[Senate Hearing 113-739]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 113-739

                         OVERSIGHT HEARING ON 
                        DOMESTIC RENEWABLE FUELS

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

                             JOINT HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON CLEAN AIR 
                           AND NUCLEAR SAFETY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                                AND THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           DECEMBER 11, 2013

                               ----------                              

  Printed for the use of the Committee on Environment and Public Works
  
  
  
  
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       Available via the World Wide Web: http://www.gpo.gov/fdsys
       
       
       
       
       
       
       
       
                         OVERSIGHT HEARING ON 
                        DOMESTIC RENEWABLE FUELS






                                                        S. Hrg. 113-739
 
                         OVERSIGHT HEARING ON 
                        DOMESTIC RENEWABLE FUELS

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

                             JOINT HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON CLEAN AIR 
                           AND NUCLEAR SAFETY

                                 of the

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                                AND THE

                              COMMITTEE ON
                      ENVIRONMENT AND PUBLIC WORKS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           DECEMBER 11, 2013

                               __________

  Printed for the use of the Committee on Environment and Public Works


       Available via the World Wide Web: http://www.gpo.gov/fdsys

                               __________
                               
                               
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               COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                    ONE HUNDRED THIRTEENTH CONGRESS
                             FIRST SESSION

                  BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana                  DAVID VITTER, Louisiana
THOMAS R. CARPER, Delaware           JAMES M. INHOFE, Oklahoma
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             JEFF SESSIONS, Alabama
SHELDON WHITEHOUSE, Rhode Island     MIKE CRAPO, Idaho
TOM UDALL, New Mexico                ROGER WICKER, Mississippi
JEFF MERKLEY, Oregon                 JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York         DEB FISCHER, Nebraska
CORY A. BOOKER, New Jersey

                Bettina Poirier, Majority Staff Director
                  Zak Baig, Republican Staff Director
                              ----------                              

              Subcommittee on Clean Air and Nuclear Safety

                  THOMAS R. CARPER, Delaware, Chairman
MAX BAUCUS, Montana                  JEFF SESSIONS, Alabama
BENJAMIN L. CARDIN, Maryland         JOHN BARRASSO, Wyoming
BERNARD SANDERS, Vermont             MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island     ROGER WICKER, Mississippi
TOM UDALL, New Mexico                JOHN BOOZMAN, Arkansas
BARBARA BOXER, California (ex        DAVID VITTER, Louisiana (ex 
    officio)                             officio)
    
    
    
    
    
                            C O N T E N T S

                              ----------                              
                                                                   Page

                           DECEMBER 11, 2013
                           OPENING STATEMENTS

Boxer, Hon. Barbara, U.S. Senator from the State of California...     1
Vitter, Hon. David, U.S. Senator from the State of Louisiana.....     2
Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland    57
Barrasso, Hon. John, U.S. Senator from the State of Wyoming......    61
Fischer, Hon. Deb, U.S. Senator from the State of Nebraska.......    67
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma...    68
Wicker, Hon. Roger, U.S. Senator from the State of Mississippi...    70
Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..    71
Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode 
  Island.........................................................    72
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama......    73
Udall, Hon. Tom, U.S. Senator from the State of New Mexico, 
  prepared statement.............................................   141

                               WITNESSES

Grundler, Christopher, Director, Office of Transportation and Air 
  Quality, Office of Air and Radiation, U.S. Environmental 
  Protection Agency..............................................    74
    Prepared statement...........................................    76
    Responses to additional questions from:
        Senator Boxer............................................    86
        Senator Baucus...........................................    88
        Senator Carper...........................................    90
        Senator Cardin...........................................    92
        Senator Gillibrand.......................................    98
        Senator Vitter...........................................    99
        Senator Wicker...........................................   102
        Senator Fischer..........................................   104
Chalk, Steven, Deputy Assistant Secretary for Renewable Power, 
  U.S. Department of Energy......................................   106
    Prepared statement...........................................   108
    Responses to an additional question from:
        Senator Boxer............................................   113
        Senator Carper...........................................   114
    Responses to additional questions from:
        Senator Cardin...........................................   115
        Senator Fischer..........................................   124
Clark, General Wesley K. (Retired), Co-Chairman, Growth Energy...   145
    Prepared statement...........................................   147
    Responses to additional questions from:
        Senator Boxer............................................   167
        Senator Cardin...........................................   168
        Senator Vitter...........................................   169
    Response to an additional question from Senator Wicker.......   171
Collins, James C., Jr., Senior Vice President, DuPont Polymers 
  and Industrial Biosciences, E.I. DuPont de Nemours and Company, 
  Inc............................................................   173
    Prepared statement...........................................   175
Drevna, Charles T., President, American Fuel and Petrochemical 
  Manufacturers..................................................   199
    Prepared statement...........................................   201
    Response to an additional question from Senator Carper.......   216
    Responses to additional questions from:
        Senator Gillibrand.......................................   217
        Senator Vitter...........................................   219
        Senator Barrasso.........................................   223
Holzfaster, Jon, Owner and Operator, Holzfaster Farm.............   225
    Prepared statement...........................................   227
    Response to an additional question from Senator Vitter.......   236
Faber, Scott, Senior Vice President for Government Affairs, 
  Environmental Working Group....................................   237
    Prepared statement...........................................   239
    Responses to additional questions from Senator Cardin........   246
    Response to an additional question from Senator Vitter.......   250
    Responses to additional questions from Senator Barrasso......   251
    Response to an additional question from Senator Wicker.......   253
Coleman, Brooke, Executive Director, Advanced Ethanol Council....   254
    Prepared statement...........................................   256
    Responses to additional questions from:
        Senator Boxer............................................   273
        Senator Carper...........................................   280
        Senator Cardin...........................................   286
    Response to an additional question from Senator Gillibrand...   292
    Responses to additional questions from Senator Vitter........   294

                          ADDITIONAL MATERIAL
                                Letters

Open letter to Congress, Eliminate the Corn Ethanol Mandate, from 
  ActionAid USA et al............................................   384
Letter to Senators Barbara Boxer and David Vitter from ActionAid 
  USA et al......................................................   385
Letter to Wayne Allard, American Motorcyclist Association, from 
  the Air Resources Board........................................   387
Letter to Representatives Ralph Hall and Eddie Bernice Johnson 
  from the Alliance of Automobile Manufacturers et al............   389
Letters to Senator John Barrasso from:
    American Frozen Food Institute...............................   390
    American Highway Users Alliance..............................   392
    Americans for Prosperity.....................................   393
    National Boating Federation..................................   394
    National Marine Manufacturers Association....................   395
Letter to Senators John Barrasso, Mark Pryor, and Pat Toomey from 
  the National Taxpayers Union...................................   396
Letter to Adam Sieminski, U.S. Energy Information Administration, 
  from Senator David Vitter......................................   397

                             Press Releases

American Bakers Association, Bakers Continue Pressing for Changes 
  to the Corn-Based Ethanol Program..............................   400
American Fuel & Petrochemical Manufacturers, AFPM Endorses 
  Renewable Fuel Standard Repeal Act.............................   401
American Lamb Council et al., Sheep Industry Joins Sen. Barrasso 
  in Move To Repeal Renewable Fuels Standard.....................   403
American Petroleum Institute, API welcomes bipartisan Senate 
  proposal to end unworkable biofuels mandate....................   404
Growth Energy, Clark: Foreign Oil Threatens America's National 
  Security.......................................................   406
National Cattlemen's Beef Association, Livestock and Poultry 
  Groups Urge Congress to Repeal the Renewable Fuel Standard.....   408
National Cattlemen's Beef Association et al., Livestock and 
  Poultry Groups Urge Congress to Repeal the Renewable Fuel 
  Standard.......................................................   410
National Chicken Council, Livestock and Poultry Groups Urge 
  Congress to Repeal the Renewable Fuel Standard.................   411
National Council of Chain Restaurants, National Council of Chain 
  Restaurants Lauds Senate RFS Repeal Bill.......................   412
Wyoming Petroleum Marketers Association, Wyoming Petroleum 
  Marketers Support Barrasso Bill Repealing Renewable Fuel 
  Standard.......................................................   414

                                Articles

ActionAid USA, Biofuels, Food Security and Land Grabs............   416
Financial Times, The US must halt biofuel production to prevent a 
  food crisis....................................................   418
Food and Agriculture Organization of the United Nations, Biofuel 
  development should not compromise food security, says CFS......   420
Proceedings of the National Academy of Sciences, Recent land use 
  change in the Western Corn Belt threatens grasslands and 
  wetlands.......................................................   422
Rolling Stone, The Ethanol Scam..................................   430
USA Today, The Editorial Board, Ethanol quotas pump money from 
  your pocket: Our view..........................................   435
The Wall Street Journal, Review and Outlook, Big Ethanol Finally 
  Loses..........................................................   437
The Washington Post, Editorial Board, Ethanol takes policy blow 
  from the Environmental Protection Agency.......................   439

                               Statements

The Alliance of Automobile Manufacturers.........................   441
The Association of Equipment Manufacturers.......................   449
The Society of Independent Gasoline Marketers of America and the 
  National Association of Convenience Stores.....................   453

                                Reports

ActionAid International USA, Biofueling Hunger: How US Corn 
  Ethanol Policy Drives Up Food Prices in Mexico.................   462
Committee on World Food Security, 40th Session, Rome, Italy, 7-11 
  October 2013...................................................   477
National Renewable Energy Laboratory, High Ethanol Fuel 
  Endurance: A Study of the Effects of Running Gasoline with 15% 
  Ethanol Concentration in Current Production Outboard Four-
  Stroke Engines and Conventional Two-Stroke Outboard Marine 
  Engines........................................................   497

                             Miscellaneous

Approximate schedule for December 5 RFS hearing..................   552


             OVERSIGHT HEARING ON DOMESTIC RENEWABLE FUELS

                              ----------                              


                      WEDNESDAY, DECEMBER 11, 2013

                               U.S. Senate,
         Committee on Environment and Public Works,
              Subcommittee on Clean Air and Nuclear Safety,

         Committee on Environment and Public Works,
                                                    Washington, DC.
    The Committees met, pursuant to notice, at 9 a.m. in room 
406, Dirksen Senate Office Building, Hon. Barbara Boxer 
(chairman of the full Committee) presiding.
    Present: Senators Boxer, Vitter, Carper, Sessions, Cardin, 
Whitehouse, Udall, Merkley, Inhofe, Barrasso, Crapo, Wicker, 
Boozman, and Fischer.

           OPENING STATEMENT OF HON. BARBARA BOXER, 
           U.S. SENATOR FROM THE STATE OF CALIFORNIA

    Senator Boxer. The hearing of the EPW Oversight Hearing on 
Domestic Renewable Fuels will come to order. We changed the 
time, I really appreciate everybody's cooperation, out of 
respect for a memorial service for Nelson Mandela.
    We are going to end this hearing at 11 a.m. So, I am going 
to be tough with the gavel, ask everybody to do a 3-minute 
opening statement, and you can stick to your 5 but I will use a 
hard gavel. So, after members, wherever we are at 10:15 a.m., 
we will call up the second panel so that we will have adequate 
time to hear from them.
    This oversight hearing is going to focus on the critically 
important Renewable Fuels Standard Program and EPA's recent 
2014 renewable fuel volumes. Congress created the RFS to 
promote a strong domestic renewable energy industry, reduce our 
dependence on foreign oil and cut dangerous emissions of 
carbon.
    In 2005, Congress established the program and set goals for 
the use of renewable fuels and in 2007 we expanded these goals 
and called for the increased use of renewable fuels such as 
cellulosic ethanol and advanced biofuels which can turn waste 
into fuel. The RFS is designed to promote the use of renewable 
fuels as transportation or jet fuel and home heating oil.
    The requirement to increase the use is designed to provide 
a clear and consistent market demand for these fuels. Congress 
also designed the RFS to be managed in a flexible way. So, the 
EPA issues rules to set annual volumes. It is important to note 
that the RFS uses tradable credits, or RINs, for each gallon of 
renewable biofuel produced in or imported into the United 
States. So, petroleum companies can buy biofuel and obtain the 
RINs to demonstrate their compliance.
    So, it is a flexible program. And, according to the EPA, by 
2022 the RFS will displace over 13 billion gallons of gas and 
diesel, cut oil imports by more than $41 billion and reduce 
carbon pollution by 138 million metric tons.
    I think those are exactly the kinds of goals our country 
should be focused on, energy independence by expanding domestic 
production of renewable fuels and reducing dangerous pollution. 
And President Obama has recognized the importance of the RFS 
and he said ``Biofuels have an important role to play in 
increasing our energy security, fostering rural economic 
development and reducing greenhouse gas emissions from the 
transportation sector.''
    I certainly agree with that statement. Advanced and 
cellulosic biofuels play a very important role in the RFS. And 
I personally believe that the Federal Government should promote 
their use.
    This industry got started during the most severe economic 
downturn in our Nation's history and now, with sustained 
commitment to support renewable fuels, EPA projects that five 
companies in the U.S. will produce commercial scale cellulosic 
ethanol by 2014. And we know that several other companies are 
working to construct commercial scale cellulosic ethanol plants 
in 2015 and beyond.
    So, I am looking forward to this oversight hearing, to 
hearing from you on how this, how the new volumes effect you, 
whether you think it was a fair role for the EPA to play. And I 
think we have a lot to learn about this. But to me, the 
fundamental point is we need to be energy independent. We need 
to clean up the air, get dangerous carbon pollution out of the 
air. Those things say to me, we are on the right track.
    With that, I will call on Senator Vitter.

            OPENING STATEMENT OF HON. DAVID VITTER, 
            U.S. SENATOR FROM THE STATE OF LOUISIANA

    Senator Vitter. Thank you, Chairman Boxer, for convening 
today's hearing. And I also want to thank our witnesses for 
being here as well. Unfortunately not invited were many 
significant stakeholders like poultry producers, food products 
manufacturers, boat owners, motorcycle enthusiasts, small 
engine manufacturers, biodiesel producers, gas station owners, 
conservation groups. But many of these groups have sent letters 
and so I would ask unanimous consent that they be included in 
the record.
    Senator Boxer. Absolutely.
    [The referenced information follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
      
        
    Senator Vitter. OK. Further highlighting my point is the 
absence of the Energy Information Administration. We asked that 
the EIA be invited to testify but, unfortunately, that request 
was denied. So, in an effort to conduct meaningful oversight, 
we sent a letter to EIA this morning asking for their input and 
certainly will receive that and make that part of the overall 
record.
    Senator Boxer. Yes.
    [The referenced information was not received at time of 
print.]
    Senator Vitter. The folks who wrote the RFS had laudable 
goals in mind at the time. But I believe it is really time to 
admit that the RFS is fundamentally flawed and limps along year 
after year, mostly benefiting a small sector of our economy 
committed to Government mandates while also causing real damage 
and dislocation to others, including the American consumer.
    A few facts. The USDA has said that the mandate played a 
part in driving up U.S. food prices 3 to 4 percent last year. 
The World Bank says that corn-based ethanol in the U.S. is 
driving up grain prices by up to 8 percent worldwide. The 
program consumes about 40 percent of the corn we grow so, 
clearly, that drives higher food prices. Even the EU figured 
this out. In September, they limited the amount of fuel that 
can be developed from food-based crops to 6 percent.
    Automakers have announced that fueling your car with higher 
than 10 percent ethanol blends will void warranties. The 
American Automobile Association warns consumers not to fill up 
their cars with E15. So, this program is really dangerous for 
folks who drive as well. Just a quick picture says that better 
than I can. It is now a real marketing push to advertise 
gasoline with no ethanol.
    Certainly the program was intended to enhance energy 
security. Certainly we all agree with that goal. But it 
actually turns out that its structure sometimes means that, for 
instance, domestic corn ethanol made here in the U.S. is 
actually traded for imported Brazilian sugarcane ethanol.
    Each year since enactment the lack of production of 
advanced biofuels in meaningful volumes has forced EPA to 
reduce the cellulosic volume requirement. Still, EPA, I think, 
exaggerates production, leaving refiners to either purchase 
more of a product that does not exist or pay a fine. And that 
is bad for consumers.
    Earlier this year, Congress, including myself, asked EPA to 
use their flexibility under the statute to waive the required 
amounts of biofuels to be blended into our gasoline. They have 
taken some action, but I am very concerned that is a temporary 
Band-Aid and we really need some more wholesale look at this 
law.
    So, I look forward to doing that, to that more holistic 
approach.
    [The prepared statement of Senator Vitter follows:]

                    Statement of Hon. David Vitter, 
                U.S. Senator from the State of Louisiana

    Thank you, Chairman Boxer and Chairman Carper for convening 
today's hearing. I would also like to thank our witnesses for 
being here as well. With this limited opportunity for review of 
the program I'd like to commend you for being selected to 
testify.
    Not present today are other stakeholders, like poultry 
producers, food products manufacturers, boat owners, motorcycle 
enthusiasts, small engine manufacturers, biodiesel producers, 
gas station owners, conservation groups, and even bakers. Many 
of these groups have sent letters that I ask be included in the 
record.
    Further highlighting my point is the absence of the Energy 
Information Administration (EIA). We asked that the EIA be 
invited to testify and our request was denied. In an effort to 
conduct meaningful oversight we sent a letter to EIA this 
morning asking for their input.
    The people who wrote the RFS had laudable goals in mind at 
the time, but it's time to admit that the RFS is a 
fundamentally flawed program that limps along year after year 
benefiting a small sector of our economy committed to 
government mandates, while simultaneously wreaking havoc on 
those required to participate--particularly the American 
consumer.
    The USDA has said that the mandate played a part in driving 
up U.S. food prices 3 to 4 percent last year. The World Bank 
says that corn-based ethanol in the United States is driving up 
grain prices by as much as 8 percent worldwide.
    So this program, which consumes approximately 40 percent of 
the corn we grow, leads directly to higher food prices. Even 
the EU figured this out--in September they limited the amount 
of fuel that can be developed from food-based crops to 6 
percent.
    Automakers have announced that fueling your car with higher 
than 10 percent ethanol blends will void warranties. The 
American Automobile Association warns consumers not to fill up 
their cars with E15. So this program is a bad deal for people 
who drive in the United States as well.
    While the program was intended to enhance our domestic 
energy security, it turns out its structure sometimes means 
that domestic corn ethanol made here in the U.S. is traded for 
imported Brazilian sugarcane ethanol.
    Each year since enactment, the lack of production of 
advanced biofuels in any meaningful volumes has forced EPA to 
reduce the cellulosic volume requirements. Still EPA 
exaggerates production, leaving refiners to either purchase 
more of a product that doesn't exist or pay a fine: That 
doesn't make sense.
    Earlier this year, some in Congress, including myself, 
asked EPA to use their considerable flexibility under the 
statute to waive the required amounts of biofuels to be blended 
into our gasoline and diesel, thus avoiding the ethanol blend 
wall. Predictions made in 2007 of increasing fuel demand turned 
out to be just the opposite: demand is actually decreasing.
    With the proposed 2014 Renewable Volume Obligations, EPA 
admitted the program is irretrievably broken, recognized the 
blend wall, and illustrated the RFS needs to be legislatively 
restructured from top to bottom.
    In an honest attempt to help the drivers, low-income 
families, and consumers who suffer when corn prices are high, 
some propose changing the law to strike the requirement to 
blend corn-based ethanol into the gasoline supply.
    That is commendable, but it is a half-answer. The RFS 
includes four different mandates. Eliminating, limiting, or 
reducing only one will solve one problem, while potentially 
exacerbating or creating a host of others.
    Taking a holistic approach at reviewing and restructuring 
the program is a bipartisan, multi-region approach Senator 
Cardin and I have discussed and continue to develop, fully 
expecting to craft a long-term policy solution to this outdated 
and increasingly burdensome mandate. We are building support 
along the way in discussions with Democrats and Republicans. We 
expect to accomplish this task very soon--early in the new 
year.
    So the RFS program is a disaster for everyone affected by 
the program, including those trying to put food on the table. 
We need to address all components of the program. Failing to 
thoroughly reform the RFS could further lead to the unintended 
consequences that so often accompany a program mandated by 
politicians, implemented by bureaucrats, and foisted on 
consumers.
    Again, I would like to thank Chairman Boxer for this 
hearing, and I look forward to hearing from all of our 
witnesses.

    Senator Boxer. Senators, we are going to put your full 
statements in the record. We are speaking each 3 minutes. We 
must end this at 11 a.m. So I am going to, after we speak and 
the first panel, at 10:15 we will move to the second panel.
    I wanted to just say, to clear the record up, that three of 
the next six panelists were, in fact, supported by the 
Republicans, the minority, which is what we always do. So, your 
witnesses will be heard. We cannot hear from 25 witnesses, but 
you did choose three witnesses.
    We are going to go to Senator Cardin.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 
            U.S. SENATOR FROM THE STATE OF MARYLAND

    Senator Cardin. Thank you, Madam Chair.
    I am a strong supporter of the Renewable Fuel Standards. It 
is important for energy security, for our environmental 
concerns. I am a strong supporter of the Clean Air Act and it 
is important for our economy.
    But I have serious concerns about our current program. I 
know that Senator Vitter has already put into the record some 
of the statements from other interests. The National Chicken 
Counsel and the American Bakery Association have concerns 
because of corn-based ethanol and its disruption to the cost of 
corn.
    As Senator Vitter pointed out, 40 percent of the domestic 
production of corn goes to fuel, and the poultry industry is 
very dependent upon the corn stock for the cost of the 
production of poultry in this country. Seventy percent is based 
in corn. The ethanol guaranteed market is there, but there is 
no guaranteed market for poultry. Poultry has to compete with 
other foods such as meat and pork, as well as on a global 
basis.
    I also will bring out concerns that we have under the 
current policy with the National Marine Manufacturing 
Association. I would like to introduce a copy of their 
statement as it relates to E15 and safety issues.
    There is a better way to structure the RFS program. It 
needs to be better balanced, for energy security, food security 
and motor safety. There are more efficient renewable energy 
sources in the advanced biofuels and that is where we should be 
focusing our attention.
    I join with Senator Vitter in concern in the way the EPA 
exercised its waiver authority on the blend wall issue. It also 
included the advanced biofuels in reducing volume which I 
thought made no sense whatsoever since the blend wall problem 
is concerning corn ethanol.
    I have been trying and working for change under the current 
law. At the 112th Congress, I introduced legislation that would 
make the volume cap sensitive to the market conditions of corn. 
This year, I am working with Senator Vitter to look for a 
practical way that we can preserve the Renewable Fuel Standard 
Program, more aggressive reductions on the volume mandates for 
corn-based ethanol, continued incentives for advanced biofuels 
in addressing the motor safety issues.
    Madam Chairman, our goal is to mitigate the concerns of 
fuel safety for all consumers and restore market fairness for 
traditional corn users and assure steady growth and opportunity 
for truly advanced biofuels from feedstock that do not 
compromise our food security.
    [The referenced statement follows:]
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
            
    Senator Boxer. Thank you, Senator.
    Senator Barrasso.

           OPENING STATEMENT OF HON. JOHN BARRASSO, 
             U.S. SENATOR FROM THE STATE OF WYOMING

    Senator Barrasso. Thank you, Madam Chairman.
    In my view, this hearing is long overdue. The Renewable 
Fuels Standard, the RFS, is among the most shortsighted energy 
policies that Congress has ever enacted. The RFS has left a 
wake of economic and environmental harm that must be put to an 
end. It has increased food prices for American families, it has 
increased fuel prices for American motorists, it has 
contributed to a dirtier environment and now the RFS threatens 
to cause widespread damage to engines, to fuel systems and our 
transportation fuel infrastructure.
    In June, I, along with Senators Pryor and Toomey, 
introduced S. 1195, the Renewable Fuel Standard Repeal Act. 
This is a bipartisan bill and it would repeal the RFS in its 
entirety. To date, 17 Senators have co-sponsored the bill, 
including Senators Boozman, Crapo and Inhofe, who are members 
of this Committee.
    I am pleased that a diverse coalition of stakeholders 
supports this bill including the National Cattlemen's Beef 
Association, the National Chicken Council, the National Turkey 
Federation, the American Sheep Industry Association. I would 
also note that the editorial boards of USA Today, the 
Washington Post and the Wall Street Journal have all called for 
the repeal of this mandate.
    The debate over the RFS is not a debate between the oil 
industry and environmentalists. It is a debate between those 
who recognize that the RFS is fundamentally broken and those 
who do not. Environmental organizations such as the 
Environmental Working Group, which is represented here today, 
recognize that the RFS is broken. Global hunger organizations 
such as OXFAM and Action Aid also recognize the RFS is broken.
    Even the EPA recognizes the status quo cannot continue. 
Last month, the EPA took a small but historic step. The EPA 
proposed reducing the total volume of biofuels that suppliers 
must make available under the RFS. The EPA has proposed this 
reduction to address issues surrounding the so-called blend 
wall. The blend wall is the amount of ethanol that can be 
safely added to the Nation's fuel supply. I applaud the EPA for 
taking this step and encourage the agency to make further 
reductions in its final rule.
    But make no mistake. The EPA cannot fix the Renewable Fuel 
Standards. Congress must weigh in and repeal this broken 
program once and for all. We must repeal the mandate that 
diverts corn away from kitchen tables and into gas tanks. This 
mandate has not only increased food costs for American families 
but has increased food costs for the world's poor. This is why 
the Director General of the United Nations Food and 
Agricultural Organization called on EPA to suspend the RFS last 
year.
    In addition, we must repeal the mandate for biofuels that 
are not commercially available. For years, we have heard that 
the RFS would result in large scale production of advanced 
biofuels, but this has not happened.
    And I am sorry that we are limited because I wanted to 
quote Democratic Senator Chuck Schumer on his concerns about 
this as well.
    So, with that I would like to put into the record my full 
statement, including the comments by Senator Schumer.
    [The prepared statement of Senator Barrasso follows:]

                   Statement of Hon. John Barrasso, 
                 U.S. Senator from the State of Wyoming

    Thank you, Madam Chairman. And thank you for holding this 
important hearing.
    In my view, it's long overdue.
    The Renewable Fuel Standard or the RFS is among the most 
short-sighted energy policies that Congress has ever enacted.
    The RFS has left a wake of economic and environmental harm 
that must be put to an end.
    The RFS has increased food prices for American families.
    The RFS has increased fuel prices for American motorists.
    The RFS has contributed to a dirtier environment.
    And--now--the RFS threatens to cause widespread damage to 
engines, fuel systems, and our transportation fuel 
infrastructure.
    In June, I--along with Senators Pryor and Toomey--
introduced S. 1195, the Renewable Fuel Standard Repeal Act. 
This bipartisan bill would repeal the RFS in its entirety. To 
date, 18 Senators have cosponsored the bill, including Senators 
Boozman, Crapo, and Inhofe--members of this Committee.
    I'm also pleased that a diverse coalition of stakeholders 
supports this bill, including the National Cattlemen's Beef 
Association, the National Chicken Council, the National Turkey 
Federation, and the American Sheep Industry Association. I 
would also note that the editorial boards of USA Today, the 
Washington Post, and the Wall Street Journal have all called 
for the repeal of this mandate.
    The debate over the RFS is not a debate between the oil 
industry and environmentalists. It's a debate between those who 
recognize the RFS is fundamentally broken and those who don't. 
Environmental organizations, such as the Environmental Working 
Group--which is represented here today--recognize the RFS is 
broken. Global hunger organizations, such as Oxfam and Action 
Aid, also recognize the RFS is broken.
    Even EPA recognizes the status quo cannot continue. Last 
month, EPA took a small, but historic step. EPA proposed 
reducing the total volume of biofuels that suppliers must make 
available under the RFS. EPA has proposed this reduction to 
address issues surrounding the ``blend wall.'' The ``blend 
wall'' is the amount of ethanol that can be safely added to the 
Nation's fuel supply. I applaud EPA for taking this step, and I 
encourage the agency to make further reductions in its final 
rule.
    But make no mistake, EPA cannot fix the RFS. Congress must 
weigh in--and repeal this broken program once and for all. We 
must repeal the mandate that diverts corn away from kitchen 
tables and into gas tanks.
    This mandate has not only increased food costs for American 
families, but has increased food costs for the world's poor. 
This is why the Director-General of the U.N. Food and 
Agricultural Organization called on EPA to suspend the RFS last 
year.
    In addition, we must repeal the mandate for biofuels that 
are not commercially available. For years, we have heard that 
the RFS would result in large scale production of ``advanced 
biofuels''--such as cellulosic ethanol. But this has not 
happened. It's absurd to fine businesses for failing to 
purchase a product that doesn't exist. Likewise, we should not 
require businesses to petition EPA--or the courts--for relief 
from this mandate year after year. We need sound energy 
policies--not artificial markets for fantasy fuels.
    Madam Chairman, the gig is up. The RFS may have seemed like 
a good idea in 2005 or 2007. But it is nothing short of a 
colossal failure.
    The senior Senator from New York predicted this would 
happen years ago. He stated that the RFS would ``haunt every 
one of us,'' and ``turn[ ] out to be a big disaster.''
    He compared the RFS to ``a catastrophic illness . . . that 
should really have a skull and cross bones label on it.''
    He explained, ``[t]here is no sound public policy reason 
for mandating the use of ethanol.'' And that ``[o]ur citizens' 
health and environment are being held hostage to the desire of 
the ethanol lobby.''
    Madam Chairman, these aren't my words. These are the words 
of the senior Senator from New York.
    Madam Chairman, it's time for this Committee to become 
relevant in this debate. It's time for this Committee to take 
up legislation to repeal the RFS. It's the right thing to do 
for American families, American motorists, and the environment.
    I thank the witnesses for taking the time to be here today. 
I look forward to your remarks.

    Senator Boxer. I think Senator Schumer will make his own 
voice heard very well on this matter.
    Senator Barrasso. Well, I welcome that opportunity.
    [The referenced information follows:]
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]   
    
        
    Senator Boxer. With you. With you. OK.
    We are going to turn to Senator Merkley now.
    Senator Merkley. Madam Chair, I am happy to get right to 
our testimony.
    Thank you.
    Senator Boxer. Thank you very much.
    We will turn to Senator Fischer.

            OPENING STATEMENT OF HON. DEB FISCHER, 
            U.S. SENATOR FROM THE STATE OF NEBRASKA

    Senator Fischer. Thank you, Madam Chairman.
    I was pleasantly surprised to find out that a Nebraska 
farmer, Jon Holzfaster, would be among today's witnesses. I 
appreciate Jon's willingness to come to Washington to share his 
views and would like to offer him a warm welcome.
    Nebraskans certainly understand the importance of the 
Renewable Fuel Standard. Our State has answered the call to 
invest in domestic renewable fuel production. Nebraska has 24 
active ethanol plants and an annual production of 2.3 billion 
gallons. These plants represent more than $5 billion in capital 
investment in the State and provide direct employment for 
approximately 1,200 Nebraskans.
    On a national scale, the RFS is working to enhance domestic 
energy supplies and reduce our dependence on foreign oil. 
Adding more than 13 billion gallons of domestic ethanol to the 
U.S. fuel supply in 2012 displaced the need for 465 million 
barrels of foreign oil at a savings of $47.2 billion to the 
U.S. economy. This is roughly the equivalent of 12 percent of 
total U.S. crude oil imports. The RFS also helps to support 
more than 380,000 American jobs and lower fuel prices for 
consumers.
    During the short time that the RFS has been in place, we 
have only become more efficient both at production of the 
biofuels themselves but also of the feedstocks for these fuels. 
Coming from the Cornhusker State, I am especially proud of our 
farmers' ability to continually produce more while using less 
land, less water and less fertilizer. Through careful 
stewardship of our natural resources and the adoption of 
innovative technologies, our farmers are able to produce an 
abundant supply of food, feed and fuel in an environmentally 
sustainable manner.
    At such a time of this innovation and growth potential for 
the biofuels industry, it is concerning that EPA is now 
proposing a significant rollback in the RFS. EPA's proposal 
essentially waives RFS requirements beyond a 10 percent blend 
of ethanol, eliminating the incentives to invest in the 
infrastructure necessary to bring higher blends to the 
marketplace and meet the goal of future biofuels growth.
    With that, I would like to have the rest of my comments put 
in the record, Madam Chair.
    Thank you.
    [The prepared statement of Senator Fischer follows:]

                    Statement of Hon. Deb Fischer, 
                U.S. Senator from the State of Nebraska

    Chairman Boxer and Ranking Member Vitter, thank you for 
holding today's oversight hearing on domestic renewable fuels. 
I am pleased that the Committee is taking time to review our 
Nation's biofuels policy and to scrutinize recent 
administrative action with respect to the Renewable Fuel 
Standard.
    I am glad that we will be hearing from witnesses who can 
share the perspective of many across our Nation who have made 
significant investments with the RFS in mind. I was pleasantly 
surprised to find out that a Nebraska farmer, Jon Holzfaster, 
would be among today's witnesses. I appreciate Jon's 
willingness to come to Washington to share his views and would 
like to offer him a warm welcome.
    Nebraskans certainly understand the importance of the 
Renewable Fuel Standard. Our State has answered the call to 
invest in domestic renewable fuel production. Nebraska has 24 
active ethanol plants and an annual production capacity of 2.3 
billion gallons. These plants represent more than $5 billion in 
capital investment in the State and provide direct employment 
for approximately 1,200 Nebraskans.
    On a national scale, the RFS is working to enhance domestic 
energy supplies and reduce our dependence on foreign oil. 
Adding more than 13 billion gallons of domestic ethanol to the 
U.S. fuel supply in 2012 displaced the need for 465 million 
barrels of foreign oil, at a savings of $47.2 billion to the 
U.S. economy. This is roughly the equivalent of 12 percent of 
total U.S. crude oil imports. The RFS also helps to support 
more than 380,000 American jobs and lower fuel prices for 
consumers.
    During the short time that the RFS has been in place, we 
have only become more efficient--both at production of the 
biofuels themselves, but also of the feedstocks for these 
fuels. Coming from the Cornhusker State, I am especially proud 
of our farmers' ability to continually produce more while using 
less land, less water, and less fertilizer. Through careful 
stewardship of our natural resources and the adoption of 
innovative technologies, our farmers are able to produce an 
abundant supply of food, feed, and fuel in an environmentally 
sustainable manner.
    At a time of such innovation and growth potential for the 
biofuels industry, it is concerning that EPA is now proposing a 
significant rollback in the RFS. EPA's proposal essentially 
waives RFS requirements beyond a 10 percent blend of ethanol, 
eliminating the incentives to invest in the infrastructure 
necessary to bring higher blends to the marketplace and meet 
the goal of future biofuels growth.
    Lowering renewable fuel targets will jeopardize years of 
progress in the biofuels industry. I appreciate that EPA took 
the time to hear from so many stakeholders at its listening 
session on the RFS last week. I am hopeful that EPA will give 
careful consideration to the comments it receives and the 
economic impacts of its proposal.
    There is much at stake for America's energy future. 
Ensuring the successful operation of the Renewable Fuel 
Standard is an important part of realizing greater domestic 
energy security. I look forward to today's discussion. Thank 
you.

    Senator Boxer. Without objection. Thank you.
    Senator Inhofe.

          OPENING STATEMENT OF HON. JAMES M. INHOFE, 
            U.S. SENATOR FROM THE STATE OF OKLAHOMA

    Senator Inhofe. Yes, I agree with the comments that this is 
overdue. We had a hearing on this 2008. The one before that was 
2006 and that was when I chaired this Committee. And it is 
overdue.
    We can all remember the RFS was expanding back in 2007 and 
one of the main arguments was to improve our national security. 
I know that General Wes Clark is going to be on the next panel, 
and he has been on the dime at the ethanol industry now for 
several years. He has repeatedly accused the U.S. Government of 
fighting wars simply for foreign sources of oil, and in one of 
his interviews he quipped, put quite simply, that is what 
people fight wars about.
    Last Saturday was December 7th, and every year we remember 
the attack on Pearl Harbor. And for good reason. That is what 
drew us into World War II. Americans fight wars to protect 
their fellow Americans from evil harms. Period. That would mean 
that energy security and national security are disconnected. 
But if want to have a conversation about that, we should look 
no further than the domestic oil and gas industry.
    Since 2008, the energy market has been turned upside down. 
The combination of precision drilling and hydraulic fracturing 
has opened up the Shale Revolution that no one saw coming. In 
2007, oil production was down and we were in the middle of 
building massive terminals to import liquefied natural gas. 
Since then, oil production is up over 50 percent and we have so 
much natural gas that we are converting the import terminals 
into export terminals.
    And the news just keeps getting brighter. In October, the 
EIA published a report stating that the U.S. will overtake 
Russia this year as the largest oil and natural gas producer in 
the world. In November, the EIA reported that by 2035, we will 
be able to meet all of our energy requirements from domestic 
sources. I would say that it would be even sooner than that, 
quite a few years sooner than that, if we would start 
developing our resources on national land. General Clark should 
know quite a bit about this because he also is the Director of 
BNK Petroleum which is an oil and gas operation all over the 
world, including my State of Oklahoma.
    Last month, the EPA announced the 2014 volume requirements 
for the RFS mandate and for the first time ever the agency 
lowered the mandate levels across the board and, in doing so, 
the EPA has admitted the mandate is completely broken. I think 
we talked about that. No one believes that it is running right. 
I have been highlighting the mandate's problem for a long time, 
and it is clear that the chorus of agreement is growing louder 
every day.
    Oklahomans of all stripes understand that the RFS is a bad 
deal and our drivers are particularly aware. Before I run out 
of time, put that chart up. All throughout Oklahoma, this is 
the marketing. If you can sell no ethanol and it is clear gas, 
they buy it.
    So, I have got a lot more to say here in this statement but 
let us roll with letting the market determine what we are 
doing. That is what I would hope this would come to.
    Senator Boxer. Well, we will put this in the record. And I 
hope people can refrain from attacking people.
    Senator Inhofe. I am not attacking anyone.
    Senator Boxer. If I might conclude? I would like people to 
refrain from personal attacks on people who believe that what 
they are doing is good for their country. There is just a 
disagreement. I do not think we need to attack each other. So, 
that is just an opinion.
    Senator Inhofe. And I agree.
    [The referenced statement was not received at time of 
print.]
    Senator Boxer. Thank you very much.
    And also for the record, let the record show that we had a 
hearing on this particular subject on April 13, 2011, where 
Secretary Vilsack was our main person who was the witness at 
that particular time.
    And we will move forward now to Senator Crapo.
    Senator Crapo. Thank you, Madam Chairman. I will help to 
move this along and waive my opening statement.
    Senator Boxer. Thank you, Senator.
    Senator Wicker.

            OPENING STATEMENT OF HON. ROGER WICKER, 
           U.S. SENATOR FROM THE STATE OF MISSISSIPPI

    Senator Wicker. I believe Senator Crapo just yielded his 3 
minutes to me, and I certainly appreciate that.
    [Laughter.]
    Senator Wicker. Thank you, Madam Chair, and Ranking Member 
Vitter. I look forward to the witnesses' testimony on some of 
the significant problems many industries face because of the 
Renewable Fuel Standards. The sheer number of the parties 
concerned about the impacts of this legislation is a testament 
to the fact that this Committee and Congress should act to 
correct some of the consequences of renewable mandates.
    It says a lot that EPA recently was forced to lower the 
overall renewable volumes for 2014. Clearly the assumptions 
made in 2007 regarding gas consumption have proven inaccurate. 
The mandates based on those assumptions are not feasible and 
should be modified.
    Allowing EPA flexibility to adjust RFS each year leads to 
one of the greatest problems with Government interference in 
the marketplace, uncertainty in the very industries that 
actually produce our country's advanced technologies and 
products. These industries must be able to continue to move our 
country forward and create jobs needed to strengthen our 
economy.
    I agree with Senator Cardin about the effect fluctuating 
corn prices have had in recent years. High demand for corn 
ethanol caused by the RFS has led to higher costs for livestock 
and poultry producers, an unintended and adverse consequence of 
this program. This directly causes American families to face 
higher bills at the grocery store and in restaurants. America's 
energy policy should promote efficiency and value. It should 
not hurt consumers or cause them to bear unnecessary costs. It 
is clear that the RFS falls short of this fundamental principle 
of U.S. lawmaking.
    In addition, regulatory action by the Administration 
disregards the facts and is shortsighted. In an ill-advised 
stop-gap rule, EPA has on several occasions waived the 10 
percent limit of ethanol that can be blended into gasoline. 
Studies conclude that gasoline with 15 percent ethanol, or E15, 
can cause premature engine damage and reduce fuel efficiency. 
These detrimental effects can force drivers to endure added 
maintenance costs and refuel more frequently.
    Last year, AAA raised these concerns when urging the Obama 
administration and gasoline retailers to stop the sale of E15. 
In addition, a number of auto manufacturers have already said 
that E15 does not meet their fuel requirements and that 
warranty coverage would not apply to vehicle damage resulting 
from gasoline with the higher blend of ethanol.
    In February, I introduced legislation to prohibit EPA from 
allowing gasoline blends with E15 to be used in passenger cars 
and trucks. And finally, Madam Chair, I believe my legislation 
should be included in the necessary reforms of RFS. This 
legislation would protect consumers and not allow the 
Administration to make fictional fixes to ethanol mandates that 
are clearly not good for the public nor solve the actual 
problem.
    Thank you.
    Senator Boxer. Thank you, Senator. We are going to--Senator 
Whitehouse has graciously said Senator Carper could go first 
because he is chairing a very important proceeding. Please 
proceed.

          OPENING STATEMENT OF HON. THOMAS R. CARPER, 
            U.S. SENATOR FROM THE STATE OF DELAWARE

    Senator Carper. Thank you so much. Sheldon, thank you, and 
to our witnesses. Thank you, Madam Chair, for giving me a 
chance to say a few words. We are having a business meeting of 
the Homeland Security and Government Affairs Committee to vote 
the nomination of the President's nominee to be Deputy 
Secretary of Homeland Security. And it starts in about 6 or 7 
minutes. So, thank you very much.
    First of all to our witnesses, thank you for joining us. 
Panel No. 1, panel No. 2, especially Jim Collins who is out 
there somewhere, I think, one of my constituents from Delaware 
who does great work on BAF at DuPont Company and really for all 
of us. So, thank you, Jim.
    In 2007, our Nation's energy future was not as bright as it 
is today. Consumption of gasoline and diesel was expected to 
grow exponentially, and feeding this growth was oil from other 
nations many of which, frankly, did not like us a whole lot and 
still do not. That is why in 2007 Congress took a number of 
steps, along with the Bush administration, to try to change our 
energy future.
    For example, Congress increased the Fuel Efficiency 
Standard for cars, trucks and vans for the first time in 32 
years. As someone who worked very closely with Senators like 
Ted Stevens, Dianne Feinstein, Dick Durbin and others to help 
us find an agreement, I am very proud of this achievement. I 
know that our efforts laid the groundwork for future efficiency 
increases by the current Administration.
    In 2007, Congress also mandated a Clean Air Act by more 
than doubling the domestic biofuel mandate to 36 billion 
gallons by 2022. We included new incentives for advanced fuels 
that were better for the environment and that were not derived 
from the food we eat or from the food that our chicken and our 
cattle eat, too.
    Since 2007, we have seen a change in the energy trend lines 
and our energy future looks a whole lot better than it has in 
decades. Today, for the first time in two decades, we are 
producing more oil than we are importing. I did not think I 
would be serving in the Senate when we could say that, but I am 
pleased to say that we are. That is because production at home 
has increased, consumption has gone down and biofuel use has 
increased replacing oil-based fuels.
    And finally today we are seeing the first commercial-scale 
advanced biofuel facilities that are being built providing an 
alternative to traditional corn ethanol.
    To keep us on the path toward a brighter, greener energy 
future, I believe it is important for this country to continue 
to invest in biofuels, especially in advanced biofuels. I 
believe the Renewable Fuel Standard is a crucial policy tool to 
keep these investment flowing.
    Biofuels done right are crucial to our energy security but 
we cannot ignore the unintended consequences of increasing our 
biofuel mandates. Supporting investments in the next generation 
of renewable fuels while still protecting our environment and 
economy is no small feat. But it can be achieved. I look 
forward to today's discussion once I return to see how we can 
strike that balance.
    On that note, I want to thank again our witnesses and thank 
you, Madam Chair, for giving me this opportunity. And I will be 
back a little bit later.
    [The prepared statement of Senator Carper follows:]

                  Statement of Hon. Thomas R. Carper, 
                U.S. Senator from the State of Delaware

    In 2007, our Nation's energy future did not look good. 
Consumption of gasoline and diesel was expected to grow 
exponentially, and feeding this growth was oil from other 
nations--many of which didn't like us very much.
    That's why in 2007, Congress took several steps to try to 
change our energy future. For example, Congress increased the 
fuel efficiency standards for cars, trucks and vans for the 
first time in 32 years. As someone who worked very hard with 
Senators Feinstein and Stevens to help us find an agreement, I 
am very proud of this achievement. I know our efforts laid the 
groundwork for future efficiency increases by the 
Administration.
    In 2007, Congress also amended the Clean Air Act by more 
than doubling the domestic biofuel mandate to 36 billion 
gallons by 2022. We included new incentives for advanced fuels 
that were better for the environment and were not derived from 
the food we eat or the food our chickens and cattle eat. Since 
2007, we have seen a change in the energy trend lines--and our 
energy future looks better than it has in decades.
    Today, for the first time in two decades we are producing 
more oil than we are importing. That's because production at 
home has increased, consumption has gone down and biofuel use 
has increased--replacing oil-based fuels. And finally today, we 
are seeing the first commercial scale advanced biofuel 
facilities being built--providing an alternative to traditional 
corn ethanol.
    To keep us on the path toward a brighter, greener energy 
future, I believe it is important for this country to continue 
to invest in biofuels--especially in advanced biofuels. I 
believe the Renewable Fuel Standard is a crucial policy tool to 
keep these investments flowing. Biofuels done right are crucial 
to our energy security, but we cannot ignore the unintended 
consequences of increasing our biofuel mandates.
    Supporting investments in the next generation of renewable 
fuels, while still protecting our environment and economy is no 
small feat, but it can be achieved. I look forward to today's 
discussion to see how we can strike that balance.
    And on that note, I look forward to having an open and 
thoughtful dialog with our witnesses and colleagues today.

    Senator Boxer. Senator, thank you so much.
    And finally, Senator Whitehouse.

         OPENING STATEMENT OF HON. SHELDON WHITEHOUSE, 
          U.S. SENATOR FROM THE STATE OF RHODE ISLAND

    Senator Whitehouse. Thank you, Madam Chair.
    Rhode Island has some exciting companies that operate in 
this space. We have Newport Biodiesel, which takes basically 
restaurant waste and turns it into useable fuel. We have 
BioProcess Algae which is running a plant right now in 
Shenandoah, Iowa and it grows algae off of the carbon waste of 
an ethanol plant and it can turn either into more fuel for 
ethanol manufacture or, if the algae is right, you can grow 
lipid rich algae that can actually be pressed out for oil that 
can be turned into fuel. So, there is great opportunity here in 
very exciting technologies, and I look forward to the hearing.
    I am glad that we stuck with the E10. I join with Senator 
Roger Wicker in supporting that. Rhode Island has a marine 
economy and the marine engines simply do not operate well at 
higher levels of ethanol, and when you are out in the ocean 
that is no time to be messing around with your engine. So, I 
thank the EPA on their responsiveness on that.
    I do think we need to reconsider the value of ethanol, 
particularly ethanol produced in coal-fired facilities as a 
carbon value as opposed to adding to our carbon hazard. And I 
am looking forward to discussing the diesel standards which 
seem improbably low and I look forward to an explanation as to 
how EPA got there.
    So, thank you for holding the hearing. This is an area 
where I think technology is going to open up vast new markets 
and opportunities and we need to make sure we are setting the 
rules in a way that supports those emerging technologies.
    Thanks.
    Senator Boxer. Thank you very much, Senator.
    Senator Sessions, we are glad you joined us.

           OPENING STATEMENT OF HON. JEFF SESSIONS, 
             U.S. SENATOR FROM THE STATE OF ALABAMA

    Senator Sessions. Good morning.
    I believe that we do need to evaluate where we are with 
ethanol. I have supported that in the past and was very 
confident about cellulosic research and development 
possibilities. Things like algae and other products of that 
kind I thought were going to be coming on line sooner than they 
have. In fact, we had some prospects in Alabama I was very 
excited about, talked to President Bush about. But they were 
not accurate, they did not produce and it is not workable.
    Those numbers, actually, from that process were utilized by 
energy, I guess, or EPA energy, to estimate what we could 
receive from cellulosic ethanol. Cellulosic has an advantage 
because it does not utilize the kind of crop land that corn-
based ethanol does. AP has had a very thorough article within 
the last few weeks in which it raises fundamental questions 
about the environmental benefits of corn-based ethanol.
    You just have to look at that. You break up land. I know 
where I grew up in Alabama land that was in timber is now being 
returned to farmland because of prices and, I assume, 
ultimately driven by some of the ethanol requirements.
    So, I think it is time for us to review these regulations. 
I support backing off the higher numbers and I wonder really 
whether we can sustain the mandates that we have and maybe we 
should look to phase those out and the subsidies in the time to 
come. That might be the best thing environmentally, it might be 
the best thing economically.
    Madam Chairman, this is an important issue. Thank you for 
having the hearing and I look forward to really learning more 
because I do not pretend to know all the answers.
    Senator Boxer. Senator, thank you. That is a unique comment 
for a Senator to make.
    [Laugher.]
    Senator Boxer. It is very refreshing, to tell you the 
truth.
    We are going to now get started. We are going to end this 
panel at 10:15 a.m., so we will go as far as we can go with the 
questions. I hope colleagues will understand. If you do not get 
your question answered, you will go first in asking a question 
to the next panel because we will have to stop at 11 a.m.
    So, we are going to get started with our panel No. 1, Mr. 
Chris Grundler, Director, Office of Transportation and Air 
Quality, United States EPA, and Mr. Steven Chalk, Deputy 
Assistant Secretary for Renewable Power, Office of Energy 
Efficiency and Renewable Energy, United States Department of 
Energy.
    So, welcome, Mr. Grundler.

    STATEMENT OF CHRISTOPHER GRUNDLER, DIRECTOR, OFFICE OF 
 TRANSPORTATION AND AIR QUALITY, OFFICE OF AIR AND RADIATION, 
              U.S. ENVIRONMENTAL PROTECTION AGENCY

    Mr. Grundler. Thank you very much, Chairman Boxer, Ranking 
Member Vitter and other members of the Committee. I appreciate 
the opportunity to testify today on the Renewable Fuel Standard 
Program.
    The RFS Program began in 2006, as has been mentioned, under 
the Energy Policy Act of 2005. The program's requirements were 
then modified by the Energy Independence and Security Act of 
2007. EISA established new volume standards for renewable fuel, 
reaching a total of 36 billion gallons by 2022, including 21 
billion gallons of advanced biofuels.
    The revised requirements also included a number of new 
provisions including greenhouse gas emissions thresholds. After 
an extensive notice and comment process, EPA finalized 
regulations to implement the EISA requirements. Those 
regulations went into effect in July 2010, and we have since 
been focused on implementing the program.
    EISA requires EPA to publish annual standards for four 
different categories of renewable fuels: total, advanced, 
biomass-based diesel and cellulosic. These standards apply to 
obligated parties which are typically refiners and fuel 
importers.
    On November 29 of this year, EPA published in the Federal 
Register a Notice of Proposed Rulemaking that would establish 
the annual RFS volume requirements for 2014. For reasons 
explained in detail in the notice, EPA is proposing to use 
authorities granted under the Clean Air Act to adjust the 
required total and advanced volumes for 2014 below the targets 
laid out in the statute.
    Our proposed rulemaking includes a detailed discussion of 
what is known as the ethanol blend wall. In the years between 
when Congress created the RFS Program and today, production and 
use of renewable fuels has grown rapidly. At the same time, 
however, fuel economy improvements and other factors have 
resulted in lower gasoline consumption than what was projected 
at that time. As a result, obligated parties are now facing the 
E10 blend wall where the country's gasoline fuel pool is 
saturated with ethanol at the 10 percent level a few years 
earlier than initially projected.
    If gasoline demand continues to decline, as is currently 
forecasted, increasing the amount of ethanol used in the fuel 
pool will require greater use of gasoline blends with higher 
ethanol contents. Examples of such blends are E15 and E85. 
There are limitations in the market, however, to the increased 
use of these higher blends including limits on fueling 
infrastructure and the number of vehicles that can operate on 
such fuel blends.
    In light of these factors, EPA is using authorities granted 
under the law to propose adjustments to the RFS statutory 2014 
volume requirements. Our objective in doing so is to balance 
the broader goals of the program, including the long-term 
growth in renewable fuels, against these constraints that exist 
in the market and fuel system today.
    Our approach applies two different authorities in the law 
that permit EPA to reduce volumes of advanced biofuel and total 
renewable fuel below the statutory volumes. When the 
Administrator lowers the required volume of cellulosic biofuel 
below the target, EPA also has the authority to reduce the 
volumes of advanced biofuel and total fuel by the same or a 
lesser amount. The Administrator can also reduce the required 
volumes of renewable fuel under the general waiver authority 
under certain conditions, including if the Administrator makes 
a determination of inadequate domestic supply.
    Our 2014 proposal uses a combination of these two 
authorities to reduce volumes of both advanced biofuel and 
total renewable fuel. The proposed volumes for 2014 are as 
follows. For cellulosic biofuel, 17 million gallons, biomass-
based diesel, 1.28 billion, advanced biofuel, 2.2 billion 
gallons, and total renewable fuel, 15.21 billion gallons.
    The proposal also includes volume ranges for each biofuel 
category. Including these ranges reflects our recognition of 
the inherent uncertainty in developing projects for biofuel use 
as well as provide stakeholders the ability to comment and 
provide data on a range of volumes and any other factors that 
should inform these ranges.
    The 2014 proposal includes a lengthy discussion and 
analysis about the proposed adjustments to these categories and 
seeks public comment on several alternative approaches to 
setting the total and advanced fuel standards. We think that 
our proposed framework for determining appropriate volumes of 
total renewable fuel and advanced biofuel would simultaneously 
address the ethanol blend wall as well as the limitations in 
availability of qualifying renewable fuels. Our intent is that 
the approach would allow for long-term growth in renewable 
fuels while recognizing current constraints in the marketplace.
    The proposed rulemaking is now open for public comment. The 
comment period runs for 60 days from publication which ends 
January 28, 2014.
    Just last week we held a public hearing on the proposal 
where we heard testimony from over 130 stakeholders 
demonstrating the high amount of interest in this policy and 
the diversity of fuels.
    I see my time is up, so I am glad to be here and I look 
forward to your questions.
    [The prepared statement of Mr. Grundler follows:]
    
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    Senator Boxer. OK. And we will put the rest of your 
statement in the record.
    Mr. Grundler. Thank you.
    Senator Boxer. Mr. Steven Chalk.

   STATEMENT OF STEVEN CHALK, DEPUTY ASSISTANT SECRETARY FOR 
           RENEWABLE POWER, U.S. DEPARTMENT OF ENERGY

    Mr. Chalk. Thank you, Chairman Boxer, Ranking Member 
Vitter, Chairman Carper, Ranking Member Sessions and members of 
the Committee. Thank you for the opportunity to discuss the 
Department of Energy's work on renewable fuels.
    As part of the President's sustained all-of-the-above 
approach to American energy, the Department is working to 
develop a diversity of advanced fuel and vehicle technologies 
that can secure our energy future and provide consumers with 
greater choice with the goal of saving energy, reducing costs 
and addressing climate change.
    As Deputy Assistant Secretary in the Office of Energy 
Efficiency and Renewable Energy, I am responsible for 
overseeing DOE's portfolio of renewable energy research, 
development, demonstration and deployment. The Department 
supports the goal of the Renewable Fuel Standard to increase 
biofuel production and use and is investing and research, 
development and demonstration to help bring next generation 
biofuels online. This an important component of the 
Department's work to leverage partnership between the private 
and public sectors, to deploy cleaner fuels, including advanced 
batteries and fuel cell technologies, in every transportation 
mode.
    Today, I will address DOE's Bioenergy Technologies Office's 
role and progress in transforming our renewable biomass 
resources into commercially viable, high performance biofuels 
and bio-products.
    While the majority of the ethanol in the U.S. fuel market 
today is starch based, DOE is making important strides in the 
demonstration and early commercialization of non-food based 
cellulosic ethanol which can be used to displace gasoline for 
light duty vehicles. Over the past 10 years, breakthroughs in 
biomass pretreatment and enzymes have helped reduce the model 
costs of cellulosic ethanol from over $13 a gallon in 2001 to 
approximately $3.25 per gallon, and this is on a gasoline 
equivalent basis.
    This model costs reflects the current status of the 
technology and includes projected learnings and refinements 
that are validated through early commercialization-scale 
demonstrations.
    DOE and the bioenergy community are now leveraging the 
cellulosic ethanol research success to accelerate the 
cellulosic and algal drop-in biofuels that can be used to 
substitute for petroleum-based gasoline, diesel and jet fuel. 
Successful R&D investments in cellulosic ethanol have provided 
the foundational knowledge and capabilities at universities, 
national laboratories and industry to develop the more 
challenging bio-based hydrocarbon fuels.
    These drop-in hydrocarbon biofuels are advantageous because 
they are largely compatible with the existing infrastructure to 
deliver, blend and dispense the fuels. Also, drop-in fuels can 
be used in heavy duty vehicle applications, aviation, home 
heating oil and other transportation modes to displace diesel 
and jet fuel in addition to gasoline.
    Through research and development demonstration, DOE seeks 
to contribute significantly to making cellulosic and algal-
based drop-in biofuels cost competitive with petroleum-based 
fuels. Our goal is to develop a sustainable pathway to achieve 
a model cost of $3 per gallon by 2017 and by 2022 validate 
multiple technology pathways which means various sustainable 
feedstocks and conversion processes.
    DOE's biofuels demonstration and deployment activities 
focus on integrated bio-refineries. As of September of this 
year, we have 24 active projects, 17 of which are either under 
construction or in operation. These competitively awarded 
projects are cost-shared by industry so that taxpayer 
investments are reduced.
    These first-of-a-kind projects at the pilot demonstration 
and pioneering commercial scales validate the key technical and 
economic performance parameters which inform our future R&D 
investments and provides information on the technologies' 
commercial readiness. With the first pioneer-scale 
demonstration facility producing initial product in 2013, it is 
expected that additional commercial-scale facilities will come 
online in 2014.
    DOE's renewable fuels and transportation technologies 
portfolio benefits consumers, reduces greenhouse gases, reduces 
our dependence on oil and keeps America competitive and on the 
cutting edge of clean transportation energy technologies.
    Thank you for the opportunity to discuss these issues, and 
I welcome any questions.
    [The prepared statement of Mr. Chalk follows:]
    
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    Senator Boxer. Thank you. In the interest of time, I am 
going to pass on my chance to question and turn to Senator 
Cardin.
    Senator Cardin. Thank you very much, Madam Chairman.
    As I said in my opening statement, I am a strong supporter 
of the Renewable Fuel Standards. Mr. Grundler, I listened to 
your testimony very carefully. And I think you have made the 
strongest argument as to why Congress needs to act to reform 
the Renewable Fuel Standard Program. And let me explain and 
give you a chance to respond.
    You indicated the use of the waiver authority was used this 
year with the proposed change that is out there for comment in 
which, because of the blend wall, because of the problems of 
gas consumption in this country and production of fuels, that 
you need to reduce the overall limits because of the safe use 
of ethanol-based fuels, although I am somewhat puzzled as to 
why you also included reductions on the advanced fuels which 
are not part of the blend wall problem. You may want to explain 
that.
    But my main concern is why EPA did not act in 2012 when 
there was a request for waiver authority? When corn price hit 
$8 per bushel and it was clearly affecting our food security in 
this country. And yet, EPA did not exercise the waiver 
authority in 2012. You did it this year, and we understand why. 
I do not understand why you did it for the advanced fuels.
    But perhaps you could explain to the Committee why food 
security issues are not clear enough under the code and do we 
need to change the code in order to be able to give you the 
take action in regards to what happened in the food industries?
    Mr. Grundler. Thank you, Senator. In 2012, when we received 
the waiver, requests for a waiver from a number of parties, the 
circumstances were different. We were suffering from a huge 
drought which had enormous consequences and damage for many 
parts of our economy and for our people. We worked very, very 
extensively with the Department of Agriculture and the 
Department of Energy and analyzed that situation very, very 
carefully, sought public comment, did a lot of analysis----
    Senator Cardin. But I am correct that it was 40 percent of 
the corn that year was used for fuels, 70 percent of the costs 
in the poultry industry is corn feedstock, I do not want to go 
through all of you analysis but it seems to me it is pretty 
clear at $8 per bushel that the demand for corn-based fuels was 
driving the costs of poultry to an uncompetitive level.
    Mr. Grundler. The question before us in 2012, Senator, was 
whether or not the RFS was causing severe economic harm.
    Senator Cardin. So, therefore, we need to change the 
statute if we want to protect food security in this country.
    Mr. Grundler. Well, that is up to you, I am not here to 
comment on what Congress should do.
    Senator Cardin. I understand it is up to us. But you do not 
have the authority to do that under the, as you have 
interpreted, under the current law?
    Mr. Grundler. We have authority to change the standards 
under a number of conditions. The one condition in 2012 was 
whether or not the RFS was causing severe economic harm to a 
State or the Nation or a region, and our conclusion was that it 
was not----
    Senator Cardin. And you based that basically on energy 
costs, not on food costs.
    Mr. Grundler. Well, the first question we are trying to 
answer, Senator----
    Senator Cardin. Yes or no? I mean, I think it is a simple 
question. I mean, your analysis is based upon the energy 
sector, not upon the entire sector of this country.
    Mr. Grundler. Our analysis was based on whether or not the 
RFS was, indeed, causing economic harm and we determined it was 
not because the oil industry was demanding ethanol, would have 
demanded ethanol with or without the RFS mandate under those 
circumstances.
    Senator Cardin. I think you have answered the question. 
Your focus, and I understand that, you have interpreted the 
code to give you authority to deal with the blend wall issues 
and the energy issues. And we need to be concerned about the 
security of this country.
    Senator Boxer. Thank you, Senator. Senator Vitter.
    Senator Vitter. Thank you. Thank you all for testifying. 
Mr. Grundler, the EPA's recent use of the waiver authority, I 
assume that means you all decided that hitting the blend wall 
was a real threat. Is that fair to say?
    Mr. Grundler. We are recognizing that the blend wall has 
been reached. Correct.
    Senator Vitter. Correct. And would you agree that reaching 
the blend wall threatens a spike in gasoline prices?
    Mr. Grundler. I do not know if I would agree with that 
statement. Reaching the blend wall clearly presents constraints 
to using more higher-ethanol quantities because of the 
infrastructure and other market limitations----
    Senator Vitter. Because of that. You do not think reaching 
the blend wall is going to drive costs up?
    Mr. Grundler. It is not clear what costs would be driven 
up. But the infrastructure clearly needs to adapt if we are 
going to use higher blend walls. And in the space of time 
between now and 2014, we did not think that it would be 
feasible to use the amount of ethanol that the Congress 
required in 2014.
    Senator Vitter. And so, therefore, without a waiver, are 
prices not going to go up?
    Mr. Grundler. We determined that it was simply not feasible 
for the system to absorb that much ethanol. It is not clear if 
the prices would go up or what choices the market would make--
--
    Senator Vitter. Is your recent action based on the waiver 
authority a temporary or a permanent solution?
    Mr. Grundler. We are exercising our waiver authority for 1 
year as we set the 2014 standard.
    Senator Vitter. Would you expect that action this year to 
be a long-term solution?
    Mr. Grundler. Well, what has been lost in a lot of the 
debate since we made our proposal, Senator, is the methodology 
that we are seeking input on, which provides a forward looking 
path to address both the realistic constraints that the current 
market conditions impose as well as providing the long-term 
growth over time.
    Senator Vitter. I do not know what that means, so let me 
re-ask the question. I am simple, I guess. Would you expect the 
action you took this year to be a permanent solution not 
requiring subsequent actions in subsequent years, whether 
legislative or administrative?
    Mr. Grundler. Sir, the law requires us to establish volume 
requirements each year. So, in 2015, based on the methodology 
we are proposing, we would be proposing the volume standards 
for 2015. And our methodology would take into account what is 
the reasonable amount of ethanol that can be used in this 
country in 2015. We will make that determination as we propose 
the 2015 standards.
    Senator Vitter. OK. Is there not a very strong possibility 
that your actions, once finalized, will be litigated?
    Mr. Grundler. Well, I would hate to speculate, but 
certainly there are, people have been suggesting that.
    Senator Vitter. OK. If that happens, that would certainly 
perpetuate or increase uncertainty, is that fair to say?
    Mr. Grundler. Yes.
    Senator Vitter. OK. A final question. On the cellulosic 
biofuel side, what was produced and available for compliance 
under the RFS in 2010, 2011, 2012 and so far in 2013?
    Mr. Vitter. So far in 2013 we expect that the biomass-based 
diesel production will reach between 1.6 billion and 1.7 
billion gallons. Last year, I think it was closer to the 
standard level, 1.28----
    Senator Vitter. We are talking about cellulosic biofuel?
    Mr. Grundler. I am sorry, I thought you said biomass-based 
diesel. Cellulosic biofuel, our proposal is for 17 million to 
be produced, that it what our estimate is for 2014. For 2013 
the standard is 6 million gallons and I do not----
    Senator Vitter. So, is your current estimate that that can 
be produced?
    Mr. Grundler. In 2013?
    Senator Vitter. Yes.
    Mr. Grundler. Yes.
    Senator Vitter. And just a final thought. Compared to that, 
what was the statutory mandate for 2013?
    Mr. Grundler. For 2013, it is 2.75 billion for advanced, 
for cellulosic it is what? 2.75 billion, sir.
    Senator Vitter. For cellulosic I think it is 1 billion. 
Does that sound right?
    Mr. Grundler. I am sorry, which, for 2013?
    Senator Vitter. Cellulosic biofuel for 2013.
    Mr. Grundler. For 2013, 1 billion, yes.
    Senator Boxer. Thank you, Senator. We have to move.
    Senator Vitter. Pretty significant gulf----
    Senator Boxer. We have to move on, Senator. Senator 
Merkley.
    Senator Merkley. Thank you, Madam Chair. And I wanted to 
continue the conversation on cellulosic. I have the EPA's 
Federal Register analysis and it shows that there are five 
groups that are coming online with commercial cellulosic 
ethanol in 2013, 2014. But the estimates read, for the first 
plant, 0 through 18 estimate, second plant, 0 through 2, the 
third, 2 through 5, then 0 through 9, 0 through 6. In other 
words, they are coming online but the estimates are still 0 
through something.
    Why is there so much uncertainty over what the plants, 
especially since at least one of them came on in 2013, two of 
them did actually, why is there so much uncertainty that they 
might actually produce no cellulosic ethanol?
    Mr. Grundler. Well, sir, this is a new business. This is 
new technology. And as my colleague mentioned, there has been 
an enormous amount of research and development. But going from 
a laboratory to a pilot scale to commercial scale is 
challenging, and it is difficult and there are startup 
problems. And that is why we see such a broad range of values 
in our estimates.
    Senator Merkley. So, even for the plants that got online in 
2013, it is still very uncertain whether they can reach their 
commercial design potential in 2014. OK. That is helpful. You 
are just kind of dropping the goal into the middle. In other 
words you estimate currently that the companies with approved 
pathways can produce 8 to 30, and so you are saying well, 
somewhere in the middle is 17 so we will toss it in there. 
Well, where does the 17 come from?
    Mr. Grundler. Sir, it is a little more sophisticated than 
that, I am pleased to say. We actually do what is known as a 
Monte Carlos Analysis where we try to look at the probabilities 
and select a mean based on what the most likely scenario is.
    Senator Merkley. So, let us compare that, say, to what was 
actually produced in 2013. Do you have a sense of how many 
million gallons actually were produced commercially?
    Mr. Grundler. Well, we are still counting, sir. Our 
standard is 6 million. I do not know if we have an estimate. We 
do not have a final number now. It is in the hundreds of 
thousands of gallons that have been produced so far.
    Senator Merkley. So, the 17 still represents a considerable 
draw forward in terms of encouraging the market. The reason I 
am raising this question is you have all of these plants and 
their potential production for next year is significantly above 
17, and you have investors who have based their investments on 
the understanding that if the fuel is produced, they will be a 
purchaser. And so I am wanting to make sure that we are not 
aiming for a mark here that essentially leaves this whole 
effort stranded.
    Mr. Grundler. I understand the question, sir, but under the 
law, and we have got recent guidance from the courts, that we 
have to base our projections on a neutral estimate of what can 
actually be produced in the future year and we are being fairly 
conservative.
    Senator Merkley. I want to turn to, in the 50 seconds left, 
to questions about corn ethanol when it is produced on new 
agriculture land that essentially is being plowed because of 
the production of corn. When you look at the life cycle 
analysis of the impact of additional acreage, the fertilizers, 
the tractors and the carbon released from the disturbance to 
the ground, is there actually a CO2 advantage to 
producing that extra acre of corn?
    Mr. Grundler. Sir, that is a very complicated question. It 
really depends on how the corn is being produced, how the 
ethanol is being processed, and we see a wide range of 
efficiencies in corn ethanol production today. To be counted as 
renewable biomass, it has to come from land that has been 
previously cultivated. So, the Congress established essentially 
two different bins, if you will, of biofuel and most of today's 
corn production was grandfathered and does not need to meet the 
greenhouse gas thresholds of 20 percent. But when we set the 
standard----
    Senator Merkley. My time is up. So, I'm going to stop you 
right there and I will look forward to continuing the 
conversation. Thank you.
    Mr. Grundler. Thank you.
    Senator Boxer. Thank you, Senator. Senator Fischer.
    Senator Fischer. Thank you, Madam Chair.
    At this time, I would like to ask if I could have included 
in the record a letter from the Renewable Fuels Association.
    Senator Boxer. Without objection.
    [The referenced information follows:]
    
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    Senator Fischer. Thank you very much.
    Mr. Grundler, the EPA's proposed rule establishing the RVOs 
for 2014. Your analysis supporting this proposal includes 
consideration of the availability of infrastructure in setting 
the volumes and it indicates that you plan to use this same 
approach in your rulemakings for the next several years. Is 
that correct?
    Mr. Grundler. Yes, Madam.
    Senator Fischer. OK. Given that infrastructure and 
investments are motivated by anticipation of more fuel entering 
the marketplace, not less fuel, how do you believe that your 
proposal is going to incentivize the installation of the 
infrastructure necessary to allow for the deployment of higher 
blends?
    Mr. Grundler. In a number of ways. And, of course, the 
Renewable Fuel Standard is more than just about one kind of 
fuel. It certainly is about corn-based ethanol but the priority 
that the Congress set is for most of the growth in the future 
it is about these advanced biofuels that we have been talking 
about. And with respect to, for example, ethanol from these 
advanced sources like cellulosic, they get their own standard 
which is essentially walled off by the law.
    So, our cellulosic standard going into the future will be 
based on our estimate of what can actually be produced in that 
next year. And as my colleague from DOE described, there has 
been an enormous amount of progress in terms of the technology 
and its efficiency and its ability to produce these higher 
volumes.
    As for the market conditions that would incentivize more 
infrastructure, we are seeing that today and in fact, our 
proposal does imagine a volume that is above the blend wall. We 
are anticipating more E85 being sold next year than is being 
sold this year. And our estimates are based on that trend line 
and that pace of new E85 stations being built.
    Now, of course, we provide a range and we are asking for 
more information and data on whether or not we got that right 
or if we are being too conservative. I can tell you, having sat 
through 13 hours of public testimony last week, that we got a 
very wide diversity of views and many people thought we got it 
wrong and that we had adjusted it too far. Others told us we 
did not adjust it enough. And a few people said we got it about 
right.
    So, what we emphasize at the hearing is please give us 
updated information on sales, on infrastructure, on our 
assumptions so that we can make the best decision we can with 
that information before we go final.
    Senator Fischer. Earlier in your comments to Senator Cardin 
you said that the oil industry has a demand for ethanol. Could 
you continue then and say that there is an economic value of 
ethanol for the oil industry?
    Mr. Grundler. Oh, without a doubt. The whole petroleum 
industry infrastructure has optimized around this 10 percent 
blend. It does have a value in terms of enhancing the octane of 
the gasoline as well as a volume extender up to a point.
    Senator Fischer. You also mentioned that, when you talked 
about the blend wall, that reaching that blend wall does not 
necessarily drive up gas prices. Did I hear you correctly on 
that?
    Mr. Grundler. What I said, what I meant to say, certainly, 
is that is a very complicated equation. And so, it is not clear 
to me exactly what the impact would be and what the incremental 
marginal costs are for going above that blend wall. That is 
what we are trying to do in this proposal. We are trying to 
estimate what is the reasonable amount of higher-blend ethanols 
that today's market and infrastructure can in fact----
    Senator Fischer. And you would say, my time is up, but you 
would say that gas prices fluctuate on a number of inputs, and 
I guess I would say ethanol would be a very small part of that. 
Would you agree with that?
    Mr. Grundler. I would agree predicting gasoline prices is 
treacherous, and we try to avoid it.
    Senator Fischer. Thank you so much. And thank you, Madam 
Chair.
    Senator Boxer. Senator Whitehouse.
    Senator Whitehouse. Thank you, Madam Chair. I just have one 
question, and that is where you got your biomass-based diesel 
requirement? If you look at cellulosic biofuel, I have U.S. 
commercial production for that in 2012 as just over 20,000 
gallons as compared to the Energy Independence and Security Act 
estimate that it would be 500 million gallons. Well, 20,000 is 
a long way from 500 million, and you all have adjusted your 
volume requirement for cellulosic biofuels as a result.
    So, then you switch over to biodiesel, and my information 
is that the biodiesel industry has produced over 1.7 billion 
gallons just this year. And EPA proposes to set the 2014 
biomass-based diesel at 1.28 billion gallons, which is a, the 
same as the 2013 requirement, no change, and b, less than what 
I understand is already being produced by the industry.
    What is the logic to that? Why did you not make an 
adjustment reflecting the industry output for biodiesel the way 
you did for cellulosic?
    Mr. Grundler. Thank you, Senator. That is a very good 
question.
    Senator Whitehouse. Well, it is a pointed question because 
it will hurt businesses that are out actually doing this if you 
do not have this right.
    Mr. Grundler. The requirements under the law for setting 
the cellulosic standard and for setting the biomass-based 
diesel standard are different. That is the short answer.
    You are right that we are keeping the standard the same. 
The law does not require us to increase the biomass-based 
diesel standard from year to year. I would note that this year 
the standard was 1.28 and the industry over-achieved for a 
number of reasons relating to the market and to tax policy. So, 
projecting into next year, there are a number of uncertainties 
as to what those market conditions will be.
    But we look at the 1.28 standard as a floor. And when we 
constructed our advanced standard, which the biomass-based 
diesel standard is a part of, we did consider this broader 
range up to 1.6 billion. And we made a policy choice that 
biomass-based diesel can compete within that advanced standard 
for that additional volume, just as they did very effectively 
this year.
    Senator Whitehouse. All I can tell you is that for the 
folks in the industry who I talk to, they do not see it as a 
floor, they see it as a target and as a number kind of around 
which the industry does not actually coalesce but it has an 
impulse in that direction anyway. And when you set it below 
existing levels, it seems to them that you are sending a 
message saying that what you are doing out there, despite all 
of the value of this biodiesel, is not worthwhile and we want 
less of it, we want to get back to a target of 1.28 billion.
    So, you need to make it a lot clearer your notion that this 
is a floor because I have never heard anybody express that 
until this moment.
    Mr. Grundler. Thank you. And I heard directly from your 
constituent at the public hearing, one of the Rhode Island 
biodiesel producers, and heard that perspective. And we are 
specifically asking for comment on this question and did we 
consider the factors right and should we consider a higher 
standard specifically for biomass-based diesel and we are going 
to be looking forward to that information.
    Senator Whitehouse. And if the biodiesel tax credit expires 
at the end of the year, if we cannot fix the tax extender 
problem which we have frequently failed at doing, this would 
then be the only market incentive remaining for that industry. 
Correct?
    Mr. Grundler. I would not say it is the only market 
incentive because there is this RIN market which provides a 
value to biomass-based diesel. But our standard is based on the 
assumption that the tax credit is expiring.
    Senator Boxer. Thank you, Senator. Senator Inhofe.
    Senator Inhofe. Thank you, Madam Chairman. Luke, put up 
that blue chart, will you? I think Senator Whitehouse, Senator 
Cardin and Senator Fischer, all of them are asking kind of the 
same thing and I hesitate to get into that, but I think it is 
something that really is not understood. Now, if you were 
talking about something that we had a mandate that was five 
times or two times or even ten times what the standard would 
finally be, that would be of more understanding to me.
    This chart though, this chart shows that the blue, I say to 
my friend Senator Sessions, is that is the requirement spaced 
out over the years, all the way to 2022. And yet the 
anticipated projection of the availability of cellulosic is 
that red line that you can hardly see down there.
    And you know, I just wonder, what would be wrong with 
putting in legislation that had something that kind of referred 
to the total mandated amount cannot exceed say 2 to 1 over the 
previous year or something like that. What is your thinking on 
that? I mean, we are so far off here. I have a hard time 
explaining to people back home why I sit on this Committee, and 
at one time chaired this Committee, and we still have that 
disparity between mandates and availability.
    Mr. Grundler. Well, I think Congress anticipated this 
possibility which is why it gave the Administrator the ability 
to waive the standard in circumstances----
    Senator Inhofe. Yes, but that far off? Now I could 
understand that, you know, being off 2 to 1 or 3 to 1, but to 
me they are passing something that does just the opposite. It 
allows the EPA to make a determination with no limit because 
the limit right there, look, you can see by the blue line, that 
is the reasoning, you give them the flexibility.
    Mr. Grundler. My eyes are getting old but I think what you 
are describing as the limit are the statutory targets that were 
written into the law.
    Senator Inhofe. Yes, there we go. And that law should be 
repealed, I believe. Do you think it should be repealed?
    Mr. Grundler. I do not have an opinion on that, sir, as you 
well know.
    Senator Inhofe. Let me mention one thing because you 
brought up the RINs, and that is kind of interesting because we 
went through this for 12 years now on cap and trade, and that 
is essentially what we are talking here, because you are 
allowing a system in place that would make up for the 
disparity. At least, this is what I see. And when I say that, I 
think it is interesting because that has been rejected for 12 
years and there probably is not a third of the votes that would 
be supporting it. Just a concept.
    Do you see that there is any relationship between that 
program and the RIN Program, how that is working? The RIN 
started out at what? One or two cents? And they have gone up at 
high as $1.20. What do you think industry is thinking out there 
not knowing what that price is going to be with a disparity 
like that? Does that concern you?
    Mr. Grundler. Well, I think most observers in this space 
anticipated a rise in the prices as this so-called blend wall 
was approaching and that is, indeed, what happened. They have 
fallen substantially since then. I do not see the connection 
that you are making though between the RIN market and cap and 
trade.
    The RINs were developed, by the way, in collaboration with 
the industry as a flexibility tool and as a means to measure 
compliance, and I think they have worked pretty effectively at 
doing that. The alternative would have been to force every 
refiner to blend every gallon of gasoline they produce with 
ethanol. This flexibility allows people to make choices in 
terms of how they reach the compliance.
    Senator Inhofe. Well, I think it is, and maybe it helps to 
make choices, but when you have a variable as we have in the 
RIN prices, I think that makes it more difficult for industry. 
Just a thought.
    You know, Mr. Grundler, I am not blaming you for this. It 
is something you kind of inherited and it is something you are 
dealing with and it is not easy. So, I have sympathy for you. 
But I think on this side of the table we should be looking at 
legislation so that we do not have the problems that Democrats 
and Republicans are all united in being concerned with.
    Thank you, Madam Chairman.
    Senator Boxer. So, I am going to now turn to Senator Udall.
    Senator Udall. Thank you, Madam Chair. And Mr. Grundler, 
thank you for your work at EPA.
    Can you tell me more about EPA's ability to meet the 
statutory deadline for finalizing RFS volume requirements each 
year by the end of November? EPA missed the deadline for 2013 
by over 9 months, the agency is only now proposing requirements 
for 2014, again missing the deadline.
    And regardless of which side of the many sides to the RFS 
debate someone is on, it seems like something we can all agree 
on is that EPA needs to reliably perform its role to enable 
this policy. Uncertainty is a significant challenge to the 
outcome. What assurances can EPA give this Committee that they 
will finalize the volumes on time in the future?
    Mr. Grundler. Do I get credit for proposing the 2015 
standard ahead of time?
    [Laughter.]
    Senator Udall. Well, if you do it on time that would be 
nice, yes.
    Mr. Grundler. Well, we have proposed the 2015 standard last 
month for biomass-based diesel, Senator.
    I am not proud of our record here. I would like to be 
faster. The truth is that this has been a very challenging 
policy issue with a lot of diverse points of view as I heard 
last week and as we have heard today. This renewable fuels 
policy intersects with a lot of different parts of the 
Government, a lot of different kinds of policy beyond 
environmental policy, and that has made it challenging.
    I am hopeful, and our goal is certainly to finalize these 
2014 and 2015 standards by this spring and hopefully get back 
on track. Our whole intention here with this proposal is to put 
the RFS on a more manageable trajectory that provides for both 
growth over time of these fuels as well as recognizing the pace 
at which the market can respond to use them. And if we get it 
right, then perhaps the temperature will drop and people can 
unite behind our approach that we are laying out.
    Senator Udall. Great. Thank you for that commitment.
    Mr. Chalk, thank you for your work at DOE.
    In your remarks today, you mentioned that one of DOE's R&D 
goals was for cellulosic drop-in fuels. Can you tell me if 
there are other similar targets for algae drop-in and advanced 
biofuels which DOE is pursuing in fiscal year 2014, what 
challenges do algae R&D focus on, and what can innovators 
working in New Mexico, how can they partner with DOE to 
continue to work on these critical challenges in the future?
    Mr. Chalk. Thank you for that question, Senator. We are 
looking at cellulosic and advanced biofuels as well as algae. 
So, we are really neutral on the feedstock. All the feedstocks 
are non-food sources. So, we would include algae toward that 
goal if it can achieve that.
    We view that as a little longer-term pathway, but certainly 
we have three pilot demonstrations right now that are making 
very, very good progress toward that goal. So, we see the algae 
pathway as very important to achieving drop-in fuels which 
really get around this blend wall issue that we have because 
they are totally compatible with the infrastructure today.
    Senator Udall. Great. I yield back, Madam Chair.
    [The prepared statement of Senator Udall follows:]

                     Statement of Hon. Tom Udall, 
               U.S. Senator from the State of New Mexico

    Good morning. Welcome, Mr. Grundler and Mr. Chalk, and our 
other distinguished guests serving on our second panel.
    Thank you for being here today. And Senators Boxer and 
Vitter, I want to thank you for holding this hearing on 
renewable fuels.
    This is an important discussion. I have long said we need a 
``do it all, do it right'' energy policy. Taking control of our 
energy security. Producing more energy here at home. And using 
a diverse portfolio of sources.
    How we manage to do this will have a huge impact. To our 
planet. To our security. And to our economy.
    The threat of global warming is real. That is not 
conjecture. That is science. The reality is we have to 
transition to a clean energy economy. This is a commitment we 
owe future generations. And it is a commitment that will not 
wait.
    So, we have to make that transition. And our goals are 
clear. To meet our energy needs. To reduce the impact of energy 
production on the environment. And to drastically cut the 
pollution of our air and water.
    Renewable fuels play an important role. For increased 
domestic energy production. For a sustainable energy mix. 
Moving our country and our economy forward in the future.
    Overall we are making progress. Market share of renewable 
fuels has increased. We've seen many success stories. Applying 
American innovation to meet our energy challenges.
    In my State of New Mexico, there are multiple examples of 
how innovation is successfully implementing solutions.
    Sapphire Energy is one example. Using algae feedstocks for 
green crude oil that flows with conventional crude oil all the 
way to the refinery for processing.
    Another company, Joule Unlimited, produces fuels directly 
and continuously from sunlight and waste CO2 in a 
novel, gas-to-liquid conversion process.
    And in both cases the end product is indistinguishable from 
conventional fuel.
    Our State also leads in biofuels research and development. 
Just last week I saw firsthand how important the R&D efforts of 
Los Alamos National Lab, the New Mexico Consortium, and each of 
their university partners, including UNM, NMSU, and NM Tech, 
are for the future of this industry.
    I am concerned that the proposed changes to the RFS could 
jeopardize near and long term growth in advanced biofuels, 
preventing innovative technologies in New Mexico from entering 
the pipeline for future production.
    We need the RFS to enable all these innovative fuel sources 
to develop side by side with conventional fuel.
    There are some areas where we can do better. First, the EPA 
rulemaking process needs to perform more reliably. When it does 
not, innovation is stifled. Business opportunities fall 
through. Investments fail. There is too much uncertainty. We 
need to change that.
    Second, we need to be more feedstock neutral. It shouldn't 
matter whether the source is corn or algae. What matters is the 
final product. That fuels our economy. And that creates jobs.
    The RFS should do more. To push innovation and technology 
in the market. With advanced biofuels that are 
indistinguishable from conventional ones.
    In 2011, I introduced a bipartisan bill to level the 
playing field for advanced biofuels and to make the RFS more 
technology neutral.
    The current RFS includes a traditional ethanol standard of 
up to 15 billion gallons by 2015. That comes mostly from corn 
feedstock. Which is linked to the price of cattle feed.
    I am concerned that this drives up prices for dairy 
producers in New Mexico, who for years have been struggling to 
break even because of inflated feed cost.
    And beef producers who have seen their herd size cut in 
half from several years of drought, limited forage, and rising 
feed costs.
    To address this issue, we can rely more on advanced 
biofuels.
    The large majority of the advanced biofuel standard is 
limited to only cellulosic biofuels. The playing field remains 
uneven. Other biofuels like algae remain at a disadvantage.
    We should change that. And we can, by removing the 
cellulosic biofuel carve-out and creating a technology neutral 
category. One that would include all advanced biofuels. 
Cellulosic. Algae. And other technologies, all at the same 21 
billion gallon standard by 2022.
    That RFS will reward innovation, provide opportunity for 
growth, and help us develop the diverse sources of energy that 
we need for the future.
    I am looking forward to hearing more from today's panels.

    Senator Boxer. Thank you very much. Senator Sessions 
followed by Senator Boozman, and then we are going to move 
right to the second panel.
    Senator Sessions. Well, to follow up on Senator Inhofe's 
question, I supported the law that we would have cellulosic 
mandates, and we thought we would have some things happening 
that were going to develop that would give us a realistic 
opportunity to meet those goals. But that law required that 
there be 16 billion gallons by 2022. And as the chart showed, 
EIA, your own Department of Energy Information Agency, says we 
are only going to have now, they are projecting, half a billion 
gallons by 2022.
    So, that represents a reality that we are going to have to 
deal with and you have indicated, and I have looked at algae 
projects and seen some up close, but that is a long way off. We 
are not going to fill this gap with algae by 2023 are we, Mr. 
Chalk?
    Mr. Chalk. Thank you for the question, Senator. I would 
like to first start with what the status of cellulosic ethanol 
is. As I said in my testimony, we brought the cost down by a 
factor of four. The research and development is completed on 
that.
    Senator Sessions. Well, let us ask--Range Fuels in Georgia, 
is it still operating?
    Mr. Chalk. No, it is not.
    Senator Sessions. It is closed. It was supposed to be the 
brightest prospect for a long time, was it not?
    Mr. Chalk. Yes, Senator.
    Senator Sessions. And then there was one in Alabama that 
was sued for fraud. And now you have got KiOR in Mississippi 
that has some potential, I think. Is that correct?
    Mr. Chalk. We see a lot of potential.
    Senator Sessions. Do you see anything better than, say, the 
KiOR technology out there that is going to have a potential to 
fill this gap?
    Mr. Chalk. Yes. There are five bio-refineries currently in 
the early stages of commercialization. We see great promise for 
the industry to expand. As Senator Boxer said in her testimony, 
when we started these efforts in the 2007 and 2008 timeframe, 
private investment was very hard to come by. So, a lot of these 
plants were delayed until that private cost share could be 
secured. And now we are in really early commercialization 
phases for cellulosic ethanol and we expect a very fast ramp 
up.
    Senator Sessions. Now, Madam Chair, for example, you 
harvest timber in Alabama and, I think, in most places, you 
have 10, 20 percent of the tops that are waste products that a 
farmer would be glad to have taken away. He would not have to 
be paid for it because it impacts his ability to replant and 
start over again. But that is limited, too.
    I guess what I am saying is I guess we probably 
overreached. Can you give us, can you give us realistically a 
specific kind of cellulosic productivity that can be achieved? 
And I will end with this. I think we would be smarter to help 
assist the technology development than to issue mandates before 
we have technology capable of meeting the mandates.
    So, we mandated cellulosic that we had no proven technology 
from and that has caused, really, an embarrassment to us all. 
So, give us your prospects of what might happen with cellulosic 
because it would be great if we could do that, it does not 
require breaking up new land and farming in the way that might 
otherwise be the case.
    Mr. Chalk. The department commissioned what we call the 
Billion Ton Study so, if you include all the agricultural 
residue and wood waste and other sources, we could potentially 
replace about one-third of our transportation energy. And we 
are committed to the RFS and this process, and the checks and 
balances that Congress provided in the law and the process that 
EPA is going through right now where they are looking at what 
is the capacity of the industry to provide these fuels is very 
good. We think it is going to result in a final rule that will 
maintain the strength and the promise of the RFS.
    We think the long-term predictability of the RFS is 
critical to maintain this investment.
    Senator Boxer. I am going to have to stop you right there 
even though you are making a really good point. We have to move 
on.
    Senator Boozman. Thank you, Madam Chair. And I know that we 
do need to go to the next panel.
    Mr. Grundler, again, is it my understanding that your 
testimony is that if we hit the blend wall substantially that 
the price of diesel would not go up significantly?
    Mr. Grundler. I did not make that statement. I do not have 
an estimate for you. But the truth is that we have hit the 
ethanol blend wall.
    Senator Boozman. But most people feel like that would be 
the case. That is a fair statement, is it not?
    Mr. Grundler. No, I cannot confirm that statement. There 
are a lot of economists that are looking into that.
    Senator Boozman. I guess it is important that you would 
figure that out.
    Mr. Grundler. OK.
    Senator Boozman. In the sense, you know, that that really 
is a huge issue.
    Mr. Grundler. Could I respond? If I could just respond? 
What we have done in our proposal is we are, actually the blend 
wall has been reached, we are making an estimate of what is a 
reasonable amount of ethanol that can be consumed by the 
current system as well as what advanced biofuels can be 
produced in providing that estimate. So, I think the 
methodology that we proposed and the comments that we are 
seeking does address this concern that some have laid out with 
respect to the economic impacts of this blend wall.
    Senator Boozman. No, and again, do not misunderstand. I 
agree with what you are doing. I think that is good. Let me ask 
you about the RINs in the sense that there is being fraud 
associated with that and things.
    Mr. Grundler. Yes, sir.
    Senator Boozman. This is a different thing than EPA, it is 
a different situation than they normally deal with. Can you 
comment about that, about the fact that there has been some 
fraud, what the agency is doing to prevent that in the future? 
I know you are in the process of a rulemaking that has not been 
complete. Maybe you can comment real quickly on when that will 
get completed.
    Mr. Grundler. Yes, that rulemaking has been proposed. We 
got an, again, an enormous amount of comment on our proposal 
which establishes a voluntary quality assurance approach so 
that people have confidence in the RIN market and it creates 
the kind of liquidity that we need.
    The rulemaking will be finalized early next year and we 
believe that already, because the way we wrote the proposal, 
allowed for some of this quality assurance to happen during 
this transition period and that we are very pleased to see that 
one of the concerns was that small producers would be going out 
of business. That has not happened. The number of producers is 
about the same. People are taking advantage of these quality 
assurance vendors. And liquidity in the marketplace has been 
restored.
    Senator Boozman. Thank you. I have got to leave. I do want 
to recognize General Clark for being here as a fellow Arkansan. 
We are very, very proud of him for his service to his country 
in a number of different ways.
    Thank you, Madam Chair.
    Senator Boxer. Thank you very much.
    So, we are good. I passed on my questions so I am going to 
make three statements. If you disagree with me, I want you to 
say so. And then we will close out.
    One, oil companies need ethanol. Two, some oil companies 
even produce ethanol. And three, if Congress were to set a 
limit every year on how much alternative fuels we would need, I 
believe that would be a disincentive to the development of 
these alternative energies. Do either of you disagree with 
anything I said? That is great. Oh, you had a momentary thought 
there.
    I really do appreciate this very, very much. I know we 
rushed you through and I appreciate the cooperation of 
colleagues.
    This panel is excused and we will move on to the second 
panel. Please make sure that you, please go as fast as 
possible.
    And new panel, come up. And if you could make sure that 
your statements do not exceed 4 minutes we will get started in 
a moment. Thank you very much, gentlemen. We are rushing. We 
want to end this when the memorial service begins out of 
respect.
    So, we are going to start off the second panel with General 
Wesley Clark, Co-Chairman, Board of Directors of Growth Energy. 
And we are going to move down. I am going to ask each of you, 4 
minutes please to make up for a little lost time.
    General, we are very honored to have you here today.

 STATEMENT OF GENERAL WESLEY K. CLARK (RETIRED), CO-CHAIRMAN, 
                         GROWTH ENERGY

    General Clark. Thank you very much Chairman Boxer, Ranking 
Member Vitter and other distinguished members of the 
Environment and Public Works Committee. Thanks for the 
opportunity to be with you today.
    So, I want to start by just saying that I believe, first of 
all, I am in, as Senator Inhofe mentioned, I am in the energy 
business. So, I am in oil, I am in gas, wind, solar and 
biofuels. I have looked at the whole thing. I am in the 
financing side of it on numerous boards of directors. And my 
real interest is American national security and the prosperity 
of Americans.
    So, I want to try to take the broadest picture in the 
couple of minutes I have got here. I think the Renewable Fuel 
Standard is a success. It has reduced our dependence on foreign 
oil, it has created 400,000 American jobs, revitalized the 
rural economy, puts $42 billion a year into it, lowered the 
price of gasoline at the pump and improved the environment. It 
is a success.
    Corn-based ethanol is the first step in bringing renewable 
fuels. You have got to build a distribution system and you have 
got to have the opportunity to put it into the automobile and 
the manufacturers have to accept it.
    So, we have hit the blend wall right now. The blend wall is 
actually an artificial creation. We can go through the blend 
wall anytime we put E15 and E85 in. E15 was extensively tested, 
80 vehicles, 150,000 miles, works fine, 2001 on, and all the 
brand new automobiles have the warranties for E15.
    Seventeen percent of the corn crop is actually used in 
fuel. Corn-based ethanol is a factor in reducing the volatility 
of corn prices. As everybody on this Committee understands, I 
am sure, the $8 per bushel price for corn last summer was 
primarily a function of drought and projections of reduced 
harvest. It was not a function of ethanol demand.
    Right now, corn prices are under $4.50 a bushel and anybody 
in the livestock or poultry business has to be happy with that 
because that is right at the cost for what it is for a farmer 
to grow it. The biggest factor in grain prices is actually the 
cost of fuel. So, that is what is really affecting us here.
    As far as the poultry industry is concerned, I am sorry 
Senator Boozman is not here, but our company, Tyson in 
Arkansas, has had record profits last year despite $8 per 
bushel corn prices.
    So, I think that we have got to see here, the big picture 
is we are moving off dependence on foreign oil. I think we 
should produce as much domestic oil as we can. But we need this 
biofuel. We are saving, as Senator Fischer said, about $40 
billion a year in the American economy right now. We will go 
over $100 billion of savings into our economy when we enact and 
get fully up there with renewable fuels. It is where we need to 
be.
    I am sorry about the EPA proposal. I think it hurts 
investments when Congress or EPA tinkers with these 
expectations. The cellulosic industry had a tough time dealing 
with the financial crisis of 2008. It chilled investment, and 
congressional tinkering with mandates and things like this 
further scares investors off.
    We have the technology now. One of the companies that I am 
associated with, POET, their plant is coming on board in 
Emmetsburg, Iowa, late this spring. We will be producing 25 
million gallons per year of cellulosic. It is combined with a 
corn ethanol plant. It can be licensed, that technology, and it 
will spread rapidly throughout the Midwest provided that we 
make space in the market to sell ethanol. And that is really 
the issue here.
    We need the help from the U.S. Congress to have the oil 
industry cooperate with us. We are all on the same team here 
trying to help promote American prosperity and energy 
independence. Let's get that fuel into the marketplace.
    Thank you.
    [The prepared statement of General Clark follows:]
    
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    Senator Boxer. Thank you, General.
    Mr. Jim Collins, Jr., Senior Vice President, Industrial 
Biosciences, Performance Polymers and Packaging and Industrial 
Polymers, DuPont.

  STATEMENT OF JAMES C. COLLINS, JR., SENIOR VICE PRESIDENT, 
  DuPONT POLYMERS AND INDUSTRIAL BIOSCIENCES, E.I. DuPONT de 
                   NEMOURS AND COMPANY, INC.

    Mr. Collins. Good morning, Chairman Boxer, Ranking Member 
Vitter and members of the Committee. I am pleased to be here 
with you today, and I will cover the significant investment 
that DuPont has made in biofuels and how we have contributed to 
the Nation's energy security, reducing greenhouse gas emissions 
and strengthening our rural economies.
    Now, this technology does represent a tremendous shift in 
how we can energize our Nation as well as our planet. It is 
real, it is happening today and it is due to the Renewable Fuel 
Standard, a critical policy that must endure.
    DuPont's commitment stretches across the country, from our 
laboratories in California to the cornfields of Iowa to our 
headquarters in Delaware. DuPont has invested hundreds of 
millions of dollars in scientific research. Through our seed 
business, we have optimized corn production, delivering more 
corn on the same amount of acres.
    We have enzyme technology and work every day to improve the 
efficiency of existing ethanol facilities. And then we also 
produce enzymes that further improve the digestibility of feed 
products, or DDGs, that come from corn ethanol production.
    So, all of these advances combined mean we are able today 
to produce increasingly more food, more feed and more fuel off 
of every acre.
    But that is only half the story. With more corn comes more 
corn residue, the leaves and stalks and cobs that are left over 
after harvest. DuPont and others are building supply chains to 
harvest this residue and commercialize biofuels from this 
plentiful source of cellulose at scale.
    Now today I can report that we are in the process of 
building a 30 million gallon facility in Central Iowa and we 
are on track to begin production next year. Upon completion, 
this plant alone will employ 70 full-time folks, it will pay 
over 500 local farmers for their biomass annually, and employ 
another 150 seasonal workers to collect, transport and help 
store this feedstock. And we will do this while remaining 
greenhouse gas neutral. Or, in other words, our supply chain 
meets a standard that other industries could never dream of 
achieving. It is fully sustainable and has a net zero 
CO2 emission.
    In addition to cellulosic, DuPont is also producing another 
advanced renewable fuel with our partner, BP, in a 50/50 joint 
venture we call Butamax. Now, this joint venture has 
extensively tested biobutanol. It is a higher energy alcohol 
fuel, is compatible with existing vehicles and existing 
infrastructure, and has twice the renewable energy content of 
E10.
    So indeed, these are tremendously exciting technologies 
that are coming online and squarely put the U.S. in a 
leadership position in the global biofuels market. If we stay 
the course, this technology really is just at its beginning.
    We start today with biofuels. Using this technology we will 
be able to unlock sugars in cellulose, and tomorrow these same 
sugars and the same supply chains that we will be enabling can 
enable a whole new world of biochemical and biomaterials. 
Delivering on the promise of a bio-based economy.
    Now, I firmly believe that reversing course on the RFS 
would have devastating effects. Short term it injects 
uncertainty into an improving economy. Medium term, it slows 
down the private, domestic investment that we will need to 
build plants two, three, four and five. Long term, we could 
find ourselves shipping these technologies, these jobs and, 
more importantly, these environmental benefits overseas to 
countries that have more stable policy environments.
    That is why DuPont is particularly concerned with the EPA's 
recent proposed rule on the 2014 renewable volume obligations. 
We believe that these targets should be set in a way that 
drives higher overall blend use rates into the future, not the 
opposite.
    Now, DuPont respectfully asserts that the Renewable Fuel 
Standard works well. Do not mess with it. Our industry is at a 
critical juncture where advanced commercial production is under 
construction and policy stability will significantly impact 
investments and the pace of that commercialization.
    Thank you.
    [The prepared statement of Mr. Collins follows:]
    
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    Senator Boxer. Thank you so very much.
    Let me turn to Mr. Charles Drevna, President, American Fuel 
and Petrochemical Manufacturers. Welcome, sir.

 STATEMENT OF CHARLES T. DREVNA, PRESIDENT, AMERICAN FUEL AND 
                  PETROCHEMICAL MANUFACTURERS

    Mr. Drevna. Chairman Boxer, thank you. Ranking Member 
Vitter and members of the Committee, I am pleased to be here.
    In 2007, Congress enacted energy legislation which in 
essence promised significant steps toward energy independence, 
national security and added environmental protections. A major 
component of that law known as the RFS calls for massive 
amounts of renewables to be blended into the Nation's 
transportation fuel supply.
    In 2013, we now know that the RFS Program was based upon 
erroneous market assumptions, obstacles that prevent the safe 
consumption of ethanol at increasing mandated levels and many 
other unintended negative consequences.
    These critical flaws in combination with the resurgence of 
domestic energy production have led us to one unquestionable 
conclusion. It is not abundantly clear that the RFS has 
systemic problems that Congress must address immediately and 
decisively to avoid severe economic harm to individual 
consumers and to the Nation's economy.
    Madam Chair, you asked the previous panel whether or not 
Congress should use every year to increase the, or set the 
volumes, for renewables. I submit that you already did in 2007. 
Those volumes are set statutorily.
    Senator Boxer. You misunderstood me, but we will get into 
that later.
    Mr. Drevna. Ironically in a free market consumer choice and 
economics would drive the safe and efficient introduction of 
biofuels. As Mr. Collins just stated, they are inputting a lot 
of money into the free market, I would say, not some 
preconceived false market. DuPont is a pretty big company. They 
have some smart people. I understand, I understand the idea of 
the free market and I applaud them for doing it.
    However, mandates are not the free market, and the reality 
is that the RFS will raise prices for virtually all consumer 
goods, possibly leading to a consumer backlash against 
renewables generally, not just the mandates. We believe this is 
not the result that Congress wants to achieve. In short, we 
should repeal this act.
    We talked about the blend wall. We understand that we 
cannot go to blend wall. Another question was asked of the 
previous panel. Will the refining industry continue to use 
ethanol? Yes, we are geared to use it at 10 percent. The 
problem is going over 10 percent whether it is from 
technologies that exist today, like corn ethanol, or cellulosic 
ethanol. It is still ethanol. The automobile engine or the 
lawnmower engine, it makes no differentiation between the two.
    Complicating matters further, we are not the entities that 
in many cases actually blend the ethanol and we must go into 
the open market to purchase the compliance credit known as the 
RIN. When this fuel supply contains the maximum number of 
renewable fuel that it can handle, no more RINs can be 
generated for producers for compliance. So, in essence, the RIN 
is a permit to sell gasoline and diesel. It is the mirror image 
of the cap and trade system.
    And Senator Vitter, this goes to your question regarding 
the impact on consumers ultimately at the pump. Refiners are 
going to have a couple of choices if this RIN market continues 
at it was in the winter and summer of 2013 here. If you cannot 
get the RIN credit to sell the gasoline or diesel, you can 
either cut runs or you can export more. Either way, as studies 
have indicated, either way is not good for the American 
consumer.
    The volumes that EPA proposed in August to waive the 2014 
requirements is a good start, but we believe you need an 
additional cushion. We believe you are trying to be too, too 
accurate on setting that number. We think a 9.7 percent would 
be better to allow some liquidity in the market.
    In closing, I have got 5 seconds here, folks, this is an 
unworkable law. It is a negative impact on the consumer. We 
understand the desire of Congress in 2007, but let us look at 
it from a 2013 reality.
    Thank you.
    [The prepared statement of Mr. Drevna follows:]
    
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    Senator Boxer. Thank you, sir.
    I wanted to mention for the benefit of everyone watching 
that our first two witnesses were majority witnesses. Our last 
witness is a minority witness. Our next witness is a bipartisan 
witness, and that is Mr. Jon Holzfaster, owner and operator of 
a farm. And we welcome you.

  STATEMENT OF JON HOLZFASTER, OWNER AND OPERATOR, HOLZFASTER 
                              FARM

    Mr. Holzfaster. Thank you. Chairman Boxer, Ranking Members 
Vitter and Sessions, thank you for the opportunity to testify 
about our Nation's domestic renewable fuels. Senator Fischer, 
thank you for your earlier introduction. Go Huskers.
    [Laughter.]
    Mr. Holzfaster. My name is Jon Holzfaster. I have been 
farming for 27 years in Southwest Nebraska. I run a cattle 
feeding operation and use ethanol blends on 30 percent on my 
farm. I grow corn, soy beans, popcorn, wheat, and alfalfa. I 
serve on NCGA's Corn Board and Chair their NASCAR Advisory 
Committee. I previously served as their liaison to the National 
Cattlemen's Beef Association.
    NCGA was founded in 1957 and represents 40,000 dues-paying 
corn growers. Corn is important globally as food, feed and 
fuel. It is possibly the most versatile crop in the world, and 
demand is at an all-time high. The RFS is a critical piece of 
our Nation's energy policy. In 2012, the RFS supported more 
than 300,000 jobs, displaced over 450 million barrels of 
imported oil, lowered gas prices at the pump by nearly $1, all 
while improving the environmental footprint of our Nation's 
transportation fuels.
    I am proud to say that farmers work hard to be good 
stewards of the land and environment. Corn farmers have 
responded to demand by producing more corn on approximately the 
same amount of land. In the last 30 years, corn production has 
improved in all measures of resource efficiency, land use, soil 
erosion, water use, energy use and greenhouse gas emissions.
    Corn ethanol is one of the most successful components of 
our Nation's renewable energy policy. Despite this, several 
environmental groups choose to ignore scientific evidence and 
side with the oil and gas industry instead of embracing a 
renewable energy resource grown here at home.
    With the emergence of the ethanol industry, U.S. farmers 
have responded to demand by growing significant larger corn 
crops while using significantly fewer inputs. Of this increased 
crop, 40 percent was used for livestock feed and 31 percent for 
ethanol production.
    During the ethanol production process, two other co-
products are made, corn oil, which is used for biodiesel 
production, and dried distiller's grains. According to the U.N. 
Food and Agricultural Organization, DDGs have become the most 
popular feed ingredient used in beef, dairy, swine and poultry 
diets. I feed locally produced DDGs to my cattle in my feed 
yard. If I did not have access to this product, I would 
seriously consider eliminating cattle feeding from my 
operation.
    We have heard criticism that the production of ethanol has 
forced land out of the Conservation Reserve Program. However, 
this is not true. General CRP sign-up acreage has decreased, 
but continuous sign-ups have increased and still target the 
most environmentally sensitive land. The land that is 
considered environmentally sound is returned to production.
    There are over 20 ethanol plants operating in Nebraska. 
This gives me multiple competitive options for marketing my 
grain, options that exist because of the commitment that 
Congress made establishing the RFS. Before these ethanol plants 
were built, a high percentage of the corn in our area was 
exported. Now virtually every bushel is transformed into fuel 
and feed locally. That value is captured and multiplied 
throughout our communities, generating economic vitality and 
tax revenue.
    Decisions affecting next year's crop have already been 
made. In the past, the RFS has provided some certainty that 
there would be a viable commodity market. But EPA's proposed 
rule eliminates this certainty. Based on USDA commodity costs 
and returns, current market prices fall below the price of 
production. This recent decline in the price of corn is the 
largest drop in prices in six decades. Combined with increased 
input costs and lower crop prices, it would no longer be viable 
for farmers to provide the resources as they do.
    NCGA appreciates this Committee's and Subcommittee's work 
to understand our perspective and we strongly believe the RFS 
is doing exactly what it is intended to do.
    I look forward to hearing testimony and answering 
questions.
    Thank you.
    [The prepared statement of Mr. Holzfaster follows:]
    
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    Senator Boxer. Thank you. Our next witness is Mr. Scott 
Faber of the Environmental Working Group. Welcome.

STATEMENT OF SCOTT FABER, SENIOR VICE PRESIDENT FOR GOVERNMENT 
              AFFAIRS, ENVIRONMENTAL WORKING GROUP

    Mr. Faber. Thank you. Chairman Boxer, Ranking Member 
Vitter, members of the Committee, thank you very much for the 
opportunity to testify. I do not envy your job after reading 
all of the written testimony and many of the footnotes and 
supplemental reports. It would be hard to be able to judge 
whether the RFS is working or not.
    Our view is that we need an RFS. We share your belief that 
RFS is critically important to reduce the carbon intensity of 
our liquid fuels but that the current RFS is not working as you 
intended when Congress passed the Energy Independence and 
Security Act of 2007.
    In particular, we believe that RFS is not providing a 
powerful enough incentive for the development of low carbon 
second generation biofuels to offset the negative impacts of 
conventional biofuels like corn ethanol. And the simple fact of 
the matter is that the surge in corn ethanol production that 
occurred after 2007 has encouraged farmers to plow up millions 
of acres of wetlands and grasslands, releasing carbon stored in 
the soil into the atmosphere.
    But that is not all. Because farmers have applied more 
fertilizer to these newly converted lands, the RFS has also 
increased nitrous oxide emissions, increased polluted runoff 
into our rivers, lakes and bays, increased water use and 
increased the emissions of air pollutants like particulate 
matter.
    I expect the environmental impacts of corn ethanol will 
continue to be subject to debate for many years. For what it is 
worth, the National Academy of Sciences looked at these 
questions and the NAS, relying on EPA's analysis, concluded, 
and I quote, corn grain ethanol produced in 2011 is a higher 
emitter of GHG than gasoline and the increase in corn 
production has contributed to environmental and surface effects 
on surface and groundwater. And finally, and again I quote, 
projected air quality effects from ethanol fuel would be more 
damaging to human health than those from gasoline use.
    And while the corn ethanol mandate has been great for corn 
farmers, and times have not always been great for corn farmers, 
it has contributed to higher food and feed prices. By diverting 
more than 40 percent of our corn crop to displace just 7 
percent of our gasoline, we have increased the price of food 
and feed. That is according to everyone from USDA to the World 
Bank to independent economists. They found that the rapid 
expansion of corn ethanol after passage of the 2007 law 
increased the price of corn and ultimately the cost of basic 
staples like milk and meat.
    Fortunately, some second generation biofuels hold real 
promise because, as you have heard today, many of these fuels 
convert crop waste, wood waste, even municipal solid waste, not 
food, into fuel. Unfortunately, as you have also heard today, 
AAA, automakers, engine manufacturers and this morning the EPA 
have repeatedly told us that the vast majority of engines and 
infrastructure are simply not yet compatible with higher-
ethanol blends.
    So, there is a real world limit on the amount of ethanol 
that can be blended into gasoline. We need to divert more of 
that limited pool to second generation biofuels, and EPA's 
proposed RVO takes an important small first step in that 
direction.
    There are other steps that we can take to accelerate the 
development of low carbon second generation biofuels. At a 
minimum, EPA could level the playing field for these fuels by 
making all corn ethanol subject to the same greenhouse gas 
reduction standards. Right now, as you know, most corn ethanol 
production is simply exempt from any greenhouse gas reduction 
standards. By contrast, second generation biofuels must reduce 
GHG emissions by 50 or 60 percent.
    There are other steps we could take as well, especially to 
accelerate the development of drop-in biofuels that do not 
create the infrastructure and engine compatibility problems 
that we have heard about today.
    So, let me stop there and simply say, again, we support 
RFS, we believe it is important to have an RFS to drive the 
development of low carbon liquid biofuels but that RFS is not 
providing a strong enough incentive to develop the second 
generation fuels that I know we all would like to see in the 
marketplace.
    Thank you.
    [The prepared statement of Mr. Faber follows:]
    
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    Senator Boxer. Thank you very much. And we complete with a 
majority witness, Mr. Brooke Coleman, Executive Director, 
Advanced Ethanol Coalition. Welcome.

   STATEMENT OF BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED 
                        ETHANOL COUNCIL

    Mr. Coleman. Thank you. Good morning Chairwoman Boxer, 
Ranking Member Vitter and members of the Committee, my name is 
Brooke Coleman. I am the Executive Director of the Advanced 
Ethanol Council.
    The Advanced Ethanol Council represents worldwide leaders 
in the effort to develop and commercialize the next generation 
of ethanol fuels. We were founded by corporate leaders to 
establish one voice for the advanced and cellulosic ethanol 
industry and we maintain a partnership with the Renewable Fuels 
Association.
    I, too, have submitted voluminous written testimony like my 
colleagues have, but I want to make a couple of points in the 
time that I have.
    First, the Federal Renewable Fuels Standard is basically an 
advanced biofuel development policy at this point. Ninety 
percent of the gallons left in the policy are advanced biofuel 
gallons. Critics want to make the policy all about corn ethanol 
because they think it puts them in the best position to succeed 
legislatively, politically and from a public relations 
perspective. But what is really at stake here is the emergence 
of a new low carbon industry via both stand-alone plants and 
bolt-on technologies at existing plants.
    If this country is going to lead the world in innovation, 
create new jobs, further reduce dependence on foreign oil and 
mitigate climate change emissions, it must reject backward 
thinking and move forward. And the RFS does that.
    Second, proposals to open up the RFS are the policy 
equivalent of exporting the advanced biofuel opportunity to 
other countries like Brazil and China. The United States is not 
going to make a $12 billion per month commitment to clean 
energy, like China has. The U.S. has not made a commitment to 
biofuel infrastructure and flex-fuel vehicles like Brazil has. 
What we have is the RFS, described by one of my members as the 
gold standard globally for advanced biofuel policy.
    A recent report by Navigant Consulting in my home State of 
Massachusetts looked at the country ranking for advanced 
biofuel development and it found that the United States is No. 
1 because of the RFS: ``The United States is currently home to 
estimated 67 percent of global ventures in advanced biofuels, 
and the Renewable Fuels Standard will keep the U.S. at the 
epicenter of the market going forward.''
    Less than 6 years after the signing of RFS II by President 
Bush, and notwithstanding our 100-year recession, we now have 
plants in places like Vero Beach, Florida, and Columbus, 
Mississippi. We are finishing construction on a plant in 
Hugoton, Kansas, where at one point recently there were 100 
construction workers and engineers, 1,000, I apologize, 1,000 
construction workers and engineers in a town of 1,400.
    Third, I would encourage the Committee to take a really 
hard look at the arguments being made against the RFS. There is 
an extraordinary amount of misinformation flowing around this 
regulation, including in this room. We all know that the oil 
industry has enough money to make it seem like it is raining on 
a sunny day and that is what is going on right here. The RFS is 
increasing food prices, we have heard. But the Food Index for 
food prices over the last 8 to 10 years is going down, not up. 
We heard that high rent prices are a cost of compliance that 
will ultimately increase gas prices.
    The oil industry has been here telling you that, until 
quarterly earnings calls reveal that companies like BP, 
ExxonMobil, Hess, Murphy, Marathon and Phillips 66 have all 
reported no significant costs and actually, in most cases, 
profit from the higher RIN prices that were being traded in 
2013. That is because they receive the RIN for free when they 
buy a gallon of renewable fuel. You cannot have the same dollar 
be a cost and a profit. That is Economics 101.
    Finally, a really important question is often overlooked. 
If not renewable fuel gallons, then what? It is not 2005 
gasoline in the rule. It is unconventional oil coming in on the 
margin of the industry. If that is where we want to go as a 
policy, that is a more expensive product, it is a more carbon-
intensive product, and it is a more ecologically damaging 
product.
    Going forward, to close, it is absolutely critical for 
Congress to leave the RFS alone. Tens of billions of dollars 
have been invested with the expectation that Congress will not 
change the rules in the middle of the game. The program is 
disruptive, but it is disruptive by design with flexibility.
    I would hope that the Committee will consider the idea that 
the program is getting all this attention not because it is 
broken, but because it is working.
    [The prepared statement of Mr. Coleman follows:]
    
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    Senator Boxer. Thank you, sir.
    So, I will start. Mr. Drevna, under current law, there is 
no limit on the rate of increase in the alternative fuels 
requirement up to the target. You probably know that. I am not 
asking a question, I am just stating fact. And I believe 
setting such a limit, which was proposed by one of the members 
of this panel, would be a disincentive to development of new 
technologies. And the first panel agreed with that. And I want 
to turn to my questions--Mr. Holzfaster, what percentage of 
ethanol is blended into the fuel you use in your farming 
equipment?
    Mr. Holzfaster. Currently the fuel that we have delivered 
to our farm is delivered at a 30 percent blend.
    Senator Boxer. Thirty percent blend. Has the use of this 
level of ethanol caused any engine or performance problems in 
your equipment?
    Mr. Holzfaster. It has not.
    Senator Boxer. None at all?
    Mr. Holzfaster. None at all.
    Senator Boxer. OK. And Mr. Holzfaster, in your testimony 
you briefly described the positive economic impacts on your 
community resulting from the RFS Program. Would you describe a 
little bit more what it is like where you live and how the RFS 
has helped your community and other rural communities across 
this country?
    Mr. Holzfaster. I live in a rural community. The small town 
of Paxton that I come from has less than 570 people when 
everybody is home.
    Senator Boxer. We have that on my street.
    [Laughter.]
    Senator Boxer. I understand.
    Mr. Holzfaster. The certainty that the RFS has provided to 
the commodity markets has allowed confidence in production. 
Right now, at the close of market yesterday, corn prices were 
below my cost of production. That takes away a lot of the 
confidence and security that otherwise I would have to proceed 
to the following year.
    I have friends and neighbors who, unlike a few years ago, 
say their families now drive safe, reliable vehicles. A 
neighbor whose kids that are in high school can now say yes, I 
am going to college. Otherwise, in a rural area, you would say 
well, we will see what the corn market does. That confidence is 
there with the current RFS.
    Senator Boxer. So, it is fair to say you see prosperity 
moving into your community because of this?
    Mr. Holzfaster. Yes, that would be fair. Prosperity is a 
strong word but at least security.
    Senator Boxer. Better hope? Is that a better way to put it? 
More hope?
    Mr. Holzfaster. Absolutely. Absolutely.
    Senator Boxer. More hope. OK.
    I wanted to point out, because I am going to yield back, 
that other environmental organizations do support the current 
RFS including the NRDC, the Union of Concerned Scientists. But 
I would say, Mr. Faber, I was pleased that you would say your 
problem is particularly with the impact of the corn ethanol on 
the environment. Is that fair to say? But you are supporting 
the development of these other alternative fuels, the non-food 
source? Is that fair?
    Mr. Faber. That is right, Chairman Boxer. Our big challenge 
is there simply is a limited pool because of the constraints on 
engines and infrastructure for ethanol. And I think we are all 
anxious to see second generation ethanol reach the marketplace.
    Senator Boxer. I understand.
    Mr. Faber. Right now, that marketplace is completely 
saturated by conventional corn ethanol.
    Senator Boxer. So you would not repeal the whole thing, but 
you would alter it?
    Mr. Faber. I think that there are certainly reforms that we 
can make that give the second generation of fuels a foothold in 
the pool for, with corn ethanol. Absolutely.
    Senator Boxer. OK. Thank you. I would yield back and ask 
Senator Vitter for his time.
    Senator Vitter. Thank you, Madam Chair. I am going to ask 
one quick question and then reserve my time and let Senator 
Inhofe go because he has some pressing items on his schedule.
    But my very quick question, and I will not get off topic, 
is just to ask General Clark. We have had a discussion about 
another public policy issue and I repeated a question to you in 
a letter yesterday which you had committed to answer in our 
conversation on October 8. And so the simple question is, do 
you plan on answering that question?
    General Clark. I am very happy to answer that question. I 
have not been paid to go down to Louisiana. I went down there 
to talk about Lifeline phones because over 36,000 veterans in 
the State of Louisiana are dependent on those phones for 
telephone communication. Those phones are not paid for by the 
U.S. Government. They are not a rip-off of the taxpayer.
    Senator Boxer. Why are we talking about people going to 
talk about phones? What is this? This is not the Commerce 
Committee.
    Senator Vitter. I was not trying to get off topic.
    Senator Boxer. Well, you got off topic.
    Senator Vitter. Will you be answering the full question in 
writing?
    Senator Boxer. I am not, may I just say, as Chairman of 
this Committee, I give people a lot of leeway. We are not going 
to attack panelists on other issues.
    Senator Vitter. I am not----
    Senator Boxer. Period. End of quote. If you want to do it, 
have a press conference.
    Senator Vitter. I will take that as a yes, so I look 
forward to your full answer in writing. With that, I will 
reserve the rest of my time and let Jim Inhofe go because of 
his schedule.
    Senator Inhofe. Thank you very much, both of you, and I 
appreciate it.
    General Clark, you and I have known each other for a long 
time. Actually, we have been friends even though we have 
disagreed. But I have to say that I was very impressed with the 
comments you made at the beginning, particularly when you said 
that we need to produce as much domestic oil as possible, 
looking at it from a national security perspective.
    So, for the record, now there is not time to give the 
answer now, don't you think a good way to increase that 
production, domestic production, would be to go into the 
Federal public lands for expiration? I will wait, just to get 
that for the record.
    I have two questions for Mr. Drevna. Mr. Drevna, first of 
all, thanks for redeeming me on my cap and trade statement. 
Right now, we have gas stations all over my State. Stick that 
up again, will you? And I am asked everywhere I go, it seems 
like it is unanimous. They all crowd into these places and I am 
really concerned about it because I get the question from the 
people in Oklahoma as to, you know, is under this RFS system, 
the way that it is divided up, what kind of assurance would 
there be that in my State of Oklahoma that we would be able to 
continue just at the current rate of selling clear gas? Do you 
have any thoughts about that?
    Mr. Drevna. Senator Inhofe, yes. That is one of the reasons 
why we specifically in our waiver request to the EPA on the 
2014 RVOs that we had suggested that they even go a little bit 
lower because, yes, in order to provide the clear gasoline. And 
by no means is Oklahoma the only State who wants E0 clean 
gasoline as was mentioned earlier in the opening statements for 
boats, et cetera.
    So, we want that a little bit lower to give it a little bit 
more fluidity into the system. Our position is that if EPA errs 
a little bit on the low side of the ethanol mandate for 2014, 
no harm, no foul because we will be blending that amount 
anyway. If they err on the high side, then we are going to find 
ourselves back in that same position that we were in the late 
spring, early summer of 2013 where the RIN prices, which are 
not free, went through the roof.
    So, what we are saying is that we need that fluidity. The 
other problem with providing E0 to everybody is that even with 
E0, we are still required to find a RIN for that particular 
gallon of gasoline. So, we have to offset it by going somewhere 
else. That is why we need that extra cushion. We applaud EPA 
for acknowledging the blend wall but we believe that they have 
to go a little bit further.
    Senator Inhofe. Maybe for the record you can give me a 
little simpler response that I can tell them when they ask the 
question in Oklahoma. And it is something of great concern. One 
more question.
    A lot of people are characterizing the oil and gas industry 
as monopolistic. I think it is really important that we realize 
the industry, I am going to make a statement and see if you 
agree with it, the oil industry has invested more on 
alternative fuel research and development than the entire 
renewable sector and the Federal Government combined. Now, a 
lot of that has taken place in our beautiful little city of 
Bartlesville, Oklahoma. When you are faced with this accusation 
of a monopolistic, what is your response?
    Mr. Drevna. Well, as you said so accurately, we have 
invested as an industry more than anyone else as far as the 
advanced biofuels. The question is, are products monopolistic 
or are companies monopolistic? The product is gasoline and 
diesel. That is what we sell. How can we, we do not control the 
gas stations who sell the gasoline. We have franchisees. About 
50 percent of the ownership of gas stations are franchisors who 
have contracts with the folks. The other 50 percent, or more 
than 50 percent, are independent, you know, non-branded. They 
do not want to put the infrastructure in at upwards of $200,000 
a station to sell a product that no one wants.
    Senator Boxer. Thank you. Well, we are going to put into 
the record the poor oil companies' profits for the third 
quarter. The five big ones, two of which are not American 
companies, earned $23.1 billion. So somehow I guess you can 
manage to spend a few bucks on the RINs.
    Mr. Drevna. Madam Chair, it is not the question of spending 
dollars on RINs. It is how much we can put into the system and 
keep the American consumer----
    Senator Boxer. I understand. You just complained about the 
price of the RINs, but maybe I heard you wrong. You did talk 
about the price of the RINs. But we are going to move forward 
here, and next we are going to have Senator Cardin.
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    Senator Cardin. Thank you, Madam Chair.
    Mr. Faber, I particularly thank you for your comments 
because I appreciate your testimony, I very much appreciate the 
group you represent, the Environmental Working Group. We are in 
agreement on our goals, and that is we understand the 
importance of energy security but we also want to make sure it 
is done in a way that is in the best interest of our 
environment. And I fully concur in that.
    And if we were drafting a Renewable Fuels Standard bill 
today, I think we would be very cautious about using corn 
ethanol. And yes, you can say something positive. It is 
produced domestically. But the damage it causes and the 
disruption to the food supply, its efficiency issues, are 
certainly not the desirable outcome and we would want better 
results.
    So, my question to you is, how do we level the playing 
field for second generation biofuels in the Renewable Fuel 
Standard provisions so that we can go to the type of product 
that is not only domestically produced but is better for the 
environment and our food supply?
    Mr. Faber. Thank you, Senator Cardin. As you well know, the 
rise, the sudden rise in corn prices had a devastating impact 
on the broiler industry. Just between 2008 and 2011, about one-
third of broiler companies were either in bankruptcy or closed 
or for sale. So, it was a difficult time to make, for that 
industry to make the adjustment to the higher corn prices. I 
think is important to remember that while it certainly helped 
one part of agriculture, it had a really significant impact on 
a second point of agriculture.
    And to your point, I think if we had known that there would 
be this surge in prices in 2007, as a result of the mandate, we 
might have written a different kind of policy. Going forward, 
we think it is important to find ways to reduce the amount of 
corn ethanol that is blended into gasoline.
    As we have heard, there is a limited pool for ethanol of 
any kind. Right now, that pool is saturated by corn ethanol. To 
make room for second generation biofuels, especially cellulosic 
ethanol, we believe it is important for Congress to help reduce 
the amount of corn ethanol that we are required to blend into 
gasoline. We think that would send a powerful signal to the 
investment community to place their bets on second generation 
fuel.
    Senator Cardin. So, just reducing the corn ethanol numbers 
would put additional incentives for investment into the next 
generation?
    Mr. Faber. I think we have to face a simple fact which is 
that the way that we are managing RFS, the delays in the RVO, 
the likelihood of litigation has created an enormous amount of 
uncertainty, and it is time for Congress to step in and provide 
some new direction so that the investment community knows what 
sorts of investments to make.
    Senator Cardin. And let me bring up the second issue that 
you and are I in total agreement. The argument being made 
against trying to move forward a sensible reform of the 
Renewable Fuel Standards is that it opens up an area that could 
be mischief. And we have heard this argument many times before.
    My view is that good policy is what we need to do and that 
the failure to enact good policy builds a pressure for more 
extreme results that could be damaging to our overall objective 
on the Renewable Fuel Standards. Would you want to comment on 
that?
    Mr. Faber. I share your concerns. Certainly amending the 
Clean Air Act is fraught with peril. There are other proposals 
to weaken the Clean Air Act that might be offered as part of 
that process. I think it is important to keep that in mind as 
we reevaluate----
    Senator Cardin. And I assume that if we do any of those 
issues, you will be one of the strongest voices to point that 
out?
    Mr. Faber. Absolutely.
    Senator Cardin. And I will be also.
    Mr. Faber. I think there is a coalition that includes 
environmentalists, the people who produce food, the people who 
manufacture cars and other small engines who would work 
together to try to fend off any of those proposals, in part 
because we ultimately all want to see a more certain regulatory 
environment that really spurs the growth of these second 
generation fuels.
    Senator Cardin. Thank you.
    Senator Boxer. Yes, and there is a similar coalition that 
would oppose us even opening up the Clean Air Act. I can assure 
you of that.
    Mr. Coleman, you wanted desperately to say something. And 
then we will turn to Senator Fischer.
    Mr. Coleman. Yes. Thank you. I sort of accused the RFS 
debate of flowing down the line of misinformation and I am 
hearing more of it, so I just want to respond.
    Point No. 1, the monopoly question that Senator Inhofe 
raised. It does not matter whether it is a monopoly or not. It 
is not a price-driven, competitive marketplace. It is 
controlled at the top by OPEC, in the United States it is 
controlled at the wholesale level in huge swaths of this 
country by ExxonMobil. And so let us not get into a debate 
about whether it is a monopoly or not.
    The issue is that it drives innovators out of a space. So, 
our guys have to look for and say, all right, if I innovate and 
if I create a better mouse trap and I beat those guys on price, 
I am going to sell my mouse trap. The problem with OPEC is that 
they can meet on a Tuesday, change prices on a Thursday, and 
that increases risk through the roof for guys that are trying 
to predict what is going to happen in 2017, 2018.
    So, to Senator Inhofe's point, it does not matter whether 
it is a monopoly. What is happening is collusion in driving 
innovation out of the space, and the RFS fixes that by giving 
us a reasonable expectation of demand over time----
    Senator Boxer. OK. I have to cut you off. You made a good 
point.
    And I want to say, Senator, do you mind if Senator Vitter 
goes first with his remaining 3 minutes? Thank you.
    Senator Vitter. Thank you. General Clark, did I hear your 
statement right that it is clear, and manufacturers agree, that 
E15 is fine, safe and no problem for 2001 and later?
    General Clark. I said that the Department of Energy tested 
a number of cars, I think 80-some-odd cars, 150,000 miles, 2001 
and later models, with no problems from E15. What I said was 
manufacturers on current models, 2011, starting 2012 and 2013, 
those manufacturers are warranting for E15.
    Senator Vitter. OK, that is an important clarification.
    Let me just submit for the record some questions and 
answers summarized in a Jim Sensenbrenner letter which makes it 
crystal clear that manufacturers are extremely concerned about 
E15 for those older models going back to 2001 because that is a 
big concern by the people who make those engines. I would 
submit that for the record.
    Senator Boxer. Thank you.
    Senator Vitter. Let me also comment in reaction to some of 
the discussion about Clean Air Act issues, et cetera. Just as 
one hopefully important example, Senator Cardin and I are 
working on a focus bill in this area. The goal of that bill is 
to make this program far more workable and take out the threat 
of hitting the blend wall and causing real disruption, 
particularly for consumers.
    The goal is not to revisit the Clean Air Act, to do away 
with the program, et cetera. Many of those things I would 
support. But in the context of working on this bill, that is 
not only not the goal, but I will oppose amendments that do 
that. And so it is just going to be about that sort of 
important reform to this program which I think is necessary.
    Having said that, if the choice is between EPA using its 
waiver authority, and presumably it will have that every year, 
or doing a reform legislative effort like that which is not 
about the Clean Air Act, which is not about doing away with the 
whole program, I would like to hear from each of you what path 
you think we should go down. Basically, the legal status quo, 
let EPA handle it, or a focused legislative fix?
    Senator Boxer. Senator. Would each of you commit to putting 
that important question in writing and getting it to this 
Committee in the next couple of weeks?
    Senator Vitter. OK. And then in closing, Mr. Drevna, is EPA 
on time for the biodiesel standards?
    Mr. Drevna. Absolutely not.
    Senator Vitter. And does that impact EPA's ability to 
increase the mandate again?
    Mr. Drevna. Absolutely. If you look at section 211(o) of 
the Clean Air Act, when the RFS was enacted, the four buckets, 
so to speak, the different fuels, when it, Congress, set the 
volumes.
    Senator Vitter. A final related question. Does any type of 
ethanol impact that blend wall issue?
    Mr. Drevna. As I mentioned earlier, Senator, once that 
molecule of ethanol is in an engine or an automobile or 
vehicle, it cannot differentiate whether it comes from corn, 
sugar cane from Brazil, or cellulosic that may or may not 
exist.
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    Senator Boxer. Thank you, Senator.
    The memorial has started. So, Senator Fischer, you will 
finish it up.
    Senator Fischer. Thank you, Madam Chairman. Of course I am 
going to be directing my questions to my fellow Nebraskan. So, 
welcome again, Jon, for being here.
    I appreciated your comments to the Chairwoman as you 
answered her questions with regards to the impact on rural 
economies on agriculture as a whole if the RFS is changed. When 
we talk about higher corn prices, I am a cattle rancher, so I 
certainly understand the impact of those higher prices and what 
they do to my industry as well. But I am fully supportive of 
ethanol because of the good economic impact is has had on rural 
communities, rural States and truly our country as a whole.
    With that, I would like to get your response on a couple of 
issues that were brought up today. The RFS requires that corn 
and other feed stuffs used to produce renewable fuels from the 
RFS only be sourced from land that was already engaged in 
agriculture production in 2007 and feed stuffs that are grown 
on land converted to crop land after 2007, they do not qualify 
for that renewable biomass. I think that is a point that we 
need to reinforce here.
    We have heard about wetlands being plowed up. We have heard 
about prairies being plowed up. We have heard about the use of 
water when we talk about the production of ethanol. Can you 
specifically address land use issues and water? You know, in 
Nebraska we are very fortunate that we have the Ogallala 
Aquifer which I am on top of the Ogallala Aquifer as you are 
down in Paxton as well. Could you address those?
    Mr. Holzfaster. Sure. Under the current Farm Bill, there 
are swamp buster and sod buster provisions that prevent me from 
doing any type of that conversion. That misinformation has been 
out there, as Mr. Coleman has stated.
    When you talk about water in Nebraska, it is a tremendous 
resource, one that we strive tirelessly to protect and use 
efficiently. We, in agriculture, have been accused of creating 
dirty air and dirty water and that, in all due respect, Mr. 
Faber, hurts. I breathe that air. I drink that water.
    I love this town, but one thing I look forward to is going 
home and breathing that air and drinking that water. I know it 
is safe, I know it is clean, and I would have it no other way. 
It is who I am, it is what I am, it is where my family lives. 
So, that is painful to hear those terms put out there. It is 
not, that is where we are at. We want clean air and water as 
much as anyone else.
    As far as the protection of that resource, I have been 
farming for 27 years and in those years, I am growing 
approximately 50 percent more corn on 50 percent less water. 
The technology that has been available to modern agriculture 
has been tremendous in that efficiency, in the efficient use of 
water.
    Senator Fischer. And how much water does an ethanol plant 
use? What would you compare it to?
    Mr. Holzfaster. A 50 million gallon a year ethanol plant 
uses about as much water as a 9-hole golf course. It is a lot 
of water. It takes a lot of water to run a 9-hole golf course 
and it does an ethanol plant as well. But that is efficient and 
good use of water.
    Senator Fischer. Thank you.
    I would like to say to all of you I appreciate you coming 
in. I think we have to have a balance when we talk about our 
energy resources and how we develop those in the future. Thank 
you very much.
    Thank you, Madam Chair.
    Senator Boxer. Thank you.
    I want to thank everyone for all of your cooperation. I am 
sorry we had a couple of sort of strange personal attacks. I 
was blindsided by that.
    But clearly we are on the verge of technological 
breakthroughs that can make America more secure, that will make 
America more secure. And, as Chairman of this Committee, and I 
have the gavel for now, I am not going to let us reverse course 
on that. I just am not. Now, no program is perfect, that is for 
sure, whatever it is. And even in the private sector no new 
product is perfect and no new marketing strategy is perfect at 
first.
    So, we have got to work together and I am willing to do 
that. But I just think that, overall, let us not turn our back 
on a way to make sure that we can become more energy 
independent and have a better environment in the long run, 
making sure that we do stress those non-food sources I think in 
the future is very important.
    I want to thank all of you. This was a tough hearing 
because we had to push so fast. And we know that EPA has a lot 
of authority under current law to respond to some of the things 
that were said here, on all sides. And they have got a hard 
job. But, you know, they have to keep politics out of it and go 
by the facts. And remember that show a long time ago, Show My 
Age? Only the facts, Madam, that was that show. Most people 
here were not even born when I watched that show.
    So, we will move forward with the facts. And I also want to 
say that Senator Fischer, she played a very important role in 
finding us this, I think, star witness today, our farmer who is 
dealing with this on the ground and he can testify to what is 
working and what is not. And he does not really have that, in 
my opinion, that special agenda that others may bring to the 
table. So, thank you so much, sir.
    And thanks to everybody in the audience.
    We stand adjourned.
    [Whereupon at 11:15 a.m. the Committee was adjourned.]
    [Additional material submitted for the record follows:]
    
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