[Senate Hearing 114-642]
[From the U.S. Government Publishing Office]









                                                        S. Hrg. 114-642

                  USDA RURAL DEVELOPMENT PROGRAMS AND
                  THEIR ECONOMIC IMPACT ACROSS AMERICA

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON RURAL DEVELOPMENT
                               AND ENERGY

                                 of the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION


                               __________

                             APRIL 6, 2016

                               __________

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




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




  Available via the World Wide Web: http://www.agriculture.senate.gov

                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

23-590 PDF                     WASHINGTON : 2018 

















           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                     PAT ROBERTS, Kansas, Chairman

THAD COCHRAN, Mississippi            DEBBIE STABENOW, Michigan
MITCH McCONNELL, Kentucky            PATRICK J. LEAHY, Vermont
JOHN BOOZMAN, Arkansas               SHERROD BROWN, Ohio
JOHN HOEVEN, North Dakota            AMY KLOBUCHAR, Minnesota
DAVID PERDUE, Georgia                MICHAEL BENNET, Colorado
JONI ERNST, Iowa                     KIRSTEN GILLIBRAND, New York
THOM TILLIS, North Carolina          JOE DONNELLY, Indiana
BEN SASSE, Nebraska                  HEIDI HEITKAMP, North Dakota
CHARLES GRASSLEY, Iowa               ROBERT P. CASEY, Jr., Pennsylvania
JOHN THUNE, South Dakota

               Joel T. Leftwich, Majority Staff Director

                Anne C. Hazlett, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

               Joseph A. Shultz, Minority Staff Director

              SUBCOMMITTEE ON RURAL DEVELOPMENT AND ENERGY



                       JONI ERNST, Iowa, Chairman

THAD COCHRAN, Mississippi            HEIDI HEITKAMP, North Dakota
JOHN HOEVEN, North Dakota            SHERROD BROWN, Ohio
DAVID PERDUE, Georgia                AMY KLOBUCHAR, Minnesota
THOM TILLIS, North Carolina          MICHAEL BENNET, Colorado
JOHN THUNE, South Dakota             JOE DONNELLY, Indiana

                                  (ii)























  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

USDA Rural Development Programs and Their Economic Impact Across 
  America........................................................     1

                              ----------                              

                        Wednesday, April 6, 2016
                    STATEMENTS PRESENTED BY SENATORS

Ernst, Hon. Joni, U.S. Senator from the State of Iowa............     1
Heitkamp, Hon. Heidi, U.S. Senator from the State of North Dakota     2
                              ----------                              

                               WITNESSES
                                Panel I

Mensah, Hon. Lisa, Under Secretary, Rural Development, United 
  States Department of Agriculture, Washington, DC...............     4

                                Panel II

Hill, Craig, President, Iowa Farm Bureau Federation, West Des 
  Moines, IA.....................................................    18
Shaw, Monte, Executive Director, Iowa Renewable Fuels 
  Association, Johnston, IA......................................    20
Sommerville, Cris, President, Dakota Turbines, Cooperstown, ND...    22
                              ----------                              

                                APPENDIX

Prepared Statements:
    Tillis, Hon. Thom............................................    34
    Mensah, Hon. Lisa............................................    45
    Hill, Craig..................................................    41
    Shaw, Monte..................................................    54
    Sommerville, Cris............................................    35
Document(s) Submitted for the Record:
Sommerville, Cris:
    DWEA Distributed Wind Vision-2015-2030, Strategies to reach 
      30 GW of ``behind-the-meter'' wind generation by 2030, 
      March 2015.................................................    78
    Griggs-Steele Empowerment Zone, Inc..........................   104
Question and Answer:
Hill, Craig:
    Written response to questions from Hon. Amy Klobuchar........   108
Mensah, Hon. Lisa:
    Written response to questions from Hon. Debbie Stabenow......   118
    Written response to questions from Hon. Michael Bennet.......   121
    Written response to questions from Hon. Joni Ernst...........   109
    Written response to questions from Hon. Amy Klobuchar........   115
Shaw, Monte:
    Written response to questions from Hon. Amy Klobuchar........   126
Sommerville, Cris:
    Written response to questions from Hon. Amy Klobuchar........   132 
 
                  USDA RURAL DEVELOPMENT PROGRAMS AND  
                 THEIR ECONOMIC IMPACT ACROSS AMERICA

                              ----------                              


                        Wednesday, April 6, 2016

       United States Senate, Subcommittee on Rural 
                            Development and Energy,
         Committee on Agriculture, Nutrition, and Forestry,
                                                     Washington, DC
    The committee met, pursuant to notice, at 10:02 a.m., in 
room 328A, Russell Senate Office Building, Hon. Joni Ernst, 
Chairman of the subcommittee, presiding.
    Present or submitting a statement: Senators Ernst, Hoeven, 
Tillis, Heitkamp, Brown, Klobuchar, Bennet, and Donnelly.

 STATEMENT OF HON. JONI ERNST, U.S. SENATOR FROM THE STATE OF 
                              IOWA

    Senator Ernst. Good morning. Thank you, Ranking Member 
Heitkamp, for being here today. We do expect that we will have 
other members of the subcommittee coming in and out this 
morning, as well, So I apologize for that. But, I call this 
hearing of the Senate Committee on Agriculture, Nutrition, and 
Forestry's Subcommittee on Rural Development and Energy to 
order.
    I feel fortunate to be chairing this committee, considering 
my upbringing in rural America and the critical role that Iowa 
plays in producing energy for the nation. Today, over half of 
Iowa's three million residents live in rural communities. Each 
year, I do a tour of our state's 99 counties, and 75 of those 
counties have a population of 25,000 or less.
    As I am committed to do when I came to the Senate last 
year, I really do want to focus on the things that make sense 
while working to streamline or even eliminate federal programs 
that foster bad behavior by both the government and the people. 
I believe it is imperative that we focus on the causes of rural 
poverty and work to provide opportunities for folks to overcome 
obstacles that have created many of the problems we see 
throughout rural America. Lack of jobs and poor rural housing 
are just two examples I hear about while traveling throughout 
Iowa.
    Since the early 1900s, the Federal Government has 
administered various programs aiding communities in rural 
America. Today, the major agency tasked with carrying out the 
bulk of these programs is USDA's Office of Rural Development. 
Created under the 1990 Farm Bill, the Office of Rural 
Development's main function is administering grants, loans, and 
loan guarantees to support a number of services in rural 
communities, including the construction and maintenance of 
electric and telecommunications infrastructure, rural business 
development and retention, water and wastewater treatment 
facilities, and rural housing.
    In continuing with my commitment to bring effective 
oversight of programs within the Federal Government, and as we 
begin preliminary discussions about the next Farm Bill, it is 
imperative we look at programs under my subcommittee's 
jurisdiction to ensure that Congress is being an effective 
steward of the taxpayers' money and that USDA is implementing 
programs as we intended.
    In Iowa, production agriculture takes the center stage, as 
our state's fertile soil and ideal growing conditions have 
allowed us to lead the country in the production of pork, corn, 
and soybeans. In addition to that, Iowa is proud to lead the 
nation in ethanol and biodiesel production. Many of the energy 
programs administered by USDA's Rural Development help support 
Iowa's biofuels industry, employing over 45,000 Iowans, and 
nationwide contributing over $52 billion to annual GDP.
    Ms. Under Secretary, I look forward to hearing your 
testimony today and asking you some questions in regards to the 
state of USDA Rural Development.
    But, before we hear from you, I want to turn things over to 
Ranking Member Heitkamp for any opening remarks.

 STATEMENT OF HON. HEIDI HEITKAMP, U.S. SENATOR FROM THE STATE 
                        OF NORTH DAKOTA

    Senator Heitkamp. Thank you, Chairman Ernst, and thank you 
for being a great partner in putting together this critical 
hearing.
    Our subcommittee, we want to point out, is the only one so 
far in this Congress in this committee to hold a hearing, and 
last Congress, when I chaired this subcommittee, we were only 
one of two. I think it highlights for us the importance of 
rural development.
    I often say this, and I think it is true, with the 
exception of my partner on this subcommittee, we wake up every 
morning thinking about rural America. Not a lot of folks in the 
Senate do. That is because we come from rural America and we 
know what a great opportunity it is to grow our economy if we 
focus on these areas.
    I do not think there is any doubt that USDA Rural 
Development is one of our country's greatest success stories. 
It has brought electricity, clean water, broadband, and 
critical infrastructure to remote areas of our nation. We have 
seen great progress, but there is still more to do.
    I think a lot of people do not realize it, but 85 percent 
of our country's persistent poverty counties are in rural 
America. Poverty is not just an urban issue. We need to 
remember that when it comes to these critical issues of 
economic development.
    I grew up in a small rural community that served our 
farmers. It is a little town called Mantador. If you do not 
know where that is, it is between Barney and Great Bend.
    [Laughter.]
    Senator Heitkamp. But it tells you--yes, you have been 
there, right? My family, incidentally, was one-tenth the 
population, so we have great bragging rights.
    [Laughter.]
    Senator Heitkamp. But, growing up in those communities, we 
know how difficult it is for communities to modernize 
wastewater facilities, expand high-speed internet, or invest in 
community facilities. USDA Rural Development's partnership with 
rural America makes that possible.
    I am proud to have been part of writing a 2014 Farm Bill 
where we continued critical investments and improved the way we 
operate, such as incentivizing greater regional coordination to 
make the best of our federal investments. As we will hear this 
morning, rural economic success is not exclusive to USDA. Other 
important policies, like the Renewable Fuel Standard, also play 
an important role in providing business certainty and ensuring 
markets for developing technologies.
    Most people do not know this, but North Dakota has a 
vibrant start-up community and we are proud to have new small 
businesses popping up all the time. In fact, I recently did a 
tour of northeast North Dakota where I heard from rural 
developers, and one of the issues that I heard, which was 
fascinating to me, is we used to believe in economic 
development back in the 1990s that if you simply created 
primary sector jobs, and new wealth creation jobs, that would 
revitalize rural communities. What we are finding out is that 
we need to create other kinds of opportunities and look at 
growing communities, whether it is the internet, whether it is 
a more vibrant retail sector, things that would attract 
businesses to those communities.
    In fact, those three communities that I visited in that 
region have almost 100 primary sector jobs wide open with no 
applicants. It is a reminder that the work that we do in 
building infrastructure is absolutely critical, along with 
affordable housing, which tends to be a real challenge in rural 
America.
    So, I am excited that one of those small businesses is with 
us today, a company that would not exist but for a rural 
development loan and which utilizes RD programs to grow their 
business. I will do a full introduction in a bit, but Dakota 
Turbines is an excellent and perfect example of how federal 
investments can grow small businesses, create jobs, and build a 
small rural community.
    So, thank you, all of our witnesses, for being here today. 
I look forward to a productive discussion on the importance of 
rural development and the ways that we can work together to 
continue these investments.
    Thank you, Chairman, and I turn the microphone back to you.
    Senator Ernst. Thank you, Ranking Member.
    Today, for our first panel, I am pleased to welcome Ms. 
Lisa Mensah, the Under Secretary of USDA Rural Development. Ms. 
Mensah had an impressive track record in the private sector 
before being nominated to this role by President Obama and 
confirmed by the Senate in November of 2014. Previously, she 
was the founding Executive Director of the Initiative on 
Financial Security at the Aspen Institute, where she led a 
national bipartisan effort to promote solutions to the complex 
problems of helping Americans save money, buy homes, and 
finance retirement. She has also served at the Ford Foundation, 
where she was responsible for the Nation's largest 
philanthropic grant and loan portfolio of investments in rural 
America.
    In her role as Under Secretary, Ms. Mensah leads the three 
agencies tasked with improving the economic well-being of rural 
America, the Rural Housing Service, the Rural Utility Service, 
and the Rural Business Cooperative Service.
    Born and raised in Oregon, she is the daughter of an 
immigrant from Ghana and of a former Iowa farm girl, and Ms. 
Mensah noted earlier that her mother was born and raised in 
Atlantic, Iowa, again, one of those small communities, 
Atlantic, Iowa is where my sister and her husband farm, and it 
is just up the road a bit from where I live today in Red Oak, 
Iowa.
    So, I appreciate it so much. Ms. Under Secretary, I look 
forward to hearing your testimony today and asking you some 
questions in regards to the state of USDA Rural Development.
    So, with that, Ms. Under Secretary, I would love to hear 
your comments. Thank you so much.

      STATEMENT OF LISA MENSAH, UNDER SECRETARY FOR RURAL 
  DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC

    Ms. Mensah. Thank you very much, Chairman Ernst and Ranking 
Member Heitkamp and members of the subcommittee. Thank you for 
the opportunity to be here this morning to discuss the 
Department of Agriculture's Rural Development mission area.
    Rural Development, or RD, as we are known in our 
communities, manages a loan portfolio that is now $212 billion, 
and we are organized into the three agencies that you 
mentioned, Rural Utility Programs, Rural Business and 
Cooperative Services, and Rural Housing and Community 
Facilities. Our fundamental mission is to increase economic 
opportunity and improve the quality of life for all rural 
citizens. Our investments support rural residents looking for 
safe and affordable housing, municipalities seeking water, 
infrastructure, and community facilities, and small rural 
businesses, co-ops, and ag producers who are looking to expand 
to new markets. RD investment capital spurs economic 
development and the jobs that come with it.
    I appreciate the authorities and the resources that are 
provided to us by Congress to allow us to continue to work on 
behalf of rural America. Your work on the 2014 Farm Bill 
renewed our authority to strengthen our efforts on our core 
programs to invest in rural America. Through the energy titles, 
in particular, this legislation expanded our ability to spur 
growth. Rural America is at the forefront of cultivating 
innovations in the renewable energy sector and driving efforts 
to increase energy efficiency.
    The 2014 Farm Bill also encouraged RD to develop and 
implement regional strategies for investments in rural America. 
We set aside $316 million in fiscal year 2016, specifically for 
projects that were engaged in regional collaboration and in 
long-term growth strategies, leveraging, and in capitalizing on 
regional strengths.
    Each day, I am determined to fully utilize the enormous 
potential and opportunity that RD funds provide to economic 
growth. Since becoming Under Secretary, I have visited many 
projects to see how rural America benefits from our 
investments. I have also met with many of our dedicated field 
staff, who engage directly with local lenders and community 
partners to solve problems. Both our investment dollars and our 
people are key to delivering economic impact.
    RD continues to make investments in water, electric, and 
broadband because they continue to be necessary for rural 
America to be competitive. Last year, I traveled to North 
Dakota to announce a nearly $47 million electric guaranteed 
loan for Central Power Cooperative. This loan will allow the 
co-op to build line and make other system improvements, 
including funding for smart grid projects.
    RD contributes to economic growth. Since 2009, we have 
created or saved more than 450,000 jobs and helped 112,000 
rural small businesses. There is tremendous opportunity to spur 
economic development in rural communities through renewable 
energy technologies. In Iowa, RD awarded the Reinhart family a 
$16,000 REAP grant to more efficiently operate their small town 
grocery stores in three different Iowa towns. This grant will 
pay for upgrades for refrigerators, freezers, and for the 
installation of high-efficiency lighting and cooling fans.
    Since 2009, RD has helped more than a million rural 
families to buy, repair, or refinance homes. In fiscal year 
2015, we did not leave one dollar left unspent in our program 
to provide direct mortgages to low and very low-income rural 
Americans. We understand the unique needs of rural residents 
and we remain committed to serving them.
    RD really works in communities to improve the quality of 
life for rural residents. In my travels to North Dakota, I saw 
the ongoing construction of the future, Richardton Health Care, 
a new nursing home and health clinic. A $5.5 million community 
facilities loan is supporting the project, which replaces an 
existing nursing home and clinic that was really inadequate for 
the changing needs of the community.
    I would like to end on RD's work to help develop low-income 
communities. RD plays a key role in USDA's place-based efforts 
in ensuring that our loan and grant programs are available and 
accessible, even in persistently poor areas. Our proactive 
approach to community economic development identifies and 
assists areas of greatest need in rural America, and I am 
committed to providing increased opportunities to allow 
everyone to share in the prosperity of a growing economy.
    Congress has provided significant resources to make real 
economic impacts in rural places, and I assure you, that not 
only are we careful with the dollars we receive, we are always 
working to collaborate to stretch them further.
    So, thank you for your continued interest and your support 
of RD programs and the people who deliver them. I believe 
together we can continue to make key investments in rural 
America's future. I do appreciate this hearing and the chance 
to testify and I look forward to your questions.
    [The prepared statement of Ms. Mensah can be found on page 
45 in the appendix.]
    Senator Ernst. Wonderful. Thank you very much, Ms. Under 
Secretary, and we appreciate you taking the time to appear 
today before our subcommittee.
    I would love to go ahead and start with questions and then 
we will turn to the Ranking Member for questions.
    First, as a veteran of the Armed Services myself, I believe 
it is critical we work to support those that have served our 
country. While I understand the Office of Advocacy and Outreach 
is the lead agency at the USDA for assisting underserved 
groups, can you update us on how USDA is making sure programs 
are being inclusive of our veterans' population, and if you 
could just expound on that and let us know where the USDA is in 
regards to those programs.
    Ms. Mensah. Thank you for your service, first, and thank 
you for highlighting the important role of veterans, many of 
whom come from rural America.
    Senator Ernst. Right.
    Ms. Mensah. You are correct that we have an overall agency 
effort. But, key parts of our efforts with veterans reside in 
rural development. I would like to speak to one of those areas 
which was strengthened in the Farm Bill, and that is our Value 
Added Producer Grant Program.
    We made a special effort to make sure those funds were 
reaching veterans. It is often the way people get into new 
areas of value added agriculture. What we find is that this 
program helps people who are new to this, whether it is doing 
some kind of micro-green growing or something that has a high 
potential of immediate income. I am very proud that program 
resides in Rural Development, and I think it is a good example 
of how Rural Development's loan and grant programs really 
support veteran farmers, people who are coming in, particularly 
who are starting out or returning to the land. That's just one 
of our efforts.
    Think of RD as nearly 5,000 folks, 70 percent of them in 
states. The joy I have is running a field-based agency where 
there are actual people on the ground who are the neighbors of 
the veterans, who are really there in place. It is those staff 
members in our localities who help connect our programs every 
day in a proactive way to communities and to people who need 
us, and that is a particular advantage we have.
    Senator Ernst. Wonderful. I thank you for that, and I have 
visited with a number of veterans, one in particular that 
returned to Iowa and is working in agriculture. He does bison 
farming, many of the veterans have expressed a real connection 
to the land, and it is often very therapeutic, as well, working 
with animals or working in the soil. We love those programs and 
we are glad that you participate in those, so thank you very 
much for that.
    There has been a lot of recent attention surrounding lack 
of adequate drinking water in large urban areas due to lead 
poisoning. There was also a recent article in the Wall Street 
Journal about drinking wells in Vermont testing for high levels 
of hazardous chemicals. What steps are USDA taking to monitor 
the viability of rural water systems and prioritize funding to 
communities with the greatest need?
    Ms. Mensah. Thank you for highlighting our work in water, 
and as you mentioned before, the age of this agency. Our water 
and waste treatment work is some of our oldest work and some of 
our strongest.
    You asked specifically what kind of steps, and I think it 
is good to think of this agency as working in two ways. One is 
when we originate new loans and grants for water and wastewater 
treatment for the system maintenance. That is important work. 
We do that every day. Sometimes it takes communities up to 
three years to put in a whole new upgrade and system, so there 
is constant outreach going on.
    But, the other way--I call it the softer side of our rural 
water programs--is the support you give us under the Farm Bill 
for things like circuit riders, technical assistance, ability 
to work with rural water associations throughout rural America. 
It is our team, our engineers, our circuit riders who support 
those programs that enable us to keep working with small 
systems throughout rural America.
    You mentioned small, most of our funds, 85 percent of them, 
are reaching communities of under 5,000 residents. So, that is 
exactly our sweet spot and I think it is an appropriate place 
for federal dollars. So, thank you for asking about it.
    Senator Ernst. Yes, thank you. Do you happen to know off 
the top of your head, are there any rural communities that you 
can think of out there that are struggling with water issues, 
where we need to focus more of the attention? Of course, Flint 
has been the focus, but I know across Iowa, I personally know 
of a few communities that are struggling. Do you happen to know 
of any examples?
    Ms. Mensah. Well, one recent example was in Sebring, Ohio, 
where our State Director was just there recently. It is one of 
these examples where we can bring to bear our Emergency Water 
Assistance Grants, cleverly named ECWAG, and we could bring 
technical assistance to bear. So, I do not think there is a 
state where Rural Development is not active with what we call 
our community program staff, and often, it is to give those 
alerts, to give assessments. These are systems that are 
maintained by community water boards.
    The one that comes to mind is the recent one in Ohio, but 
really, all of our states are active in these programs and the 
funds you give us to support things like technical assistance 
allow us to be proactive with our water portfolio.
    Senator Ernst. Very good. Well, I appreciate that. I know 
this is a struggle. The Ranking Member had mentioned it as 
well. Many of our small communities do not have the taxing 
base----
    Ms. Mensah. Yes.
    Senator Ernst. --to bring their systems up to standards. 
So, that certainly is something that we want to keep an eye on 
and make sure that our citizens are adequately protected with 
their water treatment systems.
    Ranking Member, please, questions.
    Senator Heitkamp. Thank you so much, Under Secretary, and 
thanks for the continuing commitment that USDA has, not just to 
the farm economy, but the rural economy, which is, I hope, what 
we are talking about today.
    If you are like me, you have traveled all over and you have 
heard a lot of the concerns of rural communities, and it is not 
just creating those primary sector jobs. It is, in fact, being 
able to create a community environment in which people want to 
live.
    Ms. Mensah. Yes.
    Senator Heitkamp. My great concern is that we will end up, 
even in states like North Dakota, being a place where people 
will only find opportunity in cities over 50,000, 60,000 
people. Now, that may sound humorous to some people when we are 
talking about those being cities, but those are our large 
communities in North Dakota.
    One of the challenges I think we have seen overall is what 
I like to call siloing. USDA does these programs, Small 
Business does these programs, Department of Commerce or the 
Export-Import Bank does these programs. Sometimes, it is very 
confusing to rural communities as they look at opportunities to 
access programs.
    So, as in kind, I would think the umbrella agency for rural 
development, what can you tell me about your work in trying to 
bring these programs together, get more education out there in 
terms of what is available, and actually coordinate delivery of 
federal services?
    Ms. Mensah. Well, thank you, Senator Heitkamp, for the good 
insight that we have to bust some silos if we are going to 
really get to the kind of economic impacts that we are talking 
about.
    Under this Secretary, we have done so much to really turn 
around the customer styled focus of this whole agency. There 
has been a cultural transformation underfoot at the Department 
to not just do excellent work, but to do more to connect people 
that come to us, not just to say you are here for a home, but 
to ask if there are other needs. I would say that it is a whole 
effort to look at sort of what we call a community economic 
development approach to needs.
    Our strength as an agency of rural development is, again, 
our field presence----
    Senator Heitkamp. Right.
    Ms. Mensah. --and our ability for our State Directors, 
people to be co-located, to share information----
    Senator Heitkamp. But, I will tell you, in visiting, people 
feel like these programs are disjointed, that all of a sudden, 
they will hear something from SBA that they had not----
    Ms. Mensah. --across the federal----
    Senator Heitkamp. --in terms of an opportunity, because 
everybody is trying to fill up the silo, whether it is the 
rural water silo, whether it is the rural electric silo, 
whether it is the broadband silo. We have not said--we have 
done this in the Farm Bill by creating a regional focus----
    Ms. Mensah. Yes.
    Senator Heitkamp. --so that everybody kind of gets an 
example of what the needs are. But, I do not feel like, on the 
other side of this, that we have agencies that are as 
collaborative or as cooperative as maybe what they should be in 
terms of one-stop shopping for programs, what do we know, who 
is coming to the table. I am not saying consolidate programs, 
but I am saying that we need to have a specialist out there who 
understands the whole broad array of opportunities, including 
opportunities under the Export-Import Bank or under SBA.
    I just did a start-up bill. North Dakota has a large start-
up community. We are hopeful that we will be able to see some 
of those resources going to rural communities, to use the 
infrastructure that you have spent so much money to build.
    Ms. Mensah. Yes.
    Senator Heitkamp. So, what take-aways do you have, just in 
your short period of time, about how we can better coordinate?
    Ms. Mensah. My take-away is observing up close our 
StrikeForce Zones and our Promise Zones, and I think what you 
are pointing out is not just intra-agency, but across the 
federal family. In those areas, where we have been bringing the 
force of all of our partners, on the Pine Ridge Reservation, 
where we have asked to work across agencies, my take-away is 
that that is a very different way to work and it is much easier 
for a community, particularly one that does not have often 
fancy consultants to do all the work for it.
    My success is to see where we have done it in places like 
that, where there is a Promise Zone approach, or in Kentucky, 
where they have started something like the ``Shaping Our 
Appalachian Region''(SOAR) approach----
    Senator Heitkamp. Yes.
    Ms. Mensah. --where they have come together as a community 
first and then brought the federal partners to the table to 
follow a plan.
    I think in the Farm Bill, section 6025, you did give us a 
boost to work at least within our own agency in a way to come 
together regionally, to prioritize things.
    So, two take-aways. Where I have seen it work is where 
there was already a push to do that.
    Senator Heitkamp. I think it is, not to belabor the point 
too much, but we are going to continue to ask these questions 
about consolidation and coordination, better coordination of 
these programs, especially in rural communities, where we have 
not done as well in attacking persistent poverty.
    For me, a lot of this lies in maximizing the availability 
of federal resources, maximizing the knowledge of federal 
resources and where we come talk to Penny Pritzker, talk to 
anyone that I can, Maria Contreras-Sweet, about rural 
development and about making sure that we have communities who 
know where these programs are and how they can access them, 
because it is going to take more than what we are doing right 
now to tackle this problem of rural and persistent poverty in 
rural communities.
    Senator Ernst. Senator Tillis.
    Senator Tillis. Good morning, Madam Chair. I am sorry I am 
running late. I was actually meeting with a group of advocates 
for Alzheimer's.
    Under Secretary Mensah, I want to thank you for being here. 
I am particularly appreciative of some of the work that your 
folks and the Department are doing to focus on broadband and 
communications in rural areas. That is something that I did 
when I was in the legislature, and hope that we can come up 
with a strategy that not only expands infrastructure, but also 
increases the take rate, because many people do not realize 
that even among homes in urban areas that have access to 
broadband, they have only got about 47 percent of them signing 
up. Let us work on something that is balanced but not building 
something with the hope they come. This is very, very critical 
to the rural areas for economic development, for agriculture, 
for public safety, and a number of other things.
    Also, when I was in the legislature, we focused a lot on 
development and regional approaches to rural areas. How do we 
do a better job of providing economic development 
opportunities, job creation, and housing. One of the things 
that we focused on is the need for regionalization, and looking 
at it in a different way. I do not know about other states, but 
we tend to define areas along traditional county borders, and 
what you may find out if you do that, that there are these 
areas, for example: a coastal county like Brunswick County 
could be considered a wealthy county, but it is on a band along 
the coast and it has more in common with adjacent counties. So, 
how do you go back and rethink the way that we look at our 
state in terms of regional economic zones so that we can better 
work with the Federal Government? Now that I am on this side, 
how can we better work with the state government on rural 
economic development?
    The question I have for you is in your travels, you have 
seen states taking regional approaches to economic development. 
Can you speak to the USDA's Rural Development work to promote 
those kind of efforts? In other words, incentivize states to 
come up with, and maybe reward, those who seem to be working 
better on a regional basis for economic development?
    Ms. Mensah. Yes. Thank you, Senator Tillis, and you used 
the exact word about what is the incentive----
    Senator Tillis. Yes.
    Ms. Mensah. --that the Federal Government can give. So, in 
this Farm Bill under section 6025, you gave us a new authority 
to really prioritize grant applications that came to us in some 
of our biggest programs, our Community Facilities Program, now 
a $2.2 billion loan program, Community Facilities Grant 
Program, our critical infrastructure program under the Business 
and Industry Program, our Rural Business Development Grants. We 
were incented to do a set-aside. We issued this rule last year, 
and this year, we set aside over $300 million to prioritize 
applications that come to us in these very competitive 
programs. You have been on the other side. You know how 
competitive it is to get federal grants.
    But, we have said, when those grants show evidence of 
regional development collaboration, sometimes across those 
county lines--we were not specific to exactly how it had to be, 
it looks different in other states--but when you show us an 
economic collaboration across regional, you are prioritized for 
some of those core programs.
    Senator Tillis. Is that measurable in some way? I mean, how 
do you go about determining the value of one proposal that 
shows economic collaboration versus another one? How do you do 
that or measure it?
    Ms. Mensah. Luckily, I have a strong team around us, but it 
really depends on the four different programs. It is obviously 
a little different for water than if you are doing a Rural 
Business Development Grant, or a Business and Industry Grant. 
But, in each of these, we have come together to establish a set 
of priority points, so--and that is part of our--we are public 
about that priority.
    So, we are saying that we have taken some of our core 
programs, both grants and loan, and said there will be a 
priority. We tried it without set-aside officially last summer 
and we made some of our first awards and we are back at it this 
year. Already, some of our water grants have been awarded using 
those priority points.
    So, I think you will see this agency has kind of heard that 
message and heard what was done in the Farm Bill. We 
understand, I think, what Senator Heitkamp was also pointing 
out, the need to collaborate across, that can often lead to 
stronger work, longer-term work. You see some early--we have 
made some early gains.
    Senator Tillis. Right. Thank you. Quickly, because I think 
it could take up time, we may request a meeting so we can talk 
a little bit about the strategy related to broadband. I am a 
big proponent of public-private partnerships----
    Ms. Mensah. Yes.
    Senator Tillis. --so that we have something that is 
sustainable and at some point the market forces can take over, 
make it less likely that we have something that state or local 
governments would own. So, I would like to meet with your staff 
about that.
    Also, we can talk a little bit more about what we refer to 
as the urban crescent, from Charlotte to Greensboro to Raleigh. 
You are seeing cranes in the sky. Housing is coming back and 
commercial development. But I am concerned, since we are about 
a 49 percent rural state----
    Ms. Mensah. Yes.
    Senator Tillis. --I am concerned with affordable housing in 
the rural areas and things that we can do to really promote 
that, because it not only is for the people who need a place to 
live, but it is also critically important for the workforce to 
serve the rural areas, which all go hand-in-glove with rural 
development, so----
    Ms. Mensah. Exactly.
    Senator Tillis. --I look forward to meeting with your 
office to talk about that.
    Ms. Mensah. I look forward, and thank you----
    Senator Tillis. Thank you.
    Ms. Mensah. --for making that connection.
    Senator Ernst. Senator Klobuchar.
    Senator Klobuchar. Thank you very much.
    Under Secretary Mensah, as you know, you were just in our 
state----
    Ms. Mensah. Yes.
    Senator Klobuchar. --in Little Falls, Minnesota, which 
seems very far from here, at a food hub ribbon cutting, which 
was a really great project, and I thank you for your support of 
that project.
    Ms. Mensah. It was a joy to be there with you, and great--
biggest food hub I have seen----
    Senator Klobuchar. Okay. Well, just do not tell the rest of 
the Senators that----
    Ms. Mensah. I will not.
    [Laughter.]
    Senator Klobuchar. --that is not a good thing. She did not 
really say it was the best one.
    [Laughter.]
    Senator Klobuchar. I thought I would start out--I had done 
some work on some provisions in the Farm Bill on beginning 
farmers, and could you talk about what USDA Rural Development 
is doing to help our youngest farmers overcome some of the 
challenges they face economically as we look at an aging farm 
population and the fact that we still need to produce food and 
we need people who are running the farms.
    Ms. Mensah. Thank you, and your question allows me to refer 
to what we just saw together, because what RD has done as it 
regards beginning farmers is a couple of things. I spoke 
earlier just about the Value-Added Producer Grants, but also, 
it is our whole focus on how a local food, local place's 
economy can generate opportunities for new and beginning 
farmers.
    I think that is the critical story to tell, that some of 
what RD has done is welcome new farmers by increasing the 
attention to local foods, and that means a real economy around 
food. So, what I was able to see in Minnesota is that some of 
the growers, some of the new farmers who entered into the 
marketplace were able to do so because of the aggregation of 
their food and the marketing. They did not have to play all 
roles to be able to serve a local school district or a hospital 
or resort communities, and I think that is a new approach that 
the agency has doubled-down on, so that new farmers actually 
have markets organized for them and aggregation roles. To me, 
that is the key, not only to support how you are adding value 
to the produce yourself, but how you market, how you grow.
    Senator Klobuchar. Maybe when you were in our state, 
although the particular part you were in does not have quite 
the issues that we have in other areas on the North Dakota 
border--thank you, Senator Heitkamp--and the Iowa border--thank 
you Senator Ernst----
    Ms. Mensah. We have the whole----
    [Laughter.]
    Senator Klobuchar. --regarding housing----
    Ms. Mensah. Yes.
    Senator Klobuchar. --and I know you have heard this in 
other places, and hopefully in our state from some of our 
agriculture leaders, but it is a huge problem, not just for the 
farm communities, but also for rural workforce, in general, for 
manufacturing facilities----
    Ms. Mensah. Yes.
    Senator Klobuchar. --from ag equipment manufacturing to 
companies like Digi-Key near the North Dakota-Canadian border 
that have job openings all the time. That is up in Thief River 
Falls.
    I am really concerned. I know you have the housing programs 
sections 515, 521, 538, and also the Low-Income Housing Tax 
Credit, but what do you think USDA could be doing more of, or 
should we be doing here in terms of legislation, because I am 
just--we are going to start losing business because we do not 
have enough workers----
    Ms. Mensah. Yes.
    Senator Klobuchar. --and it is going to go to foreign 
companies if we cannot fill these jobs.
    Ms. Mensah. Yes.
    Senator Klobuchar. The housing is such a critical part of 
it.
    Ms. Mensah. One of the joys of being the Under Secretary of 
Rural Development is having these connections between housing, 
infrastructure, and business. Our housing portfolio is our 
largest portfolio. You have referenced both the need for 
single-family housing and affordable multi-family housing, and 
I have both of those portfolios under my jurisdiction. They are 
critical, and they are aging.
    We use every tool at our disposal to keep properties, keep 
them modernized, but dollars matter and this is an issue that 
we see coming, both in our rental housing and RD did so much 
after the housing crisis to make sure more people could get 
into homes, particularly low-income.
    So, what I appreciate is any effort to keep the focus on 
the needs for rural housing. It is an economic need and every 
dollar will be well spent.
    Senator Klobuchar. Right, and as I look at the Southern 
Minnesota initiative that Tim Penny runs, former Congressman, 
which I know Senator Heitkamp was asking about these regional 
initiatives, and this is clearly something that they have 
identified as a major challenge.
    One of the things that a few of the mayors have brought up 
to me is this idea that they would build more housing for 
seniors, condo housing, apartments, in the towns, and then that 
housing stock would then open up that the seniors are currently 
living in and that would then be maybe rehabbed some for 
families with children and otherwise, just because building a 
bunch of new houses may not quite work financially----
    Ms. Mensah. Right.
    Senator Klobuchar. --and yet the market may be there for 
some of that with this, what I used to call the ``silver 
tsunami,'' but then I got criticized by senior groups, so I now 
call it the ``silver surge''----
    Ms. Mensah. Okay----
    Senator Klobuchar. --as we see the aging of the population 
and more seniors, this idea that they probably are not going to 
want to live in their farmhouse or live in a bigger place yet. 
Then they could move closer to town and closer to their friends 
and health care, as a way--sort of a more regional planning way 
to get at this problem. I do not know if you have looked at 
that.
    Ms. Mensah. I love the efforts that are innovative to use 
this combination of rental and single-family stock. What I 
continue to feel is that the tools are in place. We have these 
sections of our code, section 515, section 538. They are 
underfunded. The tools are in place to be strong in rural 
housing. We are here and ready to go, and the groundwork is 
laid. I love the innovative partners, often at the nonprofit 
level, who are ready to work with us. Thank you for 
highlighting that.
    Senator Klobuchar. Okay. Well, thank you, and I will put a 
question about broadband on the record----
    Ms. Mensah. Thank you.
    Senator Klobuchar. --and how important that is, but thank 
you very much.
    Thank you, Madam Chair and Senator Heitkamp.
    Senator Ernst. Senator Brown.
    Senator Brown. Thank you, Madam Chair.
    Thank you very much, Madam Secretary, for joining us. Thank 
you for what you did and what rural utility services did in 
Sebring, Ohio, with the grant that was there. It was much less 
of a problem, but a significant problem if you lived there, 
than was Flint, and the similarities were--the difference is it 
was not inflicted by state government like Flint was, but it 
was ignored by state government for too long. The state EPA 
knew about the contamination and the high lead levels in water 
that people were exposed to and sat on it. The state EPA and 
the state government sat on it for weeks and weeks and weeks. 
But, your grant really mattered, so thank you so much for that.
    Ms. Mensah. Thank you.
    Senator Brown. What else do you do to help rural 
communities? I mean, when housing stock is at least 50 years 
old, whether it is inner city, whether it is in the ring 
suburbs, or whether it is small towns, the chances of lead 
paint are pretty high and the chances of, obviously, water 
contamination are higher than we would like. What are you doing 
sort of proactively?
    Ms. Mensah. Yes. Well, thank you, Senator, and I was able 
to mention, when your Chairman asked about water systems, we 
mentioned Sebring. To me, what it highlights is the tools you 
have already given us, and they are that combination of loan 
and grant, which we are constantly monitoring to get out new 
and upgrades to systems.
    But, it is also the softer side of circuit riders, of 
investments in technical systems, in the Emergency Community 
Water Assistance Grant (ECWAG) Program. Those tools which you 
give us in the 2014 Farm Bill and which Congress funds, are our 
way of staying proactive, ahead of the time, working with our 
borrowers, with rural water associations. That is where we are 
strong. These are old systems, often, and we are able to be 
proactive when we use those tools and are able to work with 
communities.
    So, I need to say thank you for the authorities you give 
us. I feel the tools are there and we want to use every dollar 
you give us to stay active with our communities.
    Senator Brown. Thank you, and let me ask you briefly on the 
StrikeForce that has been successful around the country. USDA 
is expanding in my state into 11 counties. What can this 
committee learn from the success of the StrikeForce Program?
    Ms. Mensah. Yes. Well, I love that program. Again, it is 
our program to target communities of high poverty, but to put a 
lead staffer also in place, to make sure that somebody--all of 
our states in Rural Development identified at least two 
communities in their states which were StrikeForce. Again, this 
ability to have someone--I think Senator Heitkamp referred to 
it as someone who is proactive in not just our own agencies, 
but stretching across federal agencies. It is not just the 
communities' responsibility to find their way through the 
thicket of federal grants and opportunities.
    One of the big lessons is putting a proactive person in 
place, asking the agency to turn outward and to help 
communities, not just wait for them to come in and apply for a 
single effort. That is one of the big lessons of the 
StrikeForce, that and highlighting the fact, the statistic that 
you already said, which is that persistent poverty is often a 
much heavier rural phenomenon and not always known, and we have 
to get at this by both the way we turn outwardly in our federal 
reach, but also the way we partner. I think our Community 
Economic Development efforts have really led to strong 
partnerships with nonprofits, with other philanthropy efforts 
that has shifted how we come into communities. I think those 
are some of the take-aways.
    Senator Brown. Thank you.
    Thank you, Madam Chair.
    Senator Ernst. Thank you.
    I know I have just a very brief follow-up question. I know 
the Ranking Member has one, as well.
    I would like to follow up on Senator Tillis' point and 
really gauging those priority points, as you said, being 
competitive for grants and loans. But, I would also like to 
follow up on the back side. Once those loans and grants have 
been provided to those communities, to those participants, we 
want to know how those programs are faring, how those loans are 
doing. Are they being successful?
    One of the new provisions that was passed in the 2014 Farm 
Bill was section 6209, program metrics. This provision requires 
that the Secretary of USDA collect data regarding economic 
activities created through these grants and loans and measure 
the short-and long-term viability of award recipients and those 
that are getting assistance through those funds.
    So, I know we are still a few years away from having that 
fully implemented, but if you could, Under Secretary, if you 
would just please give us an update on how we are coming with 
those metrics and give us guidance in that area?
    Ms. Mensah. Well, thank you. You know, I started my career 
in banking and one of the things about being a lending agency 
is that some of the metrics are very clear to begin with. Is 
the loan still paying? Are people still deriving benefit from a 
lending tool? So, some of this, we are ahead of our other 
partners because we actually have quarterly and annual reports 
from all of our borrowers. So, this is something not new to us 
on loan performance.
    What is new is to get deeper into jobs and into other 
economic impacts, some of this--the title of this hearing. We 
are working on that regulation, or will be moving that forward. 
I work for a Secretary of Agriculture who is a fan of 
measurement in every aspect, and he told me when I came in, if 
you cannot measure it, how do you know you are doing this? He 
has a great card system for doing that.
    But, what I can say is that there is a seriousness to this 
portfolio, to all three of its aspects, its housing, its 
infrastructure, and its business. We have $38 billion a year, 
and we have authority. So, there is a seriousness to the 
metrics, the deeper metrics of short-and long-term impacts, 
which sometimes you have to ask additional questions, sometimes 
it is additional expense to find.
    We are putting in place how we will do these measures--some 
of that is tracked and always has been, but I think you are 
going to see some other kinds of routine reports from us about 
this portfolio. I can say that I am very proud of the kind of 
core work. Some of it is quite obvious. Is the family still in 
the house? Is the business still producing income in a rural 
area?
    So, for one thing, it will be wonderful to be able to talk 
about that. My favorite report is our progress report, where we 
go state by state and say what we have done and say a few 
reports of what has been achieved, and I look forward to doing 
that more when we have a rollout of how we will be speaking 
about all of our programs.
    Senator Ernst. Wonderful.
    Ms. Mensah. But, thank you for your interest in the longer-
and shorter-term impacts.
    Senator Ernst. Very good, and we look forward to having 
those metrics in place and really gauging where we are being 
successful and maybe where we can improve in those areas, as 
well.
    Ranking Member Heitkamp.
    Senator Heitkamp. Just to reiterate, and in case you did 
not get it from the questioning, housing is absolutely 
critical. We have done all this wonderful work in creating 
primary sector jobs. Maybe there are 20 jobs in the community. 
We cannot fill them because people cannot find affordable 
housing where they live.
    I want to reiterate Senator Tillis' problem, because it is 
a problem in North Dakota. Having a county having too broad of 
a measurement to determine qualification is critical, 
especially when you have such a diverse county as maybe a 
seaside county, where you have very wealthy participants and 
then the interior, where you do not. That happens all across 
rural America. We need to take a look at how we measure 
qualifications, because it is--the way we are doing it right 
now is not meeting the needs, in my opinion.
    The other issue is when we talk about housing, we have HUD. 
We have weatherization. We have all these other programs. What 
are we doing to coordinate and collaborate so that when we, in 
fact, do what Senator Klobuchar has recommended we do, which is 
begin that process of rehabbing older homes in communities, 
that we know those resources are there to create an 
environment.
    The third thing, when I talk to people, it is not so much 
building the home, it is the cost of development, whether it is 
sewer, whether it is city water and sewage, and building that 
infrastructure and look at regional infrastructure development 
is absolutely critical if we are going to meet the needs.
    If you take nothing away from this, take back housing, 
housing, housing, because if you said, what is the largest 
critical need in my rural communities, I would tell you it is 
affordable and available housing. Thank you.
    Senator Ernst. Thank you so much.
    Thank you, Under Secretary Mensah, for your participation 
this morning and the great information that you have provided. 
You can tell, we have a number of members here that are very 
passionate about their rural communities and ensuring that they 
are successful. So, thank you. We do hope that we will 
continually improve the effectiveness of these programs. I 
think some of those concerns were shared with you this morning.
    This will conclude the first portion of our hearing this 
morning. For our members, I would ask that any additional 
questions you may have for the record, if you could please 
submit those to the Committee Clerk five business days from 
today, or by 5:00 p.m. next Wednesday, April 13.
    Thank you very much, Under Secretary.
    We will now move to our second panel. Thank you.
    [Pause.]
    Senator Ernst. Okay. I think we will go ahead and start the 
second portion of our meeting this morning, and thank you to 
the members of the second panel who are joining us, and I have 
the pleasure of introducing two Iowans to testify before us 
today, and I will then turn to Ranking Member Heitkamp, who 
will introduce our third panelist, who hails from her home 
State of North Dakota.
    First, Craig Hill.
    Mr. Hill and his family farm near Milo, Iowa, which is not 
all that far from where I live. He is the President of the Iowa 
Farm Bureau Federation and has served in this role for over 
four years. So, thank you very much for stepping up to the 
plate there, Craig. He is a well respected leader in the 
community and he served as the first Chairman of the Iowa Ag 
State Group, which brings together representatives from all 
sectors of Iowa agriculture. Additionally, he serves on the 
American Farm Bureau Board and was recently appointed to the 
USDA's Agriculture Technical Advisory Committee on Trade.
    Welcome, Craig. It is nice to see you again.
    Monte Shaw, another Southwest Iowa farmer, is the Executive 
Director of the Iowa Renewable Fuels Association. Monte works 
tirelessly to promote our vibrant biodiesel and ethanol 
industry. Monte has also worked out here for the Renewable 
Fuels Association and for numerous candidates and elected 
officials, including Iowa's senior Senator, Chuck Grassley.
    Craig and Monte, it is great to see you again, and thank 
you very much for taking time away from Iowa and joining us 
here in the Nation's Capital to testify on this important 
topic.
    With that, I will turn it over to Senator Heitkamp for her 
introduction.
    Senator Heitkamp. It is my distinct honor to introduce you 
to an amazingly entrepreneurial North Dakotan that we have 
invited here to speak. Cris Somerville is co-founder, co-owner, 
and President of Dakota Turbines, located in Cooperstown, North 
Dakota. Cris has 25 years of experience working with and 
developing hydraulic, pneumatic, and mechanical systems. He is 
credited with six patents, two of which are for Dakota 
Turbines, and an additional two patent pendings also for Dakota 
Turbines.
    He has extensive knowledge and experience in 3-D modeling 
and design software. Taking on difficult projects and providing 
innovative solutions is something that Cris takes great pride 
in. Cris is more likely to be found in the shop or playing on a 
wind turbine tower than in a board room. He is a hands-on 
manager that never asks an employee to do anything he would not 
do himself.
    In addition to being co-owner of Dakota Turbines and its 
parent company, Posi Lock Puller, Cris started P.L. 
Manufacturing, a precision machining company. He is a North 
Dakota registered journeyman machinist and sits on the Griggs-
Steele Empowerment Zone board as well as their loan committee.
    Unfortunately, Cris' wife, Jodi, and three daughters, 
Morgan, Alicia, and Ellie, were not able to be here today with 
him, but I know they share great pride in your accomplishments, 
as I do, Cris. Thanks so much for coming and sharing your 
information.
    Senator Ernst. Great. Thank you, gentlemen, very much for 
being with us today.
    Mr. Hill, we will start with your testimony.

     STATEMENT OF CRAIG HILL, PRESIDENT, IOWA FARM BUREAU 
                     FEDERATION, MILO, IOWA

    Mr. Hill. Good morning. I am Craig Hill, President of the 
Iowa Farm Bureau Federation, representing 159,000 member 
families across the great State of Iowa. I do serve on the 
Board of Directors of the American Farm Bureau. I am a farmer 
from Milo, Iowa, raising corn, soybeans, and hogs with my wife 
and son.
    I want to begin by thanking the Chairman of this committee, 
Senator Ernst, who also was raised on a farm herself and 
understands very well the issues and concerns of rural America. 
I would also like to thank the Ranking Member, Heidi Heitkamp. 
I want to thank you for allowing me the opportunity to share 
with you my testimony today, as well as all of the efforts that 
you make representing rural America.
    Today, I will talk about the challenges and opportunities 
that Iowans and the people across America face in our rural 
communities.
    In the farm economy, we are facing many challenges. With 
lower commodity prices, farmers will have to find new, 
innovative ways to remain profitable and continue farming in 
future years. While farmers deal with economic challenges that 
threaten our profitability, we are also dealing with a Federal 
Government that continues to pass rules and regulation that 
threatens our businesses, our productivity, and, most 
importantly, our way of life.
    With new rules, such as Waters of the U.S. and a clean 
power plan, and the decreased RFS, there is a growing 
disconnect between those that write the rules in D.C., and 
those that depend on the strong, vibrant rural communities in 
America. As farmers undertake these challenges, we recognize 
the vast majority of farm families rely on off-farm income to 
diversify their risk and keep the family economically viable. 
That is why it is so important that we have vibrant rural 
economies to sustain those off-farm incomes and resources. 
Today, we must infuse new knowledge, new leadership, new 
entrepreneurship, new business development in our communities. 
Nothing is more important in those communities.
    I was a member of a group called Making Agriculture 
Productive and Profitable a few years ago when a professor from 
the University of Missouri stated that farms are today more 
dependent upon rural communities than are rural communities 
dependent upon farms. While Farm Bureau has always recognized 
the importance of strong rural economies, this task force that 
I served on resulted in several ambitious endeavors by the Iowa 
Farm Bureau and the American Farm Bureau.
    In an effort to promote and support rural development 
across the state, the Iowa Farm Bureau launched an effort with 
Iowa State University to encourage entrepreneurship in the 
classroom, investing in our young folks. Ag Econ 334 is a class 
that we sponsor with a $100,000 contribution each year, and 
that has evolved into bringing about 200 students to developing 
not only new ideas for business, but a business plan, and many 
of those concepts have been brought into commercialization and 
fruition.
    We also help entrepreneurs with Renew Rural Iowa, and this 
is the second stage of our program, where we offer mentorship 
and coaching to these new young entrepreneurs, assisting them 
in applying for state and federal funding, as well, through 
USDA.
    Along with that mentoring role of rural businesses, Iowa 
Farm Bureau helps also in the third level of investing, and we 
have invested many dollars over the course of years in these 
new start-up businesses. In fact, $32 million has been invested 
by Iowa Farm Bureau across 13 companies that have had an impact 
in rural Iowa. This has resulted in about $125 million of 
economic impact in our rural communities across Iowa.
    In addition to that, we teach entrepreneurs how to utilize 
USDA programs. One of those companies was Harrisvaccines. 
Harrisvaccines leveraged Small Business Innovation Research 
funding and our equity investment dollars from the Iowa Farm 
Bureau to create a new synthetic vaccine platform, and this 
vaccine platform played a critical role in rapidly responding 
to both swine flu outbreak of 2008 and also played a role in 
the PEDv outbreak of 2013-2014, two devastating disease 
outbreaks in swine production.
    Nationally, the American Farm Bureau has developed programs 
to further continue this business development. One of the 
innovative programs that American Farm Bureau administers is 
the Rural Entrepreneurship Challenge. If you are familiar with 
Shark Tank, the TV program, you will recognize this program, 
because the past two years American Farm Bureau has sponsored 
this, we had 128 applicants the first year that competed in 
this exercise, 165 companies that competed in the second year, 
and I will tell you with some pride that these companies that 
won both the first year and the second year, ScoutPro and 
AccuGrain, both came through these three tiers of effort 
through the Iowa Farm Bureau, all being Iowa companies that won 
this American Farm Bureau Award.
    AFBF also has developed a survey of which we will evaluate 
programs administered by the USDA, and the goal of the survey 
is to pinpoint what is working and what can be improved in 
these programs. We will use this survey and the results of that 
to develop a series of recommendations for USDA to strengthen 
those programs and help make them more effective for farmers 
and ranchers. Those results will be available in May. They are 
not quite available yet, as some 2,000 farmers are being 
surveyed as we speak. We will tabulate those results and 
provide those to the committee as well as USDA.
    It is important that we continue to support initiatives and 
improve rural communities through growing incomes, expanding 
employment, and increasing populations of rural Iowa and rural 
America. Through the efforts of organizations like the Farm 
Bureau and the USDA Rural Development, I hope that we can 
continue to improve the health and vitality of rural America. 
It is a collaborative effort, as you mentioned, Senator 
Heitkamp, a collaborative partnership that we share.
    Thank you.
    [The prepared statement of Mr. Hill can be found on page 41 
in the appendix.]
    Senator Ernst. Thank you very much, Mr. Hill.
    At this time, I am going to turn the gavel over to Senator 
Tillis and excuse myself for a vote. I will return.
    But, Mr. Shaw, if you would, please proceed with your 
testimony.

  STATEMENT OF MONTE SHAW, EXECUTIVE DIRECTOR, IOWA RENEWABLE 
               FUELS ASSOCIATION, JOHNSTON, IOWA

    Mr. Shaw. Well, good morning to Chairman Ernst, Ranking 
Member Heitkamp, and other members of the subcommittee. My name 
is Monte Shaw, and I am the Executive Director of the Iowa 
Renewable Fuels Association.
    I would just like to start by noting that it is our focus 
that renewable fuels have been and remain one of the best tools 
available to promote rural development.
    Growing up on a farm in Iowa, I can tell you that despite 
years of talk about value added agriculture that stemmed out of 
the farm crisis of the 1980s, nothing really changed in our 
part of the country until the Renewable Fuel Standard kicked 
production into high gear in the 2000s. Then, the American farm 
economy went on an amazing eight-year run of prosperity. So, I 
think it can be fairly stated that no other effort to improve 
rural economies made the impact that renewable fuels did.
    However, then in late 2013, the Obama Administration 
proposed RFS levels far below statutory levels. The rural 
economic fallout was both predictable and painful. The last two 
years have seen a dramatic downturn in the health of rural 
America. Corn prices have plummeted. Land values fell. Farm 
income plunged. Agri-businesses have laid off workers by the 
thousands, and that is just in Iowa.
    Today, as farmers look toward the future, it is more often 
with angst than it is with optimism. However, if allowed, 
renewable fuels can once again play a quick and positive role 
on impacting rural economies.
    Looking to the topic here today of the energy title, at 
least for me, in the Farm Bill, I surveyed our producers in 
Iowa and came up with some general observations.
    First, there is strong support for the energy title from 
the renewable fuels family. Obviously, I have to overview these 
in the time allowed.
    The second main point would be that the energy title does 
provide a massive return on investment. If you look at fiscal 
year 2015, I think we had a total budget in the energy title of 
$109 million. That leveraged billions in private investments 
and thousands of projects moved forward that were able to make 
a positive difference in rural communities.
    However, the third point would be that the effectiveness of 
these programs is reduced by a lack of consistent and timely 
funding. Yes, there are some implementation issues we would 
like to iron out, but Congress needs to take responsibility for 
this. We need to recognize that we are well into the second 
year of a severe rural economic downturn and rural leaders here 
need to push appropriators to properly fund these programs and 
to stop using them as more or less a cash reserve when some 
other need in some other area of the budget comes up.
    That's for today, then as you are looking forward to the 
next Farm Bill, the energy title programs should be a priority 
and funding levels should meet the needs and opportunities that 
are out there for rural America.
    Now, just a few brief observations on specific programs. 
Early on, Iowa plants that sought to use the Biorefinery 
Assistance Program, section 9003, were stymied by a lack of 
funding. More recently, they have told me that the funding 
cycle has gotten better and we have seen projects move forward 
in Iowa. But looking forward, I can tell you that I heard back 
from several plants that are looking at this program for future 
innovations that if they move forward will require large 
capital expenditures. Therefore, finding ways to smooth out the 
funding and implementation of this program could have a 
meaningful impact on rural economic development.
    The Bioenergy Program for Advanced Biofuels, section 9005, 
is vital to biodiesel producers, helping many withstand 
volatility in both the energy markets and, quite frankly, over 
the last few years, government policies. New cellulosic ethanol 
producers are also looking toward this program to help provide 
stability. I want to stress, it is not just about cash flow. It 
is about providing the private sector investors and lenders 
with confidence that there will be a return on their 
investment. If properly funded, this program will play an 
important role in helping advanced biofuels reach their full 
potential.
    The Biomass Crop Assistance Program, section 9010, was 
designed to help farmers bridge the gap in establishing 
dedicated energy crops and to perfect harvest, transportation, 
and storage of biomass. However, Iowa's cellulosic producers 
tell me that it is simply not working. There needs to be 
sufficient funding to incent farmers to change the old ways of 
doing things. Just as important, it needs to be rolled out in a 
way that matches the biomass cycle. Instead of the middle of 
the year, the program needs to be rolled out by the end of a 
calendar year to ensure there is time to plan and contract with 
growers. But, despite these shortcomings, if properly 
implemented, BCAP will be--quite frankly, must be--a vital 
program in moving our nation toward advanced renewable fuels.
    Finally, the REAP program, section 9007, is one of the most 
popular energy title programs. Biodiesel producers have used it 
with low-interest loans. Ethanol plants have used it to put in 
turbines to convert excess steam into electricity. But demand 
for REAP, even with some better funding there, has continued to 
outstrip the available funding levels.
    I would also note that Iowans are very disappointed that in 
the last Farm Bill the Congress took REAP's ability away to 
incent renewable fuels infrastructure. Under the current Farm 
Bill, REAP is statutorily forbidden from funding blender pumps. 
Allowing consumers to make their own fueling decisions at the 
pump is vital if you want more competition and you want to 
boost production of advanced biofuels.
    Finally, and I know I am running out of time here, so I 
would just note that as Senate ag leaders, you could also 
engage on some issues outside the Farm Bill. When REAP was shut 
down, the USDA now incents blender pumps through a Biofuels 
Infrastructure Partnership, or BIP, and that has been very 
successful. But, predictably, petroleum interests are already 
asking Congress to stop the BIP program. I do not know if we 
can go back and put renewable fuel infrastructure in the REAP 
program like it should be, but for goodness sakes, we can 
surely stop it from being taken out once again here. Let us not 
make that same mistake.
    I would also be remiss if I did not stress today that the 
single most important policy impacting rural economies is the 
Renewable Fuel Standard. By leveraging access to the 
marketplace, the RFS boosts rural economies. There are myths 
about the blend wall, but if you look at actual sales where 
consumers have been allowed to have the choice of fuels, there 
is no problem reaching statutory levels. Retailers today with 
blender pumps are meeting the 2022 RFS levels in their sales, 
not just the levels that are set out today. There is no blend 
wall. There is only a lack of consumer access, and that is 
exactly what the RFS was put in place to do. We urge you to 
oppose any Congressional efforts to pull that back and urge the 
EPA to implement it as it is supposed to, as it was passed.
    So, with that, I would like to thank the Senators for 
letting me be here today, for their dedication to rural America 
and their recognition of the role that renewable fuels plays, 
and I would be happy to answer any questions.
    [The prepared statement of Mr. Shaw can be found on page 54 
in the appendix.]
    Senator Tillis. [Presiding.] Mr. Somerville.

   STATEMENT OF CRIS SOMERVILLE, PRESIDENT, DAKOTA TURBINES, 
                   COOPERSTOWN, NORTH DAKOTA

    Mr. Somerville. Well, thank you, Chairman Ernst, Ranking 
Member Heitkamp, and subcommittee members, for inviting me here 
to testify before you today.
    My name is Cris Somerville and I am co-owner of the small 
wind company Dakota Turbines from North Dakota. I am also a 
member of DWEA, the Distributed Wind Energy Association, which 
is our national trade group, with over 100 members, dedicated 
to promoting the distributed wind industry in America.
    Today, I would like to share with you my perspective of the 
U.S. distributed wind energy industry and how it relies on our 
government's continued support through effective incentive 
programs like the USDA REAP program and the small wind ITC.
    First, I would like to explain what distributed wind is. It 
is sometimes referred to as small wind because it is usually a 
single turbine under 100 kilowatts that serves an individual 
local site. However, distributed wind can also include larger 
turbines and community wind projects that are deployed behind 
the meter. But, large wind farms are not included. Electricity 
produced by distributed systems is consumed locally, offsetting 
power purchased from the utility, which results in reduced 
electric bills. The typical customer is rural, because a proper 
wind turbine installation requires adequate land space and tall 
towers for unobstructed access to the wind.
    Distributed wind has all of the typical renewable energy 
benefits, including environmental, electric price stability, 
energy independence, and national security. But, what I really 
want to focus here today is one very special benefit, which is 
made in the U.S.A.
    The U.S. small wind industry is comprised of 90 percent 
American-made machinery. American small businesses like Dakota 
Turbines are employing thousands of skilled workers, and we 
have a network of over 3,000 suppliers nationwide. Our projects 
require local construction labor and O&M support, concrete, 
wiring, trucking, trenching, backhoes, and cranes; all combined 
typically represent 50 percent of the cost of the system. So, 
our industry truly is American small businesses, which are 
often rurally located, doing work with other American small 
businesses. When a U.S. small wind project receives an 
incentive, those taxpayer dollars are staying in this country, 
benefiting our small businesses and our citizens.
    Just in the U.S., there are literally tens of millions of 
suitable sites for distributed wind systems. They represent the 
potential of 1,400 gigawatts of installed capacity. This 
industry simply has enormous potential to be a very significant 
factor in our domestic energy mix, and DWEA's vision for our 
industry is to reach 30 gigawatts of domestic capacity by 2030. 
This can give rise to 150,000 new and skilled American jobs.
    Republicans and Democrats alike, in fact, 90 percent of the 
U.S. population want renewable energy to become a bigger part 
of our country's energy mix. The technology is ready and the 
people are ready, and I would say the planet is ready. All that 
is needed right now is a commitment to longer-term smart 
policies so that our industry is allowed to grow and reach 
parity with more mature technologies.
    In terms of federal policy that we support, first and 
foremost is the energy title of the Farm Bill. In particular, 
we are big proponents of REAP, but we see a little bit of room 
for improvement. This is a very well run program. It has been 
very successful, funding energy efficiency and renewable energy 
projects all across the U.S. in every single state. In fact, 
most of my customers of Dakota Turbines have been awarded REAP 
grants.
    I would also like to briefly mention federal tax policy, 
even though that is not the purview of this committee. Dakota 
Turbines and DWEA are urging Congress to extend the small wind 
ITC for businesses and residents in sections 48(c) and 25(d). 
Though extended for solar, the ITC for small wind and other 
clean technologies expires this year. If all renewable 
technologies are not treated fairly, then Congress is picking 
winners and losers and putting valuable growing American small 
companies, like Dakota Turbines, and American jobs at risk.
    In closing, the U.S. distributed wind industry is all about 
supporting small businesses and American jobs. Its customers 
are rural and ag related. Supported by strong policies, such as 
the REAP program and the small wind ITC, it is a shining 
example of positive economic development in rural America. I 
cannot think of a more responsible use of taxpayer dollars, and 
I strongly urge continued federal support.
    So, thank you again for having me here today and I am happy 
to answer any questions.
    [The prepared statement of Mr. Somerville can be found on 
page 35 in the appendix.]
    Senator Ernst. [Presiding.] Thank you very much, gentlemen, 
this morning for your testimony.
    We will go ahead and start with proposed questions. The 
Ranking Member will join us shortly, after she votes.
    First, to all of our witnesses on the panel, I again want 
to thank you for making this trip to Washington, DC. This is a 
very important topic for all of us and we appreciate the time 
that you are taking away from home. We do appreciate all that 
you do back home, as well, not only for our farmers, but also 
to support our rural economy. So, thank you for that.
    Thank you, Mr. Somerville, for your work in North Dakota 
and for joining us.
    Both the rural development and energy titles of the Farm 
Bill are extremely important to my state, as they are to many 
others, and as we continue to exercise oversight of the USDA, 
we also need to begin discussions about what the next Farm Bill 
will look like, and I would like to hear your perspective on 
what programs under USDA Rural Development are the most 
effective, but I think more importantly, as well, what 
improvements need to be made to ensure we are being responsible 
stewards of our taxpayers' money.
    So, again, focusing on what programs are really effective, 
where do we see the most good, and then, secondly, are there 
programs that need to be improved, combined, or otherwise. That 
question goes to all the members of the panel, and Mr. Hill, if 
we could start with you.
    Mr. Hill. Well, currently, I think, the business and 
industry loan guarantees that we use in Iowa, rural energy and 
energy efficiency programs are important. The Rural Business 
Development Grants, Intermediary Relending Programs, and Small 
Business Innovation Research are just a few of the examples of 
what is important.
    But, you mentioned stewardship, and water in Iowa is a very 
critical issue. We have municipalities that are dealing with 
wastewater, sewer water, water treatment. This is a very big 
issue for our communities and we are going to have to focus on 
that in the next Farm Bill title, as well. That interlocks 
with, I think, the conservation title, as well.
    We have 11 field offices in Iowa, and they are doing a 
great job. The officials involved there are doing good work and 
we would not want to lose the personnel that provide that 
technical assistance and that help there.
    Simplifying the application process might be something that 
we need to work on. It is one of those things that we need some 
improvement upon.
    Senator Ernst. Thank you very much.
    Mr. Shaw.
    Mr. Shaw. Yes. There are a number of ideas out there. A 
couple that I might mention, in the 9003 program, I have been 
told by some of our producers that have applied--I do not claim 
to be an expert, I rely on their experiences that I pass along 
here--that some of the times, you actually have to get into 
full production before the funding or the grant or whatever 
will be released, and that causes you during construction and 
commissioning to probably go out and have to seek what can be 
some very, very costly bridge financing, and in some cases that 
flat out stops the program.
    So, I know we have to be careful and not throw money out 
there that then nothing ever comes of it, but at the same time, 
if there is some way to maybe achieve some benchmarks to where 
you get some funding prior to full operational production so 
that you do not have to seek out and perhaps be stymied by a 
lack of bridge financing could be something in that program to 
look at, according to my members.
    With the REAP program, it had some problems that I think 
the last Farm Bill addressed, and so that is a case where you 
can be proud that we did not just throw our hands up. We 
actually tried to improve a program. I had a guy tell me he had 
18 inches of paperwork for it originally and then got a $5 
million loan guarantee instead of the 20 he was expecting, and 
the Senate and the Congress worked with USDA to change the 
rules so that it is different applications for different sizes 
of things.
    I think now the main issue with REAP is just that there is 
more demand for REAP programs than there is funding, even 
though it has been one of the areas of the Farm Bill energy 
title that has received support more closely to its mandatory 
funding levels than some programs.
    The final one I would say is really take a look at BCAP. 
BCAP needs to be the next REAP. BCAP is simply not working. The 
funding levels are not there to incent the farmers to make the 
changes. Even when we do roll some programs out, I am told that 
they are rolling them out at an annual time frame in the middle 
of the summer when it is impossible then to do the work. So, 
when you have two of the leading commercialized cellulosic 
plants in the nation in Iowa, one does not use the program and 
one got into it and is trying to get out of it because it is 
not working. I think that is pretty bad.
    But, do not give up. I want to be very clear.
    [Laughter.]
    Mr. Shaw. The message here is not to take that problem and 
say, well, fine, we are just going to kill the program. This is 
a vital link to that next step of advanced biofuels, but I 
think we need to fix it.
    Senator Ernst. That is the feedback that we are looking 
for, as well. Are there programs that can go away because there 
is no longer a use for them, but are there programs that exist 
where there is potential, but maybe needs to be restructured so 
that we are seeing taxpayer dollars going to good use. So, 
thank you for those.
    Mr. Somerville.
    Mr. Somerville. Thank you, Chairman. As far as the small 
wind industry, the REAP program is really absolutely vital. We 
would like to see continued support for that program well 
beyond 2019, increased funding, if available. A small complaint 
that we believe is being addressed is in the scoring process of 
REAP, how distributed wind applications are competing against 
more mature technologies within the REAP applications. But, 
again, I believe that issue is currently being taken care of, 
so we are big fans of REAP. We love REAP, and go REAP.
    [Laughter.]
    Senator Ernst. Very good. Good plug. Thank you very much.
    Craig, beyond my role today examining programs that are in 
existence through USDA Rural Development, I came to the Senate 
committed to cutting pork and working through unnecessary and 
burdensome regulations, finding where we can get rid of those 
imposed upon our farmers and in our rural economies. If you 
could, talk about any of those types of regulations, rules that 
exist out there that are hampering industry in our rural areas. 
What are those regulations and why do you see them as being an 
impediment to developing the rural areas?
    Mr. Hill. I think, speaking for farmers in general, we have 
an understanding of the rules of the game. Conservation 
compliance, a component of the Farm Bill through crop insurance 
and other mechanisms to provide ourselves with--or avail 
ourselves of any of the programs from USDA, we want to be 
compliant. We understand those rules.
    But, when EPA, an agency of government, creates the 
uncertainty that they have with Waters of the U.S., it has been 
something that has just stymied and crippled our farmers. They 
do not understand the rules and they ask for help. What is a 
definition of Waters of the U.S., and what features on their 
land would be permittable or not, what is jurisdictional or 
not, are unanswered. There is not an office in Iowa that can 
answer those because it is the Army Corps of Engineers that 
would produce that answer----
    Senator Ernst. Right.
    Mr. Hill. --and there is no office in Iowa.
    So, to implement and execute upon those new rules, new 
definitions that have never been created before by EPA that do 
not stand up to court decisions and defy, actually, what 
Congress has set out in the Clean Water Act, is just a very, 
very difficult thing for agriculture to accept.
    Senator Ernst. The way I understand that, the expanded 
definition of Waters of the U.S. would include what percent of 
Iowa, Mr. Hill?
    Mr. Hill. Most experts would declare 97 percent of Iowa to 
be jurisdictional under the new rule, tributaries being the 
definition that was created that expands that authority across 
nearly all of Iowa.
    Senator Ernst. Yes.
    Mr. Hill. I would make a statement that it is very 
disingenuous when it is said by agencies of government that, 
for example, ditches are exempt. There is no definition for a 
ditch. There are only definitions for tributaries, which is a 
bed bank high water mark, wet or dry, intermittent or 
perennial, manmade, man-altered, or natural, which that 
includes everything that conveys water. But, yet, it is said 
that, oh, no, agriculture is exempt. Ditches are exempt. There 
is no definition for a ditch, only a tributary.
    Senator Ernst. Right.
    Mr. Hill. Those kind of things are troubling, and I would 
ask the committee to consider what actually Congress has 
established in the Clean Water Act rather than this agency.
    Senator Ernst. Very good.
    Mr. Shaw or Mr. Somerville, any thoughts on regulations 
that might be hampering industry in the rural areas?
    Mr. Shaw. Well, and I will not belabor this, because you 
are well aware of it, but the proper implementation of the 
Renewable Fuel Standard would be one area that would have a big 
boost, and I think we have seen that with the data I submitted 
in my prepared remarks.
    But, also, there is S. 1239, which is a bill to equalize 
the summertime vapor pressures of E10 and E15. We need to move 
to use more advanced biofuels and even more traditional 
biofuels. We need to get to higher blends of ethanol and the 
largest impediment to that, despite a lot of roadblocks thrown 
up by some of the oil companies, the largest impediment to that 
is this, what I think was truly an unintentional regulatory 
difference between how we handle E10 and E15, which just ties 
retailers' hands and they cannot sell the fuel. If we could 
simply make that common sense correction, I think you would see 
the move to higher blends come pretty rapid. If E15 became the 
new normal like E10 is now, that would be seven billion gallons 
of additional biofuels. That would spur an awful lot of rural 
economic development.
    Senator Ernst. Very good. So, not just the rules and 
regulations, but making sure they are being implemented 
correctly.
    Mr. Shaw. Absolutely.
    Senator Ernst. Mr. Somerville.
    Mr. Somerville. Yes, just one quick point. With regards to 
REAP, within REAP is the NEPA rules. We have a little bit of a 
struggle with how NEPA is being interpreted within REAP with 
regards to it being applied fairly to all distributed energies. 
For example, solar has a categorical exclusion, but distributed 
wind systems do not. So, that issue, I believe, is also being 
taken care of, so thank you.
    Senator Ernst. That is good. I appreciate it so much.
    Senator Hoeven.
    Senator Hoeven. Thank you, Madam Chairman. Thanks for 
holding this hearing. I appreciate it very much, on rural 
development.
    I would like to thank all of our witnesses for being here 
and for the work that you are doing. In particular, I would 
like to thank Mr. Somerville. Welcome. How are things in 
Cooperstown?
    Mr. Somerville. They are very good. Thank you, Senator.
    Senator Hoeven. Good. With your company, tell me how your 
company is doing.
    Mr. Somerville. The company is doing well. Dakota Turbines 
has a dozen employees. We have a bright future. We need a 
little bit of help with federal policies, but we are pretty 
excited to be, hopefully, a major player in our small wind 
industry.
    Senator Hoeven. How long ago did you start the company, and 
what led you to do it?
    Mr. Somerville. Well, how far back do you want me to go, 
Senator?
    [Laughter.]
    Senator Hoeven. Well, I have four minutes and 46 seconds.
    Mr. Somerville. Okay. I will use it all.
    [Laughter.]
    Mr. Somerville. Well, you know my father, Dean Somerville.
    Senator Hoeven. Very well.
    Mr. Somerville. He started our Posi Lock company over 40 
years ago with his invention of the Posi Lock gear and bearing 
puller. Together with my mother, they grew Posi Lock slowly 
over many years. As my two sisters and I grew up, we were 
involved with the company. When we were done with our 
schooling, we found our own place within the family company and 
we all have kind of branched out into other new, exciting areas 
of interest.
    My sister, Stacy, started Dynamics Marketing, which employs 
150 North Dakota residents in three locations in North Dakota. 
What they do is they are a high-tech teleservices company that 
focuses primarily on market research.
    My sister, Tamara, is focusing on the Posi Lock sales and 
marketing efforts, and in particular, international marketing. 
She has grown the Posi Lock sales unbelievably, and more 
importantly, the export markets now make up almost 30 percent 
of our total sales volume. Interestingly, most of that product 
is going into China. So, she is doing some wonderful things 
with the Posi Lock company. In fact, she is going to be here in 
two weeks to accept an award from the Manufacturing Institute 
as being one of the top 100 women in business.
    Senator Hoeven. Fantastic.
    Mr. Somerville. What I have done with the company is I 
started the precision machining operations for Posi Lock. We 
make our own precision components for our own products. We also 
do job shop work for other area companies. That was started in 
large part with the help of a zero percent USDA loan. So, I can 
honestly say, without that loan, the precision machining 
operations would not have gotten the start and would not have 
eventually created Dakota Turbines. So, I really appreciate 
that program, as well.
    Dakota Turbines was started ten years ago out of my love 
for renewable energy, and because we had developed engineering 
and manufacturing capabilities, we thought that we could 
contribute to our small wind industry here in America. It has 
been a long, difficult road. Developing a wind turbine is the 
equivalent of creating an automobile that will drive 150,000 
miles per year for 20 years with almost zero maintenance over 
its life. So, it is a very, very expensive and long duration 
development project, but we are ten years in. We have been 
marketing our products for several years and we have a small 
fleet of 40 wind turbines throughout the Upper Midwest. Like I 
said, our future looks bright.
    Senator Hoeven. What is the key to getting the utility 
companies to work with you on the distributed wind piece?
    Mr. Somerville. Well, that is a loaded question.
    [Laughter.]
    Mr. Somerville. Well, in a state like North Dakota, we run 
into problems where the fossil fuel industry pretty much has a 
grip on our state. It is hard to make inroads with utilities. 
It is hard to make inroads with legislature when we are such a 
fossil fuel known state, to be honest with you, Senator.
    Senator Hoeven. Well, what economic model would work for 
them as well as for individuals that want to have the windmills 
and provide the energy?
    Mr. Somerville. Great question. I would love to see the 
utilities invest in more renewable energy, specifically 
distributed wind energy. We believe that distributed wind has a 
great benefit to the utility. Distributed wind, because it is 
spread out over a vast area, it strengthens outlying weak grid 
systems that we common have in areas in rural North Dakota.
    The utilities can benefit from renewable energy by charging 
a retail rate now for that energy rather than the large wind 
farms where that energy is valued at a wholesale rate. So, we 
think the utilities have great promise to be able to harness 
distributed wind energy, in particular.
    Senator Hoeven. Right. This is a big step for you, right, 
because, I mean, right now, you can provide energy on the farm 
or to a home or business, wherever. But, kind of the next step 
for you would be that distributed energy piece, right, and so 
you need an economic model that works both for the individual 
and for the utility company, right? I mean, that is kind of the 
key we have to figure out, is it not, to really take that next 
big step?
    Mr. Somerville. Yes. You are absolutely correct, Senator. 
Our industry is currently developing leasing models that will 
mimic the solar leases that have brought the solar industry 
their big boom in recent years. These small wind leases will 
allow individuals to get into the equipment with a very small 
or, frankly, no capital investment and take full advantage of a 
renewable energy system day one without the huge burden of the 
capital expenditures.
    Senator Hoeven. Thanks for your entrepreneurship. It is a 
great story and we want to see more of that, not just in North 
Dakota, but across the country. Thanks so much.
    Mr. Somerville. Thank you, Senator, and thank you for your 
support.
    Senator Ernst. Senator Heitkamp.
    Senator Heitkamp. Thanks, Madam Chairman.
    Cris, just an update on your testimony. You talked about 
the work that we did at the end that provided wind tax credits, 
production tax credits, and ITCs for solar. We are now working 
on an amendment that would correct and include those who were 
left behind in that effort. So, from your ears to our work, or 
from your mouth to our work, we are, in fact, working on an 
amendment that would accomplish including small wind ITCs in 
our FAA reauthorization, so we will keep you posted on that.
    I want to just switch from wind, because, obviously, I 
believe that a lot of your market could be the international 
market. I have been all across the world and have seen 
firsthand the need for a product that you develop, that can be 
managed locally, that may not, in fact, ever need to attach to 
a grid, but can provide that opportunity for electricity in 
areas that do not have electricity.
    One of the challenges we have is so much of our public 
policy has really been large command control, with huge 
distribution systems that may not be, in fact, the system that 
is needed in a village in Africa. It may, in fact, be something 
very similar to what you are producing. So, we are very excited 
and very grateful that you are also looking at producing a 
product that is low maintenance, because I think one of the 
things we get afraid of is if you put it there, can, in fact, 
the people who live there manage the project. I'm really 
looking forward to seeing your business grow. I look forward to 
seeing your efforts populate not only the rural landscape in 
North Dakota, but also across the world. We think that is a 
real growth model.
    Now, with that said, you are also on the Empowerment Zone 
committees. You also work very closely with rural development 
in general, not just in your project. We are looking for some 
advice here on how we can fashion the programs that we have 
that could be more responsive to not just you, but all of the 
efforts that are going on in that region, that Empowerment 
Zone. I am wondering if you have any advice for us relative to 
priorities for rural development?
    Mr. Somerville. Well, thank you for the question, Senator. 
I think I am going to have to get back to you on that.
    Senator Heitkamp. Okay. I mean, it would----
    Mr. Somerville. That is a wonderful question. I am just--I 
am at a loss right now.
    Senator Heitkamp. Just to give you an example, I was all 
over Northeastern North Dakota. I did a panel and a roundtable 
in Walhalla, I was in Cavalier, I was in Grafton, all places 
that have some great primary sector development. I mean, we 
have Marvin Windows, we have biofuels; we have a lot of 
projects out there.
    Their problem that they have right now is they cannot find 
workforce, and so, let us say, Cris, that you were able to land 
a couple of big contracts and needed to triple your workforce. 
Do you think you could find folks immediately that could be 
ready to work and develop your business with you?
    Mr. Somerville. No. That is a terrible problem in our area 
of North Dakota. We have one of the lowest unemployment rates 
in the country. It is very difficult to find workers, 
particularly that have a technical skill. Housing is a big 
issue in our area. Education is another issue. I think that we 
could do more to promote our trade schools. Not everybody has 
to become a doctor and lawyer. It is okay to be a precision 
machinist. Go get a two-year degree and come work for us in 
Cooperstown, North Dakota.
    Senator Heitkamp. Yes. We----
    Mr. Somerville. We have good jobs in these small towns.
    Senator Heitkamp. We had a long discussion in these 
meetings about how you educate people who are even in grade 
school and then growing up in high school about what these 
opportunities are and what the skill sets are that people need, 
and I think we are failing miserably because we created a 
presumption that without a four-year degree, you will be an 
economic failure, which is absolutely not true.
    We are going to work really hard on that piece of it, but I 
am very concerned about this idea of quality of life. By that, 
I mean many of our young folks think you have to live in, in 
our case, in Fargo or Grand Forks or Bismarck or Minot in order 
to enjoy quality of life, and we need to do a better job 
selling the Cooperstowns and the Walhallas, and there are some 
great recreational opportunities. You are not that far from a 
ball game if you want to go watch a ball game.
    But, it all is part of that continuum of development of 
kind of infrastructure and rural places that I think can help 
your business grow right there in Cooperstown. We have great 
successes all across North Dakota in small communities. I am 
concerned that as we promote those small businesses and as we 
talk about what we do and your patent work and all the things 
that you are creating, we want you to thrive, but we want you 
to thrive in Cooperstown because we think that is a model that 
is going to grow rural communities. In order to make that 
happen, we need to make sure there is affordable housing, that 
there are amenities, like you can run to the grocery store and 
get a gallon of milk. That may sound like a small thing, but 
those of us who are in rural North Dakota worry about that. 
Whether, in fact, you have to drive 15 miles to get a gallon of 
milk is a huge impediment to developing our rural communities.
    I want to congratulate Mr. Hill and Mr. Shaw, as well. We 
will continue to fight for the RFS. We will continue to 
challenge the assumptions about the blend wall. Know that one 
of the things we do not say enough on biofuels is we do not 
talk enough about how it is the building block for other 
advanced manufacturing. You know, I used to say, let us move 
beyond food, fiber, and fuels and I got schooled very quickly 
from the biofuels industry that a lot of the beginning process 
that you would use in advanced manufacturing in agriculture 
really starts at the work that you have done.
    We are not unmindful in North Dakota. In fact, I think we 
are challenged more by Waters of the United States, given that 
we are the fly zone for the prairie pothole region, given that 
there are very, very few sections of land in North Dakota 
without some kind of water on them, and that has created a huge 
disruption.
    But, we are serious in this committee and I am serious 
about rural development and making sure that we extend economic 
opportunity not just to agriculture and agriculture-based 
industries, but that we look at how we can expand and utilize 
those rural communities and the rural infrastructure that we 
have.
    So, congratulations. We are all in this fight together, and 
thank you, Chairman, for calling this hearing.
    Senator Ernst. Thank you. I appreciate it very much.
    I just want to follow up briefly with one point, Monte, 
that you had made, with second generation biofuels. There are 
some challenges that the second generation biofuels have faced, 
and if you could give an example of other energy programs that 
were supported by the government until they became more mature 
and they could compete on their own. If you would just follow 
up, that would be helpful.
    Thank you.
    Mr. Shaw. Well, the first one that jumps to mind is outside 
of renewable energy. I mean, clearly, we have a hundred years 
of tax credits targeted at petroleum. In the Senate, I think it 
is now two years ago--I would have to look it up and get you 
the exact site--but there was a hearing about the intangible 
drilling cost expensing provisions that petroleum companies 
get. They had a CEO of a very large fracking company in and he 
talked about how this was very important because it allowed us 
to try and fail for 20 years to make fracking a reality. But 
because of this very lucrative tax provision, they were able to 
recoup a lot of those costs and try again.
    I could not help but sit there and think, and people were 
applauding and this was great and America's success story. But, 
I could not help but think that if you replaced intangible 
drilling cost expensing and fracking with the biodiesel tax 
credit and biodiesel, many of the people around that particular 
Senate--it was not the Agriculture Committee--many of the 
people around that committee table would have been saying, oh, 
that is horrible. That is picking winners and losers. The 
government should not get involved.
    I do think--you mentioned the FFA--FAA bill. Excuse me. I 
am from farm country, so FFA comes out often.
    [Laughter.]
    Mr. Shaw. But, in the FAA bill, there might be a chance to 
also extend out the advanced biofuels tax credits. Biodiesel 
and cellulosic ethanol are still very young, very immature, and 
they have--they are showing promise and they are growing and 
they are becoming more efficient, but we are not there yet. 
Particularly when we are competing against commodities that 
continue to receive government support, that are profitable and 
have gotten it for literally now, I think, 103 years. I think 
it goes back to 1913. So, that would be an example of something 
where, let us do the same thing there.
    Biochemicals, section 9003, I think there is some ability 
there to help streamline some stuff to make sure that stand-
alone biochemical facilities can apply for that program. In 
Iowa, at the state level, we just passed a biochemical tax 
credit bill. Anything we make out of a hydrocarbon, we can make 
from a carbohydrate. Fuels are just the tip of the iceberg. 
Whether it is at that renewable fuel plant or across the fence 
or even a stand-alone facility, we are very excited about those 
opportunities.
    Senator Ernst. Well, great. I thank you for that. I think 
we have some exciting technology.
    I know we do have to wrap up our hearing, but I do want to 
thank all of our witnesses here today and the Under Secretary 
for appearing earlier. The testimonies provided today are 
valuable to us and to all of us as we move through any rules, 
regulations, and, of course, any legislation that is put 
forward here.
    So, thank you, Senator Heitkamp. Truly, what an advocate 
you are for rural development. We appreciate it so much.
    A lot of real challenges have been identified today and we 
hope that we are able to follow up on those, as well as 
continuing to focus on those programs that are truly working 
for rural America and for the betterment of our United States 
in general.
    So, again, I want to thank you very much for appearing in 
front of us today and thank you for your time and your 
attention to these types of matters, and we hope to work with 
you continually in the future, as well.
    So, with that, we will go ahead and close the hearing. 
Thank you for attending today.
    [Whereupon, at 11:45 a.m., the subcommittee was adjourned.]

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


                            A P P E N D I X

                             APRIL 6, 2016



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




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


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


                   DOCUMENTS SUBMITTED FOR THE RECORD

                             APRIL 6, 2016



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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



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


                         QUESTIONS AND ANSWERS

                             APRIL 6, 2016

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                   [all]