**[Statement of Amy Klobuchar, United States Senator]{.smallcaps}**

**[Before the Senate Committee on Energy and Natural
Resources]{.smallcaps}**

**[Subcommittee on Energy]{.smallcaps}**

**[Regarding Renewable Fuels Infrastructure]{.smallcaps}**

**July 31, 2007**

Thank you, Mr. Chairman, for holding this timely hearing on the topic of
renewable fuel infrastructure, and for inviting me to testify. As you
know, ethanol and biodiesel are near and dear to Minnesota, but my
interest in them goes far beyond that. Our ability to produce a
reliable, low-cost, domestic source of energy has become a question of
national security.

The United States spends more than \$400,000 per minute on foreign oil.
That money is shipped out of our economy, adding to our enormous trade
deficit, and leaving us vulnerable to unstable parts of the world to
meet our basic energy needs.

There are those who would have us believe that energy security is
decades away, but any Minnesota farmer can tell you that renewable fuels
are here and ready to use today. However, in spite of the clear
advantages of renewable fuels to our rural economy and our energy
security, we face a chicken-and-egg type of problem when it comes to the
challenge of making them available to more drivers. The auto makers are
reluctant to promote flex-fuel vehicles in areas where there are no E-85
pumps, and gas stations don't want to put in E-85 pumps where there are
no flex-fuel vehicles.

So we need to tackle both ends of the problem. On the issue of vehicles,
Mr. Chairman, I was proud to work with you to include provisions in the
Senate-passed energy bill that would require automakers to equip 50
percent of their new vehicles with alternative-fuel technology by the
year 2015.

On the other end of the problem -- the ability to find gas stations that
sell E-85 and biodiesel \-- it is crucial that Congress act to provide
more American drivers with access to renewable fuel pumps.

As you know, Mr. Chairman, Minnesota ranks first in the nation in E-85
infrastructure -- we have 320 pumps out of 1250 in the nation -- far
more than any other state. And I know, Mr. Chairman, that it's a
question of particular interest to you -- how did Minnesota come to be
the leader in this area? The answer, I believe, comes down to
leadership:

-   Leadership in state government in setting statewide ethanol
    standards and providing grants for E-85 pumps.

-   Leadership of the Minnesota Corn Growers, who formed a coalition
    with the American Lung Association of Minnesota, the National
    Ethanol Vehicle Coalition, and others to promote E-85 across the
    state.

-   Finally, leadership on the part of the ethanol producers, who have
    developed innovative marketing arrangements, whereby they sell E-85
    directly to gas stations, and cut out the oil company-owned
    middleman. In Minnesota, about 2/3 of the gas stations that sell
    E-85 purchase it directly from the ethanol producer, and that's why
    they can afford to sell it at a price that's attractive to
    consumers.

So what can we, at the federal level, learn from Minnesota's example?
First, wherever possible, we should encourage ethanol producers to sell
directly to gas stations. Outside of Minnesota, ethanol is generally
sold under long-term contract to blending terminals, which are part of
the oil company-owned pipeline system. The terminals then re-sell the
ethanol to gas stations. In essence, the price that consumers pay for
ethanol is usually set by ethanol's biggest competitor, the oil
companies. When ethanol producers sell ethanol directly to gas stations
without a middleman:

-   drivers get the benefit of a low-cost fuel,

-   the ethanol producers collect the 51 cent-per-gallon federal
    blender's credit instead of the oil companies,

-   and America's energy dollars come right back to our rural
    communities.

We have seen this model work well in Minnesota, pioneered by the
Chippewa Valley Ethanol Company in Benson. They currently supply roughly
a hundred gas stations that sell E-85 at 60 cents below the price of
gas. That's why I have introduced a bill that would help other states
follow Minnesota's lead \-- the "Ethanol Education and Expansion Act"
would provide tax credits for ethanol producers to install the kind of
equipment they need to sell directly to gas stations, and I would like
to thank you, Mr. Chairman, for cosponsoring this legislation.

Second, we should not allow oil companies to block their franchised gas
stations from selling renewable fuels. I have heard from gas stations in
Minnesota that their franchise contracts make it so difficult to sell
ethanol and biodiesel that many of them just can't do it. They have
reported cases where:

-   they're not allowed to sell renewable fuels under the main canopy
    that bears the oil company's brand name,

-   they can't convert the pumps and tanks they already have, because of
    a requirement to sell all three grades of gasoline,

-   and they're not even allowed to put up signs to let customers know
    they have renewable fuel for sale, where the pump is, or how much it
    costs.

I offered a "Right to Retail Renewable Fuel" amendment to the Energy
Bill that would prohibit oil companies from placing restrictions on
where and how renewable fuels can be sold at gas stations. I'm pleased
to report that similar language was passed by the House Energy and
Commerce Committee, which will give us an opportunity to examine this
issue in conference.

The third and final thing we can learn from Minnesota's example is that
a modest investment of federal dollars can yield big results on the
ground. The coalition in Minnesota that raised \$9 million for E-85
pumps was started with a grant of just \$250,000 from the Department of
Energy.

In closing, I would simply state that the scarcity of pumps, caused in
part by the oil companies' unwillingness to allow for competition, is
the single greatest factor limiting the positive impact that renewable
fuels can and should have on our nation's energy security. If we are
serious about finding alternatives to foreign oil, we should ensure that
drivers in every state have access to E-85 and biodiesel. Thank you, Mr.
Chairman.