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

          DISCUSSION DRAFT: THE 21ST CENTURY TRANSPORTATION FUELS ACT

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

                                    HEARING

                                   BEFORE THE

                          SUBCOMMITTEE ON ENVIRONMENT

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               DECEMBER 11, 2018

                                   __________

                               Serial No. 115-172

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                    __________

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                        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, California
    RICHARD HUDSON, North Carolina       RAUL RUIZ, California
    KEVIN CRAMER, North Dakota           SCOTT H. PETERS, California
    TIM WALBERG, Michigan                DEBBIE DINGELL, 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
    MARSHA BLACKBURN, Tennessee          SCOTT H. PETERS, California
    GREGG HARPER, Mississippi            GENE GREEN, Texas
    PETE OLSON, Texas                    DIANA DeGETTE, Colorado
    BILL JOHNSON, Ohio                   JERRY McNERNEY, California
    BILL FLORES, Texas                   TONY CARDENAS, California
    RICHARD HUDSON, North Carolina       DEBBIE DINGELL, Michigan
    KEVIN CRAMER, North Dakota           DORIS O. MATSUI, California
    TIM WALBERG, Michigan                FRANK PALLONE, Jr., New Jersey (ex
    EARL L. ``BUDDY'' CARTER, Georgia        officio)
    JEFF DUNCAN, South Carolina
    GREG WALDEN, Oregon (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page

    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     2
        Prepared statement...........................................     2
    Hon. Paul Tonko, a Representative in Congress from the State of
      New York, opening statement....................................     4
        Prepared statement...........................................     5
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, opening statement......................................     7
        Prepared statement...........................................     8
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, prepared statement........................   195

                                   Witnesses

    Steve Zimmer, Executive Director, United States Council for
      Automotive Research............................................     9
        Prepared statement...........................................    12
    R. Timothy Columbus, Counsel, National Association of Convenience
      Stores and Society of Independent Gasoline Marketers of America    19
        Prepared statement...........................................    21
    Wesley Spurlock, Past President and Chairman, National Corn
      Growers Association............................................    34
        Prepared statement...........................................    36
    Emily Skor, Chief Executive Officer, Growth Energy...............    44
        Prepared statement...........................................    46
    Geoff Cooper, President and Chief Executive Officer, Renewable
      Fuels Association..............................................    55
        Prepared statement...........................................    57
    Chet Thompson, President and Chief Executive Officer, American
      Fuel and Petrochemical Manufacturers...........................    68
        Prepared statement...........................................    70
    Brooke Coleman, Executive Director, Advanced Biofuels Business
      Council........................................................    97
        Prepared statement...........................................   100
    Michael McAdams, President, Advanced Biofuels Association........   118
        Prepared statement...........................................   120
    Manning Feraci, Director of Federal Affairs, Coalition for
      Renewable Natural Gas..........................................   148
        Prepared statement...........................................   150
    David Fialkov, Vice President, Government Relations/Legislative
      and Regulatory Counsel, National Association of Truckstop
      Owners.........................................................   162
        Prepared statement...........................................   164
    Kurt Kovarik, Vice President of Federal Affairs, National
      Biodiesel Board................................................   180
        Prepared statement...........................................   182

                               Submitted Material

    Discussion Draft, H.R. ___, the 21st Century Transportation Fuels
      Act, submitted by Mr. Shimkus..................................   196
    Summary, Discussion Draft, 21st Century Transportation Fuels Act,
      submitted by Mr. Shimkus.......................................   230
    Letter of December 11, 2018, from Frank J. Macchiarola, Vice
      President, Downstream and Industry Operations, American
      Petroleum Institute, to Mr. Shimkus and Mr. Tonko, submitted by
      Mr. Shimkus....................................................   236
    Letter of December 3, 2018, from Ted Mottaz, President, Illinois
      Corn Growers Association, to Mr. Shimkus, submitted by Mr.
      Shimkus........................................................   239
    Letter of December 11, 2018, from Todd J. Teske, Chief Executive
      Officer and President, Briggs & Stratton, to Mr. Shimkus and
      Mr. Tonko, submitted by Mr. Shimkus............................   241
    Statement of the National Farmers Union by Roger Johnson,
      December 11, 2018, submitted by Mr. Shimkus....................   243
    Letter of December 10, 2018, from Dr. David Cooke, Senior
      Vehicles Analyst, Clean Vehicles Program, Union of Concerned
      Scientists, to committee members, submitted by Mr. Shimkus.....   245

          DISCUSSION DRAFT: THE 21ST CENTURY TRANSPORTATION FUELS ACT

                                  ----------

                           TUESDAY, DECEMBER 11, 2018

                      House of Representatives,
                           Subcommittee on Environment,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:02 a.m., in
    room 2123, Rayburn House Office Building, Hon. John Shimkus
    (chairman of the subcommittee) presiding.
        Members present: Representatives Shimkus, McKinley, Barton,
    Olson, Johnson, Flores, Hudson, Walberg, Carter, Duncan, Walden
    (ex officio), Tonko, Ruiz, Peters, and Green.
        Also present: Representative Loebsack.
        Staff present: Jerry Couri, Deputy Chief Counsel,
    Environment; Wyatt Ellertson, Professional Staff Member, Energy
    and Environment; Adam Fromm, Director of Outreach and
    Coalitions; Ali Fulling, Legislative Clerk, Oversight and
    Investigations, Digital Commerce and Consumer Protection;
    Jordan Haverly, Policy Coordinator, Environment; Mary Martin,
    Chief Counsel, Energy and Environment; Sarah Matthews, Press
    Secretary, Energy and Environment; Brandon Mooney, Deputy Chief
    Counsel, Energy; Caitlin Haberman, Minority Professional Staff
    Member; Rick Kessler, Minority Senior Advisor and Staff
    Director, Energy and Environment; Alexander Ratner, Minority
    Policy Analyst; Tim Robinson, Minority Chief Counsel; Andrew
    Souvall, Minority Director of Communications, Member Services,
    and Outreach; Teresa Williams, AAAS Fellow.
        Mr. Shimkus. The Subcommittee on the Environment will now
    come to order.
        Before I do my opening statement, I want to--my last chance
    to be in the chair, I want to thank the loyal opposition and
    the minority.
        I think the subcommittee has had a pretty good record of
    moving some very contentious pieces of legislation, from TSCA
    to the Safe Drinking Water Act to Brownfields to the nuclear
    waste reauthorization language that passed 340 to 72.
        In all honesty, couldn't do it without your help, and so I
    want to publicly say that and thank you.
        I'll now recognize myself for 5 minutes for an opening
    statement.

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

        Good morning, and thank you all for being here. Given the
    large number of witnesses and in the interest of maximizing
    time for questions and discussions, I will keep my opening as
    brief as possible and welcome others to do the same.
        Over the last 2 years, many of you have heard me say
    transportation fuels legislation was one of my ``reach goals''
    for this Congress.
        To that end, interested Members participated in three
    stakeholder roundtables to get this conversation started and
    the Environment Subcommittee held five hearings to further
    explore the future of transportation fuels.
        I want to thank Chairman Walden for not just allowing but
    encouraging this effort. I also want to thank the witnesses
    before us today who actively engaged in those roundtables and
    hearings, and I especially want to thank Congressman Flores who
    coauthored the resulting discussion draft with me.
        Rather than looking at individual Federal transportation
    fuel policies on their own, the draft 21st Century
    Transportation Fuels Act takes a wider view of those
        policies and considers how they might work together to
    bring more value to consumers and more certainty to
    stakeholders.
        The draft would transition from blend-specific mandates to
    performance-based standards for future fuels and vehicles,
    remove long-standing barriers to the availability and usability
    of higher ethanol blends, provide an additional decade of
    certainty for advanced biofuels, and harmonize EPA and DOT
    vehicle efficiency programs.
        The need for this type of comprehensive reform is timely.
    Stakeholders on all sides of this debate have been whipsawed by
    months, by rumors and actual administration actions, and that
    uncertainty will only increase after 2022 when EPA receives
    even broader discretion to set biofuel blending requirements.
        In fact, given EIA projections of declining liquid
    transportation fuel demand, it's difficult to envision a post-
    2022 scenario in which biofuel volumes would not actually be
    lower than they are today.
        I look forward to a constructive dialogue about what the
    future holds as well as what the discussion draft would mean
    for the various stakeholders.
        [The prepared statement of Mr. Shimkus follows:]

                    Prepared statement of Hon. John Shimkus

        Good morning and thank you all for being here. Given the
    large number of witnesses, and in the interest of maximizing
    time for questions and discussion, I will keep my opening as
    brief as possible and welcome others to do the same.
        Over the last 2 years, many of you have heard me say
    transportation fuels legislation was one of my `reach goals'
    this Congress. To that end, interested Members participated in
    three stakeholder roundtables to get this conversation started,
    and the Environment Subcommittee held five hearings to further
    explore the future of transportation fuels. I want to thank
    Chairman Walden for not just allowing but encouraging this
    effort, I also want to thank the witness before us today who
    all actively engaged in those roundtables and hearings, and I
    especially want to thank Congressman Flores who coauthored the
    resulting discussion draft with me.
        Rather than looking at individual Federal transportation
    fuel policies on their own, the draft 21st Century
    Transportation Fuels Act takes a wider view of those policies
    and considers how they might work together to bring more value
    to consumers and more certainty to stakeholders. The draft
    would transition from blend-specific mandates to performance-
    based standards for future fuels and vehicles, remove long-
    standing barriers to the availability and usability of higher
    ethanol blends, provide an additional decade of certainty for
    advanced biofuels, and harmonize EPA and DOT vehicle efficiency
    programs.
        The need for this type of comprehensive reform is timely.
    Stakeholders on all sides of this debate have been whipsawed
    for months by rumored and actual administrative actions, and
    that uncertainty will only increase after 2022 when EPA
    receives even broader discretion to set biofuel blending
    requirements. In fact, given EIA projections of declining
    liquid transportation fuel demand, it's difficult to envision a
    post-2022 scenario in which biofuel volumes would not actually
    be lower than they are today. I look forward to a constructive
    dialogue about what the future holds as well as what the
    discussion draft would mean for the various stakeholders. And
    with that I yield the remainder of my time to Mr. Flores.

        Mr. Shimkus. And with that, I yield the remainder of my
    time to Mr. Flores.
        Mr. Flores. Thank you, Mr. Chairman.
        I appreciate you calling this hearing on today's discussion
    draft. I'd also like to extend a warm welcome to one of the
    folks that grew up in the same little town I did up in the
    Texas Panhandle, Mr. Wesley Spurlock. Great to have you here as
    a witness.
        Since the RFS was first established in 2005 and expanded in
    2007, much has changed in the market for transportation fuels.
    If Federal policies are not routinely evaluated and updated to
    reflect market conditions, consumers end up having less than
    optimal choices.
        Let me give you a few examples of the concerns that have
    been raised before this committee about the current status quo
    of American fuels policy.
        Number one, biofuels producers raise concerns on the annual
    implementation of the RFS and other regulatory barriers to the
    market.
        Two, refiners face increasing cost of complying with the
    RFS.
        Three, automakers face challenges in complying with
    efficiency programs under two different agencies inside the EPA
    and the DOT.
        As Chairman Shimkus--number four, some environmental
    communities believe that the current generation ethanol or gen
    1 ethanol is an environment--creates environmental problems.
        As Chairman Shimkus stated, the 21st Century Transportation
    Fuel Act Discussion Draft takes a larger view of Federal
    transportation fuel policies.
        This draft incorporates into legislative text many of the
    ideas from three bipartisan roundtables and five subcommittee
    hearings.
        For consumers, higher-octane fuels can bring increased
    economy and performance for the next generation of engines for
    stakeholders transitioning to the RFS.
        Transitioning RFS to national octane standards creates a
    new market opportunity for biofuels producers and gives
    compliance certainty to refiners and automakers.
        And before the panel starts, I have a few reflections on
    the testimony that I read today. One is we have to put the
    consumers and the environment first, not our self-interest.
        Number two, the choice is clear. We can either go with the
    status quo, which almost everybody has said is broken, or we
    can have a compromise solution because I can guarantee you
    there is not going to be a perfect solution that's going to
    make each of you 100 percent happy.
        These organizations spent valuable time giving feedback on
    this and that constructive feedback was appreciated. Some
    organizations spent their time bashing other stakeholders. That
    was not productive.
        And so the thing I would ask you is to stay engaged and
    remember that we don't all get 100 percent of what we want. We
    are trying to come up with an optimal solution for the
    consumers and the environment.
        Thank you, and I yield back the balance of my time.
        Mr. Shimkus. The gentleman yields back his time.
        The Chair now recognizes the ranking member of the
    subcommittee, Mr. Tonko, for 5 minutes.

       OPENING STATEMENT OF HON. PAUL TONKO, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF NEW YORK

        Mr. Tonko. Thank you, Chair Shimkus.
        And Mr. Chair, I do want to thank you for your leadership
    of the subcommittee and your cooperative spirit that has moved
    us along in the right direction.
        I agree with your assessment. We have been productive and
    very successful as a subcommittee. And I thank our witnesses,
    not just for joining us this morning but also for your input in
    this process over the course of the 115th Congress.
        Before we go any further, I do want to recognize Chair
    Shimkus and Mr. Flores for all the work that went into
    producing this discussion draft. For the past 2 years, the
    subcommittee has hosted three stakeholder roundtables and five
    hearings on transportation fuels policy.
        As we heard at previous hearings, this is a complicated
    problem with no easy solution. So I appreciate the effort that
    went into developing the proposal.
        These Members were given an incredibly difficult
    assignment, trying to find common ground on an issue where many
    stakeholders say it does not exist.
        While I have some serious concerns with the draft as it is
    currently written, I do think that the chair and Mr. Flores
    have done an admirable job and conducted a process in good
    faith to try to create that common ground.
        For the past 2 years, we have heard about issues with the
    implementation of the Renewable Fuel Standard program, which
    has existed under administrations from both parties.
        In my mind, the program can certainly be improved. We will
    hear about the use of small refinery waivers and the challenges
    with pathway approvals this morning and, despite some flaws, I
    believe it is critical, whether through RFS or another program,
    that the benefits of our Nation's clean energy transition are
    shared throughout the country including rural communities.
        Unfortunately, this administration's actions indicate that
    they do not share this belief. We have seen it through
    unnecessary trade disputes that hit farmers hardest. We have
    seen it when the president continues to deny the threat of
    climate change, despite the National Climate Assessment's
    finding that changes in precipitation coupled with rising
    extreme temperatures could reduce Midwest agricultural
    productivity to levels of the 1980s before midcentury.
        These types of actions are harming and will continue to
    harm rural economies and undermine the goals of the RFS. We
    should be working on legislation that meets our collective need
    for a cleaner energy future while directly benefitting and
    creating opportunities in rural communities.
        From the start of this process I have told stakeholders
    that I support the RFS or its potential replacement to the
    extent that it results in fewer greenhouse gas emissions.
        I am not certain that would be the outcome under the
    proposal before us. So while I look forward to hearing
    everyone's feedback, I do have concerns in its current form.
        I specifically want to mention the proposal's changes to
    the CAFE program in Title 3 of the draft. Perhaps all of
    today's witnesses will acknowledge the potential for high-
    octane fuels as a method to achieve fuel economy standards.
        If CAFE compliance will become easier through a high-octane
    performance standard on top of the administration's freeze of
    previously announced standards, I do not think we should also
    provide additional credits to achieve compliance as would occur
    under Title 3.
        If we really want to drive efficiency and innovation while
    creating certainty, this discussion draft should drop the so-
    called harmonization language and include legislation written
    by our colleague, Ms. Matsui, to preserve the previously
    announced CAFE standards.
        Finally, I want to say perhaps the only thing that will
    unite today's witnesses--granted, it is unity through
    opposition.
        It is my belief that the Federal Government should be
    advancing policies that reduce demand and reliance on liquid
    fuels. I am not naive enough to think this will happen
    overnight. But we know that the transportation sector is now
    the greatest source of greenhouse gas emissions in the United
    States and that our climate policy must address it.
        Earlier this year, we held a hearing that focused on
    electrification. But, sadly, none of the ideas discussed are
    reflected in the 21st Century Transportation Fuels Act.
        If we are going to do a major overhaul of Federal fuel and
    vehicle programs, we must look at how to further promote EVs as
    well.
        For the time being, while liquid fuels continue to be the
    predominant energy source in transportation, these fuels should
    be as clean and used as efficiently as possible.
        I thank you again, Mr. Chair, for your hard work on
    developing this proposal and with that, yield back.
        [The prepared statement of Mr. Tonko follows:]

                     Prepared statement of Hon. Paul Tonko

        Thank you, Chairman Shimkus. And thank you to our
    witnesses, not just for joining us this morning, but also for
    all your input in this process over the course of the 115th
    Congress.
        Before we go any further, I want to recognize Chairman
    Shimkus and Mr. Flores for all the work that went into
    producing this discussion draft.
        For the past 2 years, the subcommittee has hosted three
    stakeholder roundtables and five hearings on transportation
    fuels policy.
        As we heard at previous hearings, this is a complicated
    problem with no easy solution, so I appreciate the effort that
    went into developing this proposal.
        These Members were given an incredibly difficult
    assignment, trying to find common ground on an issue where many
    stakeholders say it does not exist.
        And while I have some serious concerns with the draft as it
    is currently written, I do think the Chairman and Mr. Flores
    have done an admirable job and conducted a process in good
    faith to try to create that common ground.
        For the past 2 years, we have heard about issues with the
    implementation of the Renewable Fuel Standard program, which
    have existed under administrations from both parties.
        In my mind, the program can certainly be improved. We will
    hear about the use of small refinery waivers and the challenges
    with pathway approvals this morning.
        And despite some flaws, I believe it is critical--whether
    through RFS or another program--that the benefits of our
    Nation's clean energy transition are shared throughout the
    country, including rural communities.
        Unfortunately, this administration's actions indicate that
    they do not share this belief.
        We have seen it through unnecessary trade disputes that hit
    farmers hardest.
        We have seen it when the President continues to deny the
    threat of climate change, despite the National Climate
    Assessment's finding that changes in precipitation, coupled
    with rising extreme temperatures, could reduce Midwest
    agricultural productivity to levels of the 1980s before
    midcentury.
        These types of actions are harming, and will continue to
    harm, rural economies and undermine the goals of the RFS.
        We should be working on legislation that meets our
    collective need for a cleaner energy future while directly
    benefiting, and creating opportunities in, rural communities.
        From the start of this process, I have told stakeholders
    that I support the RFS, or its potential replacement, to the
    extent that it results in fewer greenhouse gas emissions. I am
    not certain that would be the outcome under the proposal before
    us, so while I look forward to hearing everyone's feedback, I
    do have concerns in its current form.
        I specifically want to mention the proposal's changes to
    the CAFE program in Title III of the draft.
        Perhaps all of today's witnesses will acknowledge the
    potential for high-octane fuels as a method to achieve fuel
    economy standards.
        If CAFE compliance will become easier through a high-octane
    performance standard--on top of the administration's freeze of
    previously announced standards--I do not think we should also
    provide additional credits to achieve compliance, as would
    occur under Title III.
        If we really want to drive efficiency and innovation while
    creating certainty, this discussion draft should drop the so-
    called ``harmonization'' language and include legislation
    written by our colleague Ms. Matsui to preserve the previously
    announced CAFE standards.
        Finally, I want to say perhaps the only thing that will
    unite today's witnesses--granted, it is unity through
    opposition. It is my belief that the Federal Government should
    be advancing policies that reduce demand and reliance on liquid
    fuels.
        I am not naive enough to think this will happen overnight.
    But we know that the transportation sector is now the greatest
    source of greenhouse gas emissions in the United States, and
    that our climate policy must address it.
        Earlier this year we held a hearing that focused on
    electrification, but sadly, none of the ideas discussed are
    reflected in the 21st Century Transportation Fuels Act.
        If we are going to do a major overhaul of Federal fuel and
    vehicle programs, we must look at how to further promote EVs as
    well.
        For the time being, while liquid fuels continue to be the
    predominant energy source in transportation, these fuels should
    be as clean, and used as efficiently, as possible.
        Thank you again, Mr. Chairman, for your hard work on
    developing this proposal. I yield back.

        Mr. Shimkus. The gentleman yields back his time.
        The Chair now recognizes the chairman of the full
    committee, Chairman Walden, for 5 minutes.

      OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
                   CONGRESS FROM THE STATE OF OREGON

        Mr. Walden. Thank you, Mr. Chairman.
        I appreciate that, and I want to thank you and Mr. Flores
    and others for their work on this recent release of your
    discussion draft on the topic of our hearing today.
        You have done an amazing job on this and it is tough work,
    and I appreciate the seriousness that you have brought to this
    matter and I am glad you have followed through on your promise
    to push toward a legislative solution rather than let the
    traditional parties on this issue comfortably sit in their
    foxholes in perpetuity.
        It is one of the reasons why this hearing today is so
    important. This draft did not happen overnight.
        We all know that, and I want to acknowledge and commend the
    countless hours both you and Mr. Flores and our staffs and your
    staffs have spent trying to figure out what makes sense for our
    Nation's transportation fuel mix.
        As you have already said, Mr. Chairman, over the past 2
    years, this subcommittee has held three roundtable discussions
    to educate Members and another five hearings--today marking the
    sixth--to fine tune the committee's understanding of a range of
    issues related to liquid fuels and the motor vehicles powered
    by them.
        Throughout this process, I have been struck by the
    acknowledgment that liquid-fuel-powered motor vehicles are
    expected to be the dominant type of vehicle used by Americans
    for decades to come and no one knows what is going to happen
    regarding our Nation's renewable fuel mix beginning in 2023,
    which is why this draft is so important.
        By transitioning to higher-octane fuel blends and vehicles
    whose engines are designed to maximize fuel efficiency, we can
    both incorporate more renewable liquid fuels into the fuel
    supply while also increasing miles per gallon for consumers.
        I am pleased the discussion draft includes provisions I
    strongly support, especially the one which removes the gross
    inequity in Federal fuel policy regarding wood and forest
    management, so that woody biomass can play a larger role in the
    RFS program.
        But as the chairman stated, this draft is not a final
    product. We all know that. Getting this policy right is not
    easy, especially with complex and sometimes contentious issues
    like the Renewable Fuel Standard and vehicle fuel economy
    standards.
        Like any major legislation just starting out, it needs
    additional refinement. I am interested in learning from
    stakeholder expertise about what necessary refinements are
    needed for this bill and to hear about any important items that
    are not contained in it but that you believe should be.
        I am also concerned about what makes sense for the
    interests of consumers, especially as it relates to access to
    and pricing for and the availability and quantity of the
    engines and fuels that consumers demand or that Federal
    legislation requires.
        These are issues that were tangentially discussed in our
    hearings, but I feel can only be appropriately honed when
    people are evaluating a concrete proposal and providing real
    feedback about the best way to accomplish these goals.
        So to me, the bottom line is that new fuels and vehicles
    must first and foremost deliver benefits to consumers while
    improving our environment.
        I know some folks will want to discuss electric vehicles in
    conjunction with this bill and, frankly, as a hybrid driver on
    both coasts, I am certainly interested in hearing more on this
    subject. But liquid fuels for motor vehicles and the looming
    question arising in 2023 make the most sense to tackle right
    now.
        As I said at our third hearing, as things stand right now I
    have great concerns about the viability of EVs in meeting the
    needs of rural America, not to mention range and price issues
    that make EVs unrealistic for many Americans today, even as new
    innovations make their use more and more reasonable for many in
    our urban and suburban areas.
        I want to welcome our witnesses and those who chose to send
    the committee their comments to be included in the record. I
    look forward to learning from stakeholder expertise and really
    appreciate you all being here today.
        I know some interests have chosen either to be
    hypercritical or not to offer suggestions. But recognizing time
    is short for addressing this issue in a timely manner, I think
    they do so at the peril of their members.
        With that, Mr. Chairman, I thank you and Mr. Flores and
    others for your work, and I yield back the balance of my time.
        [The prepared statement of Mr. Walden follows:]

                     Prepared statement of Hon. Greg Walden

        Thank you, Mr. Chairman, for recognizing me for an opening
    statement.
        I congratulate you and Mr. Flores on the recent release of
    your discussion draft, the topic of our hearing today. I
    appreciate the seriousness that you have brought to this
    matter; and I am glad you have followed through on your promise
    to push toward a legislative solution rather than let the
    traditional parties on this issue comfortably sit in their
    foxholes in perpetuity. It is one of the reasons why this
    hearing today is so important.
        This draft did not happen overnight.
        I want to acknowledge and commend the countless hours both
    you and Mr. Flores, and your staffs, have spent trying to
    figure out what makes sense for our Nation's transportation
    fuel mix. As you have already said, Mr. Chairman, over the past
    2 years, this subcommittee has held three roundtable
    discussions to educate Members and another five hearings--today
    making six--to fine tune the committee's understanding of a
    range of issues related to liquid fuels and the motor vehicles
    powered by them.
        Throughout this process, I have been struck by the
    acknowledgement that liquid fuel powered motor vehicles are
    expected to be the dominant type of vehicle used by Americans
    for decades to come and that no one knows what is going to
    happen regarding our Nation's renewable fuel mix beginning in
    2023, which is why this draft is so important. By transitioning
    to higher-octane fuel blends and vehicles--whose engines are
    designed to maximize fuel efficiency, we can both incorporate
    more renewable liquid fuels into the fuel supply while also
    increasing miles per gallon for consumers.
        I am pleased the discussion draft includes provisions I
    strongly support--especially the one which removes the gross
    inequity in Federal fuel policy regarding wood and forest
    management so that woody biomass can play a larger role in the
    RFS program; but as the chairman stated, this draft is not a
    final product. Getting the policy right isn't always easy,
    especially with complex and sometimes contentious issues like
    the Renewable Fuel Standard and vehicle fuel economy standards.
    Like any major legislation just starting out, it needs
    additional refinement. I am interested in learning from
    stakeholder expertise about what necessary refinements are
    needed for this bill and to hear about any important items that
    are not contained in it, but they believe should be.
        I am most concerned about what makes sense for the
    interests of consumers, especially as it relates to access to,
    pricing for, and the availability and quality of the engines
    and fuels that consumers demand or that Federal legislation
    requires. These are issues that were tangentially discussed in
    our hearings, but I feel can only be appropriately honed when
    people are evaluating a concrete proposal and providing
    feedback about the best way to accomplish these goals. To me,
    the bottom line is that new fuels and vehicles must first and
    foremost deliver benefits to consumers while improving our
    environment.
        I know some folks will want to discuss electric vehicles in
    conjunction with this bill. As a hybrid driver on both coasts,
    I am certainly interested in hearing more on this subject, but
    liquid fuels for motor vehicles and the looming questions
    arising in 2023 make the most sense to tackle right now. As I
    said at our third hearing, as things stand right now, I have
    great concerns about the viability of EV's in meeting the needs
    of rural America, not to mention range and price issues that
    make EVs unrealistic for many Americans today, even as new
    innovations make their use more and more reasonable for many in
    our urban and suburban areas.
        I want to welcome our many witnesses and those who chose to
    send the committee their comments to be included in the record.
    I look forward to learning from stakeholder expertise about how
    to improve this bill. Further, since we want discussion, I
    encourage you to be forthright, but constructive about these
    proposals. I know some interests have chosen either to be
    hyper-critical or not to offer suggestions, but recognizing
    time is short for addressing this issue in a timely manner, I
    think they do so at the peril of their members.
        Thank you, again, Mr. Chairman, for this time. I yield back
    whatever remaining time I might have.

        Mr. Shimkus. The gentleman yields back the balance of his
    time.
        The ranking member of the full committee is not able to be
    here. So we will 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 our witnesses for being here today and to
    testify to the subcommittee. Today's witnesses will have the
    opportunity to give opening statements followed by a round of
    questions from Members.
        And our first witness panel is seated. I will introduce you
    as you're asked to speak, and we would like to start with Mr.
    Steve Zimmer, executive director, United States Council for
    Automotive Research, USCAR.
        Sir, you are welcome and you're recognized for 5 minutes.

     STATEMENTS OF STEVE ZIMMER, EXECUTIVE DIRECTOR, UNITED STATES
    COUNCIL FOR AUTOMOTIVE RESEARCH; R. TIMOTHY COLUMBUS, COUNSEL,
       NATIONAL ASSOCIATION OF CONVENIENCE STORES AND SOCIETY OF
      INDEPENDENT GASOLINE MARKETERS OF AMERICA; WESLEY SPURLOCK,
    PAST PRESIDENT AND CHAIRMAN, NATIONAL CORN GROWERS ASSOCIATION;
       EMILY SKOR, CHIEF EXECUTIVE OFFICER, GROWTH ENERGY; GEOFF
    COOPER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENEWABLE FUELS
     ASSOCIATION; AND CHET THOMPSON, PRESIDENT AND CHIEF EXECUTIVE
         OFFICER, AMERICAN FUEL AND PETROCHEMICAL MANUFACTURERS

                       STATEMENT OF STEVE ZIMMER

        Mr. Zimmer. Thank you.
        Chairman Walden, Chairman Shimkus, Ranking Member Tonko,
    and members of the committee, my name is Steve Zimmer,
    executive director of the United States Council for Automotive
    Research, LLC, also known as USCAR.
        It's a collaborative automotive technology research
    organization of FCA US, Ford Motor Company, and General Motors.
        USCAR provides a legal framework for its three members to
    conduct noncompetitive research supporting a broad technical
    research portfolio in eight broad areas: power trains,
    electrification, electronics, batteries, hydrogen and fuel
    cells, manufacturing safety and materials.
        The research conducted at USCAR results in a shared
    knowledge base that enables development of new automotive
    technologies that solve industry-wide challenges and
    strengthens the U.S. auto industry.
        This approach supports multiple pathways to continually
    improve or evolve new automotive propulsion systems that meet
    current and future fuel efficiency, emissions and safety
    requirements, and creates innovative and environmentally
    responsible solutions for customers.
        Each USCAR member has its own independent research
    organization and portfolio, but at USCAR they work together.
    These research tasks would be impossible to achieve as quickly,
    if at all, as individual companies.
        I appreciate the committee's invitation to appear today to
    address the discussion draft for the 21st Century
    Transportation Fuels Act. As you know, personal mobility is
    changing at an unprecedented pace.
        The automobile industry has and will deliver mobility
    options that balance many technical, safety, and society
    requirements for the driving public.
        However, now more than ever all major mobility stakeholders
    must better coordinate and develop integrated energy and
    mobility strategies together.
        This committee's discussion draft is a great milestone and
    excellent example of such an integrated approach. Setting a
    national minimum octane standard is a necessary step towards
    the continuing development of the next generation of high-
    efficiency vehicles.
        We commend the committee and the industry stakeholders
    involved and for their collaboration in this effort. We believe
    the proposed increase to 95 research octane number, or RON, as
    the new U.S. standard for regular gasoline for year 2023 and
    beyond will be a win for consumers, the auto industry, fuel
    producers, agriculture, retailers, and society.
        USCAR and its member companies are encouraged by the
    proposed 21st Century Transportation Fuels Act, the discussion
    draft that provides an excellent starting point for national
    octane standard legislation, higher-octane-rated gasoline
    facilities and the development of more efficient spark ignition
    engines.
        It is estimated that an increase in RON to 95 enables an
    average 3 percent improvement in fuel economy of newer
    vehicles. Increasing octane is beneficial for virtually all
    spark ignition engines regardless of the manufacturer, engine
    size, or architecture and does include both hybrid, electric,
    and plug-in hybrid electric vehicles.
        While establishing a new 95 RON grade is the critical piece
    of this proposed approach, it doesn't preclude the availability
    of a higher RON octane grades for use in high-performance
    vehicles.
        In Europe, 95 RON is regular while performance grade is 98
    RON or higher. While we view the discussion draft as a
    significant step in the right direction, we have some concerns
    and questions regarding several provisions.
        These include the provisions relating to a waiver for fuels
    containing up to 20 percent ethanol, vehicle design
    requirements and NIST fueling provisions.
        USCAR and its member companies look forward to working with
    the committee to address our concerns in other areas of the
    legislation.
        Ultimately, we believe the discussion draft led by this
    committee is the only viable near-term pathway for
    implementation of a 95 RON minimum and the benefits it can
    deliver.
        USCAR members are ready to move forward and implement this
    initiative. Thank you again for the opportunity to be here with
    you today and to provide testimony in support of this
    discussion draft proposing a high-octane fuel that will enable
    higher efficiency vehicles.
        Thank you very much.
        [The prepared statement of Mr. Zimmer follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. Thank you.
        The Chair now recognizes Mr. Timothy Columbus, general
    counsel, Steptoe & Johnson, on behalf of the National
    Association of Convenience Stores and Society of Gasoline
    Marketers.
        You are recognized for 5 minutes, sir.

                    STATEMENT OF R. TIMOTHY COLUMBUS

        Mr. Columbus. Here we are again, Mr. Chairman.
        Mr. Chairman, Ranking Member Tonko, members of the
    committee, my name is Tim Columbus. I am with the law firm of
    Steptoe & Johnson. I appear today on behalf of our clients, the
    National Association of Convenience Stores and the Society of
    Independent Gasoline Marketers of America.
        These associations represent something over 80 percent of
    the retail fuel sales in the United States.
        It's important that you understand that neither association
    today has a position on the discussion draft we are talking
    about. We do not support it. We do not oppose it.
        We commend the committee and the staff who have put a lot
    of time into this and we think it's an excellent start. There's
    still questions you have to answer and we have to answer before
    we know where we'll end up on this.
        In my written statement I touch on a number of issues and
    suggestions. I am going to touch on only five of those today.
        Specifically, we would suggest the draft language be
    modified to, one, make clear that any technological solution
    adopted to prevent misfueling must be cost effective with the
    auto makers but also for retailers.
        It is important to the retailing community that we don't
    end up carrying the costs of implementation on this ourselves.
    These are mostly small businesses and they're very cost
    sensitive. They will be happy to do their part, but this is
    going to have to be everybody doing their part.
        Number two, make clear that a retailer who complies with
    the misfueling prevention requirements is protected from
    liability resulting from any consumer activity, i.e., behaviour
    over which it has no control.
        Number three, make clear that existing dispensing equipment
    need not be hardened to ethanol blends above E10 unless those
    higher blends are in fact dispensed through that pump or
    dispensing equipment.
        Require EPA and FTC to harmonize their labelling regimes
    and those required labels must be clear regarding the octane
    and content levels being dispensed from any particular pump.
        That is not--they don't have to say exactly what it is but
    there should be some this would be up to E15, this could be up
    to E20.
        The fact is that the legacy fleet is not ready. I am an old
    man. The chairman knows this. I drive a very old car. It's very
    happy on E10. It is not prepared to drink E15 and it will spit
    up E20.
        So I have to know when I take that car to fuel what I am
    buying and that's really what we are looking for here.
        Finally, make clear that any price posting requirements
    that you set forth be compatible with relevant State and local
    laws and, crucially, not impair a retailer's ability to
    communicate cost-saving offers to consumers.
        Let me give you an example here. Most State laws require
    that the highest price for anyone to come in and buy a
    particular commodity be posted and we are fine with that.
         However, many retailers offer multiple prices at a pump.
    For example, if you come in and buy a carwash you may get 8
    cents a gallon off. Or if you are a member of an affinity
    program, you may have a bargain.
        The key here is to make sure that we can comply with State
    law but also not interfere with retailers' ability to offer
    consumers via the price signs a means of saving money.
        With that, I am going to wind up. I am not going to use all
    my time.
        Again, we don't have a position on this today. We look
    forward to working with all of you, going forward, on this
    project and commend you for what you have done so far.
        I will be happy to respond to any questions my testimony
    may have raised. Thank you.
        [The prepared statement of Mr. Columbus follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. The Chair thanks the gentleman.
        The Chair now recognizes Mr. Wesley Spurlock, past
    president and chairman of the National Corn Growers
    Association.
        Sir, you're recognized for 5 minutes, and welcome.

                      STATEMENT OF WESLEY SPURLOCK

        Mr. Spurlock. Thank you, Chairman Shimkus, Ranking Member
    Tonko, and subcommittee members. I appreciate the opportunity
    to be here for the National Corn Growers Association.
        I am Wesley Spurlock and our family raises corn, cotton,
    and cattle in the Texas Panhandle. As producers of the primary
    feedstock used in ethanol, corn farmers have a strong vested
    interest in the future of transportation fuels.
        The Renewable Fuel Standard has created significant
    opportunity for the farmers. The RFS is one of the most
    ambitious and successful energy, environmental, and economic
    policies Congress has enacted not only for farmers and rural
    communities but also for our drivers, our air quality, and our
    Nation's energy security.
         As use of homegrown renewable fuels has grown and has
    farmers have become more productive using fewer resources, the
    benefit of the RFS has exceeded the congressional projected.
        Agriculture met the challenge to help fuel America, not by
    putting more land into production but by becoming more
    productive with existing resources.
        Farmers today produce more corn with less land because the
    average has increased on corn by more than 25 bushels since
    2007.
        Ethanol production creates value-added coproducts such as
    distiller's grain for feed, corn oil for biodiesel, and some
    corn provides--the same corn provides food and fuel. The value
    added by ethanol and increased farmer productivity has had a
    positive impact on rural America, helping the next generation
    return to their family farms.
        But it's not only the farmers who benefit from the
    renewable fuels. Renewable fuels save drivers money.
    Environmental advocates backed enactment of the RFS. The RFS is
    the only Federal law that requires greenhouse gas emission
    reductions.
        Based on actual corn and ethanol production, the
    sustainability improvements in both today's corn ethanol
    results in 43 percent lower greenhouse gas emissions than
    gasoline. Clean burning ethanol is the fuel that displaces the
    more harmful compounds in gasoline, reducing tailpipe emissions
    and improving air quality.
        Chairman Shimkus' and Congressman Flores' discussion draft
    includes provisions corn growers do support. In addition to the
    RVP parity that allows higher ethanol blends and lower
    evaporative to be sold year round, we also support more
    regulatory certainty when it comes to approval of the higher
    blends such as E20.
        We support a high-octane vehicle test fuel so automakers
    can expedite new optimized vehicles. However, NCGA believes
    this discussion draft would undo successful renewable fuel
    policy. The net impact of this proposal would not maintain the
    market access renewable fuels currently have with the RFS and
    offer opportunity to expand ethanol as an octane source.
        Corn growers support high-octane fuels such as midlevel
    ethanol blends. We know high-octane fuels would give automakers
    the ability to design optimized engines with greater fuel
    efficiencies and with fewer greenhouse gas emissions.
        Ethanol is the lowest-cost, lowest-carbon octane source.
    Today's corn production practices are increasing soil carbon
    sequestration and ethanol's carbon footprint is shrinking.
        NCGA recently submitted comments on the administration's
    safe vehicle rule outlining the fuel economy of emissions
    benefits from a high-octane, low-carbon midlevel blend.
        We recommend regulatory steps that would remove barriers to
    fuel competition and high-octane fuel. An octane standard such
    as 95 RON that refiners can easily meet with current premium
    fuels cannot replace the market access for renewable fuels
    provided by the RFS.
        We cannot continue to reduce emissions with an octane
    standard that could be met by using octane from hydrocarbons.
        Chairman Shimkus, corn growers are grateful for your
    advocacy for farmers and the renewable fuels. We appreciate the
    time you have spent considering future transportation fuel
    needs.
        We also appreciate being asked to contribute to today's
    discussion. Should the committee undertakes future legislative
    discussion we ask that incoming Chairman Pallone and Tonko
    consider NCGA a source on renewable fuels policy and allow us
    to continue to work with the committee.
        Thank you.
        [The prepared statement of Mr. Spurlock follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. Thank you.
        The Chair now recognizes Ms. Emily Skor, chief executive
    officer of Growth Energy. You're recognized for 5 minutes, and
    welcome.

                        STATEMENT OF EMILY SKOR

        Ms. Skor. Thank you.
        Chairman Shimkus, Ranking Member Tonko, members of the
    subcommittee, thank you for the opportunity to provide our
    perspective on the discussion draft being discussed today.
        My name is Emily Skor and I am the CEO Of Growth Energy,
    the leading ethanol industry association representing 100
    producer plants, more than half of the industry's total
    production.
        A transportation fuel mixed with more ethanol lowers costs
    for consumers, revitalizes our country's rural economy, and
    improves our environment. Our members thank you for attending
    to our 21st century transportation needs and recognizing the
    important of high-octane and continuing to advance these
    national interests.
        We have thoroughly reviewed the discussion draft and
    applaud the authors for, first, recognizing that octane plays a
    critical role in helping automakers meet fuel economy and
    greenhouse gas standards; second, allowing the year-round sale
    of higher ethanol blends like E15; and, third, granting Federal
    approval for fuel beyond E15, demonstrably supporting the
    research that affirms ethanol blends above 10 percent do not
    harm passenger vehicles.
        However, where we believe this draft falls short is in the
    assumption that the Renewable Fuel Standard, the RFS, is broken
    and needs to be fixed. We wholeheartedly disagree with that
    perspective.
        In fact, despite years of mismanagement, the RFS has
    fulfilled its congressional intent to increase domestic energy
    supplies, improve farm incomes and reduce carbon emissions with
    the added benefit of lowering the price at the pump.
        By any objective measurements, the RFS has been an
    overwhelming success. Repealing the RFS is unnecessary and will
    further destabilize a struggling farm economy and ethanol
    sector.
        Moreover, the draft does nothing to stop EPA's continued
    misuse of the small refinery exemption authority or even
    acknowledge the agency's unprecedented and possibly illegal use
    of this authority.
        EPA has already waived up to 2.25 billion gallons of
    biofuel blending, undermining demand by failing to reallocate
    those gallons in line with congressional intent and we face
    additional exemptions for 2018 and in the recently released
    2019 RFS rule.
        We applaud the examination of an octane standard. But the
    draft's proposed 95 RON is easily met with today's premium
    gasoline, which costs consumers about 50 cents more per gallon
    than regular fuel.
        A recent report from the Energy Information Administration
    cites that refiners would only need to make minor operational
    adjustments to supply the increased octane requirement of a 95
    RON baseline fuel.
        And in previous congressional testimony refiners stated
    that they planned to meet the 95 RON fuel standard with a
    current 10 percent ethanol blend.
        Today, ethanol is 25 cents less per gallon than gasoline
    and was as much as 90 cents earlier this year. As I previously
    testified, the past decade has shown oil companies will
    actively ignore economic incentives to prevent market entry of
    higher ethanol blends.
        Only by coupling a stable RFS to maintain market access
    with a significant boost in octane from a midlevel ethanol
    blend can consumers realize significant cost savings, increased
    engine efficiency, and substantial environmental benefits.
        Unfortunately, this draft as proposed will lead to reduced
    blending of cleaner biofuel and it will raise fuel costs for
    American drivers.
        We commend the authors for following sound science in
    approving E20. But the draft provides minimal guidance on
    approving ethanol blends beyond E20.
        E15 was approved nearly a decade ago and we are still
    working through hurdles erected to keep this legal fuel out of
    the market. This draft should recognize and seek to eliminate
    the myriad challenges to approving ethanol blended fuels to
    enable a reasonable pathway for their entry into the
    marketplace.
        While one of the draft's primary goals is to make the U.S.
    fuel supply uniform, it does not unify the availability of
    ethanol-blended fuels above 10 percent. Simply preventing
    future actions does nothing to break down State-level hurdles
    that exist today.
        This draft may even block the States from moving forward
    with higher blends. We must avoid backsliding on the progress
    of the RFS which has helped launch a more affordable low-carbon
    alternative to traditional petroleum fuels.
        While we do support certain aspects of this discussion
    draft, we believe it misses an opportunity to lay out a bold
    vision for the future of affordable liquid fuels and to make a
    significant impact restoring growth in America's rural
    communities and decarbonizing our Nation's fuel supply.
        Thank you, and I look forward to your questions.
        [The prepared statement of Ms. Skor follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. The Chair thanks the gentlelady.
        The Chair now recognizes Mr. Geoff Cooper, president and
    CEO of the Renewable Fuels Association.
        You're recognized for 5 minutes.

                       STATEMENT OF GEOFF COOPER

        Mr. Cooper. Thank you.
        Good morning, Chairman Shimkus, Ranking Member Tonko, and
    members of the subcommittee.
        My name is Geoff Cooper, and I am the new president and CEO
    of Renewable Fuels Association, the national trade group
    representing the U.S. ethanol industry.
        I want to thank the chairman and the members of the
    subcommittee for your thoughtful consideration of our Nation's
    future energy policy needs and objectives.
        RFA has been an active participant throughout this process
    and we have appreciated the opportunity the share our
    perspectives on the vital role that biofuels can play in our
    energy future.
        The draft legislation we are here to discuss today
    represents an important first step forward in the debate about
    future fuels policy and specifically the role of high-octane
    fuels.
        Because ethanol is by far the most economical and cleanest
    source of octane available on the market today, it would seem
    on the surface that any effort to establish a high-octane fuel
    standard would benefit ethanol producers and the farmers who
    supply them.
        But it's not quite that simple. As currently drafted, RFA
    cannot support the proposal because it falls short of providing
    the future market certainty and the clear path to growth that
    our industry needs.
        By eliminating the Renewable Fuel Standard requirements for
    conventional biofuels in 2022 and adopting a no-growth
    methodology for advanced biofuel requirements through 2032, the
    draft bill would destabilize the considerable progress our
    Nation has made for greater energy security, economic vitality,
    and environmental health.
        We simply cannot support eliminating the RFS program as the
    draft envisions without a much stronger signal to the market
    that ethanol's role in our fuel supply will continue to grow.
        Even though ethanol is far superior to other octane
    boosters in terms of cost and environmental performance, a 95
    RON standard, when paired with elimination of the RFS, would
    not result in increased market opportunities for ethanol.
        To the contrary, we believe the 95 RON standard in the
    absence of the RFS or other environmental performance
    requirements could reduce demand for ethanol.
        Refiners and blenders would simply meet demand for more
    octane by increasing reformer severity and producing greater
    volumes of higher-octane hydrocarbons like aromatics, which are
    often toxic in nature, worsen air quality, and are typically
    two times the cost of ethanol.
        Thus, consumers would just end up paying more for dirtier
    gasoline.
        In fact, a new EIA Commission Study concludes that oil
    refiners would have, quote, ``no problem,'' quote, meeting a
    requirement to produce 95 RON gasoline beginning in 2022 and
    assumes that refiners would meet that standard with E10
    gasoline.
        The study found that, quote, ``no significant changes in
    refinery configuration our through put would be required to
    meet the minimum 95 RON gasoline requirement,'' end quote.
        And contrary to testimony previously offered to this
    subcommittee, the EIA study finds, quote, ``no industry wide
    capital intensive projects would be needed to meet the
    requirements,'' end quote.
        There are elements of the discussion draft that we do find
    very encouraging. We appreciate the provision requiring
    automakers to warrant vehicles built in 2023 and later for E20
    and we welcome the requirement that EPA approve an E20 fuel
    waiver.
        However, we believe ethanol blends above E20 like E25 and
    E30 will be necessary to deliver the octane levels that best
    facilitate greater fuel economy and emissions reductions.
        We also very much appreciate that the discussion draft
    again demonstrates this subcommittee's support for addressing
    the antiquated RVP barrier that is currently keeping E15 out of
    the marketplace on a broader scale.
        In closing, RFA strongly believes a high-octane fuel
    standard can work I concert with, not in conflict with, the
    RFS. The measures would be complementary and the RFS would
    assure that clean renewable octane sources like ethanol are
    able to access a high-octane fuel market that might otherwise
    be closed to competition.
        With proper oversight and implementation, the RFS can
    continue to work in tandem with a high-octane fuel standard to
    continue to drive innovation, support rural economies, and
    provide cleaner fuel choices at the pump well beyond 2022.
        We thank you again for starting this very important
    conversation and look forward to its continuation.
        Thank you, and I look forward to your questions.
        [The prepared statement of Mr. Cooper follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. The Chair thanks the gentleman.
        And last but not least on the first panel we have Mr. Chet
    Thompson, president of American Fuel and Petrochemical
    Manufacturers.
        Sir, you're recognized for 5 minutes, and welcome.

                       STATEMENT OF CHET THOMPSON

        Mr. Thompson. Thank you, Mr. Chairman, Ranking Member
    Tonko, other members of the subcommittee. I really appreciate
    the opportunity to be here this morning and share the views of
    the U.S. refining industry on this discussion draft.
        Let me start by thanking you, Mr. Chairman, Mr. Flores, and
    your committee staff for the incredible work you have done over
    the last year on this really critical topic.
        No doubt the easy thing for you to have done was to run
    quickly away from this issue a year ago. You didn't. You chose
    to stick it out, and we appreciate it.
        We also appreciate the release of this discussion draft.
        Mr. Chairman, when you told us a few months ago this was
    coming you promised us it would be far from perfect. You also
    promised us that all of us stakeholders would find something in
    it that we loved and something in it that we hate.
        Rest assured, your premonition was spot on. Well,
    unfortunately, we are not in a position to support the draft in
    its current form. But we do think it moves the ball.
        We think and hope it will generate momentum for further
    discussion and eventually statutory reform--reform that most of
    the stakeholders believe is so critical.
        As I have testified before this subcommittee on multiple
    occasions, most recently last April, the RFS in its current
    form is unsustainable. It's bad for consumers and it's only
    destined to get worse if reform does not happen before EPA
    takes over this program in 2022.
        I also testified that a proper transition from the RFS to a
    fuel-neutral 95 RON octane standard would be better for all
    stakeholders and could better harmonize our country's fuel and
    transportation policies.
        A 95 RON standard would help our auto companies improve the
    efficiency and reduce the emissions of the existing fleet and
    future fleets and comply with CAFE.
        It would provide retailers with optionality, to quote Mr.
    Columbus. It would provide farmers and ethanol producers with
    the potential for greater market share, contrary to what you
    have heard already this morning, and it would certainly provide
    relief for my members from the broken RFS.
        But most importantly, it would provide relief to
    consumers--relief in the form of lower prices.
        Against this backdrop, there are aspects of this discussion
    draft that we support and those that we don't. So let me start
    with the positive--what we can support.
        We certainly support the sunsetting of the RFS in exchange
    for 95 RON standard, you know, presuming or assuming it's done
    correctly.
        After years of study with the autos, a 95 RON performance
    standard has been demonstrated to be the most cost effective
    option for consumers for improving the efficiency of the
    transportation fleet, at least in the near term.
        Indeed, there's no other fuel option that is realistic I in
    the time frame we are talking about this morning. We support
    requiring all light-duty vehicles starting in 2023 to be
    designed specifically to run on this fuel, on at least a 95
    octane rating and potentially higher.
        Finally, we support the comprehensive misfueling
    requirements and liability protections afforded in the--in the
    draft. However, we do believe those protections need to be
    expanded to include the U.S. refining industry.
        Unfortunately, and, again, as highlighted much more
    extensively in my testimony, there are a few provisions, Mr.
    Chairman, as you might imagine, we can't support. So let me
    just highlight a few.
        First, we absolutely can't support a new 15 billion gallon
    per year mandate for a conventional ethanol. Such a mandate is
    unfeasible.
        Let me put this in a perspective. To hit this mark by 2020,
    which the draft would require, ethanol blending in our country
    would have to increase by 700 million gallons. Seven hundred
    million.
        Because of the blend wall, which is real, this would
    require E15 sales to increase by 3,000 percent--3,000 percent
    in a mere 12, 13 months. This is simply not possible.
        Nor can we support extending the RFS program until 2032.
    The program must end when a new 95 RON standard takes effect in
    2023.
        Nor can we support the draft's various E20 mandates. Autos
    should decide how to harden their vehicles to run on a new 95
    RON fuel, not the Government, and environmental and technical
    analysis that supports subsim determinations that can't be
    short-circuited through legislation.
        E20 should not be authorized to be released and used in the
    market until we have a full understanding of what the impact of
    E20 would be on existing automobiles.
        Finally, we do not support establishing 98 RON as a
    certification fuel. There is simply no nexus between a 98 RON
    cert fuel and a 95 RON that the draft would develop and create.
        There's already a pathway for EPA and for the autos to
    pursue to get a new cert fuel and there's absolutely no reason
    that this legislation needs to address this issue.
        So, again, in closing, let me say we appreciate your
    leadership over the past years, Mr. Chairman. Again, Mr. Flores
    and staff, we appreciate everything you have done.
        There are real opportunities here. The folks at this table
    have been at this for many years and we believe we are really
    starting to advance and there's lots of opportunities around a
    95 RON standard. We hope this remains a priority for this
    subcommittee next year.
        So I look forward to answering any of your questions.
        Thank you.
        [The prepared statement of Mr. Thompson follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Shimkus. The Chair thanks the gentleman.
        We appreciate you all being here today, and now I will
    recognize myself for 5 minutes to open up the round of
    questions for this panel.
        2022 is a real date. We've asked the EPA about what could
    happen and EPA has told us that they have, quote-unquote,
    ``broad authority'' they will have in 2023 and beyond, which
    could result in biofuel volumes lower than those provided in
    the statutory tables.
        Given that EIA projects a 31 percent decrease in motor fuel
    consumption between 2017 and 2025, do you expect RVOs to be
    higher or lower post-2022 than they are today?
        Mr. Zimmer, do you have any input? No.
        Mr. Columbus?
        Mr. Columbus. I will take pass on that.
        Mr. Shimkus. Mr. Spurlock.
        Mr. Spurlock. As the----
        Mr. Shimkus. You heard how I laid out the question. 2022
    liquid transportation fuels are projected to decline. EPA has
    broad authority to reset the tables.
        Will they be higher or will they be lower post-2023?
        Mr. Spurlock. I think we will show that we have done such a
    great job with the ethanol and where it's at as a additive in
    the fuel system that we'll be--we will come through fine on the
    reset.
        Mr. Shimkus. You say higher?
        Mr. Spurlock. Yes, sir.
        Mr. Shimkus. Ms. Skor.
        Ms. Skor. We would anticipate that the RVOs--if the
    blending is--the actual blending is consistent with the
    numbers, you'd be at 15 billion gallons of conventional corn-
    based ethanol.
        Mr. Shimkus. Mr. Cooper.
        Mr. Cooper. Well, we certainly see no rationale for
    reducing the volumes post-2022 and EPA is----
        Mr. Shimkus. Do you accept the premise that the EIA
    information--that there will be less liquid transportation fuel
    on our market?
        Mr. Cooper. I do.
        Mr. Shimkus. OK.
        Mr. Cooper. Yes, I agree that we are going to see a decline
    in gasoline consumption long term.
        Mr. Shimkus. Do you think EPA will then raise the blending
    limit?
        Mr. Cooper. Again, I think there's no rationale for going
    below the 15 billion for conventional biofuels.
        Mr. Shimkus. OK. Mr. Thompson.
        Mr. Thompson. There's absolutely a rationale for doing it
    and if EPA follows the data they must do it. If transportation
    fuel demand goes down, E15 blending by definition goes down and
    the E15 market is still so nascent as not to pick up the slack.
    It has to go down.
        Mr. Shimkus. Thank you.
        Let me go to Mr. Spurlock. First of all, I want to thank
    the Corn Growers for being very involved in this work and I
    want to recognize that.
        In your testimony, you state that without the mandates in
    the RFS refiners would immediately default to petroleum-based
    octane enhancers to rise from their own feedstocks.
        Given that ethanol is such an overwhelmingly cheap octane
    enhancer in addition to your noted environmental benefits,
    wouldn't some refineries be more competitive if they were to
    opt for this lower cost source of octane?
        Mr. Spurlock. Yes, I feel that they would.
        Mr. Shimkus. OK. Let me go to Mr. Columbus.
        Would your retailers like lower prices for the exact same
    fuel or higher prices for the exact same fuel?
        Mr. Columbus. Now, that I will not pass on. Retailers want
    lower prices. We interface with the consumer every day and the
    simple reality is that the competition drives the price to the
    lowest plausible level and that includes the use of feedstocks
    by midlevel blenders as well as refineries to generate the
    lowest cost of product for the consumer.
        Mr. Shimkus. Let me go back to Mr. Thompson. I would like
    for you to comment on Mr. Cooper's quote of the EIA study on
    renewable fuel. Can you comment on that?
        Mr. Thompson. Is that for me, Mr. Chairman?
        Mr. Shimkus. Yes, sir.
        Mr. Thompson. Yes, I can. I mean, it's a--unfortunately,
    it's a mischaracterization of the analysis. Look, and it's
    consistent with what we've been saying.
        The EIA is a nothing burger. They said if we look in 2023
    would there have to be substantial new investment assuming E10
    in order to make a 95 RON fuel. No, of course it wouldn't.
        At that point the new fleet of autos that require 95 would
    just be taking off. It also assumes E10, which contrary to what
    we said, assumes that the status quo remains--that the ethanol
    is using at baseline.
        Then the EIA analysis only went out to 2023, I believe. So
    it's 5 years of implementation. So all it says is that the U.S.
    refining industry, based on E10, has enough octane capacity if
    it wants to meet the needs.
        It doesn't speak to what happens when the program is fully
    implemented and at that point we think there are 19 billion
    gallons of octane up for grabs, and we think that that octane
    could be met through lots of sources including ethanol.
        Ethanol has a 4-cent advantage over other sources of
    octane. This is--it's inaccurate to suggest this is not
    potentially good market share for the ethanol industry.
        Mr. Shimkus. Thank you. My time has expired.
        The Chair now recognizes the ranking member of the
    subcommittee, Mr. Tonko, for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair.
        I would like to get witnesses' views on the preemption
    language that's included in the discussion draft. While
    California's low California fuel standard is not strictly in
    ethanol law, ethanol is certainly one potential pathway to
    compliance with the law.
        Based on your reading, do you have any thoughts as to
    whether Section 204 would prohibit another State from adopting
    a low-carbon fuel standard similar to that of California's
    program?
        Mr. Zimmer, can we start with you?
        Mr. Zimmer. Excuse me. I don't have a comment on this
    specific question.
        Mr. Tonko. Mr. Columbus.
        Mr. Columbus. The fewer people defining different fuels in
    the United States, the more efficient the overall system is
    going to be. So, historically, our clients have supported
    preemption of State fuel standards and State mandates.
        Mr. Tonko. And Mr. Spurlock.
        Mr. Spurlock. I will take a pass on that. I am not sure
    what our standing would basically be on the question, and I do
    understand what you're asking.
        Mr. Tonko. OK.
        Ms. Skor.
        Ms. Skor. We believe that the preemption language doesn't
    go far enough. It's looking at future actions but it isn't
    looking at eliminating many of the legitimate roadblocks that
    exist in several States today.
        So what we would be looking for is to make sure that what
    happens at the Federal level is also followed through in all 50
    States.
        Mr. Tonko. Mr. Cooper.
        Mr. Cooper. We did not take a position on the preemption
    provisions in the draft. However, our read of it, I guess,
    would be that yes, future policies like a low-carbon fuel
    standard potentially would be preempted.
        But, again, we did not take a position.
        Mr. Tonko. And Mr. Thompson.
        Mr. Thompson. I would certainly interpret 204 to
    potentially prohibit other States from adopting a low-carbon
    fuel standard if they actually specify how much ethanol can and
    cannot be in a gallon of gasoline.
        So I would interpret it that way and we would support that.
    You know, there's a lot of resources by all the stakeholders
    that would go into establishing a new 95 RON standard and a
    patchwork system does not work.
        Mr. Tonko. Do you believe this language might impact
    California's ability to expand or make changes to its existing
    program?
        Let me start with you, Mr. Thompson, and work back.
        Mr. Thompson. I don't think it would. It's my understanding
    that the draft says expressly that this doesn't impact existing
    prohibitions and to the extent California has prohibitions
    already on the books, by definition this provision wouldn't
    touch it.
        Mr. Tonko. And Mr. Cooper.
        Mr. Cooper. I would agree with that response with the one
    caveat being if California did at some point in the future
    decide to increase the level of ethanol that's permitted in the
    State, this provision could potentially keep them from doing
    that.
        Mr. Tonko. Ms. Skor.
        Ms. Skor. I would agree that if California wants to go
    further in terms of blending more renewable biofuel it might be
    prohibited, based on the language that we see in the discussion
    draft.
        Mr. Tonko. And Mr. Spurlock.
        Mr. Spurlock. Yes, I would agree with Emily and Geoff.
        Mr. Tonko. And Mr. Columbus.
        Mr. Columbus. I think they're all right about this. So the
    reality is yes, it can get in the way of California doing
    something.
        Mr. Tonko. And finally, Mr. Zimmer.
        Mr. Zimmer. [No audible response.]
         Mr. Tonko. It's my understanding that while ethanol may be
    the cheapest source of octane, at the moment there's no
    guarantee in this discussion draft that it will be used in a
    future high-octane fuel.
        Would anyone like to comment on why or why not the source
    octane should be left open?
        Mr. Cooper.
        Mr. Cooper. Well, thanks, and I would like to use my time
    responding to that question to really respond to what Mr.
    Thompson said about the EIA report.
        I mean, I do think it's a very good study that underscores
    exactly that point, that refiners would not likely choose
    ethanol as the source of octane for a 95 RON fuel.
        You know, there's a number of refinery modeling studies out
    there that show refiners could get to 95 RON with just an extra
    2 or 3 cents per gallon in incremental costs. They could
    happily pass that along to the consumer and, you know, the
    other thing the EIA study pointed out, and it did look longer
    term than just 2023. They did look further into the future and
    analyse whether the refining sector could meet an incrementally
    larger demand of high-octane in the future and came to the same
    conclusion.
        The study also found that there is a significant amount of
    underutilized reforming and alkylation capacity today in the
    refining sector that could easily be switched on to provide
    that extra octane.
        Mr. Tonko. Ms. Skor.
        Ms. Skor. You're absolutely right. By taking away the
    guardrails provided by the RFS that enable market access you're
    essentially closing the market from competition.
        The transportation fuel marketplace it is not a free
    market. If it were a free market, right now the better quality,
    better-priced octane enhancer would be in much higher demand
    than it is today.
        So a high octane standard coupled with guardrails to ensure
    that we are using renewable octane would be the path forward.
        Mr. Tonko. Thank you.
        And Mr. Columbus.
        Mr. Columbus. With respect, I disagree with Ms. Skor. I
    think the most important thing is refiners are not the only
    source of motor fuel in the United States.
        People who don't own refineries manufacture motor fuel via
    blending of components which are available from domestic
    refineries as well as foreign sources.
        Mr. Tonko, you and I have had this conversation before.
    What drives the costs to manufacture is the big stupid price
    sign at retail. The lowest cost wins. If a refiner wanted to
    forget about the lowest-cost octane source in the country, I
    don't believe his competitors would permit that in a commercial
    sense. Competition actually works.
        Mr. Shimkus. The gentleman's time has expired.
        The Chair now recognizes the chairman emeritus, Joe Barton,
    for 5 minutes.
        Mr. Barton. Well, thank you, Mr. Chairman.
        The former Senator from the great State of Texas, Phil
    Gramm, whom many of you know, had a saying: ``Truth is a
    powerful drug. Use it sparingly.''
        And as a retiring Member, this may be my last hearing after
    32 years on this committee. So I am going to tell us what I
    think are some Barton truths. Now, they may not be truth, but I
    think they're truth.
        First of all, I think that Mr. Flores and Mr. Shimkus have
    done a very good job in trying to patch together a compromise
    bill that's good politics, and I think it would also work.
        I don't think it would work perfectly, but I think it'd
    work and I think the politics of it, potentially, work.
        Now, having said that, let me give you the Barton Bill and
    just raise the hackles on everybody's hair in this room. I
    would repeal every existing regulation and law on oxygen and
    CAFE standards. Repeal them all except for a few and maintain
    the oxygen requirement in the Clean Air Act. I think that makes
    sense.
        I would require that any money put into the leaking
    underground trust fund, which the acronym is LUST, actually be
    used to clean up leaking underground storage tanks.
        And I might--and I would listen to my corn growers on this
    one--I might keep the quotas on imported ethanol. I might not.
    But I would repeal everything else.
        If we did that and went to a pure market for ethanol, it
    would work. It would work. Back in 2005 when I was chairman, we
    passed the Energy Policy Act of 2005 and at the request of
    then-Speaker Denny Hastert we put in mandates to use ethanol,
    or renewable fuels.
        We also created a lot of research programs for renewable
    fuels and alternative energy, and if you look at the energy
    markets in the United States today, solar is doing very well.
    Wind is doing very well, and I--although the ethanol market has
    been up and down, I think you could argue that at least it's a
    mature market. It's not a struggling start-up market.
        But then in 2007 we came back and increased these mandates
    and we also increased the fuel--the CAFE standards. And the
    current law, folks, is unworkable. It's not going to work, and
    come 2020 don't kid yourself. If we throw all this to whoever's
    running EPA, they don't have any magic wands over there.
    They're not going to be able to bring order out of chaos.
        So, again, I want to go back to Mr. Shimkus and Mr. Flores.
    They have tried to look at the politics of it, I think, and
    they've tried to come up with something that works.
        Now, having said that, it's not going to--we are certainly
    not going to mark this bill up tomorrow and put it on the floor
    next week and go to the Senate and the Senate miraculously pass
    it.
        But you might--you have got a fighting chance to do
    something in the next Congress. So this is a good--this is a
    good place to start.
        So my question, you know, since this is the question
    period, Mr. Chairman, I got to ask at least one question. I
    can't just vent here.
        Mr. Shimkus. You haven't done that before, though, so----
        [Laughter.]
        Mr. Barton. I have. So I am going to ask Mr. Thompson. You
    won the lottery here. If we did what I said, pass the Barton
    Bill and don't--the politics of that are terrible, so I know
    that's not a starter, but it is true--would ethanol be used?
    Would there be a market that ethanol would compete for and be
    successful competing--corn-grown ethanol from the United
    States?
        Mr. Thompson. Thank you for the question, and we would
    support the Barton Bill. But absolutely ethanol would continue
    to compete. The RFS could go away tomorrow and the E10 would be
    the dominant fuel in this country.
        It is the cheapest source of octane and, as you know, when
    you go to the pump we are trying to put octane into the fuel
    from regular grade up to premium grade. It is the cheapest
    source of octane.
        It has a 4-cent advantage over anything else. You know, E0
    is 22 cents more expensive to make than E15 and it's, like, 15
    cents more expensive than E10.
        My guys are a lot of things, but wasteful of money is not
    one of them. The refiners own 20 percent of the ethanol market.
    Ethanol is here to stay. The notion that it won't be is just--
    it's inconsistent with reality.
        Mr. Shimkus. The gentleman's time has----
        Mr. Barton. The last thing I will say, Mr. Chairman, I
    ought to be commended because the Barton Bill did not bring
    back MTBE, and if I really wanted to be competitive I would
    make it legal to----
        Mr. Shimkus. The gentleman's time definitely has expired.
        [Laughter.]
        The Chair recognizes the gentleman from California, Mr.
    Peters, for 5 minutes.
        Mr. Peters. Thank you. I want to thank Mr. Barton for his
    service but I also want to say I endorse the Barton Bill with a
    couple of amendments. I would also repeal all the tax credits
    that we have for energy and I would send a market signal that's
    technology neutral through a carbon tax.
        And we could--I know, so maybe the amendment--you know, I
    won't get your vote in the next Congress either, I know. But I
    think that would be the appropriate way to push these
    incentives.
        But for the time being, I wanted to talk to Ms. Skor. We
    have another witness who I think is on the next panel, Brooke
    Coleman, who is the executive director of the Advanced Biofuels
    Business Council.
        Her testimony includes the following and I would like you
    to react to this because you talk about backsliding. She says,
    quote, ``The RFS is indirectly to date a renewable octane
    cetane requirement. The 21st Century Transportation Fuels Act
    would phase out the renewability requirement and the greenhouse
    gas requirement contained in the RFS and, as discussed, all
    companies will use more petroleum additives instead of biofuels
    because it's in their economic self-interest.'' She goes on to
    explain how that's backsliding.
        Is that the concern you expressed and can you maybe flesh
    out a reaction to that?
        Ms. Skor. That's absolutely our concern.
        If you look at the price of ethanol today, if we are
    talking about price competitiveness today wholesale it sells 25
    cents lower per gallon than gasoline. But what you see is
    absent a mechanism to force competition and give the ethanol
    producer access to the end user, the consumer, we don't have a
    way to compete in this marketplace.
        The RFS provides important guardrails and not only for
    market access but for environmental impact. As Mr. Spurlock
    said, 43 percent reduction in greenhouse gas emission--that's
    with conventional biofuel. Advanced biofuel is up to 100
    percent.
        So we are cleaning the air because we've got fewer--and
    it's good for not only environmental health but human health as
    well.
        Mr. Peters. You recognize the bind the Government is in
    with the bill the way it is. What would be your suggestions
    about how to move?
        Ms. Skor. I mean, you know, our overall suggestion is that
    you couple--we absolutely applaud seeking a high-octane, low-
    carbon national standard. But that's got to be coupled with the
    guardrails that we see in the Renewable Fuel Standard that
    provide for market access.
        That would be the path forward for the most significant
    cost savings, the greatest fuel economy, and the greatest
    environmental benefit.
        Mr. Peters. OK. Well, again, I think we are sort of in this
    contortion to respond to these markets and I think that, again,
    a market--a market incentive that's technology neutral is
    preferable to this. It could save us a lot of time and meetings
    next year.
        But I do appreciate you taking it up. I think there's more
    work to do on this. I know it's not easy, and I look forward to
    working with you in the next Congress.
        And I yield back.
        Mr. Shimkus. The Chair thanks the gentleman.
        The Chair now recognizes the gentleman from West Virginia,
    Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        Over the last number of years, we've talked a lot about and
    I've heard a lot of folks talk about the greenhouse gas
    emissions and how we need to address it through a variety of
    standards, regulations, or whatever.
        But this is a summary from the MIT study that says if you
    want to reduce greenhouse gas emissions it's six to fourteen
    times more effective if you put a gasoline tax on than worried
    about efficiencies.
        I've never heard any--here anyone ever, if they're really
    serious on the other side, talking about reducing greenhouse
    gases why they have not proposed raising the gasoline tax.
        Secondly, we've also talked around this table a lot about
    uncertainty. I am concerned about, for example, a small
    refinery trying to make the change, going to spending millions
    to convert to 95 or some other level of octane standards. But
    yet there's a movement coming from the other side of the aisle
    that within the next 10 years we are going to decarbonize our
    transportation fuels.
        I don't know whether to take them seriously or not. But I
    see it in the media as beating the drum every day that over the
    next 10 years the Green New Deal should be sweeping through
    Congress.
        It should be taken very seriously. So the uncertainty is
    that why would a small refinery or any refinery go out and
    spend billions of dollars--billions of dollars--to make a
    change in carbon fuels when in 10 years we are going to do away
    with them anyway?
        So I just--my question to you, to any of you, essentially
    is is it realistic to be thinking about this Green New Deal and
    all the effort that's been made in crafting this legislation
    that goes out the window if we are going to pass something
    within the next 10 years that does away with fuel?
        Starting with you--starting with you, how realistic is
    this? Is this some crackpot idea?
        Mr. Zimmer. Well, thank you.
        And, first of all, we think that going to a 95 RON regular
    is extremely important and very doable for the stakeholders as
    well as--and a value proposition to the consumer.
        So we think it is the only--the low-cost solution to
    improving the fuel efficiency of vehicles and it's broadly
    applied and it will impact a lot of----
        Mr. McKinley. If we are trying to eliminate greenhouse
    gases, why isn't someone promoting a gasoline tax because it's
    proven time and time again that that's going to be the quickest
    way to eliminate greenhouse gases? No one's doing that.
        So we are talking about a--I want to know more about what
    effect--we are going to see a lot of debate over the next 2
    years over this Green New Deal.
        Is it realistic to do away with fossil fuels in
    transportation, as they're calling for? I would like to hear
    from any one of you. I only have a minute left.
        Mr. Columbus. In the short term, sir, no. It's not going to
    happen in the short term, and I certainly commend Mr. Tonko and
    his colleagues for starting that conversation.
        There are a lot of things about EVs that have to be sorted
    out. There are a lot of things about EV recharging structures
    that have to be sorted out.
        I can remember many years ago people talking about we are
    going to have----
        Mr. McKinley. Could we have the other people answer as
    well, just--so yours is--it's not realistic.
        Mr. Spurlock.
        Mr. Spurlock. As we look at the news recently and we are
    talking about putting a high fuel tax on in order to improve
    greenhouse gas and cut the fuel down, I think if we look at
    what's happening in France, that's what they tried to do in
    France. That is not working very well publicly right now.
        Ms. Skor. Liquid fuels will remain the dominant fuel source
    for many years to come, and so what is realistic is to look for
    ways to provide automakers with greater fuel economy, consumers
    with cost savings, and cleaner air.
        So there is an important conversation to be had and a path
    forward in that regard.
        Mr. Cooper. It takes, roughly, 17, 18 years for the fleet
    to turn over, right. So every new vehicle being sold today, the
    overwhelming majority of which are internal-combustion-engine,
    liquid-fuel vehicles, are going to be around on the roads
    driving on liquid fuel for, you know, the better part of the
    next 20 years.
        It is going to take a long time to get to the electric
    vehicles and some of the ideas that are contemplated in a Green
    New Deal.
        So, you know, we think there's an immediate opportunity to
    help decarbonize that liquid fuel that's going to be used in
    that intervening period.
        Mr. Thompson. Yes. We firmly believe that fossil fuels and
    the internal combustion engine will be here for many decades to
    come.
        Mr. McKinley. Thank you.
        I guess what I am--my point is----
        Mr. Shimkus. Gentleman's time has----
        Mr. McKinley [continuing]. That I am worried about, Mr.
    Chairman, and as we close out on this is small refineries are
    going to be challenged under this. I just hope there's some
    language--something can be worked into your bill that takes
    care of the small refineries that gives them some protection as
    compared to the larger--the Marathons and the Mobils.
        Mr. Shimkus. We'll talk about that. The gentleman's time
    has expired.
        Mr. McKinley. Yield back.
        Mr. Shimkus. The Chair now recognizes the gentleman from
    Texas, Mr. Olson.
        Mr. Olson. I thank the chair.
        I would like to open my questions by saying congratulations
    to Chairman Shimkus, not only for this bill but this past
    Saturday his Army squeaked by my Navy in a football game in
    Philadelphia.
        Mr. Shimkus. I was being kind and didn't dig anything into
    you. So it's your mouth to God's ears, right?
        Mr. Olson. I said congratulations. Congratulations.
        Also congratulations to my Texas colleague, Bill Flores.
    You guys have done a lot of hard work to get this bill where it
    is right now--this discussion draft.
        It's too late for this to become law in this Congress. But
    the table has been set for real action in the 116th Congress,
    and thank you all for that.
        My first question is for you, Mr. Zimmer. In your testimony
    you mentioned that 95 RON is a, quote, ``fundamental enabler,''
    end quote, for lower emissions. As someone who represents an
    area that's made great emissions progress--Houston, Texas
    area--and is making every effort right now to reduce emissions
    but are still in noncompliance.
        I know that vehicle emissions are critical to continuing
    this trend we see. My question is can you talk about what sort
    of environmental benefits we've seen from moving to 95 RON?
        Mr. Zimmer. Thank you for the question.
        We believe that 95 RON with engines that are designed to
    use it effectively, and it's that system that's very important,
    can achieve on average 3 percent fuel efficiency across the
    board and it's, you know, a broad spectrum of products. Doesn't
    matter who the manufacturer is or the architecture--we'll see
    that benefit.
        So we think it's--we think RON 95 is doable right now--it's
    the only thing that's really doable--and deliver that type of
    result.
        It also--you will find a lot of internal combustion engines
    are used in hybrids and plug-in hybrids. Those vehicles will
    also benefit from that efficiency improvement.
        Mr. Olson. Good point.
        Question for you, Mr. Columbus, and I want to first off
    thank you. You hosted me at a Stripes store at the Westpark
    Tollway in Texas 22 a couple weeks ago, or a couple years ago,
    actually.
        I worked the cash register. I rolled out the worst
    tortillas ever in American history--terrible, terrible,
    terrible--and I also pumped E10 gasoline.
        And so most Americans have no idea at the pump what we are
    talking about today. They just hear the word ethanol and see it
    on the gas tank but have no implications--no idea what
    implies--happens to their whole vehicle system with this in the
    product.
        They know what ethanol is but all they want is for their
    car to work and their fuel to be affordable prices. So I am
    always concerned about issues with misfueling and our policies
    can make the lives of average Americans easier.
        Can you talk--in your opening statement you had some
    comments about issues with misfueling. How about more details
    on what you see at your stores with misfueling challenges with
    E15 today and how these new challenges, going forward, may
    impact the price at the pump and also just the perception of
    people that are paying for the gasoline?
        Mr. Columbus. OK. With respect to E15, as you're aware, in
    many areas of the country we can only sell it 8 months a year
    because of the ozone season. So in that sense, the products had
    a very hard time catching on, going forward.
        There are many retailers who do not have the facilities at
    their retail outlets to sell anything more than E10. The
    Environmental Protection Agency requires a retailer to be able
    to demonstrate on an affirmative basis that his dispensing and
    storage equipment is compatible with whatever's in the ground
    with the product.
        So having said that, our experience is that, very simply,
    consumers want the lowest cost motor fuel they can put their
    hands on on which their cars will run.
        In my comments, I said as long as people are aware this car
    is warranted up to E15--this car is warranted up to E20,
    whatever--as long as those levels are posted at the retail
    outlet, the overwhelming preponderance of consumers take their
    own self-interest into account and fuel properly.
        There are those for whom I have no help. I cannot help
    people who put gasoline in a diesel engine. I cannot help
    people who see a big sign that says, this car has to be used
    for something--don't use this fuel for anything before 2001
    model year and pump it into my 1987 car.
        If I do that, it's my fault. It's not the retailer's. But I
    believe that low-cost provider still wins in the retail market.
    I think it would----
        Mr. Olson. Time to yield back?
        Mr. Shimkus. The gentleman's time has expired.
        Mr. Olson. Congratulations, Mr. Chairman.
        Mr. Shimkus. Thank you very much.
        Mr. Olson. Three years in a row.
        Mr. Shimkus. A little streak.
        The Chair now recognizes the gentleman--the other gentleman
    from Texas, Mr. Flores, for 5 minutes.
        Mr. Flores. Thank you, Chairman. I appreciate--again, I
    appreciate all of you participating in this hearing today.
        So I have--let me start with one question for each of you
    and that is you got two options. One is keep the status quo the
    way it is today. Make no changes. Let the regulatory agencies
    sort out how CAFE is going to work, how the emissions
    requirements are going to work, and how the RFS is going to
    work.
        So that's option A. Option B is let's come up with a
    statutory solution to fix this. So which do you prefer, Mr.
    Zimmer? Option A or option B?
        Mr. Zimmer. B.
        Mr. Flores. Mr. Columbus.
        Mr. Columbus. There are things in this bill that my clients
    support. There are things in this bill that my clients do not
    support. So I can't really choose today. I got to see that
    final product.
        Mr. Flores. I understand that. But do you--in the absence
    of----
        Mr. Columbus. There are things in the fuel system that are
    broken, Mr. Flores. So if you say is improvement possible, the
    answer is yes.
        Mr. Flores. OK. Good. That's close enough.
        Mr. Spurlock.
        Mr. Spurlock. I would agree with Mr. Columbus. There are
    things that can be improved and need to be improved and look
    through all levels as we go with that direction.
        Mr. Flores. OK.
        Ms. Skor.
        Ms. Skor. I would say that improvements need to be made on
    the administration side--the implementation of the Renewable
    Fuel Standard currently on the books.
        Mr. Flores. OK. Do you believe that the EPA has sufficient
    statutory authority to do the things that you'd like to do
    without litigation?
        Ms. Skor. We do, and reed vapor pressure is a very good
    example of something that's within the EPA's ability to make it
    happen.
        Mr. Flores. Mr. Cooper.
        Mr. Cooper. I would agree that certainly there are things
    that could be improved with the current program but we agree
    that EPA does have the administrative authority to make those
    fixes.
        In fact, they have the administrative authority to adopt an
    octane----
        Mr. Flores. So are you and Ms. Skor saying that no
    statutory solution is the preferred outcome? Is that what I am
    hearing from you?
        Mr. Cooper. If the--if option B is the draft currently----
        Mr. Flores. That's not what I asked. I mean, option B is
    does a--is a statutory solution going to be a better solution
    than relying on the uncertainty that currently exists with the
    law and the administrative structure of that?
        Mr. Cooper. I think it depends on what that statutory
    solution is.
        Mr. Flores. OK. All right.
        Mr. Thompson.
        Mr. Thompson. Yes. We support legislative reform of the
    RFS.
        Mr. Flores. OK. Well, every roundtable we've had and almost
    in every hearing we've had virtually every one of you has
    always said the statutory solution is better.
        And so that's the reason we need to stay engaged on this
    rather than trying to run to--as you heard earlier, run to our
    respective foxholes and not get anything done.
        Mr. Columbus, one of the things that has been claimed is
    that the consumer doesn't really control the cost of gasoline.
    I mean, can you--can you address that?
        For instance, if the cost of gasoline--if the cost of
    liquid fuel is artificially raised doesn't the consumer have a
    say on what the price is going to be by lowering their demand
    for that product?
        Mr. Columbus. I think the short answer to that is
    absolutely.
        First of all, I don't know how you artificially raise the
    motor fuel price. If we knew how to do that, I am telling you
    we would have done it a long time ago.
        I always laugh about the prices signs. But this is the most
    transparent commodities market on the face of the earth.
        Mr. Flores. So at the end of the day, the committee----
        Mr. Columbus. So it drives price down every day to the
    lowest level, to the level the low-cost provider is prepared to
    sell it.
        Mr. Flores. So if we are talking about increasing octane,
    the consumer is going to revolt if the refining--if the
    suppliers elect anything other than the lowest cost solution.
    Would you agree with that?
        Mr. Columbus. Totally. I promise you they will vote with
    their feet.
        Mr. Flores. OK. So there's no incentive for Mr. Thompson or
    his constituents to suddenly come up with a nonoptimum solution
    that the consumers are going to revolt against.
        Mr. Columbus. I believe that's true and, more importantly,
    as those consumers vote with their feet those companies'
    shareholders will vote with their lawyers. So, I mean, they
    have an obligation to maximize profit and don't do that by
    selling a high-cost product in a low-price market.
        Mr. Flores. OK.
        Ms. Skor, I am going to go over a few provisions of the
    draft legislation. Would you please answer two questions on
    each of these?
        Number one, the ethanol industry has asked the EPA to take
    administrative action on and, number two, which of these
    provisions do you anticipate the EPA can accomplish through
    rulemaking without legal challenge?
        The first one is can the EPA require all vehicles beginning
    in 2023 to use high-octane fuels. Have you--have you asked the
    EPA to do that?
        Ms. Skor. We have asked the EPA to certify and approve
    higher level ethanol blends with a specific date in mind, no,
    we have done that.
        Mr. Flores. And can they accomplish that without legal
    challenge?
        Ms. Skor. Yes. We believe EPA has the ability to set--EPA
    has the ability to put in place a 95 RON national standard
    fuel.
        Mr. Flores. I would assert that that's probably not going
    to be the case.
        That said, I have other questions for you. I will
    supplementally provide those to you and ask you to
    supplementally answer those.
        Thank you. I yield back.
        Ms. Skor. Thank you.
        Mr. Shimkus. The gentleman yields back his time. The Chair
    now recognizes the gentleman from Michigan for 5 minutes.
        Mr. Walberg. Thank you, Mr. Chairman, and thank you for
    holding this subcommittee hearing today and for working
    continuously to address the issues with the RFS.
        I know it's something that you and Mr. Flores have worked
    on for some time and you have held numerous round tables and
    hearings on this issue and heard from all parties involved
    numerous times and I, for one, would like to see this issue is
    finally resolved but in ways that I and my constituents would
    like them to be resolved.
        It's no secret that I am an avid Harley rider and any
    vehicle with an engine between two wheels. I am also the
    cochair of the Congressional Motorcycle Caucus, and I have
    concerns there as well.
        I also have the pleasure of representing the Great Lakes
    State of Michigan, which is surrounded by most of the 20
    percent of the world's fresh water resources and filled with
    boating enthusiasts all around that State and connected to
    other States as well.
        So they have obvious reasons to be concerned about fuel in
    their engines and motors as well. Michigan is also the
    birthplace of the modern auto industry and continues to be very
    much concerned in that area with a lot of research and
    development.
        It's also the place that is very much given to antique and
    classic vehicles, one being my own, which has great concerns
    about continuing and not just being put on a shelf somewhere
    and looked at but, rather, driven, used, continue to be used.
        And so, Mr. Zimmer, with those statements I would like to
    ask you a question and then open it up to any others who would
    address it, though maybe out of your purview.
        This question--how will this current draft legislation
    impact small engine manufacturers like Harley Davidson and the
    boating industry--Evinrude, Mercury, et cetera--and the classic
    and antique vehicles as well?
        Mr. Zimmer. I can't speak to those specific industries but
    I do think and I think our members believe that, you know, in
    this collaborative approach they should be--come to the table
    in here and have those inputs because, you know, I understand
    that there are different issues in those engines and those
    markets than we might have in the automobile industry.
        But just to reiterate, we believe the 95 RON is extremely
    important to the automakers will enable--improve fuel
    efficiency in a broad range of products.
        Mr. Walberg. Anyone else want to----
        Mr. Thompson. Let me add that--just to be clear that under
    this draft legislation the 95 RON fuel would be developed, you
    know, to be used with a new automobile fleet.
        It would add--either replace premium or add another grade
    of fuel to the mix. It would not impact our ability to deliver
    regular grade gasoline. Hopefully, you know, E0 for boaters and
    motorcyclists.
        So we will continue to supply that very important market.
        Mr. Walberg. Certainly--certainly at a higher cost but it
    needs to be there.
        Mr. Zimmer, you mentioned that misfueling devices beyond
    nozzle size are available. What are those and should they be
    required?
        Mr. Zimmer. It's a very, very important topic to the car
    makers--misfueling in this area, and historically we've
    addressed--when we went to unleaded we addressed misfueling
    with nozzle sizes and that's in the current proposal.
        This is--this can be--I think it's quite complex because of
    the--in the retail market and I think the retailers could talk
    about the multiuse pumps and stuff like that. But we think
    there is technology out there that might be, you know, very
    robust in this area and we would encourage, you know, an in-
    depth discussion there and that's basically communications
    between fueling pump and the vehicle and we think that's
    probably something that's doable. We think it's probably a good
    option and we would encourage people to look at them. We'd be
    very happy to work with----
        Mr. Walberg. Require a lot of flexibility and then
    consideration of defeat devices also?
        Mr. Zimmer. Excuse me?
        Mr. Walberg. I would assume it would require a lot of
    flexibility and then syncing up an understanding with the
    defeat devices that could be a part of the problem.
        Mr. Columbus. Yes, sir, and the discussion draft addresses
    that and we would endorse that. In fact, a group of us have
    been working on misfueling prevention for a while and that
    includes the autos, retailers, to jobbers.
        I think there's probably a way through this. The question
    is cost. The equipment manufacturers have indicated to us a
    cost of something under $300 per pump for a multiproduct
    dispenser that dispenses all three products or four products,
    whatever, through a single hose. That's it.
        But this is addressable, I believe, and one of the things
    we are holding off on is--I know what Gilbarco has told us. I
    want to actually see it. I want to see an invoice.
        Mr. Walberg. Thank you. I yield back.
        Mr. Shimkus. Gentleman's time has expired.
        The Chair now recognizes the gentleman from Georgia, Mr.
    Carter, for 5 minutes.
        Mr. Carter. Thank you, Mr. Chairman, and thank all of you
    for being here. This is certainly an important subject,
    something that we've talked about before. Some of you have been
    here before.
        Mr. Cooper, I haven't heard much from you so I wanted to
    start with you today and ask you a question.
        First of all, full disclosure. I represent the entire coast
    of Georgia, over a hundred miles of coastline. Therefore,
    marine engines are extremely important to us and the impact
    that some of these fuels have on--the negative impact that some
    of them can have on marine engines are certainly of interest
    and certainly of concern.
        Biobutanol--as I understand it, it has properties that more
    closely align with gasoline than ethanol does and it has much
    less--I am sure much less of a negative impact on engines.
        And, in fact, the National Marine Manufacturers Association
    and the American Boat and Yacht Council did a 5-year study with
    the Department of Energy and found out that--they studied the
    properties of isobutanol fuels on engines and that was very
    helpful for all of us.
        Just wanted to ask you, if biobutanol were widely available
    in the market, how would it fit into the current supply? How
    would we be able to incorporate it?
        Mr. Cooper. Well, thank you for the question, and I guess
    the first thing I would say is, you know, first of all, E10--10
    percent ethanol blends--are approved and warrantied for all
    off-road engines today including outboard marine engines and
    motorcycles. So the fuel that is most common in the marketplace
    today is absolutely fine for use in outboard engines and marine
    applications.
        In terms of biobutanol, you know, certainly, we do see some
    promise there. We have some member companies who are either
    producing or very interested in producing biobutanol along with
    ethanol.
        So yes, I mean, I think there are other molecules, other
    applications, other biofuels that at higher blend levels could
    be suitable for today's----
        Mr. Carter. Are there any obstacles for the companies that
    want to market this? Are they having any barriers they're
    having to overcome?
        Mr. Cooper. Primarily cost, today.
        Mr. Carter. Is that right?
        Mr. Cooper. I mean, you can't--biobutanol just can't
    compete with ethanol and other components in terms of
    production costs.
        Mr. Carter. How much of a difference are we talking about?
        Mr. Cooper. I would have to get back to you on that.
        Mr. Carter. Is it significant enough to where it's----
        Mr. Cooper. I think it's significant enough that we are not
    seeing widespread adoption of biobutanol today.
        Mr. Carter. OK.
        Mr. Thompson, I will go to you. As I understand it, 95
    octane is the correct octane level. In fact, you mentioned in
    your testimony that the ideal level was 95 for maximizing
    output of vehicles.
        How did you arrive at that? How did you arrive at the 95
    octane being the maximum level?
        Mr. Thompson. Thank you for the question.
        You know, this is the conclusion we reached with working
    with several stakeholders but with--really, with USCAR and
    others where we got technical expertise from the refineries and
    from the autos and, frankly, they worked for almost 2 years
    exploring a lot of things and looking at the whole system cost.
        If you were looking to get a three to four improvement--
    efficiency improvement out of the autos, what would be the
    cheapest way for consumers to get there, either all the
    improvements from the auto side or all the improvements coming
    from fuel, and this is documented in my testimony before this
    committee in April, but we did simply a cost analysis and what
    we found is that the cheapest way to get that 3 to 4 percent
    efficiency improvement came from 95 RON.
        The other part of this was one of the big factors was
    making sure whatever we selected, according to the autos and
    rightfully so, the fuel had to be available on day one and had
    to be available nationwide.
        Anything other than 95 RON is not available nationwide.
    California and nine other States, you know, prohibit higher
    levels of octane.
        Mr. Carter. So you couldn't go to 97 in California?
        Mr. Thompson. Under their predictive model our conclusion
    was no.
        Mr. Carter. OK. OK. Well, thank you for that.
        One other question just to follow up. Does your
    organization have any specific numbers on how gas mileage would
    improve for customers across the U.S.?
        Mr. Thompson. Well, again, a couple things. One, it would
    be a 3 to 4 percent improvement--efficiency improvement--and
    that translates into gas miles.
        And the other thing it's for those who--it's equivalent to
    putting 720,000 electric vehicles on the road year after year
    after year. So there's a substantial improvement--efficiency
    improvement by doing this.
        Mr. Carter. I suspect that would--that would be hard to
    sell to a consumer who just concentrates on price?
        Mr. Thompson. I would hope--I would hope we would have a
    good story to tell. This is--would be a high-efficiency fuel
    that helps make their cars more efficient, it keeps
    optionality. It allows them to choose an internal combustion
    engine that's more efficient over, say, electrified vehicle
    they may not want.
        I mean, I think the consumer, when they fully understand
    the offering, will be supportive.
        Mr. Carter. Great. My time has ended and I yield.
        Mr. Shimkus. The gentleman yields back.
        Waiving on to the committee as he has in the past, Mr.
    Loebsack from Iowa, for 5 minutes.
        Mr. Loebsack. Thank you, Mr. Chair. I really do appreciate
    you allowing me to waive on. You have been very generous, and
    especially knowing that we don't necessarily agree on these
    issues.
        So I really appreciate that a lot. We don't agree on the
    outcome of the football game either, since I have a stepson and
    his wife who are Naval Academy grads. But for me--for me, the
    only surprise was the margin--that it wasn't greater.
        But at any rate, to the panel I do appreciate your being
    here. In some ways, it's deja vu all over again because many of
    you have been here before.
        Mr. Cooper, welcome. I know Bob did a great job, but you're
    going to do a fantastic job as well. Thank you for taking over
    that position.
        Look, folks, we know that the RFS was created to diversify
    America's liquid fuel market, grow our world economy, and cut
    harmful emissions and it has succeeded in those efforts.
        I don't think there's any question about that at all. The
    RFS has helped America achieve greater energy security. It's
    decreased our reliance on foreign oil.
        My Marine kids perhaps don't have to go fight wars because
    of that in the future, hopefully, and that has, in turn,
    protected our national security.
        Fuels have lower cost at the pump and in Iowa and other
    parts of the Midwest the RFS has clearly been an economic
    driver--that's indisputable--creating thousands of good-paying
    jobs at biofuels plants and establishing a significant market
    for our farmers. Very important now, especially given our trade
    issues that we see happening to our farmers.
        We need to be looking toward growth in the future instead
    of taking steps backwards. This has been a very tumultuous year
    for biofuels producers and farmers.
        We know that the EPA has granted waivers to 48 refiners
    that have cut more than 2 billion gallons of biofuels out of
    the market with no plan to reinstate those gallons, and that's
    unfortunate, to say the least.
        This sort of action destabilizes the agricultural economy
    and that has implications for years to come and, again, we have
    to be thinking about the trade disputes, too, when we talked
    about these issues because that just complicates it for these
    farmers and others in the Midwest.
        Instability has led to biofuels plants across the country
    being idled, in at least one case closed permanently. The USDA
    reported net farm income is down again over 12 percent this
    year and the ag economy is suffering, and we cannot afford, I
    believe, to take a step in the wrong direction.
        And so respectfully, Mr. Chair, I do believe that this
    draft legislation is a step in the wrong direction for rural
    America and for the RFS.
        It was already mentioned the EIA released a study last
    month that a nationwide 95 RON fuel can be achieved through
    petroleum products and would not guarantee the use of more
    biofuels.
        I would like you to respond to that. You already did a
    little bit. Maybe expand a little bit on your answer to Mr.
    Thompson on that.
        The fact of the matter is we have to be very thoughtful
    about this, going forward. We have to make sure that whatever
    we do does not harm the biofuels market I think here in this
    country.
        I appreciate everyone's responses to the questions here.
    But I do want to start out with Ms. Skor by just basically
    answering the question would a 95 RON standard increase or
    decrease the use of biofuels.
        Ms. Skor. Made with a 10 percent ethanol blend it would
    most assuredly increase the price of fuel for American drivers.
        Mr. Loebsack. Right.
        And Mr. Cooper, would you like to elaborate a little bit? I
    don't know if you have more to say about your response to Mr.
    Thompson about the----
        Mr. Cooper. Well, you know, I think, again, some of the key
    points that came out of that study for us and it was
    commissioned by EIA but it was conducted by Baker & O'Brien,
    which is a well-known consulting firm that does lots of work
    for the oil industry. So these guys know what they're talking
    about.
        And a few of the key points that really rose to the surface
    for us was that, you know, there wouldn't be hardly any
    incremental increase in the cost of producing 95 RON at the
    existing fleet of refineries to meet a 95 RON requirement in
    the first year of the program, 2023, but also longer term.
        You know, it just said there wouldn't really be a need to
    increase ethanol blending at all to meet that requirement.
        Mr. Loebsack. Did you want to respond to the Barton Bill?
    Because it looked like you had some issues with that.
        Mr. Cooper. Well, I mean, we supported the first Barton
    Bill, right--the original RFS--and I just--you know, I don't
    remember exactly all the points that he was making.
        But, you know, we certainly see the RFS as a tremendous
    success, both the original program, the RFS2. We see absolutely
    no reason to walk away from that progress. And again, we think
    a high-octane fuel standard can layer very well on top of the
    RFS and those two programs could work in harmony.
        Mr. Loebsack. And I do want to make sure that, you know, we
    hold this administration's feet to the fire too on its promise
    to have the EPA go ahead and write rules, obviously, that allow
    the 15-year round.
        I think it's really important. I hope it wasn't just a
    campaign stop, if you will, on the part of the president at
    Council Bluffs, you know, for a Republican congressional
    candidate and a Republican gubernatorial candidate.
        We've got to make sure that we--you know, that we do hold
    their feet to the fire on that.
        So thanks, everybody, for being here. I really appreciate
    it, and I have lots more questions but I am sure I will have
    more opportunities in the future.
        Thank you, Mr. Chair.
        Mr. Shimkus. The gentleman returns the time and the Chair
    wants to thank the panel. You did not disappoint. Obviously,
    there's much more work to do and I gladly will turn this over,
    hopefully, to Mr. Tonko in the next Congress to accept the
    challenge of moving forward.
        I will just say certainty is better than uncertainty.
    Marrying engineering technologies of engines and fuels for the
    greatest efficiencies is the way to go.
        So I hope that that would be at least a base by which
    people would move forward.
        With that, I want to dismiss this panel and sit the second
    panel.
        [Pause.]
        Mr. Shimkus. OK, folks. Let's move out of the room so we
    can get started.
        We want to thank our witnesses for being here today and
    taking the time to testify before the subcommittee. As you
    observed, it's still a very energetic discussion, questions and
    answers, and we would expect no less from this panel either.
        Today's witnesses will have the opportunity to give opening
    statements followed by a round of questions from Members, and I
    will introduce you as I call you to testify.
        And we would like to start with Mr. Brooke Coleman,
    executive director at Advanced Biofuels Business Council.
        Brooke, you're recognized for 5 minutes. Welcome.

      STATEMENTS OF BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED
    BIOFUELS BUSINESS COUNCIL; MICHAEL MCADAMS, PRESIDENT, ADVANCED
       BIOFUELS ASSOCIATION; MANNING FERACI, DIRECTOR OF FEDERAL
     AFFAIRS, COALITION FOR RENEWABLE NATURAL GAS; DAVID FIALKOV,
    VICE PRESIDENT, GOVERNMENT RELATIONS/LEGISLATIVE AND REGULATORY
      COUNSEL, NATIONAL ASSOCIATION OF TRUCKSTOP OWNERS; AND KURT
    KOVARIK, VICE PRESIDENT OF FEDERAL AFFAIRS, NATIONAL BIODIESEL
                                 BOARD

                      STATEMENT OF BROOKE COLEMAN

        Mr. Coleman. Thank you. Thank you. Still good morning, I
    think.
        Chairman Shimkus, Ranking Member Tonko, members of the
    subcommittee, my name is Brooke Coleman. I am the executive
    director of the Advanced biofuel Business Council.
        We represent worldwide leaders in the effort to develop and
    commercialize cellulosic biofuel ranging from cellulosic
    ethanol made from agricultural residues to advanced biofuel
    made from sustainable energy crops and municipal solid waste.
        Let me start by thanking the committee and staff for
    deliberating what we know is a tough issue--the Renewable Fuels
    Standard--and more generally, the need to curb or at least
    bring competition to the pump with regard to fossil fuels.
        The RFS is a political lightning rod not because it is
    flawed. Rather, because it is creating competition that
    incumbents do not want to see and drives the growth of now the
    largest renewable energy sector in the country.
        The RFS pertains to the industry I represent, the
    cellulosic biofuels industry. An underpinning of the political
    case against the RFS is the allegation that we have failed to
    deliver on the promise of cellulosic biofuels.
        What has actually happened over the last 10 years as our
    industry has gone from the technological development phase to
    the commercial deployment phase, as promised.
        But in order to build plants and scale the RFS must be
    enforced and in many recent years the RFS was not enforced at
    all. In other years, billions of gallons were unlawfully waived
    in reaching oil refiners large and small at the expense of
    rural America.
        This level of unpredictability pushes innovators outside of
    the country and that's what has happened as we watch China,
    Brazil, Canada, even Romania and other countries now beat us to
    the punch on cellulosic biofuel development.
         So what's the solution? I think it's a fair question.
    While we appreciate the committee's work in trying to find one,
    we cannot support this particular one as constructed.
        There are two primary pieces to successful biofuels
    deployment. The impetus to produce the fuel on the front end
    and the ability for consumers to access it on the back end. The
    RFS does both at the same time.
        It encourages production by requiring blending and it
    enforces a RIN system on the back that rewards those who make
    investment to deliver more biofuel to the consumer. It's a very
    simple system.
        The discussion draft more explicitly requires market
    readiness for biofuels as it relates to vehicles, fuel
    dispensers, and important regulatory updates like RVP.
        That's a good thing. But it offers explicit market
    readiness at the expense of the upstream policy that would
    allow more biofuels to flow through updated hoses and
    regulations and into vehicles.
        Ideally, a free market provides the impetus to produce
    biofuels. But as we have seen for decades with ethanol, beating
    the incumbent on price does not guarantee demand because motor
    fuel markets are not free markets.
        Replacing the cure for this problem in the RFS with an
    octane standard is the equivalent of an open invitation for the
    oil industry to use less biofuel and increase carbon emissions
    in the process.
        Earlier this month, the EIA on a report that we have talked
    about already, confirmed what the oil industry has previously
    admitted--that a 95 RON standard could be easily met with
    minimal refinery upgrades.
        The truth is--and we haven't talked about this--we have
    done this before. The oxygen standard enacted in 1990 was a so-
    called performance based fuel quality standard. It was supposed
    to drive demand for ethanol based on its superior fuel
    characteristics including price.
        It didn't, because the oil industry prefers to control the
    entire motor fuel gallon by purchasing octane from themselves.
        So instead of ethanol we got MTB, a fuel additive that
    polluted America's drinking water and had some small towns
    trucking drinking water into local schools.
        Unfortunately, the discussion draft offers a similar
    dynamic as it pertains to advanced biofuels. The act would
    establish a more automated system when it comes to setting and
    enforcing advanced biofuels standards.
        In theory, this system would provide more predictability
    for innovators. That is a good thing.
        But it offers predictability by tying the volume standard
    to the actual production in the prior year. The problem with
    setting the cellulosic biofuel standard based on prior year
    production is it puts the growth trajectory of cellulosic
    biofuels into the hands of our competitors in the oil industry.
        This is true, because in order to secure investment to
    build capacity our industry has to be able to show likelihood
    of demand. In the absence of a free market and within RFS phase
    out, we would have to show some sort of commitment form the oil
    industry to buy cellulosic biofuel. If the oil industry knows
    it can control the cellulosic biofuel to secure financing, the
    oil industry knows it can control cellulosic biofuel
    development by avoiding those commitments and that Federal law
    now rewards that behavior with greater market control. That's
    what they will do.
        We continue to believe that the solution here is not
    legislative. There is already an administrative effort underway
    to address RVP. We can do many of the things to create
    certainty from a forecasting perspective inside of existing
    law.
        We appreciate the opportunity to be here today.
        [The prepared statement of Mr. Coleman follows:]
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        Mr. Flores [presiding]. Mr. McAdams, you're recognized for
    5 minutes.

                      STATEMENT OF MICHAEL MCADAMS

        Mr. McAdams. Chairman Flores, Ranking Member Tonko,
    Congressman Olson, Chairman Shimkus, I am delighted to once
    again appear before you to testify on the importance of Federal
    policy in furthering the development of next generation
    sustainable renewable fuels.
        On behalf of the membership of the Advanced Biofuels
    Association, I want to personally thank Chairman Shimkus and
    Congressman Flores for your courage and leadership in providing
    an RFS draft reform package.
        The countless hours that Members on both sides of the aisle
    have spent attempting to craft a middle ground to update and
    revise the focus of the delivery of second generation advanced
    fuels is long overdue.
        In spite of the best intentions, it is clear that the
    current statute needs updating if we are to enable the
    technologies to move forward and produce the volume of fuels
    which were envisioned by the original authors of the law.
         That renewed focus is particularly relevant, given the
    recent release by the administration's warning on the impacts
    of climate change and the containment of the most destructive
    wildfire in California's history.
        In addition to continued growth in aviation, which is
    currently doubling every 15 years, along with the new global
    carbon targets for international airlines, will drive the need
    for these fuels, moving forward.
        These advanced fuels will provide an alternative to higher
    carbon fuels in our future, as noted by the Government's recent
    climate report. However, as I've testified before, there are
    numerous barriers to entry under the current RFS program that
    specifically disadvantage advanced biofuels.
        My written testimony goes into specific recommendations in
    more detail. Previously, I provided you 21 of them. But I would
    like to highlight a few potential reforms as well as some--
    offer some comments on the recent draft bill introduced by
    Congressman Shimkus and Congressman Flores.
        First and foremost, if you consider making changes to the
    RFS, we would urge Congress to take the politics out of the
    equation as much as possible by making the RFS a rules-based
    system.
        Therefore, we support the provision in this bill that would
    base the annual RVO on the previous year's actual production,
    queuing up midyear and end-year volumes, which would set the
    RVO for the future and that would thereby set a mandate for the
    obligated parties.
        This would reduce volatility in the RIN market, diminish
    the need for cellulosic waivers for fuels which do not exist,
    and encourage obligated parties to buy available produced
    gallons for the RINs.
        Any reform to the RFS should also expand the definition for
    what constitutes renewable biomass and allow feedstocks to
    comply on a mass balance basis rather than imposing burdensome
    mapping restrictions on those feedstocks.
        Naturally regenerative trees under sustainable forest
    management practices should be available for use under this
    program. Currently, they are not.
        We are long past due to have a plant-a-tree pathway
    promised by EPA years ago. The Shimkus-Flores bill takes an
    important step in this direction by redefining renewable
    biomass to include trees and tree residues, paving the way for
    increased deployment of pyrolysis and other technologies.
        By the way, the three current cellulosic plants being in
    the United States, which we represent, are all pyrolysis
    technologies.
        We support the bill's efforts to pivot the focus on the
    development of fuels of the future by providing some regulatory
    certainty for the advanced and cellulosic biofuels and
    biodiesel through 2032 or longer. We recommend you look at the
    length of the average debt financing, which is 20 years, in
    lieu of 2032.
         This time frame is consistent with the standard of the
    debt term. The steps which you have taken in your draft bill at
    a minimum will send a strong signal to the financial
    institutions that the Federal Government supports the
    development of these fuels in the future by guaranteeing the
    rent over a longer time frame.
        We also suggest you encourage EPA to address the
    biointermediate issue in the upcoming reset rules proposed this
    year. Currently, three of our members who are building plants
    would not get a rent unless this problem is resolved.
        I attached a list of other specific recommendations for
    your consideration, which I believe would all fall under the
    title of common sense, which will require statutory changes in
    order to allow EPA to make this program more economically and
    administratively efficient.
        Again, on behalf of all of our members, we want to thank
    you for your leadership and urge the members of this committee
    to seriously consider making the reform of this program a
    priority in the coming year.
        Thank you, and I look forward to answering your questions.
        [The prepared statement of Mr. McAdams follows:]
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        Mr. Flores. Thank you, Mr. McAdams. I think we can all
    agree on having commonsense titles in our bills. It's a good
    start.
        Mr. Feraci, you're recognized for 5 minutes for your
    opening comments.

                      STATEMENT OF MANNING FERACI

        Mr. Feraci. Thank you, Mr. Chairman.
        Chairman Shimkus, Ranking Member Tonko, members of the
    subcommittee, I appreciate having the opportunity to testify
    today on behalf of the Coalition for Renewable Natural Gas.
        Renewable natural gas, or RNG, is derived from biogas
    captured from organic waste streams at landfills, wastewater
    treatment facilities, and from anaerobic digestion of
    agricultural waste.
        The captured biogas is refined to meet fuel quality
    standards that make RNG indistinguishable from natural gas. The
    fuel is fully fungible in our Nation's existing infrastructure
    and can be readily used in natural gas vehicles.
        More than 25 percent of the Nation's medium and heavy duty
    natural gas vehicles are fuelled by RNG. RNG qualifies as a
    cellulosic biofuel under the Renewable Fuels Standard. It
    reduces life cycle greenhouse gas emissions by 80 percent or
    more compared to the conventional diesel fuel.
        In fact, the RNG industry provides more than 95 percent of
    the fuel used to meet the program's cellulosic biofuel
    requirements today.
        The production and use of RNG has grown significantly since
    it was included in 2014 as a cellulosic biofuel. The industry
    has developed over 45 production facilities and there are over
    50 projects currently under construction or consideration.
        RNG production for transportation fuel grew from
    approximately 33 million ethanol equivalent gallons in 2014 to
    240 million gallons in 2017. That's more than a 620 percent
    increase in the 3-year period.
        This growth has put the industry on track to exceed EPA's
    production estimate from 2018. Each RNG project averages--on
    average creates 173 direct or indirect jobs and attracts
    between $10 million and $70 million in capital investment.
        In sum, the RFS has resulted in a growing vibrant domestic
    RNG industry that is converting waste into growing volumes of
    domestically produced cellulosic biofuel that is good for the
    environment, and that sounds like a winning policy to us.
        As I mentioned earlier, the RNG Coalition is pleased to
    provide initial feedback on the discussion draft. The RFS is a
    complicated multifaceted program and statutory changes should
    be carefully vetted, given the impact they can have on
    stakeholders who have made significant capital investments.
        The RNG Coalition recognizes the subcommittee's diligence
    in looking at this issue. The RNG industry supports the RFS
    program as a way to increase domestic production and use of
    advanced biofuels and, in turn, address the Nation's energy and
    environmental policy objectives.
        This methodology used to set volume obligations under the
    RFS program should be consistent with this approach. Volume
    targets, going forward, should be realistic and attainable.
    They should also be structured in a way to encourage steady
    growth of advanced biofuel production.
        Under current law, the RFS program does not lapse. Beyond
    2022, the EPA administrator sets the program's volumes based on
    six statutory factors. The discussion draft would sunset the
    RFS program for advanced biofuels after 2032.
        RNG projects require significant capital investment and
    deployment in new infrastructure. They often involve a 20-year
    offtake agreement with feedstock providers.
        A long-term RFS program provides a policy framework that
    attracts that capital needed to develop new RNG projects.
    Conversely, a premature sunset of the RFS program's advanced
    biofuels requirements could chill investment in new RNG
    projects, which could undermine the overall policy objectives
    of the RFS program.
        The discussion draft would also modify how the volume
    targets for advanced biofuels are set. It would use the
    previous year's production levels--production data to set
    annual use requirements for advanced biofuels.
        While the RNG Coalition recognizes the desire to provide
    certainty in the volume setting process, this approach could
    have the unintended consequence of causing advanced biofuel
    production to stagnate or potentially contract.
        The RNG Coalition wants the RFS program structured in a way
    that promotes steady sustainable growth in the advanced
    biofuels marketplace.
        Mr. Chairman, Chairman Shimkus, Ranking Member Tonko,
    again, I appreciate the opportunity to testify. The RNG
    Coalition recognizes the hard work and effort that this
    subcommittee had made to tackle what is admittedly a very, very
    difficult issue.
        There are significant benefits associated with the expanded
    domestic production and use of RNG, and we remain willing to
    work constructively with you going forward to achieve the RFS
    program's worthwhile policy goals, and I would be happy to
    answer any questions you may have.
        [The prepared statement of Mr. Feraci follows:]
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        Mr. Flores. Thank you.
        Mr. Fialkov, you're recognized for 5 minutes for your
    opening comments.

                       STATEMENT OF DAVID FIALKOV

        Mr. Fialkov. Good morning, Mr. Chairman.
        Chairman Shimkus, Ranking Member Tonko, thank you very much
    for inviting me to testify today. It's really a privilege to be
    here with you.
        My name is David Fialkov. I am the VP of government
    relations at NATSO, which is a national trade association
    representing really off-highway fuel retailers from large
    multibillion-dollar travel center and truckstop chains to
    smaller independent single-store mom and pop type operators.
        Most of our members sell gasoline. Many of them blend
    ethanol. My testimony this morning, however, will focus
    primarily on diesel markets and opportunities for Congress to
    incentivize diesel retailers to incorporate increasing amounts
    of advanced biofuels such as biodiesel into the Nation's diesel
    fuel supply.
        The RFS, which this bill would reform, has largely been
    successful in doing this. Over the last decade, for example,
    biodiesel and grown tremendously and the reason for that is
    that the RFS creates a mechanism whereby diesel retailers can
    offer fuel to truck drivers for less money the more biodiesel
    that they incorporate into the their fuel supply and that's
    really a fundamental component to understand throughout all of
    this.
         Retailers are not obligated to blend biofuels under the
    RFS. They choose to do it, and they only choose to do it if
    doing so allows them to sell fuel for less money.
        So in this respect, retailers really function as surrogate
    for consumers in assessing advanced biofuels' value proposition
    and my views on the legislation today, which I will share, are
    simply designed to help you enhance advanced biofuels value
    proposition. In many ways the bill moves the RFS in the right
    direction in this respect. In other areas, it could be
    improved.
        Taking a step back, the RFS is really an extraordinary
    example of Congress and the executive branch sharing authority
    to implement the program.
        Mandating such a substantial shift in the composition of
    motor fuel in the United States is not an insignificant
    assertion of legislative authority and, obviously, to avoid
    unintended consequences associated with future market
    developments that Congress cannot be expected to predict or
    know, EPA has to have some flexibility to make adjustments
    along the way.
        In my view at this time, however, EPA has too much
    discretion and it has led to volatility and uncertainty that
    undermines the program's objectives.
        In reforming the RFS, the main lesson that you should have
    learned over the last decade is that Congress needs to reassert
    itself and limit the degree to which the ideological and
    political preferences of the executive branch can alter the
    program's trajectory.
        Overall, I think that the bill threads this needle quite
    nicely. A rules-based RVO process, extending the advanced
    biofuels categories an extra 10 years while also allowing for
    midyear adjustments will undoubtedly incentivize more fuel
    retailers to buy and blend more advanced biofuels while baking
    in enough flexibility with the midyear adjustments to avoid the
    unintended consequences.
        That being said, it was very disappointing to see that the
    bill was silent on the issue of small refinery exemptions. Over
    the past year, the EPA has been handing out small refinery
    exemptions like Halloween candy and they have been doing it
    oftentimes to some of the most successful profitable refining
    companies in the country.
        And the fact that those agencies are doing that in this way
    is undermining the demand for advanced biofuels. That agency
    officials can say with a straight face that they're doing it
    consistent with the law should operate as a bright shiny red
    flag to you that it's time to reexamine that provision either
    by eliminating it entirely or by altering it so that waivers
    are issued far less frequently and they're issued in a way that
    does not so dramatically undercut demand for advanced biofuels.
        I've heard Chairman Shimkus say before that in giving
    advice to people who testify that you're not going to hurt
    anyone's feelings if you don't use your full allotted 5
    minutes.
        So in that vein, I hope to hurt none of your feelings and I
    am happy to answer any questions that you have.
        Thank you again for inviting me.
        [The prepared statement of Mr. Fialkov follows:]
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        Mr. Flores. Thank you.
        Mr. Kovarik, you're recognized for 5 minutes for your
    opening statement.

                       STATEMENT OF KURT KOVARIK

        Mr. Kovarik. Good morning.
        Thank you, Mr. Chairman, Chairman Shimkus, Ranking Member
    Tonko, and members of the committee. Thank you for inviting me
    to testify today.
        My name is Kurt Kovarik and I am vice president of Federal
    affairs for the National Biodiesel Board. My trade association
    represents 130 members with biodiesel production facilities in
    nearly all 50 States.
        The produce clean-burning biodiesel from a variety of
    feedstocks including vegetable oils, animal fats, and recycled
    oils such as used cooking oil.
        I appreciate the subcommittee's inclusion of biodiesel in
    today's discussion and throughout this process. I look forward
    to contributing to the development of any proposals to improve
    the Renewable Fuel Standard.
        The discussion draft highlights one of our frustrations
    with the RFS. The biodiesel industry has proven over and over
    again its ability to produce higher volumes. Yet, EPA
    continually sets biomass based diesel volumes in the annual RFS
    rules well below our demonstrated capacity.
        The agency continues, as demonstrated in November's final
    rule, to limit growth for our advanced biofuel volumes.
    Biodiesel achieves considerable carbon reductions, up to 86
    percent compared to petroleum fuels. Higher volumes for biomass
    based diesel would better achieve the environmental goals of
    the original RFS program.
        Biodiesel is the success story of the RFS. The program has
    been the foundation for biodiesel industry's growth over the
    past decade. Our industry has grown from about 400 million
    gallons in 2007 at the start of the program to more than 2.6
    billion gallons today.
        We expect the program will continue incentivizing
    investment and supporting our industry's growth over the decade
    and more.
        We are pleased that the discussion draft recognizes that
    the biodiesel industry would not benefit from the proposed
    changes to the octane standard or other regulatory changes in
    the discussion draft.
        We appreciate the committee's recognition that the
    biodiesel market is different from the ethanol market and that
    the discussion draft includes provisions to provide additional
    certainty for advanced biofuels.
        Unfortunately, these provisions fall short. We are
    concerned that the discussion draft does not incentivize
    ongoing investments and support predictable year-over-year
    growth for our industry.
        The discussion draft would direct EPA to set backward
    looking volume requirements. While this may protect existing
    assets in the near term, it would not drive further investments
    or growth.
        One necessary improvement to the draft would be to add
    achievable predictable growth for our industry over time. With
    consistent and predictable growth, the biodiesel industry would
    have the necessary incentive to make capital investments,
    develop additional feedstocks, and improve efficiencies.
        Stagnant or decreasing volumes do not provide any of those
    incentives. For the biodiesel industry there is no pressing
    need to significantly reform or replace the RFS.
        The program does not end or change drastically in 2022,
    despite what some have said. The EPA is required to set future
    volumes for all fuel categories under the same process that has
    been in place for biomass-based diesel since 2013.
         The RFS, therefore, has the potential to support our
    industry's growth beyond 2032 to where the discussion draft's
    support would end.
        The biodiesel industry continues to grow and to invest
    under the current RFS because the program, when stable,
    promises the opportunity for additional growth.
        We appreciate that the discussion draft would direct EPA to
    set volumes according to our proven ability to produce, that
    the draft would be significantly improved if it provided long-
    term certainty and predictable growth over time.
        Thank you for the opportunity to testify today on behalf of
    America's biodiesel renewable diesel industry.
        I am happy to answer any questions.
        [The prepared statement of Mr. Kovarik follows:]
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        Mr. Flores. Thank you for your opening comments. We
    appreciate each of your testimony. We are now going to move
    into the Q&A portion of our hearing. I want to recognize myself
    for 5 minutes for my questions.
        Mr. Coleman, your testimony claims that the discussion
    draft will increase gasoline prices because ethanol will not be
    used by refiners. That's somewhat in conflict with what we
    heard in the last panel.
        I think there were some folks that want to argue about the
    readily available octane enhancers today versus what was
    available 15 years ago.
        But I am interested in developing a current solution. So
    what's your proposed legislative solution for keeping gasoline
    prices lower using a high-octane performance standard?
        Mr. Coleman. So the reason that I made that allegation is
    that here is no alternative octane to ethanol that is even
    close to as cheap as ethanol is.
        And so you're either creating a status quo environment or
    are you putting something in the fuel that is more expensive?
        You don't have to look very far. If you look at zero
    percent ethanol blends in the market today they're 40 to 50
    cents per gallon more expensive.
        In terms of--and I am not going to dodge your question on
    what the legislative proposal is--I think the RFS should be
    bedrock baseline in this country because it's produced such
    outstanding outcomes, particularly for the middle of the
    country.
        And if you want to get to a cleaner environment with--give
    the auto industry what they want, which is cleaner fuel so they
    can improve emissions, then you do it on top of the RFS.
        Can you make tweaks to the RFS that makes sure dumping the
    RFS for higher octane will just remove the incentive to use
    renewability----
        Mr. Flores. So how do you set those levels and in a
    declining liquid fuels market how do you set them or you get
    them right and you don't somehow create disturbances in the
    market that harm consumers?
        Mr. Coleman. I am not sure if I agree with the idea that it
    harms consumers. So if you use--if you keep--maintain certainty
    with the RFS and what the signal that sends to the marketplace
    is that we are going to keep ethanol in the fuel, which right
    now is not--Mr. Thompson said it was 4 cents cheaper. It's
    closer to 20 cents cheaper.
        It says don't replace ethanol with more expensive octane
    enhancers and then ramp your RON the way you want to go. You
    don't lose ethanol, and if the oil industry wants to alkylate
    fuel or add more aromatics on top of that, then they can get
    there.
        They're not going to tell you they can do that, but they
    can do that.
        Mr. Flores. Let's continue.
        I think we heard in the last panel that the consumers
    ultimately are going to make the decisions as far as what the
    costs are, not the refiners. Not any other party.
        Mr. Kovarik, your testimony states, we appreciate that the
    21st Century Fuels Act would direct the EPA to set volumes
    according to our proven capacity to produce.
        You went on to say you would prefer that it provided long-
    term certainty and predictable growth over time.
        What does that mean from a legislative language
    perspective? If we wanted to incorporate your concepts in our
    legislation what would that look like?
        Mr. Kovarik. Thank you for the question. I appreciate the
    opportunity to answer that.
        One of the things that has harmed our industry and really
    prohibited our industry from achieving its full potential is
    the fact that all of our Federal policies that affect our
    industry have been terribly uncertain since the creation of the
    RFS--the original RFS in 2005.
        One way to improve this legislation might be to not only
    provide longer term period for advanced biofuels but also
    include some degree of statutory certainty that volumes will
    increase year over year to allow the industry to make the
    capital investments, developing additional feedstocks, and grow
    to an economy of scale where they may no longer need certain
    areas of Federal policy support.
        Mr. Flores. So you're in the weeds a little bit. How would
    you set those volumes? How would that be done? When you don't
    know what the market is going to be like, you don't know where
    the technology is going, how would you set the volumes?
        Mr. Kovarik. I think you could start by looking at the
    domestic--the market, what is currently produced, and then
    include a reasonable achievable levels of growth whether that
    be--5 percent year over year might be an example. But what
    would be achievable and certain for the industry so that they
    could respond to it.
        Mr. Flores. OK. If you have positive tax treatment for
    biodiesel blending if you assume that that's assured, would you
    need the RFS to compete?
        Mr. Kovarik. The two policies are very complementary. The
    RFS essentially guarantees producers that there will be a
    market for certain volume of product.
        The tax incentive works in very different way in that is
    provides the incentive for our downstream partners to put in
    the infrastructure, the blending facilities, and the retail
    facilities to sell additional product to consumers.
        The reason our downstream partners want to sell more of the
    product is because of the value proposition because of the
    combination of the RFS and the tax credit, and I would like to
    see a time and place where we no longer need those policies.
        But the fact of the matter is neither have been certain
    enough with the longevity required to provide the industry with
    the certainty to grown and flourish.
        Mr. Flores. Thank you. My time has expired.
        I recognize Mr. Tonko for 5 minutes for his questions.
        Mr. Tonko. Thank you, Mr. Chair, and I think many Members
    support the RFS due to its envisioned role in promoting the
    development of and market for advanced biofuels.
        Even the program's most ardent supporters would have to
    admit that the expected growth of these fuels has not come to
    fruition.
        I know there are many reasons that that is the case. But I
    want to use this time to look forward.
        So would anyone like to comment on why or why not this
    discussion draft would remedy those issues and actually result
    in the growth of a domestic advanced biofuels industry?
        Anyone? Mr. Coleman.
        Mr. Coleman. I am sure I will have a couple people who want
    to help answer this question. But we do not believe that it's
    going to create growth in the advanced biofuels industry
    because we have to partner with the oil industry one way or the
    other to get the job done in the advanced biofuels industry.
        Sometimes it's on the front end with actual strategic
    investment. Valero, BP--they've been investors historically in
    this industry.
        But inevitably it's also on the back end. You have to be
    able to show investors that an oil industry is interested in
    not taking your fuel in order to build that plant and if we
    have a system that automatically predicts incoming gallons
    based on last year's volumes, the oil industry is simply not
    going to participate in that process and you're going to have
    incremental, if any, growth, basically only when the oil
    industry is completely uninvolved.
        And the issue that we have had with deployment over the
    last 10 years--and I think this is a point of agreement for all
    of the advanced biofuels advocacy--is not one of commercial
    technological development.
        We are there. It's an issue of scale. And when the program
    is not enforced for 2 or 3 years in the wake of a 100-year
    recession and then we have waivers, we have nothing to look to.
        So that is where our issues are and we would ask that we
    keep pushing on EPA to enforce the law.
        Mr. Tonko. Anyone else? Mr. McAdams.
        Mr. McAdams. I would say that the right question is, since
    you guys are working with the discussion draft here, what can
    you do to bring those fuels.
        And what I gave you after the last hearing was 21 examples
    of specific barriers to entry, definitions in other regulatory
    regimes that block the future of advanced undesignated fuels
    and block cellulosic fuels.
        What this draft does do is it speaks specifically to the
    wood piece in a way that has never been addressed before and
    that is a very positive thing.
        Let me give you an example. If you, under the current
    biointermediate regs at EPA, if I am trying to take a pyrolysis
    plant which I am either Ensign, which building a plant in
    Georgia or I am Fulcrum, I am building a plant in Nevada or I
    am Red Rock, I am building a plant in Oregon, and I use the
    woody biomass and I make a pyrolysis oil, under the current
    biointermediate standard I can't colocate that to coprocess
    into a jet fuel or into a diesel.
        And one of the things this hearing has done is it's focused
    way too much on gasoline and not enough on the fact that we use
    55 billion gallons of diesel and it's the fastest growing
    commodity in terms of demand, going forward, along with jet
    fuel.
        So if you want to make billions of gallons of jet fuel to
    fly the airplanes because they're not likely to be electric in
    my lifetime, you're going to need those diesel distillate
    fuels.
        And all of these impediments are statutorily driven that
    need to be addressed in a way. Same thing with waste oil. Same
    thing with one-celled biological organisms.
        There's a whole plethora of these things that just prohibit
    technologies that we never knew existed when we did the spill
    in '07 that blocked the entry to these volumes.
        Mr. Tonko. Thank you.
        Mr. Feraci.
        Mr. Feraci. Thanks, Mr. Tonko.
        So I think it's a great question and I want to share the
    experience that we've had in the RNG industry because it's a
    fairly new experience but I think that there's some lessons to
    be taken from that.
        So our fuel become qualified as a cellulosic biofuel in
    2014 and as I said in my statement, I mean, we've seen a 620
    percent growth in the use of the fuel--the cellulosic biofuel--
    and what--one of the big things that has spurred that is the
    RFS program and it's something at the Federal--a decision at
    the Federal level that we are going to prioritize the
    introduction of advanced biofuels and that reduce greenhouse
    gas emissions that that's a Federal priority from an energy
    policy standpoint and from an environmental standpoint.
        But beyond that, the way that the RFS is structured now is
    when you set volumes out into the future it's prospective so
    that it allows investors to go and get private sector capital
    investment to put in the projects.
        And like I said, when you're doing an RNG project, you
    know, it's not something you just put up overnight. I mean,
    you're going to have to go into a 20-year offtake agreement
    with a feedstock provider to do this.
        So, you know, as it comes back to the discussion of the
    discussion draft, I mean, I think that a piece of constructive
    criticism would be that you really want to have a formula,
    going forward, that does drive growth and you want it
    prospective looking because if it's just--if you just look back
    at previous production it could have--what I was careful to say
    is, I think, an unintended consequence of potentially having
    production be flatter or even contract.
        Mr. McAdams. Mr. Chairman, could I address this RVO
    production?
        Mr. Shimkus [presiding]. Well, I think I am going to be
    asking you that question. So----
        Mr. Tonko. I will yield back.
        Mr. Shimkus. This is our last time together, so we are
    milking it out.
        So let me just go directly to Mr. McAdams, because I want
    to address this issue about how you set the RVOs.
        Obviously, you're in the minority at the panel saying that
    we should do it based upon--and we've had this discussion about
    what are we actually producing now and then--and then you
    propose a midterm review. So talk to your fellow panellists on
    why you think that is successfully achieving, I think, what
    their goals are.
        Mr. McAdams. OK. First of all, we need to realize that the
    Federal court directed EPA in 2013 that they could not put
    their thumb on the scale.
        So all three of these guys up on this panel are suggesting
    that they want to play politics and put their thumb on the
    scale instead of having a rules-based rule.
        I disagree with them. So in the case of Mr. Kovarik, if you
    took the approach that you have put in this bill, Mr. Kovarik
    would have gotten 2.7 billion gallons of an RVO for the
    biodiesel industry this year instead of 2.1. That's a 600-
    million-gallon advantage.
        So I don't know what we are talking about when we are
    talking about taking the actual production----
        Mr. Shimkus. OK. We can be nice.
        Mr. McAdams. OK. Taking the actual EMTS numbers off the
    system which have to be put in the system five days after the
    fuels are produced and then every 6 months queue up the RVO in
    line with the actual production of those numbers, OK.
        Now, the second reason we should do this is because the oil
    industry and the obligated parties were allowed to use the
    waiver credits under the cellulosic standard and EPA, under the
    existing statute, which is another reason why we have to change
    the statute, EPA has taken the position since the beginning of
    the program that they must issue the same number of waiver
    credits each year as the RVO.
        So if I am Exxon Mobil, hypothetically, and I only need 300
    million waiver credits for the cellulosic pool, I wait until
    the end of the year and I buy the waiver credits from EPA.
        And all the gallons of cellulosic or biogas from my friend
    here don't get bought and it's not bought on a rateable take.
    You should consider a rateable take. That's also in my written
    testimony.
        Mr. Shimkus. Follow up with the midterm review and--because
    I do think the intent was for us let's have achievable real
    numbers.
        But then I do also appreciate the signals that we send
    about--for people who wanted growth. So talk about the midterm
    review and does that help incentivize that.
        Mr. McAdams. So the way I would see it is, if you--if
    you're actually bringing these fuels into the market, what
    would happen at the 6-month review, the EMT system would
    already incorporate these advanced numbers. So the number would
    go up.
        So for Mannie, at the 6-month mark instead of having to
    wait until the end of the year and argue that the next RVO
    should go into a black box at EPA and the number be lifted, the
    number automatically at 6 months relative to the projects he
    brought in would come into the RVO.
        It would be added to the RVO at 6 months. It would also be
    queued up at the end of the year at 12 months.
        So you would collect your numbers and, again, the NBB guys
    would collect their numbers in the actual line with what they
    produced and that has nothing to do with whether the oil
    industry is going to buy this fuel or not, because David's
    right--this fuel is going to get bought if the price is right.
        Mr. Shimkus. OK. Let me give you a short chance to respond,
    Mr. Coleman.
        Mr. Coleman. Very quickly, two quick things.
        We are not opposed to truing up. We've been asking for true
    up, which is midterm review, for quite some time. So that's
    point one.
        Point two is----
        Mr. Shimkus. So that's a good process of our bill?
        Mr. Coleman. Yes, that's a good--trueing up is OK as long
    as----
        Mr. Shimkus. Very good. Whew, I am glad I got a good one.
        Mr. Coleman. Although there's a comma. As long as----
        Mr. Shimkus. OK. Keep going. Keep going, quickly.
        Mr. Coleman. As long as--and this is the short second
    point--that it's forward looking and EPA--the one thing that
    Mr. McAdams said that wasn't true is we are not asking for a
    thumb on the scale.
        After they lost that case, EPA went out and did a good
    forecasting methodology that's forward looking. They can do
    that, have it be completely legal, and do midterm review.
        Mr. Shimkus. Great. Thanks. Anyone else?
        Go ahead, Mr. Feraci.
        Mr. Feraci. Yes, and----
        Mr. Shimkus. Quickly.
        Mr. Feraci. I am going to start, Mr. Shimkus, by--I am
    going to be nice. So here's my--so here's what I would say, and
    I really do think that Mike is probably coming at this from a
    good place and he's advocating for his members.
        When we said that there could be--potentially being
    unintended consequences, let's take a very real-world example.
        So the EPA just came out with the RVO for cellulosic
    biofuels this year. They're going to set that at 418 million
    gallons.
        So prospectively for this year, going forward, that's what
    the biofuel requirement is going to be. If you were doing a
    look back, it would be--the numbers aren't in final but it
    would be around 323 million based on EPA's numbers.
        So when you're talking about something of the scale that
    way, when you're talking about trying to drive RNG investment,
    it's a lot easier to go and get that investment forward
    looking, having a volume like that, as opposed to looking back
    and saying, yes, there's going to be this midterm review
    process and it may work out. It may not. People may time their
    buying different based on that midterm review.
        So, again, it's just a constructive observation in terms of
    things to think about when you----
        Mr. Shimkus. Yes. I've got--my time is expiring and so I
    think we are hashing this out that there is a way to get there
    and that's, again, Mr. Tonko's problem next year.
        [Laughter.]
        But I want to end--I want to end on this statement. Then I
    will go to Mr. Olson.
        While the RFS does not end in 2022, as you all have
    highlighted in this panel, it does evolve in a scenario where
    EPA has enormous discretion to set levels based upon a bunch of
    unweighted factors.
        That should scare everyone and that's part of the reason
    why we are trying to move to certainty versus uncertainty.
        And with that, I would like to yield to the Texan, Mr.
    Olson, for 5 minutes.
        Mr. Olson. I thank the chair, and welcome, guys, and let's
    be very friendly. OK.
        I am from a big oil and gas State, Texas. You all know
    that, but I want to say, Mr. Feraci, I've seen your product
    firsthand back home.
        Fort Bend County, right near Needville, Texas, we have a
    renewable natural gas facility that's going strong for about 5
    years now. It's in partnership with WCA, Morrow, Enerdyne, and
    Fort Bend County.
        What it does is there is a municipal dump. They stack up
    their products at the dump. They are decomposing. They grab
    methane. They turn that into natural gas, get a pipeline, it
    goes to market.
        So I believe in your product. It's working back home. I've
    seen it first hand. I will invite you to come out and see if
    you haven't.
        I have a question for all five of you, just sort of around
    the table. One thing that has bothered me over and over that's
    talked about by this panel is how uncertain the RFS is.
        I know DC has a role in that. There's other market factors.
    So can you talk about whether this bill moves in the right
    direction or the wrong direction for certainty and are there
    things that we should look at?
        Mr. Coleman, you're up first, sir.
         Mr. Coleman. So our position on the fundamentals of the
    bill, which is octane trade for RFS, is that that's not going
    to work for us because we don't know what the oil industry is
    going to do.
        The EIA suggestion that they can do it without us we do not
    feel like that is a good trade for us and could actually--we
    could be rolling back from a renewable fuels perspective.
        Mr. Olson. Mr. McAdams, sir.
        Mr. McAdams. Any bill that starts a discussion on reform is
    a good bill for us.
        Mr. Olson. There we go.
        Mr. Feraci.
        Mr. Feraci. I would base it on current law. So right now,
    admittedly, there's instability in the way that it functions
    post-2022. But it is permanent law, and it's something that's
    there for our industry as opposed to something that will
    sunset.
        Mr. Olson. I apologize. Mr. Feelakov? Feelakov, is that
    close?
        Mr. Fialkov. That's very close.
        Mr. Olson. Thank you.
        Mr. Fialkov. It's Fialkov. But I think that the bill moves
    in the right direction with respect to the rules-based RVO. I
    agree with everything that Mr. McAdams just said.
        I would say that this notion that there's kind of a
    homogenous oil industry that will, as part of a stratagem, not
    buy biofuels in order to artificially lower the RVO in a given
    year.
        It's simply not true. I mean, to the extent it would lower
    diesel prices by a cent a gallon I know people who would kill
    one another to get that cent.
        So that is something I am not concerned about and I don't
    know where that fear comes from. But I will say that all of the
    progress in terms of establishing certainty and what not
    doesn't mean a lot if you don't address the small refinery
    exemption issue because that is the kind of thing that will
    inject uncertainty and the mere fact that it's looming out
    there means that there's a level of uncertainty that you just
    can't overcome no matter how you adjust the RVO process.
        Mr. Olson. And Mr. Kovarik, your concerns.
        Mr. Kovarik. Yes, thank you, sir.
        Just very quickly. I think we view the backward-looking
    setting the volumes as a small step towards certainty. That,
    coupled with no guarantee or no ensure of growth--our
    industry--along with the sunsetting of the program in 2032, are
    the failings of the bill.
        Mr. Olson. Thank you.
        One final question for my good friend who controls all the
    power pumps there. We have professional drivers, mostly truck
    drivers, pros. We talked last panel about misfueling.
        Now, that could be a concern, and one of the panellists on
    the last panel pointed out a great point that hey, I can't
    control a person putting diesel in a gasoline engine--that just
    happens.
        So my question is are your customers more likely or less
    likely to make a misfueling mistake because they're pros and
    how can this bill help ensure we have no misfueling issues or
    as few as possible? Because that's a real big deal back home.
        That's a yes or----
        Mr. Fialkov. So with respect to the--if I understand your
    question correctly, there's very little concern that a
    professional truck driver will put gasoline in a truck, if
    that's what you're asking. I think----
        Mr. Olson. How about most of the people you work for--it's
    not just truck drivers. You got a lot of people here at the
    pump, and that's where these mistakes are made.
        Mr. Fialkov. Yes. I mean, undoubtedly, when you have a
    bifurcated fuels market or automobile market where some cars
    can only accept certain fuels, other cars can only accept other
    fuels and one of those fuels is materially less expensive than
    another, there are going to be instances where people are going
    to try to put the less expensive fuel in a car that can't
    handle it.
        So I think that all of the misfueling mitigation concerns
    that were addressed in the last panel by Mr. Columbus are spot
    on and the committee would be wise to take them.
        Mr. Olson. Thank you. I am out of time.
        Have a great holiday season. I yield back.
        Mr. Shimkus. The gentleman yields back his time.
        Seeing no further Members wishing to ask questions, I would
    like to thank you all for being here. I think it was a very
    vibrant and important part of this discussion on the draft
    bill, and I would like thank you for being here today.
        Before we conclude, I would like to ask for unanimous
    consent to submit the following documents for the record: a
    letter from the American Petroleum Institute, a letter from the
    Illinois Corn Growers, a letter from Briggs & Stratton, a
    letter from the National Farmers Union, and a letter from the
    Union of Concerned Scientists.
        Without objection, so ordered.
        [The information appears at the conclusion of the hearing.]
        And pursuant to committee rules, I remind Members that they
    have 10 business days to submit additional questions for the
    record. I ask that witnesses submit their responses within 10
    business days upon receipt of the questions.
        Without objection, this subcommittee is adjourned.
        [Whereupon, at 12:30 p.m., the committee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                 Prepared statement of Hon. Frank Pallone, Jr.

        Since this is likely the last Environment Subcommittee
    hearing of the 115th Congress, I want to commend Chairman
    Shimkus and Ranking Member Tonko on their record of success. We
    have enjoyed a level of mutual respect that I believe has
    benefited both sides and produced work we can all be proud of.
    I look forward to continuing this working relationship in the
    116th Congress.
        Today's hearing on the Renewable Fuel Standard (RFS) is the
    fifth this Congress, and a culmination of Chairman Shimkus'
    substantial effort to reform transportation fuel policy. I
    commend the chairman for his efforts.
        The RFS program is far from perfect. Unfortunately, the
    ``21st Century Transportation Fuels Act'' is even less perfect
    than the program it supposedly is reforming.
        This discussion draft does not address any of the known
    problems at the Environmental Protection Agency (EPA). It does
    not address EPA's substantial misuse of small refinery waivers
    to exempt refineries that are neither small nor in financial
    distress from biofuel blending obligations. It also does not
    address EPA's failure to set volumes at levels required by the
    law.
        What the 21st Century Transportation Fuels Act does is to
    create a high-octane fuel standard without a biofuel mandate.
    It also waives misfuelling liability for vehicles manufacturers
    and retailers. And, it provides fuel economy credit
    ``harmonization'' to automobile manufacturers in an effort to
    garner their support. Ultimately, this legislation is mainly a
    broad compilation of diverging changes to the RFS and other
    vehicle programs.
        For a reform effort to be fair and successful, any RFS
    restructuring proposal should provide long term stability and
    certainty for all stakeholders. It should increase transparency
    and consistency in the market and promote overall environmental
    benefits through the diminishing use of fossil fuels.
        The discussion draft before us fails to meet any of those
    goals.
        Congress enacted the RFS program to diversify the fuel
    supply, reduce dependence on fossil fuels, promote rural
    development and deliver environmental improvements of air
    quality and greenhouse gas reduction. Furthermore, the RFS
    program promotes economic development for American farmers and
    their families, drives long term investments in technology, and
    provides a critical market for home grown fuel at a time when
    our rural economy is hurting.
        These are important things to consider in judging any
    reform effort. But it's also critical to ask the question of
    whether, in the face of intensifying climate change, a proposal
    improves the environmental benefits of the RFS or if it
    undermines them?
        This question is vital, because the transportation sector
    is the largest contributor of U.S. greenhouse gas emissions.
    Let me be clear: a policy change that extends the dominance of
    fossil fuel use in transportation, that slows improvement in
    vehicle fuel economy standards, or keeps us on a path of
    increased carbon emissions in the transportation sector is
    absolutely unacceptable.
        Unfortunately, I believe that will be the overall effect of
    this discussion draft. It will ultimately increase the use of
    liquid fossil fuels in inefficient cars, long into the future.
    Looking through a climate lens, this proposal would do nothing
    to address the existential problem of climate change and would
    likely make it worse. And, that's something I will oppose.
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