[Senate Hearing 113-561]
[From the U.S. Government Publishing Office]





 
                                                        S. Hrg. 113-561

                      GROW IT HERE, MAKE IT HERE:
                         CREATING JOBS THROUGH
                        BIO BASED MANUFACTURING

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

                                HEARING

                               BEFORE THE

                       COMMITTEE ON AGRICULTURE,
                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION


                               __________

                             JUNE 17, 2014

                               __________

                       Printed for the use of the
            Committee on Agriculture, Nutrition and Forestry
            
            
            
            
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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, Jr., 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

                              ----------                              
                                                                   Page

Hearing(s):

Grow It Here, Make It Here: Creating Jobs Through Bio Based 
  Manufacturing..................................................     1

                              ----------                              

                         Tuesday, June 17, 2014
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry...     1

                               Witnesses

Vitters, Scott, General Manager, PlantBottle Innovation Platform, 
  The Coca-Cola Company, Atlanta, GA.............................     4
Galbreath, Ashford A., Director, Advanced Materials and Comfort 
  Engineering, Research and Development, Lear Corporation, 
  Southfield, MI.................................................     7
Miller, Kurtis, President, Business Unit, Cargill Industrial 
  Specialties, Cargill, Inc., Hopkins, MN........................     8
Monroe, Adam, President, Americas, Novozymes North America Inc., 
  Franklinton, NC................................................    10
Hankins, J.D. II, Vice President, Hankins, Inc., Ripley, MS......    11
                              ----------                              

                                APPENDIX

Prepared Statements:
    Cochran, Hon. Thad...........................................    24
    Galbreath, Ashford A.........................................    26
    Hankins, J.D., II............................................    29
    Miller, Kurtis...............................................    34
    Monroe, Adam.................................................    43
    Vitters, Scott...............................................    47
Document(s) Submitted for the Record:
Galbreath, Ashford A.:
    Benefits of SoyFoam-Environmental Performance................    52
Hankins, J.D., II:
    North American Softwood Lumber...............................    57
Question and Answer:
Galbreath, Ashford A.:
    Written response to questions from Hon. Debbie Stabenow......    74
    Written response to questions from Hon. Tom Harkin...........    75
Hankins, J.D., II:
    Written response to questions from Hon. Debbie Stabenow......    77
    Written response to questions from Hon. Tom Harkin...........    78
    Written response to questions from Hon. Amy Klobuchar........    80
Miller, Kurtis:
    Written response to questions from Hon. Debbie Stabenow......    81
    Written response to questions from Hon. Tom Harkin...........    83
    Written response to questions from Hon. Amy Klobuchar........    85
Monroe, Adam:
    Written response to questions from Hon. Debbie Stabenow......    86
    Written response to questions from Hon. Tom Harkin...........    87
    Written response to questions from Hon. Amy Klobuchar........    89
Vitters, Scott:
    Written response to questions from Hon. Debbie Stabenow......    92
    Written response to questions from Hon. Tom Harkin...........    93



                      GROW IT HERE, MAKE IT HERE:


                        CREATING JOBS THROUGH



                        BIO BASED MANUFACTURING

                              ----------                              


                         Tuesday, June 17, 2014

                              United States Senate,
           Committee on Agriculture, Nutrition and Forestry
                                                     Washington, DC
    The Committee met, pursuant to notice, at 10:06 a.m., in 
room 328A, Russell Senate Office Building, Hon. Debbie 
Stabenow, Chairwoman of the Committee, presiding.
    Present: Senators Stabenow, Donnelly, Heitkamp, Boozman, 
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. Well, good morning. Call to order the 
Committee on Agriculture, Nutrition and Forestry. We have 
members that are coming, but in the interest of time, because 
there are votes that are going to start about 11:00 this 
morning, we will proceed at this point.
    I look forward to so much not only to hearing from all of 
you today, but to the bio-based manufacturing showcase that we 
have next door, and the opportunity to really lift up an 
exciting part of our economy and innovation, and to do this in 
a way that is going to bring some more attention to all of the 
wonderful work that you are doing and the 35 companies, I 
believe, that we have next door that are all showing us what 
they are doing today.
    Thank you for being here to take a look at one of the most 
promising opportunities we have to grow jobs and strengthen the 
economy, bio-based manufacturing. Over the past couple of 
years, this Committee worked together to write a new Farm Bill 
that focuses on both feeding the world and strengthening the 
economy.
    Earlier this year, we saw the work that began at this table 
make its way to the President's desk. The Farm Bill generated 
significant support from our colleagues in both the House and 
the Senate because members on both sides of the aisle 
recognized how critical it is to growing the economy.
    They recognized that the Farm Bill really is a jobs bill. 
One of the biggest ways the Farm Bill is helping to create jobs 
is found in the energy titles, Bio-Based Initiatives. We 
created new opportunities to support bio-based manufacturing so 
innovators in both rural and urban America can continue growing 
their businesses and creating manufacturing jobs.
    We recognize the connection between manufacturing and 
agriculture and understood early on its potential for growing 
the economy. Now, I have to say, as a Michigander and 
Chairwoman of the Agriculture Committee, I certainly see the 
importance of connecting agriculture and manufacturing.
    As I always say, we in Michigan both grow things and make 
things. I do not think we have an economy as a country unless 
we grow things and make things. And, in fact, I think that is 
the foundation of the middle class of our country.
    For years, manufacturers have been looking toward 
agriculture to find bio-based alternatives to petroleum 
products. I have seen it firsthand from our auto makers in 
Michigan. Agricultural products are being used in nearly every 
part of automotive production from seats to interior panels, 
arm rests to sunshades, soy wire coatings, carpets, and 
structural foam. I am very pleased that one of our witnesses 
today from Lear Corporation will tell us more about that work.
    Bio-based manufacturing goes beyond the auto industry as 
well. More than 3,000 companies in the United States either 
manufacture or distribute bio-based products. What does, quote, 
bio-based mean? It means instead of using petroleum-based 
chemicals to manufacture products, companies are creating new 
products from American-grown agricultural crops, like soybeans 
and corn, just as examples.
    This shift toward using biodegradable and renewable 
materials displaces the need for foreign-based petroleum and 
helps to create American-grown jobs. Outside of this hearing 
room today, as I indicated earlier, just around the corner in 
the Kennedy Caucus Room, many of these products will be seen on 
display following today's hearing and we would urge everyone to 
have the opportunity to go over and take a look.
    You will be able to see bio-based innovation firsthand, and 
I certainly hope that you will take the time to do so. The 
products on display will include household items like cleaning 
products and soaps as well as installation in plastics, foam 
products, and fabrics.
    Innovation in the bio-based industry is creating high-value 
products from traditional agricultural goods. I just have to 
stress, creating jobs. This innovation is helping us move away 
from petroleum-based products.
    As we heard from another panel of witnesses in April about 
the importance of growing the production of advanced bio-fuels, 
the technology and commercialization of bio-based alternatives 
to petroleum are no longer just around the corner. They are 
here. Advanced bio-fuels are creating jobs while also helping 
the United States become more energy independent, which in turn 
is creating new opportunities for bio-based manufacturing.
    All of these perspectives have helped shape our thinking as 
we develop the energy title of the Farm Bill. For the first 
time we created new opportunities for bio-based manufacturing 
and renewable chemical production, officially recognizing and 
supporting these areas like they have never been before.
    We also increased USDA's resources to manage the bio-
preferred labeling and procurement program, which promotes bio-
based products. The opportunities we created in the Farm Bill 
here at this very table will go a long way in supporting more 
entrepreneurs and innovators to develop and manufacture 
products and to fuel economic growth and jobs.
    So again, welcome to each of you. I am going to introduce 
each of our witnesses and then ask you to give us five minutes 
of opening testimony and then certainly we want to have the 
opportunity for anything that you would like to give us in 
writing as well and any products you want us to take a look at 
as well. I will be turning then to questions not for myself, 
but for colleagues as they arrive.
    So our first witness on the panel today is Mr. Scott 
Vitters, General Manager of the Coca-Cola Company's PlantBottle 
Innovation Platform. Mr. Vitters has been with Coca-Cola since 
1997, holding a number of positions of increasing 
responsibility. He also serves as an advisor to Michigan State 
University's Center for Packing Innovation and Sustainability.
    I should have meant my alma mater, so I am glad to see that 
connection. He is also on the Governing Board of the Bio-
Technology Industry Organization Industrial and Environmental 
Section and was recognized in 2011 by Fortune Magazine as a 
green star within the most admired companies. That is terrific.
    Our second witness today is Mr. Ashford Galbreath, who was 
named Director of Advanced Materials and Comfort Engineering--I 
love that term, comfort engineering--for Lear Corporation's 
Seating Division in 2004. He is responsible for engineering, 
design, and technology advancements, including seating system 
materials innovations.
    He holds over 20 patents and has been instrumental in the 
commercial success of Lear's SoyFoam renewable foam and several 
other lightweight material breakthrough technologies.
    Good morning, Senator Heitkamp. Wonderful to have you. 
Well, thank you. Thank you very much. I am so glad you are 
here.
    Senator Heitkamp. We have to say that to each other.
    Chairwoman Stabenow. That is right. I strongly advocated 
for Senator Heitkamp on the Committee because we do not have 
enough redheads either on the Committee or in the Senate.
    So you have 100 percent of the redhead caucus here today of 
the United States Senate.
    [Laughter.]
    Chairwoman Stabenow. I know that Senator Klobuchar wanted 
very much to be here to introduce Mr. Kurtis Miller, and I know 
once she arrives, we will give her an opportunity to bring 
greetings as well. But let me--I know she is on her way, so let 
me go ahead though and say, our third witness is Mr. Kurtis 
Miller, who is President and Business Unit Leader for the 
Cargill Industrial Specialties Business Unit.
    He is responsible for the manufacturing, research and 
development, and sales and marketing for all of Cargill's Ag-
based industrial products. Mr. Miller has over 25 years of 
experience in specialty industrial chemical industries, ranging 
from paints and coatings to plastics, transformers, foams, and 
asphalt. That is a wide range.
    Our fourth witness is Mr. Adam Monroe, the Regional 
President of the Americas, Novozymes, a world leader in bio 
innovation and a leading manufacturer of enzymes, 
microorganisms, and bio-pharmaceutical ingredients. Mr. Monroe 
has over 20 years of experience in the industrial biotechnology 
industry, is a leading voice on sustainability, bio-energy, and 
a bio-based economy. Welcome.
    Our fifth and certainly last but not least witness is Mr. 
J.D. Hankins. Mr. Hankins is the co-owner and Vice President of 
Hankins Forest Products, a land and timber company based in 
Ripley, Mississippi. Mr. Hankins has worked in the industry for 
over 50 years, starting as an eight-year-old in his 
grandfather's sawmill.
    Next month Mr. Hankins will begin serving as Chairman of 
the Executive Board for the Southeastern Lumber Manufacturer's 
Association and his expertise in the industry makes him a 
sought after voice regarding how Federal trade practices affect 
independent mill owners.
    So we are so pleased to have such a packed powerhouse group 
of witnesses with such wonderful expertise with us this 
morning.
    Good morning, Senator Boozman. Welcome.
    Mr. Vitters, we will let you proceed at this time with your 
testimony.

   STATEMENT OF SCOTT VITTERS, GENERAL MANAGER, PLANT BOTTLE 
  INNOVATION PLATFORM, THE COCA-COLA COMPANY, ATLANTA, GEORGIA

    Mr. Vitters. Well, thank you and good morning, Chairwoman 
Stabenow and members of the Committee and staff. On behalf of 
the Coca-Cola Company and our 130,000 employees and more than 
700,000 system associates, it certainly is a pleasure to be 
here today and have the opportunity to discuss our commitment 
and investment in helping to advance the renewable chemicals 
and bio-based manufacturing sectors here in the United States 
and abroad.
    Inside every bottle of Coke is a story of creating new 
value through increasing efficiency and advancing innovation. 
We have a long-term vision to help realize a world in which 
creating and using products wastes nothing. To achieve this 
zero waste vision, we are designing more resource efficient 
packaging, supporting community-recycling systems, and 
increasing our use of renewable materials through breakthrough 
innovations like our PlantBottle package, the first ever fully 
recyclable PET plastic bottle made with plants.
    Coca-Cola introduced the world to PlantBottle in 2009. The 
technology uses natural sugars found in plants to make 
ingredients identical to the fossil-based ones traditionally 
used in polyester fiber and resins. PlantBottle packaging 
looks, functions and importantly recycles just like traditional 
polyester, or PET plastic, but with a lower dependence on 
fossil fuels and a lighter environmental footprint on the 
planet.
    Thomas Edison is quoted as saying that the value of an idea 
is in the using of it. Our measure of success with PlantBottle 
is in advancing commercial solutions that go beyond pilot tests 
or niche green product uses. Our expectation is to realize the 
technology's full potential and deliver meaningful, positive 
change everywhere we do business.
    Our first generation PlantBottle technology has already 
been launched in 31 countries across more than 25 billion 
bottles. It has helped to reduce our dependence on fossil-based 
materials and remove over 190,000 metric tons of CO2 emissions, 
or the equivalent of more than 400,000 barrels of oil.
    In just four years, Coca-Cola has become the world's 
largest bio-plastic end user through our PlantBottle and we are 
committed to going even further with our goal to have all new 
PET plastic that we use contain PlantBottle technology by 2020.
    Commercializing bio-based materials, and specifically our 
PlantBottle technology, are a material part of the company's 
2020 Vision and Roadmap for Winning. At the heart of this 
vision and plan is a commitment to double our business in this 
decade. We see a world of opportunity and growth in areas like 
a rising middle class. We also see a world of challenge and 
need in areas like population, poverty, and the growing stress 
on finite resources.
    Put those together, and it is obvious that the only way we 
can hope to double our business is to double it sustainable. 
Packaging has a huge impact on those aspirations. Every one of 
the 3,500 different beverage offerings we produce, for every 
consumer, in every market requires some form of package.
    Over half of the global volume delivered today is through 
PET plastic beverage bottles for Coca-Cola. Behind this demand 
is a desire for lightweight, shatter-resistant, resealable, 
cost effective, and highly recyclable packaging. To continue 
meeting these beverage needs in the years ahead, while 
maintaining public trust and sustaining growth, requires moving 
beyond traditional fossil-based materials to renewable and 
recyclable bio-based sources.
    Coca-Cola today is partnering with companies to build 
manufacturing capacity for PlantBottle technology in local 
markets around the world. Until this supply chain is optimized 
locally, in most markets we pay an added cost to use 
PlantBottle. We view this premium as an investment, an 
investment both in our future competitiveness of our business 
and the health of the local communities that we serve.
    As a result, we have not increased the price of our 
products in PlantBottle. Instead we have challenged ourselves 
to get the supply chain built out under the timeline we have 
set, or even better, do it faster.
    To help accelerate investment in the PlantBottle supply 
chain and further expand the positive sustainability impact of 
the technology, Coca-Cola is rethinking traditional approaches 
to innovation. For example, instead of just holding the 
technology to ourselves, we are actually enabling other early 
adaptors to join with us on our PlantBottle journey.
    In fact, we even envision a future in which our competitors 
also have ready access to the technology as well. In 2011, 
Coca-Cola formed a strategic partnership with H.J. Heinz to 
produce ketchup bottles made with PlantBottle technology. In 
2013, we joined forces with the Ford Motor Company to showcase 
a Ford Fusion plug-in hybrid with its interior fabric made from 
PlantBottle polyester. Just this year, we have partnered with 
SeaWorld Parks and Entertainment to debut the first ever 
refillable plastic souvenir cup made from PlantBottle 
technology.
    I want to pause and thank leaders from both the Senate and 
House Agriculture Committees for the tireless work on 
reauthorizing the Farm Bill. Specifically, we applaud the 
extension of eligibility to renewable chemical technologies 
under the Biorefinery Assistance Program and Bio-Research and 
Development Program, and the support for new purpose grown 
energy crops. These efforts are truly helping open doors to new 
bio-based manufacturing opportunities and jobs here in the 
United States.
    For some the growing emergence of renewable chemicals and 
bio-based products may raise questions regarding the 
sustainability of using harvested agricultural biomass. As one 
of the largest buyers of sugars and starches in the world, I 
can assure that any trend with the potential of negatively 
impacting food and feed supplies would be of significant 
concern to our company.
    Through transparency and credible third party partnerships 
we can advance breakthrough bio-based manufacturing 
opportunities that deliver better environmental and social 
performance without negatively impacting local food security. 
Working with the World Wildlife Fund last year we launched the 
BioPlastics Feedstock Alliance, a new collaboration with 
several other leading consumer brand companies focused on 
guiding the evaluation and sustainable development of plant-
based feedstocks specifically for plastics.
    Last year our efforts focused on advancing the use of 
agricultural residues for PlantBottle was selected as an 
official eco-partnership within the U.S.-China Strategic and 
Economic Dialogue.
    Ensuring the sustainability of the agricultural ingredients 
we source for our products is a critical area of focus for our 
business. Through collaborative programs like Field to Market 
we are working across the entire agricultural supply chain to 
measure and improve the environmental and social performance. 
These measures are helping to inform and guide the responsible 
use of biomass for industrial materials.
    Investing in the bio-economy is good for business, for our 
business, the communities that we serve, and our shared 
environment. Today our first generation PlantBottle technology 
replaces one of the two ingredients that make PET plastic. Our 
long-term goal is to realize a 100 percent renewable, fully 
recyclable plastic bottle.
    To realize this goal, Coca-Cola is investing millions in 
local technology companies, companies like Virent in Madison, 
Wisconsin; Gevo in Englewood, Colorado; and Avantium in 
Amsterdam, the Netherlands. We have already demonstrated the 
potential for producing such bottles and are now focused on 
advancing commercial pathways for successfully scaling the 
technology.
    These are truly exciting times. Thank you again for 
allowing me to share Coca-Cola's progress here today and for 
your continued commitment to helping realize the transformative 
potential of the renewable chemical and manufacturing sector. 
Thank you.
    [The prepared statement of Mr. Vitters can be found on page 
47 in the appendix.]
    Chairwoman Stabenow. Thank you very much. It is exciting to 
hear what you are doing. Mr. Galbreath and I started together, 
I think in 2011, carrying around your soy-based foam seat, 
doing press conferences about what bio-based manufacturing was 
all about in Michigan. It is great to have you here today.

STATEMENT OF ASHFORD A. GALBREATH, DIRECTOR, ADVANCED MATERIALS 
    AND COMFORT ENGINEERING, RESEARCH AND DEVELOPMENT, LEAR 
               CORPORATION, SOUTHFIELD, MICHIGAN

    Mr. Galbreath. Thank you. Well, first of all, I would like 
to thank you, Chairman Stabenow and the Ranking Member Cochran 
and members of the Committee for the invitation to speak today 
about Lear Corporation's bio-derived products.
    My name is Ashford Galbreath and I am here representing the 
Lear Corporation team, from Chairman Stabenow's home state of 
Michigan, which develops bio-based products and launched 
Soyfoam in 2007 on the 2008 Ford Mustang. Environmental 
stewardship and sustainability are key dimensions of Lear 
Corporation's mission statement.
    In 2004, Ford Motor Company approached Lear about 
partnering to develop soy-based automotive foams. We formed a 
team, including the United Soybean Board Checkoff, Renosol, 
Bayer and a soy polyol supplier, and set a new standard of 
environmentally friendly foam performance with the first-to-
market launch of SoyFoam.
    SoyFoam is soybean oil-derived automotive polyurethane for 
use in seating, head restraint, armrest, and console foam 
padding. For SoyFoam we substitute petroleum-based polyol with 
soybean oil-based polyol and adjust the formula to meet strict 
automotive specifications. We successfully replaced 5 percent 
petroleum polyol by weight in a low density seating cushion and 
back foam and replaced 16 percent petroleum oil content by 
weight in a high density head restraint and typical European 
seat cushion foam.
    Today Lear sells SoyFoam seating on multiple Ford, General 
Motors, Hyundai and other customer vehicles molded in the 
United States and Mexico. We have approvals for 10 percent 
level Soyfoam we are preparing to launch, and research shows 
promise for at least double that amount.
    Soy polyol provides significant environmental improvements 
as measured by the National Institute of Standards BEES Study. 
Giving all environmental impacts equal weighting, soy polyol 
showed a 75 percent improvement compared to petroleum polyol.
    Global warming improvements from a net reduction of 5.5 
kilograms of carbon dioxide for each kilogram used. Two 
kilograms of carbon dioxide is captured from the atmosphere 
when grown, plus you avoid the 3.5 kilograms of carbon dioxide 
release from petroleum.
    We consider SoyFoam to be very significant to Lear 
Corporation in that it serves as a firm representation of our 
commitment to the environment, product cost control and meeting 
both our customers' and our consumers' needs. Most of our 
global OEM customers have environmentally proactive initiatives 
in response to demanding regulatory hurdles such as the 
European Commission's requirement to lower carbon use levels.
    Success with SoyFoam helped establish Lear's environmental 
leadership position in automotive seating. Environmental 
innovation continued at Lear with launches of DECS, Evolution 
seating systems that combine weight reduction with bio-based 
and recycled innovations. Recently we added an EcoPadding 
product, which is a trim laminate made with 40 percent 
nanocrystalline cellulosic fibers and 24 percent recycled 
polyester that can replace polyurethane foam trim laminates.
    We are also close to incorporating other bio-based foam 
ingredients such as soy oil. At Lear there are multiple 
business-related drivers for bio-based product innovation. One 
is economic consideration of controlling product cost increases 
from rising oil price.
    Petroleum-related price increases are costly to Lear's 
customers and consumers. Although currently somewhat stable, 
historically oil price is much more volatile than the price of 
soybeans. As use increases, new volume should improve supply 
economics in affiliated industries. North American use of soy 
polyol and other critical raw materials should continue to grow 
at a good pace as the product proliferates and content per pad 
grows.
    Lear's internal foam molding business is growing globally 
and SoyFoam is expected to be a key component of that growth. 
Bio-based products are one of our key areas of innovation 
focus.
    Lear faces a variety of what we would consider 
sustainability pressures, and response-related initiatives are 
multi-dimensionally important to us; compliance with local and 
national regulations, conflict minerals and voluntary 
protocols; market pressures from customers needing to reduce 
supplier impacts; consumers with a growing environmental 
awareness; business benefits from innovative products with 
increased market potential; and a sustainable workplace 
attracts new talent for Lear; and social concerns desiring to 
protect employees' welfare and build community relations.
    Thank you again, Chairman Stabenow, Ranking Member Cochran, 
and members of the Committee for your time today. I look 
forward to answering any questions you may have and thank you 
for your support of bio-based product development.
    [The prepared statement of Mr. Galbreath can be found on 
page 26 in the appendix.]
    Chairwoman Stabenow. Thank you so much.
    Mr. Miller, welcome.

 STATEMENT OF KURTIS MILLER, PRESIDENT, BUSINESS UNIT, CARGILL 
   INDUSTRIAL SPECIALTIES, CARGILL, INC., HOPKINS, MINNESOTA

    Mr. Miller. Good morning, Chairman Stabenow, Ranking Member 
Cochran, and distinguished members of the Senate Committee on 
Agriculture, Nutrition and Forestry. Thanks for the opportunity 
to testify before you today.
    I am Kurtis Miller, President of Cargill Industrial 
Specialties. Our business unit within Cargill delivers 
customer-focused solutions in targeted industrial markets. We 
leverage our expertise in agricultural-based chemistries to 
create specific technologies that solve particular application 
needs in our customers' respective markets.
    With more than 60 years of experience in the industrial 
sector, we are encouraged by the new growth and opportunity I 
bio-based technologies. I want to thank the Committee for its 
committed leadership, commitment and leadership to bio-based 
manufacturing. I hope my statement will provide insight to the 
current state of our bio-industrial sector and highlight 
economic and job creation potential.
    I really have the best job at Cargill. Every day I go to 
work and I look to replace petroleum products with Ag-based 
solutions. We have a proven track record of delivering the 
solutions our customer want. I have included in my written 
testimony three winners of the EPA President's Green Chemistry 
Award, PLA, soy polyol, and FR3 transformer fluid, but there 
are hundreds of other Ag-based solutions being delivered to 
customers daily.
    One example of innovation for our customers was with Owens 
Corning and their fiberglass insulation. Owens Corning wanted 
to replace phenolic resins with a more friendlier environmental 
chemistry, but they were struggling with a bio-based solution, 
and they went to Cargill and asked, Can we help? Well, we did 
not know anything about fiberglass insulation or the process 
and technology involved, but we sure know a heck of a lot about 
bio-based technology.
    The combination of two teams got together and delivered 
Ecotouch bio-based binder solution, which was an incredible 
savings for Owens Corning. So it delivered a bio-based product, 
99 percent, either renewable or bio-based--or recycled or bio-
based--and it is the leading technology in the marketplace. So 
you will see it under the Ecotouch brand in your hardware 
stores.
    So Cargill recommends that the Committee continue to 
support the entire adoption process from R&D through 
commercialization, really, in three key areas: R&D, innovation 
centers, and product differentiation. What we are doing is 
really hard stuff, and continuing to support classical R&D in 
this area is critical.
    One of the biggest risks we face in pre-commercialization 
scale-up is, we need to have--our customers need large 
quantities to test their product--our product in their product, 
so it semi-works. It is a critical component and one of the 
most risky components of the development process.
    One solution could be a private/public innovation center, 
which companies could rent out production space or scale-up 
prior to building a full scale manufacturing plant. We have two 
chemistries that fall under that characteristic right now where 
we would love to move forward, but do we spend the money, the 
high risk, to build a semi works plant?
    Another way the community could support bio-based 
technologies is by recognizing product differentiation. For 
example, our FR3 bio-based soybean oil based transformer fluid 
is treated exactly like mineral oil when it comes to the EPA 
and spills. So there ought to be an opportunity for us to do 
something with bio-based renewable differentiation.
    In closing, consumers continue to demand more 
environmentally-friendly products and our customers want to 
deliver products to meet those demands. As an industry, it is 
our responsibility to find ways to tap R&D opportunities, open 
commercialization avenues, and encourage adoption. In the end, 
only the marketplace will decide which innovation succeeds.
    However, we are strong believers that bio-based 
technologies can compete and out-perform existing alternatives. 
I, again, want to thank the Committee for the opportunity to 
share Cargill's views today as well as continue to commit to 
bio-based manufacturing. We urge you to continue investing in 
these promising technologies.
    [The prepared statement of Mr. Miller can be found on page 
34 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Monroe, welcome.

STATEMENT OF ADAM MONROE, PRESIDENT, AMERICAS, NOVOZYMES NORTH 
           AMERICA INC., FRANKLINTON, NORTH CAROLINA

    Mr. Monroe. Thank you, Chairwoman. Chairwoman Stabenow and 
members of the Committee, my name is Adam Monroe and I am 
President of Novozymes for the Americas, and it is an honor to 
be here today to represent our company and its technology, but 
to also talk about the bridge that we see from the technologies 
we develop to a brand new American industry.
    Let me start today by thanking Chairwoman Stabenow for her 
unique leadership in this space and the Committee's invitation 
to testify today, and for recognizing that the United States 
has an opportunity to innovate an entire new portfolio of 
products from renewable feedstocks.
    If anyone is wondering about the nature of my accent, 
Senator Boozman would understand.
    Like you, we have a vision for a new American industry 
rooted in agriculture. We see an America that is dotted with 
advanced manufacturing plants using the latest technologies 
from fermentation techniques to microbial development. These 
manufacturing plants are going to drive development in some of 
the most under-served economic areas of our country, and they 
will bring not only our businesses, but new businesses, 
restaurants and tax revenue to these communities.
    Scientists and engineers would not only staff them, but 
they would be staffed by folks from the local community with 
high school degrees, technical degrees, and college degrees. We 
believe in that vision as a company and we are doing a number 
of things to help that take root.
    So for those of who do not know, Novozymes is a $2 billion 
global technology and science company and we are in the 
business of bio-based manufacturing. It is what we do. We make 
enzymes and microorganisms, and some of these things come from 
very unique and interesting places. I wanted to give you an 
example of one today that I think is relevant.
    Back in World War II, our troops were fighting the enemy in 
the South Pacific, but they were also fighting heat, humidity 
and insects, and also this very strong blue-green fungus that 
ate everything cotton, from their tents to their uniforms to 
sandbags to the canvases that were covering their most vital 
equipment.
    The Army was smart enough to isolate this organism from a 
tent and take it back to a research center to understand what 
they could do to combat it. Now, funny enough, after decades of 
research, we understand that these enzymes are some of the most 
powerful in the world and can turn a tent into sugar. Sugar is 
an ideal platform for bio-based manufacturing.
    You have heard about that today. You can turn renewable 
sugar into anything you can get from a barrel of oil, from 
plastics to absorbency in diapers, as an example. We, as a 
company, have developed a number of new enzymes from that same 
organism that do everything from treat denim to make your jeans 
look a certain way to soften the towels in your laundry to help 
make these alternative fuels for the nation.
    We have also invested hundreds of millions of dollars in 
developing microorganisms for agriculture, which will allow 
farmers to more efficiently use their land and their fertilizer 
and the water that they need. We recently announced plans to 
create a new bio-ag research center in Raleigh, North Carolina, 
where I live, where we are going to invest more than $36 
million and create another hundred new research jobs in this 
area.
    Between farmers and timber growers and even trash 
collectors, we believe the U.S. is the most productive producer 
of renewable feedstocks anywhere in the world. This broader 
domestic portfolio of feedstocks is going to help the U.S. 
insulate itself from global volatility. It also will provide a 
new economic growth engine for the country.
    We believe that market-driving policies that you find in 
the USDA's Biomass Programs, the Farm Bill and the Renewable 
Fuel Standard: these programs are critical to establish these 
new feedstock supply chains.
    Let me take this opportunity now to thank this Committee 
for its strategic thinking reflected in the new Farm Bill. Two 
of these programs are helping two of our current partners, 
specifically the Biomass Crop Assistance Program and the Loan 
Guarantee Program.
    Ten years ago, I would not have imagined that as a company 
we would have built a $200 million enzyme plant in Nebraska for 
just one industry, the renewable fuel industry in this case. 
But today, you can go to Blair and see 110 local Nebraskans and 
Iowans working in this facility, and I welcome all of you to 
come out and see it. It is a pretty amazing place.
    With your support, we are confident that when we look back 
a generation from now, we are all going to be amazed by what we 
helped to create. So thank you for the opportunity to testify 
today and I am very happy to answer questions.
    [The prepared statement of Mr. Monroe can be found on page 
43 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much.
    Mr. Hankins, we are happy to have you with us. I know that 
Senator Cochran was very excited about your being able to 
participate today and sends his greetings as well.

 STATEMENT OF J.D. HANKINS II, VICE PRESIDENT, HANKINS, INC., 
                      RIPLEY, MISSISSIPPI

    Mr. Hankins. Thank you, Madam Chairwoman. I would like to 
thank the Committee for holding this hearing on bio-based 
manufacturing and for inviting me to discuss the importance of 
the bio-based programs to the forest products industry. I would 
also like to thank the Committee for all the hard work on the 
2014 Farm Bill and for the expansion of the bio-based program 
to more comprehensively include forest products.
    Our industry also greatly appreciates this Committee's work 
on the Farm Bill on issues such as the forest roads provision, 
research, and conservation funding. We were very fortunate, as 
an industry, to have had so many strong advocates sitting 
around this table during the Farm Bill process.
    My name is J.D. Hankins and I am Vice President and co-
owner of Hankins, Inc. near Ripley, Mississippi. I also 
currently serve as Vice Chairman of the Southeastern Lumber 
Manufacturer's Association, or SLMA. Hankins, Inc. is a 
privately held family owned company that manufactures, dries, 
and planes Southern Yellow Pine lumber that is sold throughout 
the United States.
    The Southeastern Lumber Manufacturer's Association is a 
trade association that represents independently owned sawmills, 
lumber traders and their suppliers in 17 states throughout the 
Southeast. Hankins, Inc. was founded in 1988 when my brothers, 
Harold, David, and I, decided to separate from our family's 
sawmill and purchase a small sawmill. We purchased a mill that 
was producing about 12.5 million board feet of green lumber per 
year.
    Since that time, we have modernized the operation bringing 
total production to over 95 million board feet per year and 
bringing more than 90 good-paying jobs to rural Mississippi. 
The lumber industry has a long history of being green and we 
like to say that Southern Yellow Pine was the original green 
building product.
    We are proud to be good stewards of natural resources, and 
are therefore very interested in using the bio-based label to 
tout our products. Unfortunately, the original rules developed 
around this program prohibited forest products from eligibility 
by defining the industry as a whole as a mature market that is 
not innovative.
    The 2014 Farm Bill changed this dynamic and clarified the 
inclusion of forest products in the program. While it would be 
difficult for me to argue that a two-by-four from a generation 
ago is any different in function than a two-by-four today. The 
path that a two-by-four takes from a forest to your home or to 
your grandchild's swing set is a significantly different and 
improved path.
    Innovation in the industry over the past two decades has 
been phenomenal and has allowed the industry to more fully 
utilize our country's natural resources. For this reason, we 
believe the forest products industry will be well-positioned to 
become a full entrant into the bio-based market.
    Recognizing that most people have probably not had the 
opportunity to tour a modern mill and to see the strides that 
have been made by the original bio-based industry, I would like 
to share with you a few of the innovations we have adopted at 
our mill in Ripley, Mississippi.
    At Hankins, Inc., we apply responsible stewardship 
principles to our manufacturing process from the start. We have 
received certification from the Sustainable Forest Initiative, 
which ensures the timber we source is from well-managed timber 
stands.
    In the production line, we have installed high tech 
equipment for more efficient use of both energy and logs. We 
completely renovated the manufacturing equipment starting in 
1993. These improvements include a gangsaw that is capable of 
sawing multiple sizes of boards from the same log 
simultaneously and optimized trimming and edger system that 
maximize yield from logs.
    Additionally, we have added more efficient planing systems 
and sorting systems. Since 2000, Hankins, Inc. has invested 
approximately $20 million to upgrade our optimization program, 
programmable logic controllers, motor-controlled devices, that 
have resulted in production efficiencies increases by 37 
percent, and energy efficiencies by 25 percent.
    One of the most energy dependent processes in the mill is 
the drying process. We have taken great lengths to improve the 
efficiency of this process by replacing dry kiln systems in our 
mill. One such change reduces the drying cycle by 14 percent, 
which reduces our energy footprint. Our kilns also burn 
residuals from the lumber-cutting process as a source of 
energy, thereby ensuring the waste in the lumber cutting 
process and energy use is minimized.
    Also, we sell excess residuals from our mill to fuel pellet 
manufacturers to be utilized as a green energy source. While it 
is difficult to describe some of this technology we use in 
mills, I hope everyone will stop by the table and see the 
equipment during the bio-based expo this afternoon. Their 
display will provide video of how the state-of-the-art 
equipment works.
    In conclusion, I look forward to the opportunity to use the 
bio-based label when the USDA rule is finalized. Thank you 
again for your time today and your commitment to the bio-based 
label. I look forward to answering any of your questions.
    [The prepared statement of Mr. Hankins can be found on page 
29 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much to each of 
you.
    I would like to start by asking each of you if you could 
take a moment to discuss how important Federal policies and 
initiatives are to growing this very exciting industry, and any 
experience that you have with the bio-based product procurement 
system that the President has set up and USDA is promoting to 
try to really promote the industry. Mr. Vitters.
    Mr. Vitters. Happy to. On the first in terms of from a 
policy perspective, I have certainly been encouraged with the 
work that has been done to date. As I think was referenced 
earlier, one of the biggest challenges, and particularly as we 
look to our PlantBottle 2.0 of being able to go to this other 
ingredient that we are looking to replace, is you have got 
first-in-kind technologies that are moving from pilot or small 
scale trying to reach to commercial scale.
    We were very excited in terms of the loan guarantee program 
offerings within USDA 9003. One encouragement in terms of what 
that meant for these companies is being able to raise capital 
and be able to make these programs work.
    What has been raised by a couple partners as a potential 
concern is an interpretation that perhaps with some of them, 
that it is mandatory to have a bio-fuels component as part of 
that, versus it being able to be accessed separately for just a 
renewable chemicals company. So obviously, for a company like 
ours, ensuring that it was set for renewable chemical use would 
be important.
    As for the purchasing side, in particular, the USDA 
BioPreferred Program, we have been very pleased with the work 
with USDA and the support that we have gotten, and we think it 
is important in terms of raising awareness around bio-based 
products that exist, and certainly appreciate the leadership 
that has existed on that front.
    Chairwoman Stabenow. Great. Mr. Galbreath.
    Mr. Galbreath. Yes. Most of our help, as I mentioned, for 
this technology to emerge came from funds the Chekhov Committee 
concept provided. Back in those days, there was some limitation 
on capital through that program. Not only did Lear benefit from 
research and development from that money, but so did our 
customers and our supply base.
    So now that there is capital available through some other 
funding programs for our supply base that is where we could use 
some help. As we try to grow, it is very difficult at times for 
us to predict volumes because automotive sales can fluctuate.
    So for, in particular, a Polyol supplier, they need to 
invest capital in some new plants and prototype facilities to 
try out new Polyols for our use. Automotive grade Polyols are a 
special grade for seating. They are not like furniture or 
insulation that is more common so sometimes it takes a little 
help to get us to the full volumes we need for automotive.
    As I said, we are going to new larger volumes now and 
trying to globalize as well, so it is becoming even more 
important now that supply base be available for us to grow.
    Chairwoman Stabenow. Great.
    Mr. Galbreath. Thank you.
    Chairwoman Stabenow. Mr. Miller.
    Mr. Miller. Yes, thank you. I will talk a little bit about 
the BioPreferred Program. So when it initially was rolled out, 
there was a tremendous amount of interest, which is what we 
like, so if we can talk to people about bio-based technology 
and what we can do, then we can show them the benefit of the 
bio-based technology.
    The challenge is that there is really no teeth to it, so 
although we have got a lot of products tested and approved, if 
there is absolutely no--if there is no cost savings or 
significant improvement in value for the Government, typically 
we do not move forward. So we definitely have sold a lot of 
chemistry into this market, but there is not a lot of teeth to 
it.
    Chairwoman Stabenow. That is important for us to know. Mr. 
Monroe.
    Mr. Monroe. Chairwoman, so a number of these--you asked 
about the Federal policies, and a number of these policies are 
really critical in a new industry like we are talking about 
today.
    If you think about it from the perspective of a farmer or 
feedstock provider, some of these feedstocks are new and have 
farmers considering whether or not to invest in what it may 
take to get this new feedstock to market. Providers are also 
considering how long the consumption of this feedstock will go 
on.
    So things like the Biomass Crop Assistance Program 
contained in the Farm Bill are very helpful to help these guys 
overcome the initial establishment of these supply chains.
    The other side of that, of course, is we work with many 
partners across the country in new biorefinery projects, and 
the investor community is watching this as well and they are 
trying to understand the technology. While we are confident, 
often investors do not understand it all.
    Programs like the Biorefinery Assistance Program helped to 
offset, if you will, some of their uncertainties. So both of 
those, I think, are critical to help getting this new industry 
off the ground.
    Chairwoman Stabenow. Thank you very much. Mr. Hankins.
    Mr. Hankins. Yes. Our main concern, of course, as I 
mentioned in the speech is on the labeling.
    We are wanting to use this in sales to help promote our 
product, to continue to expand it here in the country and to 
the public.
    The public is wanting to look at bio-friendly things and 
wanting to buy bio-friendly products, and that is where we are 
directing and trying to show that we are and have been a bio-
product for all this time.
    As far as any financing, of course, we are open to anything 
that develops out of it or anything that can be used in it 
somewhere.
    Chairwoman Stabenow. Thank you very much. All right. 
Senator Boozman.
    Senator Boozman. Thank you, Madam Chair. Mr. Hankins, many 
Arkansas jobs depend on our renewable resources in the forest 
products industry, just like in your state. I am very pleased 
that the forest products are now, as you mentioned, eligible to 
more fully participate in USDA bio-based programs.
    I am encouraged by that and it sounded like, from your 
testimony, that you are encouraged as well. What can you tell 
us, though as we see the implementation go forward? What should 
we keep an eye on with USDA?
    Mr. Hankins. Well, I think the first concern is in the 
rules and where lumber and forest products can be labeled. As I 
said, in our opinion, we are definitely a BioPreferred product. 
Right at the start on all lumber products, you put a grade 
stamp on it telling your mill, association and the grade, but 
you have also got an opportunity to put other things that you 
are involved with.
    Currently we put on there that we are Sustainable Forest 
Initiative Certified. As soon as we got approval, we would be 
glad to add the BioBased label to where everybody buying those 
forest products would know these were bio-based products.
    Senator Boozman. Very good. It is good to have you here, 
Mr. Monroe, as one Razorback to another, and somebody that 
attended the University of Arkansas. Again, concerning the 
importance of this stuff, people ask us at home, what we are 
doing. The name of the game is jobs, jobs, jobs. That's what 
this is really all about.
    As I meet with small business owners across Arkansas, 
almost all of them tell me about their hesitancy to hire new 
workers or grow their companies due to the climate of 
uncertainty that continues to hang over our economy. You also 
discuss this uncertainty in your testimony. However, I am very 
encouraged by your plans to create a new bio-agricultural 
research center, which would create 100 jobs.
    Can you elaborate on the impact of this economic 
uncertainty, the effect it has had on your business decisions, 
and how you hope to mitigate those effects moving forward?
    Mr. Monroe. Sure. So I mentioned earlier, when we are 
talking about a brand new industry like the one we are 
embarking on, despite the research that we have been doing for 
a long time, as we all know in this economically uncertain time 
period, capital is hard to find. The more certainty we can 
provide in a number of ways, the more it helps.
    So as an example, things like the Renewable Fuel Standard, 
and I know that is not the subject today, is a mechanism that 
helps us to provide certainty for a marketplace where we can 
continue to develop technologies, and our investor can look at 
and say, ``Okay, there will be a market for your product.''
    The second part of that is the enormous potential of 
agriculture. This Committee is very important because it's 
helping to get the word out about the enormous potential that 
this country has for bio-based feedstock, it's what we are 
doing today. If we can get to that feedstock, that will provide 
a tremendous amount of economic growth and jobs.
    These are jobs that are very hard to outsource. We are not 
going to collect feedstock in a 50-mile radius and then ship it 
somewhere else in the world to bring the product back. We are 
going to do that right here at home in local communities. So if 
we can get to that vision, and I think we are doing the right 
things to get there, we will have more certainty and we will 
have more jobs.
    Senator Boozman. Very good. Mr. Miller, you mentioned the 
challenge of gauging customer interest as an ongoing obstacle 
for bio-based manufacturers. What steps have you taken to 
market yourself to potential customers? What advice would you 
give to emerging companies?
    Mr. Miller. So originally when bio-based rolled out--I am 
dating a little bit, but 20 years ago, the challenge was the 
chemistry was not very good and we were trying to put chemistry 
where it should not be. The big difference today is we are 
focused on those markets and those applications and those 
technologies that really drive value.
    Green is nice, but it does not sell. Right? You have to 
have the performance, it has to be there and you have to have 
the market knowledge. I would caution everybody is green is 
almost a table steak and you need to focus on driving the 
chemistry and the technology forward.
    For instance, with our green transformer fluid, yep, it is 
green, made from soybean oil. But it also has a high flash 
point. Right? It is biodegradable. It also makes a transformer 
last longer. Not only do you get the environmental impact, but 
you also get safety and then you can save money for the 
utilities. So the key is, you have to have the value 
proposition.
    Senator Boozman. Right. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much. Senator Heitkamp.
    Senator Heitkamp. Thank you, Madam Chairman. This is a 
topic for a state like North Dakota that is near and dear to 
our heart. We have gone, hopefully, with no offense intended to 
the fuels portion of this. I think we are looking at moving 
agricultural manufacturing beyond food, fiber, and fuels.
    How do we do that? What I heard today is that, first off, 
the most critical part of this is getting the product right, 
product quality, because it has got to be competitive. If you 
went to 100 percent bio-based, you might not have the integrity 
of the bottle. You might not have the integrity for the 
transformer. So it has got to be a quality product.
    Then we have got to create a marketplace so that we can, in 
fact, engage the capital markets in investment. In my state, 
that investment typically came in the co-op movement, whether 
it was advanced manufacturing or what we would call value-added 
agriculture and pasta or food, you know. We were--strawboard 
was a big product, which did not perform well in the 
marketplace because it did not have the integrity that it 
needed in order to be a resilient building material.
    I agree with you, it is product quality, it is capital, and 
then it is responding to the needs that the community has for 
labeling. It needs to be an appropriate standard for labeling.
    So we are hearing all this, but my question for each one of 
you is, if you were sitting in our chair, as the Chairwoman of 
this Committee or one of the members who believes deeply that 
this advanced manufacturing is where agriculture needs to go 
for a future for our farmers and for production agriculture, 
what more would you be looking at? What more would you be 
doing, Mr. Vitters, and all the way down the line?
    Mr. Vitters. A couple things. One, I would not separate out 
fuels and chemicals. I think that is often a mistake that gets 
made by folks looking at the technologies. Many of our partners 
actually do fuels as well, and I think what they have come to 
realize is for getting started, the chemical space is a little 
smaller, a little easier to scale, perhaps has a little more 
value within it today for being able to get started and moving.
    Senator Heitkamp. So if we were looking at this as we fight 
the RFS or as we have that transition, to talk to people about 
the importance of that technology in the next generation of 
what you do?
    Mr. Vitters. Exactly. So chemicals as a vehicle toward also 
solving needs as it relates to fuels as well, for one thing. 
The second thing I mentioned in terms of ensuring within the 
loan guarantee, renewable chemicals have a place within that if 
they are not advancing bio-fuels. Maybe as a third thing, there 
have been a lot of comments around providing certainty or 
flexibility within the markets for companies that are getting 
started.
    One thing that does impact the decisions around putting 
domestic manufacturing capabilities in place is around, when 
you are getting started, flexibility on feedstocks, looking at 
are there duties and taxes that are either prohibiting or 
creating challenges for being able to have an industry have the 
most amount of flexibility at the beginning.
    Some looking at how you might reduce or eliminate incoming 
duties and taxes for the renewable chemicals market would be 
something we would be interested in terms of having it 
explored.
    Mr. Galbreath. Seven years ago we had a customer who had a 
marketing strategy to become green and that was Ford Motor 
Company. As Mr. Miller mentioned, I believe the value 
proposition has to catch up with the product. What is happening 
now is that value has caught up a little more for other 
customers because they are competing with Ford.
    But in the interim there has been a lot of work done to 
clean up the material, make it more pure and more useful. So I 
think the research incentive is very important. As you heard 
Mr. Vitters mention, half of their product still has potential 
to be bio-based. The same is true for automotive seating foam.
    We are only dealing with the Polyol portion, but the other 
side, the isocyanate also has potential. So we could 
theoretically get to 100 percent with the right level of 
research and dedication by our supply base.
    The other one is incentives for use. We still have some 
holdout customers. It is entirely possible that use would grow 
faster if they had some incentives. I also previously mentioned 
capital investment. Some of that support was a little slower, 
in my world anyway, to catch up with our supply base and can, I 
think, also help expedite things in the future as well. Thank 
you.
    Chairwoman Stabenow. I am going to ask each of you to be 
brief as well. We have votes starting here shortly. I want to 
make sure we hear from all our members. So please go ahead.
    Mr. Miller. Product differentiation with EPA. The other one 
is the challenge of switching costs. Any time you change from 
one chemistry to another, there is a lot of switching costs 
involved. So if our customers would get credit for switching 
costs, it would be interesting.
    Mr. Monroe. For those of whom do not work in this town and 
run businesses, the debate over existing good policy like the 
new Farm Bill and the Renewable Fuel Standard creates 
uncertainty in our communities. We can live with whatever 
detailed works there may be when we have two good things like 
that we can rely on.
    The mandatory section of the Farm Bill was a very nice add 
in this edition. So the less debate about what we have that we 
can work from, I think, in some ways the better. The mandatory 
side of the Farm Bill is a really good thing.
    Mr. Hankins. If it was me, I would be pushing for 
development in the residual products from wood products. I 
would be willing to push development in an area to use them, to 
generate energy, or to do whatever could be developed out of 
them. It is a cheap alternative, because it is a byproduct.
    Europe has already taken advantage of it. Like I said, all 
our excess byproducts are going into making pellets to go to 
Europe to heat their homes and things. I mean, I think it is a 
wide-open industry if it is just pushed and capitalized.
    Senator Heitkamp. Thank you.
    Chairwoman Stabenow. Great. Thank you very much. Senator 
Grassley.
    Senator Grassley. Thank you, gentlemen, for what you do to 
extend the products that we raise on our farms. First question 
I will ask you, and all of you do not need to respond, but I 
would like to get a consensus. Have consumers shown that they 
will pay a premium for bio-based products or do they see bio-
based products as a unique option that needs to be priced 
competitively?
    Mr. Vitters. As a branded company up here, I will take the 
first shot at that. I think it was mentioned earlier in terms 
of our initial drivers for this program was looking at broader 
value. It is around long-term competitiveness for our business, 
around decoupling from the volatility of fossil fuels, as well 
as looking at other considerations like increasing farmer value 
through the program as well.
    That said, we always had a belief that there could be 
opportunity for connecting plant-based products with consumers. 
Traditionally, when you look across mainstream brands, if it is 
positioned on an environmental attribute, there often tends to 
be a challenge in terms of having that be a driver of purchase 
intent, so if you are looking carbon or recycling or whatever 
the environmental attribute.
    However, we believe there are other ways to talk about bio-
based products, talk about the connection to plants that are 
relevant to consumers. That may, in the future, be able to 
demonstrate. We have seen early signals that are encouraging on 
that fact, but we are not depending on that as the only driver 
of value for the program today.
    Certainly, though, I will say that you have to have trust 
in order to build marketing love, and within key stakeholders 
having deeper conversations around the value of bio-based 
products in opinion elites and thought leaders. It is very 
important to have that foundation and that is helping to drive 
in terms of the product sales for it.
    Mr. Galbreath. Most of our sales are direct to automotive 
and that is primarily a price-driven situation. However, I will 
note that all of our global surveys show that consumers are all 
interested, no matter what their age or their demographic, in 
bio-based and environmental products, and they do state a 
willingness to pay more for them.
    Also, when we launched Soyfoam, we saw a wave of customers 
coming into dealers, we heard, on the West Coast in particular, 
and saying, is this the place that sells Soyfoam in the 
Mustangs? We want one of those. It was to the point where we 
were asked for samples to send to the dealers of the seats, so 
they can reside at the dealers to help sales.
    So I think they would be willing to pay a premium, 
personally, but that is just my opinion. We still struggle with 
being price-competitive unless we are adding value, and there 
are some ways that we are able to do that.
    Mr. Miller. Just quickly, there is always a small portion 
of the economy that will pay a premium, but in my opinion, over 
the years, it is very small. But the key is that when you come 
and talk to your customers, they listen. Right? If you give 
them the quality, they will buy it.
    Mr. Monroe. What I would add to this is that while we may 
see trends today, for those of you who have kids--I have two 
teenage daughters--I have absolutely no doubt that as we go 
into the future, the younger generations will--they just expect 
this.
    We can feel it, I know, in our company so we need to live 
up to this and pursue it. So I think basically over time, there 
will be a price premium for it, but it will also just be the 
expectation.
    Mr. Hankins. The main thing that we have seen is that yes, 
they will pay some more, but it is not a lot more. But their 
demand stands out a lot more. They demand that it be something 
and they will go to any product that is there and is 
competitive. As long as you can give a competitive product and 
a quality product, they are willing to accept it.
    But everybody is looking at their grandchildren or children 
and knowing that the future makes a difference. So they feel 
that way and they want to spend that way and they will if you 
give them the opportunity.
    Senator Grassley. I have got a question on research and 
development. How long does R&D on these new projects take to 
ensure their quality is on a par with what consumers expect? 
Does R&D on bio-based products cost any more than it would on 
non-bio-based products?
    Mr. Miller. I will jump in real quick. So it really depends 
on the challenge that you are trying to overcome. So if you 
have a Horizon Three, a tough challenge, or a Horizon Two 
challenge or One challenge. So I am not sure it takes any 
longer. It just depends really on the challenge that you are 
trying to overcome.
    Mr. Galbreath. To me the longest time was making the 
product pure. Lear was able to work around the chemistry to 
overcome that purity, to get it launched earlier, but it was 
time consuming and costly. I would say we are still working to 
develop soy now and make it work even more efficiently in our 
products.
    The other one is the switching costs. There is a validation 
cost as we get approval to sell to automotive. We have to re-
validate the product to make sure it is as safe and durable as 
the current product. That is an additional cost that we 
consider in R&D and does slow it down and can take up to a 
year.
    We have been able to expedite that now because we have 
credibility of the product in the market. But without that, it 
was very difficult.
    Mr. Vitters. I would second a lot that has already been 
said. The only thing I would say differently is part of the 
reason we drove to drop-in chemicals, so at the end of the day, 
what we are producing is the exact same chemical as a fossil-
based material except instead of coming from dinosaurs, it is 
coming from carbon that has been extracted out of the air.
    By doing that approach, it has allowed us to drive toward 
cost competitiveness faster. It is less disruption within the 
value chain and then in terms of getting approvals and being 
able to advance the technology faster, which was an expectation 
for us, has been able to be done.
    Senator Grassley. If that is all, whatever you say, Madam 
Chairwoman.
    Chairwoman Stabenow. Well, thank you very much. We do have 
votes that have just been called. We have many more questions. 
We will continue this discussion in the showcase right around 
the corner in the Kennedy Caucus Room. I do want to invite 
everyone to come between 11:30 and 1:30.
    We have 35 companies representing 25 different states, so 
half the country is represented next door and you can see 
firsthand what is happening in what I think is one of the most 
exciting areas of growing the economy in terms of innovation. 
It really is bringing together making things and growing things 
and creating jobs.
    So if anyone has any additional questions for the record, 
they should be submitted to the clerk five business days from 
today. That is 5:00 p.m. on Tuesday, June 24th. The meeting is 
adjourned.
    [Whereupon, at 11:11 a.m., the hearing was adjourned.]
      
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