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30–237 PDF 2006

S. HRG. 109–714

THE STATE OF THE BIOFUELS INDUSTRY

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 26, 2006

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

SAXBY CHAMBLISS, Georgia, Chairman 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

JAMES M. TALENT, Missouri 

CRAIG THOMAS, Wyoming 

RICK SANTORUM, Pennsylvania 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota 

KEN SALAZAR, Colorado

MARTHA SCOTT POINDEXTER, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

VERNIE HUBERT, Majority Deputy Chief Counsel 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

The State of the Biofuels Industry ......................................................................... 1

Wednesday April 26, 2006

STATEMENTS PRESENTED BY SENATORS 

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 1

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 2

Coleman, Hon. Norm, a U.S. Senator from Minnesota ........................................ 8

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 5

Crapo, Hon. Mike, a U.S. Senator from Idaho ...................................................... 10

Dayton, Hon. Mark, a U.S. Senator from Minnesota ........................................... 6

Lincoln, Hon. Blanche, a U.S. Senator from Arkansas ........................................ 15

Nelson, Hon. E. Benjamin, a U.S. Senator from Nebraska .................................. 9

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 13

Salazar, Hon. Ken, a U.S. Senator from Colorado ................................................ 10

Stabenow, Hon. Debbie, a U.S. Senator from Michigan ....................................... 12

Talent, Hon. James, a U.S. Senator from Missouri .............................................. 14

Thomas, Hon. Craig, a U.S. Senator from Wyoming ............................................ 9

WITNESSES 

Brown, Robert C. Ph.D., Bergles Professor in Thermal Science, Professor, 

Mechanical Engineering, Chemical and Biological Engineering Agriculture 

and Biosystems Engineering Director, Center for Sustainable Environmental Technologies, Iowa State University, Ames, Iowa ................................ 22

Debertin, Jay D., Executive Vice President and Chief Operating Officer, Processing CHS, Inc. ................................................................................................... 21

Dinneen, Bob, President and CEO, Renewable Fuels Association, NW Washington, DC ............................................................................................................. 17

Jobe, Joe, Chief Executive Officer, National Biodiesel Board, Jefferson City, 

Missouri ................................................................................................................ 19

APPENDIX 

PREPARED STATEMENTS: 

Salazar, Hon. Ken ............................................................................................ 42

Brown, Robert C. .............................................................................................. 44

Debertin, Jay .................................................................................................... 48

Dinneen, Bob ..................................................................................................... 52

Jobe, Joe ............................................................................................................ 59

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Statement of the American Forest and Paper Association ........................... 64

Statement of the National Association of Conservation Districts (NACD) .. 71

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD: 

Nelson, Hon. E. Benjamin ............................................................................... 74

Salazar, Hon. Ken ............................................................................................ 75

Page

IV

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD—Continued

Thomas, Hon. Craig ......................................................................................... 77

(1)

THE STATE OF THE BIOFUELS INDUSTRY 

WEDNESDAY, APRIL 26, 2006

UNITED STATES SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, D.C. 

The committee met, pursuant to notice, at 10:05 a.m., in Room 

SD–106, Dirksen Senate Office Building, Hon. Saxby Chambliss, 

Chairman of the committee, presiding. 

Present or submitting a statement: Senators Chambliss, Roberts, 

Talent, Thomas, Coleman, Crapo, Harkin, Conrad, Lincoln, 

Stabenow, Nelson, Dayton, and Salazar. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM GEORGIA, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. Well, good morning, and welcome to the Senate 

Agriculture Committee’s hearing to examine the current state of 

the biofuels industry. 

Interest in biofuels has exploded in this country, with good reason. Last week, oil futures prices reached nearly $75 per barrel on 

the New York Mercantile Exchange. Asian economies continue to 

boom, creating soaring demand. Several of the countries we import 

from, such as Nigeria, are experiencing political and social unrest. 

Venezuela is planning to nationalize oil production, and we have 

continued uncertainty in the Middle East—in Iraq, as democracy 

struggles to grow, and in Iran, as its regime preaches hatred and 

world domination. Even with all of this uncertainty and the regrettable impact on our wallets, the United States can meet these challenges and in the future succeed in making this country energy 

independent. 

I believe we have a bright future and have already taken the 

right steps to get us there. Last year, Congress passed the comprehensive 2005 Energy Policy Act to lessen our dependence on foreign sources of oil and to ensure a healthy and prosperous future 

for all Americans. The energy bill balanced energy production at 

home with new conservation and efficiency efforts and increased investment in research and development. 

Two of the most notable provisions in the energy bill as they relate to our topic today are the creation of a national renewable 

fuels standard and the extension of the biodiesel tax credit. Already 

we are seeing the results of the 2005 Energy Policy Act. The renewable fuels standard will require the production of 7.5 billion 

gallons of ethanol by 2012. The industry is well on its way to exceeding that requirement. 

2

Biodiesel production in this country is growing at a fantastic 

rate. In 2004, the industry produced just 25 million gallons. In 

2006, it is expected to produce a minimum of 150 million gallons. 

This year, Congress will work to ensure the law is implemented 

and progress is made towards the goals it established. Congress 

also will conduct vigorous oversight to ensure everyone plays by 

the rules, especially as it relates to gasoline pricing. 

This hearing is the first in a series the committee will hold to 

examine the various components of agriculture in America as we 

prepare for the next farm bill. Producers have had years of experience with biofuels, and they are uniquely situated to capture the 

benefits of future investment in them. 

I am pleased to report to my colleagues that there are several opportunities in my home State of Georgia, which traditionally has 

not been a large producer of biofuels. For instance, there are two 

biodiesel plants using a variety of feedstocks currently operating in 

the northwest part of our State. In the southwest part of Georgia, 

the part of the State where I call home, there are plans to build 

a 100-million-gallon corn ethanol plant. It will be uniquely situated 

to tap into Southeastern fuel markets and will bring significant 

economic development to the area. 

This hearing is not specifically on the farm bill, but I expect that 

this committee will expand the energy title in the farm bill that we 

expect to write next year. I am excited about the opportunities in 

the biofuels industry for producers and look forward to today’s testimony to learn from the industry’s experience and hear its expectations for the future. 

I will now turn to my ranking member, my good friend, the Senator from Iowa, Senator Harkin, for any comments he wishes to 

make. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

Senator HARKIN. Well, Mr. Chairman, thank you very much, and 

I want to thank you for having this very important hearing about 

the state of the biofuels industry. This committee has a long history of promoting and being involved in biofuels, and under your 

great leadership, I know we are going to do even more, because we 

have a new farm bill coming up soon. And I heard your statements, 

Mr. Chairman, about the importance of energy in the farm bill. 

I want to thank all our witnesses for being here, especially Dr. 

Brown from my alma mater, Iowa State University. 

Just a few years ago, many Americans saw ethanol as kind of a 

boutique industry. It was okay for the Dakotas and Iowa, and 

maybe Minnesota and Missouri. I don’t know if it got to Idaho or 

not. But, anyway, that was sort of we were using it and nobody 

else, and it was not going to be good for the rest of the country. 

Well, my, how times have changed. With the price of oil at record 

highs and escalating energy and gasoline prices, 3 bucks a gallon 

for gasoline, and all of a sudden, people are saying, you know, ethanol is not a bad deal after all. And when we look at what we have 

seen happen in Brazil, we think, My gosh, you know, they started 

in the 1970s and look where they are now. 

3

Well, the truth is we desperately need biofuels. The President 

was correct yesterday when he said that we are addicted to oil and 

that biofuels are our best bet for weaning America from this dangerous addiction. And yet I will take a little bit of issue with the 

President because I think there was something in his statement 

yesterday indicating that maybe ethanol producers and supporters 

are part of the problem. 

There has been this, for lack of a better word, I would say almost 

like propaganda or misinformation that somehow ethanol is responsible for the run-up in gasoline prices. Well, I beg to differ. When 

crude oil is $73 a barrel and going up, the fact is ethanol is helping 

to moderate gas prices, not boost gas prices. 

I am referring to when the President said in his remarks that 

State and local officials in parts of the country are worried that the 

sudden changes from MTBE to ethanol will cause supply disruption 

in the short term, and that is causing the price of gasoline to go 

up some amount in their jurisdictions. That is just total misinformation. Whoever gave that to the President ought to be set 

straight because somebody was misinformed on that one. 

Now, again, despite this, we have been making progress. Many 

of us on both side of the aisle chamoined the renewable fuels standard E85 installation tax credits will get more E85 pumps out there. 

These are big steps forward. The biomass provisions that Senator 

Lugar and I put in the recently passed energy bill I think are another big step forward. This is going to help with the research to 

get more ethanol out of a kernel of corn than we get today, and to 

do more research into the kind of and the variety of feedstocks that 

we can use, especially for cellulosic conversion into ethanol. 

Again, the budget problem is that only half of the funding that 

we have put in there is being used right now. The President’s 

budget only put in half of what we requested for the funding. 

Thousands of additional E85 pumps must be deployed to gas stations across the country. If you are going to have E85 and flexiblefuel cars, that is fine. But if you do not have the pumps, what good 

does it do you? So both of those have to be addressed at the same 

time. And we need to continue to press the auto companies to 

produce more FFVs, and consumers ought to have that choice. 

We know that biofuels are a solution to the great environmental 

challenge of our time—global warming. The more ethanol and biodiesel we produce, the less petroleum we would use. And, of course, 

as these crops grow, they take CO2 out of the air so there is not 

a net addition as there is when you burn petroleum products. 

Of course, we will also need better fuel economy, the expansion 

of other vehicle technologies, such as hybrids, hybrid FFVs, and 

more research into hydrogen. On hydrogen, the President was right 

on the mark yesterday when he talked about that. 

Lastly, the farm bill is coming up. In the 2002 farm bill, Senator 

Lugar and I worked together to put the first ever energy title in 

a farm bill to promote biofuels, wind power, other renewable energy resources. I think agriculture is the proper place to look to for 

that. And so, again, I am hopeful that we can continue to move this 

forward in the next farm bill and also that the budgets we pass 

here will reflect that. 

4

The energy price crisis I think drives home the critical need for 

the President and Congress to get on the right track and make the 

necessary Federal investment in biofuels and bio-based products 

research and development. And I know Senator Conrad is here, 

and he has come up with a bill that I have looked at personally. 

I have not looked at the whole thing, but he is on the right track 

in terms of taking a long-term, comprehensive look at what do we 

do in everything. We cannot just do this and think we are solving 

a problem. Our response has to be very comprehensive. 

But I am convinced, after 30 years on the Ag Committee, both 

in the House and the Senate, watching the ethanol industry and 

biodiesel—and, you know, I was just telling Dr. Brown, who is a 

mechanical engineer, that I had always been told that you need a 

differential in tax incentives because you get about 20 percent less 

power, less BTUs out of ethanol than you get out of gasoline. So 

you have got to have some differential there to make up for that 

20 percent less. I just thought this was a physical fact of life and 

we just had to live with it. 

Now I find out that Saab has built an automobile with a new engine and a turbo charger that actually gets as much and slightly 

more power out of ethanol than gasoline. So there you go. You turn 

it over to the mechanical engineers, they can do it every time, I 

guess. Right? 

So what I am saying is that these are the things that we can 

start doing in our country. You know, we can make these automobiles, we can make these kind of engines. We need to do the tax 

incentives and the tax policies, plus the budget and other policies 

that move us in that direction. 

So I think this committee and under your leadership, Mr. Chairman, I think we can do a lot to really move this country forward 

in this area, and I thank you for your leadership on this. 

The CHAIRMAN. Thank you, Senator Harkin. You know, you are 

right about the automobile industry. They are making great strides 

towards producing flex engines that will allow up to E85 and even 

100 percent ethanol utilized around the country. You folks in the 

Midwest have been doing it for years. We are now getting a taste 

of it in the Southeast, and I am excited about the opportunity. And 

I will report to you, too—you and I are going to talk more about 

this because I envision that we will get serious with our friends 

from Brazil. 

I had a meeting yesterday with the Agriculture Minister of 

Brazil, and I hope that is the first meeting in a series of meetings 

that you and I can have with our Brazilian neighbors to develop 

somewhat of a partnership in this area. We are the two dominant 

producers of ethanol in the world, and I think we have got a great 

chance to export not just ethanol from our two countries around 

the world but export technology and create a whole new market 

there that will really be exciting for agriculture. 

As staff, I know, advised every member, you will be recognized 

according to the way in which you showed up. Senator Conrad was 

first. He already has his charts out. I don’t know why I am not surprised that he has charts this morning. But, Senator Conrad, we 

will turn to you for any opening statement you have this morning. 

5

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM 

NORTH DAKOTA 

Senator CONRAD. Thank you, Mr. Chairman, and thank you, Senator Harkin, for your kind comments on the legislation I have introduced. 

I introduced, just before we took the Easter break, legislation 

that I think is by far the most important legislation I have ever 

introduced in the Congress of the United States. I call it the BOLD 

Act, Breaking Our Long-term Dependence. And for about 7 months 

now, we have worked to meet with every entity in agriculture, in 

energy. We spent a lot of time with the people at the Hewlett–

Packard Foundation, who financed a broad-based review of America’s energy vulnerability. We have talked to everybody that we 

could find who had an idea for what might be done in a serious 

way to dramatically reduce our energy dependence. 

I think the President got it right when he said in his State of 

the Union that we have a serious problem that we are addicted to 

oil, much of it coming from the most unstable parts of the world. 

The President has got that exactly right. 

Let’s go to the next one. 

This shows the level of dependence we have now reached: 60 percent of our oil is being imported, much of it from Saudi Arabia, Kuwait, Abu Dhabi, and other places that are unstable. 

Let’s go to the next one. 

The circumstance that we confront is that, increasingly, this is 

an incredible drain on the economy of the United States. We are 

now spending over $260 billion a year for our oil imports—$260 billion a year. That is over a third of our trade deficit. 

When we look for ideas for what might be done, the chairman 

and ranking member have both mentioned Brazil. Let’s go to the 

next slide. Brazil 30 years ago was 80 percent dependent on foreign 

energy—80 percent dependent on foreign energy. They have reduced that to less than 9 percent now, and they tell us they will 

declare their energy independence next year. At the same time 

they have been reducing their dependence, we have been dramatically increasing ours. We have gone from 35 percent dependent on 

foreign energy to 60 percent, and we are headed for 80 percent dependence if we fail to act. 

You know, I was hopeful that others would move forward and introduce legislation that was really comprehensive and dramatic 

and would make a substantial difference. And, finally, I decided 

just to do it, and that is what the BOLD Act is all about. It would 

call for extending biodiesel and ethanol tax credits through 2013. 

It calls for increasing ethanol use from 4.7 billion gallons in 2007 

to 30 billion gallons in 2025. It calls for all vehicles sold in the U.S. 

by 2017 to include alternative fuel technologies such as hybrid electric or flex-fuel systems. 

Why? Because that is at the heart of what Brazil did so successfully. They aggressively promoted ethanol and biodiesel and flexible-fuel vehicles. So that has got to be the cornerstone of our strategy. 

The BOLD Act also creates an alternative diesel standard starting at 250 million gallons in 2008 and increasing to 2 billion galVerDate 0ct 09 2002 14:34 Feb 23, 2007 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 C:\DOCS\30237.TXT SAG2 PsN: SAG2
6

lons in 2015. These are the kinds of aggressive steps that are going 

to be necessary if we really are going to make substantial progress. 

You know, the energy bill we passed last year was good. I supported it. But it is not going to make a meaningful difference in 

our energy dependence. This legislation, if passed, the experts tell 

us, would make a dramatic and meaningful difference. And to me 

it is time to step up. 

Now, not only do we, instead of looking to the Middle East, turn 

toward the Midwest for our energy supplies, instead of looking to 

foreign oil fields, we start to look toward the farm fields of America 

to help grow our way out of this crisis. But we also do a whole series of other things, including clean coal technology; investments in 

hydrogen, the fuel of the future; domestic energy production incentives to use CO2 to repressure oil fields in this country so that we 

get more production out of our domestic oil fields; authorizing the 

opening up of offshore drilling for natural gas. All of these have to 

be part of a comprehensive solution. 

I thank the Chair and thank my colleagues. I urge them to take 

a look at the BOLD Act. It is going to take this kind of aggressive 

action to make meaningful progress. 

The CHAIRMAN. Thank you very much, Senator. 

Senator Dayton? 

STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM 

MINNESOTA 

Senator DAYTON. Thank you, Mr. Chairman. Thank you for convening this very important hearing. I hope it will be the first and 

not the last, and from what you said I trust that it will because—

The CHAIRMAN. I think you need to hit your microphone. 

Senator DAYTON. Sorry. I think it is better when I am not heard 

sometimes. 

I want to thank you, Mr. Chairman, for convening this hearing. 

I hope it will be the first, not the last, because biofuels, specifically 

ethanol and biodiesel, are real and viable and here are now alternatives to the ever-increasing costs of gasoline and diesel fuels. It 

is an important component of Senator Conrad’s BOLD initiative. I 

commend him for that. I am proud to be a cosponsor of it, and that 

is the kind of bold action that we need. It is going to be very, very 

important. 

As we all know, we are in this room now with a larger than 

usual capacity because in part we are in the midst of another price 

crisis for the gasoline, the diesel, and the oil upon which our cities 

and our industries, our lifestyles and our entire U.S. economy depend. Most Americans want their fuel prices to be lower, but they 

don’t want to change their fuels in order to make them so. They 

say solve our energy problems right now, that is certainly understandable, but don’t make us do anything different in order to accomplish that. 

That is why I respectfully disagree with those who say that we 

do not have a national energy policy. We do. It is to maintain the 

status quo for as long as possible. And that is actually a rational 

policy because our existing energy sources, over 95 percent of 

which are and have been for over three decades oil-derived products, coal, natural gas, and nuclear, have been and in most cases 

7

continue to be cheaper, more available, more convenient, and certainly more familiar than any of their alternatives. The sources of 

supplies, their production, transportation and distribution systems, 

and retail networks are all well established and well protected by 

everyone who profits from them. 

Those industries and companies that control and profit from our 

country’s enormous and almost exclusive dependence upon their 

sources of energy have enormous stakes in preserving their control 

and protecting their profits by destroying any real competition, 

competitive threats to their energy monopolies. 

Nowhere are the stakes higher than in our Nation’s transportation sector. Over 40 percent of total U.S. energy consumption is 

of oil and petroleum products, and over two-thirds of that oil is 

used for transportation. Our country now consumes almost 30 percent of all the oil that is produced in the entire world every year, 

which means that 20 percent or one out of every five barrels of oil 

produced in the entire world goes into an American car, truck, 

train, or airplane. And up until recently, oil was the only fuel that 

those cars, trucks, trains, and airplanes could run on. What a gigantic energy monopoly that is. It is the largest monopoly of any 

in the world. And like most monopolies, it is hugely profitable for 

the monopolists and hugely expensive for everyone else. 

And like every other source of enormous profits and financial 

power, it is not going to be surrendered voluntarily by the profitable and the powerful. The huge oil and oil products monopoly is 

not going to willingly surrender sales or market share or profits to 

a competitor like the biofuels industry. Like other well-established 

energy monopolies, they may give lip service to energy alternatives, 

but they do not really mean it. 

That was very clear when the Senate considered its energy bill 

last year. Full-page ads in The Hill and Roll Call by the American 

Petroleum Institute smeared biofuels with the same distortions and 

fears that they tried to use a decade ago to defeat a 10-percent ethanol mandate in the Minnesota Legislature. They claimed it would 

raise the price of every gallon, as the President repeated yesterday, 

that the supply would be impure and unreliable, and that people’s 

gas tanks would explode or their carburetors would implode and 

their cars would be damaged or destroyed. 

None of that occurred in Minnesota. Yet almost 10 years after 

the Minnesota Legislature required every gallon of gasoline sold in 

our State to contain at least 10 percent ethanol, we are still the 

only State in the Nation to have that requirement, and nationwide 

the use of ethanol is only about 2.5 percent of that gasoline. 

That is starting to change, in large part because of these prices, 

and I commend the automobile industry for leading that initiative 

here in this country. If you see what has been passed out to my 

colleagues here, the current issue of U.S. News and World Report, 

the inside cover is a two-page advertisement by General Motors 

touting their flex-fuel engines. 

Yesterday, Daimler Chrysler announced that 500,000 of its vehicles by the year 2008, one-fourth, would be also containing these 

flex-fuel engines. 

In Brazil last year, over 80 percent of the automobiles sold in 

that country contain flex-fuel engines. I have had legislation for the 

8

last 3 years that would require every vehicle sold in this country—

automobile, SUV, small truck—that now consumes gasoline to contain a flex-fuel engine by model year 2006, 2008, 2010, take your 

pick, because it is technologically feasible, it costs about $100 to 

$300 per engine, I am told by the engineers in Detroit. And if the 

American consumer demands those vehicles as a requirement for 

buying or leasing new vehicles, it is going to spur this development, 

and then the consumer will have a choice. And that is the key. It 

is the price competition between ethanol E85 or E100 and gasoline—every time the consumer goes to the service station, it is that 

price competition that is going to help more than anything else we 

can do to reduce the price or reduce the increase in prices of our 

fuels. 

Mr. Chairman, again, I thank you for holding this hearing. I 

hope that we will have the opportunity at some future date to ask 

the chief executives of the major automobile manufacturers to come 

here and see how we could work cooperatively with them to encourage this implementation of flex-fuel engines in our Nation’s automobile and vehicle supply. 

Thank you very much. 

The CHAIRMAN. Thank you, and that is a great suggestion, and 

we will work on that. 

I am not suggesting that everybody make an opening statement, 

but I want to make sure that anybody who has anything to say has 

the opportunity. Does any other Senator wish to make an opening 

statement? Senator Coleman? 

STATEMENT OF HON. NORM COLEMAN, A U.S. SENATOR FROM 

MINNESOTA 

Senator COLEMAN. Mr. Chairman, I will be, if I can, very, very 

brief. 

First, I want to thank you for your leadership. This is critically 

important. There are so many crises we have in which the solutions are outside of our hands, we cannot control it. This is one 

that is right in our hands. It is in the hands of farmers in Iowa 

and Minnesota and the Dakotas. It is in the hands of American 

technology. So this is one that if we simply have leadership that 

says what John Kennedy said in the 1960s, when he said we are 

going to land a man on the Moon by the end of the decade, and 

we did not have the computer capacity to get to the Moon, nevertheless get back, what we simply need to say is that we are going 

to end the unhealthy dependence on Middle East oil and foreign 

oil, and we can do it. 

I am not going to get into the detail here. The reality is we need 

to obviously do more with ethanol and biodiesel. We have also got 

to get the infrastructure out there. Half the E85 pumps in America 

are in Minnesota. Great for Minnesota, but this is not, as you said, 

as the ranking member said, it is not a Minnesota issue or an Iowa 

issue or a Midwest issue. It is an American issue. 

And my last comment, Mr. Chairman, goes to your comment 

about China. I had a chance to visit with Hu Jintao last week. I 

talked about this issue. You know, we have an unhealthy dependence on Middle East oil. The Chinese are walking down the same 

path, and that has some terrible global, political, security implicaVerDate 0ct 09 2002 14:34 Feb 23, 2007 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\30237.TXT SAG2 PsN: SAG2
9

tions. And so if we can figure out a way to forge a partnership on 

this issue, we can both help our own security and help our economy, and I think help the world. 

So great things to do, great opportunity. Let’s seize the opportunity and make it happen. 

The CHAIRMAN. Senator Nelson? 

STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR 

FROM NEBRASKA 

Senator NELSON. Thank you, Mr. Chairman, and I, too, want to 

thank you for putting this issue on the agenda for today, and I appreciate the opportunity to hear from all of our colleagues and from 

the panelists as well. 

I am also pleased that the President spoke of alternative fuels 

and ethanol in particular in his State of the Union address. What 

I think that did is it legitimized the whole discussion that we are 

having today in a way that could not have been accomplished in 

such a timely manner as we have seen it. 

I am convinced that American agriculture is positioned to supply 

the Nation with an abundant source of clean, high-quality energy 

that will reduce our destructive reliance on foreign oil. That is 

what our purpose is all about. 

I, too, have visited Brazil, met with them when I was Governor, 

learning of their dependence issues of the past and their independence rise in the present and the future. We have the same opportunity to do that. 

As we look to the farm bill in 2007, I would hope that we would 

think in the following terms: If we like importing 60 percent of our 

fuel, we would love importing 60 percent of our food. So I am hopeful that, as we look at the importation requirements that we are 

experiencing today, we would focus on how to make the Food and 

Fuel Security Act of 2007 the highlight of what we are attempting 

to do, because it is a matter of security. Our food is a matter of 

our own security, to be able to produce enough so that we are not 

dependent on foreign sources for the predominance of our food any 

more than we want to be dependent on foreign sources for our fuel. 

So I hope that we can think as we move forward and look at 2007 

and the farm bill, that our focus will then be on how we could—

and for the sake of those in the South, we can add fiber, too. I 

know cotton is very important to some of our friends, if we are into 

Food, Fuel, and Fiber Security Act for 2007. 

I appreciate it very much. Thank you. 

The CHAIRMAN. You got my vote for President. 

[Laughter.] 

The CHAIRMAN. Senator Thomas? 

STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM 

WYOMING 

Senator THOMAS. Well, thank you, Mr. Chairman, and I am very 

interested in hearing from our members of the panel. I agree entirely with what has been said here. This is an opportunity for us 

to do some things. But I am very anxious to know what the prospects are for making this kind of an approach a little more efficient, a little more effective. I mean, if we go up to the 7 billion 

10

area that we talked about, or 6.3 billion, that is 3 percent—that is 

3 percent of our energy needs. So we need to be working here, but 

we need to find some ways to see how we can make it work a little 

better. 

You talk like you are going to change the whole thing with ethanol. Well, that is not the case the way it is now. So we need to 

be really interested in how we can make this whole program be a 

little more efficient in terms of volume. That is really the key. So 

I am anxious to hear from you. 

Thank you. 

The CHAIRMAN. Senator Crapo? 

STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM 

IDAHO 

Senator CRAPO. Thank you very much, Mr. Chairman. 

First of all, I want to thank all of our witnesses for coming here 

today. I have a very eloquent and well-prepared statement, but 

most of the points I was going to make have already been made. 

I would simply submit my statement for the record and add that 

I had the opportunity recently to be in Brazil and to meet with the 

agricultural leaders and many of the other leaders of Brazil and actually go out and visit some of their ethanol facilities and observe 

some of the decisions that they are making in an effort to become 

energy independent. 

And although I believe that the circumstances that the United 

States faces and the circumstances that Brazil faced are sufficiently different that we may have to design a little bit different 

approach to it. 

But the fact is that the effort that Brazil has made shows that 

it can be done and that biofuels can be a key part of achieving energy independence, can be good for our agriculture community and 

good for our energy independence, and, frankly, as Senator Coleman has indicated, it can be very helpful to us in our international 

relations as energy issues become increasingly forefront issues in 

terms of the relations between nations. 

So I think this is a very critical issue. I have got some questions 

for the panelists about how we will be as effective as possible, both 

technologically as well as in terms of the development of these 

fuels. But I am convinced that this is one of the key areas that 

needs to be a highlighted part of our national energy policy. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Salazar? 

STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM 

COLORADO 

Senator SALAZAR. Thank you very much, Chairman Chambliss. 

Let me first thank you and Ranking Member Harkin for putting 

the spotlight on this issue because it is an issue that is very timely. 

Two, I want to thank Bob Dinneen and Joe Jobe for their leadership and for the renewable fuels summit that you put together yesterday. I thought it was very, very well done, and I appreciated 

participating in that. 

11

I have a statement for the record, and I will submit that for the 

record, but I want to make just a couple of quick points, and I will 

try to be very brief. 

First of all, it seems to me that when you look at the national 

policy issues that we are dealing with here today, they are the 

most important national policy issues of our time for our country. 

And when you look at the national security issue of our overdependence on foreign oil—the President’s statement that this was 

an addiction that we had to foreign oil—it tells a story that we 

ought not to be putting the future of our country or our children 

in the hands of the sheiks and kings of the Middle East. And there 

is a tremendous national security imperative that I think brings 

conservatives, progressive Democrats, and Republicans together to 

try to address this issue. 

Secondly, from a rural America point of view, I think that what 

happens with biofuels and bio-energy is going to create a whole 

new chapter of opportunity for what I often call the forgotten 

America, places that struggle so much, and I think it is a real opportunity for us to try to re-energize rural America. 

The fourth point, quickly, Colorado I think is like the rest of the 

Nation, moving very fast forward in terms of embracing biofuels 

concepts. You know, 14 months ago, we had no ethanol plants in 

the State of Colorado. Today we have two that are up and functioning. There is ground-breaking scheduled for another five. There 

are biodiesel projects that are going on, probably in 20 locations 

around the State. This is really, really a very exciting movement 

and I am sure Colorado is an example of what is happening in the 

other States around the country. 

I spent time with President Bush when he came out to Colorado 

and visited the National Renewable Energy Lab. I know he is excited, as is the Department of Energy, with respect to what we do 

with biofuels, including cellulosic ethanol and a whole host of other 

things. And I think, Mr. Chairman, it would be important for this 

committee to take the opportunity of the momentum that has built 

around the concept of renewable fuels and the technology that we 

now have around renewable fuels, to try to push forward with an 

energy package that might be very much what Senator Conrad has 

introduced—there are others who have ideas out there—but to try 

to do that this year as opposed to even waiting for the farm bill 

that I know we will be having hearings on in the year ahead and 

considering it for next year. 

It seems to me that this is the issue of our time of this year, and 

we as an Agriculture Committee I think have a good sense of how 

it is that rural America can contribute to dealing with this national 

issue. 

So my suggestion to you, Mr. Chairman, is that as we move forward with this issue of biofuels, we might want to speed up our 

conversation about legislation that might help us get to the energy 

independence that Senator Conrad spoke about so eloquently with 

respect to what has happened in Brazil. 

The CHAIRMAN. Very good point. 

[The prepared statement of Senator Salazar can be found on 

page 42 in the appendix.] 

The CHAIRMAN. Senator Stabenow? 

12

STATEMENT OF HON. DEBBIE STABENOW, A U.S. SENATOR 

FROM MICHIGAN 

Senator STABENOW. Thank you, Mr. Chairman, and, first, welcome to our guests this morning, and thank you for your patience. 

I think the fact that all of us are here and have wanted to share 

thoughts means that this is something that we all care very much 

about, and it is, I think, wonderful to see that this is really an area 

where we can come together on a bipartisan basis. We have a real 

vision that is very exciting, I think, for where we can go as a country, both that relates to our national security, our foreign policy, 

our jobs, as well as supporting agriculture. 

And, Mr. Chairman, I thank you and I also want to thank Senator Harkin. When I think about the farm bill in 2002, I think one 

of the most forward-thinking provisions in there was the energy 

title, and I am hoping with both of your leadership that we will 

really be able to build on that, because as Senator Conrad has said, 

this really is about being bold now. And it is exciting to see what 

all of us can do together. 

Just a couple of points I would make. One is that our auto manufacturers are stepping up and are very excited and investing millions of dollars now in biofuels and alternative energy, and I appreciate Senator Dayton talking about the industry headquartered in 

Michigan. We are very proud of what is being done. Daimler Chrysler is the first automobile manufacturer to approve the use of B20 

biodiesel. General Motors is advertising, as is Ford, for ethanol 

E85. Many of our vehicles right now can use that without any 

changes, and people are not aware of that. Flex fuels, hybrids, Ford 

has put out a bold plan for the future for their fleet. 

There is a lot of excitement here, and in Michigan, where we will 

have five ethanol plants by the end of the year, and we already 

have biodiesel industries, announced that they are going to build 

a 3-million-gallon-per-year biodiesel production facility near Detroit. There is a lot happening. This is very exciting. And it is 

about jobs, and it about supporting agriculture, and it is about energy independence. 

The only thing I would add is something that is also very exciting, Mr. Chairman. We are seeing now that not only are we talking 

about ethanol out of corn byproducts and also being—the possibilities now are for sugar cane, sugar beets, which are very important 

in Michigan in terms of ethanol. There are, of course, soybean biodiesel, a variety of things. But we have been working in Michigan 

on other oil-based products. Plastics now can be made from corn 

byproducts. The President of Michigan State University just released a report on creating oil-less products in terms of plastics, 

and we are developing in Michigan now automobile parts. There is 

a development process going on for a dashboard that would be 

made with plastic from corn byproducts. And it has the added byproduct that if you get hungry and you are driving, you can... 

But I throw out there because I think there is some real excitement and real possibilities for us that relate to not only fuels but 

relate to plastics and other options. And we can all come together 

around a vision that says we want our fuels and we want our plastics to come from middle America rather than the Middle East. 

Thank you, Mr. Chairman. 

13

The CHAIRMAN. Thank you. Indeed, there are a number of other 

products that we are experimenting with, and I had the privilege 

of joining my colleague Norm Coleman at the Farmfest in Minnesota last year. And knowing that I come from a big cotton-producing State, they presented me with a golf shift made from corn 

byproducts. They did tell me that it had not been perfected yet and 

that if I got hot and sweaty, it would fade. 

Well, by the time I got in that night, it having been a very warm 

day, I had the most beautiful pair of pink underwear you have 

even seen. 

[Laughter.] 

The CHAIRMAN. But the shirt is very nice. 

I hate to turn this over to Senator Roberts now, but, Senator 

Roberts? 

STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM 

KANSAS 

Senator ROBERTS. Well, up to this point, pink underwear has 

been classified, but it now seems it is out. 

[Laughter.] 

Senator ROBERTS. Mr. Chairman, thank you, and thank you to 

Senator Harkin for really highlighting this issue, which is not a 

temporary challenge. It is a long-term challenge, maybe a permanent challenge. 

I want to thank Senator Salazar for really stating what this is 

about, and that is, our national security in regard to our national 

economy. But it is our security as well. 

We hold a lot of hearings in the Intelligence Committee that are 

classified, and I want every member here to know that this is a 

long-term, very serious challenge that we have, if you add up what 

the fuel consumption is going to be in terms of fossil fuels with 

India and more especially China and the turmoil in the Middle 

East, look at what happened with Iran. And Hugo Chavez is not 

behaving very well down in Venezuela. And then you take a longterm look at that in terms of increased population, and you look 

at what the price increase has done in regards to energy and farm 

country, and we have a very serious challenge. One would say it 

might even be a crisis, but I do not like to use that word. 

I would like to know that we would continue to build this industry that we are talking about that everybody has mentioned with 

sound economic principles. I remember the 1970s when we went 

through the gasohol business and we had the National Alcohol 

Fuels Commission traveling all over the country with previous Senators and members. I think Senator Harkin was very much aware 

of that. And then it all folded like a tent in terms of the economic 

viability. 

So I want to hope that we make sure that we educate and we 

equip our local communities to help make practical and financially 

sound investments in this fuel technology. We have seven ethanol 

plants, a biodiesel plant coming on board, and we are using that 

product. It seems like to me we have a real chicken and egg problem. Why would you buy a flex-fuel vehicle—and many more are 

going to be made, and that certainly isn’t an answer if you can’t 

buy biofuels at your local gas station. And if you are a station 

14

owner, what incentive do you have to dedicate a pump for biofuels 

if your customers do not have the vehicles that can use it? Now, 

we can work that out, but that has to be according to a plan, and 

I don’t think we can do it with mandates. 

We have the higher blends of fuel in Kansas, the E85, B2, B10, 

B20, all of the fuel pumps popping across the State, and a lot of 

vehicles aligned to line them up, but we need more. 

I am very pleased with the progress that we have made, but I 

have a word of caution. I said again that we must be sure that certainly our communities invest in the long-term viability of these 

biofuels, but these plants must be able to sustain price changes in 

our commodities and the prospect of future market fluctuations. 

We all certainly know about that. So we have to support incentives 

for, I think, the alternative fuel vehicles, and like the tax credit to 

producers that was included in the energy bill, and I agree with 

Tom Harkin, we need an energy section in the farm bill, and we 

need to consider that. 

And we have to get these fuels from the countryside to the coasts 

and the urban areas as well. And I think we have to view our investments in regards to alternative fuels in the broader context of 

the next farm bill. What will the energy title look like? We need 

to keep in mind that any incentives or policy changes we make on 

the energy side cannot come at the expense of the food-based agriculture. And I think we need to think very carefully about the law 

of unintended consequences as we go through this, how our commodity programs and conservation and energy programs will work 

together, have to work together. Changing one title at the expense 

of another is just not the answer. 

And that includes research. We have to continue to invest in the 

agricultural research that has increased our crop variety, production, and yield and disease resistance. Basically this is just not 

going to work without the proper research, and so research into 

these feedstocks will only help to ensure the viability of the 

biofuels industry. 

I am pleased that the alarm bell has gone off. I am pleased that 

the American people are waking up to this issue. We have an obligation on our hands, and I think, Mr. Chairman, with you and Senator Harkin at the helm that we certainly will meet these challenges with some good answers. 

The CHAIRMAN. Thank you, sir. 

Senator Talent? 

STATEMENT OF HON. JAMES M. TALENT, A U.S. SENATOR 

FROM MISSOURI 

Senator TALENT. Thanks, Mr. Chairman. Three things, briefly. 

E85 in Missouri is selling for 50 cents a gallon less than unleaded gasoline. It is already moderating the price of energy, and 

this at a time when supply is under stress and the distribution network is not as fleshed out as it needs to be and as it is going to 

be. 

There is a town in mid–Missouri called Mexico, Missouri, and 

they broke ground on a biodiesel plant, and so a practical illustration of Senator Salazar’s point, this is one time when it is a good 

thing that jobs are going to Mexico, in this case Mexico, Missouri. 

15

And we are seeing this story repeated all over rural Missouri, and 

I believe we are going to see a renewal of many economies in rural 

America because we are now going to fuel with the same kind of 

substances that we have been using for food. 

And, finally, Mr. Chairman, we are in the renewable era now. 

The energy bill last year I think did that. It ushered us into it. And 

all that bill really did was unblock the situation so the normal economic forces should work. And we should understand what was 

going on for years in the country. The oil companies are vertically 

integrated, and they just wouldn’t buy ethanol, even though it did 

make economic sense, because they were in control of the oil market. And the renewable fuels standard, which many people in this 

committee worked hard to get, has made the difference because it 

was the watershed that said, no, we are going to buy ethanol, and 

it has allowed the economic forces that I think otherwise would 

have worked to work. And that’s why I think everybody has come 

out of the gate, if you will, so fast because it was pent up anyway. 

So we have taken a big step. I think we all wish that it had been 

taken earlier, but we have taken it. And then the question is now: 

What is the next step how to perfect this process? We do need continued investment, and we need continued investment in the infrastructure, in the distribution network as well. And I am going to 

be very interested to hear what the witnesses have to say about 

that, and I want to say a special welcome to Joe Jobe from Jefferson City, Missouri. It is good to have you here, Joe. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Senator Lincoln? 

STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR 

FROM ARKANSAS 

Senator LINCOLN. Well, thank you, Mr. Chairman, for putting together such an extremely timely hearing on the state of the 

biofuels industry. We want to welcome our panel, and I will try to 

be brief so we can get to you all because we want to hear from you. 

But this is clearly a topic that is on most Americans’ minds, and 

it is: What are we going to do to control the price of fuel? Whether 

you are a farmer, whether you are trucker, whether you are just 

trying to get to a job, it is a critical issue, and it is really hitting 

at your pocketbook and your ability to do your job. 

But the question I get the most when I go to Arkansas and I 

travel across my State is: Why are we not doing more? They know 

the technology exists. They know that there are so many opportunities out there for us to do something about the issue of the price 

that they are paying for petroleum-based fuels. And they just cannot understand that we are not moving forward more quickly. 

So we are looking to you for some help in answering those questions to constituents of how we can provide the kind of help that 

the industry needs in order to jump start it in a little faster fashion. 

I have said for so many years that the biofuels can play an important role in bringing down the cost of fuel and certainly reducing our dependence on foreign oil, but they also do a tremendous 

amount for the environment. They are great as a secondary marVerDate 0ct 09 2002 14:34 Feb 23, 2007 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\30237.TXT SAG2 PsN: SAG2
16

ketplace for our producers of crops and job creation. As Senator 

Talent mentioned, in Missouri, in Arkansas, places like that, this 

is going to be a real jump start in terms of the redevelopment of 

many of our rural areas. Being able to put up a lot of small plants 

in different places is going to mean an awful lot. And certainly 

through supply and demand we can figure that out. 

We know that demand out there, the demand problem comes 

from the increasing industrialization of the Far East—that has 

been mentioned as well—namely, China and India and the demands that are being put on the supply that exists. Certainly the 

world market is more competitive than it has been, and it is not 

going to be slowing any time, and that is one of the other reasons 

you see a sense of urgency among our constituency when I was 

home for 2 weeks. They know it is not getting any better. They can 

see the future ahead of them, and they realize that over the course 

of this summer it is not going to get anything but probably worse. 

So up to this point we have not been able to fundamentally address the supply problems that we face, and I think people are anxious and ready for us to do that now. We have tried diplomacy, urging oil-rich countries to open their spigots to meet increasing demand. We have tried greater investment, putting in place tax 

structures, other mechanisms that allow oil companies to seek investment in marginal sources they might not otherwise attempt. 

You know, to date, these efforts have just not achieved what we 

have got to do. 

We have got to get serious about making an investment in alternative fuels, and I think that is why it is time for us to take ownership. I am pleased that the chairman and Senator Harkin are leading the way. We have to develop a domestic renewable fuels industry that can meet our Nation’s energy demand, and we have got 

to do it now. You know, in our Nation’s history we have faced unbelievable technological challenges that we have confronted and we 

have overcome. You know, we did not put a man on the Moon by 

talking about how important it was. We developed a plan and we 

committed the resources and we dedicated ourselves to achieving 

that plan. That is what we have to do in regard to renewable fuels. 

We have to embrace it. We have to set it as a priority, and we have 

to be willing to make the investment. Industry cannot do it by 

themselves. They have done a tremendous job in developing new 

technology and making biofuels a viable option. I attended a dedication; the very first new biofuels biodiesel plant in Arkansas 

opened last week. We were real proud of that. They did a great job 

not only in terms of making sure that they had the feedstock and 

the oils and the refinery in place, but they put together a financial 

plan and a whole business plan that also included the oil marketers and the distribution, making sure that what we are doing is not 

looking at just one component but all components, making sure 

that we are going to have these alternative fuels available. But 

they had to go to six different funding sources. They had to jump 

through hoops and blow whistles, and it was just unbelievable, the 

challenges. But they did it in less than a year to prove that it can 

be done. It does not take decades to do this. We can make it happen, and we can make it happen in a timely way that the American 

people expect us to do that. 

17

So I am grateful that we are here today. I know, Mr. Chairman, 

in your State, First United Ethanol is getting ready to break 

ground. That is, I think, a wholly privately funded operation. They 

visited our office to talk to us about what they were up to. So we 

know that private industry has got the capacity and the capability 

to do it. We just have to be able to provide them the incentives and 

certainly the wherewithal to make sure that they are out there. 

There are great success stories. Hopefully we will hear about some 

more of them from you all. We have got our stories to tell. The 

most important thing are your suggestions of how we accelerate 

those stories and multiply them. 

So thank you, Mr. Chairman. I am pleased to be here and certainly proud that the panel is willing to spend the time to work 

through this issue with us. 

The CHAIRMAN. Thank you very much, Senator Lincoln, and now 

we will move to our panel. Gentlemen, thank you for your patience. 

Our panel today consists of Mr. Bob Dinneen, President and CEO 

of the Renewable Fuels Association, headquartered here in Washington, D.C.; Mr. Joe Jobe, Chief Executive Officer, National Biodiesel Board, from Jefferson City, Missouri; Mr. Jay Debertin, Executive Vice President and Chief Operating Officer of Processing, 

CHS Inc., St. Paul, Minnesota; Dr. Robert C. Brown, Bergles Professor in Thermal Science. He is a mechanical engineering professor and chemical and biological engineering at Iowa State University in Ames. 

Gentlemen, thank you very much for being here. We will start 

with you, Mr. Dinneen, and move down the row for any opening 

statement you wish to make. 

STATEMENT OF BOB DINNEEN, PRESIDENT, RENEWABLE 

FUELS ASSOCIATION, WASHINGTON, DC 

Mr. DINNEEN. Thank you, Mr. Chairman. Mr. Chairman, members of the committee, good morning. While my statement may not 

be as eloquent and well prepared as Senator Crapo’s, I would ask 

that it be entered into the record, and then I will try to summarize 

real quick. 

The CHAIRMAN. Without objection. 

Mr. DINNEEN. First of all, Mr. Chairman, I want to thank you 

for holding this very timely and, indeed, very important hearing. 

I am pleased to be here. I want to tell you all about the growth 

in the domestic ethanol industry, the unprecedented growth that 

we are seeing today. Indeed, ethanol today is the single most important value-added market for farmers. Ethanol is the second 

largest consumer of grain this year, having passed exports in terms 

of demand. The growth that we are seeing in the industry today 

is simply phenomenal. 

Today’s ethanol industry consists of 97 biorefineries located in 19 

different States. We are processing close to 2 billion bushels of 

grain today into more than 4.5 billion gallons of fuel ethanol. And 

we are going to continue to grow. But ethanol is totally blended in 

40 percent of the Nation’s fuel—40 percent. Virtually every single 

gallon of gasoline in California is blended with ethanol. Minnesota 

has led the way with a 10-percent requirement. Ten percent of the 

fuel sold in Minnesota is blended with ethanol, 85 percent of the 

18

fuel in Iowa and throughout most of the Midwest, but it is no 

longer just a niche market in the Midwest. Ethanol is now sold virtually coast to coast and border to border, and we are going to see 

continued demand. 

The 4 billion gallons of ethanol that were produced last year 

have provided tremendous economic benefits for the country. In 

using 1.5 billion bushels of grain, we increased gross output in this 

country by $32 billion. We added 153,000 jobs across all sectors of 

the economy last year. Household income was increased $5.7 billion 

as a result of the ethanol industry that exists today, and we are 

growing. The ethanol industry added $1.9 billion in Federal tax revenues, $1.6 billion in State and local taxes, money that is used then to 

build infrastructure, build schools, and add to the quality of life in 

rural communities. Ethanol today is revitalizing rural America. 

When I go to grand openings and I see a thousand farmers that 

have invested their own money in an ethanol plant, they are so excited because jobs and economic opportunities are returning to 

rural America. That is what the ethanol industry is doing today. 

In addition, as many of you have noted, ethanol is having a tremendous impact on energy. The 4 billion gallons of ethanol that 

were sold last year reduced our oil imports by 170 million barrels 

a day. That is reducing our trade deficit by $8.7 billion, and those 

benefits will continue to grow. 

In terms of air quality, the 4 billion gallons of ethanol sold last 

year reduced greenhouse gas emissions by some 8 million tons. 

That is the equivalent of taking a million vehicles off the road. 

Now, the reason for that tremendous growth is in large part because of the energy bill that was passed last year. As you, Mr. 

Chairman, noted, the renewable fuels standard that was passed as 

a part of that bill that so many on this committee worked hard to 

do was a clarion call to our industry to go ahead and grow. We 

have 35 plants under construction today; 24 of those have begun 

construction since August 8th when President Bush signed that bill 

into law. 

The other reason for all the tremendous growth is that MTBE is 

hemorrhaging the marketplace. Now, importantly, there is nothing 

in the energy bill, nothing in the Clean Air Act, no Government requirement that says the oil companies have to remove that MTBE. 

It is probably a good thing because MTBE had been contaminating 

drinking water supplies all across the country. And some have 

questioned whether or not there is going to be sufficient ethanol to 

meet that tremendous increased demand, and absolutely there will 

be. 

We are growing, as I have noted. There is going to be some migration from ethanol sold in conventional gasoline markets to those 

markets where it is needed more for MTBE replacement. And there 

will be some level of increased imports. We are working awfully 

hard today with our oil industry customers and the transportation 

infrastructure to make sure that ethanol is where it needs to be 

when it needs to be and the transition is moving forward as 

smoothly as we can expect. 

In the future, we are going to continue to grow. The industry 

right now is changing. It is evolving. There are new feedstocks that 

19

are coming into play, new technologies. Our industries are looking 

at corn extraction, gasification to reduce energy inputs. It is a very 

exciting time to be a part of this industry. I look forward to continuing to work with the leaders on this committee on bold energy 

initiatives and other measures to increase the production and use 

of renewable fuels because it is terribly important for our country, 

for our national security, as Senator Salazar has said, for economic 

opportunity, as Senator Harkin knows, seeing all the development 

in the State of Iowa, and for the environment in the future. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Dinneen can be found on page 

52 in the appendix.] 

The CHAIRMAN. Thank you, Mr. Dinneen. 

Mr. Jobe? 

STATEMENT OF JOE JOBE, CHIEF EXECUTIVE OFFICER, 

NATIONAL BIODIESEL BOARD, JEFFERSON CITY, MISSOURI 

Mr. JOBE. Good morning, Mr. Chairman, Ranking Member Harkin, members of the committee. I am the chief executive officer of 

the National Biodiesel Board. That is the trade association representing the biodiesel industry in America. And I am also pleased 

to report that the biofuels industry is in an era of tremendous 

growth. I will focus my comments this morning briefly on the factors that have contributed to that growth for biodiesel, why that 

growth is important to America, and what must be done to keep 

it on its current successful path. 

As you mentioned, Mr. Chairman, the amount of growth has 

been substantial. We went from 25 million gallons in 2004 to approximately 75 million gallons of production and sales in 2005 and 

on track for 150 million gallons in 2006. In the last 2 years, the 

biodiesel industry has built approximately 45 biodiesel plants, 

which have come online—as many of the Senators have mentioned, 

in their own States—and another 40 more that are currently under 

construction. 

The majority of diesel fuel in the United States is used in overthe-road trucks, and the trucking industry serves as a critical part 

of our economy, as you all know. Everything that is in this room—

this microphone that I am speaking at, this table—all of the products that we use every day were brought to us by diesel-powered 

trucks and America’s truckers. Average diesel prices have nearly 

doubled over the past 4 years, which represents a tremendous 

threat to the trucking industry. 

The American Trucking Association has endorsed the use of B5 

as a way to supplement our Nation’s energy supply, and likewise, 

Sysco Corporation, which is the largest private truck fleet in the 

Nation, has begun using B5 in its trucks. Biodiesel contains oxygen, so it burns cleaner, it reduces smoke and smell, it increases 

cetane and improves lubricity. And as ultra-low sulfur diesel fuel 

is coming online beginning in June of this year, biodiesel is well 

positioned to replace lubricity that is lost in the refining process of 

ultra-low sulfur diesel fuel. 

The high price of fuel is just one of the contributing factors to 

increased biodiesel use. But I am here today to highlight three Federal policy measures that have been extraordinarily effective in 

20

stimulating biodiesel development. Because of these three measures, biodiesel is beginning to make a small but significant impact 

on our Nation’s energy supply. All three of these measures are 

scheduled to expire soon, but must be continued in order to keep 

the growth of biodiesel going strong. Although we are showing significant signs of success, we are an industry that is still in its infancy and we are comparable to the ethanol industry in approximately 1982. 

First, the biodiesel blenders tax credit, which, Mr. Chairman, you 

alluded to earlier this morning, was part of the restructured Volumetric Ethanol Excise Tax credit, or VEETC, went into effect in 

January of 2005. It functions similarly to the excise tax credit for 

ethanol and was the primary stimulant for the development of the 

biodiesel industry in 2005 and that showed a lot of increase in new 

plants and jobs in biodiesel production. 

Senators Grassley and Baucus have introduced the Alternative 

Energy Extender Act, S. 2401, and this act includes the extension 

of the biodiesel tax credit through 2010, which would make it consistent with the ethanol provision. Additionally, as Senator Conrad 

mentioned, there is an extension through 2013 in his BOLD Act. 

Legislation is also currently pending in the House which would extend this credit. 

The second policy measure is the Bioenergy Program. A 2005 

OMB evaluation reported that that program has done much to 

stimulate biodiesel growth and could continue to be effective for the 

emerging biodiesel industry. The report stated, and I quote, ‘‘Increases in the production of biodiesel indicate a rise in the supply 

of domestically produced renewable fuels. It is also an indicator of 

the viability of the biodiesel industry and its expanded consumption of agricultural commodities.’’

High diesel fuel prices are also hurting farmers as they have entered the spring planting season. But while costs are going up, the 

projected value of their crop is going down. The USDA is estimating the highest number of planted soybean acres on record for 

2006 and projecting that soybean prices will drop below $5 per 

bushel in 2006 and 2007, triggering significant payments to soybean farmers. If the extended 2007 Bioenergy Program increased 

soybean prices and reduced Government payments, increased the 

production by $40 million, it is expected it would reduce Government payments by $210 million, which would be a net plus for the 

United States Treasury. That program is scheduled to expire in 

July of this year, so it is critical that we work to do something to 

extend that program. 

The third program I will mention briefly is the USDA’s Biodiesel 

Fuel Education Program. It was part of the energy title of the 2002 

farm bill. That has been extraordinarily important in addressing 

fuel quality measures, which is vital to the success of our industry, 

as well as educating the petroleum partners and the automotive industry. So, to summarize, the three Federal policy measures: the 

extension of the biodiesel tax credit, the extension of the Bioenergy 

Program for biodiesel, and the extension of the Biodiesel Fuel Education Program. 

Mr. Chairman, we appreciate this opportunity, and I thank you 

very much for this committee. 

21

[The prepared statement of Mr. Jobe can be found on page 59 in 

the appendix.] 

The CHAIRMAN. Thank you. 

Mr. Debertin? 

STATEMENT OF JAY D. DEBERTIN, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER, PROCESSING, CHS 

INC., ST. PAUL, MINNESOTA 

Mr. DEBERTIN. Thank you, Mr. Chairman. My name is Jay 

Debertin. I am Executive Vice President and Chief Operating Officer for CHS Inc. We appreciate very much the opportunity to appear before you and would like to express our appreciation to the 

members of this committee for their strong support of efforts to 

promote a viable and competitive United States renewable fuels industry. 

By way of introduction, CHS is an energy, agricultural supply, 

and grain-based foods company owned by about 1,100 local cooperatives and 350,000 farmers in over 30 States. This year we are 

marking our 75-year anniversary. 

CHS is also one of the few farmer cooperatives that own petroleum refineries and fill key agricultural and rural market niches. 

Yes, I am one of those refiners. We own a refinery in Montana and 

have majority interest in a refinery in Kansas. In fact, we are the 

largest fuel supplier, including diesel, for on-farm use. 

We are also one of the few refiners that have an equally strong 

commitment towards renewable fuels. For example, CHS has been 

extremely active in the renewable fuels business for a quarter of 

a century, marketed many times in States that you represent 

under the Cenex brand that you might see at facilities across your 

States. 

In 2005, we marketed more than 500 million gallons of ethanolblended fuels and sold approximately 100 million gallons of B2 diesel. We have been marketing these fuels since the late 1970s, went 

through those gasohol phases that we spoke of earlier, and we have 

been there. 

While our focus has long been in the marketing of renewable 

fuels, last fall we took the major step of investing significantly in 

U.S. Bioenergy, a South Dakota company that manufactures and 

markets ethanol and which has a half dozen plants under construction or planned in the Midwest, as well as ownership in an established plant in Nebraska. They also have plants under development 

and under construction in many States that you might represent. 

This represents a major commitment by our cooperative to our 

Nation’s energy future and in helping our farmer owners better 

capitalize on new value-added opportunities as part of a growing 

renewable fuels industry. Being a cooperative also helps them to 

reduce the effective cost of fuel and other inputs as well as improve 

their income from the marketplace since our earnings are returned 

directly to our farmer members. 

The renewable fuels industry is still a very young and growing 

industry. We see tremendous opportunities, but there are still some 

challenges. Two that we could talk about would include making 

sure that the Renewable Fuels Program is a true national program; 

22

and, number two, to continue the development and enhancement of 

a distribution system. 

The recently passed renewable fuels standard was an important 

achievement in helping drive industry growth. It is also important 

that EPA rulemaking help ensure that it is a national program, applying to both blending requirements and the use of tradable credits. 

There is a geographic imbalance between where ethanol is produced and where the majority of the United States motor fuel is 

consumed. Ethanol production largely takes place in the Midwest 

today while the bulk of our population is in the coastal States. 

Therefore, we need to continue to ensure that we have an economical and efficient transportation and distribution system that facilitates this future growth. 

In conclusion, what can Congress do to further encourage the 

production and availability of renewable fuels in a way that enriches rural America? We have a couple of thoughts: 

First, to pursue an increase in the allowance for blending of ethanol with gasoline from the 10-percent level to an ultimate goal of 

25 percent or more in addition to the current E85 option; 

Second, to ensure that the current Renewable Fuels Program is 

a national program; 

Third, continue to encourage the development and use of renewable fuels by maintaining current programs and tax incentives; 

Fourth, to help meet current and future distribution requirements through continued infrastructure improvements; 

Fifth, to work to ensure that future farm legislation builds on the 

success of the current farm bill to help promote the development 

and growth of renewable fuels; 

And finally, sixth, to maintain and strengthen the ability for 

farmers to join together in cooperative efforts to capitalize on new 

value-added opportunities and improve their income from the marketplace. 

Thank you, Mr. Chairman. We look forward to working with you 

and the members of this committee on these and other important 

issues. 

[The prepared statement of Mr. Debertin can be found on page 

48 in the appendix.] 

The CHAIRMAN. Thank you very much, Mr. Debertin. 

Dr. Brown? 

STATEMENT OF ROBERT C. BROWN, PH.D., BERGLES PROFESSOR IN THERMAL SCIENCE, PROFESSOR, MECHANICAL 

ENGINEERING, CHEMICAL AND BIOLOGICAL ENGINEERING, 

AGRICULTURAL AND BIOSYSTEMS, ENGINEERING DIRECTOR, CENTER FOR SUSTAINABLE ENVIRONMENTAL TECHNOLOGIES, IOWA STATE UNIVERSITY, AMES, IOWA 

Mr. BROWN. Mr. Chairman, thank you for this opportunity to 

speak on the future of the renewable fuels industry. I would also 

like to thank Senator Harkin for his long-term support of biomass 

research at Iowa State University and his personal vision for a bioeconomy. 

The Chicago Board of Trade recently reported that ‘‘the U.S. ethanol industry is experiencing exponential growth and this trend is 

23

expected to continue.’’ In other words, the sky is the limit. If this 

sounds like the heady days of the 1990s Internet boom, there are 

indeed parallels. The Washington Post notes that both the Internet 

and the renewable fuels industry started from relatively small 

bases, they are dependent upon technological innovation for 

growth, and both were underinvested relative to the size of the potential market. This parallel has not been lost on the original investors of the Internet who are among the largest investors in the 

renewable fuels industry today. With a growth rate averaging 22 

percent in the last 4 years and a doubling expected in the next 5, 

it is hard not to be excited about this industry. However, we must 

realize that decisions made today will determine whether this industry meets expectations or whether it falls victim to irrational 

exuberance. 

The Department of Energy calls for renewable fuels to meet 20 

percent of U.S. transportation demand by 2030. Currently, ethanol 

represents only 3 percent of transportation fuels. but even the most 

optimistic scenarios do not predict grain ethanol to displace more 

than 6 to 8 percent of gasoline demand. Agriculture must think beyond corn and soybean production if it is to supply a significant 

fraction of U.S. transportation fuels. 

At Iowa State University, I teach students about biorenewable 

resources in one of the only such graduate programs in the United 

States. As a class exercise, I ask my students, given the choice of 

growing an acre of corn, soybeans, or switchgrass, which would 

yield the most transportation fuel and which would produce the 

greatest quantity of dietary protein. Most students choose corn for 

fuel and soybeans for protein. They are surprised to learn that an 

acre of switchgrass could yield almost twice the biofuel as an acre 

of corn and almost the same amount of protein as an acre of soybeans. Much work remains to make this intriguing possibility a reality. 

Success would allow renewable fuels to meet 30 percent or more 

of our Nation’s transportation needs, according to a recent USDA 

study. 

The emergence of the renewable fuels industry is only part of a 

bigger movement known as the bioeconomy. The Des Moines Register recently characterized this movement ‘‘a revolution’’; indeed, 

proponents of a bioeconomy call for nothing less than the complete 

replacement of petroleum with plant-based chemicals and materials in the manufacture of not only transportation fuels but building materials, fabrics, lubricants, plastics, and other durable and 

consumable goods. 

We must be careful in our delineation of goals for the bioeconomy. Often people confuse pathways with goals. For example, 

converting corn into ethanol is not a goal of the bioeconomy but, 

rather, a pathway, and possibly a transitory one at that, as new 

technologies present more efficient and high-yielding pathways. I 

suggest four goals for the bioeconomy. 

The first goal is to reduce reliance on imported petroleum. If we 

discover after a decade of ‘‘exponential growth’’ in the renewable 

fuels industry that we still import more than 60 percent of our 

transportation fuels, then the bioeconomy is not fulfilling its promise. 

24

The second goal is to improve environmental quality, especially 

reducing emissions of greenhouse gases into the atmosphere. In 

principle, the manufacture of biofuels yields no net emissions of 

greenhouse gases, while innovations in agriculture can substantially sequester carbon into soils. In practice, these advantages are 

diminished by overreliance on fossil fuels in the production of 

biofuels and failure to employ sustainable agricultural practices. 

We must be diligent about keeping the ‘‘renewable’’ in renewable 

fuels. 

The third goal is to expand markets for U.S. agriculture products. Although these products might be traditional cash crops, they 

might also be new commodity crops that better meet the needs of 

a bioeconomy. 

The fourth goal is to provide economic development opportunities 

for rural America. Outsourcing by U.S. corporations is often justified as ‘‘following the resource.’’ In the bioeconomy, the resources 

are the rich agricultural lands of rural America. We can expect the 

manufacture of biofuels and biobased products to occur in communities close to this resource, which will boost our rural economies. 

The way to a bioeconomy is not clear even with the well-defined 

set of goals. It is too early to pick winners and losers among the 

technologies that can transform biomass into biofuels and biobased 

products. I think you would be surprised and astonished at the 

wide array of technologies that are being explored as pathways to 

the bioeconomy. Much of the recent public discussion has been 

about the development of advanced enzymes to produce cellulosic 

ethanol, but other possibilities include Fisher–Tropsch liquids or 

alcohols from syngas, co-refining bio-oils and petroleum crude, and 

hydrogen generation from algae, to name a few. Expanded research 

both applied and fundamental in nature is the best way for Government to help industry distinguished the winners for commercialization. 

Thank you for this time this morning. 

[The prepared statement of Mr. Brown can be found on page 44 

in the appendix.] 

The CHAIRMAN. Dr. Brown, you certainly make the point that 

Senator Roberts emphasized, and that is that we must continue agricultural research in this area and the funding thereof. 

Mr. Dinneen, the Federal excise tax credit and the recently enacted renewable fuels standard are both designed to sustain domestic ethanol production and encourage future growth. According to 

a study completed by USDA last year, if the Federal tax credit of 

51 cents per gallon is eliminated, ethanol production would fall 

sharply to about 1.5 billion gallons per year. With petroleum prices 

reaching record highs and gasoline at $3 per gallon, ethanol producers are receiving a higher return for a gallon of gasohol than 

at any time in the past. 

Do high gasoline prices lessen the need for the tax credit? If so, 

how much longer would the credit be necessary in order to meet 

the minimum production schedule called for by the RFS? And at 

what point will the domestic ethanol industry mature where the 

tax credit and the import tariff are no longer necessary? 

Mr. DINNEEN. Mr. Chairman, I can tell you that the ethanol industry is doing everything it possibly can to reduce production 

25

costs. We are indeed evolving as an industry with new technologies 

all the time, and it is exciting to see. 

Clearly, we want to look to a time when such Government supports are not necessary, but I will tell you that the oil industry 

today is making their investment decisions based on a conclusion 

that there is still going to be $25-a-barrel oil. And, clearly, what 

the oil price is going to be is going to determine whether or not additional incentives, continued incentives for ethanol production are 

necessary. 

I would hope that in the future they would not be, and we are 

certainly working toward a place where they should not be. 

In terms of the tariff, I think it is important to understand, to 

put the tariff in some kind of structure. There are two tariffs for 

imported ethanol. There is the ad valorem duty which is imposed 

at 2.5 percent for undenatured ethanol, 1.9 percent for denatured 

ethanol. That compares to a tariff of 25 percent in Brazil, 65 percent in Europe, about 135 percent in Japan. The lowest ad valorem 

duties anywhere on the globe. There is a secondary tariff that is 

imposed that is often talked about that merely offsets the benefit 

of the tax incentive that refiners get no matter the source of the 

ethanol. So we are, in effect, asking an importer to pay for the benefit of the tax incentive. The reason for that is we do not need to 

be asking U.S. taxpayers to subsidize already subsidized Brazilian 

ethanol. 

Brazil over the past 30 years has built a heck of a program. I 

give them great credit for the industry that they have created, and 

Senator Conrad’s chart shows the results of that investment. But 

they have had decades of tax incentives, production incentives, 

mandates, export enhancements, building the infrastructure, forgiving the debt. So they have done everything that they possibly 

can to build their industry. They do not need our incentives as 

well. 

And if you remove the tariff and you have not changed the structure of the tax incentive, that is, in effect, what you would be 

doing. 

I think the focus of both of us ought to be, as it seems your discussion with them yesterday was, how do we build worldwide markets for ethanol so that both Brazil and the United States and others can export product, because there is a growing demand for renewable fuels all across the globe. That is an agenda that makes 

a great deal of sense. 

But I think nations that are trying to build a biofuels industry, 

as Brazil did, as we are doing, ought to be able to build incentives 

into their programs and encourage domestic production of renewable fuels from indigenous feedstocks without having to subsidize 

Brazil or without having to subsidize us. We would not go to Europe and say, you know, give us your incentives. I think that is the 

responsibility for our Nation, and we are doing it. 

The CHAIRMAN. Senator Harkin? 

Senator HARKIN. Thank you very much, Mr. Chairman. 

Let me ask a question, and I am going to start with Dr. Brown, 

but I would like you all to kind of respond to it. We heard from 

Mr. Jobe here about biodiesel, and then you, Dr. Brown, you talked 

about the whole bioeconomy, about looking at different items that 

26

we can build from this bioeconomy. Other than just ethanol and 

biodiesel, but there is a whole host of other things that an be produced. 

I guess my question is sort of are we—and, Bob, I would ask you 

to think about this, too. We have been so focused on fuel because 

that is the Big Kahuna out there. That is what is costing us all this 

money because we are importing oil. But are we shortchanging ourselves by not thinking about how we combine the fuel production 

with feed—now, we do that already with ethanol, with distiller’s 

dried grain, but what about the other types of things that we can 

get out of agricultural production that you mentioned. In other 

words, what about a refinery that would not only make your ethanol or biodiesel but would also make a whole host of other things? 

Has anyone really looked at that? Do we know about the economics of that? Or are we building a whole industry now that will have 

to be revamped at some point down the pike? Will that cost us 

more than if we were to right now begin integrating with those fuel 

plants, the ethanol plants, the biodiesel plants, the necessary components for a biobased production facility that would make other 

things? Are we shortchanging ourselves? Should we be thinking 

about it in a broader scope, for example, in terms of tax benefits, 

tax write-offs, provisions, things like that, rather than only ethanol 

or biodiesel? 

Mr. BROWN. Senator Harkin, if our goal is to reduce petroleum 

imports, we have to remember that we also use petroleum for an 

awful lot of products that—if you look around the room, the carpet 

I am just certain is a petroleum-based product, and paints and any 

number of things are based on petroleum. So if we are going to 

make that substitution for fuels, we also need to address the issue 

of how we transform biomass into the other products that we use? 

Now, those are not necessarily going to be identical products, but 

examples like polylactic acid, PLA, as a polymer for the use in fabrics and utensils, plastic utensils and such, is a good one. 

The idea is to build a biorefinery that models what a petroleum 

refinery does, which is a notion we can get both fuels and important products out of it. 

I believe that the economics of a biorefinery will be very dependent on its ability to capture value clear through the processing, 

that it will not be enough to produce fuels. We need to do—in fact, 

they refer to it as an integrated biorefinery, the notion to make 

them pay, you need to be able to squeeze every BTU, if you will, 

out of the biomass that goes into it, and use it in production of 

fuels and different products. 

I think one of the difficulties, though, is we do not have a good 

handle on what are the attributes, the physical and chemical attributes, of biobased materials that make them superior consumer 

products? You know, a lot of years have been put into looking at 

petroleum-based polymers and solvents, et cetera, to make good adhesives or cleaners or whatever. And I think the industry would be 

helped, the biobased industry would be helped tremendously if 

there was more information on what makes for a superior product 

using these biobased materials, and that is coming to an understanding of the physical and chemical properties of those materials 

that are being produced. 

27

Senator HARKIN. Mr. Debertin? 

Mr. DEBERTIN. Senator, it is a very insightful question, and as 

an investor in these plants and in these businesses, it is something 

that we are exactly thinking about at the same time, because clearly there are opportunities. And when we talk about on the ethanol 

side—and Bob could probably speak to this better than I, but there 

are thoughts around ethanol and corn degerming and taking the oil 

off the corn, and that may be going into corn oil or into the pharmaceuticals industry, which has opportunities in the future. 

The issue that we really face is that the industry is moving very 

fast. Those types of opportunities are not yet, it seems, ready for 

the market. And I wish that they were because I would rather invest in an operation that was capturing all that. And I know at the 

end of the day we are going to have to go back and plow some 

ground again. 

The offset to that is wait until all that is proven out, and I am 

afraid that this industry is—and some companies perhaps are taking that route. We have decided to enter into this industry knowing 

that there is probably going to be some ground that is going to 

have to be replowed, whether it be due to using pharmaceuticals 

as an option for some bioproducts of an ethanol plant or using 

switchgrass as a feedstock, which, again, may take some existing 

plants and have to do rework to those plants when that technology 

is marketable and ready for market. 

Senator HARKIN. Mr. Jobe, how do you respond to that? Keep in 

mind that what I am thinking about is if we are shortchanging ourselves by just looking at fuel and maybe some feed, such as animal 

feed. Should we be thinking about biorefineries that are capable 

and even right now responding to a growing demand for biobased 

products out there, such as starches and other things? 

Mr. JOBE. Senator Harkin, excellent question, and as it pertains 

to biodiesel specifically, the primary bioproduct of biodiesel production is glycerine, and there is already starting to be some response 

in the development of that product as an industrial chemical, as a 

more profitable industrial chemical, as a part of a biorefinery concept. In fact, there was an announcement of a glycerine plant that 

will be refined into a replacement of propylene glycol, which is a 

chemical that is used for a number of industrial uses, but primarily 

one of the major ones is as a de-icer at airports. And it is a valuable industrial chemical; however, as crude oil increases and as 

more biodiesel production comes on line, we can begin to utilize our 

glycerine-refining capacity, which is in surplus, and develop these 

industrial chemicals that compete with conventional petroleumbased petrochemicals. So that is beginning to become a driver. 

I believe that the best way to do that on the biodiesel side is to 

do more of what we are doing, which is making the economics of 

biodiesel work. And what we are seeing in our industry, which is 

rather exciting, is as the economics begin to drive this, then the 

profitable biorefinery concepts and the bioproducts and the other 

emerging industries that are supporting it are beginning to—the 

creative processes are flowing and beginning to thrive. 

Senator HARKIN. Mr. Dinneen? 

Mr. DINNEEN. Senator, indeed, there is nothing that is currently 

produced at an oil refinery that could not theoretically be produced 

28

from an ethanol refinery, a biorefinery. And, indeed, I have had to 

begin to change my own vernacular and stop talking about ethanol 

plants and start talking about ethanol biorefineries, because that 

is what they are today and that is what they are likely to be in 

the future. There are already many of my member companies that 

are highly engaged in bioproducts—pharmaceuticals and other 

products. But it is not just the large agri-processors that are doing 

this. Some of the smaller, farmer-owned ethanol plants also have 

very aggressive research programs underway right now because 

they recognize that to be competitive in the future, they have to 

have diversified products and they have to be looking at these technologies. 

The incentives that the Congress has put in place for fuel obviously have been terrific and have allowed this industry to grow and 

develop, and I do think it probably makes some—a great deal of 

sense to think about how to create additional incentives to encourage bioproducts as well as biofuels. 

Senator HARKIN. I appreciate your response to that. And, Mr. 

Chairman, I just think that is something we did not really incorporate fully into the energy title of the farm bill last time, but I 

think it is something we ought to be really thinking about down 

the pike for next year. 

I would just add two other things. I had a picture here. I guess 

my staff gave it to Senator Stabenow’s staff and they left. Just to 

show you there is nothing new under the sun as they say, it was 

a photocopy of a picture I have—and I have it in my office. It was 

a picture of Henry Ford with an axe handle hitting the trunk of 

a 1939 Ford. The picture was taken in 1939, the year I was born, 

and Ford was hitting the trunk of a car. The picture shows him hitting it with an axe handle to demonstrate that a trunk made from 

soybeans would not crack or dent when hit with an axe handle. 

And he predicted in 1939, as Senator Stabenow said, that much of 

the automobile of the future would be made from soybeans. That 

was 1939 so he was way ahead of his time. 

I will say one other thing. In regards to a lot of the biobased 

products, again, it is the chicken and egg. Why don’t more people 

or companies buy them or use them? Well, because they are a little 

bit more expensive than petroleum-based products. Well, why are 

they more expensive? Well, they are more expensive because no one 

buys them. And no one buys them because they are more expensive. You see, someone has got to crack this thing. 

And so my idea was to at least put a demand pull. There is a 

small section that we slipped in the farm bill the last time that not 

too many people know about, Section 9002. It is a mandate. It says 

that every Federal department and agency—every one, not just the 

Department of Agriculture but Defense, Commerce etc. Every Federal department and agency shall give a preference to biobased 

products in their purchasing as long as they are equivalent in 

price, performance, and availability. This was signed into law by 

President Bush. 

Well, the Department of Agriculture dragged its feet. We kept 

hammering it to come out with the rules on this so departments 

would know what to do. It was not until—and I say this, quite 

frankly, until Secretary Johanns came down and I met with him 

29

about. He got it because there is a biobased plant north of Omaha 

owned, I think, by Cargill Dow that uses starches, and they make 

a lot of plastics and things like that. And he has now gotten the 

initial rules out on it. I think by the end of this year, he predicted 

they would have several hundred items on the list, Mr. Chairman, 

that now the Federal Government will have to buy, as long as they 

are reasonably equivalent in price, performance, and availability. 

I mean, just think if all the hydraulic fluid that the Department 

of Defense uses every year for its equipment and such was, made 

from soybeans. We know that. All the grease that is used could be 

made from soybeans. Starches. McDonald’s buys some of their plastic from the plant that is in Nebraska. 

I asked President Bush one time on this, I said, How many plastic knives, forks, spoons, and plates do you think the military uses 

every year? Hundreds of millions of dollars worth. Well, now they 

are supposed to be buying those based upon biobased products. 

Oh, here is my picture. They got it back. Henry Ford hitting his 

1939 Ford car. 

So that is why I asked the question, because if we are going to 

start really purchasing these, then we have got to make sure we 

have the refineries to make them. And I am concerned that we are 

not doing that, that we are only looking at fuels. As I said, that 

is important because it is the 900-pound gorilla on the block. That 

is what we have got to take care of. But we use our imported petroleum for other things, too, I say to my friend from North Dakota, 

and hopefully we can think about this in terms of biorefineries. 

I have taken too much time, but I just wanted to make that point 

and get your response on it. Thank you, Mr. Chairman. 

The CHAIRMAN. It is interesting you make that point, Senator 

Harkin, because when I was called recently by the White House 

and asked what can we do about fuel prices, I said, Well, you know, 

it occurs to me that the Department of Defense has one heck of a 

gas bill every month, and one problem we have got relative to ethanol consumption is the availability of pumps in places like the 

Southeast. We just do not have them. But at military bases, it is 

pretty easy to install them. We can control that because we control 

the retail outlets. And I suggested to him they might think about 

mandating that all military installations move to at least a 10-percent blend of ethanol. So hopefully they will start thinking about 

those things. 

Senator HARKIN. Put me on that, will you? 

The CHAIRMAN. Okay. 

Senator Conrad? 

Senator CONRAD. Thank you, Mr. Chairman, and thank you, Senator Harkin. I think the question you asked actually is very, very 

important because it helps change the economics in a very favorable way when you extend the product mix that comes from these 

biorefineries. So I think that was a very important question. 

Mr. Dinneen, the BOLD Act that I have introduced calls for ethanol production to be increased from 4.7 billion gallons in 2007 to 

30 billion gallons in 2025. Can the industry meet that ambitious 

timetable? 

Mr. DINNEEN. Senator, we can. Obviously, it would not all come 

from grain. National Corn Growers have done a very comprehenVerDate 0ct 09 2002 14:34 Feb 23, 2007 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\DOCS\30237.TXT SAG2 PsN: SAG2
30

sive study of where they think the upper bounds of ethanol production from grain would be, and their analysis suggests that we can 

get 15, 16 billion gallons of ethanol from grain. 

The industry is moving today to look to new feedstocks, to look 

to cellulose-ethanol production, and we are very, very close. Senator Crapo has been leading an effort to help a plant that is beginning to produce ethanol from wheat straw in Idaho. One of my 

member companies recently announced the construction of a plant 

in Spain that will be producing ethanol from both grain and cellulose, and they intend to bring that technology to the United 

States. 

There are many other efforts. Dupont is working awfully hard. 

There is not, frankly, a single ethanol producer that I represent 

that does not have a very aggressive cellulose-to-ethanol research 

program underway today, because they all have cellulose already 

coming into the plant, and if they can convert that into highervalue ethanol, they are going to be more competitive. 

I believe that we are going to see a time well before 2025 when 

there is meaningful production of ethanol from cellulosic material, 

and that will allow the types of numbers that you are talking about 

be realized. 

Senator CONRAD. Let me just say BOLD Act also calls for a 

benchmark of producing 100 million gallons of cellulosic biomass by 

2010, increasing to 250 million gallons by 2013, to help that effort. 

We also have an alternative diesel fuel standard, and I want to 

ask Mr. Jobe about this. Starting at 250 million gallons in 2008, 

increasing to 2 billion gallons by 2015, is that an achievable standard? 

Mr. JOBE. I think it is, Senator, and our industry is supportive 

in principle of that measure. We are certainly very interested in 

working with you and your office on some of the mechanics of that. 

Obviously not all of that volume is in reference to biodiesel. There 

are a number of alternative diesels, coal—

Senator CONRAD. It also involved coal-to-liquids, because that 

has got to be an important part of this. We have anticipated that 

this new diesel fuel standard would not only reach out to biodiesel 

but also to coal-to-liquid fuels as a source. 

Mr. JOBE. Absolutely. And we agree that that would be a very 

important way to support domestic—increase domestic production 

of a very viable alternative diesel technology and one that is compatible with biodiesel, frankly, because coal-to-liquid technology is 

a very arid fuel. And biodiesel is complementary with that fuel on 

the lubricity side. 

Senator CONRAD. One of the things we have also done in the 

BOLD Act is to extend the existing income and excise tax credits 

through 2013. You know, we see as one of the big problems here 

that we have got all these short-term time horizons, and for the industry to plan appropriately—if we are really going to make a big 

push, if we are going to do anything close to what Brazil accomplished, we have got to get serious about this. Brazil did this over 

a 30-year period. They went from 80 percent dependence on foreign 

energy, and they say they are going to declare their energy independence next year. An aggressive promotion of ethanol and biodiesel and flex-fuel vehicles was right at the heart of their strategy. 

31

Now, some have said we have got a more complex economy than 

they do. Absolutely we do. That is why in the BOLD Act we do not 

just have the renewables. We also have coal-to-liquid fuels. We 

have hydrogen. We have extension of the wind energy credit, the 

solar credit. We also have provisions on domestic energy, repressuring existing oil fields with CO2 and additional incentive for the oil 

industry to do that. 

We also open up offshore natural gas reserves because that has 

got to be part of an overall comprehensive strategy, and that is 

what is desperately needed. 

Let me just say the chief criticism of my bill has been it invests $40 billion over the next 5 years. That is $8 billion a year. I have 

said to those who raise that criticism we are going to spend $1.3 

trillion over that period buying oil from unstable parts of the world. 

So the BOLD Act is 3 percent—is less than 3 percent of what we 

are buying from abroad. That is the cost of it. And the transformation, I would say to the chairman and say to my colleagues 

from Minnesota and Arkansas, Colorado, is that money—instead of 

spending $260 billion to ship our money to Saudi Arabia and Kuwait and Abu Dhabi and all the rest, invest that money here. Just 

a fraction of it, how that would transform rural America, how that 

would reduce the vulnerability of our country. 

My time has expired, Mr. Chairman. I just think this is the time, 

and I urge my colleagues to look at the BOLD initiative. I would 

welcome original cosponsors. 

The CHAIRMAN. Senator Dayton? 

Senator DAYTON. Thank you, Mr. Chairman. 

I certainly agree with my esteemed colleague, Senator Conrad, 

about the importance for action now, and I think what Senator 

Salazar suggested earlier about the Senate passing another energy 

bill this year, if we are really serious and are going to take bold 

action and take action itself rather than just continue to wring our 

hands over these problems, I think we have to act, and I hope that 

the Ag Committee, Mr. Chairman, under your leadership could be 

part of that, along with the Senate Energy Committee. 

I just want to offer one more editorial comment, Mr. Dinneen. 

When you talk about ethanol as a substitute for MTBE—and I recognize that it is, and I recognize that the practical, short-term 

focus, concern of some parts of the country is the impact of that 

on price and the like, and supply. I think in terms of this body, and 

the House as well, the mentality, the East Coast mentality toward 

biofuels, that the misconception that ethanol is a substitute for 

MTBE rather than a substitute for gasoline is one of the biggest 

conceptual barriers we have got to get over here. 

I hear that again and again from my colleagues. You know, what 

is the additional cost that ethanol is going to add to a gallon of gasoline? It is grossly exaggerated. But I go to a very highly respected 

source, Congressional Quarterly Weekly, this current week about 

ethanol, and it says the Energy Information Administration estimates that expanded use of ethanol will add up to 4 cents per gallon in some places to the price of regular unleaded gasoline this 

year. 

Well, first of all, I think that is an exaggeration because if you 

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a-gallon increase, that would be a $1.33-a-gallon, if it were 100 percent ethanol, increase. That is contradicted by what I see the price 

of E85 is in Minnesota. 

So I don’t think it is correct, first of all, but secondly, it reinforces this notion here that that is really the limit of ethanol’s capability. So why go through all the trouble. It is one of the same 

problems we have with, I think, 2-percent biodiesel. I mean, it is 

a start, but why ask truckers to go through all the fears they have 

and the possible disruptions and everything else for a 2-percent 

variable and the price difference you get from that? Whereas, if 

ethanol is 85 percent of the fuels, then whatever transitional 

changes have to be made are really going to be worth it. They are 

really going to pay off for the consumer. The same thing for the 

truckers with biodiesel. So I offer that. 

That segues into my—I guess my question is: I was driving 

around Minnesota quite a bit last week. I have an SUV that can 

go on E85 so I can, you know, price shop as I go into every station. 

The price of E85 last August–September in Minnesota was $1.70 

a gallon. Last week, it was typically about $2.39 a gallon. The price 

of regular unleaded was about $2.79 a gallon. So it was about 40 

cents less than regular unleaded. But that is based on—from a 

year ago, that is an increase of 69 cents a gallon in ethanol, in E85. 

That is a 41-percent price increase. And what I have heard 

anecdotally from some station managers is that they—or at least 

somewhere along the line somebody is just pegging the price of E85 

to about 40 cents below the price of regular unleaded. It is not 

based on the cost. You know, frankly, it is as much profiteering 

somewhere along the line as I fear is happening with gasoline. And 

I think it is going to be the destruction of the industry and this 

opportunity now because if it is not kept the price well enough 

below the—as you know, with the difference in fuel density and, 

therefore, miles per gallon, it has got to be priced about 80 percent, 

or it depends on the vehicle, less than regular unleaded in order 

to be price competitive. And I think they assume people do not 

know that so they can get away with it. But if you are going to—

whoever is along the line here is going to take advantage of this 

current situation, I think it is going to undermine the short-term 

cost competitives. 

I see you nodding your head, Mr. Debertin, and I appreciate 

what Cenex has done around Minnesota to make available and encourage the use of this fuel. I would be interested in your comments, and anybody else’s. 

Mr. DEBERTIN. I would agree with the comments that you made, 

Mr. Dayton. The pricing formulas that are hitting energy products, 

whether they be straight gasoline or gasoline blended with unleaded, are fundamentally different than they were just a year ago 

when we saw ethanol prices roughly half what we have right now, 

and it has translated into the pump price, too. 

If commodities act in such a way that they start losing public 

support, such as E85, if they act in such a way, it will do the industry long-term harm. And, therefore, what we think is going forward 

is that this will become more and more of a commodity business, 

more production is coming online, more production will come online, and that is going to do what price does, and it is going to 

33

bring those prices down for an ethanol-blended fuel across the marketplace. But your comments I would agree with. 

Senator DAYTON. Well, who is making these pricing decisions? 

Mr. DEBERTIN. On the ethanol side, most of the times the pricing 

decisions are made by the ethanol manufacturer that sells the 

product. That isn’t the case in all places because other companies 

will buy the ethanol off these plants, bring it into a terminal, and 

then market that ethanol to be blended with gasoline across the 

terminal. So you kind of could have two sets of pricers, so to 

speak—an ethanol plant that sells it directly off his plant to a retailer that you may have stopped to buy gas at, or they may have 

sold it to a company like us or other companies that bring it into 

a terminal and blend it with gasoline. So there are kind of those 

two. 

Mr. DINNEEN. Senator, if I may just real quick, ultimately it is 

the marketplace that is going to set the price, and the demand for 

ethanol has indeed been very strong this year because refiners 

made the decision to remove MTBE. That has driven demand much 

higher than the demand that was created by the renewable fuels 

standard, about a billion gallons more demand than Congress had 

suggested was going to be necessary. So, I mean, that is what is 

driving the price right now. 

I might add that refiners having made the decision to remove 

MTBE, were it not for ethanol, were it not for the fact that our industry has been expanding and we are there in order to supply the 

11-percent MTBE volume coming out of gasoline, prices would be 

significantly higher. It is true that that has absolutely had an impact on the E85 market, but virtually all the ethanol sold in this 

country is sold as a blend component with gasoline, and very little 

of it today is sold as E85. When there are more vehicles, when 

there is more infrastructure, quite frankly, when there is more ethanol, then you will see a pricing structure for E85 developed that 

is independent from the blend marketplace. 

Senator DAYTON. Thank you, Mr. Chairman. 

The CHAIRMAN. As I turn to my colleague, Senator Coleman, I 

am going to also turn control of the microphone over to him as I 

am meeting with the Majority Leader right now. But, gentlemen, 

thank you very much for being here. I appreciate your participation 

today, and we look forward to continuing to use all of you as a resource as we move through this very critical issue. 

Senator Coleman? 

Senator COLEMAN. [Presiding.] Thank you, Mr. Chairman. I am 

going to ask one question because I think we have a series of 

stacked votes at noon, and I want to give my colleague, Senator 

Salazar, an opportunity to ask some questions. 

A very simple question, Mr. Debertin. You talked about geographical imbalance. I think, as I said before, perhaps half the E85 

pumps in America are in Minnesota. What do we have to do to—

what can be done—and I would open it up to anybody—to extend 

the infrastructure? I think, by the way, we should mandate it in 

military bases. We should simply say—we do 10-percent ethanol 

blend in Minnesota. We could do it with the military. It works well. 

But I would like some ideas on what can we do to expand infrastructure. I am the author of a bill that has two choices—one to 

34

increase the ethanol tax credit from 30 percent to 50 percent; another piece would use some of the CAFE penalties to fund fueling 

infrastructure grant program, Department of Energy. There has 

been some talk about requiring the oil companies to step up to the 

plate. I would be interested in your perspective, how to extend infrastructure. 

Mr. DEBERTIN. Senator, I think the examples that you give are 

exactly the types of things that I would offer to you. Minnesota, as 

you said, has the vast majority of E85 pumps. In Minnesota, we 

have the vast majority that are under our brand. But we are in 

rural America. Unfortunately, rural America does not have the 

population, does not have the large consumption that you see other 

places. 

So I think incentives, to incentivize other parts of the country, 

other retailers to put in more E85 pumps is a big role. I think increasing ethanol as a blend stock in more parts of the country is 

also a role, because E85 is one good route. It is one good route, but 

it is not the only route. Increasing ethanol as a blend stock in gasoline goes a long way toward addressing the energy problems for the 

country. 

I think also then the credit trading system that the EPA is developing and how that gets developed is going to be—I think it is 

something that is a little bit under the radar screen to a lot of people, but it is a very important development. If that credit trading 

system gets developed in a certain way, it almost could inhibit the 

movement of ethanol around the country. If it gets developed in another way, it could make ethanol become more of a fuel type of 

product, which it becomes fungible and transportable and dependable. And those are the components that I think you have to have 

for ethanol really to move up to be a part of the fuel chain of the 

country, beyond just, you know, kind of an isolated product. 

Mr. DINNEEN. Senator Coleman, there are lots of things that 

have to happen before E85 is a much more meaningful component 

of our motor fuel infrastructure. You have to have more vehicles. 

We have got 5 million flexible-fuel vehicles on the road today. That 

represents less than 3 percent of our total vehicle fleet and, quite 

frankly, only a fraction of those know that they even have the cars. 

I give great credit to what General Motors and Ford have done to 

promote FFVs of late, and I think the yellow gas cap campaign will 

help to inform consumers. 

But given the fact that there are so few vehicles on the road 

today, it is awfully difficult to go to a gasoline marketer and say, 

hey, turn over one of your pumps to E85 to satisfy a fraction of the 

marketplace. And so incentives to help them do that make sense, 

and they should be done, and it is all good. But we need to have 

incentives for infrastructure coinciding with efforts to have more 

vehicles that are capable of running on the fuel. 

Senator Harkin has legislation in place requiring automakers to 

produce more FFVs. This country this year will produce some 17 

million vehicles. Roughly a half a million of them will be flexiblefueled. Yesterday Chrysler made an announcement at our conference talking about they are going to have a quarter of their vehicles FFVs next year. That is great. That is terrific. We need to do 

more, however, but it needs to be on the vehicle side, on the infraVerDate 0ct 09 2002 14:34 Feb 23, 2007 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 C:\DOCS\30237.TXT SAG2 PsN: SAG2
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structure side, and maybe just one more brief comment. If we are 

incentivizing the production of FFVs, let’s make sure that we are 

incentivizing the most efficient use of the fuel as well. General Motors had a vehicle at our conference yesterday, a turbo-charged engine that, as Senator Harkin talked about, realizes no mileage penalty whatsoever when ethanol is used. Unfortunately, while they 

had that vehicle out front of the hotel, you cannot buy it here in 

the United States. General Motors has plans to introduce that vehicle here, but I think we need to encourage that kind of technology, that kind of leadership, because ultimately that is what is 

going to create the marketplace environment to allow E85 to be 

used more widely. 

Senator COLEMAN. Mr. Jobe? 

Mr. JOBE. Senator, it is an excellent question. One of the primary 

things for biodiesel is blends up to B20 can be used in any conventional diesel engine seamlessly. So for us it is not a matter of having a special vehicle, but it is a matter of having availability of 

blends of B20. And it also is a matter of getting better, more fervent support by the engine manufacturers specifically stating that 

they support the use of B20 in their vehicles. Most state now verbally that B20 will not void their warranty. Some of them in their 

written statements say they do not recommend blends over B5. But 

one of the key elements that is helpful in getting more support 

from engine manufacturers is the Biodiesel Fuel Education Program that I mentioned earlier, and working with our automotive 

industry partners and our petroleum industry partners. 

I will also mention that that applies also with OEM’s dealing 

with rail and water transportation, our barges and rail industries. 

Biodiesel can be used in those aspects as well, and so rail and 

water transportation issues, critically important on the diesel side. 

One last point as to the infrastructure and availability of B20. 

Infrastructure credits and the infrastructure credit that offers tax 

credits for retail pumps of E85 and B20 can be very effective. However, one of the things that is very critical when putting in infrastructure credits is making sure that the mechanisms actually 

work within the Tax Code and can be taken advantage of. We know 

historically the income tax credit that was available for E85 did not 

really work for E85 until it was restructured into the VEETC tax 

credit. And as we are looking at the rulemaking process for the infrastructure tax credit, it could be limited in how effective it could 

be unless we perfect it in some way. 

Senator COLEMAN. Your response has been very helpful. Before 

I turn to Senator Salazar, I would note that my colleague from 

Iowa was talking about Henry Ford. I believe that Henry Ford’s 

first automobiles actually ran on ethanol fuel. But it was the availability of cheap Pennsylvania crude that really turned him to using 

a petroleum base. Had he gone in another direction, we would have 

had different hearings, I think, today. 

So with that, Senator Salazar? 

Senator SALAZAR. Thank you, Senator Coleman. 

I have four questions, and I would appreciate it if you would 

keep your responses to 30 seconds because we have a vote coming 

up shortly. 

36

Senator COLEMAN. I believe, by the way, the vote is at 12:15, so 

you have a little time, Senator Salazar. 

Senator SALAZAR. Okay. Thank you, Senator Coleman. 

First, Jay, if you can respond to this question, what, in terms of 

technical and financial assistance, are we doing enough for all of 

these communities that want to do something regarding a biodiesel 

or ethanol plant or a biorefinery program so that they know what 

to do instead of having their exuberance somehow wasted out 

there? Is there something more than the United States of America 

should be able to do? 

Number two—I am going to ask all my questions so you can all 

then respond to them in 20 second. Number two, for Joe, if you can 

tell me what the level of technology is with respect to some of the 

jelling that has occurred with biodiesel in some places around the 

country, with some people saying that it makes a not very effective 

fuel in some of our colder States. Joe, also for you, and for Bob, the 

question about small-scale projects that are actually on-farm 

projects that can produce fuel, how feasible is that? How far along 

is the technology on that? 

And then, Bob, for you on the question of cellulosic ethanol, we 

are spending—investing tremendous amounts of money, $50, $100 

million into each one of these ethanol plants now where we are 

using corn as a feedstock. How difficult is it going to be to convert 

those plants over to a new feedstock, whether it is corn stocks or 

switchgrasses, et cetera, when we get to the 2012 time frame and 

we have the technological capacity to do it? 

So why don’t we just go down the line, give me a 30-second response to each of those questions. Go ahead. 

Mr. JOBE. I can start. First of all, the community production, are 

we doing enough to stimulate investment in plants and community 

production, I believe the answer to that is the Bioenergy Program, 

which I mentioned in my comments, is set to expire in July. That 

program has been extremely effective in developing domestic biodiesel production capacity as we look at—biodiesel does not have 

an offsetting import tariff like the ethanol industry does, and in 

terms of how we address that, the Bioenergy Program is going to 

be important because it has been a cornerstone in the development 

of a domestic biodiesel industry, and we believe that perhaps is the 

best, strongest way to compete against imports. 

In terms of jelling, the Biodiesel Fuel Education Program is very 

important because some of the fuel quality problems that we have 

had have been not having the proper information and education 

with the petroleum industry on proper handling and blending. 

Also, that program helps support fuel quality programs in the industry. 

And, finally, on-farm small-scale production, that has not been a 

focus of the industry. We have kind of let the market take care of 

that. But we are—the average biodiesel plant is considerably smaller than the average ethanol plant. Many of the plants that are 

going up right now—in fact, the average scale is about 3-milliongallon plants—they are farmer-owned and community-based. 

Senator SALAZAR. Thank you, Joe. 

Bob Dinneen? 

37

Mr. DINNEEN. In terms of on-farm small-scale production, most 

of that today I believe is going into beverage, not necessarily fuel. 

It is really not an economic model. Most ethanol production facilities today that are going in are 50 or 100 million gallons. The 

economies of scale are important. I would say, however, that the 

single largest ethanol producer taken as a whole today is the farmer-owned ethanol plant. So farmers are investing. They have got a 

strong place in this industry, and they always will, but it is going 

to be coming together, not necessarily putting it in on-farm production. 

In terms of cellulose-ethanol production, I do not see that replacing existing facilities. I think you are going to have cellulosic ethanol production alongside an existing grain-based ethanol facility. 

The two technologies are going to continue to evolve, but evolve together over time. 

Senator COLEMAN. Jay? 

Mr. DEBERTIN. Mr. Chairman, just the issue of what you are 

doing for local communities and getting investment, I can’t say 

there is nothing around the edges that might be helpful or might 

be necessary, but I can say you are doing it 90 percent right. Investment in ethanol manufacturing within rural communities is 

going well. The money issue is not a problem today. Local communities are welcoming this both from jobs and a property tax point 

of view. They are welcome employers and in light manufacturing 

in those towns. So I think it is on a good track as we speak. 

Senator SALAZAR. Thank you very much for your exciting and 

very, very informative testimony. 

Senator COLEMAN. Senator Harkin, is there anything else that 

you want to raise? 

Senator HARKIN. No. I see a vote is on right now? 

Senator COLEMAN. The vote is to go on at 12:15, so we are right 

on schedule. 

Senator HARKIN. Could I just ask one thing? 

Senator COLEMAN. Absolutely. 

Senator HARKIN. I appreciate that very much. Thank you. 

You have all touched on ethanol production in one way or the 

other, and, Bob, you have been involved in this for many years. But 

one of the constant kind of things I hear are fears that, oh, my 

gosh, if we are just going to use all our corn for ethanol, then we 

are going to be going fence row to fence row? Are we going to be 

plowing up all this conservation land we have, and are we going 

to have all the environmental problems that come with that? It is 

going to maybe even impinge upon the use of that grain for other 

things. 

And so what has appealed to me is this whole idea of cellulosic 

conversion, Senator Lugar and I have talked about this, and he has 

kind of been the leader in that for a long time. And I know Canada 

has at least one demonstration plant. I think we have maybe one 

here in the near future. I do not know. I am not as familiar with 

it in the States a I’ld like to be. 

How aggressive should we be—now, we got the renewable fuels 

standard. We got that in, and we will probably exceed that, by the 

way. 

Mr. DINNEEN. Far exceed it, yes. 

38

Senator HARKIN. But how aggressive should we be in the research and the development of cellulosic conversion now, anticipating this big growth? Again, I am thinking about the next farm 

bill. I am thinking about the WTO and what we have to do in 

terms of cutting back on our price supports and things like that. 

The world is changing on us, and if we are going to be in that WTO 

negotiation, which I believe we should be and part of it, then we 

are going to have to cut back on a lot of the old traditional types 

of supports that we have had for agriculture. Well, then, maybe we 

ought to think about how we shift it into some other areas, and I 

am thinking about cellulosic conversion. Can we see that it actually 

will be—Dr. Brown, will that be a viable part of our fuel supply? 

Will it be economically feasible at some point? And how do you see 

it, Bob? What do you see for ethanol production down the pike? 

How aggressive should we be on this cellulosic conversion? 

Mr. DINNEEN. Senator, I think we have to be as aggressive as we 

possibly can. We are 60 percent or more dependent on imports. You 

look at the world oil situation. You see what China and India and 

others are doing to worldwide oil supply by creating tremendously 

increased demand. And, Senator, quite frankly, Americans are 

dying today because of our dependence on oil from that part of the 

world. 

We have to be doing everything that we possibly can to assure 

greater production of ethanol and other biofuels from domestic 

feedstocks. That is not just corn. Corn growers are incredibly productive and efficient, and the Corn Growers, as I mentioned earlier, 

have an analysis out there that they anticipate being able to get 

15 billion gallons of ethanol. Actually, 15 billion bushels of grain, 

by the way, in the future. We are coming off of back-to-back 11-

billion-bushel corn crops. They are doing a tremendous job. But 

even they will tell you that if ethanol is to become a much more 

meaningful component of our motor fuel supply, that you have to 

be producing ethanol from other feedstocks. And there is no question. 

But as I indicated earlier, there is not an ethanol producer I represent that does not have a very aggressive ethanol cellulosic program. I have been in this industry now for 19 years. When I first 

started with the association, Department of Energy would say that 

the cellulosic ethanol production is 5 years away. And it has been 

5 years away every year since then. But, Senator, we are closer 

today than we have ever been. There is production of ethanol from 

cellulose today. Iyagen has a facility in Canada, but they are looking to build a much more—a commercial size facility here in the 

United States. Abengoa Bioenergy is today building a commercial 

size cellulose and grain ethanol production facility in Spain, but 

Abengoa operates four plants here in the United States, and they 

intend to bring that technology here. 

There are others out there—Dupont, many other companies—

that are excruciatingly close to cracking the code to be able to 

produce ethanol from cellulose economically. This is not a time to 

be taking the foot of the gas. This is the time to be going forward. 

Senator HARKIN. Well, I am open for any kind of suggestions any 

of you have, whether it is in the Tax Code or whether it is pilot 

39

projects or whatever else we might do. If you have got any suggestions, let me know. 

Dr. Brown, do you have any comment? 

Mr. BROWN. I would echo both remarks. At the growth rate of 

the ethanol industry right now, we will have no choice but to be 

producing cellulosic ethanol in 7 years. We need to make sure we 

are ready to do that, and I am not convinced we are. I think we 

are going to need to be doing both research and pilot scale—

Senator HARKIN. We need to put more money in research in that 

area? 

Mr. BROWN. I believe so, and I believe there are many options 

for doing this, and we have not explored all of those. And I think 

we need to open that up and look at those possibilities. 

As I mentioned in my testimony, enzymatic hydrolysis is just one 

possibility. There was mention of coal to diesel. It is also possible 

to go to biomass to a green diesel using a Fisher–Tropsch type 

process. So there’s a lot of possibilities, but it takes time to do that, 

and the next 7 years is really pushing it as a schedule. 

Senator HARKIN. Well, because, you know, we have gotten—what 

do we have now? Norm, how many acres do we have got in the 

CRP? About 40 million acres? Thirty-six million acres in CRP now, 

and, you know, farmers have to plant a conserving crop on that, 

such as switchgrass or alfalfa. It would seem to me if you could 

keep that CRP thing going but give farmers another incentive to 

grow something that would be harvested for fuel without disrupting the conserving nature of it, that would give the farmers an 

income stream to offset a decrease in commodity prices because of 

WTO. That is why I am interested in this approach and how close 

we are to cellulosic conversion. 

Senator COLEMAN. I would note the vote was posted at 12:03, so 

I just—

Senator HARKIN. I appreciate that. Thank you very much. I am 

sorry I had to leave for a phone call, but I was listening to you out 

there. Thank you. 

Senator COLEMAN. Gentlemen, this has been an extraordinarily 

helpful panel, and we are very, very appreciative. And as the chairman said, this is the start of a much longer discussion so I want 

to thank you for your participation and thank the ranking member 

for his leadership on this issue. 

With that, this hearing is now adjourned. 

[Whereupon, at 12:11 p.m., the committee was adjourned.] 

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