    [Senate Hearing 114-715]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-715

                            FROM CROP TO CRAFT BEER:
         FEDERAL REGULATION'S IMPACT ON AMERICA'S FOOD AND AGRICULTURE

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

                                  FIELD HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                   HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                AUGUST 17, 2016

                                   __________

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

                           Printed for the use of the
            Committee on Homeland Security and Governmental Affairs

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            COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                        RON JOHNSON, Wisconsin Chairman
    JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
    ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
    RAND PAUL, Kentucky                  JON TESTER, Montana
    JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
    MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
    KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     GARY C. PETERS, Michigan
    BEN SASSE, Nebraska

                      Christopher R. Hixon, Staff Director
                       Satya P. Thallam, Chief Economist
          Devin Mogler, Legislative Assistant, Office of Senator Ernst
                  Gabrielle A. Batkin, Minority Staff Director
               John P. Kilvington, Minority Deputy Staff Director
                         Laura W. Kilbride, Chief Clerk

                                C O N T E N T S

                                     ------
    Opening statements:
                                                                       Page
        Senator Johnson..............................................     1
        Senator Ernst................................................     3
    Prepared statements:
        Senator Johnson..............................................    27
        Senator Ernst................................................    28

                                    WITNESS
                           Wednesday, August 17, 2016

    Jim Zimmerman, Farmer, Rosendale, Wisconsin......................     6
    Rick Vaughn, Chief Executive Officer, Innovative Ag Services.....     7
    David Fritz, President and Volunteer Director, Potosi Foundation,
      Inc............................................................     9
    Richard Williams, Ph.D., Director, Regulatory Studies Program,
      Mercatus Center, George Mason University.......................    11

                         Alphabetical List of Witnesses

    Fritz, David:
        Testimony....................................................     9
        Prepared statement...........................................    38
    Vaughn, Rick:
        Testimony....................................................     7
        Prepared statement...........................................    32
    Williams, Ph.D., Richard:
        Testimony....................................................    11
        Prepared statement...........................................    41
    Zimmerman, Jim:
        Testimony....................................................     6
        Prepared statement...........................................    30

                                    APPENDIX

    Statements submitted for the Record from:
        Consumer Federation of America (CFA).........................    48
        National Resources Defense Council (NRDC)....................    51

                            FROM CROP TO CRAFT BEER:
         FEDERAL REGULATION'S IMPACT ON AMERICA'S FOOD AND AGRICULTURE

                                  ----------

                           WEDNESDAY, AUGUST 17, 2016

                                         U.S. Senate,
                               Committee on Homeland Security
                                      and Governmental Affairs,
                                                           Dubuque, IA.
        The Committee met, pursuant to notice, at 12:00 p.m., in
    Grand River Center, 500 Bell Street, Dubuque, Iowa, Senator
    Johnson, Chairman of the Committee, presiding.
        Present: Senators Johnson and Ernst.

                 OPENING STATEMENT OF CHAIRMAN JOHNSON

        Chairman Johnson. This hearing of the Senate Homeland
    Security and Governmental Affairs Committee (HSGAC) will come
    to order.
        I want to welcome all of our guests for attending. I
    appreciate your interest in the subject.
        I want to thank all of our witnesses. I know a couple of
    you have traveled a fair amount. I drove farther than he did,
    but I really appreciate your thoughtful testimonies. We
    reviewed them and look forward to your oral testimonies as well
    as your answers to our questions.
        Today's hearing is titled, ``From Crop to Craft Beer:
    Federal Regulation's Impact On America's Food And
    Agriculture.''
        Before I kind of make some brief opening comments, I would
    ask unanimous consent to enter my written statement into the
    record.\1\
        We also want to just describe a little bit about what this
    Committee does. It is kind of a big name--the Homeland Security
    and Governmental Affairs Committee. It is really two Committees
    in one--compared to the House. We have the homeland security
    side of the Committee and then we have the governmental affairs
    side, which is really the Senate's Committee on oversight, with
    broad jurisdiction over providing the necessary oversight of
    the Federal Government.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Johnson appears in the
    Appendix on page 27.
    ---------------------------------------------------------------------------
        The first thing I did when I became Chairman is, I reached
    out to Ranking Member Carper and other Committee Members and
    suggested that we develop a mission statement. And, we did.
    And, it is pretty simple. It is: to enhance the economic and
    national security of America. Those two things are inextricably
    linked. If you are going to have national security, you have to
    have economic security. You have to have a strong economy.
    Then, on the homeland security side, we established four basic
    priorities: border security, cyber security, protecting our
    critical infrastructure--including our electrical grid--and
    countering Islamic terrorists.
        And, we have concentrated like a laser beam on those four
    priorities on the homeland security side.
        On the oversight--the governmental affairs part of that--of
    our assignment--we established two Subcommittees. One on
    regulatory reforms, chaired by James Lankford, with Ranking
    Member Heidi Heitkamp from North Dakota. And, we have really
    been delving into regulatory performance, which is the subject
    of this hearing. And, the other Subcommittee is chaired by
    Senator Rand Paul. It is really about identifying duplicative
    programs and waste, fraud, and abuse (WFA) in Federal spending.
    And so, that pretty well lays out what this Committee is all
    about.
        And so, today's hearing really is focusing on the
    governmental affairs side--the oversight responsibility we
    have, which both Senator Ernst and I take very seriously. The
    focus is drilling down in on regulatory overburden,
    particularly, as it relates to food processing and agriculture.
    And, before I turn it over to Senator Ernst, who, by the way, I
    just have to say--I do not know if you keep records of the
    hours spent in Committee, but I would say Senator Ernst has,
    probably, the highest level of attendance--just below the
    Chairman, because I always have to be there--but she has been
    such a faithful Member of this Committee and such a valuable
    Member. And, I just give her great kudos and I just really
    enjoy her participation. And, I am glad you chose this
    Committee.
        Let me just lay out the massive cost of Federal
    regulations.
        In testimony and in different studies, it has been shown
    that it costs about 2 trillion dollars, per year, to comply
    with Federal regulations. Now, I know we are getting immune to
    these massive numbers--these trillions of dollars--so let me
    make that a little more relatable.
        If you divide that 2 trillion dollars by the number of
    households in America, it translates to $14,800 per year, per
    household. That is the cost of complying with Federal
    regulations. And, of course, people do not realize it, because
    the cost is hidden in the price of products. For example, a
    water heater costs $450, because of Federal regulations tacked
    onto the normal cost.
        I was talking to a Wisconsin paper manufacturer, who said
    that just four regulations--just four issued under this
    Administration--are costing his business the equivalent of
    $12,000 per year, per employee.
        And, the question I am asking is--certainly, folks in
    Wisconsin--would you rather have that $12,000--or that
    $14,800--feeding a big, bloated government bureaucracy or would
    you rather have that $12,000 to $14,800 in your paycheck,
    feeding and providing for your family?
        To me, I think--and Senator Ernst--it is pretty obvious.
    Now, we need some regulations--no doubt about it--but they have
    to be reasonable.
        Today, we are going to be talking about the cost-benefit
    analysis (CBA) of regulations and I just want to concentrate on
    just one of the ideas we are going to be talking about:
    atrazine. And, Mr. Zimmerman is going to be speaking to that.
    But, the Environmental Protection Agency (EPA) is trying to
    reduce the allowable amount of atrazine in water flow, right?
    From 10 parts per billion (ppb) to 3.4 parts per billion. Now,
    that seems like a massive reduction, right? From 10 ppb to 3.4
    ppb?
        Let me actually make that a little more relatable. We are
    in the midst of the Olympics, right? We are watching our
    American heroes win gold in the pool. Well, an Olympic-size
    pool holds 660,000 gallons. Ten parts per billion, in a 660,000
    gallon pool, is the equivalent of about 5 teaspoons (tsp). If
    you reduce that down to 3.4 ppb, you are reducing it down to
    1.7 teaspoons. So, we have to look at the reasonableness of
    these regulations. We have to put them in context and we always
    have to compare the benefit to the enormous cost, because, I
    believe, in your testimony, you are going to say that it could
    cost us--the American economy--almost 2.5 billion dollars to
    reduce the level of atrazine from--to use our example--5
    teaspoons, in an Olympic-size pool, down to 1.7 teaspoons. We
    have to get reasonable and we need some common sense.
        And, with that, I will turn it over to Senator Ernst.

                   OPENING STATEMENT OF SENATOR ERNST

        Senator Ernst. Thank you, Senator Johnson. Thank you for
    coming to the beautiful State of Iowa.
        Chairman Johnson. It is beautiful.
        Senator Ernst. And, I want to thank you for your kind
    comments as well. I do participate, regularly, on the Homeland
    Security and Governmental Affairs Committee, because it is such
    an important Committee on two fronts. I have several different
    passions. Of course, the first is protecting our homeland. We
    all have a vested interest in that. But, rules and regulations
    are also a huge part of our everyday lives--and many times they
    do not seem to make common sense or be based on science. And,
    we want to do things right, here, in the United States. But, we
    want to do them right, as far as making sure that they make
    common sense and they are science-based.
        So, with that, I do have a statement that I would like to
    enter into the record.\1\ And then, we will proceed with our
    witnesses.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Senator Ernst appears in the Appendix
    on page 28.
    ---------------------------------------------------------------------------
        Thank you, gentleman, for being here today. It is a
    pleasure to meet with you and to have visited with you to talk
    about some of these issues. I am anxious for our public to hear
    your personal stories as well. So, again, thank you for being
    here.
        And, again, we are holding this field hearing here in
    Dubuque, Iowa. We are glad to have our audience with us and I
    know that our witnesses did have to take time away from their
    busy schedules. So, thank you for joining us, today.
        Today, we will be exploring a few specific regulatory
    issues, but, as we do this, please keep in mind that they are
    symptoms of a broader problem.
        This Administration has made a habit of acting
    unilaterally--skirting the rulemaking process, ignoring
    Congressional intent, and taking broad liberties with the
    regulations they put forward.
        This is a large part of why the Administration has lost the
    trust of the American people. Too often, I hear from Iowans
    that they feel like the government is out to get them. I have
    heard that at nearly every stop that I have made on my 99-
    county tour, across the State of Iowa.
        This is a refrain I hear, especially, from farmers,
    ranchers and landowners. Today, I want to focus on some
    regulations that unfairly impact these particular groups.
        The memorandum on Retail Exemptions--Process Safety
    Management (PSM) of Highly Hazardous Chemicals and Application
    of the Retail Exemption, issued by the Department of Labor
    (DOL), specifically, the Occupational Safety and Health
    Administration (OSHA), in July of 2015, reclassified the
    majority of traditional farmer cooperatives (co-ops) in Iowa
    and Wisconsin.
        These farmer-owned businesses warehouse and distribute crop
    nutrients, including anhydrous ammonia, at thousands of sites
    across the Midwest.
        In fact, Iowa uses more anhydrous ammonia as a crop
    nutrient than any other State, as it is the most cost effective
    form of nitrogen for farmers to utilize in producing affordable
    food and fuel for our growing world population.
        The changes OSHA has made will be difficult for the
    companies to implement and will yield little--if any--safety
    benefits. Further, they will cost these retailers tens of
    thousands of dollars per site. Per site. These are costs that
    will, ultimately, be passed onto the family farms they serve.
        Unfortunately, since the Department of Labor did not go
    through the formal rulemaking process, these key stakeholders
    were not afforded the opportunity to comment on the impact
    these changes in regulations will have on their livelihoods.
        When Congress passed an annual spending bill last December,
    we spelled out that OSHA could not enforce their memo until
    they went through the proper notice and comment rulemaking
    process. But, a week later, OSHA, ignoring Congressional
    intent,
    simply stated that it would delay enforcement until the
    spending bill expired--this coming October 1. All of the while,
    this issue is tied up in the D.C. Court of Appeals. So, in May,
    OSHA informed the Court and sent a letter to every member of
    Congress, stating that they intended to go through the
    rulemaking process after
    all--but they would not rescind the memo while the multi-year
    rulemaking process takes place.
        This is the kind of logic that can exist only inside the
    D.C. bubble. It only exists there. The Agency expects all
    farmer co-ops to be in compliance this October, while they
    belatedly go through the process to create the rule and gather
    feedback from the stakeholders that will bear the brunt of this
    misguided guidance.
        Another imprudent move from this overzealous Administration
    came this past June, when the Environmental Protection Agency
    released its 520-page draft ecological risk assessment report
    of the herbicide atrazine. Much like their 297-page ``Waters of
    the United States'' (WOTUS) rule, this too threatens to
    increase costs for the men and women who are the bedrock of our
    safe and affordable food system.
        The EPA's report indicates that the routine use of atrazine
    could be harmful to animals and our ecosystem. The report seems
    to ignore the nearly 7,000 scientific studies, over the past 50
    years, which show the safety of atrazine--which is used by over
    400,000 corn, sorghum, and sugar cane growers across the United
    States.
        A primary concern I have with this report is that it is
    based, in large part, on studies that the EPA's own Federal
    Insecticide, Fundicide, and Rodenticide Act (FIFRA) Scientific
    Advisory Panel (SAP) called flawed just 4 years ago. It appears
    the Administration may, once again, be cherry-picking the data
    they find most convenient to support their overreach.
        A 2012 University of Chicago study concluded that banning
    atrazine could cost corn growers an additional $59 per acre in
    input costs. The EPA has even estimated that not having access
    to this herbicide will cost corn growers $28 per acre in
    reduced yields. All of this is at a time when producers are
    looking at a $3.00 or lower price of corn--well below the cost
    of production.
        I also wanted to mention that, just last week, a
    manufacturer in Cedar Rapids, Iowa announced that it was
    cutting jobs due to regulations. McLanahan Universal of Cedar
    Rapids, a maker of heavy equipment for mining, said that it is
    eliminating 15 jobs. And, according to their president and
    Chief Executive Officer (CEO), it is a direct result of the
    Obama Administration and the regulations that it has put in
    place, which have crippled the industries we serve.
        All of these regulations follow a similar theme. One of
    bigger government, a disregard for common sense, and a
    ``Washington-knows-best'' mentality. It is the responsibility
    of this Committee to keep an eye on an Administration run amok
    and to push back where we can.
        Thank you, Mr. Chairman. I will yield back to you.
        Chairman Johnson. Thank you, Senator Ernst.
        It is the tradition of this Committee to swear in
    witnesses, so if you will all rise and raise your right hand.
    Do you swear the testimony you will give before this Committee
    will be the truth, the whole truth and nothing but the truth,
    so help you, God?
        Mr. Zimmerman. I do.
        Mr. Vaughn. I do.
        Mr. Fritz. I do.
        Dr. Williams. I do.
        Chairman Johnson. Thank you. You may be seated.
        Our first witness is Jim Zimmerman. Mr. Zimmerman is a corn
    grower near Rosendale, Wisconsin. He is a board member of the
    National Corn Growers Association (NCGA). He is also a director
    of the Wisconsin Corn Promotion Program and an advisor to the
    Integrated Pest and Crop Management Program. He was previously
    the president of the Wisconsin Corn Growers Association (WCGA).
    Mr. Zimmerman.

      TESTIMONY OF JIM ZIMMERMAN,\1\ FARMER, ROSENDALE, WISCONSIN

        Mr. Zimmerman. Chairman Johnson and Senator Ernst, good
    afternoon.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Zimmerman appears in the Appendix
    on page 30.
    ---------------------------------------------------------------------------
        My name is Jim Zimmerman and I am a board member for the
    National Corn Growers Association. And, I also serve as a
    director for the Wisconsin Corn Promotion Board. I thank the
    Committee for inviting me to testify at this hearing on the
    regulations affecting U.S. agriculture.
        I would like to begin my testimony by telling you a little
    bit about myself and my operation. I am a Wisconsin grower with
    2,700 acres of corn, soybeans, and wheat, which are grown using
    conservation tillage methods of no till and strip till--
    depending on the crop. I am a third generation farmer and I
    plan for my son, Aaron, to take over the farm one day. Every
    farming decision I make is motivated by what is best for the
    long-term viability of the farm. From the crops we grow to
    choices in tillage practices, everything is done with an eye on
    the future.
        A key consideration for every farmer is which crop
    protection tools to use to ensure we raise a successful and
    healthy crop. One of the most important tools I use on my farm
    is the herbicide atrazine. And, I am far from alone in this
    regard. Atrazine is one of the most widely used herbicides in
    the United States. Used on well over half of corn and sorghum
    acres and on as much as 90 percent of sugar cane acres. Many
    specialty crops rely on the herbicide as well. Applying
    atrazine to control weeds allows farmers to use conservation
    tillage, a farming method that leaves the residue from the
    previous crop to cover the soil surface after planting.
    According to the United States Department of Agriculture
    (USDA), by leaving the crop residue and reducing or eliminating
    tillage trips, farmers are able to protect the soil from water
    and wind erosion, conserve moisture, reduce runoff, improve
    wildlife habitat, and limit the output of labor, fuel, and
    machinery. In fact, conservation tillage reduces soil erosion
    by as much as 90 percent.
        Atrazine is the most widely used herbicide in conservation
    tillage systems. Without atrazine, farmers would have to use
    higher quantities of other herbicides that are less effective,
    while increasing tillage and threatening the soils health and
    nutrients.
        Atrazine has been used in this country for more than 50
    years. More than 7,000 scientific studies have been conducted
    on the safety of this herbicide to both the environment and to
    humans. The evidence, overwhelmingly, confirms atrazine is
    safe. The World Health Organization (WHO) and regulatory
    agencies in Australia, Canada, and the European Union (E.U.)
    have all come to the same conclusion. That is why NCGA was
    shocked to learn of the EPA's findings in the preliminary
    ecological risk assessment that was released this past June.
    Through the use of highly questionable studies, the EPA arrived
    at an aquatic Level of Concern (LOC) of 3.4 parts per billion--
    a two-thirds reduction from the current level of 10 ppb.
    Scientific evidence points to a safe aquatic life Level of
    Concern at 25 parts per billion or greater. A Level of Concern
    of 3.4 is, practically, unachievable and would represent a de
    facto ban on the use of atrazine, were it to become the
    standard.
        The EPA's conclusions rest on serious scientific errors and
    flawed interpretations--and are inconsistent with many of the
    Agency's previous conclusions. Several rigorous, high-quality
    scientific studies were discounted by the draft ecological risk
    assessment, in favor of studies found flawed by the EPA's own
    2012 SAP.
        By the EPA's own estimate, farming without atrazine would
    cost farmers an additional $28 per acre. A 2012 University of
    Chicago study puts that number closer to $60 per acre. A loss
    of atrazine would have an additional negative consequence in
    controlling weed resistance. NCGA has advocated for farmers to
    implement multiple modes of action as a key part of weed
    resistance management. Atrazine is one of these essential modes
    that make this best management practice possible.
        If atrazine--one of the most studied herbicides with a
    proven track record of over 50 years of safe use--is
    experiencing such difficulty in re-registration, the future
    does not bode well for other crop protection tools. The
    cornerstone of our regulatory process must continue to be
    reliant on the best science and data. Flawed risk assessments,
    like the one at hand, threaten the integrity of the review and
    the regulatory process as well as farmers' ability to maintain
    high crop yields and to reduce soil runoff through the use of
    atrazine. NCGA and our farmer members are submitting comments
    to the EPA on this document, and we remain hopeful that the EPA
    will return to a review process that is based on sound science.
    The credibility of the Agency and the long-term sustainability
    of U.S. agriculture depend on it.
        Again, I thank the Committee for this opportunity to
    testify and for holding this hearing on a topic that is
    critically importantly to this nation's farmers.
        Chairman Johnson. Thank you, Mr. Zimmerman.
        Our next witness is Rick Vaughan. Mr. Vaughan is the CEO of
    Innovative Ag Services (IAG), a 4,845 farmer-member-owned
    retail farm supply co-op in Iowa and Wisconsin. He oversees 33
    locations, 340 full-time employees, and up to an additional 165
    seasonal employees. He was previously the CEO of Prairie Land
    Cooperative and the CEO and controller of Avon Grain Company.
    Mr. Vaughan.

       TESTIMONY OF RICK VAUGHAN,\1\ CHIEF EXECUTIVE OFFICER OF
                         INNOVATIVE AG SERVICES

        Mr. Vaughan. Thank you, Senator Johnson and Senator Ernst.
    Everything I listened to, from Senator Ernst--I appreciate your
    knowledge on this. You hit every point I was going to try and
    make, so thank you for that.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Vaughan appears in the Appendix
    on page 32.
    ---------------------------------------------------------------------------
        Let me summarize my submitted information for you, please.
        We currently spend 593 hours per year, which equates to
    about 64 cents per ton, training our employees on how to safely
    handle anhydrous ammonia.
        I have been in this business for 35 years. I have worked at
    the ammonia plant, loading ammonia for our farmer customers. I
    have delivered ammonia to their farms and have also worked on
    the equipment at the ammonia plant. In that 35 years, I have
    not been involved in any anhydrous ammonia fatalities. None,
    whatsoever.
        Our PSM compliance cost estimates are outlined 1 through
    Document 6, which I included in my prepared statement.
        Document 1 provides the written detail that I am currently
    summarizing.
        Document 2 provides the up-front cost estimates to bring an
    anhydrous ammonia location into PSM compliance. You will note
    that amounts to 177 hours of time and $26,000 per location. You
    have, probably, read there are estimates out there for more
    hours and more dollars and also for fewer hours and fewer
    dollars. This information was compiled by our safety consulting
    firm, which we have contractually hired, and by Thatcher Block,
    the safety director in our organization, along with some of our
    operations people.
        The location we use has 92,000 gallons of anhydrous ammonia
    capacity: one 26,000 gallon fixed tank, one 12,000 gallon fixed
    tank, and 55 small tanks that are used to transport product to
    the farm.
        Document 3 and Document 4 provide detail of the up-front
    cost segments that make up this 177 hours. If you look through
    that detail and those technical points, you can see information
    that our industry has not needed over the many safe years that
    anhydrous ammonia has been used to produce corn in the United
    States.
        Document 5 provides an annual estimate to keep PSM program
    materials updated, along with additional time for training, as
    is being mandated by PSM.
        Document 6 provides a summary of the up-front costs, plus
    the annual cost, along with an illustration of the PSM cost per
    ton, per location at Innovative Ag Services.
        I think what is important is that this table illustrates
    the magnitude of the cost of PSM compliance and identifies
    which locations will be subject to close due to PSM.
        Our research tells us that we could spend up to $725,000 to
    comply, if we elect to become PSM compliant at all 27
    locations. This annual cost amounts to $10.31 for all ammonia
    tons that we sold in fiscal year (FY) 2016 for our year, ending
    in August of 2016.
        We do not believe this cost per ton to be economically
    feasible, so we are left with deciding what choices we are
    going to make. If we choose $10 as a threshold and cut it off
    there, we are going to be forced to close 59 percent of our
    facilities, or 16 locations. Why $10 a ton? Well, today, I can
    tell you that we can get sold out, by our customers, for the
    $10 number--really quickly.
        So, one real question is, how many of our competitors and
    other users of ammonia are going to comply? And, if we set out
    to do this, immediately, what kind of cost advantage--
    disadvantage, excuse me--are we going to put ourselves in?
        But, I think it is extremely important to move from--to
    think about the fact that 64 cents a ton is what we are
    spending, now, on training. There have not been any fatalities
    in the 35 years I have been in business. And, we are going to
    be asked to spend $10.31. So, what is the value of that almost
    20-fold increase in cost?
        Another thing that is important--65 percent of our total
    tons of ammonia are picked up by our farmer customers. We
    deliver the other, approximately, one-third of our total tons.
    So, the closure of any number of these facilities is going to
    cause customer dissatisfaction.
        Remember, these are the farmer-customer owners of our
    organization. We are going to put more anhydrous loaded miles
    on the road, if we have to do this. If we convert all of that
    tonnage to urea-ammonium nitrate (UAN), which is a liquid form,
    it is a 2.6-factor increase in the amount of nitrogen. You are
    going to put another 1,500 trucks on the road in the 2 week to
    3 week spring planting season. You have to stay ahead of the
    planters if you are going to get the levels of nitrogen down.
    There are other choices, but not to the magnitude that we are
    currently doing it, today.
        Our facilities operate--our ammonia facilities operate 2
    weeks to 3 weeks in the spring, ahead of the corn planters.
    They operate 2 weeks to 3 weeks in the fall--after the
    combines, after the temperatures drop, and before Thanksgiving,
    primarily. There is another approximately 2 weeks in the spring
    season--or ahead of the spring season and ahead of the fall
    season--that we are filling those facilities and those tanks to
    be prepared for those busy seasons. That amounts to 20 percent
    of the year. These anhydrous ammonia facilities are sitting
    idle for 80 percent of the year.
        So, thank you for your time this afternoon. I hope this
    information can help you to understand the challenges this PSM
    regulation is causing and also the economic burden it will
    place on our farmers, who are committed and who will produce
    the food supply that we have.
        Chairman Johnson. Thank you, Mr. Vaughan.
        Our next witness is David Fritz. Mr. Fritz is the volunteer
    president of the Potosi Foundation and volunteer director and
    general manager of the Potosi Brewing Company. The Foundation
    is the sole shareholder and owner of the Potosi Brewing
    Company. He is also president and CEO of TRICOR Insurance an
    independent insurance agency in Wisconsin, Iowa and Minnesota.
    Mr. Fritz.

    TESTIMONY OF DAVID FRITZ,\1\ PRESIDENT AND VOLUNTEER DIRECTOR,
                        POTOSI FOUNDATION, INC.

        Mr. Fritz. Thank you, Chairman Johnson and Senator Ernst.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Mr. Fritz appears in the Appendix on
    page 38.
    ---------------------------------------------------------------------------
        The Potosi Foundation was organized, in 2000, to save the
    original building that housed the Potosi Brewing Company that
    was built in 1852 and shut down in 1972. After a $7.5 million
    renovation, the Potosi Brewing Company opened in 2008 and is
    the home of the National Brewing Museum, an interpretive center
    for the Great River Road, and an operating brewery and brew
    pub. In 2010, we took beer to retail and, because of the
    increasing beer sales, we needed to move the brewing operations
    and the restaurant to an outside company we call the Potosi
    Brewing Company. And, the sole shareholder and owner of that
    company is the Potosi Foundation.
        From 2010 to early 2015, we worked with an outside brewery
    and contracted the production of most of our beer that went to
    retail. Early in 2015, we opened a new $6 million production
    facility and that facility includes bottling, kegging, and
    canning capabilities. We are also beginning to contract, brew,
    and package for other smaller breweries around the Midwest. We
    wanted to get the manufacturing jobs in southwest Wisconsin
    back and we also wanted to maintain 100 percent of our own
    quality, which was the reason for moving ahead with our own
    production facility.
        Potosi produces 6 styles of beer year-round and over 10
    seasonal, limited edition, and barrel-aged products. We also
    produce and sell draft and bottled root beer. We distribute in
    Wisconsin, the eastern half of Iowa, and the northern tier of
    Illinois, through 13 independent beer wholesalers.
        The craft beer industry, in Wisconsin and countrywide, has
    experienced remarkable growth in recent years. At the end of
    2015, there were 4,269 breweries in the United States,
    representing a 15-percent growth over 2014. In November 2015,
    the number of breweries exceeded the peak, which was 4,131
    breweries, in 1873. In 1978, the number of breweries dropped to
    89 operating breweries in the United States. The rate of growth
    is slowing a little bit in 2016.
        The economic impact created by the craft brewing industry
    is significant.
        Craft breweries are a rare manufacturing success story and
    this is fueled by the farmers providing quality ingredients.
    Sixty-five percent of the U.S. barley crop is used by the
    brewing industry. And, of that number, 35 percent to 38 percent
    is used by craft breweries. The number of hops acres planted in
    the United States, in 2016, is at 51,000. That is up from
    43,000, in 2015. Family farms are providing the highest quality
    ingredients in the world, allowing the craft breweries to
    produce the highest quality beer in the world.
        Potosi uses Wisconsin honey in our root beer. We use pure
    lemon juice in our ``Steamboat Shandy'' and we use pure
    tangerine juice in our Tangerine India Pale Ale (IPA). The
    farmer-produced products used by the craft beer industry are
    very broad.
        For the craft beer industry to continue to thrive, it is
    important that we are not subjected to regulations that drive
    up our costs of doing business. The consumers have shown they
    are willing to pay more for quality beer, produced in small
    batches, by private business owners.
        Some of the issues that we are facing today--the Food and
    Drug Administration (FDA) menu-labeling issue, which stems from
    the Food Modernization and Safety Act (FSMA) will be very
    costly to brewers. Restaurants with more than 20 locations are
    required to provide the nutritional information of beer and
    other spirits--and the cost would likely fall on the brewery to
    provide this. So, if Potosi wanted to continue to provide beer
    to craft restaurants--or to chain restaurants--we would need to
    spend an estimated $1,000 to bring that data to the chain
    restaurant, per style of beer.
        Transparency in labeling allows consumers to make informed
    choices when purchasing beer. Consumers have an interest in
    knowing the name of the brewery company or parent corporation
    that, ultimately, owns the beer brand. Encouraging all brewers
    to disclose to consumers their ownership of beer brands,
    including the name and the parent brewery that owns the brand,
    on the brand's label, enables consumers to make informed buying
    choices.
        Recently, the FDA attempted to restrict the spent grain--
    and that is the by-product after the grain--after the brewing
    process is completed--from being used for animal feed.
    Following a lot of discussion, the FDA exempted brewers grain,
    so that it can be used for animal feed. I believe this is an
    excellent example of an unintended consequence in the new
    regulations. This is also a good example of how government
    worked together to solve the problem and eliminate what would
    have been a very expensive cost.
        The craft brewers pay $7, per barrel of beer produced, in
    an excise tax. Consideration should be given to reduce the
    expense to the craft industry. Reducing the Federal excise tax
    to $3.50 per barrel, in the example of Potosi, would have saved
    us $20,000 in 2015. Based on production forecasts, it would
    have saved us $40,000 in 2016 and $63,000 in 2017.
        What would the money be used for? It would be used to hire
    new employees and expand our operations.
        The Craft Beverage Modernization and Tax Reform Act of 2017
    is working its way through Congress. Craft brewing is an
    innovative industry--growing quickly, hiring people, and being
    built by entrepreneurship. These are small business owners, who
    love what they do and use the craft beer industry to make a
    living for their families.
        The margins are small and there is a lot of competition.
    Brewers want to make the highest quality product for the
    consumers and the consumers are very informed and willing to
    pay for quality. It has thrived, because of a light regulatory
    touch. We are ``risk swamping'' that success, if we hit the
    regulatory throttle too hard.
        Thank you for allowing me to testify before your group this
    morning.
        Chairman Johnson. Thank you, Mr. Fritz.
        Our final witness is Dr. Richard Williams. Dr. Williams is
    the Director of the Regulatory Studies Program and a senior
    research fellow at the Mercatus Center at George Mason
    University (GMU). He is a 30-year veteran of the Food and Drug
    Administration. He was previously a director for social
    services at the FDA Center For Food Safety and Applied
    Nutrition (CFSAN). He is also an advisor to the Harvard Center
    for Risk Analysis (HCRA) and is a U.S. Army veteran. Thank you
    for your service and thank you for your testimony. Dr.
    Williams.

     TESTIMONY OF RICHARD WILLIAMS, PH.D.\1\, DIRECTOR, REGULATORY
       STUDIES PROGRAM, MERCATUS CENTER, GEORGE MASON UNIVERSITY

        Dr. Williams. Thank you. Chairman Johnson and Senator
    Ernst, thank you for inviting me to testify today on the impact
    of Federal regulations on American food manufacturing and
    agriculture.
    ---------------------------------------------------------------------------
        \1\ The prepared statement of Dr. Williams appears in the Appendix
    on page 41.
    ---------------------------------------------------------------------------
        As a long-time employee of the Center for Food Safety and
    Applied Nutrition in the Food and Drug Administration, I
    believe we are in a position, if we choose, to embrace the
    changes that have occurred in the last several decades in
    society and in the food industry to make real progress in food
    safety.
        First, we have better technology. These new technologies
    can help us locate the sources of food safety outbreaks as well
    as create safer foods and packaging.
        Second, because of increased interest in food safety, by
    the public, we can give stakeholders more of a role in creating
    new regulations by allowing them to challenge Agencies, in
    court, when they fail to properly analyze their rules. With
    better technology and better information, we can finally pledge
    down the number of cases of foodborne disease that repeat
    themselves year after year.
        On the other hand, if we stick with the same old policies
    that continue to fail us, we will continue to hear that 48
    million Americans get sick every single year from foodborne
    disease.
        As a public health researcher, this is depressing. Is there
    ever going to be an end to this? Are we ever to going to take
    public health seriously and insist on results, rather than on
    just more costly rules? For those in the food business,
    particularly, those who are far too busy to play in the complex
    process of the Federal regulation, the shame is that they live
    in a state of constant uncertainty about what to plan or
    produce and how much regulations are going to cost them this
    year. And then, they end up paying for regulations that do not
    work.
        Let me give you a few examples of our regulatory failures.
    After decades of using their own creative system of process
    controls, known as the Hazardous Analysis Criminal Control
    Point (HACCP), the industry stood helplessly by as the Federal
    Government commandeered it to turn it around and required its
    regulations--particularly, where it was not needed. Where
    before it was a targeted, flexible system, now it is a
    universal, static bureaucratic system.
        The first three mandated HACCP regulations were for
    seafood, raw fruit juices, and the USDA meat and poultry rule.
    As an example of the failures of this approach, the benefits of
    the seafood rule relied, primarily, on solving the problem of
    contaminated oysters from the Gulf of Mexico. But, 15 years
    after the rule became final, the cases of foodborne disease
    from raw oysters from the Gulf had doubled.
        Now comes the glut of new rules directing the rest of
    industry to use HACCP.
        One of the more extensive rules directs the entire packaged
    food industry to start using a ramped-up version of HACCP--even
    though the FDA acknowledges that most foodborne disease comes
    from homes and retail establishments.
        The FDA estimated the cost at about one billion dollars.
    The industry replied, using a Mercatus tool, that it will more
    likely cost in excess of 18 billion dollars. It fails the
    ``benefit-cost'' test.
        Next, as mentioned, there is the animal feed rule.
    Originally proposed to cover both pet food and farm animal
    feed, the FDA's analysis--which the FDA ignored--demonstrated
    that the vast majority of the problem was with pet food.
    Mercatus research demonstrated that including farm animal feed
    added approximately 120 million dollars to this rule. Whereas
    before, to cover pet food, it would have only cost $10 million.
        Then, there is the produce rule, where some of the most
    tortured logic is employed, to cover all fruits and vegetables
    that might be eaten raw. I would like to say that this logic is
    rare, but, throughout my entire FDA career, I heard it often.
        So, rather than just limiting the rule to produce that had
    been associated with outbreaks, the FDA explains that all
    commodities must be covered, because they have the potential to
    be contaminated. This means that, for the FDA, the problem is
    not food safety. It is a lack of regulation.
        Why can we not have better outcomes? It is not for lack of
    money. The FDA's budget has increased by 116 percent since
    2007. Not to mention the hundreds of millions of dollars spent
    by industry to comply. I actually included a chart\1\ in my
    testimony that shows how little we have gotten for the money
    that we have spent.
    ---------------------------------------------------------------------------
        \1\ The chart referenced by Dr. Williams appears in the Appendix on
    page 46.
    ---------------------------------------------------------------------------
        Maybe the problem is that we hire experts and we ask them
    to write multiple rules every year. For the FDA, this is now
    going on 110 years.
        Lately, this does not seem to be getting us new and
    workable solutions.
        So, here are some new directions for Congress to consider.
    First, we have tools that did not exist 20 years ago. A few
    decades ago, if you produced a contaminated food, the odds were
    that no one would ever find out it was your food. We now have
    better tools, in government, to identify specific
    pathogenstrains in sick patients. We also have new private
    technology, like Radio Frequency Identification (RFID) tags and
    deoxyribonucleic acide (DNA) spray-on technology, which can be
    attached to foods to help trace them back to the source of
    contamination.
        So, if we pursue these tools more vigorously, we will be
    able to go, much more frequently, from a sick person back to
    the
    source--and to positively identify that source. Once regulators
    know the source, an investigation can be conducted to determine
    the cause of the problem.
        Posting problems and solutions on the Internet can identify
    these firms, because of the intense consumer interest. It will
    drive the millions of private food contracts, which now include
    food safety provisions as well as private inspections, up and
    down the food chain. Posting the results of outbreak
    investigations can get rapid results by creating strong
    incentives to exercise due diligence. No one wants to incur the
    massive costs associated with an outbreak.
        The changes that I have just described, as a result of such
    a system by the private sector, can be particularly effective,
    relative to regulations that take an average of 4 years to
    create--and many more years of inspection to get results.
        So, rather than trying to get all firms to use HACCP--where
    there is either no problem or it does not work--let us focus on
    what is actually wrong and move quickly to address the
    problems.
        Second, let us give stakeholders much more of an equal role
    in food safety regulations by giving them the right to sue an
    Agency when its regulatory analysis is missing, poorly done, or
    ignored.
        Mercatus has demonstrated these problems time and time
    again.
        Finally, let us embrace technology--the way we finally did
    when pasteurization was invented. We did not embrace
    irradiation--even though it would have prevented hundreds of
    thousands of cases of foodborne disease. Both genetic
    modification and nanotechnology hold a great deal of promise
    for food safety. If we start doing things differently, we can
    avoid the same annual announcements of the same number of
    foodborne illnesses. We can also save our farmers, producers,
    and consumers for overspending on regulations that do not work.
        Thank you.
        Chairman Johnson. Thank you, Dr. Williams.
        Again, I want to thank all of our witnesses for their
    testimonies.
        I will start with Mr. Zimmerman and ask the basic question
    I will probably ask all of you. In terms of results, as it
    relates to atrazine and the EPA, do you know why they are
    trying to do this? I mean--and, again, I laid out the Olympic
    pool example--5 teaspoons to 1.7 teaspoons. Why?
        Mr. Zimmerman. Well, that is a good question and I would be
    kind of speculating if I were to say.
        Chairman Johnson. Go ahead and speculate.
        Mr. Zimmerman. But, the point is, if you can take a product
    that has been proven safe and has been used for over 50 years,
    and you can greatly minimize it, then you can do anything. You
    have then--pretty much everything is at risk.
        I mean, you have now done something that would be
    limitless, as far as what their--their reach would be. So, that
    would be the issue there.
        Chairman Johnson. In your testimony, you talked about the
    fact that your farm is multigenerational.
        Mr. Zimmerman. Yes.
        Chairman Johnson. That everything you do is really for the
    long-term viability of the farm. I come from the private
    sector. It is bad for business to hurt your customers. It is
    bad for business to expose your--keep the work with you--to
    endanger--lack of safety. I, certainly, believe that the vast
    majority of farmers are really concerned about their own animal
    husbandry and about keeping their--the sustainable type of
    farming. You talked about conservation and tillage. Can you go
    into that in a little bit of greater detail, in terms of how
    seriously you take the long-term viability of your farm and why
    you really do not need a lot of these regulations to make sure
    that you maintain a clean environment on your farm?
        Mr. Zimmerman. Thank you. Yes. It is about preserving the
    future for the next generation and understanding that we really
    do not own the land. We use the land and we want to be able to
    have it in better shape than when we received it. So, it is a
    tremendous resource for us, in that regard.
        Every now and again in every lifetime you have certain
    circumstances that occur--events--like a 50-year event that
    will happen while you are farming--and we had one in 2008. We
    had, approximately, 14 inches of rain, in about 10 days--late
    June or early July. The crop was well established and what not.
    And, some of the farms in the township--where they were not
    necessarily, practicing conservation tillage--they had to get
    out the snow plow to remove the soil off of the road to make it
    passable. And, next--the roads next to our farm--we were busy
    with the backhoe, getting the residue out of the culverts, so
    the water could flow through.
        Now, what that means is, it is really evident that
    preserving--not only the soil, but also the water quality--in
    regards to making sure that phosphorus does not move off and
    that we have good water quality. We all want that.
        But, that is, primarily, what is key, here, with
    conservation tillage. And, it is maintaining our resource--that
    soil, which we generate our livelihoods from.
        Chairman Johnson. So, again, if you are not able to use
    that herbicide--that atrazine--you will, probably, be less
    likely to use conservation tillage and you really do more harm
    than potential good--that is, basically, your point?
        Mr. Zimmerman. Yes. One of the things about conservation
    tillage--and atrazine--in that regard, is the fact that it
    takes more management to deal with the residue on the surface--
    and we do this because of the improved benefits that go along
    with conservation tillage. And so, atrazine is just--is one
    part of the tools that we need. And, we need all of them.
        The fact is that they are not making new products. And, we
    have a limited source of products from which to utilize. And,
    by having multiple modes, we talk about weed resistance
    management--the point is that, in order to keep all of these
    products durable--and prevent weed resistance--management--we
    need all of them. And, atrazine is key for us.
        We use it at a rate that is--in conjunction with another
    product--between the two of them, we use less than, maybe, what
    the label rate is--or nearly. That is within--on the label--and
    we have found that we are using less active ingredients per
    acre, because we are adding those--that combination of
    products.
        Chairman Johnson. Mr. Vaughan, as I was listening to your
    testimony, a thought was going through my mind--which always
    goes through my mind as I am looking at these regulations--it
    is a solution looking for a problem. Let me ask you that
    question. Why is OSHA doing this?
        Mr. Vaughan. I do not know that I have a good answer for
    you.
        Chairman Johnson. Again, you can speculate.
        Mr. Vaughan. It is my understanding that it started as a
    result of the West, Texas explosion that happened and that
    involved ammonium nitrate. It is my understanding that the only
    thing--or one of the main things that survived that explosion
    was the anhydrous ammonia tank--intact with the product still
    in it.
        So, how it was extrapolated to central Iowa, with our
    ammonia facilities that operate 20 percent of the year, I do
    not know. Some of Senator Ernst's comments caught my
    attention--about overreach and someone trying to solve problems
    with a wide, sweeping pen. And, I do not understand all of the
    rules and regulations.
        I heard Dr. Williams talk about--and we are involved in
    some HACCP, too--but it just feels like someone is, with a
    stroke of a pen, thinking they are going to solve something.
    And, they do not have a full understanding of the magnitude of
    the challenges that they are creating and the economic burden
    it places on people.
        Chairman Johnson. Well, coming from the private sector,
    where, let us face it, every business is motivated by growth
    and profitability--one thing I found about our government is,
    it has the same motivation. It wants to grow. And, I guess I
    would put that down as one of the concerns.
        Can you describe what the difference is, in your locations,
    because, obviously, some of these locations are going to be
    able to bear the burden of this increased cost if you have to--
    if this regulation gets implemented and others cannot. Can you
    describe why that is?
        Mr. Vaughan. We see PSM as a fixed cost per location--that
    $27,000. And then, on an ongoing basis, 10--so if you want to
    ammortize that fixed cost that is the cost over 5 years--I do
    not know if that 5 years is a good number. Tell me how much
    more regulation is coming--or not coming--at us, so that, if
    you have a fixed cost of operating--against a different size of
    tonnages.
        One of our challenges out here in rural Iowa is, if we were
    going to settle Iowa today with the current technology we have,
    we would not drop a city in every 10 miles. We did that because
    of the technology 150 years ago. So, consequently, our
    customer-producers are used to that service, in that geography,
    and the only way you can drive that cost is to run more tons
    through that fixed cost.
        Chairman Johnson. So, in other words, it is volume related?
        Mr. Vaughan. Yes.
        Chairman Johnson. And, this is the point I wanted to make,
    because it is extremely important. Every politician is always
    talking about supporting small business, right? And yet, every
    last one of these regulations harms small business, relative to
    large businesses--because large businesses can afford the cost
    of compliance.
        It actually ends up being a barrier to entry in a lot of
    businesses. So, even in your own operation, you have larger
    locations. Higher volume locations can actually support--or can
    survive with that added cost--and smaller ones cannot. So, I
    guess the point I am making is, if you want smaller businesses
    to survive--which, by the way, that is what competition is--
    those are the people that create jobs and that is the
    innovation in our economy--you have to be really concerned
    about overregulation.
        I will yield to Senator Ernst.
        Senator Ernst. Thank you very much.
        And, just on that topic, too, I had a quote--and I am not
    going to say who I am quoting. I do not want to put him under
    the gun, but he gave a quote--and it is a co-op from the
    central part of Iowa--and they have 70 retail locations serving
    their farmer-owners all across the State of Iowa. And, this
    gentleman--and I am going to quote this. He says, ``At this
    point, this co-op has committed to going forward with
    compliance, so that we are ready by October 1. We are spending
    about $20,000 to $30,000 per site, to be ready. I have had
    other agriculture retailers inquire about our intentions.
    Several, with only one or two locations, are, probably, going
    to exit the business. Since this particular co-op is all in, I
    guess it is best, for us, if the PSM eliminates competitors. I
    doubt that farmers or Senator Ernst will agree, but that is
    what government regulations do--sort out free competition.''
        And, that is what we see. And, some of the larger retailers
    will be able to make it through--at significant cost--but the
    smaller retailers simply do not have that kind of capital to
    put into these types of regulations. And so, they will be
    eliminated and they will be forced out of the business.
        And, that means, as you said, additional traffic on the
    roadways, as farmers have to go farther to get their products
    and--and so on and so forth. It is endless.
        So, you have made some really great points, Mr. Vaughan.
        I am going to go back to the explosion at West, Texas,
    because you did bring that up--and you are correct that this
    new rule, by OSHA, is a result of that--and OSHA has stated
    that. They used this tragic explosion as an excuse. And, when
    they narrowed
    down the definition of retailers of anhydrous ammonia to force
    farmers--cooperatives to comply with the PSM regulation--they
    did that, even though they are simply storing--we know our
    retailers are just simply storing--as you stated--the product.
    They are not producing it. So, it was just exposing them to
    onerous regulation.
        And, I thought it was very funny. And, I go back to, again,
    science-based, factually-based rule and regulation making. The
    explosion was not due to anhydrous ammonia. It was due to an
    entirely different product. And, later on, as it was
    discovered, the explosion was the result of arson. It was not
    due to these products. And yet, we now have a new regulation
    that is subjecting our American agricultural industry to a
    significant expense.
        But, I have stated that I think it is going to lead to
    reduced competition. Mr. Vaughan, what do you think this rule
    will do? Do you have other examples of businesses that have
    come to you and, maybe, stated that they would get out of the
    business?
        Mr. Vaughan. Yes. We are currently visiting with a company,
    today, that is independent--a single location business. It is
    considering transferring ownership, because of the age of the
    father and the son's lack of interest in it--devoting as much
    capital to the business. And, when I asked him about this--if
    they had started on it--they did not know anything about it.
    And, they did not plan to do it. So, I think that is a perfect
    example of what is going to happen.
        And, I think the numbers we have compiled are a good
    example of--we are a larger company, but we cannot afford to do
    that everywhere--when you look at some of those tons that are
    being considered. And, the reason is, because, at location X,
    if it is extremely expensive--because of low tonnage--can you
    expect location Z farmers to pay for that over time, if it is
    not a sound investment of the capital?
        Senator Ernst. And, you brought up a great point as well.
    You stated that that retailer did not know about these changes,
    correct--or, the rules and regulations and the improvements
    necessary?
        Mr. Vaughan. That was the son's answer to me, when I asked
    the question.
        Senator Ernst. And, I think that is a problem with this
    specific rule as well--that stakeholders were not involved in
    the rulemaking process. So, I would not be surprised if there
    are others that are out there who are not aware--and, maybe,
    they are aware now, because we have talked a lot about it, but,
    as far as actual notifications coming up from OSHA--and then,
    actually, being able to participate in a rulemaking process--
    they were simply disregarded.
        Mr. Vaughan. I believe that to be true, yes.
        Senator Ernst. Well, I would like to ask all of you for
    your thoughts from--we have talked about a number of issues. We
    talked about atrazine. We have talked about anhydrous ammonia.
    We talked about some of the issues with PSM. But, from some of
    the regulations that we have talked about, today--apart from
    those, can you think of any other regulations that we should be
    highlighting, today? And, what are those regulations doing, as
    far as interfering with you being able to grow your business--
    expand your businesses? Are there things that you can think of,
    off of the top of your heads? And, actually, I am going to
    start down here, with Dr. Williams. Could you think of other
    regulations that you have seen, during your time in
    governmental Agencies?
        Dr. Williams. Well, certainly, the one you mentioned. As
    far as in the United States, I think, this is the huge one.
        If I may, I would just like to go back to the atrazine
    example, because you asked what the problem is. The Department
    of Energy (DOE) has just opened up a very interesting question,
    which is: should we continue to use the linear-to-log model?
    And, what that model says is that, if you feed animals very
    high doses of something and they get ill, you extrapolate all
    of the way down to the amount that humans would actually be
    exposed to--and all of the way down to zero, which is,
    somewhat, biologically implausible.
        The Department of Energy has now asked whether we should
    continue to use that model. That is the model that is
    responsible for these kinds of results.
        In my time, at the FDA, for example--at one time, we banned
    saccharin, which later proved not to be a carcinogen. We did
    it, because we fed rats the equivalent of 800 cans of soda a
    day. And, we said, ``Well, if you drink one or two cans of
    soda, then you just get that much less.'' It is the equivalent
    of saying, ``If I jump down ten flights of stairs, I will be
    killed. So, if I jump down one stair, maybe, I won't be hurt
    that badly.''
        It is time to reconsider that model and I think that is one
    of the main issues with atrazine.
        Senator Ernst. Great. Thank you. Mr. Fritz.
        Mr. Fritz. I will go with that and add just a couple of
    things that, maybe, are a little bit broader in scope--and,
    certainly, the increasing costs of healthcare and the insurance
    premiums, as
    a result of increasing costs, which are affecting all small
    businesses--and that is my day job. We do a lot of that type of
    work. And, whether it is the Potosi Brewing Company or any
    other small business out there, that is an incredible cost that
    is being put upon them and a burden. And, hopefully, we can see
    some resolutions to that going forward.
        The other thing, in the brewing industry, we have a lot of
    part-time jobs. Now, we have some really high-quality
    professional people working in the industry. Our head brewer
    and the director of brewing operations is a microbiologist. We
    have another biologist running our lab. The equipment that our
    staff and people are running is highly automated, and they get
    paid very well. We have our sales staff.
        But, on the flip side of that, a lot of small craft
    breweries do a lot of hand packaging. People come. They recruit
    part-time people to come in. They enjoy the experience.
        And, if you see a--driving up of, for example, the minimum
    wage, to a level that makes it very difficult for the small
    brewer--now the large brewers, they have all the automated
    packaging equipment in the world. Good for them. We hope to be
    there at some point.
        We, recently, priced out an automated packaging line, on
    the back-end of our bottling line. And, it was like $250,000.
    We are fairly close to starting to pull the trigger on some of
    those components, but, right now, we are utilizing other
    resources to do that. We use the local sheltered workshop,
    actually, near where we are, to open our other cases, which are
    boxes that hold the four six-packs. They open the six-packs.
    They put them in the box and they ship them to us. It is 19
    cents a piece. That is a nice--they
    need the work. It is good for us. And then, our volunteers,
    sometimes--but a lot of times we are paying these people. And,
    you drive the cost of that--I mentioned that, in 1873, there
    were over 4,000 breweries. When Potosi shut down, in 1972, they
    were one of the last ones to be able to sustain themselves.
    And, there were less than a hundred breweries--operating
    breweries.
        It has completely turned around. And, you have seen a
    significant impact on local foods. People want to know where
    their products are being made and we are, probably, approaching
    4,400 to 4,500 breweries. This thing will reverse itself, and
    we will start going back in the other direction--unless there
    is reasonableness put into any of the legislative initiatives
    that are out there. And, the consumer will, ultimately, decide
    whether a product is good or bad. If you are producing a good
    product and if you try to regulate a good product, you are only
    going to drive out the competition.
        Senator Ernst. We are getting a little upside-down on rules
    and regulations. Mr. Vaughan, do you have any additional
    comments on any rules that we have not touched on, today?
        Mr. Vaughan. I would like to have some regulation and some
    funding to get us back to holding the individual accountable
    for their own actions, disciplines, and all of the things that
    made this country great. I believe we still are a great
    company, but, every time I turn around, I am adding additional
    company resources to try to get things done. If the individuals
    could be held accountable through all of the systems, there
    would be a lot less overhead.
        Does that make sense?
        Senator Ernst. It does make sense.
        Mr. Vaughan. It just seems like I spend an inordinate
    amount of time--compared to 20 years ago--on those kind of
    subjects.
        I just went through an unemployment hearing. The gentleman,
    unfortunately, was not doing what we asked him to. After the
    third time, we terminated him. We lost the unemployment,
    because there was some policy that we did not have in place
    that we, supposedly, were supposed to have in place--over and
    above the current handbook we have. And so, he got through the
    system one more time and was afforded economic benefits at the
    expense of society--specifically, businesses. And, that just
    does not seem right.
        Senator Ernst. I think that the outside compliance is also
    a great point. There are so many rules and regulations out
    there, whether it is through the human resources (HR) channels,
    whether it is through PSM, or whatever it might happen to be,
    that a lot of companies have a very difficult time even keeping
    up with
    compliance, as far as what is out there and what must be done
    by--whether it is codified in law or whether it is, actually, a
    rule or a regulation, through a specific Agency. That is a
    really great point.
        And, I will close with you, Mr. Zimmerman.
        Mr. Zimmerman. Yes. Thank you. And, Dr. Williams hit on the
    one that I want to highlight a little bit more. And, that would
    be WOTUS. The thing that, as I look at it--as it would come
    back to Wisconsin, it would be up to the interpretation of the
    local officials--and it is very difficult to find uniformity in
    it.
        And, the other issue that it touches on is that the
    overreach of WOTUS would amount to--if they used a 1,500-foot
    setback from every ``waters of the United States,'' it would
    take 65 percent of the land. It would include 65 percent of the
    land that we are farming, now, in the State of Wisconsin. And,
    if they did the 4,500-foot setback, it would be, like, 93
    percent, so it would be--they could then do with that what they
    pleased, for whatever reason, and we would lose control.
        You might as well ask, ``What private property rights do we
    have?'', if that is allowed to continue. And so, that is a true
    threat to what I see as having the room to be able to enjoy our
    way of life.
        Senator Ernst. And, thank you for that, Mr. Zimmerman. And,
    here in Iowa, with the expanded definition of WOTUS, it would
    cover 97 percent of the land mass in Iowa. In Missouri, I know
    Senator Blunt has stated that it would cover 99.8 percent of
    Missouri--where you would have to go through Federal Agencies
    to get permits to do work on your own property.
        So, thank you for that.
        Chairman Johnson. Of course, some of those permits can take
    more than 2 years to obtain and can cost over $200,000 to
    obtain as well. We talk about trying to be globally
    competitive. Why are we losing our manufacturing base? You take
    2 trillion dollars, divided by an 18 trillion dollar economy--
    that is an 11-percent cost on all of our products. That makes
    us globally uncompetitive.
        Mr. Fritz, I grew up underneath--just right below the
    Mankato Brewing Company. My dad was the general manager. I had
    my own beer stein and hospitality. So, I grew up in sort of the
    heyday--at least in modern times--of smaller breweries. There
    are all kinds of them. And, we watched that. My dad ended up
    becoming Treasurer of the Missouri Synod Lutheran Church, up in
    Minneapolis, Minnesota, and got out before that brewery closed.
    Now, we see this explosion, again, of small craft breweries,
    which I just love to see. But, again, we are talking about
    ``small versus big'' and you are, certainly, concerned about
    the problem of being able to compete as a small brewery against
    the big guys.
        Trust me, I have been in Miller Brewing Company. I have
    seen those unbelievable high-speed filling lines--and an
    enormous operation. And, I am looking around, thinking ``Where
    are the people?'' It is all automated. And, that is the point I
    wanted to make. You were talking about a $15 minimum wage. If
    you combine a $15 minimum wage with these artificially low
    interest rates--and I have been in the manufacturing sector. I
    have made investment decisions on millions of dollars. If the
    cost of capital is that unbelievably low and you artificially
    drive up the cost of labor, what does that result in?
        Mr. Fritz. It is going to result in a lot of the breweries
    having to close. And, the National Brewery Museum is
    celebrating the history of all of those breweries, like the one
    your father was running.
        And, we do not want our museum to be loaded with all of the
    past stories and memorabilia of the breweries, today, if they
    begin to close again.
        Chairman Johnson. Does it not also--because you were
    talking about, potentially, buying automated packaging
    material?
        Mr. Fritz. Yes.
        Chairman Johnson. Packaging lines?
        Mr. Fritz. Yes.
        Chairman Johnson. So, it makes it a whole lot easier, when
    capital is really cheap and labor starts getting a lot more
    expensive, if you are worried about job growth and if you are
    worried about providing opportunities--for example, for people
    in the inner city of Milwaukee, where you do not have the hope
    and you have despair, because they do not have the employment
    opportunities--the last thing you want to do is to increase the
    cost of the labor when you have low interest rates, correct?
        Mr. Fritz. Absolutely.
        Chairman Johnson. You also talked about the sheltered
    workshops. And, first of all, God bless you for using those. I
    have gone to visit so many in the State of Wisconsin. You see,
    these are individuals with mental and physical disabilities,
    who have the opportunity to get together in a working
    environment. It is their family. They spend--rather than
    sitting in their apartment, they are there at work. The only
    way that is economically viable, though, is
    for a subminimum wage. In order for you to pay a reasonable
    price--a competitive price, because you are competing with
    bigger companies with all of the automation and you are
    competing globally--so the only way you can access those
    sheltered workshops is if, basically, those operations can have
    a subminimum wage--so they can offer you a product or service
    that is competitive, correct?
        Mr. Fritz. Absolutely. And, the local sheltered workshop
    was a little nervous when they heard we were pricing out
    automated packaging equipment. But, in the brewing industry,
    variety packs are very popular. It takes quite a machine to put
    a variety pack together. So, I assured them that, for years to
    come, they will have plenty of work to do, as we move forward
    to different levels of success.
        Chairman Johnson. Are you aware that there are elements, in
    this country, that are trying to get rid of the subminimum wage
    for those types of organizations? Basically, they are trying to
    put those businesses out of business that provide that--again,
    those that provide that experience for people with
    disabilities--because we are hearing that as well.
        Mr. Fritz. They should all be required to go and experience
    a sheltered workshop and see the value and the joy that is
    brought to those individuals.
        Chairman Johnson. Dr. Williams, a number of times now, I
    have heard the word ``uncertainty.'' I am not sure that is
    included in that 2 trillion dollar cost. But, again, coming
    from the business world, as somebody who has made investment
    decisions, the first thing you want is some measure of
    certainty--or as much certainty as possible. Business is risky
    enough. You have to compete against your competitors. You do
    not know what they are up to. You do not know what products and
    you do not know what breakthrough innovations there are. So,
    you already have, baked in the cake--when competing in a free-
    market system--a high level of uncertainty.
        Talk about the cost that the Federal Government is throwing
    on top, in terms of added uncertainty.
        Dr. Williams. The 2 trillion dollars that we estimated was,
    basically, reduced innovation in the United States. And, the
    uncertainty--due to regulations--that is the cause of that.
    That is what we actually went out and estimated.
        What we see around the world is, we see that America is
    dropping back--is becoming a more and more regulated country,
    relative to our competitors. They are going forward. They are
    instituting lots of different programs to reform, particularly,
    their regulatory process. We can talk a lot about individual
    regulations--and there are a lot of bad ones--but, until we get
    the process right, we are going to continue to get these bad
    ones.
        And, what we see in other companies--excuse me, in other
    countries--they are recognizing that--they are reforming their
    regulatory process. I know we have had a lot of activity over
    the last, particularly, 4 years or 5 years to do this, but so
    far we have not gotten anywhere.
        Chairman Johnson. Can you address the cost-benefit analysis
    that these Agencies go through? I know President Obama has
    issued some Executive Orders (EOs) that remind me of the
    MasterCard commercial: ``This is priceless.''
        So, the benefit is always priced out as priceless and the
    cost is grossly understated. Can you just kind of speak to that
    phenomenon?
        Dr. Williams. Sure. I did it for 27 years in the FDA--as
    well as supervised it. I can tell you that, what, generally,
    happens is, whoever is in charge makes a decision. Everybody
    knows what that decision is. Then, the pressure gets put on the
    economist, saying, ``Go make a cost-benefit analysis that makes
    my decision look good.'' That happens far too frequently.
        If you actually do an analysis that does not make it look
    good, they will just ignore it, and then you will never get
    promoted. But, that happens.
        But, I have to tell you, President Obama has said, what
    every President has said, going back to Jimmy Carter--that it
    is ridiculously hard to control the giant Executive Branch.
        President Carter went in and said--going into office, he
    said, ``This will be my biggest challenge, to control this
    Executive Branch.'' Coming out, he said, ``This was a lot
    harder than I thought it was going to be. That was my biggest
    problem.''
        Chairman Johnson. Government wants to grow. And, it is
    extremely good at growing. What I am going to do, before I
    close out the hearing, is allow you all an opportunity to kind
    of give a closing comment, based on the discussion here. But, I
    would, certainly, like to give Senator Ernst another
    opportunity to ask questions, if you have any.
        Senator Ernst. I think we can go ahead and hear their
    closing statements and then we will conclude.
        Chairman Johnson. We will start with Mr. Zimmerman. Do you
    have any closing comments?
        Mr. Zimmerman. Thank you. Yes. One of the things that I
    would add is how much opportunity we have missed, because of
    overregulation and--and different things that could be solved--
    problems, diseases, pests, and things like that--that could
    affect many other species--many other crops and whatnot, if the
    cost of the regulation process did not chew up so much patent
    time and if there was not so much time involved in getting it
    deregulated.
        And so, we miss out on a lot of opportunities to be able to
    develop and advance more technology. So, this overregulation
    is--I see it as a huge cost--and we are driving consolidation,
    within our industry, because only the very large industries--or
    groups--companies can afford a research platform and also
    sustain a fall of
    13-, 14-, or 15-year research--and wait for the deregulation of
    product--to come out on the market. And so, when that happens,
    it is just a snowball effect back down to us. And, we see that
    the consolidation will continue with the farms also.
        Chairman Johnson. You are really talking about the
    opportunity cost of regulation. If you are an owner or a
    manager, you only have so many hours in the day. And, if a big
    chunk of your time is spent complying with Federal regulations,
    that means you are not spending time on improving your
    products, innovating, or creating.
        We had the Chancellor of the University of Wisconsin (UW)-
    Madison come into my office the last 2 years. The number one
    thing she was complaining about is the regulatory burden. She
    came in this year, with a study, commissioned by other research
    universities, that said that, on Federal grants--again, these
    are grants that are given to universities to push the bowels of
    science and human knowledge--to cure diseases--42 percent of
    every researcher's time--of those researchers' time spent on
    those grants is spent complying with the Federal regulations
    attached to the grants--42 percent.
        That is an enormous opportunity cost right there. Mr.
    Vaughan.
        Mr. Vaughan. Thank you very much.
        It feels like you both have a very good handle on the
    challenges that we need to face--things we need to do. I concur
    100 percent with what is being said about regulation becoming a
    burden. I spend more and more of my time on it and it takes
    away from our customers, our employees, and the future
    productivity of our organization. This money needs to stay
    where it is generated. In this case, in Iowa. We are operating
    in eastern central Iowa--it is not sent off some place else and
    redistributed in some other manner.
        We have experienced that with the Patient Protection and
    Affordable Care Act (Obama care). We have experienced that with
    some of the labor laws that are changing.
        And, one challenge we have is operating in a rural
    environment with our farmer-customers, who do not have to
    adhere to much of any of that--they do not have much time for
    it. So, it instantly pits us against our most important
    aspect--which is our customers.
        So, thank you for your time. Thank you for your dedication.
    Keep up the good work.
        Chairman Johnson. By the way, those dollars are shipped off
    some place. It is called Washington, D.C. Washington, D.C. is a
    boomtown.
        Mr. Fritz, do you have any closing thoughts?
        Mr. Fritz. The success of our industry, in the craft beer
    segment, is all about quality. And, every individual
    entrepreneur that is in that industry segment is doing
    everything they can to make sure that they are producing a
    quality product. And, they have many different styles of beer--
    and some people may not like an IPA, and some people do. But,
    the quality of the product, in making it fit the style of the
    beer that they are trying to brew, is at the top of their minds
    when they are out there. If their costs continue to elevate,
    where they cannot be competitive--and the consumer will pay for
    quality. That is evidenced, every day, with the choices that
    are being made when you walk into the retailer and buy that
    product.
        But, if it gets pushed further, then what will happen--and
    we are seeing it already--there are a lot of large breweries
    out there that, on a very regular basis, are buying up
    breweries in the craft segment. They want to play in that
    market. And, it is, probably, a smart business choice for them,
    because they know that it is being very well perceived. But, as
    they individually get picked off and picked off--and it was
    mentioned, with one of the co-ops, that, if they cannot compete
    and comply, then they need to move on. And, as long as there
    are buyers out there--so the success of this industry depends
    on helping them stay in business.
        And, they will take care of the quality. But, just do not
    overburden them with costs that are unnecessary.
        Chairman Johnson. As a plastics manufacturer, I would have
    loved to have been a monopolist. But, because I had to compete,
    my prices were lower and my quality was higher--as was my
    dedication to customer service. The larger the number of small
    businesses, the greater the competition. And, you have all of
    those benefits of a free-market system. Dr. Williams.
        Dr. Williams. Yes. As I mentioned, I would love to see
    better cost-benefit analysis done in the U.S. Government--more
    frequently done and paid attention to. But, cost-benefit
    analysis does not cover a lot of the cost of our regulatory
    stakes. It does not cover--for instance, we are never going--to
    begin with, small firms and medium-size firms that closed, it
    does not cover the products that were lost or the products that
    were never produced to begin with. It does not cover jobs lost
    and, certainly, it does not cover the enormous cost, now, of
    just dealing with Washington, D.C.
        I think it would be better if manufacturers would be able
    to focus on running their own businesses and not having to
    focus so much time on dealing with Washington, D.C. That is
    very costly.
        Chairman Johnson. Thank you, Dr. Williams. Senator Ernst,
    would you like to make a closing comment?
        Senator Ernst. Yes. Again, our panelists--I want to thank
    you for taking time out of your schedules to be with us, today.
    And, thank you for presenting your personal testimonies,
    because they are very valuable--not only to Senator Johnson and
    I, as we take your thoughts to Washington D.C. and share them
    with our other Committee Members, but it is important to our
    constituencies as well. We know that there are many out there
    that share those same stories that you do, about government
    overreach and the cost of regulations, in doing business.
        And, we know that, as you have demonstrated, today, those
    overreaching rules and regulations are burdening our employers
    and our businesses. And, we are not growing the economy like we
    could be and should be, here in the United States, because of
    that.
        So, I know that Senator Johnson has been very diligent in
    approaching how we can reform the rules and regulations and--
    and do it in a way where we are involving stakeholders--
    because, oftentimes--just as some of the examples that were
    given, today--those stakeholders are not involved in the
    process. And, these Agencies are not following original
    Congressional intent. So, we have to get back to that. This is
    valuable information that I will be taking back and working
    with the Committee on.
        And, finally, Senator Johnson, thank you for being such a
    great leader on these issues. Senator Johnson is the Chairman
    of our Homeland Security and Governmental Affairs Committee.
    And, your work has really been noticed by me, and I appreciate
    it so much, because, if we do want to grow our economy, here in
    the United States, these are the issues that we need to be
    focusing on. So, thank you for taking the time to come to Iowa
    to share your thoughts with our constituents.
        Chairman Johnson. Thank you for inviting me. This was
    Senator Ernst's idea, and it was a great idea for what, I
    think, has been just a great hearing.
        I do want to thank everybody in the audience for coming and
    showing interest. Obviously, our witnesses have great
    testimonies and have given great answers to our questions.
        Thank you to the members of the press, for coming here and
    highlighting this.
        I always have said that overregulation is the silent
    killer. It crushes innovation. It crushes small businesses.
    And, it crushes the kind of competition that we need in order
    to grow our economy, which is the number one solution. If we
    want opportunities--whether in the inner city of Milwaukee or
    anywhere in Iowa or Wisconsin--we need to grow our economy.
    And, this enormous regulatory burden is making it very
    difficult for businesses to grow and to create those good-
    paying jobs that we all want.
        So, again, I just want to thank everybody for participating
    in this. It was a great idea for a hearing. I love coming here,
    to Dubuque--beautiful part of our State and your State. I am
    going to enjoy the drive back.
        With that, the hearing record will remain open for the next
    15 days until September 1, at 5:00 p.m., for the submission of
    statements and questions for the record.
        This hearing is adjourned.
        [Whereupon, at 1:22 p.m., the Committee was adjourned.]

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