[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
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Page
Hearing(s):
Grow It Here, Make It Here: Creating Jobs Through Bio Based
Manufacturing.................................................. 1
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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
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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
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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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