    [Senate Hearing 115-71]
    [From the U.S. Government Publishing Office]

                                                      S. Hrg. 115-71

                       LEGISLATIVE HEARING ON S. 517, THE
                     CONSUMER AND FUEL RETAILER CHOICE ACT

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENVIRONMENT AND PUBLIC WORKS
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 14, 2017

                                   __________

      Printed for the use of the Committee on Environment and Public Works

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                   COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS

                         ONE HUNDRED FIFTEENTH CONGRESS
                                 FIRST SESSION

                        JOHN BARRASSO, Wyoming, Chairman
    JAMES M. INHOFE, Oklahoma            THOMAS R. CARPER, Delaware
    SHELLEY MOORE CAPITO, West Virginia  BENJAMIN L. CARDIN, Maryland
    JOHN BOOZMAN, Arkansas               BERNARD SANDERS, Vermont
    ROGER WICKER, Mississippi            SHELDON WHITEHOUSE, Rhode Island
    DEB FISCHER, Nebraska                JEFF MERKLEY, Oregon
    JERRY MORAN, Kansas                  KIRSTEN GILLIBRAND, New York
    MIKE ROUNDS, South Dakota            CORY A. BOOKER, New Jersey
    JONI ERNST, Iowa                     EDWARD J. MARKEY, Massachusetts
    DAN SULLIVAN, Alaska                 TAMMY DUCKWORTH, Illinois
    RICHARD SHELBY, Alabama              KAMALA HARRIS, California

                  Richard M. Russell, Majority Staff Director
                   Gabrielle Batkin, Minority Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page

                                 JUNE 14, 2017
                               OPENING STATEMENTS

    Barrasso, Hon. John, U.S. Senator from the State of Wyoming......     1
    Carper, Hon. Thomas R., U.S. Senator from the State of Delaware..     3
    Fischer, Hon. Deb, U.S. Senator from the State of Nebraska.......     7

                                   WITNESSES

    Brooke, Coleman, R., Executive Director, Advanced Biofuels
      Business Council...............................................    16
        Prepared statement...........................................    19
    Jonathan, Lewis, Senior Counsel, Clean Air Task Force............    32
        Prepared statement...........................................    34
    Mike, Lorenz, Executive Vice President, Sheetz Inc...............    43
        Prepared statement...........................................    45
    Todd, Teske, Chairman, President & CEO, Briggs & Stratton
      Corporation....................................................    55
        Prepared statement...........................................    58
    Janet, Yanowitz, P.E., Ph.D., Principal Engineer, Ecoengineering
      Inc............................................................    65
        Prepared statement...........................................    67

     LEGISLATIVE HEARING ON S. 517, THE CONSUMER AND FUEL RETAILER CHOICE
                                      ACT

                                  ----------

                            WEDNESDAY, JUNE 14, 2017

                                           U.S. Senate,
                     Committee on Environment and Public Works,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:05 a.m. in
    room 406, Dirksen Senate Office Building, Hon. John Barrasso
    (chairman of the committee) presiding.
        Present: Senators Barrasso, Carper, Inhofe, Boozman,
    Fischer, Moran, Rounds, Ernst, Sullivan, Cardin, Merkley,
    Gillibrand, Booker, Markey, Duckworth, and Harris.
        Senator Barrasso. Before we start today's hearing, I would
    like to just say a few words about the shooting at the
    congressional baseball practice this morning.
        Our thoughts and prayers are with all the victims and with
    their families. Based on initial reports, the skill and the
    bravery of Congressman Scalise's security detail and the
    Capitol and local police prevented a much greater tragedy. It
    is a reminder that we should never take for granted the skill
    and dedication of those that protect all of us here in the
    Capitol, in our neighborhoods, and around the world.
        Senator Carper.
        Senator Carper. Some of us have played in the past in the
    congressional baseball games. I played in it for 10 years, and
    it is one of those rare opportunities for Democrats and
    Republicans to join together, not in conflict, not in vitriol,
    not in back-biting, but actually having fun together, and it is
    the kind of thing that we need to be doing more of rather than
    less.
        I just want to join in the words of our Chairman. We don't
    say thanks enough to the Capitol Police and, frankly, to law
    enforcement officers probably in our own States. It is just a
    reminder for us to look for the opportunities to say thank you.
        I think it was Maya Angelou who used to say people won't
    remember what we said, they won't remember what we do; they
    will always remember the way we make them feel. And we need to
    make our law enforcement officers, including the ones right
    here, feel appreciated.
        Thank you.

               OPENING STATEMENT OF HON. JOHN BARRASSO,
                 U.S. SENATOR FROM THE STATE OF WYOMING

        Senator Barrasso. Thank you, Senator Carper.
        I call this hearing to order.
        Today the Committee is going to consider S. 517, the
    Consumer and Fuel Retailer Choice Act, introduced by Senator
    Fischer.
        This bill would amend Section 211 of the Clean Air Act,
    which governs the regulation of fuels. Specifically, the bill
    would exempt fuels containing gasoline and more than 10 percent
    ethanol, fuels like E15, E20, and E30, from certain Clean Air
    Act requirements during the summer ozone season.
        The Clean Air Act sets forth standards for fuel volatility
    to control emissions of volatile organic compounds that
    evaporate from gasoline. Volatile organic compounds, or VOCs,
    and nitrogen oxide, or NOx, react in the presence of sunlight
    to create ground level ozone, or smog.
        The Clean Air Act sets forth different standards for fuel
    volatility for different areas of the Country. In general, the
    Clean Air Act sets forth more stringent fuel volatility
    requirements in areas that are not in attainment with the
    National Ambient Air Quality Standards for ozone, and then less
    stringent fuel volatility requirements for areas that are in
    attainment for those standards.
        So the principal question at today's hearing will be: What
    does the bill mean for air quality and for communities trying
    to comply with the Clean Air Act ozone standards? Another
    important question at today's hearing will be: Will this bill
    result in more corn ethanol production? And, if so, what are
    the impacts of additional corn ethanol production?
        According to one of our witnesses, corn ethanol has
    accounted for about 87 percent of the biofuels used to meet the
    renewable fuel standard over the last 10 years. Yesterday, the
    Advanced Biofuels Association wrote that it has deep concerns
    that the legislation will be detrimental to the future of
    advanced biofuels in the United States.
        I think we also need to ask what does the bill mean for
    consumers. In addition to exempting fuels like E15, E20, and
    E30 from certain Clean Air Act requirements, this bill would
    codify in statute the EPA's 2010 and 2011 decisions to approve
    E15 for use in model year 2001 and newer vehicles.
        In Wyoming, folks want fuel with less, not more, ethanol.
    They have seen what ethanol does to small engines and boat
    engines. They worry what fuel with more ethanol will do to
    their car engines and who will be stuck paying the bill.
    Consumers, manufacturers, and others are deeply skeptical about
    EPA's decision to approve E15 for use in the 2001 and newer
    vehicles. Congress, I believe, should not codify it.
        No one should be surprised that I don't support S. 517. But
    S. 517 deserves a full and fair hearing before this Committee.
        I also can't end my remarks without mentioning another part
    of Section 211 of the Clean Air Act, specifically the renewable
    fuel standard. Now, I believe the renewable fuel standard is
    broken, and EPA is not in a position to fix it. The program is
    causing distortions in the marketplace and damage to the
    environment. I believe it needs to be fixed.
        With that, I will now turn to the Ranking Member of the
    Committee for his remarks.
        Senator Carper.

              OPENING STATEMENT OF HON. THOMAS R. CARPER,
                U.S. SENATOR FROM THE STATE OF DELAWARE

        Senator Carper. So on this legislation we just mark you as
    undecided?
        Senator Barrasso. But still your friend.
        Senator Carper. I just hope you will still be Deb's friend
    too.
        [Laughter.]
        Senator Carper. Well, thanks, Mr. Chairman, for pulling
    this together, and to the Senator from Nebraska for offering
    this legislation. Giving us something to talk about, something
    important to talk about.
        I want to thank all of our witnesses for joining us today,
    for sharing your perspectives with us.
        Before I really get started, I want to take a moment or two
    just to remind folks how we got here in the first place. Not in
    this room, but on this subject.
        In 2007, our Nation's energy future was not bright. If you
    will recall, U.S. consumption of gasoline and diesel was
    expected to grow exponentially, and the supply of oil to feed
    that growth was expected to be imported from other nations,
    many of which, frankly, didn't like us a whole lot.
        That is why, in 2007, Congress took a number of steps to
    try to change our energy future, and in that year Congress
    increased the fuel efficiency standards for cars, for trucks,
    for vans for the first time in over 30 years.
        As someone who worked very hard with Senator Ted Stevens,
    with Senator Diane Feinstein, with our colleague, then
    Congressman Ed Markey, to help us find an agreement, I am very
    proud of this achievement. Our efforts laid the groundwork for
    future vehicle efficiency increases by the Obama
    administration.
        In 2007, Congress also amended the Clean Air Act to more
    than double the domestic biofuel mandate to 36 billion gallons
    by 2022. We included new incentives for advanced fuels that
    were intended to be better for the environment and were not
    derived from the food that we eat or the food our chickens and
    our cattle eat.
        Since 2007, we have seen a dramatic change in the energy
    trend lines and our energy future looks better, brighter than
    it has in decades.
        Today, thanks to the groundwork laid in 2007, consumers pay
    less at the pump, vehicles are cleaner and more efficient, and
    our Nation is no longer a net importer of oil.
        I continue to believe that biofuels, if done correctly, can
    give us an environmentally friendly option, friendlier option
    to reduce our dependence on fossil fuels and our dependence on
    foreign energy production. However, we cannot ignore any
    unintended consequences, be they economic or environmental, of
    increasing our biofuel mandate.
        The bipartisan bill before us today assumes gasoline with
    ethanol blends greater than 10 percent contribute to ozone
    pollution no more or no less than gasoline blends with 10
    percent ethanol and, therefore, the fuel should be treated the
    same under the Clean Air Act.
        My first and foremost concern is making sure that
    assumption is correct, and I suspect that everybody feels that
    way. Representing a downwind State with ozone pollution
    problems, I want to make sure that passing this legislation
    will not increase ozone pollution that would make it more
    difficult for my State and other States that live at the end of
    America's tailpipe to reach attainment.
        Along this line, States with extreme ozone concerns like my
    State, Delaware, have the authority to regulate the fuels sold
    within our borders, and I want to make sure this legislation
    does not inhibit States' rights to address ozone pollution.
        My second concern is in regard to advanced biofuels. I have
    been told that this legislation would increase market access
    opportunities for higher blends of ethanol by allowing
    retailers to sell E15 and other higher ethanol fuel blends
    year-round. I just want to make sure that advanced biofuels,
    not necessarily traditional corn ethanol, benefit from this
    increased market share.
        My third and final concern is related to the volatility in
    the markets used by refineries complying with the renewable
    fuel standards, known as the Renewable Identification Number,
    RIN, market. In the past 4 years, spikes in the RIN market have
    negatively impacted merchant refineries around the Country like
    one in Delaware City, Delaware, and others along the East
    Coast. I am interest in learning today what, if any, impact
    this bill may have on the RIN market and what more we can do to
    add transparency and certainty to what is really an opaque
    market there.
        I started with a little history lesson. Now let me conclude
    with just a touch more of history, and that is the history of
    how this legislation found its way before us today.
        I understand that this legislation has come before our
    Committee as part of an agreement among Republican Senators
    with respect to Senate consideration of another bill, one that
    is not this Committee's jurisdiction. So I just want to make
    clear to my colleagues that I was not privy to that agreement,
    and at this time I have not committed to any action with
    respect to this legislation that may have been discussed among
    our Republican colleagues, nor have I made commitments
    regarding our Committee's possible consideration of this bill
    in the future.
        Having said that, when you have a bill like this that is an
    important bill and purports to do and intends to do good
    things, and is offered, I think, in good intent and with
    bipartisan support, and I applaud the author of the bill for
    gathering that kind of support. This is the way we ought to
    move a bill, work a bill. And when there are differences of
    opinion, we ought to have a hearing and we ought to have people
    who can express well all the different opinions, and then we
    will make our decisions. So this is the right way to do things.
        I am happy that we are here and look forward to learning as
    much as we can.
        Thank you all.
        [The prepared statement of Senator Carper follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Thank you, Senator Carper.
        Senator Fischer.

    STATEMENT OF HON. DEB FISCHER, A UNITED STATES SENATOR FROM THE
                           STATE OF NEBRASKA

        Senator Fischer. Chairman Barrasso and Ranking Member
    Carper, I thank you for convening today's legislative hearing
    to discuss bipartisan legislation that I introduced with
    Senators Donnelly and Grassley, and that is S. 517, the
    Consumer and Fuel Retailer Choice Act.
        Thank you to my EPW colleagues, Senator Ernst and Rounds,
    Duckworth and Moran, for supporting this important legislation.
        I would also like to thank the witness panel today for
    their willingness to share their time and experience with our
    Committee this morning.
        When I first arrived in the U.S. Senate, I attended a
    meeting in Senator Klobuchar's office, and it was to discuss
    renewable energy and fuels; and several of my colleagues were
    there, Senator Durbin, Harkin, and Franken, to name a few. It
    was my first bipartisan meeting in the U.S. Senate. And in that
    meeting we lay the groundwork for including renewable in our
    Nation's ``all of the above'' energy strategy.
        We made a strong connection. We all wanted to come together
    and work across the aisle to advance environmentally friendly
    fuel options for American families.
        The bill before us today, the Consumer and Fuel Retailer
    Choice Act, is a renewable energy bill. It would extend the 1
    pound Reid vapor pressure waiver, more commonly referred to as
    the RVP waiver, to E15. Extending the RVP waiver would allow
    this fuel to be sold year-round. Currently, it is illegal for
    E15 to be sold during the busy summer travel season, from June
    1st to September 15th. Consumers who want to purchase it during
    that time, they can't buy it.
        In 1990, the EPA granted a 1 pound RVP waiver to E10.
    However, this waiver does not apply to E15 during the summer,
    even though it has a lower RVP and burns more cleanly. As a
    result, fuel retailers are required to change fuel labels at
    the pumps before and after the summer season. This leads to
    increased costs, and it is also greater confusion for
    consumers.
        E15 is a cleaner, higher octane fuel that has been approved
    by the EPA for use in passenger cars, light duty trucks, and
    medium duty passenger vehicles built after 2001. Currently, E15
    is offered to consumers in 29 States, including Wyoming, South
    Dakota, Nebraska, Kansas, Oklahoma, Iowa, Arkansas, Illinois,
    Alabama, Mississippi, and West Virginia.
        In Nebraska, we are known for supporting renewable fuel, so
    it might surprise you that Illinois, West Virginia, Minnesota,
    Texas, and many other States, well, they sell more E15 than my
    home State does.
        The Consumer Fuel Retailer Choice Act would expand consumer
    choice and eliminate confusion at the pump. It does so by
    ensuring a consistently labeled product is offered year-round,
    which would decrease the occurrence of misfuelings.
        S. 517 will also provide relief for our retailers who have
    been forced to change fuel pump labels twice a year for a fuel
    that does not change.
        Good business decisions rely on accurate information and
    stability. Providing the RVP waiver for E15 would ensure that
    retailers have the certainty they need to make sound business
    decisions that will lead to greater economic growth
    opportunities in our local communities.
        We all want clean air and clean water, and renewable fuels
    help us protect our world for future generations. Renewable
    fuels reduce greenhouse gas impacts by an average of 43 percent
    over gasoline. E15 has lower evaporative emissions than E10. It
    is a more environmentally friendly burning fuel.
        Mr. Chairman, I have letters of support from multiple
    stakeholders, including the National Association of Convenience
    Stores, E15 retailers, Prime the Pump, the National Corn
    Growers Association, and Nebraska agriculture leaders, and I
    would ask unanimous consent that these letters be included in
    the record.
        Senator Barrasso. Without objection.
        [The referenced information follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Fischer. Thank you, sir.
        Renewable solutions are out there to fulfill our Nation's
    energy needs, and E15 is one of them. American families should
    be able to decide which fuel they put into their vehicles. Our
    bill would ensure retailers can offer consumers consistent
    choices at the pump year-round, with less confusion and red
    tape.
        So I am looking forward to today's discussion and I thank
    my colleagues for joining me on this legislation.
        And thank you, Mr. Chairman, for holding the hearing.
        Senator Barrasso. Thank you very much, Senator Fischer.
        We are now going to hear from our witnesses.
        Joining us today is Brooke Coleman, who is the Executive
    Director of the Advanced Biofuels Business Council; Jonathan
    Lewis, who is the Senior Counsel at the Clean Air Task Force;
    Mike Lorenz, who is Executive Vice President of Sheetz; Todd
    Teske, who is the Chairman, President, and CEO of Briggs &
    Stratton; and Janet Yanowitz, who is the Principal Engineer at
    EcoEngineering.
        I would like to remind the witnesses that your full
    testimony will be made part of the official hearing record, so
    please try to keep your statements to 5 minutes so that we may
    have time for questions. I look forward to hearing the
    testimony.
        Let us begin with Mr. Coleman.

     STATEMENT OF R. BROOKE COLEMAN, EXECUTIVE DIRECTOR, ADVANCED
                       BIOFUELS BUSINESS COUNCIL

        Mr. Coleman. Thank you. Good morning, Chairman Barrasso,
    Ranking Member Carper, and members of the Committee. My name is
    Brooke Coleman. I am the Executive Director of an organization
    called the Advanced Biofuels Business Council. I want to thank
    you for the opportunity to testify today. We represent
    worldwide leaders in the effort to develop and commercialize
    the next generation of advanced and cellulosic biofuels.
        I have submitted a fairly lengthy written testimony that I
    will not read back to you, so I want to just hit on a couple of
    top-line points.
        Our Council represents a wide variety of companies that
    produce a wide variety of innovative American products, whether
    it is biochemicals, biogas, biodiesel, cellulosic ethanol. But
    today's hearing is about ethanol, so I want to focus on the
    ethanol industry.
        This is a very exciting time for the ethanol industry. We
    have built more than 200 ethanol biorefineries in this Country
    in little more than 25 or 30 years. We displaced the equivalent
    of Saudi Arabia, plus, it is probably a smaller OPEC country in
    terms of foreign oil dependence, and we now are innovating in
    cellulosic ethanol, which is the industry that I represent. In
    Iowa, there are commercial scale cellulosic biorefineries in
    Galva, in Emmetsburg, we call it DSM, and then DuPont's
    facility, of course, in Nevada. Nebraska is home to the largest
    advanced enzyme facility in the Country.
        But with a growing industry comes industry challenge, and
    one challenge that new technologies face, whether it is clean
    energy, renewable energy, or anything else, is regulatory
    readiness. In fuels, regulations in policy really matter,
    because we don't have the benefit of selling to a competitive
    free market; we have to ask the oil industry to use our
    product. Our fuels can only go as far as policy and regulations
    allow them to go.
        We all want to get to the point where we have a free
    market, but we are not there yet.
        S. 517 essentially cures a regulatory glitch. Vapor
    pressure in gasoline is controlled for evaporation, and
    evaporation contributes to smog. Ten percent ethanol blends are
    allowed a 1 pound waiver in the summer because our lower
    tailpipe emissions offset the small increased emissions from
    smog.
        And I won't get into too much detail because Janet is going
    to do that, I believe, and she is the expert, but the glitch is
    that higher ethanol blends like E15, while being cleaner and
    actually lower vapor pressure, are not granted the same waiver.
        So while S. 517 will increase the availability of what I
    think, and I think will be proven, to be a cleaner, cheaper,
    lower carbon American-made and renewable fuel, it is my job to
    focus on how important this would be for cellulosic ethanol.
    And I want to emphasize that a little bit now.
        Cellulosic ethanol technology is commercially ready. The
    issue that we have right now is the market is saturated, and
    project finance, and I won't try to bore you, at least, but
    project finance, if you go to a bank or a lender and say you
    want to build a biorefinery, it is a back-to-front
    conversation. You don't go and you say I have all this fuel;
    can we find a place for it. No one is going to fund that. You
    go and you say this is guaranteed demand, this is our demand
    opportunity, this is our market access, and will you finance
    that.
        You can't go and say, well, maybe if they fix the RVP
    thing, we will have a market opportunity. No one is going to
    fund that.
        So what S. 517 essentially does is it provides market
    headroom for cellulosic ethanol right at the point where we
    need it, and roughly 20 companies--I believe a letter was
    mentioned by the Chairman. There is a point where people who
    run trade associations, and that includes myself, should be
    sort of pushed to the side. Twenty company executives signed a
    letter saying they support S. 517 for the very reason that it
    will unlock project finance in an industry that is very, very
    important and growing in this Country.
        I think I am going to use the time left to discuss very,
    very clearly what this proposal is, and in some cases is not.
        I have said that the proposal would allow cleaner, cheaper
    fuel to be available all year. That is true. It would
    undoubtedly accelerate the commercialization of the lowest
    carbon fuel in the world. Our fuels are anywhere from 80 to
    more than 100 percent better than gasoline from a carbon
    perspective. Think about that. Some of our fuels are carbon
    sinks. It would further reduce U.S. dependence on foreign oil
    and most importantly, perhaps, keep American fuel consumer
    dollars circulating in our Country and our States, instead of
    going overseas.
        But just as important, here is what S. 517 does not do. It
    does not introduce a new fuel that is alien to consumers. We
    have used this, as Senator Fischer said, in 29 States. It does
    not replace current blends and, therefore, does not require
    small engine manufacturers to re-spec their engines, because
    E10 and E0 will still be available where it is available now.
    And it does not change current law in reformulated gasoline
    areas, which does not allow waivers of any kind, and it does
    not in any way change California law, where they have the
    special authority to regulate their fuel statewide. They will
    be making their own decisions with regard to E15.
        It is extremely rare, in my opinion, not sure if I have
    seen it in my 20 years doing biofuel work, to have the
    opportunity to do so much with such a small and simple
    regulatory fix.
        Thank you for reviewing this proposal, and we humbly ask
    you to support S. 517. Thank you, and I look forward to your
    questions.
        [The prepared statement of Mr. Coleman follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Thank you very much for your testimony.
        Mr. Lewis.

      STATEMENT OF JONATHAN LEWIS, SENIOR COUNSEL, CLEAN AIR TASK
                                 FORCE

        Mr. Lewis. Good morning. My name is Jonathan Lewis. I am
    Senior Counsel at the Clean Air Task Force, which is a
    nonprofit organization that works to help safeguard against the
    worst impacts of climate change by catalyzing the rapid global
    development and deployment of low carbon energy technologies
    through research and analysis, public advocacy leadership, and
    partnership with the private sector.
        I want to thank the Committee for inviting me to testify
    today and for holding this hearing. Any efforts that could
    result in amendments to the Clean Air Act should proceed
    through regular order so that the potential consequences for
    public health and the environment are fully considered.
        The Clean Air Task Force has several concerns about E15,
    but my comments today focus on two of them: the potential
    climate impact of additional ethanol production and the
    possibility that greater use of E15 will increase ozone
    formation.
        Allowing E15 to be used year-round would expand the market
    for ethanol. Some, maybe most, of that new market space would
    be filled by corn ethanol. An unfortunate lesson from the
    renewable fuel standard is that creating a market for advanced,
    low-carbon ethanol offers no guaranty that such fuels will be
    developed and deployed in significant volumes.
        Ten years after Congress created a huge market for
    cellulosic biofuels, production levels for cellulosic ethanol
    remain miniscule. Meanwhile, corn ethanol continues to dominate
    the RFS program.
        Increased corn ethanol production is bad for our climate.
    According to the Environmental Protection Agency's own data,
    the additional corn ethanol produced in response to the
    expansion of the RFS has higher lifecycle greenhouse gas
    emissions than gasoline.
        The National Research Council looked at EPA lifecycle
    emissions data and reported that corn ethanol produced in 2012
    or 2017 has ``lifecycle GHG emissions higher than gasoline
    unless it is produced in a biorefinery that uses biomass as a
    heat source. Thus, according to EPA's own estimates, corn grain
    ethanol produced in 2011, which is almost exclusively made in
    biorefineries using natural gas as a heat source, is a higher
    emitter of GHG than gasoline.''
        The ethanol industry argues that EPA's data are flawed and
    that corn ethanol's lifecycle greenhouse gas emissions are
    significantly less than those of gasoline.
        Nearly all the studies that reach this conclusion
    dramatically undercut the emissions from RFS-driven land use
    changes.
        We need low carbon liquid fuels to de-carbonize the
    transportation sector. Biofuels can play a role in this effort,
    particularly with respect to aviation. But by expanding the use
    of E15 without first demonstrating the capacity to produce an
    adequate supply of climate-beneficial biofuels, this bill could
    undermine climate change mitigation efforts by encouraging
    additional production of corn ethanol.
        We are also concerned by E15's potential impact on ozone
    formation. Ozone forms in VOCs and NOx, and mix in the
    atmosphere in the presence of sunlight. Ozone is particularly
    dangerous during summer months, when sunlight is more abundant
    and when hotter temperatures can worsen the incidents and
    severity of diseases that are aggravated by ozone pollution,
    such as asthma and emphysema.
        Adding ethanol to gasoline affects the emissions of both
    VOCs and NOx. E15 is slightly less volatile than E10, so a
    switch from E10 to E15 might result in a slight reduction in
    VOC emissions.
        NOx formation is more straightforward. If the amount of
    ethanol blended into gasoline is increased, the oxygen content
    of the fuel also increases. Higher oxygen levels typically
    result in hotter combustion temperatures, which in turn
    typically result in higher NOx formation.
        Modern light duty engines, especially those that have been
    built since 2007, have computerized fuel injection systems that
    work with a through-way catalyst to limit the release of NOx
    from the tailpipe. Older cars that do not have this emission
    control technology, as well as newer cars in which the emission
    controls may have degraded, are less effective at capturing the
    additional NOx that is created when they burn E15.
        The potential additional NOx emissions are important
    because, according to a May 2017 study by EPA, ozone formation
    in most parts of the Country is much more sensitive to changes
    in NOx emissions than it is to changes in VOC emissions. The
    EPA analysis finds that in most cities the impact of NOx
    reductions on ozone formation is up to five times greater than
    the impact of comparable VOC reductions. In non-urban areas,
    EPA found that NOx reductions are over 10 times more impactful
    than VOC reductions.
        Small increases in ozone due to increased NOx emissions
    from summertime use of E15 might be enough to push or keep some
    areas over the ozone standard, triggering adverse health
    impacts and additional control requirements. We have identified
    31 potentially impacted areas, including 5 areas in California;
    3 areas in Arizona, Wisconsin, Michigan, Indiana, Pennsylvania,
    and Ohio; and most of the major cities in the northeast United
    States.
        Before legislation that allows the sale of E15 during
    summer ozone season is considered, we urge that more research
    be conducted to better understand how the use of E15 affects
    NOx emissions from a wide range of engine types, engine model
    years, and engine usage patterns. In other words, we should
    look before we leap. The last thing that areas that are
    otherwise on the verge of meeting their ozone targets need is
    the introduction of additional NOx into their airsheds.
        Thank you.
        [The prepared statement of Mr. Lewis follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Thank you very much for your testimony.
        Mr. Lorenz.

    STATEMENT OF MIKE LORENZ, EXECUTIVE VICE PRESIDENT, SHEETZ INC.

        Mr. Lorenz. Chairman Barrasso, Ranking Member Carper,
    members of the Committee on the Environment and Public Works,
    thank you for the opportunity to testify today in strong
    support of legislation that allows fuel retailers across the
    Country to sell a fuel product approved by the Federal
    Government year-round, just like every other transportation
    fuel on the market.
        My name is Mike Lorenz. I am the Executive Vice President
    of Petroleum Supply at Sheetz, a family owned convenience store
    chain based in Altoona, Pennsylvania, with 550 stores in six
    States. I have spent the last 17 years of my career with Sheetz
    managing our fuel supply strategy. Prior to joining Sheetz, I
    worked 22 years at Mobil Oil.
        For more than 60 years, our mission at Sheetz has been to
    meet the needs of the customer on the go; offer them a variety
    of high quality products and let them choose. We don't create
    customer demand; we work hard to satisfy it. Their purchases,
    much like votes, show us which products they prefer strongly.
        Recently, we expanded our fuel options, providing customers
    with the ability to purchase a 15 percent blend of ethanol,
    known as E15, at more than 190 of our stores, and we are adding
    more stores each month. We did this on a voluntary basis
    because we believe that providing more fuel options such as
    E15, which is lower cost, higher performing, and better for the
    environment, is what our customers want.
        So far, I can tell you that offering E15 at our stores is
    working. Consumers are purchasing it because it is three to ten
    cents a gallon less than regular gasoline and is 88 octane
    instead of 87.
        That is what motivates fuel purchases: cost and
    performance. They don't care about fuel volatility, ethanol
    concentration, or the public policy behind renewable fuels. And
    after millions of E15 transactions by thousands of customers
    purchasing millions of gallons and driving millions of miles,
    one thing is clear: we have not had a single customer complaint
    or any cases of misfueling.
        But this has been a major challenge, not being able to sell
    E15 in the summer to the same customers that we sell to the
    rest of the year. In addition to lost sales during the summer,
    relabeling will cost retailers roughly $2 million this year,
    and possibly $5 million next year.
        The inconsistency creates confusion and undermines the
    integrity of this product, and could also lead to potential
    misfueling. Frankly, we think this problem is nothing more than
    a technicality that can be easily fixed.
        This legislation fully addresses this issue, simply
    providing E15 the same vapor pressure treatment that is given
    regular gasoline, and ultimately lets the consumer choose what
    fuel works best for them.
        I want to thank Senators Fischer, Ernst, Rounds, Moran, and
    Duckworth for their leadership on this issue and their support
    of S. 517, the Consumer and Fuel Retailer Choice Act.
        Sheetz is not selling E15 because of ethanol producers. We
    sell it because there is consumer demand for the fuel. We don't
    support this legislation because it is backed by corn farmers;
    rather, we support this legislation because it allows us to
    sell a legal fuel to customers that want to buy it year-round.
        We still offer other fuels, including E10, a fuel
    specifically warranted for small engines, marine, off-road, and
    motorcycle engines. We believe adding a lower cost, higher
    performing fuel to our offer allows Sheetz to provide superior
    selection and service to those who visit our stores.
        I want to again thank the Committee for this opportunity to
    appear today. I want to close by saying that this bill is
    simply about fixing a regulation that is almost 30 years old,
    and prevents retailers like Sheetz from offering a legal fuel
    year-round, just as we do with regular gasoline.
        I would be happy to answer questions.
        [The prepared statement of Mr. Lorenz follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Thank you very much for your testimony.
    We appreciate you being here today.
        Mr. Teske.

     STATEMENT OF TODD TESKE, CHAIRMAN, PRESIDENT & CEO, BRIGGS &
                          STRATTON CORPORATION

        Mr. Teske. Chairman Barrasso, Senator Carper, distinguished
    members of the Committee, thank you for inviting me here today
    to discuss the renewable fuel standard and the Consumer Fuel
    and Retailer Choice Act on behalf of Briggs & Stratton.
        My name is Todd Teske. I am Chairman, President, and CEO of
    Briggs & Stratton. Today I hope to offer insight to our
    experience with the renewable fuel standard and specifically S.
    517. I have provided more detailed written testimony, which I
    would ask to be included in the record.
        Briggs & Stratton is a 109-year-old U.S. manufacturer
    headquartered in Milwaukee, Wisconsin. We have U.S.
    manufacturing sites in New York, Georgia, Alabama, Missouri,
    Kentucky, Wisconsin, and Nebraska. Briggs & Stratton is the
    world's largest producer of small air-cooled gasoline engines
    for outdoor power equipment, and we are a leading designer,
    manufacturer, and marketer of power generation, lawn and
    garden, turf care, and jobsite products. If you have a garage,
    you probably have a Briggs & Stratton product in it right now.
        We have 5,500 employees worldwide, with approximately 5,100
    of them right here in the U.S. We take pride in producing over
    85 percent of our products and 72 percent of our sales here in
    the U.S.
        Briggs & Stratton has a longstanding commitment protecting
    our environment. Since 1995, we have reduced our emissions by
    75 percent. In 2007, we pledged with the Department of Energy
    to reduce our energy consumption by 25 percent over 10 years,
    and I am pleased to say that we were able to achieve that goal.
        Keeping our commitment to the environment in mind, I
    believe that the environmental goals underpinning the RFS and
    E15 were laudable. However, it has since become apparent that
    these goals are unlikely to ever be met and, more importantly,
    may have significant unintended consequences for consumers.
        I would like to briefly outline several concerns I have
    with the RFS and the increased availability of E15.
        Extensive research has shown that the use of E15 in small
    non-road engines can have harmful and costly consequences, and
    the EPA has confirmed these findings. We have conducted our own
    studies that show that as the level in gasoline increases, the
    level of alcohol increases as well. Alcohol contains inherent
    properties that cause problems with engines.
        By definition, E15 would have an alcohol content of 0 to 15
    percent, which would result in great difficulty in engines
    meeting both emissions and performance requirements.
    Furthermore, the Department of Energy's testing of E15 in non-
    road engines found that small engines experienced a variety of
    difficulties with higher ethanol blends. More than half of the
    engines tested behaved poorly or erratically, according to the
    DOE's report, which caused the EPA to exclude small engines
    from the E15 waiver. This exclusion, however, has not led to
    decreased problems due to consumer misfueling.
        The EPA has issued a mandatory warning label for pumps that
    distribute E15. While we appreciate this preventative effort,
    research has shown that warning labels are not effective in
    preventing misfueling, and consumers continue to use E15
    despite the risks.
        Behavioral studies have shown that consumers at the pump
    overwhelmingly favor the lowest priced fuel. In the 1970's and
    1980's, the U.S. made the transition from leaded to unleaded
    gasoline, and new cars were designed with different fuel tanks
    that were incompatible with older, leaded gasoline pumps. It
    was found that even with this physical obstruction in place,
    consumers would still opt for the lowest priced fuel option in
    their car. If a physical obstacle could not deter consumers
    from using the correct gasoline, can we assume that a sticker
    is going to prevent misfueling?
        At Briggs & Stratton, we have partnered with other small
    engine manufacturers and retailers across the Country to
    educate consumers on proper fueling. Together, we created the
    ``Look Before You Pump'' campaign to assist consumers when
    purchasing new small engine products. While we are happy to do
    our part to educate the public on the negative impact ethanol
    can have on our products, we do not believe that we should
    solely be responsible for this effort. It is going to take a
    concerted effort with industry and Government to fully educate
    the public on the risks of misfueling with ethanol.
        Last, small engines and outdoor power equipment are not
    designed, warranted, or EPA approved to operate on gasoline
    containing more than 10 percent ethanol. This is why we fully
    support the development of advanced biofuels as a solution.
    Biofuels from other feedstock are drop-in fuels. Drop-in fuels,
    by definition, meet existing gasoline specifications, are not
    ready to drop in to infrastructure, minimizing compatibility
    issues. We have conducted extensive testing with a drop-in
    isobutanol blended gasoline, which demonstrated evidence that
    such fuels can provide the performance and operational criteria
    necessary without demonstrating any negative effects.
        I strongly support further research into these alternative
    fuels that are effective and do not damage our products. The
    Consumer Fuel and Retailer Choice Act would allow retailers
    across the Country to sell E15 year-round. Under this
    legislation, it is highly likely that consumers would misfuel
    small engines with even more frequency. Misfueling would lead
    to significant economic harm for consumers as these small
    engines fail. Reliance on warning labels would do little to
    prevent misfueling, despite our best efforts at education and
    prevention, and we believe the risk of misfueling would be
    substantial, and damage to our products would be irreversible.
    This puts us at risk to lose decades of trust from consumers
    and negatively impact our reputation.
        For these reasons, Briggs & Stratton opposes S. 517 as
    currently written. We encourage the Committee to work together
    in a bipartisan way to draft new legislation that protects
    consumers. We recommend that any reform legislation rescind the
    partial waiver for E15 and establish gasoline blended with up
    to 10 percent ethanol as the general purpose domestic fuel. I
    also encourage the Committee to pursue policies that encourage
    research into the next generation of renewable fuels that are
    safe, proven, and for all types of engines.
        Mr. Chairman, Senator Carper, thank you for this
    opportunity to testify today. I appreciate the Committee
    looking into the complicated issues dealing with the RFS, and I
    would be happy to answer any questions you might have.
        [The prepared statement of Mr. Teske follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Thank you so much for your testimony.
        Ms. Yanowitz.

     STATEMENT OF JANET YANOWITZ, P.E., PH.D., PRINCIPAL ENGINEER,
                          ECOENGINEERING INC.

        Ms. Yanowitz. Chairman Barrasso, Ranking Member Carper, and
    distinguished Committee members, thank you for the opportunity
    to speak here today. It is an honor. I am an engineer that has
    worked on the emissions from biofuels for almost two decades.
        Today you are evaluating whether to allow E15, a fuel which
    is 15 percent ethanol and 85 percent petroleum, to have the
    same 1 PSI waiver currently permitted for E10. At this time,
    virtually all the fuel sold in the U.S. is E10, and extending
    the 1 PSI waiver to all ethanol fuels will encourage the use of
    E15 in place of E10. I will be discussing the air emissions
    impact of this change.
        As any scientist who has spent time on vehicle emissions
    will tell you, the issue is complicated and different vehicles
    can behave quite differently. However, for those of you who are
    listening for the bottom line, replacing E10 with E15 would be
    a small change with minimal emissions impacts, according to the
    best available emissions test data.
        On average, the total tailpipe organic emissions and the
    ozone forming potential of those organics will be expected to
    decrease or stay the same, and nitrogen oxide, or NOx, which
    also impact the ozone formation, are expected to be unchanged.
    Ethanol and aldehyde emissions will likely increase and carbon
    monoxide and benzene will decrease.
        This analysis is based on studies reported in the peer-
    reviewed scientific literature and by the coalition of
    petroleum and automobile companies that make up the
    Coordinating Research Council, or CRC. More information on
    these studies is included in my written submittal, but I will
    quickly describe the most significant so you get a feeling for
    the size of the studies and the results.
        In 2008, a team comprised of scientists from three national
    laboratories conducted emissions testing on 16 vehicles using
    E0, E10, E15, and E20. The found that increasing the ethanol
    content resulted in no significant effect on NOx or organic
    tailpipe emissions, although the acid aldehyde emissions
    increased. Similar results on three vehicles were reported by
    Karavalakis and his colleagues at UC Riverside. The CRC also
    reported that increased ethanol content up to 20 percent
    ethanol reduced CO emissions, although the same study reported
    an increase in NOx emissions with higher ethanol content.
        An analysis of the 12 2001 newer vehicles included in
    another DOE study found that non-methane hydrocarbons, carbon
    monoxide and NOx trended slightly lower with higher ethanol
    contents. In another study conducted by a subcontractor to
    NREL, non-methane hydrocarbons and carbon monoxide emissions
    were either equal or lower for six vehicles aged and then
    emissions tested on E15 versus E0, and NOx emissions were
    unchanged.
        The total amount of organics emitted provides a rough gage
    of the overall forming potential of the emissions, but not all
    organics are equally prone to reacting to form ozone. Thus,
    studies which considered the reactivity of the specific
    organics released are more accurate at determining the ozone
    forming potential of the emissions. The UC Riverside team did
    this analysis for emissions from two 2012 model year vehicles
    and found that the ozone reactivity for emissions from E15 were
    less than those from E10.
        In addition to tailpipe emissions, vehicles emit additional
    organic compounds to the atmosphere via evaporation. There have
    been no significant studies comparing evaporation emissions of
    E15 to E10, but two studies made with E20 and E10 show mixed
    results, suggesting that increases in evaporative emissions
    between vehicles using E10 and E15 of the same vapor pressure
    are small or non-existent.
        In another study, limited data from the testing of four
    vehicles using E0 and E15 showed no significant differences
    between the two fuels in evaporative emissions.
        In conclusion, the available emissions test data indicates
    that replacing E10 with an E15 of the same vapor pressure will
    cause a slight decrease in emissions of ozone-forming organic
    compounds and carbon monoxide, and no change in NOx.
        Thank you.
        [The prepared statement of Ms. Yanowitz follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Barrasso. Well, thank you all for your testimony.
    We appreciate you all being here today.
        Mr. Teske, let me start with you.
        Earlier this week, the National Marine Manufacturers
    Association, the American Sports Fishing Association, Boat USA,
    Center for Sports Fishing Policy, Marine Retailers Association
    of the Americas, Theodore Roosevelt Conservation Partnership
    sent the Committee a letter expressing concerns about how E15
    can contribute to engine failure. I don't know if you have seen
    that letter.
        Mr. Teske. I have.
        Senator Barrasso. Do you share the concerns of these
    groups?
        Mr. Teske. We do, because ethanol or alcohol does a couple
    different things to an engine; it doesn't matter whether it is
    a marine engine or a small lawnmower engine. Basically, it will
    fail over time if you put E15 in them, in a relatively short
    period of time. And in many cases, it has to do with the fact
    that enleanment, which means that the engine will run hotter,
    will start to distort the components in the engines. So it is
    no different, really, between any of the engines you mentioned,
    with marine or our engines at Briggs & Stratton.
        Senator Barrasso. Thank you.
        Dr. Yanowitz, I have a couple of studies here that you have
    put forth in terms of performance, compatibility and
    environmental impacts of ethanol. Were they funded by the
    ethanol industry? I am looking at the March 2012 study prepared
    for the Renewable Fuels Association, funded by the Renewable
    Fuels Association in May 2015, prepared----
        Ms. Yanowitz. Seems like you have answered your question.
    Yes, they were.
        Senator Barrasso. OK, thank you.
        Mr. Lewis, in your testimony you explained that E15, when
    compared to E10, may produce lower emissions of the VOCs, but
    likely to produce higher emissions of NOx. So what does that
    mean in terms of ozone formation?
        Mr. Lewis. There are some studies that show slightly higher
    NOx emissions. It is not a large effect, but it is something
    that we are concerned about because, as I mentioned earlier, in
    the vast majority of areas of the Country where ozone is a
    problem, a slight change in NOx emissions or change in NOx
    emissions is going to have a much more significant impact on
    ozone formation than a change in VOC emissions.
        None of the studies that we have looked at have looked at
    the full range of different vehicle types, the vintage of those
    vehicles or the miles that they are driven, and consider what
    NOx impacts from those vehicles might be on ozone formation,
    but it is definitely an area of concern for us given the
    direction that NOx formation has on ozone.
        Senator Barrasso. We had talked earlier in my opening
    comments about NOx emissions and the potential to push regions
    of the Country which are currently in attainment with the
    National Ambient Air Quality Standards for ozone pushing them
    into non-attainment, Mr. Lewis. So do you believe that these
    additional potential NOx emissions have the potential to
    prevent regions of the Country which are currently in non-
    attainment from getting into attainment, as we look at the
    impact of that? And which regions of the Country might be most
    vulnerable?
        Mr. Lewis. In our written testimony, we identified 31
    regions around the Country that are either just above or just
    below the 2008 ozone standard and the 2015 ozone standard, and
    in those areas they are making heroic efforts to bring down
    ozone levels to attain those standards, and slight changes in
    ozone levels make a significant difference in whether or not
    they are going to attain. So the areas that we mentioned, there
    are five of them in California; there are three in Arizona,
    Wisconsin, Michigan, Indiana, Pennsylvania, and Ohio; Illinois,
    Maryland, West Virginia, and Nevada each have two of these
    areas; and they include most of the major cities in the eastern
    United States.
        Senator Barrasso. So it seems more related to the cities.
        Mr. Lewis. It is a significant concern for cities,
    particularly since many of the east coast cities are downwind
    from ozone producing areas. So even if they take significant
    efforts at home, it won't necessarily solve the problem.
        Senator Barrasso. And I think you mentioned that there are
    a number of other impacts on air, water, land quality. Could
    you expand on that a little bit?
        Mr. Lewis. Yes. In addition to the climate concerns that I
    outlined in my opening statement, we are very concerned about
    the impact on water quality. Farm runoff is a significant
    problem, particularly from corn production, and that has led to
    water pollution and degraded water habitats in streams, rivers,
    the Chesapeake Bay and the Gulf of Mexico.
        We are also concerned about habitat loss. Between 2008 and
    2012, studies have found that 7 million acres of range land,
    wetland, native prairie lands have been converted into crop
    production, and soybeans and particularly corn have accounted
    for most of the plantings on that cleared land.
        Senator Barrasso. Thank you. Thank you for your response.
        Senator Carper.
        Senator Carper. So, we were talking, like a sidebar
    conversation here, and said this really is a good panel, and
    this is an issue about which people have some real serious
    differences. But this is the kind of panel we need to help us.
    And one of the things that I always look to a panel of this
    nature on an issue that is contentious, bipartisan, but
    contentious, is to help us find a path to a smart public
    policy. And I think at the end of the day we want to make sure
    that what we are doing, if we are going to move from E10 to
    E15, the effect on the environment, what it does for customers,
    what it does in terms of reducing our demand on foreign oil.
    There are a lot of factors out here, and there are some aspects
    that would suggest that this is a good thing, and then there
    are others we have to be concerned about.
        I flagged in my statement a concern that may not be shared
    by others, but it deals with something called the Renewable
    Identification Number, RIN, and volatility in the RINs market.
    We don't have time to explain well the concern, but the concern
    is related to the volatility in the market used by refineries
    to comply with the renewable fuel standard, and it is known as
    the Renewable Identification Number, the RIN market.
        In the past 4 years or so, the RIN market had spikes, the
    RIN market goes up, it goes down, and those spikes in the RIN
    market have negatively impacted a number of refineries. We call
    them merchant refineries because they are not connected to a
    service station, gasoline stations across the Country. But I am
    interested in knowing, and maybe I will just come to you, Mr.
    Coleman.
        What impact will this bill have on RIN markets? We think
    they are too opaque. We need more certainty. We need more
    predictability. We need less volatility. Otherwise, some of
    these refineries are going to be driven out of business, and
    that would be a great tragedy.
        Please.
        Mr. Coleman. Thank you, Senator Carper. So the RIN markets
    are essentially renewable fuel standard credit markets, and the
    oil industry buys credits when it cannot put more renewable
    fuel into the marketplace. So, in other words, RIN prices go up
    when demand for those credits increases when the usability of
    renewable fuel, in this case ethanol, is restricted. What we
    are asking for is an alleviation on the restriction to use
    ethanol. It will provide a place for the ethanol to go and RIN
    prices will come down.
        The last point, of course, is that we are at 15 billion
    gallons. We are at the capped amount for corn ethanol, and we
    should see alleviation in those credit prices.
        Senator Carper. All right. Someone mentioned, I think,
    isobutanol, and we have had a real interest in biobutanol in
    the State of Delaware. DuPont has worked on this forever and
    along with, I think, BP and I think the Navy. They have a
    partnership and share views, markets and provided the products
    to markets in maybe Great Britain. I think I understood one of
    the panelists to say isobutanol does not have the problems that
    the corn ethanol has. Would you clarify that for us, isobutanol
    versus biobutanol versus corn ethanol? Again, this was with
    respect to small engines.
        Mr. Teske. Correct. Yes, that is correct, Senator. We have
    done extensive testing on isobutanol, and it has
    characteristics that are much more like gasoline, so it is much
    more like a drop-in fuel.
        Senator Carper. I understand it travels better in
    pipelines.
        Mr. Teske. Yes.
        Senator Carper. It passes better with gasoline and it has
    better energy density, I think.
        Mr. Teske. Yes, correct. So you can use existing
    infrastructure along the way, all the way from pipelines all
    the way to convenience stores. And then when you ultimately use
    it in small engines, it has the same characteristics as
    gasoline, so it performs very well in our engines.
        Senator Carper. We have been talking about this for a long
    time. In terms of market, making an impact on the markets,
    having this stuff being sold commercially in this Country,
    other countries, what is going on? Anybody. This is for
    anybody.
        Mr. Coleman?
        Mr. Coleman. Yes. Look, the way you get isobutanol is you
    basically cook the biofuel more, so you inject more energy in
    the production process, and you can actually make it look more
    like gasoline. We support the production of those fuels. To
    date, those fuels are more expensive than ethanol. Ethanol is
    the lowest cost solution. And I am a little bit confused about
    the Briggs component of this because Brazil uses two times as
    much ethanol as we do and that company sells small engines into
    Brazil, to my knowledge, without problem. So other countries
    are ahead of us. They certainly have small engines in Brazil,
    so that is one confusion that we have.
        Senator Carper. All right, my time has expired. Thank you
    so much.
        Senator Barrasso. Thank you, Senator Carper.
        Senator Inhofe.
        Senator Inhofe. Thank you, Mr. Chairman.
        I am going to do something a little bit different. I have
    questions for our witnesses, but I also have a statement I want
    to start with. I appreciate the opportunity that this hearing
    brings for us to address the wider issue of renewable fuel
    standards.
        I understand the supporters of the bill believe that the
    Reid vapor pressure issue should be a separate consideration
    from RFS, but I can't separate the two as this bill provides
    another win for ethanol at the expense of other forms of
    energy. The bill is more than a mere technical fix, more than
    mere regulatory reform. The bill would expand the waiver to E15
    and beyond.
        If we are to revisit the provision of the Clean Air Act,
    which was intentional, we must also look at the many other
    issues that have arisen since the mandate was created. Congress
    enacted the RFS in 2005 and expanded it in 2007. I opposed both
    efforts. The world of liquid fuels has changed since then and
    we produce more oil here, import less and consume less gasoline
    and emit fewer emissions from oil-based fuels. Most of the
    rationale originally justifying the RFS has disappeared. All we
    have left is an unstable program rooted in EPA waiving entire
    portions of annual requirements, allowing imported soybeans and
    ethanol from South America to count toward RFS in regularly
    missed deadlines.
        The mismanagement of the RFS has hurt every party involved.
    Oklahomans understand that the RFS is a bad deal. Our pork
    producers, our cattlemen understand that to drive feed prices
    up, Oklahoma drivers understand the ethanol blends add wear and
    tear on their engines. Oklahoma gas stations across the State
    advertise gasoline without ethanol.
        There we go. I took those myself.
        [Laughter.]
        Senator Inhofe. Unfortunately, it is going to get harder
    for Oklahomans to burn clean gas because the RFS only gets
    worse from here.
        Yet, regardless of demand and other concerns, the previous
    EPA pushed increased ethanol blends to levels that can corrode
    engines and void vehicle warranties. These are just a few of
    the reasons why I continue to oppose the RFS, which I have done
    since its creation in 2005. And because of these concerns and
    those addressed by the Chairman, I believe any discussion of a
    waiver under the Clean Air Act should not be made in a vacuum.
    I welcome the opportunity to explore these concerns.
        Now, Mr. Teske, back when I enjoyed life, I was a builder
    and developer along the coast in south Texas. Texas didn't have
    options for the small engines out there. They were surprised to
    find out in Oklahoma we don't have that problem. In fact, it is
    hard to find anything with an ethanol blend where you actually
    have the small engines in our lake areas. And I have to remind
    people sometimes that Oklahoma has more miles of freshwater
    shoreline than any of the 50 States, and we know what we are
    doing there. But down in Texas they don't have that option.
        Now, here is what I hear from the guys down there. You are
    in the engine business, so you are in a position to understand
    this. They are upset because of the effects on their
    warranties. They will go ahead and be using the blends that
    they are required to use because there is no option along the
    coast in their small engines. Then, when something happens,
    they come back against the manufacturer, that would be you, and
    have a lawsuit in many cases as a result, when in fact it was
    really just the blend that caused it.
        Is this all new to you or is this something you have been
    aware of?
        Mr. Teske. It is certainly not new to us. We warrant up to
    E10, and our engines are fine running up to E10. But the issue
    is that when there is misfueling there are opportunities for
    dealers to determine how much ethanol is in the fuel. There are
    testing kits and other things that are out there, which is why
    they oftentimes will do that test and then reject the warranty
    claim along the way. So what happens is the consumer is left
    with a damaged product.
        Senator, if I could just clarify one thing in Brazil. The
    comment was made on Brazil. Brazil has a different type of
    ethanol; it has a sugar cane based ethanol. You have to
    remember that when you are talking about performance of a small
    engine, we are talking about a tradeoff that happens between
    emissions regulations and performance. Well, down in Brazil it
    is different. So it is sugar cane based. And I can tell you we
    have a pretty good carburetor business down in Brazil because
    of the fact that they get replaced all the time.
        But to your original question, yes. This is not----
        Senator Inhofe. And I was aware of the situation down
    there. That was going to be my next question to ask you, so I
    appreciate it. But I don't want my time to completely expire.
        I have been with this issue probably longer than anyone at
    this table has, with the whole ethanol issue, and I remember
    when Al Gore invented it all.
        [Laughter.]
        Senator Inhofe. Well, I am serious about that. He did it
    with the idea that this is better for the environment and all
    that, and I think, Mr. Lewis, if I judge from your statement,
    it sounds to me like Al Gore was wrong. Do you think he was?
        Mr. Lewis. Yes, we do. We don't think much of ethanol.
        Senator Barrasso. Thank you, Senator Inhofe.
        Senator Merkley.
        Senator Merkley. Thank you, Mr. Chairman. The Ranking
    Member noted this was a good exploration of public policy, and,
    Mr. Chairman, I would just like to ask you the question are we
    holding this hearing in order to gain the diverse perspectives
    and develop better public policy in this area?
        Senator Barrasso. Well, that is the goal.
        Senator Merkley. Thank you.
        I just want to note that I think this is extremely
    valuable. We have heard that these fuels create a carbon sink,
    and we have heard that they create more global warming gases.
    We have heard they damage engines; we have heard that they
    don't damage engines. We have heard that there is no misfueling
    problem and that there is a misfueling problem.
        Just as we are having this exploration, it is incredibly
    important that we have this type of public process on any bill
    having a significant impact in America, and that is why I want
    to encourage my colleagues, all my colleagues on this
    Committee, Democratic and Republican, to insist that before a
    health care bill goes to the floor of the Senate, that it gets
    a full public hearing.
        The current plan we have heard from the Republican
    leadership is to put that bill on the floor with no hearing,
    and that would be an extraordinary violation of due process,
    would shortchange American citizens, who have every right to
    see this bill and to comment on it; it would certainly
    shortchange the legislative process, in which all 100 Senators
    should be able to see that bill, weigh in with their
    constituents, hear their constituents' responses, test the
    ideas against the testimony of experts and against the opinions
    of their colleagues; and something affecting hundred millions
    of Americans should absolutely not be considered in the Senate
    without a hearing of this type and a chance to mark up the
    bill.
        I hope my colleagues of both parties will agree and fight
    for that principle of legislative deliberation.
        Now I want to turn to my first question to Mr. Coleman.
        You referred to the fact that often you can create a
    biofuel that is a carbon sink, in which case it means it
    captures more carbon dioxide than it emits. Can you expand on
    that? Why is there such a big contrast between that point of
    view and the point of view expressed by another individual on
    the panel that says you are going to increase global warming
    gases?
        Mr. Coleman. So, to clarify the witness to my left,
    Jonathan, he is making that claim about corn ethanol, and I
    will talk about that in a minute.
        The carbon sink fuel cellulosic ethanol, the cellulosic
    ethanol that is coming out of the first round of commercial
    biorefineries, as I said, is anywhere from 85 to sort of 126
    percent better than gasoline. What that essentially means is
    that in the process of making the fuel, as it absorbs CO2 and
    sunlight, there is more CO2 and energy going in from a carbon
    perspective than is emitted when that fuel is burned. And this
    is an independently certified pathway, and it is pretty
    extraordinary because a lot of the fuels that are regarded to
    be the most innovative, like electric drive, hydrogen fuel
    cells, etcetera, do not approach this level of carbon
    reductions. And if we are concerned about climate change, there
    is an opportunity with these high-end fuels to actually pull
    down on our carbon inventories.
        On the corn ethanol side, and I don't represent that
    industry, I have to say that notwithstanding the fact that
    Jonathan and I are from the same town in Boston, we don't agree
    on this. If you look at the agencies that actually say corn
    ethanol is reductive, they include USDA, EPA, notwithstanding
    his statement, Department of Energy.
        Sixty-five percent of the credits under the low carbon fuel
    standard in California are actually produced by the corn
    ethanol industry, and what the organization did was they
    cherry-picked data out of EPA data and changed the system
    boundary around what EPA did on corn ethanol to come up with
    their conclusion. And that is not the conclusion, by the way,
    that EPA actually had, which is that corn ethanol reduces
    carbon emissions.
        Senator Merkley. And you are speaking lifecycle to
    lifecycle?
        Mr. Coleman. Inclusive of indirect land use change, yes.
        Senator Merkley. And, Mr. Lewis, you came to a different
    conclusion. If you could just, in one or two sentences, what is
    the huge difference here in your calculations?
        Mr. Lewis. The difference is that the analysis that EPA
    published, the analysis that Brooke is referring to, looks at a
    future hypothetical production scenario that begins in 2022 and
    assumes production technologies that have not been adopted by
    the industry. The analysis that we are looking at, that EPA
    also did, looked at current production technologies and found
    that there was a higher GHG emissions than from gasoline.
        Senator Merkley. Mr. Coleman, you are shaking your head.
    What is the difference?
        Mr. Coleman. I am shaking my head because in order for EPA
    to measure the carbon impact of biofuels, they had to go out
    into the future, because they wanted to do land use change. And
    to check land use change, you have to shock a model out into
    the future with a high level of biofuels. What EPA then said
    was, if we are going to go out into the future system boundary-
    wise, we are going to credit biorefining efficiency that we see
    every single year out into the future. It is either the future
    or the present.
        What this organization did was they went out into the
    future on land use change and went to the present on
    biorefinery. So they picked the negatives out of the future and
    then picked the negatives out of the present, put them together
    and said, well, that is not as good. That is why there are
    system boundaries when you do scientific analysis, and that is
    a distorted outcome.
        Senator Merkley. Thank you both.
        Senator Barrasso. Senator Fischer.
        Senator Fischer. Thank you, Mr. Chairman.
        As a cattle rancher, I just can't let my dear friend,
    Senator Inhofe's, comments pass without me weighing in on what
    ranchers think about ethanol and ethanol plants and byproducts.
    As a cattle rancher, we have mother cows on our ranch. We live
    in the Nebraska Sand Hills, and we use, as our neighbors use,
    the byproducts from ethanol plants. We are also very fortunate
    in Nebraska, we bypass Texas, to my dear friends from Texas,
    with Cattle on Feed, and we do so because of those byproducts
    from ethanol plants. So there is a direct benefit to cattle
    ranchers, people in the livestock industry, and I wanted to
    point that out.
        Before I begin my line of questioning, I would also like to
    bring to the Committee's attention two surveys that were
    conducted by Quadrant Strategies that illustrate consumers'
    knowledge and confidence about the different types of gasoline
    available to purchase. The first survey found that 96 percent
    of motorcyclists say it is easy to figure out the type of
    gasoline to put in their engines. The second survey found that
    94 percent of boat owners are confident that they know the
    right gasoline to use in their boats. And I too put my faith in
    consumers who can pick out the right kind of gasoline to put in
    their engines.
        Mr. Chairman, I would ask unanimous consent to place these
    two surveys into the record.
        Senator Barrasso. Without objection. I would note also that
    about 89 percent of all drivers consider themselves in the best
    one-third of all drivers.
        [Laughter.]
        Senator Fischer. There again, Mr. Chairman, I am sure that
    Nebraska rated higher.
        [Laughter.]
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        Senator Fischer. Mr. Lorenz, I would like to thank you for
    being here today. In your testimony you discussed how this bill
    would alleviate what I think you and I both agree is kind of
    nonsensical regulatory barriers that prevent consumers from
    choosing the fuel that they want to use in their vehicles
    during the summer months. Can you please explain to me the
    process your stores must undertake to comply with this barrier
    during the current summer fueling season?
        Mr. Lorenz. Absolutely, Senator. So we currently have, as I
    mentioned, 190 stores, and that has continued to grow, with an
    average of five dispensers per store. So before June 1st this
    year we had to replace almost 2,000 stickers or labels on all
    those dispensers; five dispensers, 190 stores, both sides.
        Senator Fischer. And do you believe that the current
    treatment of E15 limits consumer choice?
        Mr. Lorenz. Absolutely. Here you have a product that is
    perfectly fine for eight and a half months out of the year, but
    for an antiquated regulation you can't sell it for three and a
    half months out of the year. I know of no other product on the
    market that falls into that category.
        Senator Fischer. I thank you for your support of the bill
    and for consumer choice. So thank you.
        I assume that you talk to other E15 retailers around the
    Country on a fairly regular basis. Do they share your views
    with this regulatory issue?
        Mr. Lorenz. Oh, absolutely. All the same.
        Senator Fischer. And we hear a lot in this debate on the
    impact this would have on small engines, off-road engines. Can
    you tell me what percentage of fuel sold nationwide goes into
    these engines?
        Mr. Lorenz. I know the combination between small engines,
    boats, and motorcycles is about 3 percent. Well, let's say E0
    would be 3 percent.
        But I think just to add, if I may, Senator, our customers
    consist of homeowners, motorcyclists, boat owners, and we have
    no incidents, having sold this product for almost 2 years, we
    have no problems with misfueling. To your point about the
    surveys, people know what to put in their boat, car, small
    engine, motorcycle.
        Senator Fischer. As followup, do you believe consumers can
    continue to correctly choose the right fuel for their engines?
        Mr. Lorenz. Absolutely. You know, for eight and a half
    months out of the year, again, we assume they can, and now for
    this reason we are saying for three and a half months out of
    the year there is this concern that they are not going to be
    able to select the right choice. So it doesn't make any sense
    to me.
        Senator Fischer. I agree with you.
        Are you concerned about any liability on misfueling?
        Mr. Lorenz. We guaranty all the gas that we sell, so if
    there was a problem caused by the fuel that we sold you, we are
    going to make it right and fix it.
        Senator Fischer Good. Thank you, sir.
        Thank you, Mr. Chairman.
        Senator Barrasso. Thank you very much for your questions.
        It seems that there were a number of Democrats who were
    here, and none of them are back right now, Senator Carper, so
    with that I am going to head back to the Republican side for
    questions and turn to Senator Rounds.
        Senator Rounds. Thank you, Mr. Chairman. Just a couple of
    thoughts.
        Mr. Lorenz, the corn ethanol industry in South Dakota has a
    huge amount of support within our population.
        Before I go on, I guess I would like to submit to the
    record a letter of support for S. 517 from the South Dakota
    Corn Growers.
        Senator Barrasso. Without objection.
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        Senator Rounds. Thank you, Mr. Chairman.
        The corn ethanol industry in South Dakota employs literally
    tens of thousands of South Dakotans, and it really is a pillar
    of our State's economy. We have the capability of producing
    nearly a billion gallons of this product per year. As the
    market for ethanol increases, the market for corn will grow,
    and that means more jobs and increased revenue for corn
    farmers, many of whom work on their own family owned farms.
        There is a byproduct, the dry distillers grain and the wet
    distillers grain, which I think you find in the upper Midwest
    we all recognize as being a very high quality food product for
    livestock. We call it, in some cases, Dakota gold, and we
    market it not only in South Dakota, but to dairy farmers
    throughout the Country. California even brings it in, so it is
    a high quality product. And the more ethanol we produce, the
    more of the byproducts we also have available as well. So it
    isn't necessarily a matter of losing food production to the
    production of alcohol.
        I am just curious, Mr. Lorenz, when you look at this
    particular legislation that is in front of us, where we go from
    10 to 15, don't you think that what we are really doing is just
    taking out a whole lot of red tape so we can sell basically the
    same or very similar product throughout the year?
        Mr. Lorenz. Absolutely. Like I have said before, we have
    the ability to sell this product for eight and a half months
    out of the year, and it is purely, in our view, a technicality
    and an antiquated regulation that doesn't allow us to sell it
    during the summertime.
        Senator Rounds. Between E10 or 10 percent blend of an
    ethanol with gasoline versus a 15 percent blend, would there be
    a change in price? Would you expect a change in price?
        Mr. Lorenz. We currently offer E15, so I just want to make
    it clear that in all the stores that we have E15, we also sell
    E10. So you have a choice, and this is what it is all about for
    us, is giving the consumer a choice. So we typically sell that
    from 3 to 5 cents a gallon, currently 5 cents a gallon less
    than 87. So it is not only more affordable; it is higher octane
    and cleaner burning, which appeals to the consumer.
        Senator Rounds. And I think that is important to point out.
    I think it is fair to say that most people, I think, would
    assume that if you have a higher octane fuel, you have a better
    fuel. Would that be fair to say as not only a belief, but
    perhaps found in fact?
        Mr. Lorenz. The consumer equates higher octane with better
    performance, which is true. And they also equate that with
    higher price. The thing about E15 is it is actually breaking
    down the consumer's paradigm on fuel on two levels, because you
    have a fuel that is not only cheaper, but also cleaner burning.
    And typically a consumer would expect to pay more for a fuel
    that is higher octane and more environmentally friendly, and
    that is not the case with E15.
        Senator Rounds. Ms. Yanowitz, I am just curious. The last
    statement in your testimony you say, ``Data indicates that
    replacing E10 with an E15 of the same vapor pressure will cause
    a slight decrease in emissions of ozone-forming organic
    compounds and carbon monoxide.'' Can you elaborate on that
    statement?
        And I would just like you to answer one other question for
    me as well, and that is I am really curious, I always thought
    that alcohol was alcohol and, by definition, would have a
    similar formula. Can you share any thoughts? And I know that
    Mr. Teske had suggested the change in ethanol from a sugar cane
    base versus a corn base. Is there actually differences in terms
    of the chemical compounds between the two of them?
        Ms. Yanowitz. You are quite right, ethanol is ethanol
    wherever it is, but in Brazil they use some hydrous ethanol
    that has water in it, and there could be differences in
    emissions, for example,
        Senator Rounds. OK. When we talk about the value, the
    ability to determine octane, and for this, Brooke, if you
    wouldn't mind, I like a higher octane in my vehicles, and I try
    to buy it. I buy E20 and E30. I have a flex fuel vehicle that
    is set up to do that, and I will buy E20 and E30 fuel blends,
    and part of what I like about it is the fact that I can get a
    higher octane rating, which I have always assumed was a better
    product, and it costs me less money as a consumer.
        I am just curious. Long-term, when we get to the CAFE
    standards coming in in the year 2025, in that neighborhood,
    isn't it going to be a valuable item to be able to have a
    resource such as an alcohol product, regardless of where it is
    made, to be able to increase the actual octane ratings at a
    lower price than what it would be if we had a different type of
    a product, another chemical than we would have to put in to the
    existing petroleum products to bring that octane rating up? And
    aren't we really moving toward advanced fuels when we add
    something that feeds into that octane rating?
        Mr. Coleman. We are. So modern vehicles, and I think the
    autos have to make their own decisions about which way they are
    going to go over the next not just 5 years, but 10, 20 years.
    But you can tune a modern engine to take advantage of the
    higher octane and ethanol, and create much greater efficiencies
    as long as that octane is there and as long as it is clean
    enough to comply with the Clean Air Act; and the only solution
    in that lane is ethanol and alcohol. So where we want to go is
    to give, as Mike said, consumers a choice at the pump. But
    imagine a scenario where the higher ethanol blends are actually
    cheaper, higher octane and create efficiencies from an internal
    combustion engine that really get to where everybody wants to
    go.
        Senator Rounds. Thank you.
        Thank you, Mr. Chairman.
        Senator Barrasso. Thank you, Senator Rounds.
        Senator Ernst.
        Senator Ernst. Thank you, Mr. Chairman. And thanks to all
    of the witnesses here today. This really, truly, Chairman, is
    one of the most exciting panels that I have seen so far. This
    is really great and a wonderful topic for the folks in the
    Midwest that actually do grow corn. I want to echo sentiments
    about the DDGs, the distillers grains that are used as
    feedstock. Those that know ethanol production know that very
    little is wasted from that original kernel of corn when it
    enters into that plant; it is all used for the benefit of our
    livestock and our growers.
        So removing this unnecessary impediment for retailers and
    consumers alike is a crucial step toward expanded acceptance of
    biofuels nationwide and will help pave the way for advanced
    biofuels. I would like to enter for the record two letters from
    different groups expressing their support for this legislation,
    along with a survey conducted earlier this month of small
    engine machine owners.
        Senator Barrasso. Without objection.
        Senator Ernst. OK. Thank you, Mr. Chair. I appreciate it.
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        Senator Ernst. And it has been an interesting discussion
    because a lot of what I have heard today is talking about
    misfueling.
        Mr. Lorenz, you brought up a great point: most folks know
    what product to use. I am a motorcyclist. I know exactly what I
    can put into my motorcycle and what I can't.
        Mr. Teske, you had mentioned misfueling with small engines.
    Does Briggs & Stratton offer a two cycle oil-gasoline small
    engine?
        Mr. Teske. We do not.
        Senator Ernst. You do not.
        Mr. Teske. We do not.
        Senator Ernst. OK. Do you know of other manufacturers that
    might?
        Mr. Teske. Yes.
        Senator Ernst. And do you think those consumers can
    adequately blend that oil and fuel together to properly run
    their small engines?
        Mr. Teske. Yes. But manufacturers have also taken to doing
    it for them. So there are opportunities where, because there
    have been failures. I know of lots of failures where people had
    not properly blended, and ultimately there has been a market
    now for premixed fuel along the way, too, and that market
    wouldn't exist if everyone knew how to blend.
        Senator Ernst. Do you think that there are consumers at the
    gas pump or pulling into a station that might fuel their
    vehicles with diesel when those engines aren't diesel engines?
        Mr. Teske. I don't believe so, no. Not that I am aware of.
        Senator Ernst. You don't believe so. But we heard other
    testimony where there is lots of misfueling out there; even if
    there are barriers provided, other people will try and fuel
    their cars with the wrong products. To me, that is not trusting
    the consumer to know their products and what to use in their
    own vehicles. I think there is a level of trust.
        Mr. Lorenz, you said you don't see those misfuels. Is that
    correct?
        Mr. Lorenz. That is absolutely correct. We just, like I
    said, 2 years selling E15 and we have had no incidents of
    misfueling.
        Senator Ernst. OK.
        Mr. Lorenz. Or problems with vehicles.
        Senator Ernst. Mr. Teske?
        Mr. Teske. Senator, if I may. It is generally not the
    convenience store owner that is going to hear about it; it is
    going to be us, and specifically through retailers. So we have
    talked to a number of our retailers. Fuel-related issues are
    becoming more prevalent.
        Senator Ernst. I would say----
        Mr. Teske. Up to 40 percent of the returns at a major
    retailer has to do with fuel-related type issues, and it is
    just very frustrating because they have identified that a lot
    of it has to do with ethanol. They put out a promotional
    campaign that said ditch the ethanol, which we are not
    advocating to ditch the ethanol.
        Senator Ernst. Certainly, I hope you don't.
        Mr. Teske. But they did, and ultimately were threatened by
    a number of different constituents because ultimately ethanol
    is a problem in small engines. So we warrant up to E10----
        Senator Ernst. OK. And I understand. I use small engines. I
    am a motorcyclist, so I do understand, and I hope that most
    consumers understand the products that they use. But there is
    an argument here that consumers don't understand what product
    is right for their small engines, or even for their vehicles,
    and I think that is a bad argument; that we should discontinue
    the use of a product simply because consumers don't know what
    is the recommended product for their own particular engine. So
    I think we need to trust our consumers.
        I would like to go back to Mr. Lorenz. You have E15
    products that are offered at your convenience stores. What were
    the barriers to entry for selling that E15?
        Mr. Lorenz. Actually, one of the barriers was this very
    issue. This was a concern of ours. We still made the business
    decision to go ahead because we thought that this product was
    compelling enough of a value proposition to the consumer. This,
    though, is a severe barrier to actually offering this; worse
    than actually what we expected. Because we knew this was going
    to be a problem going in, but what we found is it has really
    tended to undermine the integrity of the product during the
    summertime, because relabeling, the consumer really doesn't
    know what is going on. That doesn't happen with any other fuel,
    and it is extremely detrimental.
        Senator Ernst. Again, I think if it is an OK product to
    sell any other time during the year, and limiting that
    opportunity during the summer, again, goes back to availability
    of product that is approved for sale, but also trusting the
    consumer and the consumer knowing what is the right product or
    the best product for them to choose. I think that is somewhat
    of the underlying issue that we are seeing today.
        So I do thank you.
        I am out of time, but I want to thank you, Mr. Chair. This
    has been a great discussion.
        Senator Barrasso. Thank you, Senator Ernst.
        Senator Duckworth.
        Senator Duckworth. Thank you, Mr. Chairman, and also the
    Ranking Member for convening this very important conversation.
        I am a proud cosponsor of the bipartisan Consumer and Fuel
    Retailer Choice Act because it will solve this regulatory
    burden without weakening the Clean Air Act.
        My bottom line is simple: the renewable fuel standard is a
    win-win. It creates good jobs in Illinois, across the Midwest,
    all around the Country, and it helps to cut our Nation's
    dangerous dependence on foreign oil and reducing greenhouse gas
    emissions.
        Mr. Coleman, many of us support the RFS because it is
    spurring growth in advanced biofuels. Can you share with us how
    adopting the waiver that exists for E10 fuels and applying it
    to E15 will help the advanced biofuels industry grow and create
    good paying jobs?
        Mr. Coleman. Yes. Thank you, Senator Duckworth. I talked a
    little bit about this, but I would be happy to expand on it.
        Senator Duckworth. Please.
        Mr. Coleman. Again, the investment in our industry, we are
    at the point now where we have developed the technology at
    pilot scale; we have developed the technology at demo scale;
    and at this point we need money to build plants. And for a very
    long period nobody was lending money of any type over the great
    recession five, 6 years ago, or longer. We are now at a point
    where the economy is healthier, but the conversations we are
    having with investors are will there be demand; is there
    headspace in the marketplace? And this will fundamentally
    change that conversation because together with the renewable
    fuel standard, which provides a greater incentive at this point
    for cellulosic ethanol, which is good news, actually, for corn
    ethanol production because it is feedstock diversification,
    that will change the conversation. We will have the ability to
    unlock a lot of project finance, which means new refineries,
    new bolt-on lower carbon; and basically you will have an
    ethanol industry that gets to the next level from an innovation
    standpoint.
        Senator Duckworth. How much conventional gasoline could we
    potentially replace once you get to that point?
        Mr. Coleman. Well, the upside for cellulosic ethanol alone,
    according to NREL and some other reports, is tens of billions
    of gallons from agricultural waste alone, without disrupting
    food and feed markets. So that is obviously a study, so that is
    a ceiling analysis. But if this technology were to
    commercialize in scale in a similar way that corn ethanol did,
    which is very quickly, we are talking about billions of gallons
    of displacement of foreign oil working together with other
    technologies to get energy independent.
        Senator Duckworth. Thank you.
        Dr. Yanowitz, I understand that you have worked extensively
    with the master renewable energy laboratory and studied the
    impact of ethanol on vapor pressure specifically. I am
    wondering if you could characterize your opinion on the
    environmental impacts of ethanol more broadly. Can you share
    your thoughts, for example, of ethanol's impact on greenhouse
    gas emissions?
        Ms. Yanowitz. I am really a one-trick pony.
        [Laughter.]
        Ms. Yanowitz. I can't speak to greenhouse gases. I can tell
    you about ozone. I don't expect there will be any impact on
    ozone. I expect it will reduce PM emissions. I expect it will
    be a benefit to air quality, as opposed to greenhouse gas
    emissions.
        Senator Duckworth. Wonderful. Thank you.
        Mr. Chairman, I would like to request unanimous consent to
    submit three letters into the record that support the passing
    of S. 517, a letter from the Renewable Fuel Association, a
    letter from 28 members of the advanced and cellulosic industry,
    and also a letter from the National Corn Growers Association.
        Senator Barrasso. Without objection.
        Senator Duckworth. Thank you.
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        Senator Duckworth. I would also like to submit an analysis
    of greenhouse gas benefits associated with this bill.
        Senator Barrasso. Without objection.
        Senator Duckworth. Thank you.
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        Senator Duckworth. Mr. Lorenz, you indicated in your
    testimony that Sheetz sells E15 because there is a consumer
    demand for the fuel, not because of any required mandate. If
    true, this means that consumers are losing money because E15 is
    often less expensive than alternative fuels, and gas stations
    are spending more to comply with labeling burdens that deliver
    little value to consumers during those summer months.
        Is this assessment correct, and can you share how this
    labeling conundrum is challenging the market?
        Mr. Lorenz. Well, I mean, I think it is preventing current
    retailers from entering into the market and offering E15. It is
    also affecting retailers that are offering E15 today and the
    fact that it is difficult to actually grow sales, because we
    have seen where sales have been growing, then the summer comes
    along and we have to relabel all of our dispensers, and the
    sales don't return or the customers don't return after the
    summer. And I think it has to do with they are just confused as
    to what the product is because, like I said, there is no other
    product or no other gasoline fuel that we have to relabel. So
    they don't know anything about our VP or waivers or anything
    like that. We actually created a brochure to explain that, but
    they don't really care. I mean, the consumer just wants to buy
    their gas and go; they don't want a lesson on gasoline 101 or
    renewable fuel standards, or anything else.
        Senator Duckworth. So this is a burden, especially on those
    gas station owners who are small businessmen who are trying to
    just retain their market share and provide a service.
        Mr. Lorenz. Oh, absolutely. I mean, I think that we look at
    it from the standpoint that this is an advantage, that we are
    offering a new product, giving that consumer choice of a
    product that is cleaner burning, cheaper; and that is what they
    want. If you look at the consumer, as a retailer, we speak for
    the consumer. And what they want, the gasoline product is
    highly price-sensitive. They want something that is cheaper and
    higher performance, and that is what E15 gives you.
        Senator Duckworth. Thank you.
        I yield back, Mr. Chairman.
        Senator Barrasso. Thank you, Senator Duckworth.
        Senator Boozman.
        Senator Boozman. Thank you, Mr. Chairman.
        Mr. Teske, I think you gave the statistic that 40 percent
    of the warranty was fuel-related.
        Mr. Teske. Up to 40 percent of the returns to one of the
    major retailers that we deal a lot with has to do with fuel-
    related issues.
        Senator Boozman. I have heard that also from the retailers.
    Also, when you visit with the mechanics, the mom-and-pop shops
    that services equipment, the reality is I think they would say
    the same thing; maybe even more so. So we do have a problem in
    that regard when you look at the return rate, when you look at
    the people that are actually dealing with the products, so it
    is something that we have to deal with. You mentioned in your
    testimony, I believe, you referenced the transition from leaded
    to unleaded gasoline in the 1970's and 1980's, and during this
    period new fuel tanks were designed to ensure consumers were
    not at risk of misfueling. Can you explain why this is
    preferable to labeling?
        Mr. Teske. Having a physical barrier will prevent someone
    from misfueling. So the whole idea was, back then, is that if
    there is a physical barrier, you really can't do it. Now,
    people were trying to circumvent that, but you had to be
    mindful of what you were doing.
        So we don't have that same luxury here. This has to do with
    a label on a pump, a pump that can be really confusing. And
    Senator Ernst said we should trust consumers. Consumers are
    also economic animals, and they believe, and we have studies,
    as well, that show they basically trust the convenience store
    not to sell them something that won't work in their product.
        So think about a convenience store today. You will have
    separate pumps for diesel. You will have separate pumps for
    E85. In my neighborhood, we now have 88, they are calling it
    unleaded 88, which is E15. It is within the same pump
    configuration as what has always been there and, in fact, it is
    cheaper. So what they will oftentimes do is they will migrate
    to that cheapest product that is out there because they want to
    save money. I don't blame them for wanting to save money, but
    they will have more cost in the long-term because ultimately
    that engine is going to fail.
        So, ultimately, we don't think a label is going to make a
    difference. We think that it is useful, but it is not going to
    prevent misfueling from occurring.
        Senator Boozman. So in the case of diesel, you simply can't
    stick it in your--I think probably most of us, certainly I have
    tried to do that, when I am daydreaming or whatever. That is
    just something that most of the audience, I think, has
    experienced also.
        Mr. Coleman, you mentioned cellulosic ethanol. Corn ethanol
    was supposed to be the bridge as we got into cellulosic
    ethanol, which makes a lot of sense. Tell me about its
    progress. This is something we have heard about for a decade
    now, over a decade, that it was going to be and do, and we are
    all looking forward to that, but tell me what the sticking
    points are, why are not there yet, and really foresee into the
    future, be a futurist for me and tell me what the difference is
    that is going to be a few years from now or 10 years from now
    as we make that transition.
        Mr. Coleman. Sure. Thank you, Senator, for the question. So
    essentially cellulosic ethanol became part of national energy
    policy in 2007 with RFS-2. The rules were completed by EPA in
    2010 and, as you know, by then we were mired in a global
    recession where we couldn't get any lent money, essentially, to
    build. So there was a delay. President Obama----
        Senator Boozman. But it really went back even before that,
    in the sense of the----
        Mr. Coleman. Well, as I had mentioned earlier in my
    testimony, doing the stuff in the lab and actually convincing
    the oil industry to buy it are two different things, and the
    RFS-2 was really the first time that we had a law that would
    require the oil industry to buy it in a non-competitive
    marketplace. The good news is it is no longer a future issue.
    As Senator Ernst knows and Senator Fischer knows, we now have
    enzyme facilities up and running, cellulosic ethanol commercial
    facilities up and running, three of them in Iowa. So what you
    will see over the next couple years is what we----
        Senator Boozman. So it is cost-effective now?
        Mr. Coleman. It is cost-effective. You have to remember
    that ethanol replaces some of the most expensive components of
    gasoline. It is an octane enhancer. And I am sure Mike or
    others could expand on this. But we are not replacing
    conventional gasoline; we are replacing benzene, alkylates. And
    some of these things are $5.00 a gallon, which is why you are
    seeing savings. So we will see commercial learning curve
    achievements over the next four or 5 years if we can get
    demand, and that is why this bill is so important.
        Senator Boozman. OK.
        Thank you, Mr. Chairman.
        Senator Barrasso. Thank you, Senator Boozman.
        Senator Markey.
        Senator Markey. Thank you, Mr. Chairman, very much.
        Mr. Coleman, in Massachusetts and in many other States
    across the Country we use reformulated gasoline that is
    designed to burn more cleanly and reduce smog forming and toxic
    pollutants. Could you comment on the impact of this bill on
    reformulated gasoline areas like Massachusetts?
        Mr. Coleman. Appreciate the question, Senator Markey. This
    does not affect RFG zones at all. Ethanol waivers are not
    allowed in RFG zones. Essentially, the oil industry produces
    sub-vapor pressure-based gasoline, so this is really a
    conventional gasoline law.
        Senator Markey. In order to create a higher octane fuel
    that allows engines to run more efficiently, petroleum refiners
    add benzene-based aromatic hydrocarbons known as BTEX. But
    there is a major problem with BTEX, and its combustion
    byproducts are carcinogenic and neurotoxic and a major source
    of toxins in urban areas. Maybe instead of BTEX it should have
    been BTOX they are called.
        The good news is that ethanol is an even better octane
    booster than BTEX, and it is cheaper, as well.
        Could increasing usage of E15 reduce America's exposure to
    BTEX?
        Mr. Coleman. Yes. In order to comply with the Clean Air
    Act, you can't have too much octane or too much of these
    components, so when you add more ethanol, by definition you
    have to take some stuff out of the blend to make sure that it
    complies with fuel specs. So what comes out is the most toxic
    and often expensive octane enhancers, as you describe, and
    replacing them with something that is renewable and American
    made.
        Senator Markey. Dr. Yanowitz, could you discuss some of the
    dangers to human health associated with BTEX, benzene, toluene,
    xylene?
        Ms. Yanowitz. I am certainly not an expert on, again, this
    topic, but benzene is a well known carcinogen, and removing any
    petroleum from the mix will reduce the amount of this
    carcinogen in the air.
        Senator Markey. And in your expert opinion, would it be
    possible for refiners to replace the BTEX in gasoline with
    ethanol and deliver consumers a high octane premium gasoline
    that costs the same as regular?
        Ms. Yanowitz. They can certainly remove some of the benzene
    by replacing it with ethanol.
        Senator Markey. Mr. Lewis, have you looked at the impact of
    air toxics from BTEX in gasoline, and is the Clean Air Task
    Force concerned about these pollutants?
        Mr. Lewis. We are concerned about those pollutants.
        Senator Markey. You are concerned?
        Mr. Lewis. Certainly.
        Senator Markey. What is the concern?
        Mr. Lewis. With respect to BTEX?
        Senator Markey. Yes.
        Mr. Lewis. We are concerned about the carcinogen effects of
    BTEX. We are also concerned about the toxic impacts of
    aldehydes. And there is mixed impacts from ethanol on both
    fronts.
        Senator Markey. Mr. Coleman, in your testimony you note
    that all types of ethanol have lower lifecycle carbon emissions
    than gasoline, even after accounting for changes in land use.
    Is this because more and more of the oil we are extracting
    today is coming from hard-to-reach sources like deep ocean
    drilling, shale, and tar sands?
        Mr. Coleman. That is part of it. You know, essentially we
    know more now than we did 10 years ago, and the more recent
    analysis reflects efficiencies on the biorefining side for all
    fuels. It also reflects more knowledge on land use. But you
    make a good point. These fuels should not be analyzed in a
    vacuum. So if you take ethanol out or add it back in, you are
    either replacing it or displacing something, and that something
    is not average petroleum. There is no big tank in the middle of
    the Country where it is all mixed together. What is actually
    being replaced is marginal petroleum. The era of light sweet
    crude is over and, as you can see, the oil companies are
    looking in deepwater, fracked oil, heavy oil from Venezuela,
    and we are displacing the marginal gallon of oil, which is
    significantly more carbon intensive, and that is particularly
    the case with regard to tar sands.
        Senator Markey. And I know that some of the other Senators
    have already asked questions on the share of this growing
    advanced biofuel industry and the impact on climate change.
    Since that has already been covered, I won't go over that same
    territory.
        I was the chairman of the Select Committee on Energy
    Independence and Global Warming back in 2007, when we created
    that new law with regard to cellulosic, and in the law it said
    that by 2022 our national goal was 16 billion gallons of
    cellulosic biofuels. And, of course, that was December 2007
    when that law was signed into law by George Bush. 2008, the
    biggest recession since the Great Depression. 2009 it
    continued. The capital markets were very skittish about the
    investment that would have to be made, so it was an unfortunate
    worst case scenario for the cellulosic industry in terms of
    getting off the ground to meet these goals. And the goals have
    been lowered, but it still offers tremendous promise for the
    future and it is starting to really pick up some momentum right
    now. So that is our great hope.
        Thank you, Mr. Chairman.
        Senator Barrasso. Thank you very much.
        Senator Carper.
        Senator Carper. Thanks very much.
        When I got out of the Navy near the end of the Vietnam War,
    I moved from California to Delaware to get an MBA, and I
    remember one of the courses I took was marketing. And the
    professor brought into our class 1 day not a glass, but he
    brought in a container from margarine, and he said what do I
    have here? And we said, well, that is a container for
    margarine. And he said, people buy this for different reasons.
    He said some people buy this margarine because of the price.
    Some other people buy margarine because of the taste. Some of
    them buy the margarine because of its, I don't know, its health
    benefits for them, or lack thereof. He said some people buy the
    margarine because this container is recyclable. Some people buy
    it because they like the way it looks and they want to use it
    for storing things. But he said people buy it for a lot of
    different reasons.
        And sitting here I was reminded today of a little bit of
    that. People buy ethanol for fuel for their vehicles for
    different reasons. Some people think it is good for the
    environment. There is reason to believe maybe that is true.
    Others think that is not the case. Some folks buy it because
    they think there is better value, lower cost, and we actually
    have higher performance because of the octane. Some people buy
    it because they like the idea that we want to reduce our
    reliance on foreign oil.
        I have a concern. I will go to Todd and the concern that he
    has raised about the impact on their business and their
    customers and so forth. I think we have to follow the Golden
    Rule, put ourselves in their shoes; how would we wanted to be
    treated here. I think that is important for us to keep in mind.
        For me, a real consideration of this legislation deals with
    the RIN market and trying to decrease volatility in the RIN
    market. There is a saying, you have heard it: All politics is
    local. One of Ed Markey's great mentors, Tip O'Neill, used to
    say that, so a half dozen or so refineries, mostly on the east
    coast, for which this spiking up and down, volatility in the
    RIN market, is threatening to put them out of business. And we
    are anxious to see if there is some way to address, either in
    this legislation or other legislation, the way to reduce the
    volatility in the RIN market.
        Could you just explain, Mr. Coleman, for us or describe how
    many more RINs, just roughly how many more RINs we are talking
    about that might become available if a bill like this were to
    become law and what more could we do to make the RIN market
    more transparent?
        Mr. Coleman. Well, my view on this, although there are
    different kinds of RINs and, as you know, we have gotten to the
    point where the conventional biofuel RIN, which is
    predominantly corn ethanol, which is the one of concern for
    refineries, we are no longer increasing the requirement for
    that RIN. So pressure is going to come off of that RIN. Now, it
    takes a little while for that fuel to flow out, but the more
    that fuel does flow out, the less pressure there will be on
    credit markets. Where this will really generate results is the
    production of D3 cellulosic RINs because suddenly you are
    changing the discussion.
        So I guess I would summarize a relatively complicated issue
    by saying the degree to which we facilitate a shift to using
    more renewable fuel and ethanol, it pushes the market away from
    putting pressure on RIN markets, which is what creates that
    volatility more toward usability of the fuel, which takes
    pressure off those RIN markets. And it also moves it toward D3
    RINs and away from the RINs that have been an issue for your
    refineries.
        Senator Carper. All right, thanks.
        Mr. Chairman, I said at the beginning this is a good panel,
    and it is one if I wanted to find some consensus on this issue,
    this is probably a good place to start. I think I have some
    reservations about the legislation that is before us. I know
    others do as well. But for me, in deciding where to go, one of
    the issues we have to address as part of it is the one I have
    raised here today.
        Thank you all for coming. Thank you for your thoughtful
    testimoneys. We are just very grateful to you. Thank you.
        Senator Barrasso. Thank you, Senator Carper.
        Mr. Lewis, anything you would like to add? You have been
    sitting here mostly quietly for a little while.
        Mr. Lewis. Thank you. I would like to respond to the point
    that Mr. Coleman made that we cherry-pick data. I just want to
    point out that the National Research Council took the same
    exact approach that we did in determining whether or not EPA's
    greenhouse gas emissions analysis for corn ethanol was
    accurate.
        And I would just like to leave off by saying there are
    important unanswered questions about the extent to which
    expanded use of E15 will impact corn ethanol production levels
    and ozone formation, and we think that those questions should
    be studied and answered before any further consideration of
    this bill occurs.
        Thank you.
        Senator Barrasso. Well, thank you.
        I want to thank all of you. I thought it was a very
    productive discussion. We obviously had a lot of people here
    attending the hearing and a very busy day here on Capitol Hill.
    Members are going to be able to submit questions for the
    record. The hearing record is going to stay open for 2 weeks,
    so please, if you get written questions, respond quickly.
        I want to thank all of the witnesses for your testimony
    today.
        Thank you, Senator Carper.
        The hearing is adjourned.
        [Whereupon, at 11:50 a.m. the committee was adjourned.]

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