will drive
transportation fuel prices down, structurally and
sustainably.'' This is exactly what is happening.
Energy economist Philip Verleger, who served as an adviser
to both Ford and Carter, recently said, ``the U.S. renewable
fuels program...translates to consumers paying between $0.50
and $1.50 per gallon less for gasoline'' by adding the
equivalent of Ecuador to extremely tight world liquid fuel
markets.
Finally, we are aware of the livestock industry blaming
biofuels for increases in the price of its feed. I know this is
a difficult issue for agriculture. I would point out that corn
prices today are about the same as they were in 2008 when these
programs started. But the issue is bigger than that for
advanced biofuels. We remember the downside of sub-$2 bushel of
corn when U.S. farmers were price takers, selling oversupplied
grains at below cost and struggling to make a living. Congress
responded in part by committing to policies promoting value-
added agriculture. We believe that Congress was right to take
this path, that the development of cellulosic biofuels is a key
part of this vision, and that more prosperity and new markets
in rural America are a good thing.
The question for our industry is no longer whether we are
going to commercialize. Globally speaking, it is when and
where. The programs you have established are the right
programs, and if allowed to work, they will pay dividends for
generations.
Thank you for the privilege of speaking today, and I look
forward to your questions.
[The prepared statement of Mr. Coleman can be found on page
43 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Dr. Arora, welcome.
STATEMENT OF SUMESH M. ARORA, PH.D., VICE PRESIDENT, INNOVATE
MISSISSIPPI, AND DIRECTOR, STRATEGIC BIOMASS SOLUTIONS,
RIDGELAND, MISSISSIPPI
Mr. Arora. Good morning. Chairwoman Stabenow, Ranking
Member Cochran, and members of the Committee, thank you for the
opportunity to testify today in support of advanced biofuels.
My name is Sumesh Arora, and I am the vice president of
Innovate Mississippi, a nonprofit organization dedicated to
technology-and innovation-based economic development, and I
also serve as adjunct faculty in entrepreneurship.
I hope to provide a perspective on how advanced biofuels
and bioenergy options may be accelerated in the southeastern
U.S., where considerable activity is already taking place on
multiple fronts.
Today I will address five challenges and opportunities for
furthering these goals.
2014 is a breakthrough year for the advanced biofuels
industry, but this industry is still in its infancy. Currently
there is no dominant design for advanced biofuels technologies
or feedstocks, which means that many different technologies are
being perfected that can use a broad array of feedstocks. This
is leading to many technical and business innovations ranging
from deploying very large-scale biorefineries, as we heard, to
small modular and even on-farm systems. Achieving the concept
of dominant design makes a technology more bankable and much
easier to be adopted by the masses. However, there is a
significant need to educate entrepreneurs and investors to look
at risks in five key areas: technology, markets, management,
finance, and execution.
Innovate Mississippi has developed the Renewable Energy
Venture Startup Academy for training entrepreneurs to evaluate
and mitigate these risks. REVSup workshops have been conducted
all over the country in the last 3 years. Furthermore, linking
business plan competitions and business accelerators around the
country is critical to encourage new investment in these
ventures.
Second, many parts of the country, especially the
southeastern U.S., are well suited to generate current and
emerging feedstocks in an ecologically sustainable manner, thus
providing very effective regional solutions. For example,
forestry and poultry are two of the biggest industries in the
South that can currently supply feedstocks for advanced
biofuels. Emerging dedicated energy crops such as grasses and
algae also grow very well in that climate, but additional
research and market development is still needed to optimize
these feedstock supply chains.
Third, deployment of these technologies will lead to an
increase in the number of Science-Technology-Engineering (STEM)
related jobs across the country, which cannot be offshored and
will also lead to rural wealth creation. However, we need to do
a better job of connecting and leveraging Federal research
assets with local universities, schools, businesses, and
nonprofit organizations to accelerate these innovations to
market. For example, Innovate Mississippi is the original
member among nine partners with the USDA Agricultural Research
Service, among nine partners with ARS, with the goal to
facilitate commercialization of ARS research. I applaud the
2014 farm bill for urging the Department of Agriculture to move
forward with further development of such public-private
partnerships to provide venture development training for
innovative technologies.
Fourth, advanced biofuels should be viewed in a more
holistic manner to include viable biomass-based energy and
biochemical options in gaseous, liquid, and solid forms. This
requires a long-term comprehensive energy policy that provides
clear market certainty. The announcement by President Obama on
March 28 unveiling a strategy to curb methane emissions does
that to a great extent; however, the national Biogas Roadmap
scheduled for release in June this year will focus mainly on
the dairy industry, which is quite small in the South compared
to poultry. Millions of tons of poultry waste is generated in
States from Maryland to Arkansas, and the contributions to
biogas production from this very viable feedstock have largely
been ignored. There are tremendous entrepreneurial
opportunities in deploying such systems that can lead to rural
job growth and keep energy prices low for farmers, while
improving soil health and water quality.
Fifth, large volumes of advanced biofuels and energy
options in the overall mix will help keep fuel prices in check
by diversifying our energy supply and enhancing our national
security, but market-conditioning efforts led by various
Federal agencies must continue for greater adoption of such
fuels.
Our work at Innovate Mississippi can be summed up in two
words: ``coach and connect.'' While this may sound simple,
coaching early stage innovation-based enterprises and
connecting them with resources like early-stage capital,
technical research, and entrepreneurial service providers is
challenging. The ultimate goal is to create fast-growing,
profitable companies, which also yield great returns for the
early-stage investors. Innovate Mississippi relies on various
sources of State, Federal, and private sector funding to
provide such services at low or no cost to the entrepreneurs.
I am proud to say that, due to the combined efforts of many
stakeholder organizations, Mississippi is emerging as a
regional leader and the proving ground for commercial-scale
production of various advanced clean energy technologies such
as woody biomass and MSW-based cellulosic biofuels, biogas
production from poultry waste, torrefied wood pellets, thin
film solar panels, and energy efficient windows.
In closing, I would like to make the analogy that investing
in renewable energy is just like investing for your retirement.
In this case, we have to invest to diversify our Nation's
energy portfolio, which is dependent on fossil fuels for nearly
93 percent of its transportation sector needs. From a timing
standpoint, we cannot put off making these serious investments
in renewable forms of energy until the expiration of these
fossil fuels is imminent.
Thank you very much.
[The prepared statement of Dr. Arora can be found on page
31 in the appendix.]
Chairwoman Stabenow. Thank you very much.
Ms. Young, welcome.
STATEMENT OF NANCY N. YOUNG, VICE PRESIDENT, ENVIRONMENTAL
AFFAIRS, AIRLINES FOR AMERICA, WASHINGTON, D.C.
Ms. Young. Thank you for the opportunity to discuss the
benefits that advanced alternative jet fuels can bring to the
United States airline industry, our economy, and our Nation. My
name is Nancy Young. I am vice president of environmental
affairs of Airlines for America, representing the major
passenger and cargo airlines of the United States.
The U.S. airline industry is indispensable to our Nation
and its economy. To place this in context, the Federal Aviation
estimates that civil aviation supports more than 10 million
jobs, $1.3 trillion in economic activity, and over 5 percent of
the GDP. Even so, the steady rise of jet fuel prices and price
volatility have had tremendous negative impacts not only on the
airlines and their customers but their employees and the
communities that the airlines serve.
Fuel is our number one cost center, representing over one-
third of operating expenses. Although U.S. airlines consumed 5
billion fewer gallons of jet fuel in 2013 than they did in
2000, they spent a staggering $34 billion more. A stable
domestic supply of commercially viable alternative jet fuel
would provide a competitor to petroleum-based fuel, tempering
jet fuel price and volatility. It would also help the U.S.
airlines build on their strong environmental record.
But the benefits of advanced aviation biofuels would not
inure to the airline industry alone. Our armed forces would
derive similar benefits. In addition, a vibrant alternative jet
fuel industry would create American jobs and spur economic
development in the areas that are most hit by the recession.
Rural America would benefit greatly from access to new
markets for biomass crops while industrial areas would be
revitalized. Moreover, the energy security of the Nation would
be improved.
For the past several years, A4A and our members have been
working in earnest to achieve these synergistic benefits. As a
co-founding and leading member of the Commercial Aviation
Alternative Fuels Initiative--CAAFI--we have significant
successes to report. Through CAAFI we helped lead the
successful effort for specifications certifying two alternative
jet fuels, and other fuel conversion technologies are now up
for approval.
A4A and our members are committed to ensuring that the
alternative fuels we accept will have reduced life-cycle
emissions compared to today's fuels and not compromise the food
basket. Thus, I am pleased to report that we have developed
methods and tools to demonstrate that these aims are met. Our
vigorous pursuit of alternatives has sent an unmistakable
signal to farmers, fuel producers, and investors: U.S. airlines
are committed to making alternative jet fuels viable and will
do our part.
But we recognize we cannot do it alone. Working in public-
private partnerships, we have gone beyond testing and test
flights to commercial airline and military jet flights. Yet we
still need to scale up supply and make it fully cost
competitive.
Central to this effort is our Farm to Fly initiative. Since
2010 we have worked with the U.S. Department of Agriculture,
Boeing, and other stakeholders to align U.S. biofuels
agricultural policy to support advanced aviation alternative
fuels. Farm to Fly has brought farmers, fuel producers, and
airlines together. It has spawned two regional initiatives to
foster alternative jet fuels derived from homegrown biomass,
and more efforts are in the works. But I note that this
initiative could not exist without the Energy Title of the farm
bill. Hence, we commend this Committee for its leadership in
seeing that legislation through to passage. By assuring multi-
year authorization and funding for critical programs, Congress
will provide the stability needed for further progress.
Our joint efforts are bearing fruit. For example, United
Airlines has executed a purchase agreement with AltAir Fuels
for 15 million gallons of advanced bio jet fuel over a 3-year
period, to begin at the end of this year. Alaska airlines has
entered an agreement for the future purchase of sustainable
aviation biofuel from Hawaii BioEnergy, with deliveries slated
to begin in 2018.
Although these initial purchases are promising, we cannot
be complacent in our efforts. To see these projects through to
fruition and spur more, we must continue to employ all the
tools we have to further scale up supply. This is exactly what
the Defense Production Act project between the USDA, Department
of Energy, and Department of Defense is designed to do in
partnership with private industry. We urge Congress to continue
to support this important program.
In sum, the aviation industry and would-be alternative jet
fuel suppliers are on the cusp of creating a viable alternative
jet fuel industry--a synergistic win for the airlines, the
traveling and shipping public, U.S. jobs, our armed forces, our
economy, and our Nation. But continued Government partnership
is needed in the near term to get us over the cusp. With
sustained support, advanced aviation biofuels will, quite
literally, get off the ground.
Thank you.
[The prepared statement of Ms. Young can be found on page
64 in the appendix.]
Chairwoman Stabenow. Well, thank you to all of you. In
listening to all of you, I think from race cars to airlines and
everything in between, biofuels are a very exciting new
opportunity, a growing opportunity, and some would say, again,
back to Henry Ford, not new but an opportunity now for us to
create jobs and create new opportunities for agriculture and to
get us on to cleaner types of fuel and energy.
We are in a situation, though--and I would like each of you
to respond for a moment--in that what is facing us right now is
the EPA talking about lowering the 2014 RFS volumes. In the
face of all of this, when we see, on the one hand, we can grow
more, we have more opportunities that are coming on the market
every day, assuming that we can continue to see that happening
and financing and so on, given the RFS situation, and we have
the consumer end of it, whether it is airlines or race cars or
whether it is automobiles, people at the pump. Yet here we are
with the EPA talking about the ``blend wall'' and the impact
that they would argue.
So I guess I would like each of you to respond specifically
to that. Is there a limit to the percentage of biofuels that
can be blended in conventional gasoline? What do we do to
increase the market penetration? What happens if, in fact, the
EPA goes ahead in terms of the ability to do the things that we
are talking about this morning? Mr. Childress?
Mr. Childress. I think if they do that, the consumer is the
one that will pay. At the end of the day, all of our Americans
will end up paying the price. If we cannot get more ethanol, we
have got to have blend pumps at these service stations to give
our consumers a choice. It would be one of the most negative
things, in my opinion and in Growth Energy's opinion, that if
they lower the standards, it will be devastating to our public.
It just opens the door for more foreign oil.
Chairwoman Stabenow. You know, Dr. Koninckx, I am going to
ask you to respond, but I often think what a crazy situation we
are in where we are trying to create more competition so prices
will go down at the pump for consumers. Yet the folks that do
not want competition control whether or not there is the pump
there to create the competition. This is kind of a crazy
situation that we certainly need to figure out how to get
beyond. Dr. Koninckx?
Mr. Koninckx. Yeah, and the EPA decision or the EPA's
proposal unfortunately makes it worse and basically goes along
with that faulty assertion. What is really a problem here is
that the EPA has used a method, a logic to restrict or to limit
the RVOs on the basis of the supply chain, which the incumbent
controls, and that is more devastating than any other aspect of
their proposal, because this really would put biofuels in a
downward movement, and this really would slow down and stop the
positive impact that it has had on agriculture, on energy
prices, by lowering the demand for oil. Also, immediately there
will be an impact on greenhouse gas emissions, which will
increase.
There is really no blend wall. I call it the ``blend
step.'' The technology to go beyond E10 is there. My neighbor
here has talked about it already. There are numerous options
there, and really the EPA--we are surprised and disappointed
about their proposal. The EPA there makes an error that is
going to cost us.
Chairwoman Stabenow. Mr. Coleman
Mr. Coleman. Thanks for the question. You hit the nail on
the head that the oil companies control the pumps, and so then
you need--if you have that situation, then you are not going to
have competition without policy. The RFS is actually designed
to push higher renewable fuel blends into the marketplace. One
of the ways it does that, because Jan has so articulately
described it to this point, is using the RIN. One of the things
that has happened is EPA has decided that what happened last
year is a bad thing and they are dialing the program back,
when, in fact, what happened last year was the oil industry
refused to comply with the program, RIN prices went up, and
then other independents were just getting in the big game and
they were going to grease the skids to comply with the program.
So the program was actually working as designed last year,
and if EPA sees that and reacts to it and decides that it is
going to make changes, that it is going to convert an obligated
party into a non-obligated party, the investors are going to
see that, and they are going to run away from the industry.
That is really the situation that we face.
E15, for example, is certified in 2001 and newer vehicles.
That is three-quarters of the cars on the board. You have got
diesel fuel--I drive a diesel car. You have diesel fuel sitting
there. They have made the investment to put diesel there. A
small percentage of passenger cars are diesel cars.
So we have the infrastructure to go where we need to go. It
is really all about the program pushing incumbents there.
Chairwoman Stabenow. Thank you.
Dr. Arora and then Ms. Young. I know I am running out of
time here, but I would like to hear from each of you for a
minute.
Mr. Arora. Thank you for the question. I think regarding
the question of blend wall, Brazil shows that really there are
no technical limits to blend walls, and you can put even up to
100 percent ethanol. So does NASCAR show that as well. But I
think what also we are missing the point on is that biofuels
really offer good options to have regional strategies, and we
are trying to, I think, pursue a one-size-fits-all strategy for
the whole country. So we should also be looking at ethanol,
which really works beautifully in the Midwest, as well as for
other applications. We should also be looking at drop-in
biofuels in the Southeast where the feedstocks are different so
you can match--take woody biomass or poultry industry biomass
and convert that over to the biofuel. So we need to look at it
more on a regional basis as opposed to a one-size-fits-all
strategy for the country.
Chairwoman Stabenow. Thank you.
Ms. Young?
Ms. Young. Jet fuel is not subject to the volume
requirements of the RFS for good reason: Making jet fuel to
meet the rigorous safety requirements we have is a higher
hurdle than it is for ground-based fuels. But we have a win-win
opportunity here. Under the RFS program, the very projects I
was talking about that produced advanced jet fuel, advanced
biofuel, can qualify under the RFS, and in those cases they can
offset the obligation of the producer for purely ground-based
fuel.
So it is sort of a win-win in that it can take some of that
pressure off of ground-based fuel. The more we can do with
alternative jet fuel, the better for everybody.
Chairwoman Stabenow. Very interesting. Thank you very much.
My time is up.
I will turn to Senator Cochran for questions.
Senator Cochran. Madam Chair, let me join you in thanking
our panel of witnesses for being here today and helping us
understand some of the issues involved in this subject.
I wonder, are any of you specifically recommending the
adoption by Congress of changes in the existing law that would
help meet some of the goals and targets that you think would be
fair to this competitive environment that we are trying to help
support?
Mr. Coleman. Well, I guess I will go first. The answer is
an emphatic no. The program is designed well at the legislative
level. The issues that we have are entirely administrative, and
we are working with EPA, and Members of Congress have been
helpful in that regard.
Mr. Koninckx. Yeah, I would join exactly that. We would ask
you to use your oversight authority to encourage EPA to
implement the law as it was designed, and to not look at the
supply chain that is controlled by the oil industry as an
obstacle to its implementation.
Senator Cochran. Ms. Young?
Ms. Young. I think from our perspective, our message is
largely ``stay the course.'' I think that is very important for
fuel producers and investors and others right now. With due
respect, some of the uncertainty in the programs has been
difficult for the investor community and fuel producers and
airlines alike who want offtake agreements. So we are greatly
appreciative of the work you did on the farm bill, and we are
looking forward to continued support for the Defense Production
Act project that DOE, USDA, and the Navy are working on
together so diligently.
Senator Cochran. Dr. Arora?
Mr. Arora. Yes, I absolutely support the consensus with the
rest of the panelists here and would add the fact that I think
as a whole the industry has underestimated the proverbial value
of death in trying to come out of the perspective of bringing
these biofuels to markets. Oftentimes the biofuels industry has
been compared to bringing a new drug to market, which now takes
$1 billion and 10 to 15 years to come to market. In respect of
that, the biofuels industry has actually done a great job of
really moving these technologies to commercialization much
quicker than a lot of other industries have. So we must stay
the course with the RFS.
Senator Cochran. Thank you.
Thank you, Madam Chair.
Chairwoman Stabenow. Thank you very much.
Senator Donnelly?
Senator Donnelly. Thank you, Madam Chairwoman. Gosh, there
is so much I want to talk about here. I am an all-in-America
energy person. The more, the better, as long as it is, from our
country and from North America. But I view this not only as an
economic issue or an environmental issue but a national
security issue in that every barrel of American fuel we make is
one less that we have to get from places that might not be
friendly toward us.
You know, I know other members of the Committee were
recently in Ukraine as well, but I was there, and a huge
portion of everything that is going on there is the Russians
holding the Ukraine hostage over natural gas. You think the
very technologies that you are talking about today can help
change the world, that it provides jobs, helps the environment,
increases our national security, and makes us independent. And
so I view this as critical.
When we were landing in Ukraine, you looked and it looked
just like Indiana, the farmland there, and the things that can
be grown there. And to use your technology over there and
helping them to become energy independent changes the world.
Mr. Childress, I want to thank you for not only moving this
technology along and promoting it, but also for the smiles you
put on the faces of Hoosiers every week, and for also employing
a Hoosier driver. We are very excited about that as well. He is
a pretty good driver, too.
Dr. Koninckx, what I wanted to ask you is this advanced
cellulosic, has always been, ``In 5 years, we are going to have
this.'' Then 5 years late, it would be, ``Five years from now
we are going to have this.''
Obviously with stover we are there. How about woody pulp
and all the other different sources?
Mr. Koninckx. Yeah, indeed, Senator, with corn stover we
are in construction right now, and numerous--several other
companies--Brooke mentioned them already, Abengoa, POET-DSM--
are in the same place and will start up this year. As you said,
this is a great competitive advantage for the U.S. to use.
Agricultural productivity is phenomenal here. Our farmers are
very good, and as a company invested in agriculture and very
active in agriculture, we know this very well and we connect
with that.
We are in our facility in Tennessee, where we--as I alluded
to, the facility that we use to develop data and know-how on
how to develop additional biomasses as feedstock, we are
already active. We work with switchgrass. We work with
agricultural wastes of different types. So, absolutely, this
will be extended.
We picked corn stover as a starting point, a crop we know a
lot about, a crop the U.S. is tremendously competitive in, and
a crop, corn stover itself, we do not need to convince anybody
to grow. It is there, and we now have to harvest it.
Senator Donnelly. How hard is it--so you picked corn
stover. You have basically unlocked the code on that.
Mr. Koninckx. Right.
Senator Donnelly. Is what you are learning from that going
to help us unlock the code on woody pulp and other----
Mr. Koninckx. Absolutely. This is a tweak, I would call it,
in technology. It is an optimization of technology to another
feedstock. It is not a redevelopment. It is really a tweak.
Senator Donnelly. Cost-wise, how competitive is this
product going to be?
Mr. Koninckx. The product at first, when we start up these
plants, will be more expensive than corn ethanol and more
expensive than fossil fuel. But over time this will come down,
and we continue--as we have always said, we continue to
anticipate to be competitive with oil at about $80 a barrel.
The cost for carbon that we pay is far lower than crude, and it
is our entitlement to then work down the conversion cost, to
bring that down. Just as the oil industry has been able to do
over a century, we will bring this down much faster, and as I
said, we anticipate being competitive over time with oil at $80
a barrel.
Senator Donnelly. Mr. Coleman, one of the biggest
challenges we have is infrastructure. The EPA has told us the
reason they have done this is the lack of infrastructure. It
seems like shaky logic to me. But we do have infrastructure
challenges. What are you recommendations to overcome those
infrastructure challenges?
Mr. Coleman. Well, the first thing is the industry itself
has made a lot of progress since the inception of RFS2. So one
of the things that I think is incorrect with regard to when EPA
is talking about infrastructure is they talk about it like it
is a big problem that has not been solved. So we have made
great steps forward with regard to E85 and made great steps
forward with regard to E15. There is much more interest in the
marketplace at today's gas prices to do some of these things.
Senator Donnelly. I mean, they say we cannot get--we have
the product, it works great, we cannot get it to market.
Mr. Coleman. Right. The big issue is that the oil industry
is standing in our way, and so the mechanism that the RFS puts
into law actually solves that problem. It actually--so the way
that RINs work--and whenever we talk about RINs, it is a scary
thing because the eyes can glass over. But the way that RINs
work is the oil companies that do not want to do it have to buy
RINs. If they buy a lot of RINs, the RIN prices go up, and then
the oil companies that suddenly have an opportunity to make
money on RINs jump in, and you flow the fuel into the
marketplace, and you have market penetration. There is one
critical point--and I am sure Jan can add to this--this RIN
trading that goes on, it does not increase gas prices because
it is an intra-trading scheme in the oil industry.
So if you do not want to do it, you can buy RINs. But when
you do not want to do it, it allows the folks the independence
that do want to do it to get in the game. That is what the EPA
is short-circuiting when it decides to go backwards.
So it is not all about the number. We have heard
Administrator McCarthy says we are going to increase the
numbers, and our investors say, well, that is good, because
shrinking marketplaces send investment the other way. But we
have to get at this mechanism question.
Senator Donnelly. Well, I want to thank all of you for your
investment in our country, and that every day you do this,
please know you make our Nation stronger not only economically
but also safer as well.
Thank you.
Chairwoman Stabenow. Thank you very much.
Senator Hoeven?
Senator Hoeven. Thank you, Madam Chairman. I want to thank
all of you for being here. Mr. Childress, I want to commend you
on your incredible record, and thanks for being here today. As
Senator Donnelly said, we have many NASCAR enthusiasts as well
and enjoy watching you and your team very much.
Let us start with you. How do we get the petroleum industry
and the biofuels industry to work together? Look, we all want
more domestic supply, and at the pump we want our consumers to
have more choices and lower prices. So how do we get the
traditional oil industry, the petroleum industry and the
biofuels industry, how do we help them work together better to
serve the consumer? What can we do?
Mr. Childress. You know, I think it boils down to our
Nation, the economic side of it, we have to have more choices
for our consumers. Until we can convince our oil companies that
it is good for America, I do not think we will ever get there.
It is kind of like trying to get a big bully to do something
over a young kid. You will never convince them.
So I would like to see the big oil companies understand how
important ethanol is. But when you talk about taking dollars
out of someone's pocket, it is hard to get them to work with
you.
Senator Hoeven. Touch on for a minute the mileage issue
with the biofuel blends and also some of the liability issues
that we hear in terms of impacts on engines and that kind of
thing. You are running 30 percent, obviously, in your cars. You
talked about higher blends. So touch both on mileage and on the
liability issues at least as you perceive them.
Mr. Childress. Yeah, okay. We run E15. Sunoco E15 is what
we run in our cars. We tested all the way up to E30, and that
is where I wish we were at in America today, was working more
closely to E30 to give our consumers a better choice at the
pumps.
You know, the liability side of it, a lot of that is a
myth, in my opinion. In research that we have done, the
liability, the way we run our engines is not there. If you talk
about small engines, having a small engine, you cannot run a
lawn mower or whatever this is. That engine, Briggs & Stratton,
may cost $30. But the piece that maintains the correct ratio of
fuel to air for ethanol fuels would probably costs another 30
bucks. So that is the reason they are not putting it in there.
In our cars we have a sensor that goes through our ECU that
assures the correct ratio of fuel to air so there are no
problems. The newer cars, 2001 up, will not have a liability
problem because they were built from the factories to sustain
ethanol fuels.
You know, the other thing that we all have got to look at
in the future is in 2025, I think it is, they are going to
mandate a higher fuel mileage. Well, you get fuel mileage by
octane. We are going to have to have smaller cars--I think it
is 57 or 67 miles a gallon. We are going to have to have
lighter cars. We are going to have to have smaller engines. The
way we are going to get there, one of the ways to get there is
ethanol, is a higher octane. It will make more power, it will
burn cleaner, and it will help all of our greenhouse emissions.
So that is something we have all got to look at when it
comes to 2025, when we all have to go to higher fuel mileage.
You can get there, but it has to be done with octane.
Mr. Hoeven. One thing you mentioned that I want to follow
up on is blender pumps, and I think you talked a little bit
about blender pumps as being important in terms of consumer
choice and pricing. Just talk about you feel blender pumps can
make an impact?
Mr. Childress. There are several--well, one, the cost. You
know, it is more economical if you put ethanol in your cars and
blend it. If we have got more stations sitting out there today
with blend pumps that will give our consumers a choice, it is
going to be more economical. We are going to use more ethanol.
I was just reading in here, I think if we could put ethanol in,
we will save 7 billion gallons of foreign oil coming into this
country, and that is a big number. But the blend pumps are
already being put in a lot of stations--not near what we need,
but when we can get it, it will give our consumer a greater
choice, and it is going to mean more dollars in their pocket
that they can go spend in other places. We are being held
hostage by foreign oil.
Senator Hoeven. Again, Mr. Childress, thanks for being
here. We enjoy following your racing team. To all of you,
thanks for being here today. I appreciate it.
Mr. Coleman. Do you mind if I add one quick point on the
choice question?
Chairwoman Stabenow. Sure.
Mr. Coleman. Thank you. Respectfully, thank you.
One quick thing that was not mentioned was E15, the fuel
that is causing heartburn for AAA and small engine makers, is a
choice fuel. It is an option at the pump. I think when a lot of
consumers and trade associations think of ethanol, they think
of it as a 10-percent blend, they are going to have to put it
in their car if they use 87 octane. We are moving into a new
territory here where, if you have a small engine, you have a
lawn mower, you do not have to put E15 in your lawn mower. In
fact, they ask you not to. It is banned from doing that. So----
Senator Hoeven. You are talking with the use of blender
pump?
Mr. Coleman. Well, no, if we did--without blender pumps, if
stations tomorrow decided to put E15 on the island, it is a
choice fuel. They cannot get rid of the other fuels. So what we
are facing here is a situation where you pull up and you have
this new choice of E15. You can pass on it, but that ultimately
is where our industry needs to go because we should--people
should have the choice to use more and people can have the
choice to use less.
Senator Hoeven. What I would come back to is the question I
started with Mr. Childress on: How do we make it easier to do
that? How do we make it more cost-effective to do that for our
petroleum retailers? I think that is a real key to get to what
we want in terms of the consumer, more domestic supply, more
choice, lower prices.
Chairwoman Stabenow. Thank you very much.
Senator Heitkamp?
Senator Heitkamp. Thank you, Chairman and Ranking Member,
for holding this hearing.
It is clear from the testimony today that we are so far
advanced in the technology of creating these fuels that our big
problem is marketing these fuels, is actually getting it into
the market. There is a whole lot of kind of myths, and, Mr.
Childress, I think today you dispelled very many of those
myths. Every day when you run your cars, that tells the story
that this is not something consumers should be afraid of.
But I do reject in some ways the argument that the oil
industry is so integrated vertically that they control every
pump or every station. I can tell you what consumers do. If you
do not have a predisposed inclination against ethanol--which I
do not--I look up when I am driving in, and I say, ``What price
gets me the cheapest gasoline?'' Right? You pull into that
pump, and you say, ``This is what I am going to run.'' We know
we can get fuel economy and fuel efficiency from ethanol. That
is another myth: number one, it will wreck your engine and
destroy your warranty. The other is that it is not as efficient
and you will not get as high a mileage.
We can dispel each one of those, but that is pervasive in
my State, even in my State, which is an agricultural State. We
are also an oil-producing State.
My question is: What is the next generation of marketing
strategies beyond Renewable Fuel Standards, beyond what we are
doing with the RINs? What have your companies or your industry
thought about in terms of how do we transition to providing
greater incentives and responding to some of the concerns that
our dealers have, our petroleum marketers have? I guess, Mr.
Coleman, that would really fit your lane best.
Mr. Coleman. Yes, thanks for the question. You know, I
think you are seeing it. I think the NASCAR thing is very
helpful. You are seeing our industry work more directly with
the gas station retailers. Recently, over the last couple
years----
Senator Heitkamp. Can you provide some examples of that?
Because my dealers come in, and obviously, we are pro-ethanol
in North Dakota for the most part, but yet they talk about
concerns about their underground tanks and whether that is
going to create leakage and destroy their small business into
the future. They talk about marketing and the huge investment
that they would have to put in to accommodate those products.
So how do I respond to that?
Mr. Coleman. Well, so what we saw over the last year or so
was retailers and independent marketers reacting very quickly
to the RFS. The signal last summer was very clear: ``We are
going to use more ethanol.'' We had Mapco, we had Zarco, we had
some of these stations making big investments in blender pumps,
400 pumps that would have fundamentally changed how much
ethanol could get in the marketplace. We are talking about one
business deal alleviating 17 percent of EPA's supposed gap that
we cannot do. So those are specific examples, and then when EPA
said, well, we might go backwards, they all stopped.
So what I would say to you is the single most important
thing that we can do is make sure that the RFS continues to go
forward. Everything flows around it from there. I would have a
hard time answering your question the other way, to be totally
honest. People build higher docks to deal with incoming tide.
They do not build higher docks to deal with outgoing tide. If
the tide starts to flow out on renewable fuels, we are not
going to have people signing up for marketing deals.
Senator Heitkamp. Well, I guess my point is that as we move
forward, I think the real challenge is not only a regulatory
challenge, but it is also a public policy challenge. You know,
I do not know what would happen if you put Renewable Fuel
Standards to a vote today in the United States Congress. Right?
You know, we would like to think we would maintain it and be
able to present those arguments. But it may not be factual, and
so I think it is really important that we start talking about
what is the next generation of incentives, what is the next
generation--just like you guys are doing advanced biofuels,
what is the new advanced marketing strategy? How do we get it
out there as you are working on equality and pricing?
Like I said, if I know that I can offer a product at 10, 15
cents lower than the product across the street, I am going to
put that product in because I am going to get that business. So
it is all a game of money, it seems to me, and consumer choice.
I totally agree with that. But I think that we need to think
beyond Renewable Fuel Standards, is actually I guess my point,
which is what is the next thing that we need to do to guarantee
that the infrastructure gets built out so that we can offer
this consumer choice, so that we can continue the diversity of
the American fuel industry. I really applaud what the airline
industry is doing. I think we are going to see some other
alternative fuels, whether it is compressed natural gas--there
are some creative things that are happening to diversify this
industry, but we are challenged by the marketing. So I look
forward to other ideas.
Mr. Koninckx. Senator, if I can comment on that, as a
company that is investing very much in advanced biofuels, I
chair the board of our joint venture with BP, Butamax, that is
developing butanol and will commercialize butanol. It is a good
example of the kind of things you ask for.
But I have to say at the same time these kind of
initiatives are less likely to succeed if the RFS is being
questioned. If there is lack of stability in the regulatory
environment, investors in this kind of difficult technology
development will shy away.
Senator Heitkamp. You know, and I get that, but the
argument you get on the other side is: When is this product
going to stand on its own feet and market itself in a way that
does not require any Government mandates, any Government
programs? I just raise that because, I think about all the
arguments that the oil industry or all the detractors from RFS
present us, and we need to have responses to those, and we need
to have the next generation of marketing strategies.
Chairwoman Stabenow. Thank you very much.
Senator Grassley is next.
Senator Grassley. Thank you. Thank you all. I heard all of
the testimony except for Ms. Young. I am sorry. I had to go
back to Finance.
There is a lot of debate in Congress about moving towards
non-corn, non-food biofuels. Of course, I support every effort
to develop advanced biofuels, but I think there is a
misunderstanding about the role of corn ethanol in developing
advanced biofuels.
For instance, there are Members of Congress that have
offered legislation to repeal the corn ethanol portion of the
Renewable Fuel Standard. Some of the same members have also
advocated on behalf of advanced or non-corn biofuels.
So to Mr. Coleman and Dr. Koninckx, can you help me
understand the relationship between first-generation and
second-generation biofuels? Can we have an advanced biofuel
industry if we eliminate the Renewable Fuel Standard for corn
ethanol or traditional biofuels? Would we have an advanced
biofuel industry without the corn ethanol industry?
Mr. Coleman. Senator Grassley, thank you for the question.
We have a partnership with the Renewable Fuels Association for
a reason. They work on corn ethanol; we work on next-generation
ethanol. The reason we have a partnership with them is because
at the end of the day we are connected at the business sense,
at the market sense, et cetera. I have given examples in my
testimony. If you look at some of the first movers in
cellulosic ethanol, you will see POET, you will see DuPont, you
will see Abengoa with 500 million gallons of corn ethanol. But
the list goes on and on: Quad County, Pacific Ethanol is
moving.
The reason they are moving so quickly is because they have
an interest in diversifying feedstock at the plant. These are,
in essence, integrated ethanol refineries. It is in their best
interest to also use stover in addition to the corn kernel.
When corn prices go up, they want to find other feedstocks,
too. So there is a clear connection--not in all cases but in a
lot of cases with regard to the first movers--between the
first-generation ethanol guys and the second.
Now, specifically with regard to Senator Feinstein's
proposal, it is not a good proposal for a number of reasons.
First is when Congress makes a 15-year commitment and changes
the rules a third of the way through, it does not matter
whether you think it is warranted or not, the message to the
investment community will be that Congress changes its mind. So
it is clear that Senator Feinstein does not like the corn
ethanol part of the RFS. The problem is realistically it will
affect our industry. What she is proposing to do is already
done. Ninety percent of the gallons left in the RFS are
advanced biofuel gallons. So it is unclear to me what exactly
the point is of the legislation.
The last piece of this that we do not find believable is
that she is proposing to amend the Clean Air Act in the RFS in
a very politically clean way and that they can control the
politics. Our investors will not believe that.
Thank you.
Mr. Koninckx. Brooke gave a very complete answer, Senator.
Thank you for your question. Absolutely, the advanced biofuels
would be much more difficult, if possible at all, if there was
not a corn ethanol industry as well that provides tremendous
synergy and provides an example for further diversification of
feedstock.
Very much as Brooke, as Mr. Coleman just indicated, what we
need is a stable regulatory environment, and if it is shown
that the regulatory environment is changed in mid-course in
these very difficult development cycles--and, trust me, I have
worked on this myself for the last 7 years, coming out of the
laboratory to commercial scale--stability in the regulatory
environment is needed. Investors--and we are particularly
worried about a second wave of investors. You know, we see
direct foreign investment that is interested in this and is
shying away when we see a lack of stability in the regulatory
environment. So any change in the RFS will threaten the further
growth in advanced biofuels as well.
Senator Grassley. Mr. Coleman, for the last few years we
have heard that advanced and cellulosic biofuels are just a
year or two away from commercialization. Since you represent
one of the largest organizations representing advanced biofuel
producers, are we at a critical juncture for commercialization?
If so, what effect has the EPA proposal had on cellulosic
facilities that will be coming online in the near future?
Mr. Coleman. We are a critical point. We are just 6 years
past the signing of RFS2, and so our industry has been in the
lab for a long time. But we all know that the key to
commercializing a fuel is to have a demand trajectory, and it
is hard to have a demand trajectory when you are asking the oil
companies to buy a product they do not want to buy. RFS2 solved
that problem, and since then we have made very, very good
progress, notwithstanding the financial markets. We have all
these plants coming online. You can visit them. They are big
metal, concrete objects. You have seen them, and we have seen
them, and that is really exciting.
What the EPA proposal did, first the leaked version in
October and then in November, is it froze everything. We have
had--every single one of my companies--there are no
exceptions--have either picked up the phone or testified in
meetings with Congress that what EPA has done is froze
everything. What we are waiting to see is if the Obama
administration and EPA turns around on this and addresses both
the retraction on the numerical side and also properly
reinstitutes the mechanism that would force change in the
marketplace. If that is done, we will recover, and we will
recover well.
Senator Grassley. Can I ask one more question?
Chairwoman Stabenow. Sure.
Senator Grassley. Mr. Childress, I understand you have
tested ethanol. What did your testing conclude about the use of
higher ethanol blends such as E30? Did you find any serious
issues with blends above E15?
Mr. Childress. Yes. When we were testing E30, it actually
showed better in the engines from horsepower--the octane built
more horsepower, which would go back to what I was talking
about earlier, the 2025 mandates on fuel economy, and you get
through octane.
I think one of the other things that we--going back to what
you had asked earlier, is educating our consumer. There are so
many myths out there, again, what you said about the food. We
only use one-third of the corn, out of the corn, to make
ethanol with. The rest of it goes into distiller's grain, which
goes to the animals. This is not corn we eat. So that is a big
myth that people have tried to let our consumers think that it
is food versus fuel. It is not. We have got the greatest
shortage today on beef that we have ever had in America since
the 1940s, but a lot due to the drought. The same with the
disease on some of our pork.
So there are a lot of myths out there that a lot of people
are using today. I know that is not in the question you asked,
but I had to say that. Thank you, sir.
Chairwoman Stabenow. Thank you.
Senator Grassley. Well, give me more time.
[Laughter.]
Chairwoman Stabenow. I did, Senator Grassley, I did.
Senator Klobuchar?
Senator Klobuchar. Well, thank you very much, Madam
Chairwoman. Thank you for holding this important hearing.
I truly believe that the success, the story of the success
of the Renewable Fuel Standard is only half-written. You look
at the fact that we have reduced our dependency on foreign oil
by 60 to 40 percent. Now, that is a combination of things. We
know it is. Some of it is the drilling going on of oil and
natural gas in my neighboring State of North Dakota there. Some
of it is the gas mileage standard increases that we have seen
that have been so positive. Some of it is biofuels, and I
sometimes think people do not understand that biofuels is now
10 percent of our fuel supply. People seem to dismiss it as
some kind of a boutique fuel. That is not true.
That is why I was so concerned when the EPA came out with
the rule. I think it creates uncertainty, something that you
were just talking about, Dr. Koninckx, that is going to be bad
for the market, and especially when we are in a situation where
oil has kept its nearly $40 billion in tax credits and ethanol
has literally lost theirs, as well as any kind of incentive
from the tax credit standpoint for advanced biofuels. So that
really concerns me, and that is why I think that this renewable
fuel standard is so important.
I think I wanted to start with something specific that you
had alluded to, Dr. Koninckx, and that is biobutanol and the
blend wall. How do you see biobutanol--we actually have a plant
in Luverne, Minnesota, and DuPont has signed on to an agreement
to convert another ethanol plant in Lamberton, Minnesota, to
also produce this fuel. How do you see it in other advanced
biofuels working to overcome some of the blend wall problems
that have been raised?
Mr. Koninckx. Well, as I mentioned earlier, Senator, I do
not think of it as a blend wall but a blend step. It is a
transition in the market that the RIN mechanism that Mr.
Coleman spoke about earlier enables and facilitates. Butanol
would be one and will be one of the mechanisms that allows for
further blending of renewable energy into fuels without any
adjustment or change to the infrastructure.
So with butanol, you can basically bring twice the
renewable content and renewable energy to gasoline without any
changes to the existing infrastructure. In an equivalent of
E15, you could implement the entire Renewable Fuel Standard
without infrastructure changes.
In addition, butanol brings a number of advantages to
refiners and really allows all refiners to make better use of
the oil barrel in total as they make gasoline, jet fuel, and
other products.
But I would say, again, it is one of the possible ways to
increase the renewable content, the energy content, and it is
something that we invest a lot of effort, our best resources
in, together with our partner BP. We look very much at the
stability and the implementation of the Renewable Fuel Standard
to continue that.
Senator Klobuchar. Thank you.
Mr. Coleman, I hosted a meeting in my office with
Administrator McCarthy and with a number of people in this
room, half Democrats, half Republicans, about our concern about
the changes to the Renewable Fuel Standard and their proposal.
One of the things I was struck by was that the Director
continues to believe that renewable fuels are cleaner and
better for the environment than petroleum-based fuels. Can you
talk about the improvements the renewable fuels industry has
made in reducing the greenhouse gas intensity and water
consumption and how you see advanced biofuels making
improvements in this area?
Mr. Coleman. Thank you for the question. So at a basic
level, cellulosic biofuels are the lowest carbon fuels in the
world. Some of our fuels are carbon neutral or better, and so
when we are talking about building these plants, if carbon is
something you care about, these are the lowest carbon fuel
plants in the world, and they are a tremendous opportunity for
fundamentally changing the marketplace.
With regard to another point which I made in answering
Senator Grassley's question, there are synergies between
conventional and advanced biofuels. Some of our members are
bolting on technology to conventional plants, so that then
raises the question, well, how much and to what degree are
those plants improving? What we have seen over the last 10 to
15 years is an industry going in starkly the opposite direction
of the oil industry. The oil industry is running out of light
sweet crude and is using--has to go heavier and heavier and
more carbon intensive. We have reduced our water and our
energy, et cetera, in the vicinity of 30, 40, 50 percent.
Senator Klobuchar. Right. Do you see biodiesel as part of
this? That has also been quite a success story, and we have not
talked as much about that. But the feedstock diversification
and also the wider number of fuels like bio jet fuels.
Mr. Coleman. I do. I do, and I think over--one of the
things you are going to see a decade from now is a lot of
different companies being in both the gasoline and diesel fuel
marketplace. We have companies that said they were all about
ethanol, and there are really integrated biorefineries, and
some of them now are producing jet.
Senator Klobuchar. Speaking of jets, Ms. Young, we are a
Delta hub, and I know Delta actually, to try to reduce some of
this volatility, has gotten its own refinery going. But how do
you look at advanced biofuels helping to reduce volatility and
provide more competition in the jet fuel market? I look at
this, as head of the Tourism Caucus, as also an economic issue.
Foreign tourists spend an average of $4,000 when they visit our
country. It is a huge boon to us, and if we have a
diversification of fuel and we do not see these spikes, it is
going to make it easier to bring in tourists because they are
going to be able to afford to come in, and then they spend
their money at the Mall of America in Bloomington, Minnesota,
or--I do not know, I am trying to think where they would spend
their money--in Des Moines, in Iowa. Senator Grassley, they
would tour an ethanol plant in Iowa, for instance.
Ms. Young. Well, thank you for the question. With fuel as
our airlines' number one expenditure, we are really focused on
trying to have a competitor to petroleum-based fuel exactly for
the reason that you say. I think, price volatility certainly in
the last several years has sort of eaten airlines' lunch, so to
speak. With that big of a cost center, not being able to
predict, airlines like Delta, have had challenges, and our
airlines lost a lot of money.
Now we are in a period of going from a lot of loss, over
$50 billion lost over 10 years, to a period of very razor-thin
profits. But if we cannot manage the fuel price and volatility
issue, those very razor-thin profits are going to be
diminished.
As I noted before, it is really not just good for the
airlines, it is good for their customers, it is good for the
economy, and it is good for really the industries that we would
be supporting--the new biomass industries, the farmers, et
cetera--if we can get this competitor to petroleum-based jet
fuel.
Senator Klobuchar. Thank you very much.
Chairwoman Stabenow. Thank you very much.
As we wrap up, there is one other question I wanted to ask,
and I know Senator Cochran had a question as well. As we
conclude, I wanted to ask Dr. Koninckx, we are going to be
later in the spring talking about bio-based manufacturing,
which is something I know that you are very involved in as well
with DuPont. In the farm bill, we made important steps by
expanding the Energy Title to include not only biofuels, which
are very, very important, but the ability to focus more on bio-
plastics, bio-based manufacturing opportunities. We want to
highlight that later this spring, but I wondered if you could
just talk about the fact that biorefineries can integrate a
number of different processes, at one location produce more
than just biofuels and multiple--renewable chemicals that have
multiple purposes or polymers that can be used, as I mentioned
in bio-plastics.
So I wondered if you might just take a moment sort of
teeing up what we will be discussing later down the road, how
the production of biofuels can create additional manufacturing
opportunities.
Mr. Koninckx. Yes, certainly, and I cannot thank this
Committee enough for the support that you have given through
the farm bill for these programs. It is a great encouragement
for us.
We are already working on biochemicals. As I mentioned
earlier, we already produce something called propanediol in
Tennessee from sugar in a biorefinery. It happens to be a corn
wet mill. That sugar is being used to produce the propanediol,
which is then used to make things like carpet fiber and so on.
But the development that we see going forward is one in
which the supply chain that is growing for biofuels will enable
efficiency and low-cost access to renewable carbon for
biochemicals in a way that is not possible up until now. So
just like petrochemicals grew with the petroleum supply chain
and an energy market as a supply chain source, we expect the
same as biofuels will be enabling the growth of biochemicals.
So this is very much critical for that.
Chairwoman Stabenow. Thank you very much.
Senator Cochran had a question, and then, Senator Grassley,
since you are remaining as well, we might just let you ask one
more question, if you would want to do that. So it is up to
you.
Senator Cochran?
Senator Cochran. Madam Chairman, thank you very much.
Dr. Arora, you mentioned in your testimony that in the
Southeast there are many opportunities in terms of emerging
feedstocks that are readily but not traditionally used for food
or feed use. Can you elaborate on some of the barriers to
development of advanced biofuels in the South?
Mr. Arora. Sure, I would be glad to do that. I think one of
the things, as I mentioned earlier, the South, we are able to
grow a lot of different types of feedstocks, which includes
switchgrass and also grasses like miscanthus, one of them
actually that was developed at Mississippi State University and
is now being licensed commercially. But when we say ``licensed
commercially,'' we are still talking about very small,
relatively small penetration on these things.
Tennessee, for instance, has over 6,000 acres of
switchgrass growing, but when you compare that to conventional,
traditional crops like corn, it is just a very small amount of
acreage that is dedicated to these advanced biofuels and
biofuels feedstock. So we need much greater penetration of the
acreage for these feedstocks that can grow easily in this
region.
Additionally, as I mentioned earlier in my testimony also,
the poultry litter is actually a tremendous potential that is
generated in not only the South but just from Maryland all the
way across to Arkansas, and the numbers that I have seen are we
have over 26 billion pounds of poultry manure that is
generated, and we oftentimes see that as a liability for our
country. Yet indeed that can actually lead to about over $550
million worth of biogas that is trapped, methane gas, actually
that is trapped within the poultry litter. If you think of the
future implications, we are talking about products like Bio
Compressed Natural Gas (BioCNG) that could be produced from
that and help with the RFS requirements.
Senator Cochran. Thank you
Chairwoman Stabenow. Thank you very much.
Senator Grassley, if you would like to offer the last
question, you are welcome.
Senator Grassley. I do not have a question, but I would
have a couple suggestions: first of all, to thank Mr. Childress
for bringing credibility to this industry through his use of
the product and, most importantly, the outspokenness where he
is willing to take a stand. I appreciate that very much.
I would suggest to you that you send Mr. Coleman's
testimony to the Wall Street Journal.
[Laughter.]
Chairwoman Stabenow. I will do that. In fact, we are going
to send all the testimony over to EPA as well.
We want to thank everyone for being here today. You can
tell that our Committee is very committed to extending and
expanding opportunities through biofuels as well as bio-based
manufacturing. We are talking about jobs and growing rural
communities and helping us to become more energy independent.
We understand that we need policies that give us long-term
certainty so that investments can be made in the future. We
know this is a fight--it really is--about competition, and we
are on the side of the consumers that want lower costs, lower
competition, whether it is a business consumer like in the
airlines or whether it is a family trying to make ends meet and
stretch every dollar and pulling up to the pump, or somebody
who is enjoying a great race on a NASCAR weekend. So we thank
you very, very much for being here.
Any additional questions for the record should be submitted
to the Committee clerk 5 business days from today. That is 5:00
p.m. on Tuesday, April 15th. The meeting is adjourned.
[Whereupon, at 11:29 a.m., the Committee was adjourned.]
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QUESTIONS AND ANSWERS
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