[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
        
        
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]  
      
      

                                     

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
25-158 PDF                  WASHINGTON : 2017                     
          
----------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, 
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). 
E-mail, [email protected].         
        
        

        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.]

                            A P P E N D I X

                              ----------                              


[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]