[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



ADVANCED BIOFUELS UNDER THE RENEWABLE FUEL STANDARD: CURRENT STATUS AND 

                            FUTURE PROSPECTS

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

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON ENVIRONMENT

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 22, 2018

                               __________

                           Serial No. 115-144
                           
                [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
                        
                               __________
                               
                    U.S GOVERNMENT PUBLISHING OFFICE
                    
35-142	                  WASHINGTON : 2019  



                    
                    COMMITTEE ON ENERGY AND COMMERCE

                          GREG WALDEN, Oregon
                                 Chairman
JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
BILL FLORES, Texas                   JOSEPH P. KENNEDY, III, 
SUSAN W. BROOKS, Indiana                 Massachusetts
MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, CaliforniaL RUIZ, 
RICHARD HUDSON, North Carolina           California
CHRIS COLLINS, New York              SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina


                      Subcommittee on Environment

                         JOHN SHIMKUS, Illinois
                                 Chairman
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
  Vice Chairman                        Ranking Member
JOE BARTON, Texas                    RAUL RUIZ, California
TIM MURPHY, Pennsylvania             SCOTT H. PETERS, California
MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
GREGG HARPER, Mississippi            DIANA DeGETTE, Colorado
PETE OLSON, Texas                    JERRY McNERNEY, California
BILL JOHNSON, Ohio                   TONY CARDENAS, California
BILL FLORES, Texas                   DEBBIE DINGELL, Michigan
RICHARD HUDSON, North Carolina       DORIS O. MATSUI, California
KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex 
TIM WALBERG, Michigan                    officio)
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
GREG WALDEN, Oregon (ex officio)



  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     1
    Prepared statement...........................................     2
Hon. Jerry McNerney, a Representative in Congress from the State 
  of California, opening statement...............................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, prepared statement.....................................   109

                               Witnesses

Mike McAdams, President, Advanced Biofuels Association...........     6
    Prepared statement \1\.......................................     8
    Answers to submitted questions...............................   112
Derrick Morgan, Senior Vice President, American Fuel & 
  Petrochemical Manufacturers....................................    15
    Prepared statement...........................................    17
    Answers to submitted questions...............................   117
Robin Puthusseril, Vice President, Greater Chicago Truck Plaza, 
  On Behalf of the National Association of Truck Stop Operators..    27
    Prepared statement...........................................    29
    Answers to submitted questions...............................   142
Randy Howard, CEO, Renewable Energy Group, On Behalf of the 
  National Biodiesel Board.......................................    50
    Prepared statement...........................................    52
    Answers to submitted questions...............................   147
Brooke Coleman, Executive Director, Advanced Biofuels Business 
  Council........................................................    55
    Prepared statement...........................................    57
    Answers to submitted questions...............................   149
Collin Omara, President, National Wildlife Federation............    73
    Prepared statement...........................................    76
    Answers to submitted questions...............................   157
Luke Morrow, Managing Director, Morrow Energy, On Behalf of the 
  Coalition for Renewable Natural Gas............................    85
    Prepared statement...........................................    87
    Answers to submitted questions...............................   165

                           Submitted Material

Letter of June 19, 2018, from Representative Bruce Poliquin to 
  the subcommittee...............................................   111

----------
\1\ The attachments to Mr. McAdams' statement can be found at: 
  https://docs.house.gov/meetings/IF/IF18/20180622/108464/HHRG-
  115-IF18-Wstate-McAdamsM-20180622.pdf.



 
ADVANCED BIOFUELS UNDER THE RENEWABLE FUEL STANDARD: CURRENT STATUS AND 
                            FUTURE PROSPECTS

                              ----------                              


                         FRIDAY, JUNE 22, 2018

                  House of Representatives,
                       Subcommittee on Environment,
                           Committee on Energy and Commerce
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:17 a.m., in 
room 2322, Rayburn House Office Building, Hon. John Shimkus, 
(chairman of the subcommittee) presiding.
    Present: Representatives Shimkus, Harper, Olson, Johnson, 
Flores, Cramer, Walberg, Duncan, Ruiz, Peters, Green, McNerney, 
Cardenas, and Matsui.
    Staff Present: Samantha Bopp, Staff Assistant; Kelly 
Collins, Legislative Clerk, Energy/Environment; Wyatt 
Ellertson, Professional Staff, Energy/Environment; Margaret 
Tucker Fogarty, Staff Assistant; Theresa Gambo, Human 
Resources/Office Administrator; Mary Martin, Chief Counsel, 
Energy/Environment; Sarah Matthews, Press Secretary; Austin 
Stonebraker, Press Assistant; Jean Fruci, Energy and 
Environment Policy Advisor; Caitlin Haberman, Professional 
Staff Member; Rick Kessler, Senior Advisor and Staff Director, 
Energy and Environment; Alexander Ratner, Policy Analyst; and 
Catherine Zander, Environment Fellow.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. The Subcommittee on Environment will now come 
to order. And the chair recognizes himself for 5 minutes for an 
opening statement.
    This is our fourth hearing this year specifically aimed at 
addressing issues related to fuels and vehicles. The first 
provided an overview of the future of fuels and vehicles. The 
second took a detailed look at the high octane concept. The 
third focused on electric vehicles as a small but growing part 
of the vehicle mix.
    In each of these hearings, the renewable fuel standard was 
a part of the discussion, which is not surprising because this 
program continues to have a significant impact on the fuels 
market. But most of the RFS focus thus far has been on corn 
ethanol and related issues, like blend wall, and not the 
advanced biofuels part of the program.
    Today, we address the imbalance by having a discussion 
focused entirely on advanced biofuel issues. And I welcome our 
witnesses who represent those operating in that space.
    Biodiesel is every bit as important to my soybean growers 
as ethanol is to my corn growers. And both biodiesel and 
cellulosic production facilities are significant job creators 
in the local communities where they are located, including in 
my district in southern Illinois.
    So the economic impact of advanced biofuels cannot be 
ignored. The 2007 changes to the RFS envisioned a transition 
from first-generation biofuels to more advanced biofuels. In 
fact, the RFS statutory targets for 2022 call for 21 billion 
gallons of advanced biofuels while corn ethanol and other first 
generation would top out at no more than 15 billion gallons. 
The future is going to include a great deal more advanced 
biofuels.
    The reality has been somewhat mixed. For biodiesel, the 
production capacity has grown significantly, and billions of 
gallons are now added to the Nation's diesel supply each year. 
In that regard, the RFS provisions for biodiesel have been a 
success. But biodiesel remains expensive compared to petroleum-
based diesel fuel, and there has been little progress, making 
it more cost competitive.
    Unfortunately, cellulosic biofuels have not progressed as 
well as hoped. Congress was convinced in 2007 that cellulosic 
biofuels were just around the corner. But more than a decade 
later, we are still waiting for liquid cellulosic biofuels to 
make a significant contribution.
    Biogas from landfills has been a main source of cellulosic 
biofuels. Investors in cellulosic facilities point to the need 
for certainty and that the policy surprises coming from EPA and 
the White House undercut that certainty. Critics say that 
including cellulosic biofuels in the RFS was a flat out 
mistake, especially now that the fracking revolution has 
reduced dependence on foreign oil.
    So some want to double down on incentivizing cellulosic 
biofuels while others want to pull the plug on the idea. 
Interesting times. It is important to note that, as we consider 
various RFS reform ideas, including the transition to high-
octane fuels, we need to be mindful that biodiesel and 
cellulosic provisions need to be part of the conversation and 
addressed as well. All of these parts are interrelated. Thus, 
the future of advanced biofuels is tied up with the future of 
the RFS.
    I look forward to the hearing from today's witnesses and 
the members in order to engage in a meaningful dialogue on this 
topic. And looking to my side, anyone wishing my remaining 
minute and a half.
    Seeing none, I will yield back my time and yield to the 
ranking member right now of the subcommittee, Mr. McNerney, of 
California.
    [The prepared statement of Mr. Shimkus follows:]

                     Statement of Hon. John Shimkus

    This is our fourth hearing this year specifically aimed at 
addressing issues related to fuels and vehicles. The first 
provided an overview of the future of fuels and vehicles, the 
second took a detailed look at the high-octane concept, and the 
third focused on electric vehicles as a small but growing part 
of the vehicles mix. In each of these hearings, the Renewable 
Fuel Standard was a part of the discussion--which is not 
surprising because this program continues to have a significant 
impact on the fuels market. But most of the RFS focus thus far 
has been on corn ethanol and related issues like the blendwall, 
and not on the advanced biofuels part of the program. Today, we 
address this imbalance by having a discussion focused entirely 
on advanced biofuels issues, and I welcome our witnesses who 
represent those operating in that space.
    Biodiesel is every bit as important to my soybean growers 
as ethanol is to my corn growers, and both biodiesel and 
cellulosic production facilities are significant job creators 
in the local communities where they are located, including in 
my district in Illinois. So, the economic impact of advanced 
biofuels cannot be ignored.
    The 2007 changes to the RFS envisioned a transition from 
first generation biofuels to more advanced biofuels. In fact, 
the RFS statutory targets for 2022 called for 21 billion 
gallons of advanced biofuels while corn ethanol and other first 
generation would top out at no more than 15 billion gallons. 
The future was going to include a great deal more advanced 
biofuels.
    The reality has been somewhat mixed. For biodiesel, the 
production capacity has grown significantly and billions of 
gallons are now added to the nation's diesel supply each year. 
In that regard, the RFS provisions for biodiesel have been a 
success. But biodiesel remains expensive compared to petroleum-
based diesel fuel, and there has been little progress making it 
more cost competitive.
    Unfortunately, cellulosic biofuels have not progressed as 
well as hoped. Congress was convinced in 2007 that cellulosic 
biofuels were ``just around the corner'' but more than a decade 
later we are still waiting for liquid cellulosic biofuels to 
make a significant contribution. Biogas from landfills has been 
the main source of cellulosic biofuels.
    Investors in cellulosic facilities point to the need for 
certainty and that the policy surprises coming from EPA and the 
White House undercut that certainty. Critics say that including 
cellulosic biofuels in the RFS was a flat-out mistake, 
especially now that the fracking revolution has reduced 
dependence on foreign oil. So, some want to double down on 
incentivizing cellulosic biofuels, while others want to pull 
the plug on the idea.
    It is important to note that as we consider various RFS 
reform ideas, including a transition to high-octane fuels, we 
need to be mindful that the biodiesel and cellulosic provisions 
need to be part of the conversation and addressed as well. All 
of the parts are interrelated; thus, the future of advanced 
biofuels is tied up with the future of the RFS.
    I look forward to hearing from today's witnesses and the 
members, in order to engage in a meaningful dialogue on this 
important topic.
    Thank you.
    I yield back the balance of my time.

 OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. McNerney. Well, I thank the chairman. Good morning.
    And I thank the witnesses for coming here this morning.
    An important goal of the renewable fuel standard program is 
to promote fuel diversity and lower consumer and environmental 
costs of transportation fuels. Until Congress created the RFS 
program, the transportation sector relied exclusively on fossil 
fuels. Our overdependence on these fuels has made consumers and 
our economy vulnerable to price spikes and supply disruptions 
at various times in the past. Decades of fossil fuel use have 
unleashed massive volumes of harmful air pollutants and carbon 
emissions. Developing cleaner fuels must be part of the 
solution to these ongoing challenges.
    Growth in the use of advanced biofuels fuels far short of 
what Congress anticipated when this program was expanded in 
2007. The industry has made progress, but technical and 
economic challenges are still holding back greater use of these 
fuels. I believe the witnesses here today will all be offering 
some suggestions on how we can improve the investments and 
marketing climate for advanced renewable fuels.
    The advanced biofuel program is very important to my home 
State of California. This Federal program helps California to 
meet its goal for low carbon fuels. Regulatory programs, like 
California's low-carbon fuel standard and Federal RFS program, 
help the early market incentives needed to spur investments in 
cleaner fuels. Biodiesel, biogas, and cellulosic ethanol are 
needed to reduce carbon emissions and other harmful air 
pollutions from the transportation sector. Reducing carbon 
emissions from the transportation sector is a big challenge, 
but it is one that we must take since emissions in this sector 
do continue to grow.
    The good news is that, despite these challenges, 
investments in alternate fuels are being made. And these 
investments are creating jobs and increasing the supply of 
alternative fuels in California.
    There are several facilities in my district, and a new 
biogas facility is under construction. If we want to see these 
investments continue, investors must be convinced that there 
will be a market for these fuels. The uncertainty created 
through the EPA's delays in rulemaking and in approval of new 
biofuel pathways are among the challenges with the RFS program 
that affect advanced biofuel investments.
    Clearly, the management of the program is an important 
factor in ensuring steady progress for new fuel technologies. 
Unfortunately, it appears that Administrator Pruitt has used 
his waiver authority to create additional uncertainty in the 
renewable fuels market. The Administrator's decision to grant 
unprecedented numbers of waivers to some refiners through a 
process with no transparency calls into question the target 
amount of biofuel that the market and its participants will be 
using. Conventional ethanol still makes up the bulk of the 
renewable fuel markets.
    But I suspect that reducing the number of refineries 
obligated to blend biofuel will affect the market for all 
biofuels, including biodiesel and advanced biofuels. Whatever 
the faults of the RFS program, manipulating markets through a 
secret waiver process that calls the program into question is 
not the way to address those faults. Our committee should be 
looking into this and ensuring that the Administrator is 
managing the program accordance with the law.
    Again, I want to thank the participants and the witnesses, 
and I yield back.
    Mr. Shimkus. The gentleman yields back his time.
    Let me apologize to the folks here for the heat of this 
room. And I think the air has kicked on. So maybe we are going 
to feel a little bit cooler. And this is a note to committee 
staff to make sure that it stays cool.
    Mr. McNerney. Mr. Chairman, this room is either too hot or 
too cold.
    Mr. Shimkus. And this issue might be a little too hot or 
too cold for a lot of people.
    So, looking on the majority side, anyone seeking time to 
make a statement?
    Seeing none, looking on the minority.
    The chair recognizes the gentleman from Texas, Mr. Green, 
for 5 minutes.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman. I want to thank you and 
both the ranking member for holding the hearing today. Most 
people here know that I am not really a big a big fan of the 
renewable fuel standard, the RFS.
    The RFS has led to artificially inflated costs thrust upon 
both refiners and our consumers for a product that hasn't had 
the environmental impact reduction that was promised when the 
RFS was created.
    A few years ago, our district had three small biofuel 
refineries, but the market cratered, and I think I have one 
left. Although in our area, I don't have small refiners. They 
are 100,000 barrels, 250,000 barrels. And so that is one of my 
concerns.
    I look forward to hearing from our witnesses today, 
specifically about the RFS interaction with advanced biofuels 
market. While I think the RFS program is inherently flawed, I 
do not believe waivers given out in secret without established 
processes is a good use of Administrator Pruitt's authority. I 
am afraid that, while many of these smaller refineries have 
received waivers, the larger ones who do not will still have to 
meet the overall blend requirements which satisfy the RFS 
program.
    Thank you again for calling this hearing.
    Mr. Shimkus. The gentleman yields back his time.
    We now conclude with members' opening statements. The chair 
would like to remind members that, pursuant to committee rules, 
all members' opening statements will be made part of the 
record.
    We want to thank all our witnesses for being here today and 
taking the time to testify before the subcommittee. Today's 
witnesses will have an opportunity to give opening statements 
followed by a round of questions from the members present.
    Our witness panel is before us, and I would personally also 
like to thank you all for coming. I have some folks from 
Illinois and actually my congressional district. And we will 
recognize them appropriately when we get a chance to do that.
    I would like to start with Mr. Mike McAdams, President of 
Advanced Biofuel Association. Sir, your full statement is in 
the record. You have 5 minutes. Welcome.

   STATEMENTS OF MIKE MCADAMS, PRESIDENT, ADVANCED BIOFUELS 
 ASSOCIATION; DERRICK MORGAN, SENIOR VICE PRESIDENT, AMERICAN 
  FUEL & PETROCHEMICAL MANUFACTURERS; ROBIN PUTHUSSERIL, VICE 
   PRESIDENT, GREATER CHICAGO TRUCK PLAZA, ON BEHALF OF THE 
  NATIONAL ASSOCIATION OF TRUCK STOP OPERATORS; RANDY HOWARD, 
    CEO, RENEWABLE ENERGY GROUP, ON BEHALF OF THE NATIONAL 
 BIODIESEL BOARD; BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED 
 BIOFUELS BUSINESS COUNCIL; COLLIN OMARA, PRESIDENT, NATIONAL 
WILDLIFE FEDERATION; AND LUKE MORROW, MANAGING DIRECTOR, MORROW 
 ENERGY, ON BEHALF OF THE COALITION FOR RENEWABLE NATURAL GAS.

                   STATEMENT OF MIKE MCADAMS

    Mr. McAdams. Thank you, Mr. Chairman, Ranking Member, 
members of the committee. It is nice to be with you this 
morning.
    My name is Mike McAdams. I am the President of the Advanced 
Biofuels Association. I welcome the opportunity to testify this 
morning on the current status and the future prospects of the 
RFS program. I want to thank Chairman Shimkus and members of 
the committee for your efforts over the last year to reform the 
RFS.
    ABF members strongly support RFS reform. ABFA represents 35 
companies across the entire biofuels distribution chain who 
produce the fuels, distribute the fuels, and market advanced 
biofuels under the RFS program. Our combined production is over 
4 billion gallons per year currently. The RFS has resulted in 
both great successes as well as shortfalls. We believe 
comprehensive reform will maximize future volumes of advanced 
and cellulosic fuels for the future.
    On the success front, the production and use of biodiesel 
and renewable diesel is three times greater than what was 
originally anticipated and is now approaching 3 billion gallons 
per year. The environmental performance of these gallons 
achieve GHG reductions of up to 80 percent off of baseline 
fuel. This sector also continues to hold great potential as the 
United States diesel market is over 50 billion gallons a year 
and growing.
    In this space, we can deliver not only biodiesel, but we 
can also deliver drop-in diesel and jet fuel for a growing 
airline industry.
    As for advanced and cellulosic fuels, I urge the committee 
to address numerous barriers of entry in the RFS program that 
specifically disadvantages the innovative fuels of the future. 
I have provided the committee with ABFA's list of 21 RFS reform 
proposals for you to review. These proposals fall into three 
broad categories: one, address definitional and technical 
issues; two, clarify statutory ambiguities; and, three, tweak 
certain overly burdensome regulatory frameworks which are 
currently in place. As much as possible, we urge the Congress 
in making these changes to the statute, to take the politics 
out of the equations and make the RFS a rules-based system as 
much as possible. An example of this is Congressman Welch's 
legislation to amend the annual RVO process. His bill would 
base the RVO on the previous year's actual production, queuing 
up at midyear and end-year adjustments to account for increases 
or decreases in production. This approach would remove the 
uncertainty and therefore reduce voluntarily in the RIN market. 
It also diminishes the need for using waivers when you set the 
RVO, especially the use of cellulosic waivers. Additionally, 
the cellulosic waiver system must be reformed so that RINs 
attached to actual cellulosic gallons are purchased before we 
use the waiver credits in their place.
    Finally, in order to finance the production of new and 
advanced biofuels of the future, investors must have certainty 
over time that there will be the value of the RIN standing 
behind them. A 20-year guarantee would provide that certainty 
and encourage much more investment in this space as it is tied 
to the average debt frame for a capital loan.
    Among ABFA's 21 proposals are suggestions to permit the use 
of a broader range of technologies and feedstocks via pathway 
approval reform. For instance, Chairman Walden has been working 
on a number of fixes for the wood-based fuels that would allow 
the growth for pyrolysis, one of the promising technologies in 
the cellulosic space. Currently, three of ABFA's members are 
building cellulosic plants in the United States with this 
technology.
    In conclusion, I urge the committee to review EPA's recent 
actions regarding the small refinery exemptions which have had 
significant impacts on the RIN market. Administrator Pruitt has 
recently chosen to lower the thresholds that EPA utilizes to 
grant RFS compliance exemptions to small refineries. Press 
reports state that EPA has granted up to 30 exemptions for 
years 2016 and 2017, three times what we have ever previously 
seen. These actions have undermined the program and rendered 
the RVO mandates meaningless. ABF urges the committee to review 
EPA's applications of these thresholds and the lack of 
transparency surrounding these decisions.
    Thank you again for the opportunity to testify. And I look 
forward to your questions.
    [The prepared statement of Mr. McAdams follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    [The attachments to Mr. McAdams' statement can be found at: 
https://docs.house.gov/meetings/IF/IF18/20180622/108464/HHRG-
115-IF18-Wstate-McAdamsM-20180622.pdf.]
    Mr. Shimkus. Thank you. The gentleman yields back his time.
    The chair now recognizes Mr. Derrick Morgan, Senior Vice 
President of American Fuel and Petrochemical Manufacturers.
    You are recognized for 5 minutes.

                  STATEMENT OF DERRICK MORGAN

    Mr. Morgan. Thank you, Mr. Chairman, Mr. Ranking Member, 
members of the committee. Thank you for inviting me to testify 
today on advanced biofuels under the renewable fuel standard. 
AFPM members account more than 95 percent of the refining 
capacity in the United States and are the obligated parties 
under the RFS. As a result, we are acutely aware of the costs 
and the challenges associated with advanced biofuel mandates.
    The RFS was intended to grow a market for first-generation 
biofuel while spurring commercialization of advanced and 
cellulosic biofuels. Although reasons for these goals are 
understandable--energy security, rural development, 
environmental benefits--our experience with the RFS has made 
clear that the law is failing to deliver upon many of its 
goals.
    The corn ethanol industry has been the prime beneficiary of 
the RFS. E-10 is a competitive fuel and does not require a 
mandate, as evidenced by more than a billion gallons of ethanol 
exports last year. The advanced biofuel and cellulosic mandates 
are a different story, though.
    The vision of cellulosic biofuels capturing 16 billion 
gallons of market share by 2022 is illusory, has proven 
illusory. The U.S. will produce only about 10 million gallons 
of liquid cellulosic fuels in 2018, a mere fraction of the 
nearly 200 billion gallons of transportation fuel we will 
consume this year.
    Despite this reality, EPA has routinely set mandates hiring 
than actual production, leaving refiners to buy phantom fuel 
credits for gallons of products that just don't exist. The lack 
of cellulosic production is not for a lack of trying, including 
by a number of our member companies. Someday, someone could 
make a breakthrough. And when they do, it very likely won't 
need a mandate.
    Biodiesel is the primary advanced biofuel on the market 
today. Unfortunately, it is also tremendously expensive. Last 
year, biodiesel cost approximately $1.50 more per gallon than 
the petroleum diesel it was blended into, even before taking 
into account its lower energy density. For this reason and 
despite advanced biofuel mandates approaching 3 billion 
gallons, U.S. producers never made more than 2 billion gallons 
of biomass-based diesel in a given year.
    As a result, imported biofuels are displacing U.S.-produced 
petroleum and diesel. This simply does not make sense for a law 
entitled the Energy Dependence and Security Act. AFPM strongly 
supports a transition to a more competitive fuels market and 
away from the RFS. We have gone from the world's largest 
importer of crude oil and refined products to the largest 
exporter of refined products in the world. Our net imports of 
petroleum are way down, the lowest percentage since 1967. 
Domestic production of crude oil and finished products 
continues to increase. Of what we do import, more is coming 
from our immediate neighbors with 40 percent from Canada.
    North American energy security has never been stronger. But 
as long as the RFS is the law of the land, we ask policymakers 
to place a stronger nexus between mandated volumes and 
demonstrated domestic production. This will ensure we can 
comply with the law and would be better for consumers who 
should not have to pay more for fuel to subsidize foreign 
biofuel manufacturers.
    We also support rural communities and biofuel production. 
Many of our members, our large biofuel producers themselves, 
will have investments or joint ventures with biofuel producers. 
Many of our refineries are located in rural areas. And we 
produce the diesel that powers tractors and school buses. We 
simply believe there must be better ways to support rural 
America than by creating expensive and inefficient Federal 
mandates.
    We remain open to good-faith discussions about the future 
of the RFS and ways to create better opportunities for all 
stakeholders, especially consumers. The committee's work on the 
issue is greatly appreciated by our members. We look forward to 
the dialogue in the coming weeks and months, and I look forward 
to answering your questions today.
    Thank you very much.
    [The prepared statement of Mr. Morgan follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Shimkus. Thank you.
    Now, next for my colleagues, we are going to recognize 
Robin Puthusseril. So that is probably the most difficult name 
to pronounce and read here. So we are glad she is here. Vice 
President of Greater Chicago Truck Plaza. Now, I am a down-
stater. So we will claim her today. Greater Chicago Truck 
Plaza, on behalf of the National Association of Truck Stop 
Operators.
    And you are recognized for 5 minutes.

                 STATEMENT OF ROBIN PUTHUSSERIL

    Ms. Puthusseril. Chairman Shimkus, Ranking Member, and 
members of the subcommittee, thank you for the opportunity to 
testify this morning. My name is Robin Puthusseril, and I am 
the Vice President and part owner of the Greater Chicago I-55 
Truck Stop in Bolingbrook, Illinois. Along with my father, John 
Puthusseril, and my brother.
    I am testifying today on behalf of NATSO, the national 
association representing travel centers and truck stops. NATSO 
represents not only small, single-store operators, such as 
myself, but also large, nationwide travel center and 
convenience store chains. My testimony today will focus on my 
company's experience with biodiesel and provide my perspective 
as to how Congress can continue to incentivize fuel retailers 
like myself to incorporate biodiesel into our diesel fuel 
supply.
    First and foremost, it is important to understand that, as 
a diesel retailer, I operate in the most transparent, 
competitive commodities market in the United States. Truck 
drivers are, by and large, more savvy and price-conscious than 
typical American motorists. Truck drivers are often aware of 
retail diesel prices when they are hundreds of miles away from 
potential refueling sites. Fleet managers use this information 
to direct drivers to specific retail locations in order to 
purchase the lowest priced fuel available.
    I say this to illustrate the competitive nature of my 
market, which compels me to pass through cost savings on to my 
customers.
    The RFS is sound Federal policy because it recognizes this 
reality. Specifically, it creates a structure where, when it is 
implemented properly, I am able to offer lower fuel prices the 
more biodiesel I sell. This is generally good for retailers 
because, as buyers, we like long markets with a diverse array 
of supply options at our disposal.
    Absent government incentives, biodiesel costs more money to 
sell than diesel fuel. So, absent government incentives, I 
would have absolutely no reason to blend biodiesel into my 
diesel fuel because it would make the end product more 
expensive rather than less expensive.
    The RFS makes the end product less expensive. Under the 
RFS, when I blend biodiesel into diesel fuel, I am able to 
separate and sell compliance credits, known as RINs. When I 
sell RINs, I can lower the cost of my diesel fuel. This allows 
me to better compete for market share.
    My travel center has been selling biodiesel blends for 12 
years. After the RFS and similar State incentives were enacted, 
it was clear to me that I had to invest in biodiesel in order 
to remain competitive. In addition to spending more than 
$500,000 to update my fuel infrastructure, I spend 
approximately 70 percent of my time today managing this line of 
supply. This includes analyzing pricing proposals, testing our 
fuel supply, coordinating deliveries, managing inventory, and 
ongoing administrative and regulatory compliance work, which is 
significant. This is all on top of managing our staff of more 
than 50 employees and overseeing all aspects of our truck stop, 
from fuel sales and truck parking lot maintenance to our sit-
down restaurant and convenience store.
    I didn't ask for the RFS. But now that it is the law of the 
land, I view it as my responsibility to my family's business 
and our employees to adjust our practices accordingly. The 
growth prospects for advanced biofuels are in Congress' hands. 
Because biodiesel is more expensive than diesel fuel, it must 
continue to be subject to robust Federal incentives if it is to 
continue to gain market share. I firmly believe that the 
advanced biofuels market has a potential to be a part of 
American's long-term all-of-the-above energy future.
    I am concerned, however, that the EPA in recent months has 
granted small refinery hardship waivers to an unprecedented 
number of refineries. These waivers have lowered demand for 
advanced biofuels. They have substantially diminished the value 
of the biodiesel investments that Congress encouraged me to 
make when it established the RFS.
    Going forward, I would hope that EPA act in a manner that 
is more consistent with the RFS by requiring all waiver 
requests be received and assessed prior to finalizing biofuel 
mandates for a given compliance year. That way, when RVOs are 
finalized, the market can be confident that those numbers will 
not be adjusted downward after the fact.
    When the RFS was enacted, if I didn't invest in biofuel 
infrastructure and adjust my business practices, I would be at 
a serious disadvantage today. That is why I made the 
investments. If Congress can continue to provide a roadmap that 
leads to robust advanced biofuels markets, the travel center 
industry will be better able to offer affordable fuel for 
motorist as we serve as the home away from home for America's 
truck drivers.
    Thank you for the opportunity to testify today. I am happy 
to answer any questions that you may have.
    [The prepared statement of Ms. Puthusseril follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Shimkus. Thank you very much.
    Now I would like to turn to Mr. Randy Howard. For full 
transparency, REG operates national biodiesel refinery in 
Danville, Illinois, which is in the northern part of my 
congressional district. And he is the CEO of our renewable 
energy group.
    You are recognized for 5 minutes. Welcome.

                   STATEMENT OF RANDY HOWARD

    Mr. Howard. Thank you.
    Chairman Shimkus, Congressman McNerney, and members of the 
subcommittee, it is my pleasure to be here with you this 
morning. I am Randy Howard, President and CEO of Renewable 
Energy Group, or REG. I am honored to speak to you today on 
behalf of the National Biodiesel Board and more than 60,000 men 
and women across the country that support the biodiesel 
industry.
    Established in 1992, NBB is the leading U.S. trade 
association representing biodiesel and renewable diesel, 
including producers, feedstock suppliers, and fuel 
distributors.
    Let me tell you a little about my company. REG is the 
largest domestic producer of advanced biofuel making biodiesel 
in 10 plants across the United States. We also own and operate 
a 75 million gallon renewable diesel refinery in Louisiana and 
two biodiesel plants in Germany. Combined, our plants have 
demonstrated the annual production capacity of 575 million 
gallons. We currently employ 840 people in our company in good-
paying jobs and also support thousands of other jobs in 
agriculture, transportation, and energy sectors.
    I first joined REG as a member of their board of directors 
after a 33-year career in the petroleum industry. When I 
retired from Unocal 76 in 2005, the oil industry was embracing 
renewable fuels as part of the Nation's all-of-the-above 
strategy. I saw then and continue to see biomass-based diesel 
as the key to the future of liquid transportation fuels, 
transforming waste, fats, and oils into high-quality, low-
emission renewable fuel that extends our precious petroleum 
reserves and contributes greatly to the energy security of 
America.
    The most important part I would like to make to you today 
is that biodiesel is truly a success story of the RFS, helping 
to realize the energy security and environmental benefits that 
are RFS was intended to achieve. Biodiesel is by far the most 
wildly used advanced biofuel, meeting more than 90 percent of 
the annual RFS advanced biofuel obligations. According to EPA, 
biodiesel reduces lifecycle greenhouse gas emissions by 57 
percent to 86 percent compared to petroleum diesel. The 
greenhouse gas reductions from 15.5 billion gallons of 
biodiesel used through 2017 equates to the removal of over 30 
million passenger vehicles from America's roadways.
    Biodiesel has consistently delivered more than the RFS 
currently requires, and we can do much more. Federal and 
industry data shows the U.S. biomass-based diesel plants 
operate at the start of this year have an aggregate capacity of 
more than 2.6 billion gallons. Since that time, companies have 
announced or completed another 238 million gallons of expanded 
capacity. REG just completed a 20 million gallon expansion of 
our first plant, and we are looking at a major expansion of 
renewable diesel in the future.
    Biodiesel can also help to boost U.S. exports and rebalance 
international trade. The EIA estimates growth of another 200 
billion gallons of distillate fuel demand worldwide by 2030. 
U.S. biodiesel is and should be a part of that growth.
    Second, in addition to these energy and environmental 
benefits, biodiesel supports rural American jobs. Biodiesel can 
help solve the current farm crisis. Farm income has declined 
steadily over the last 4 years, reaching lows not seen since 
2009. Last year, REG added value to nearly 4 billion pounds of 
agricultural waste.
    Feedstock diversity continues to be a strength of our 
industry. U.S. producers utilize a wide range of feedstocks, 
such as recycled cooking oil, vegetable oils, animal fats, and 
distillers corn oils. This diversity allows biodiesel and 
renewable diesel producers to alter feedstock use based on 
regional and global market dynamics. Supplies are ample and 
continue to grow. There is also a number of feedstock pathway 
applications which EPA has not acted on, in some cases for 
several years, which would provide even more feedstocks.
    Third, there are no infrastructure barriers to biodiesel's 
continued growth. While biomass-based diesel currently makes up 
less than 5 percent of the distillate pool, there are hundreds 
of fuel retailers across the U.S. selling biodiesel blends up 
to B20, or 20 percent. REG and other advanced biofuel companies 
are selling high biodiesel and renewable diesel blends to a 
growing list of corporate and municipal customers. We are proud 
to have customers such as FedEx, UPS, and the New York City 
sanitation department, just to name a few.
    In closing, biodiesel is a renewable industry success story 
and stands ready to deliver more gallons and more economic and 
environmental benefits to the market. The RFS provides a 
winning combination of benefits for Americans, greater energy 
security, substantial environmental benefits, and enhanced 
value-added agriculture. We would ask Congress to continue the 
support of the program and to use its oversight authority to 
ensure the EPA administers the program according to Congress' 
intent.
    I look forward to answering your questions, and thank you 
for this opportunity.
    [The prepared statement of Mr. Howard follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Shimkus. I thank the gentleman.
    The chair now recognizes Mr. Brooke Coleman, Executive 
Director at Advanced Biofuels Business Council. He has been 
here before. Welcome back.

                  STATEMENT OF BROOKE COLEMAN

    Mr. Coleman. Good morning, Chairman Shimkus, Congressman 
McNerney, members the committee. My name is Brooke Coleman. I 
am the Executive Director of the Advanced Biofuels Business 
Council. Thanks for the opportunity today to testify. We 
represent worldwide leaders in the effort to develop and 
commercialize the next generation of advanced and cellulosic 
biofuels.
    By any measure, the RFS is doing what it was designed to 
do. The ethanol industry alone has built 200 biorefineries in 
the last 30 years to the oil industry's roughly 10 and now 
displaces the rough equivalent of Saudi Arabia and foreign oil. 
And few, if any, of the companies producing first-generation 
biofuels are not somehow invested in advanced biofuels.
    It is politically expedient to cast the RFS as good for 
first-generation biofuels but less effective at promoting 
advanced biofuels. These claims are designed to divide and 
conquer the left-right coalition that made the RFS a reality 
and are wildly overblown. Already advanced biofuels make up 
about 20 percent of the volumes required under the RFS, and now 
the most technologically advanced biofuel, cellulosic biofuel, 
is on the precipice of large-scale commercial growth.
    Policy and financing uncertainty notwithstanding, we are 
producing commercial volumes of cellulosic ethanol from 
agricultural residues and municipal solid waste. Not everyone 
has succeeded in the timeframe anticipated, but delay should 
not be mistaken for failure.
    So let me address the elephant in the room. Why are we 
measuring cellulosic biofuels by the millions instead of the 
billions, as anticipated? Certainly, the global recession 
occurring shortly after the passage of the law slowed things 
down. When things started to get better in the 2012-2013 
timeframe, the previous administration succumbed to oil 
industry pressure and stopped enforcing the law altogether. The 
RFS was back on track in November 2016, but the current 
administration almost immediately proposed to cut RFS volumes, 
ultimately turning to refinery waivers to roll the program back 
and create the investment uncertainty that biofuel innovators 
are too familiar with.
    While it is certainly plausible to argue that these 
implementation issues could be cured by amending the statute, 
we disagree. Current law could not more clearly prohibit the 
type of waivers used by the Obama administration from 2013 to 
2016 as recently confirmed by, I believe, the 10th circuit. But 
they did it anyway. Current law could not more clearly prohibit 
giving small refinery waivers to some of the largest refiners 
in the world, but the current administration did it anyway. 
Current law could not more clearly make woody biomass and corn 
fiber eligible for the RFS. But a decade later, we still don't 
have answers about trees, and many corn fiber pathways are 
logjammed at EPA.
    These aren't statutory problems. They are political will 
problems, and not the political will in this room. We do not 
support trying to cure a political will problem by opening up 
an already strong Clean Air Act statute. It is unclear to me 
what political metric would suggest that the current political 
environment would produce a stronger statute for advanced 
biofuels than we have today. But either way, the process would 
not produce solutions to the problem at hand.
    Let me finish with a couple of thoughts. The RFS is 
essentially a contract designed to convince the private sector 
to spend billions of dollars to bring new fuels to market, and 
they have done that. Single companies in my council have spent 
$500 million alone. If you want to keep U.S. investment, keep 
and hold program administrators to this commitment.
    Two, proper enforcement of the law is extremely important 
for our fuel industry. Fuel markets are not free markets. Oil 
prices are manipulated at the top by OPEC often for the express 
purpose of weakening competition, including in the oil 
industry. At home, ethanol has been the cheapest form of octane 
for decades. But without policy, we struggle to find buyers 
because the oil industry would prefer to buy octane from 
themselves, even when it is cheaper.
    Number three, while it may not seem like it, the oil 
industry is running out of ways to avoid the law. The courts 
have struck down prior misuse of RFS general waiver authority 
already, and the absurdity of the current small refinery waiver 
scheme has and will continue to be exposed.
    Four, there are much easier ways to produce step change 
results for my industry and advanced biofuels in general. I 
will mention two. First, it is not easy work, and progress has 
certainly been made. But EPA must kick out eligibility pathways 
faster. For example, we can produce hundreds of millions of 
gallons of cellulosic ethanol from corn fiber in the near term 
if we can clear the pathway logjam at EPA. Clarity on municipal 
solid waste are two more that have already been mentioned.
    Second, and this is largely for cellulosic ethanol. 
Regulator parity for RVP, which we have discussed, Reid vapor 
pressure, would open new and immediate opportunities for growth 
in cellulosic ethanol. As you mentioned, 15 billion gallons is 
capped.
    I will close by saying that it may not be the sexiest 
answer to the question asked, but the best statutory path 
remains the path that we are on.
    Thank you.
    [The prepared statement of Mr. Coleman follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Shimkus. The chair thanks the gentleman.
    The chair recognizes Mr. Collin O'Mara, President of the 
National Wildlife Federation. You are recognized for 5 minutes.
    Welcome back.

                   STATEMENT OF COLLIN O'MARA

    Mr. O'Mara. Thank you, Mr. Chairman, and thank you, Mr. 
McNerney, for convening this session today.
    Is this on?
    OK. My name is Collin O'Mara, and I am head of the National 
Wildlife Federation. We are America's largest conservation 
organization with 6 million members, a couple million hunters 
and anglers and as well as birders and gardeners, completely 
bipartisan, representing every part of the country.
    And 2 years ago today, I was before this committee talking 
about this exact issue. And at the time, I said, we were 
supporters of the original RFS and the RFS2 because of the 
promise of getting to advance truly sustainable fuels and the 
promise that was made that there would not be adverse impacts 
to habitat and to wildlife, both of which have kind of proven 
not to be true.
    And so, at the time, I said, the road to hell is paved with 
good intentions. But at the end of the day, as my old boss Jack 
Markell used to say, he used to be Governor of Delaware, a 
vision without execution is nothing but a hallucination. And I 
do think that we have to have an honest conversation about the 
role of government in getting us to the point where we are 
today. We have distorted these markets to the point where we 
are basically reducing the amount of investment that we are 
seeing in the advanced, and we are basically creating a massive 
incumbent industry that is having adverse impacts on the 
landscape.
    And so I want to talk about three things today. The first 
one is to expand on the vision for what an advanced biofuel 
future could actually look like. The second is I want to offer 
a perspective for why we failed to achieve the vision so far. 
And I want to suggest some ways that Congress can actually 
right the ship and reach these elusive goals because I do 
think--and I do disagree with some of my panelists here. I do 
think that there is this fallacy that we all accepted 7 years 
ago, or 11 years ago now, that if we invest in first-generation 
biofuels, they will automatically lead to kind of the future 
that we want for the advanced biofuels. And we just simply 
haven't seen that happen.
    And if you look at the amount of venture capital money and 
equity money going into the advanced fuels, it is a fraction of 
the money going into traditional corn ethanol. And the reason 
is pretty simple. If you give a fairly guaranteed return from a 
fairly predictable program on the first-generation side and you 
have wildly unpredictable volumes on the next-generation side, 
of course you are going to put the smart on the last 
generation. It is just good economics.
    In my previous testimony, I talked a lot about the wildlife 
impacts, the loss of grasslands in the plains. Right now, 87 
million acres of land are in corn production. That is the most 
since World War II. Eighty-nine million acres are in soy 
production. If you look at those 176 million acres, the 
production on them, the productivity on them, is absolutely 
fantastic. We are getting better and better at being more 
efficient in the amount of crop that we are producing. This is 
because of biotechnology, because of the application of 
fertilizers and pesticides.
    The landscape is shifting, so we are losing acres in more 
arid places--we are basically taking acres that are more arid 
places out of production, and then we are putting more acres 
that were habitat in the grassland into production. And what 
has ended up happening, for folks that care about wildlife and 
sportsmen, folks who like to duck hunt and pheasant hunt, we 
are losing some of the best habitat in the country for ducks 
and for pheasants.
    And so kind of the point I wanted to make on the vision was 
that sustainably harvesting native grasses, native prairie, 
these could provide feedstock and provide revenues for ranchers 
and for folks across rural America while continuing to 
sequester additional carbon, providing homes and forage for 
wildlife species, and maintaining or enhancing water storage 
capacity, and offering diversified revenue streams.
    The same thing with cover crops. Instead of just paying 
folks for cover crops that are taking up nutrients, actually 
harvesting those cover crops, turning those into feedstock for 
biofuels creates another revenue stream for farmers that are 
already trying to do their part to improve water quality.
    Same thing in areas with more trees and grasses. They could 
benefit significantly from thinning and using other woodywaste 
to create a few feedstocks for advanced biofuels.
    And so the question is, why aren't we there? If there is 
all these potential food stocks that have good economics behind 
them at a micro level, why can't we get to the macro growth? 
And I would argue it is mainly for two reasons.
    The first reason is that EPA's having to lower the statute 
for their overly ambitious target has really strangled the 
industry in its infancy. And then, once these annual targets 
are set, they are consistently undermined by the issuance of 
these waiver credits. And I think you are hearing broad 
agreement on that point today.
    These moving targets are horrible for both the producers as 
well as the investors that are looking to make decisions. And 
so there isn't that incentive to make the big investments for 
the next generation of fuels.
    And so the two industries are in a very different place. If 
you think about where the corn ethanol industry was 11, 12 
years ago, it was in its infancy. We are at 10 percent now. I 
mean, soybeans right now, it is 2 billion gallons. We have made 
incredible progress in those areas to the chagrin, in some 
ways, of the wildlife impacts.
    But we haven't seen any of that on the other side. And I 
think what I would really encourage this committee to do is 
look at the GREENER Fuels Act that Congressman Welch has 
introduced. There are a lot of commonsense solutions, 
bipartisan solutions in that act that will create a lot more 
certainty in the industry, reduce the conservation and the 
wildlife impacts from the current RFS, and do it in a 
bipartisan way.
    The longer we wait for a solution, the harder it is going 
to be to get one. I do think that there is a bipartisan 
solution here that could have a huge benefit for wildlife and 
still achieve that incredible vision for a sustainable energy 
future at the same time.
    I look forward to your questions. Thank you, Mr. Chairman.
    [The prepared statement of Mr. O'Mara follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Shimkus. Thank you very much.
    And last but not least is Mr. Luke Morrow, managing 
director at Morrow Energy on behalf of the Coalition for 
Renewable Natural Gas.
    Sir, you are recognized for 5 minutes. Welcome.
    Mr. Morrow. Thank you. Are you able to hear this?
    Mr. Shimkus. You are good.

                    STATEMENT OF LUKE MORROW

    Mr. Morrow. OK. Excellent.
    Thank you, Chairman Shimkus, Ranking Member, and members of 
the subcommittee. I am Luke Morrow, President and Founder of 
Morrow Renewables. I also serve on the board of directors of 
the Coalition for Renewable Natural Gas, which is the trade 
association for the renewable natural gas industry. I 
appreciate having the opportunity to testify today about 
renewable natural gas, or RNG, and the important role it plays 
in the RFS program.
    RNG is biogas-derived biofuel. Our industry takes untreated 
biogas captured from landfills, wastewater facilities, and 
anaerobic digesters and refines it to meet the fuel qualify 
standards of geologic natural gas. It is fully fungible in 
existing pipeline infrastructure.
    RNG qualifies as cellulosic biofuel under the RFS. It 
represents over 95 percent of the fuel used to meet the 
program's cellulosic biofuel requirement and reduces lifecycle 
greenhouse gas emissions by 80 percent or more compared to 
conventional diesel fuel.
    My company, Morrow Renewables, is based in Midland, Texas. 
We have been involved in the natural gas industry since 1986 
and have been active in the RNG industry for the last 18 years. 
We work collaboratively with landfill owners, operators, and 
waste management companies to bring RNG projects to fruition. 
Our company developed and utilizes patented technologies to 
refine biogas into high BTU RNG that can be readily used in 
natural gas vehicles. We employ over 180 people and have seven 
projects across the Texas, Louisiana, and Arkansas producing 
cellulosic biofuel.
    In fact, 2 days ago, I was the ribbon cutting for our 
latest project in Melissa, Texas, which is one of our biggest 
projects to date. This project will produce, at a minimum, 12 
million gallons of cellulosic biofuel annually. In total, our 
current projects produce about 35 million gallons of cellulosic 
biofuel every year, which we expect to almost double by the end 
of this year.
    Since 2011, the RNG industry has developed over 45 
facilities capable of producing high BTU RNG that can be used 
for transportation applications. There are currently an 
additional 48 projects under construction or consideration.
    Our industry has produced increasing volumes of cellulosic 
biofuel since RNG was incorporated into the RFS program. RNG 
production for transportation fuel grew from approximately 33 
million ethanol equivalent gallons in 2014 to over 240 million 
gallons in 2017. That is more than a 620-percent increase in 
the 3 years--620 percent.
    For 2018, the EPA estimated that RNG production would 
increase by approximately 21 percent over the previous year's 
levels. EPA actual data show that the industry has grown 29 
percent over the last 12 months. In other words, our industry 
is currently on track to exceed the EPA's estimate of 274 
million gallons of production for 2018.
    America's RNG industry has a great story to tell. We are 
converting waste into a transportation grade fuel that can be 
used in natural gas vehicles, such as the Metro buses here in 
Washington, D.C.
    In addition, we are providing the fuel needed to meet the 
RFS program's cellulosic biofuels target and doing it in an 
environmentally sustainable manner while adding high-paying 
engineering, manufacturing, construction, and operations jobs 
to our economy.
    As this subcommittee thinks about the future of the RFS 
program, I want to convey how important policy certainty is to 
the stability and growth of our nation's RNG industry. I can 
tell you from firsthand experience that bringing an RNG project 
to fruition requires significant capital investment and long-
term contractual arrangements.
    There are things that the EPA can do to provide this 
stability. Keeping the annual rulemaking process that sets the 
program's volumes requirements on schedule is helpful. The use 
of a consistent methodology that recognizes historic growth 
while accounting for new investment when setting the cellulosic 
biofuel volume targets will help provide the certainty required 
to attract additional investment and expand cellulosic biofuel 
production.
    Lastly, I would note that reports of the small refinery 
exemptions being applied in new expanded ways have injected 
uncertainty and undermine the economic assumptions upon which 
capital investments were made and continue to be made in the 
RNG industry.
    We would encourage the subcommittee to take appropriate 
steps to ensure that the small refinery exemption is being 
applied in a manner consistent with the letter and intent of 
the law and in a way that does not undermine our industry's 
ability to produce additional volumes of cellulosic biofuel.
    Chairman Shimkus, ranking member, and subcommittee members, 
thank you again for the opportunity to testify. I would welcome 
any questions you may have, and may God bless America.
    [The prepared statement of Mr. Morrow follows:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    
    Mr. Shimkus. May God bless America. Thank you very much.
    Especially after this testimony here, we need a lot of 
blessing going on here.
    So let me thank you for your testimony and move to the 
question-and-answer portion the hearing. I will recognize 
myself 5 minutes for the beginning.
    So we are here because, really, the policy certainty 
question, right? So anyone know who is going to be elected 
President in 2022? Anyone know who will be the next 
Administrator of the EPA? The answer is no, right? Does anyone 
know when it is perceived that the RFS program will be turned 
over to the next Administrator? 2022, right?
    So let me start with my question for McAdams, Howard, 
Puthusseril, Morrow, and Morgan. What are your main concerns 
with the RFS post-2022? And what, in your view, is the best way 
to address those concerns?
    Mr. McAdams. So I would answer by doing a reform bill so 
that we have clarity, not only before 2022 but after 2022, 
instead of waiting for a reset. And the reason I say that is 
because so many of the current provisions in the statute and in 
the current regs are so ambiguous that EPA doesn't have the 
ability to make the calls they need to make. And I have seen 
two major companies build plants, one in China and one in 
Sweden, because we couldn't make the calls on how to apply the 
policy in the first place.
    So I know I have disagreements with folks on this panel 
about that. But having represented those two companies who 
couldn't build a plant here because we couldn't make a decision 
on whether tall oil was a waste when it is 2 percent residue in 
a tree or whether a single-cell organism is an algae, but----
    Mr. Shimkus. OK. I have got other people to go. We got your 
point.
    Mr. Morgan.
    Mr. Morgan. I would say it is certainly a little bit of the 
uncertainty question post-2022. But the main point is that 
ultimately fuel should be standing on their own two feet and 
competing in a free and open marketplace where there is a 
willing seller and a willing buyer. Both people are better off 
after the transaction.
    So we need to move toward a free market. And doing that now 
would actually be good, because it would give you more of an 
opportunity, more of a runway to figure out how to do that 
post-2022. So now is the time for reform.
    Mr. Shimkus. Ms. Puthusseril.
    Ms. Puthusseril. I run a truck stop, and so we look at 
things on a day-to-day basis. And so for my customers, what 
they are looking for is the most affordable fuel prices. They 
are looking for a fuel that they can get that is good. And we 
have seen the RFS, as it is intended to work, is working. 
Whenever I can offer low price fuel for the drivers----
    Mr. Shimkus. Let me ask, you have you been briefed by the 
association of a concern on 2022?
    Ms. Puthusseril. No.
    Mr. Shimkus. OK. Let me move--I am running out of time, so 
let me go to Mr. Howard.
    Mr. Howard. Thank you, Mr. Chairman.
    Frankly, Mr. Chairman, I am not sure we see much difference 
post-2022 with the uncertainty that we have seen to date in the 
RFS and the implementation. Certainly we would like to see 
updates in transparency and consistent long-term growth that is 
clear for biodiesel and renewable diesel. Clearly, it has been 
a success story, but it has been in fits and starts, and we 
don't see much difference.
    Mr. Shimkus. OK. Let me go to Mr. Morrow.
    Mr. Morrow. Yes. Thank you, Mr. Chairman.
    So we have only been as cellulosic biofuel RNG in the 
market for 3 years, and 2022 is right around the corner. So our 
entry is making massive investments. So we would just like to 
see some certainty going forward and to know what that is to 
make investments to continue to do what we do.
    Mr. Shimkus. So does your industry feel that there is 
certainty right now?
    Mr. Morrow. Not at all.
    Mr. Shimkus. OK. And this is kind of outside. But one of 
the main drivers of us possibly moving forward is the octane 
debate. The basic debate is best fuel engineers and the best 
vehicle passenger engineers producing the best vehicles to meet 
CAFE and low carb and some of those other issues.
    I would like to go through the panel, but quickly. I know 
that is not in your segue, but since that drives about 75 
percent of this debate, what are your thoughts on that?
    McAdams, you want to----
    Mr. McAdams. Oh, I----
    Mr. Shimkus. Quickly though. Quickly.
    Mr. McAdams. OK. I am on the optimal task force with DOE, 
and they going through a range of different fuels. And you want 
to make sure that you leave enough flexibility that you can 
have a drop in fuel that is renewable. And it doesn't have to 
necessarily----
    Mr. Shimkus. OK. Let me go to Mr. Morgan because he is 
really the person I want to ask this of.
    Mr. Morgan. Yes. We definitely see potential in a 95 octane 
specification in exchange for a sunset of the RFS that could 
potentially work better for everybody, including for consumers. 
A 95 RON level would be a nationwide fuel on day one. That is 
important to the automakers. The automakers tell us and 
testified before this committee that that is the optimal level 
that would allow them to engineer the vehicles. And if the RFS 
goes away, it will free up enough investment for us to be able 
to compete in a free and open market.
    Mr. Shimkus. And I will end here. But I think, in 
observation of the other panels, you would probably be alone in 
the statement of sunsetting the entire RFS? Just instructional.
    So, with that, I will turn to the ranking member, Mr. 
McNerney, for 5 minutes.
    Mr. McNerney. I thank the chairman.
    Mr. O'Mara, how can Congress work to improve the RFS and 
ensure it includes other biofuels and biogasses?
    Mr. O'Mara. Thank you, Mr. McNerney.
    And I think, if you look at the legislation that 
Congressman Welch just put forth, the GREENER Fuels Act, 
looking at having more clear, kind of, definitions for the 
types of fuels that are allowed but then being a little 
technology agnostic. Like, we shouldn't be picking winners and 
losers from LG versus native grass versus, you know, different 
technologies. Set performance standards and let the market 
actually work. And I think, right now, we are overly 
prescriptive. And the process of having EPA allowing new next-
generation fuels into the process has been absolutely abysmal.
    And so, again, I mean, I do think there are models in 
California and other places that have set standards, and then 
let American innovation work.
    Mr. McNerney. I have heard a couple of panelists refer to 
Mr. Welch's legislation.
    Is there anyone that is familiar with it that would oppose 
that legislation?
    Mr. Coleman. Yes. We oppose Mr. Welch's legislation. So 
there is a number of things in that bill that, quite frankly, 
are mind blowing, from my perspective. There is a whole bunch 
of asks from the American Petroleum Institute: a cap of ethanol 
use, a total exclusion for corn fiber, cellulosic ethanol, 
sunsetting where it shouldn't exist.
    We have a number of problems with that bill, and we would 
ask for opposition.
    Mr. McNerney. Thank you.
    Anyone else?
    Mr. McAdams, does your industry find the playing field for 
biofuels, gas, and diesel to be level?
    Mr. McAdams. No, sir, because they are at different 
economic places at the current time. And that is part of the 
problem with the program when you have had 40 years and $20 
billion, as the incumbent corn industry has, and you are trying 
to compete ethanol to ethanol, they are not on a level playing 
field.
    So you have to buoy up if you are going to have the 
advanced fuels compete with the incumbent fuels on both an 
octane basis and just on an entry to the market basis. And, 
frankly, the teeth in the RFS didn't do that for cellulosic.
    Mr. McNerney. Does anyone on the panel feel that the EPA's 
waiver for small refineries that is actually given to large 
refineries is a good idea? Does anyone think that is a good 
idea?
    Mr. Morgan. I will just say we don't take positions on any 
individual refinery waivers because it deals with confidential 
business information and all that. But we oppose the idea of 
doing a retroactive reallocation. We are not sure how they 
could do that legally and logistically under the statute. And 
it points to the need, really, for a comprehensive solution. 
That is why we are here. I would just say to my fellow 
panelists, if they are frustrated with how the RFS is run, 
welcome to the club. And if you think it is bad now, wait for 
2022 when there is even more uncertainty. So all of this to me 
points right back to the need for a comprehensive solution.
    Mr. McNerney. Mr. O'Mara, who do you think that that policy 
benefits, the policy that the Administrator is pushing forward?
    Mr. O'Mara. Yes. I think there are places where the 
uncertainty and the RIN cost and things like that have 
adversely impacted some manufacturers and some refiners. I do 
think that reduces some pressure on kind of habitat impacts, 
especially as prices get up higher and higher.
    But I think the challenge of this debate continues to be 
projected as just corn versus oil. And there are a whole series 
of constituencies that are badly influenced by the status quo. 
And I think the problem is that we keep trying to have these 
little quick fix kind of get through the press cycle and do 
something from either the administration where we need to have 
a bigger conversation because it is just more complicated than 
any individual action that the Administrator has taken.
    Mr. McNerney. Well, I certainly agree with the chairman on 
this. It is a good diverse panel, and so we get some different 
viewpoints on that.
    Mr. McAdams. Mr. McNerney, I just want to make the 
committee aware that I have actually sued the Environmental 
Protection Agency over the way they are issuing the small 
refinery waivers. And what they have done is they have 
purposely driven down the price the D6 RIN. And that is a 
direct benefit to the merchant refiners.
    Then what they did was they went from an average of 7 to 10 
to 30. And some of my largest distributors of diesel have lost 
millions and millions of dollars as a result because they were 
sitting there holding a hundred million RINs. So our guys have 
received economic harm and that some of the people they gave 
them to didn't pass the economic harm test.
    Mr. McNerney. Thank you.
    Mr. Coleman. One additional point. When it all comes down 
to it, what those waivers do is they transfer wealth from rural 
America into the pockets of refinery owners. That is what they 
do in the short-term. And rural America is hurting and 
refineries are not.
    Mr. McNerney. I just want to end by saying, Mr. Morrow, I 
was pretty excited hearing your testimony. Let's see how we can 
continue that success story.
    Mr. Morrow. Thank you, sir.
    Mr. McNerney. Mr. Chairman, I yield back.
    Mr. Shimkus. The gentleman yields back his time.
    The chair recognizes my friend and colleague from Texas who 
has been laboring with me on this issue, Mr. Flores, for 5 
minutes.
    Mr. Flores. Thank you, Mr. Chairman. I apologize to the 
audience for being late today. My mother experienced a 
significant medical condition earlier this week, so I had to 
deal with some of those things this morning.
    Mr. Morgan, your organization has been supportive of the 
high octane concept. What, if any, changes need to be made to 
the advanced biofuels provisions in the RFS in order for a high 
octane program to move forward?
    Mr. Morgan. Thanks for the question.
    Yes, I think the key thing is there that we need to be 
moving toward a free market. We are open to all ideas about how 
to do that in the advanced space. We feel like the octane idea 
has the potential to do that in the conventional ethanol space.
    We don't have a specific solution, to be honest, on the 
advanced space, but we are open to ideas and looking for an 
off-ramp toward all the fuels competing on an equal basis.
    Mr. Flores. OK. Would your constituents accept a sunset 
date for advanced biofuels that is later than a sunset date for 
the remainder of RFS?
    Mr. Morgan. We feel so strongly that the program needs to 
be sunset over time that we are open to all ideas. The 
timetable needs to be reasonable of course. But we are open to 
hearing what the colleagues on this table and others need to 
have the certainty that they need and the timeframe that they 
need. We will take a look at that, take it back to our 
membership, and we are open to ideas.
    Mr. Flores. OK.
    Mr. McAdams, do you envision a sunset date for RFS that 
includes advanced biofuels? And if so, what would that sunset 
look like?
    Mr. McAdams. Well, I think you have to base it on how you 
would get your financing. And so 20 years is what most people 
have in terms of the debt that they take when they have a loan. 
And if you gave the plants, when the plants came on, like you 
do in the Tax Code, you flip the switch on and you get 20 years 
of a RIN, then people are going to have the confidence to 
finance those plants.
    Twenty is not the only answer you could have, but I think 
you have got to have some longevity where they can repay the 
loan just like you have a 30-year loan on your house because it 
is easier to pay for.
    So that is the game that has to be worked on in terms of 
how long you would go forward in order allow these plants to be 
financed and built.
    Mr. Flores. OK. Thanks for the answer. Just to clarify, you 
are saying most of the capital investments have about a 20-year 
financing----
    Mr. McAdams. Yes. When you look at the electric side, you 
usually see a 20-year agreement between the purchaser of the 
power and a purchase power agreement, right? That is generally 
what the electric industry does, so I just borrowed that from 
the electric----
    Mr. Flores. Oh, OK, I see what you are saying.
    Mr. Morgan. And I would just point out that would be 17 
plus 20, which is 37 years, is a long time to wait.
    Mr. McAdams. Well, you wouldn't have to do it that way. You 
could do it in some other constructions is what I am saying. 
You have to work that out. Because you guys had to have 30 
years to pay for the $6 billion refineries. It is the same 
issue.
    Mr. Flores. OK. Well, this is helpful.
    Mr. Morgan, there are recent reports that the EPA is 
considering reallocating waived volumes from exempted small 
refineries in the 2019 RVO. What is your perspective on these 
reports?
    Mr. Morgan. I would just say that----
    Mr. Flores. Just to be clear there, reallocating from small 
refineries to everybody else.
    Mr. Morgan. Yes. We have very grave concerns about that, 
particularly trying to retroactively put in waived volumes into 
a new rule. I am not sure how they could do that. We have very 
strong concerns for that legally.
    Also, I think, to my point just a minute ago, I think this 
points out why we need to have a comprehensive solution, 
clarity in the statute, rather than relying on administrative 
action. And in 2022, the statutory guidelines fall off and 
there is more administrative discretion.
    So for those of us who are concerned about how the program 
is being operated now, it is much more so in the future, which 
is why we all need to figure out a path forward.
    Mr. Flores. OK. Mr. McAdams, am I interpreting correctly 
that that is one of the catalysts for your litigation?
    Mr. McAdams. Yes, sir. Absolutely. I mean, who is going to 
finance a $200 million plant in 5 years?
    Mr. Flores. OK. I thank the panel. It has been great.
    And, Mr. Chairman, I yield back the balance of my time.
    Mr. Shimkus. Wow, the gentleman yields back his time.
    The chair recognizes, I think, the gentleman from Texas--
maybe not--for 5 minutes.
    Mr. Green. The chair and I have some little competition.
    I want to thank all of the panel for being here today.
    One of the frustrations--and I think the chair and I were 
on the committee when this system we have now was created from 
a number of energy legislation over the last decade or so--the 
frustrating thing I have is that, not only coming from an oil 
and gas community, but biofuels hasn't taken on, and what is 
picked up is the corn ethanol.
    And I know from the environmental perspective, biofuels 
really have a plus for the environment, whereas corn ethanol 
doesn't, and that is the frustration.
    So, Mr. Morgan, has the RFS had help to commercialize and 
develop cellulosic biofuels and advanced biofuels other than 
biodiesel?
    Mr. Morgan. Not really. I think you have heard the numbers 
today, that it is overwhelming, that biodiesel has been in the 
advanced pool with only 10 million gallons of liquid cellulosic 
fuels at this point, setting aside the biogas, the compressed 
natural gas.
    Mr. Green. Have we seen domestic production rise 
dramatically? Has the mandate kept pace with the domestic 
production capabilities?
    Mr. Morgan. No, it has not.
    Mr. Green. And how do existing mandates prioritize imports 
over domestic production?
    Mr. Morgan. Yes, I think you see that in a couple of 
different ways. So if the mandate is placed higher than 
demonstrated domestic production, then you are either going to 
have some increased domestic production, which we have seen a 
little bit of that, but you also have a lot of increased 
foreign imports. And that is kind of against the whole purpose 
of the Energy Independence and Security Act.
    Mr. Green. And I agree that one of the concerns is that we 
should be producing it. If you don't like bringing in foreign 
oil, you surely wouldn't want to bring in biofuels.
    Mr. Morgan. Yes, that is right, and especially because we 
produce the diesel here in the United States, our members. So 
we are actually, in terms of refined products, we are a net 
exporter, the largest net exporter in the world of refined 
products.
    So when you bring in the biofuels from overseas, you are 
actually displacing American fuels. Again, some of that is 
derived from foreign crude oil, but it is domestically 
produced.
    Mr. Green. Speaking for AFPM, what effect has Mr. Pruitt's 
RFS waivers had on the industry? Are some of the refineries 
concerned that they will be left holding the short end of the 
stick when the burden of compliance only applies to remaining 
refiners who do not receive those waivers?
    Mr. Morgan. I would say it certainly splits our members. It 
is between those who have received waivers and those who have 
not.
    And as to how they are reallocated, we have very strong 
concerns about that. That would actually hurt everyone, 
including, for example, like PES, for example. It would be 
reallocated to them when they are in financial distress at the 
moment. That is just one example.
    Mr. Green. And the chair and I have been wrestling with RFS 
for a number of years. And a lot of it is just--the RIN system 
is just broken and somewhere along the way Congress needs to 
fix it. And I think everybody at the table ought to be there to 
help, because I like domestic production, but I also see that a 
lot of folks making money out of the energy sector, it is not 
putting one drop of gas in our vehicles.
    Mr. Chairman, that is all the questions. I yield back.
    Can I save it for next week?
    Mr. Shimkus. I think you already owe us numerous minutes.
    Mr. Flores. Will the gentleman yield the balance of his?
    Mr. Shimkus. Mr. Flores would like to----
    Mr. Flores. Thank you.
    Mr. Green brought up an issue that I think is important to 
consider. Do any of you think the EPA can fix this on its own 
administratively or do you think that it is going to require a 
statutory initiative? As quickly as you can.
    Mr. Morrow. That sounds like a loaded question.
    Mr. Flores. It is not intended to be a trick question.
    Mr. Morrow. I think, from our industry's standpoint, as we 
are new in the RFS, I think maybe any type of legislative post-
2022 would be good for us in knowing that there would be some 
certainty and potentially something that would transcend the 
next election. So that would probably be helpful for us.
    Mr. Flores. Mr. O'Mara?
    Mr. O'Mara. Yes. I think if there was absolute certainty 
and multiple year out and actually saying the volumes are going 
to be consistent and not having all these the workarounds, I 
think there are some abuses that could be a avoided.
    I also think if the Triennial report on the environmental 
impacts, which is now 7 years overdue, because there are things 
that they can do to reduce filings based on impacts and that 
work isn't being done. But the only way to make sure it is 
right, to the chairman's point, long term, regardless of 
administration, regardless of administrators, have Congress 
take action.
    Mr. Coleman. EPA has the administrative authority to fix 
everything that I have heard mentioned. And so I think if there 
is disagreement, it is how to get those things fixed.
    Mr. Howard. Yes, I would agree. I think a long-term 
consistent plan is easily implemented if the guidelines are 
there.
    Mr. Flores. Do you agree with the statutory approach or the 
administrative approach?
    Mr. Howard. I think there needs to be changes and updates 
to the RFS. I think it can be fixed to give more clarity, to 
give more transparency. A lot of the issues I have heard 
articulated here are due to the lack of transparency in the 
policy.
    Mr. Flores. I need to move on. I am running short on time. 
Sorry.
    Mr. McAdams. We did this program 10 years ago and a lot has 
changed in the industry on the innovative technology side and 
the original statute didn't take that into consideration.
    So a lot of projects now are multifaced projects with two 
elements to them instead of one. The statute was written for 
one element, not two. There are all kinds of problems with 
respect to how they put the programs together. For the use of 
wood, they just box these facilities.
    Mr. Flores. Just to summarize, you are saying statutory, 
right?
    Mr. McAdams. It needs to be reformed.
    Mr. Flores. OK.
    Mr. Morgan.
    Mr. McAdams. And I have given you a list of 21 things that 
directly need to be statutorily reformed.
    Mr. Flores. OK.
    Mr. Morgan. We believe the statutory reform is the best 
path going forward.
    Ms. Puthusseril. I agree with that.
    Mr. Flores. OK. Thank you. I yield back my negative time.
    Mr. Shimkus. The gentleman from Texas yields back his time.
    The chair now recognizes the gentleman from South Carolina, 
Mr. Duncan, for 5 minutes.
    Mr. Duncan. Way over here on the far right.
    Thank you, Mr. Chairman.
    Thanks to the panel for being here.
    I want to examine the future of advanced biofuels under the 
RFS. We need to set demands and mandates that the market can 
actually meet. I think Mr. Morgan addressed in his testimony 
that nearly a third of all the RFS advanced biofuel mandates 
were met in the last 2 years with imported fuels. So it seems 
to me that the demands and mandates are exceeding what the 
market here in America can provide.
    It seems counterproductive, especially since RFS was set to 
mitigate the dependence on foreign sources. We have, in fact, 
decreased dependence on foreign oil, but I am not so sure that 
much of that can be attributed to RFS standards. Most of it is 
due to aggressive exploration and production here at home of 
fossil fuels. And so just because the government set up 
biofuels demand doesn't mean we are able to domestically meet 
it.
    So, Mr. Morgan, your testimony directs EPA to set a 
reasonable advanced biofuel mandate tied to domestic 
production. In your opinion, what is a reasonable advanced 
biofuel mandate?
    Mr. Morgan. Yes, I think you would look at the previous 
year's production domestically here and set it at it that level 
so you have a track record there. And then as it grows, then 
you can increase the number the next year.
    But you are exactly right, that if a third of this is being 
met by foreign imports--and again, as I just mentioned, some of 
that is displacing American-produced fuel, or it all is--some 
of which is derived from feedstocks from overseas certainly, 
but it is all American-derived fuel, it is kind of at 
counterpurposes.
    Mr. Duncan. Mr. Howard, do you want to comment on that?
    Mr. McAdams. Isn't a third of the fuel you use in the U.S. 
refineries from overseas?
    Mr. Morgan. In terms of feedstock, now our percentage of 
imports is the lowest it has been since 1967.
    Mr. McAdams. But it is still a third.
    Mr. Shimkus. OK. I love this banter. This is a throwback to 
Billy Tauzin. We will let Mr. Duncan control his time.
    Mr. Howard. Yes, Mr. Duncan, I think you----
    Mr. Duncan. Let's go to Mr. Howard.
    Mr. Howard. Yes. So let me say, Mr. Morgan, some of these 
numbers are very misleading. As of through last year, through 
August of last year, 600 million gallons of Argentine biodiesel 
were dumped into this market and that preceded the prior 3 
years. Countervailing duties were put in place last August that 
restricted that volume.
    The biodiesel industry has stepped up. We were running at 
two-thirds capacity because of that. Now that those 
countervailing duties are in place and we have fair trade, the 
biodiesel industry is meeting the RVO requirements. And we have 
continued growth and plans to continue to meet that from 
domestic production.
    Mr. Duncan. Let me just ask you this. Because, look, I 
drive a Chevy Duramax diesel pickup truck. That is my truck 
when I am at home in the district. I like biodiesel. I think 
the viscosity actually helps my engine probably more than 
anything. So I am not a novice on this.
    But I will say this, that biodiesel is much more expensive 
than regular diesel fuel. So how can we overcome that? Because 
if I as a consumer--and trust me, I am--if I can find biodiesel 
in South Carolina now, I think there is one distributor that 
has got it.
    So if I want to buy biodiesel and I find a station that has 
it, why am I paying 30, 40 cents more a gallon for biodiesel? 
Because I can tell you, even though I want to do that, because 
think it will help my engine, and I like the whole idea of 
biodiesel, I am not going to buy it, I am not, not with 30 or 
40 percent price difference.
    So until you can overcome that, you are not going to have 
the consumer buying your product. So how do you overcome that?
    Mr. Howard. Well, I think you have heard from one of my 
customers sitting next to me that she is able to lower her 
price by blending biodiesel.
    Part of the industry's need for continued growth is to be 
able to have the distribution network to get to everywhere in 
the country. Right now we have great distribution in the 
Chicago area, where her truck stop is. We do not have great 
distribution in your area.
    We need to continue to invest in infrastructure. Last year 
REG, we opened 10 new distribution terminals.
    Mr. Duncan. What is the price point difference in the areas 
where you have great distribution?
    Mr. Howard. Right now, typically biodiesel with incentives 
is sold less than diesel price and passed on to the consumer.
    Mr. McAdams. Congressman, I represent Pilot Flying J and 
Love's, which are the two largest distributors of diesel in the 
United States, 15 billion out of 50, and they generally pay 25 
percent less for the diesel and blend it because they get 
margin. And when the marginality isn't there, they don't blend.
    And because of the small refinery waivers, the RIN 
collapsed on the floor pool and now we are 15 percent lower 
blending. So all the truckers supported us on the tax credit 
because we provided cheaper fuel over the long haul in the 
entire United States.
    Mr. Duncan. Let me just say this in the 5 seconds that I am 
actually over.
    Mr. Shimkus. Ms. Matsui.
    Mr. Duncan. The market will dictate what is purchased. And 
if we as an American government want to see more of these 
products on the market, they need to be cost competitive, cost 
effective, right? They need to be almost equal to or less than 
the competitive fossil fuel brand.
    With that, I will yield back.
    Mr. Shimkus. The gentleman yields back.
    At this time the chair recognizes the gentlelady from 
California, Ms. Matsui, for 5 minutes.
    Ms. Matsui. Thank you, Mr. Chairman. I do appreciate the 
testimony we have heard today.
    Advanced biofuels can have a substantially lower climate 
impact than traditional gasoline and even corn ethanol. The 
California Air Resources Board last year reported that about 
one-third of all biofuels in the state's fuel mix were 
categorized as advanced. That is a significantly higher percent 
than the rest of the country as a whole.
    The key to California's success has been the State's 
biofuels program, known as the Low Carbon Fuel Standard, which 
sets goals based on the carbon content of the fuel rather than 
the feedstock. Under the program the state measures the carbon 
intensity of the fuel over its full lifecycle. Low carbon 
intensity fuels generate credits that can be traded.
    This performance-based standard clearly has greater climate 
benefits, but it seems to me that its flexibility is also 
better for the advanced biofuels industry.
    Mr. McAdams and Mr. Coleman, would you say it is more 
beneficial to have standards that are performance-based, like 
the Low Carbon Fuel Standard, or technology-based, like the 
RFS? What are the benefits of each?
    Mr. McAdams. Go ahead.
    Mr. Coleman. Thank you, Congresswoman Matsui, for the 
question.
    So I worked on that program for a while out there. And you 
are right to point out that not just advanced biofuels have 
carbon benefits. So we are playing this game right now where we 
draw a line between advancing corn ethanol even though corn 
ethanol is the largest investment in cellulosic ethanol. So you 
have gains with corn ethanol and then you have bigger gains 
with advanced biofuels.
    In terms of the answer to your question, we like both 
policies. The RFS is prescriptive. It is very clear for 
investors when it is properly implemented. And the Low Carbon 
Fuel Standard has more flexibility.
    If there was an opportunity to talk about performance 
standards, we are more than willing to have that conversation. 
Right now those policies are perfect complements to each other.
    And if you go to California and talk to the California Air 
Resources Board, they will tell you the RFS drives gallons 
towards California and makes compliance with that program 
helpful and possible. So it is a tremendously important. We 
would be happy to have further conversation with you.
    Ms. Matsui. Well, another difference between the two 
standards is that California standards are structured to 
incentivize the lowest-carbon fuels possible. So under the RFS, 
once the fuel has achieved the requisite 50 or 60 percent 
greenhouse gas reduction, it is eligible to compete in the 
market, but there is no benefit for fuels that go beyond the 
standard.
    So on the other hand, the California standard rewards lower 
carbon-intensity fuels by allowing them to generate more 
credits than fuels that barely meet the standard. This creates 
an incentive to develop fuels that can reduce carbon emissions 
to the greatest extent possible.
    Once again, Mr. McAdams or Mr. Coleman, what do you think 
about the different market signals created by the two 
standards? Are there benefits to using a sliding scale of 
rewards based on carbon intensity?
    Mr. McAdams. So I think it is a great program they have. I 
think the political situation in the Congress makes it hard to 
take the California standard and put it into Federal law, to be 
candid with you.
    But I think you could address the same impact by simply 
saying any fuel that delivers more than the baseline of 50 
percent or 60 percent of the statute will receive an extra one-
tenth of a RIN would give an incentive.
    So, for instance, if my colleague down here with the 
Biodiesel Board uses a tallow, he gets an 80 percent reduction 
fuel, he would get three-tenths of a RIN.
    Well, three-tenths of a RIN on a 40 cent RIN value is quite 
a bit of incentive for the margin for him and that would help 
bring the fuels into the market in the same way that 
California's standard does, but using the existing format of 
the RFS.
    Ms. Matsui. OK. In 2014 the EPA finalized regulations 
permitting biogas to count as cellulosic biofuel under the RFS 
when converted to electricity to power electric vehicles or 
used directly in natural gas vehicles.
    Applications to generate RINs using electricity from biogas 
to fuel EVs are currently pending before the EPA, but the 
Agency has yet to approve an application.
    The potential impact of the electric pathway under the RFS 
is great for both biogas producers and EV manufacturers. DOE 
estimates that a proved electric RIN pathway could reduce the 
cost of electric vehicles and potentially put an additional 3.5 
million battery electric vehicles on the road by 2025. The 
demand for biogas would also rise dramatically.
    Let me ask probably Mr. Morrow first. Are you familiar with 
electric RINs and what type of benefits do they have and the 
potential to provide for the environment and biofuels industry?
    Mr. Morrow. Thank you for the question.
    The electric pathway there, it is just like anything, I 
think the devil is in the details. We are not really sure how 
many RINs would be generated on a per MMBTU or per kilowatt 
basis, so it is hard for me to comment on what that might look 
like if it becomes a proved pathway. So really all we know 
right now at this time is what an MMBTU of treated RNG going to 
the pipeline looks like. I am familiar with the pathway.
    Ms. Matsui. OK. Well, it seems I am going to run out of 
time. I think this is an area we ought to explore further.
    Thank you very much. I yield back.
    Mr. Shimkus. The gentlelady yields back her time. Shows you 
that there is interesting opportunities in future, good or bad, 
for those at the panel.
    So we want to now turn to another Californian, Mr. Peters, 
and you are recognized for 5 minutes.
    Mr. Peters. Thank you, Mr. Chairman.
    And I apologize, I was on floor so I didn't get to hear 
some of the testimony from the beginning. So if you answered it 
I hope you will bear with me.
    I also want to wish the best to my colleague Mr. Flores' 
mother, hope she is all right.
    I wanted to ask Mr. O'Mara, in general, given the timeframe 
and what has happened since this was first adopted, how does 
the dramatic price collapse in natural gas affect all the 
incentives? And is that part of your thinking as you suggest we 
take another look at how to incentivize next-generation 
biofuels?
    Mr. O'Mara. Yes. I appreciate the question.
    We feel strongly that we should be looking at actual 
reductions, right, where are the performance based, where do we 
actually achieve the greatest kind of environmental outcome, 
and don't pick winners and losers on the technology side. 
Because I do think that there was a price--like, any time a 
fuel has a dramatic decrease in the price, it does drive 
greater competition and forces other people to try to meet that 
price in the marketplace. And so we have seen it in the 
electrical sector and we are seeing it a little bit here.
    And I just think the less Congress is being prescriptive on 
technology and the more they are focused on outcomes and 
performance, the better off for everybody, particularly better 
off for the environment.
    And David De Janeiro from my team is over here who has been 
working with your staff and others on this. There are a lot of 
these kind of safeguards you can put in place and also 
performance standards. And I would encourage folks to look at 
Congressman Welch's bill, the GREENER Fuels Act, because it 
actually gets in that direction.
    Mr. Peters. In terms of technological, in terms of 
performance standards, how would you define those?
    Mr. O'Mara. So there are the examples that Congresswoman 
Matsui talked around actual performance. Let's talk about 
emission reductions based on some kind of full lifecycle 
analysis that we can all agree upon.
    I do think that there are lessons that could be learned 
there fairly easily. I think the easiest one is the carbon 
content, because it is one that has--there is more 
standardization of the methodology and it is a way to basically 
compare apples to apples across the entire fuel portfolio.
    Mr. Peters. Mr. McAdams, did you have a comment on that 
kind of approach? Is that what you were talking to Ms. Matsui 
about?
    Mr. McAdams. I was just saying you could solve a lot of 
these problems in different ways. So if you wanted to reward 
from a behavioral standpoint, just like the Tax Code that 
sometimes scales things at percentage bases, you could amend 
the RIN, give away portions. They are done on energy density 
now and you could change that section of the law.
    Mr. Peters. And that is another way of tracking the subsidy 
with the need for the subsidy I suppose, right?
    Mr. McAdams. And so that gives guys more headroom, right, 
to sell their fuel against incumbent fuels that are going to be 
cheaper. So it lets them play in the market.
    Mr. Peters. I would just say it strikes me--and I haven't 
really looked that deeply at the Welch bill yet, it strikes me 
there must be a difference today in the market from what would 
happen when this was enacted. And it seems to me that I am 
skeptical that staying with this program has got to be the best 
we can do.
    But I am going to take you at your word, Mr. Coleman, and 
sometimes the best is not to do anything. But it does strike me 
that given the dramatic change in the whole price structure in 
the energy market and the fact that we have 100 years of energy 
here domestically now, the way you incentivize alternatives 
must have been affected by that.
    Mr. Howard, did you want to say something?
    Mr. Howard. Yes. Thank you, Mr. Peters.
    Let me just make sure that it is clear that the industry 
has transformed, REG specifically. Ten years ago we made 50 
million gallons; last year over 500 million gallons.
    The foundation of our business is a waste collection 
business, used cooking oil, agricultural byproducts. And so 
when you think about how we have transformed, 80 percent of our 
feedstock now is a waste fat and oil, not a refined vegetable 
oil.
    So, yes, the market has changed, and we have responded to 
the California incentives that the Congresswoman mentioned. So, 
yes, there is a transformation of our industry much more 
towards that foundation of waste-based conversion. In that, you 
also get the tremendous environmental benefits.
    So however you think about this program going forward and 
giving us a long-term kind of consistent pathway, you need to 
make sure that both those functions are valued, the 
environmental benefits as well as this kind of waste-based 
environmental collection process. And that is never mentioned 
as something that is really foundational to our business and 
must be valued.
    Mr. Peters. Yes. That is a very fair point. And I think it 
is useful going forward.
    I would just observe in closing that it is very clear to me 
that the states as laboratories is very constructive in terms 
of giving each state a little bit of leeway to do that. And I 
would forward that message on to Administrator Pruitt who seems 
to not want California to be able to do these kinds of 
experiments. I think it is very useful.
    I yield back.
    Mr. Shimkus. The gentleman yields back his time.
    And I, again, appreciate the panel. You all are great. And 
I think it illustrates the challenge that we have.
    I would just note for my colleagues one of the concerns I 
deal with is we have incentivized based upon current law and so 
we have to be careful about taking away from folks that we have 
already got into the market and the investments that have been 
made. And not just current production levels, but as I tell 
people stay, still in the ground and things moving based upon 
the law as written.
    So it is a very challenging exercise, as we continue to 
find out.
    Seeing that there are no other members wishing to ask 
questions for this panel, I would like to thank you all for 
being here.
    Before we conclude, I would like to ask unanimous consent 
to submit the following document for the record: a letter from 
Representative Bruce Poliquin, which has a question for the 
record. The Democrat majority has agreed with that.
    [The information appears at the conclusion of the hearing.]
    Mr. Shimkus. And pursuant to committee rules, I remind 
members that they have 10 business days to submit additional 
questions for the record. And I ask that witnesses submit their 
response within 10 business days upon receipt of the question.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 10:44 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Greg Walden

    Thank you, Mr. Chairman, for recognizing me for this 
opening statement.
    As you mentioned in your remarks, today's hearing is the 
first time in this subcommittee's hearing series on the future 
of fuels and vehicles where we have directly tackled advanced 
biofuels. Before I get to more general remarks on that subject, 
I want to observe how today's subject highlights a problem 
facing my constituents and a solution that could help the 
nation in several ways. Mr. Chairman, I know you are very proud 
of the corn and soybean growers in Illinois that you represent. 
In Oregon, we're equally proud of the generations of foresters 
and millworkers who have been helping manage our forests since 
the days of the Oregon Trail.
    As we learned in our hearing last October on air quality 
impacts from wildfires, federal forests in Oregon and across 
the West face the threat of catastrophic wildfires pumping 
harmful particulates and carbon into the atmosphere. Our 
witnesses that day made clear the importance of thinning our 
forests and removing the fuel that's out there. A key component 
of this preventative management is addressing chips and slash 
material that are volatile in a fire and help carry the fire up 
into the tree canopy. With limited economic value for this wood 
product, much of it is burned in piles in the winter. While 
this is much better than a wildfire, an even better alternative 
is to utilize this wood as a carbon neutral energy source to 
power our vehicles.
    We used to think the main barrier to garnering sustainable 
and economic wood-based biofuels was technical in nature--such 
as developing ways to economically remove lignin from forest 
materials. That in turn would allow us to access and utilize 
the valuable cellulosic material for productive, value-added 
purposes.
    However, it turns out that beyond the technical barriers, 
another significant barrier to growing the use of sustainable 
wood-based biofuels is the arbitrary limits established within 
the Renewable Fuel Standard (RFS). Specifically, the RFS 
renders biofuels sourced from woody biomass off federal land 
ineligible for RIN credits. As a result of these RFS limits, we 
are missing another opportunity to clean up and improve the 
management of our federal lands. Going forward, I hope we can 
address this matter.
    As for the broader topic of advanced biofuels, the 2007 
amendments to the Renewable Fuel Standard were passed with the 
expectation of a fully mature advanced biofuels marketplace--
one that, four years from now, was supposed to be 28 percent 
larger than that of corn-based ethanol and other first-
generation biofuels. While some people think it was a mistake 
then to include cellulosic biofuels in the RFS, the fact is 
they are not going away and should be part of any discussion on 
this complex and interdependent program. For this reason, it is 
important that when discussing the RFS program we keep these 
fuels in mind.
    I want to thank our witnesses for joining us to share their 
experiences and expertise on this subject. We appreciate them 
taking time out of their busy schedules to help us better 
understand intricacies of advanced biofuels.
    Thank you, again, Mr. Chairman for the time. With that, I 
yield back.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    


                                 [all]