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34–149 PDF 2007

S. HRG. 110–17

AGRICULTURE AND RURAL AMERICA’S

ROLE IN ENHANCING NATIONAL ENERGY

SECURITY

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JANUARY 10, 2007

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

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa

MARK HALVERSON, Majority Staff Director 

ROBERT E. STURM, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Agriculture and Rural America’s Role in Enhancing National Energy Security ......................................................................................................................... 1

Wednesday, January 10, 2007

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from the State of Iowa, Chairman, 

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

Chambliss, Hon. Saxby, a U.S. Senator from the State of Georgia ............. 5

Panel I 

Collins, Dr. Keith, Chief Economist, U.S. Department of Agriculture, Washington, DC ............................................................................................................. 10

Pacheco, Michael, Director, National Renewable Energy Laboratory, Golden, 

Colorado. ............................................................................................................... 14

Sharp, Hon. Philip, Ph.D., President, Resources for the Future, Washington, 

DC .......................................................................................................................... 7

Smith, J. Read, 25 X 25 Steering Committee, Wheat, Small Grains, and 

Cattle Producer, Former President, National Association of Conservation 

Districts, St. John, Washington .......................................................................... 11

Panel II 

Gourley, Gene, National Pork Producers Council, Iowa Pork Producers Association, Webster City, Iowa ................................................................................. 48

Kemp, Loni, Senior Policy Analyst, The Minnesota Project, Canton, Minnesota .................................................................................................................... 51

Miller, Ron, President and CEO, Aventine Renewable Energy Holdings, LLC, 

Pekin, Illinois ....................................................................................................... 44

Sellers, John, Farmer-Member of Iowa State Soil Conservation Committee; 

Member, Board of Directors, American Forage and Grassland Council, 

Corydon, Iowa ....................................................................................................... 53

Webb, Roger, Director, Strategic Energy Institute, Georgia Institute of Technology, Atlanta, Georgia ...................................................................................... 46

APPENDIX 

PREPARED STATEMENTS: 

Roberts, Hon. Pat ............................................................................................. 70

Stabenow, Hon. Debbie .................................................................................... 72

Collins, Keith .................................................................................................... 73

Gourley, Gene ................................................................................................... 89

Kemp, Loni ........................................................................................................ 103

Miller, Ron ........................................................................................................ 109

Pacheco, Michael .............................................................................................. 114

Sellers, John ...................................................................................................... 120

Sharp, Hon. Philip ............................................................................................ 122

Smith, J. Read .................................................................................................. 133

Webb, Roger ...................................................................................................... 141

Page

IV

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Chambliss, Hon. Saxby: 

‘‘Cellulosic Diversity for Alternative Energy’’, prepared by Auburn University ............................................................................................................ 150

QUESTION(S) AND ANSWER(S): 

Harkin, Hon. Tom: 

Written questions for Mr. Gourley .................................................................. 154

Written questions for Mr. Collins ................................................................... 154

Chambliss, Hon. Saxby: 

Written questions for Mr. Collins ................................................................... 155

Written questions for Mr. Sharp ..................................................................... 159

Written questions for Mr. Smith ..................................................................... 160

Written questions for Mr. Pacheco .................................................................. 161

Written questions for Mr. Miller ..................................................................... 162

Written questions for Mr. Webb ...................................................................... 163

Written questions for Mr. Gourley .................................................................. 164

Written questions for Ms. Kemp ..................................................................... 166

Gourley, Gene: 

Written response to questions from Hon. Tom Harkin ................................. 167

Kemp, Loni: 

Written response to questions from Hon. Saxby Chambliss ......................... 172

Miller, Ron: 

Written response to questions from Hon. Saxby Chambliss ......................... 174

Pacheco, Michael: 

Written response to questions from Hon. Saxby Chambliss ......................... 176

Written response to questions from Hon. Blanche L. Lincoln ...................... 177

Smith, J. Read: 

Written response to questions from Hon. Tom Harkin ................................. 179

Written response to questions from Hon. Saxby Chambliss ......................... 181

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD: 

American Forest & Paper Association, prepared statement ................................ 194

ArborGen, LLC, prepared statement ..................................................................... 200

The National Corn Growers Association, prepared statement ............................ 202

(1)

AGRICULTURE AND RURAL AMERICA’S 

ROLE IN ENHANCING NATIONAL ENERGY 

SECURITY 

Wednesday, January 10, 2007

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 9:32 a.m., in room 

SR–328, Russell Senate Office Building, Hon. Tom Harkin, Chairman of the Committee, presiding. 

Present: Senators Harkin, Lincoln, Nelson, Brown, Klobuchar, 

Chambliss, Roberts, Coleman, Thune, and Grassley. 

Senator CHAMBLISS. Good morning. As is customary at the first 

official get-together of the Agriculture Committee in a new session 

when we have had a change of power, it is the time to welcome the 

new Chairman—welcome, excuse me, the return of the new Chairman. Tom Harkin, obviously, has been very involved in this Committee’s work for the entire service that he has given to the U.S. 

Senate and the great people of Iowa. 

Tom has also been a good friend to me. He and I had the opportunity to work very closely on the 2002 Farm Bill when you chaired 

the Committee over here then, Tom, as you remember. And over 

the last couple of years we have had a very good working relationship as Chairman and Ranking member, and I know that will continue. 

You know, being Chairman of this Committee has its privileges 

and it has its problems and challenges, and certainly this year, 

Tom, you are going to be challenged with reference to energy issues 

which we are going to talk about today with the Farm Bill and 

with trade issues, but with your experience, your knowledge, and 

your commitment, along with the good staff that you have in Mark 

and others, I know that certainly you are up to the challenge. My 

staff, as well as all members on this side look forward to working 

with you on addressing these issues, and particularly as we get 

into the Farm Bill negotiations. 

But Tom, I congratulate you as coming back in as Chairman and 

I look forward to a great year on the AG Committee. 

Chairman HARKIN. Thank you very much. 

Senator CHAMBLISS. With that, I will hand you the gavel. 

2

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

THE STATE OF IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

Chairman HARKIN. Well, Senator Chambliss, thank you very 

much for those very kind and overly generous remarks. I thank you 

for your great leadership of this wonderful Committee, which we 

all love. Over the last couple of years, and I say that in all sincerity 

and candor, you have been exemplary as a Chairman. You have 

been fair and open. And again, I would be remiss—you know, it 

was Pat Leahy who used to always make the statement that Senators are a constitutional impediment to the smooth functioning of 

staff. And with that disclaimer, I want to say I want to thank Martha Scott. Martha has just been wonderful, and I am glad she is 

going to be continuing on. Both she and Mark Halverson have 

worked very closely together. 

Martha, thank you very much for your great leadership of the 

staff for the last couple of years. We look forward to that continuing relationship. 

I thank you again, for your leadership of this Committee and for 

really starting the process of the hearings on the Farm Bill last 

year. So much of the work that whoever was going to be Chairman 

this year has already been done by you. You had good field hearings all across the country. I thank you for that. You came to Iowa 

and we had a great hearing in Iowa. And you went to several other 

States, so you saved me some travel and I appreciate that very 

much, and getting set up. 

So we have got a good basis. We have some good hearings that 

you have started as a basis for moving ahead on the Agriculture 

Committee. It is, for me, again—I was thinking this morning as I 

came in. I think this is the fourth or fifth time that the gavel has 

changed in this Committee since I have been here. Pat, I think it 

is four or five. I cannot remember which. I will have to think about 

that again. And I think that is good. That has been over twenty 

years, so if you average it out, about five years per side. I think 

that lends itself to a closer working relationship, and it lends itself 

to a more bipartisan atmosphere on this Committee. I do think 

that this Committee, of all the Committees I have worked on in 

both the House and Senate, this Committee is the least partisan 

in terms of its approach. We may have regional differences, obviously, and we tend to protect our own regions, obviously, but it 

does not come down to partisan matters. It usually comes down to 

what our regional interests are. But we have worked those out in 

the past. We had a good bipartisan effort on the last Farm Bill in 

2002. The Senate was run by Democrats then and the House was 

run by Republicans, and I think we worked out a pretty darn good 

Farm Bill. It seemed to work pretty well. 

And so I look forward to that same kind of working relationship 

this year. This is not going to be any kind of a Democratic bill or 

a Republican bill. It is going to a bill for all America, and for all 

of rural America. 

And so, with that, you mentioned the challenges and that type 

of thing. I have to, again, confess a little bit here that one of the 

biggest challenges for me now as Chairman is to be here on time. 

I am congenitally late for everything. 

3

[Laughter.] 

Chairman HARKIN. I think I was born—I don’t know. Maybe I 

was born late. I don’t know, Pat. So now I have got to be here on 

time since I am Chairman. So to me that is going to be one of my 

biggest challenges is to make sure I beat Roberts here in the morning. 

Senator CHAMBLISS. We will start without you the first couple of 

times. 

[Laughter.] 

Chairman HARKIN. You probably will. 

Let me just, again, say, before I make my opening statement, 

just a couple of things. I will continue the same policy that Senator 

Chambliss had, that unless there is some real burning desire or 

some immediacy to a Senator’s schedule, opening statements will 

be restricted to Chairman and Ranking Member. We will do 10–

minute rounds of questions. We will ask our panelists who our 

here, our witnesses, to provide up to 6 minutes and no more. 

Please do not read any statements. Summarize as best you can 

within that 6–minute timeframe. And those will sort of be the general ground rules which, basically, you had set up, and I think that 

is a good way to operate. 

So I will just, then——

Senator ROBERTS. Mr. Chairman, can I just say one thing? 

Chairman HARKIN. Yes, sir. 

Senator ROBERTS. I have three Committee meetings at the same 

time. I don’t know how that worked out. I was usually up in the 

bubble up in the Intelligence Committee and did not know what 

was going on anywhere. At any rate, I just wanted to say something to you personally. I do not know in the history of this Committee if we have had a Chairman that came on and then rode off 

to other pastures and came back. I do not know about the history 

of that, but that may be unique. And I would just say that there 

is a space for your portrait up there if we want to reserve that for 

you and to welcome you back. 

I am going to date myself. One of my favorite movies was called 

Shane. And Brandon De Wilde told Alan Ladd after he killed the 

bad guy as he rode off into the mountains, ‘‘Shane. Come back, 

Shane. Come back.’’ So now we are saying, ‘‘Tom. Come back, Tom. 

Come back.’’. 

And so I want to welcome you back and I want to thank the 

former Chairman and our current Ranking Member. I have been 

riding shotgun with him. He has complained that I am a lot like 

the Vice President in terms of wielding a shotgun. 

[Laughter.] 

Senator ROBERTS. But I want to thank him for starting this. And 

I want to thank you for holding a hearing in regards to energy. I 

don’t know if we are going to have an energy title or whatever. The 

biggest concern I have is that we do not compromise one title at 

the expense of another. It has to be part of a team effort. 

And with that, I would just ask permission to make my full 

statement part of the record, and that I am going to have to leave 

early. 

Welcome back, Tom. 

4

[The prepared statement of Hon. Pat Roberts can be found on 

page 70 in the appendix.] 

So I would just, again, proceed with my opening statement, then 

I will recognize our Ranking member, and then we will proceed to 

our witnesses. 

So I want to say good morning to all my colleagues, to our witnesses. I saw the huge audience out in the hallway, so obviously 

there is a great deal of interest in the subject of this hearing. I am 

pleased to welcome you this first hearing on the Senate Committee 

on Agriculture, Nutrition, and Forestry of the 110th Congress. 

And again, Senator Chambliss, as I said earlier, I look forward 

to working with you and Martha Scott, and all the staff, in providing leadership to this Committee. 

I also want to welcome our new members, Senator Sherrod 

Brown from Ohio, Senator Bob Casey—well, they are not here, but 

Lindsay Graham from South Carolina, Bob Casey from Pennsylvania, Amy Klobuchar from Minnesota, and John Thune from 

South Dakota. 

Our most important Committee task this year, of course, will be 

to formulate a new Farm Bill. When we wrote the last Farm Bill, 

which was titled the Farm Security and Rural Investment Act of 

2002, we included an energy title for the first time. Since then, we 

have seen vigorous growth in energy production in rural America, 

especially in the form of biofuels and wind power, revealing a new 

and encouraging energy supply capability in rural America. 

During the same period, we have become increasingly aware of 

just how precarious our national energy situation is. Energy prices 

have gone up and appear to be staying up. Environmental impacts 

of energy use, especially from autos and power plants are still a 

major concern. The evidence of climate change is absolutely clear 

and very ominous. And we know that combustion of fossil fuels is 

the primary contributor to the greenhouse gases that drive global 

warming. 

On top of all that, our use of petroleum is rising steadily, and 

we are importing about 60 percent of that petroleum from foreign 

sources, many of whom are politically unstable or unfriendly to the 

U.S. In short, we need to initiate a major transition of our energy 

sector to one that is far more efficient, is much less reliant on fossil 

fuels and on imported oil, and is utilizing vastly more domestically 

produced renewable energy. 

This convergence of national energy needs and national security 

with agricultural sector energy capabilities represents a genuine 

opportunity for all of us: for farmers, ranchers, and all who call 

rural America home. We can, and I believe we must, formulate and 

pass a Farm Bill that encourages and accelerates the rural production of energy for the whole Nation. 

In other words, we have the opportunity now to move our agricultural sector from one that supplies food and fiber alone to a sector that supplies food, fiber, and energy. This is a convergence with 

a real win-win potential, to help the Nation with its pressing energy needs and national security needs while promoting rural development through business expansion to energy suppliers. 

Our new bill this year will not be a, quote, Farm Bill, in the classical, old-fashioned manner. It must be bold, innovative, chalVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
5

lenging, and supportive of a transition to a bio-economy based on 

our rich resources of productive land, our agribusiness infrastructure, and our hardworking, patriotic, rural citizens. 

So that is why I wanted this first Committee hearing to begin 

to set the stage for bringing our agriculture and rural sector’s renewable energy capabilities to bear on our national energy needs. 

That is why I have chosen to focus this first hearing on what is 

arguably our most critical energy need, and that is reducing our 

dependence on foreign oil. 

To that end, we have invited two panels of witnesses this morning to talk to us about significantly increasing the production of 

biofuels, and the challenges and implications associated with that 

expansion. 

And again, with that, I welcome Senator Chambliss. Again, 

thank you for your great leadership. I look forward to our close relationship, and I yield to you for an opening statement. 

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

FROM THE STATE OF GEORGIA 

Senator CHAMBLISS. Well thank you very much, Mr. Chairman, 

and I congratulate you again. I look forward to a very, as I say, 

challenging but interesting—a year in which we have some great 

opportunities for American agriculture, and we look forward to 

your leadership. 

But also I would like to welcome our new members. Senator 

Thune is kind of coming back since he served on the House Agriculture Committee with Senator Roberts and myself. And we are 

looking forward to leaning on our new members’ experience in agriculture to bring us some fresh ideas to the Committee. 

The hearing today on agriculture and rural America’s role in enhancing national energy security is timely and appropriate, and it 

is the first hearing before this Committee and the 110th Congress. 

Agriculture in the United States is undergoing one of the most profound changes we have ever seen and previously held assumptions 

about the role of farmers and ranchers across our country are radically changing. 

The Chairman is right to point out that agriculture and foreign 

policy are not only about food and fiber, but also fuel. Renewable 

fuels like ethanol, biodiesel, and wind are the centerpiece of our 

discussion today, and support for these sources of energy is indisputable. 

Biofuel production is helping to spur a rural renaissance in the 

Midwest as large amounts of capital are being spent to expand 

biofuel production. Other regions of the country can and need to 

share in this renaissance. Areas such as the Southeast are just beginning to build corn ethanol plants like one that I helped dedicate 

last week in Camilla, Georgia, and have tremendous potential for 

growing energy-dedicated crops. 

I am extremely excited about the research being conducted at 

Georgia Tech, the University of Georgia, Auburn University on 

woody biomass and switchgrass. It is my hope and intention that 

the energy title in the 2007 Farm Bill will accelerate this progress, 

in hopes of commercializing these feedstocks earlier to relieve some 

of the pressure on corn demand. 

6

The exuberance surrounding biofuels is evident in the aggressive 

growth of the industry over the past year. From January 1, 2006, 

the Renewable Fuel Standard went into effect, and since then the 

United States has used more than 5 billion gallons of ethanol, outpacing RFS requirements by more than 25 percent. According to 

the RFA, in the next 18 months, the industry will add nearly 6 billion gallons of new production capacity. 

In short, in 2008, new capacity will exceed the minimum that is 

called for in the RFS. This progress is astounding to say the least; 

however, this expansion has not come without affecting the rest of 

the agriculture sector. For the first time in memory, corn prices increased during the 2006 harvest season, and exceeded a critical 

threshold of $4.00 per bushel on the Chicago Board of Trade just 

last week. This is far beyond the estimates of the U.S. Department 

of Agriculture just last year, and of the National Corn Growers Association, when that organization advocated a higher standard in 

the 2005 Energy Policy Act. The 87 percent increase in the price 

of corn in just the last two years is a welcome development for corn 

growers, but it is increasing a critical input cost for cattle, dairy, 

hog, and poultry producers in my State and across the country. 

Mr. Chairman, the RFS is bidding corn and fuel grains away 

from traditional customers and beginning to affect the livestock 

and poultry industries. If corn prices continue to set new highs 

over the next year, the industry in my home State of Georgia will 

come under increasing pressure, and I fear continued price spikes 

will force some producers out of business. 

We find ourselves in the position of encouraging an industry that 

directly competes with another that is important in all our States, 

and I hope the end result is not a policy that encourages livestock 

operators to further integrate and consolidate. I strongly support 

the biofuel sector, and, like my colleagues on the Committee, want 

to find ways to expand their use in order to lessen our dependence 

on imported oil. However, doing so may require modification of existing incentives. The research community is tirelessly working on 

new processes to convert cellulosic biomass to ethanol. 

The expansion of the ethanol industry will depend on this critical 

research and future incentives, and I look forward to testimony 

today particularly my friend from Georgia Tech on this issue, and 

Mr. Chairman, I would like to give you a personal invite down to 

Georgia to see some exciting things that we are doing, both at 

Georgia Tech, as well as at the University of Georgia, and our research departments here on this conversion of cellulosic material 

into ethanol. It is pretty exciting to see what we are doing. And as 

we discuss these issues, perhaps we should focus more on feedstocks that do not compete with animal agriculture, while at the 

same time promoting innovation. 

I want to thank our witnesses in advance. I look forward to hearing their testimony. And at this time, Mr. Chairman, I would ask 

unanimous consent that written testimony from Auburn University 

be inserted into the record. 

Chairman HARKIN. Without objection. 

Senator CHAMBLISS. Thank you. 

[The following information can be found on page 150 in the appendix.] 

7

With that, we will turn to our panels. We have two panels. The 

first panel will cover America’s energy security and the potential 

role that biofuels can play in our nation’s future. 

We have, of course, Dr. Collins from USDA to testify on the economics related to increased biofuel production, and also a summary 

of the technology status and research potential of biofuels. 

Our first panelist is the Honorable Phil Sharp, President for Resources for the Future. 

Dr. Keith Collins, Chief Economist for the Department of Agriculture. 

Mr. J. Read Smith, Committee Co-chair of the 25 X 25 Committee. 

And Dr. Michael Pacheco, Director of the National Bio-energy 

Center from the National Renewable Energy Laboratory. 

Our first witness will be Phil Sharp, again, a longtime friend and 

colleague of mine. Phil and I came to the House together in 1974, 

so we were in that same class. I served together in the House with 

Phil for—well, I was there for 10 years and then came to the Senate, and then Phil went on to serve for another 10 years in the 

House. I think until about 1995. He was one of the key players 

during all that time on the Energy Committee on the House of 

Representatives. 

I just got to thinking, Phil, when I saw that you were going to 

be here this morning that there are not too many of us left from 

that Class of 1974. I was just thinking about, in the Senate, there 

is Chris Dodd, Max Baucus, Me, and Chuck Grassley are the only 

ones left from that Class of 1974. 

So I am glad that you have continued your involvement in this 

area of energy and renewable energy. And I congratulate you on 

taking the helm of the Resources for the Future. With that, we welcome you, Phil, to the Senate Agriculture Committee. It is good to 

see you again. 

STATEMENT OF HON. PHILIP SHARP, PH.D., PRESIDENT, 

RESOURCES FOR THE FUTURE, WASHINGTON, DC 

Mr. SHARP. Well thank you very much, Mr. Chairman. I certainly 

appreciate the invitation. It is nice to be back with you. We were 

both Watergate babies, elected in 1974. And if I am accurate, both 

your family and mine had our first child in that first term. Not the 

wisest way to plan a family. 

Chairman HARKIN. That’s right. 

Mr. SHARP. But Mr. Chairman, I am President of Resources for 

the Future, which is a nonpartisan think tank and not engaged in 

advocacy. So what I say here are my own opinions. And I was 

asked simply to comment briefly on the energy challenges our Nation faces, and particularly with respect to oil. 

And, of course, as those in this Committee and elsewhere that 

have dealt with energy issues know, our first and foremost difficulty is always reconciling the various goals we try to get energy 

policy to serve. We clearly want cheap energy supplies to fuel prosperity. We do not want to damage our national security and we do 

not want to damage our environment in the process. And that is 

a very tall order, and there simply are no silver bullets, of course, 

for hitting that complex target. 

8

With respect to oil, the first couple of charts in my testimony 

demonstrate what everybody knows. We are scheduled to continue 

to grow in our import of foreign oil and in our general use of oil. 

The pie charts on Chart 3 most startlingly show the EIA projections for 2030 that suggest that we do not in any significant way 

alter between now and then the proportion of our energy that will 

come from petroleum products, roughly 40 percent of everything we 

use now and then. This is in spite of the EIA’s calculations of all 

the proposals in the law as of 2005 that might make an alteration. 

Now, it is pleasant to note, however, that already those projections are off with respect to ethanol because it is very clear if what 

has been happening this last year is sustained, it will more than 

meet what is assumed in that model. 

Mr. Chairman, the oil dependency, of course, as you have articulated and others have articulated, brings a certain number of risks 

to us in terms of foreign policy: the possibility of a serious supply 

disruption, the pressure to compromise important foreign policy 

goals for the sake of oil supply, the possibility that global production will not keep pace with global demand, and therefore there 

will be intense competition between us, China, and others over 

short supplies, the pressure to militarily protect the oil markets. 

Many new groups have come into the American public arena, bipartisan in nature and nonpartisan in nature, reasserting the advocacy that we must act more forcefully in this regard: the Energy 

Futures Coalition, the National Committee on Energy Policy, the 

Energy Security Leadership Council, and recently a taskforce of the 

Council on Foreign Relations. None of this is new to members of 

this Committee. We have simply, in the past, not been able to 

change the course over the last 30 years because we have simply 

not been willing to pay the price that was necessary, and it was 

always more expensive than the cheap oil we were able to buy from 

abroad. 

The history also has been one of an up-and-down in world oil 

prices. When the prices go up, we find intense interest by consumers in fuel-efficient vehicles and alternative fuels. We find that 

same intensity among investors and government policy is asserted 

to try and make changes in both arenas. When prices go down, we 

see a withdrawal of that interest. And so we have had an on again, 

off again proposition, which means that, if we want to make a difference, we have to sustain policy to do so. 

Now, the newest of our energy goals, and it has not totally been 

accepting in this country, but I think increasingly the consensus is 

that we must do something over time about greenhouse gas emissions, which are very much the result of our burning of hydrocarbons. And what we see over the next decade here in the United 

States and abroad is not a pretty picture in this regard, because 

most of what is anticipated for investments in the electrical sectors 

as well as the oil sector are likely to increase significant greenhouse gas emissions. 

If we look at electricity, for example, in the United States, we are 

about to build a whole new wave of power plants, many of them 

planned to be coal combustion. This is even more dramatic a case 

in China and in India. 

9

In terms of our oil supply, we not only expect to use more here 

and abroad over the next twenty years, but also there be a shift 

to unconventional fuels, which, because they require so much energy to produce, they also create considerably more greenhouse gas 

emissions. 

If you look at Chart 4, that is a complex display of the alternatives to conventional gasoline or oil, whether it is biodiesel or it 

is oil shale. And that is displayed in terms of the generally estimated costs for the production of those alternatives, as well as the 

range of likely greenhouse emissions. In simplistic terms, let me 

say to you what the story there is, if the oil prices, the driving factor in what decisions that were made by investors, what we will 

see is investment in those energy sources that are highest in carbon emissions, rather than those that are lesser. 

Now, what is missing from that chart is the work that you folks 

have done here in the last few years that has already had a profound effect. The subsidies that the Federal Government has put 

into play has significantly reduced those cost figures for cellulosic 

ethanol, biodiesel, and corn ethanol so that they have come into the 

range of being competitive in the world market, or what is anticipated in world oil prices. The significant thing, I think, is that 

those policies or something like them have to be sustained if you 

expect for these fuels to play a significant role. 

I will leave it to more knowledgeable colleagues here at the table 

and on the panel to identify just how big a role and what the complex issues are surrounding each of those fuel developments. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Sharp can be found on page 122 

in the appendix.] 

Chairman HARKIN. Thank you very much and I will have some 

questions for that chart. I looked at that last evening. 

Now we turn to Dr. Keith Collins, who is no stranger to this 

Committee or the House Committee. I am told that this is the 76th 

time Keith Collins has testified before the Agriculture Committee. 

Is that factual? 

Mr. COLLINS. That is about right, Mr. Chairman. 

[Laughter.] 

Chairman HARKIN. Over how many years, Keith? 

Mr. COLLINS. I did my first hearing in 1993. And I can tell you 

when I did, my hair was black. You can see what it has done to 

Mr. Roberts. 

Senator LINCOLN. Give him a plaque. 

Chairman HARKIN. Yes, give him a plaque. Just nail it down 

there. 

Well, Dr. Keith Collins, who is the Chief Economist for the Department of Agriculture has been a great source of information on 

a bipartisan basis for this Committee for a long, long time. We just 

welcome you back, Keith. Thank you for your great service and 

your continued service. I look forward to your testimony. 

10

STATEMENT OF DR. KEITH COLLINS, CHIEF ECONOMIST, U.S. 

DEPARTMENT OF AGRICULTURE, WASHINGTON, DC 

Mr. COLLINS. Thank you very much, Mr. Chairman, and I appreciate that personal comment, and thank you for the invitation 

today to discuss the implications of bio-energy for U.S. agriculture. 

I think there is nothing more exciting than renewable energy in 

agriculture today. The producers are generating electricity from 

wind. They are using manure to produce biogas, and the biogas is 

being used to produce electricity and it is being scrubbed and sold 

as renewable natural gas. But nowhere has interest and discussion 

been more intense than in the area of liquid biofuels. 

The prospects for biofuels are shifting from niche markets to 

mainstream energy sources, and that is crucial to reducing U.S. 

fossil fuel imports. Ethanol production last year was three times 

greater than 2000. Biodiesel production was over 100 times greater 

than in 2000. 

Since June alone, U.S. ethanol production capacity in operation 

and under construction has increased by an astounding 4 billion 

gallons. We are on a track to exceed 12 billion gallons of ethanol 

production in 2009, more than doubling last year’s level in 3 years. 

In 2000, 6 percent of U.S. corn production was used to produce 

ethanol. Last year, it was 20 percent. Within three years, it is likely to well exceed 30 percent. And biodiesel now accounts for 13 percent of U.S. soybean oil use, compared with almost none 6 years 

ago. 

This increased use of crops for biofuels is having, and is expected 

to continue to have, a sustained major positive impact on crop producers, rural areas, and the agriculture sector broadly, including 

fertilizer suppliers, seed suppliers, equipment suppliers, and so on. 

The rapid fuel growth raises a number of questions. I believe we 

are entering right now a critical three to 4 year period where several key supply and demand issues will be sorted out. First, consider biofuel supply. How will crop markets adjust to increased demand for corn? Thus far, the demand increases this past year have 

been largely met by drawing down stocks, but stocks for corn are 

now at a historically low level. This spring, high corn prices are expected to draw substantial acreage away from other crops, particularly soybeans, and into corn. As more increases in corn acreage 

occur in subsequent years, we are going to see that continued pressure on the corn acreage base. 

Higher ethanol production over the next several years is likely 

to push corn prices to record highs, especially if the weather does 

not help. Higher corn yields are likely to temper price increases in 

acreage shifts, and corn productivity trends have gotten stronger 

over the last several years. 

A related issue, as Senator Chambliss mentioned, is the impact 

of higher feed costs for livestock and dairy. Sustained higher feed 

costs, if you hold everything else equal, mean lower livestock, poultry, and milk production, and higher livestock and livestock product prices, but as those prices of livestock products rise, that will 

restore profits to the livestock sector, but there is some period of 

adjustment. 

Importantly, about 30 percent of corn used in ethanol can return 

to animal feed as Distiller Dried Grains or other feeds, and adVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
11

vances are occurring that will likely make DDGS a more useable 

feed for hogs and poultry. 

Second, consider biofuel demand. Will ethanol prices stay high 

and demand continue to grow? In the near time, although corn 

prices have soared this fall and oil prices have dropped, ethanol returns remain above the levels attained prior to 2006. Over the long 

term, while ethanol prices to producers will reflect the price of gasoline and the ethanol tax credit, they are increasingly going to reflect blending opportunities. 

Ethanol is a blend component, and its key market is blends up 

to 10 percent. As ethanol’s share of the blended gasoline market 

moves into the eight to 10 percent range, ethanol’s demand and 

price premium in the marked will depend on the ability to use ethanol in higher blends, such as E85. 

To move ethanol beyond low level blending and substantially reduce crude oil imports, infrastructure such as E85 pumps and flexible fuel vehicles are needed. But to ensure their development, ethanol supplies must exceed what is practical from corn. Breakthroughs that allow commercialization of cellulosic ethanol are 

needed to provide that supply boost. Successful commercial-scale 

production would allow many other feedstocks to be used for ethanol. 

In conclusion, USDA sees renewable energy as a prime opportunity to stimulate economic growth in agriculture in rural areas. 

We have a range of grant, and loan, and research programs that 

support renewable energy. Last year we spent over $250 million on 

those programs. We also coordinate joint biomass research with the 

Department of Energy and other Federal agencies, and we draw on 

the Department of Energy to help us implement our programs. 

We are very optimistic that biofuels will create greater economic 

opportunities in rural America, and contribute significantly to diversifying the Nation’s energy supplies. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Collins can be found on page 73 

in the appendix.] 

Chairman HARKIN. Thank you, Dr. Collins for the testimony. I 

have some questions about that, too. 

Now we turn to Read Smith, who is one of the great leaders of 

the 25 X 25 Renewable Energy Project. This has sort of captured 

the imagination of a lot of people around this country. It is a great 

alliance of national agriculture and forestry leaders in promoting 

agriculture’s potential contribution to our energy independence. 

They have laid out a very challenging scenario for this country, 

and one that I hope that this Committee and our new bill this year 

will be involved in trying to meet some of those goals. 

So Mr. Smith, thank you for your leadership in the whole are of 

renewable fuels. Welcome to the Committee and please proceed. 

STATEMENT OF J. READ SMITH, 25 X 25 STEERING COMMITTEE, WHEAT, SMALL GRAINS, AND CATTLE PRODUCER, 

FORMER PRESIDENT, NATIONAL ASSOCIATION OF CONSERVATION DISTRICTS, ST. JOHN, WASHINGTON 

Mr. SMITH. Thank you and good morning, Chairman Harkin and 

Ranking Member Chambliss, and members of the Committee. 

12

Thank you for the opportunity to share with you today on behalf 

of the nearly 400 organizations that comprise the 25 X 25 Renewable Energy Alliance. 

My name is Read Smith. I am one of the two Co-chairs of the 

Alliance. And along with my wife and son, I manage our family 

farming interest in Whitman County, Washington. Our principle 

crops there are wheat, barley, minor crops, and I also manage a 

cow-calf operation. 

Mr. Chairman, on behalf of the 25 X 25 Alliance, I want to begin 

by welcoming you back to the Chairmanship and thanking you for 

your longtime leadership in both energy and conservation. 

Today’s hearing on energy solutions from agriculture and forestry 

make a dramatic statement about the importance to this Committee on accelerating the development of renewable energy from 

our Nation’s farms, ranches, and forests, and it is very much appreciated by those of us who make their living from the land. 

As you well know, our Nation and the world are searching for 

new energy solutions. Due to increasing demands and limited supplies and our growing reliance on imported oil from unstable regions of the world, directly compromising our national security, 

Americans cannot continue on the path that some have called ‘‘Yesterday Forever.’’ As energy demands increase both here and 

abroad, we will need to come up with additional energy supplies, 

ones that are sustainable instead of importing oil from the Middle 

East, we can produce energy here at home in the ‘‘Middle West’’ 

and other parts of the country using America’s agriculture and forestry lands for fuel as well as food, feed, and fiber. 

With these challenges and opportunities as a backdrop, our 

group of highly respected agricultural leaders came together in 

2004 to discuss agriculture’s role in helping our Nation meet those 

energy needs. The vision was emerged as 25 X 25, and that is that 

25 percent of the energy supplies we use in our country will come 

from renewable sources by the years 2025, while still producing 

safe, abundant, and affordable food, feed, and fiber. 

This vision has grown into an alliance of nearly 400 groups, as 

well as 22 current and former Governors, 4 state legislatures, 30 

current and former Senators, and many members of this Committee, and 94 current and former Representatives. 

Mr. Chairman, a 25 X 25 energy future will generate increased 

farm income, stimulate rural development, and help improve air, 

water, and soil quality. It will also result in improvements in wildlife habitat and conservation on crop land, range land, and pasture 

lands. 

Last year, we commissioned a major analysis from the University 

of Tennessee to determine the ability of America’s farms, forests, 

and ranches to provide 25 percent of the total U.S. energy needs 

by 2025 and to assess the economic impacts of the 25 by ’25 goal 

on the agricultural sector and the overall economy. The analysis revealed the following findings:. 

The 25 X 25 goal is achievable. This goal can be met without 

compromising our ability to produce food, feed, and fiber. Reaching 

the goal would have extremely favorable impacts on rural American and the Nation as a whole. 

13

By reaching 25 X 25, annual net farm income could increase by 

$37 billion. With higher market prices, an estimated cumulative 

savings in government payments could result in a $15 billion. 

Contributions from America’s fields, farms, and forests could result in the production of over 86 billion gallons of ethanol and biodiesel by the year 2025. 

And with your permission, Mr. Chairman, I would submit that 

entire research project for the record. 

Chairman HARKIN. Without objection. 

[The following information can be found on page 134 in the appendix.] 

The 25 X 25 partners are now working to construct a road map 

to achieve our 25 X 25 vision. Over the past 6 months, representatives from the endorsing entities have been jointly and in working 

groups meeting to develop a detailed 25 X 25 implementation plan, 

which will include policy recommendations to achieve this goal. The 

plan will be ready for Congress in February, in time for crafting 

the new Farm Bill. 

In our view, American agriculture is uniquely positioned to play 

a major role in improving energy and national security, strengthening the rural and national economies, and improving the environment. The first step in achieving the 25 X 25 energy future is 

to establish 25 X 25 as a national goal. And Mr. Chairman, you, 

along with Senators Grassley, Salazar, Lugar, and 12 others introduced 25 X 25 as Concurrent Resolution 97. We thank you and we 

look forward to your continued leadership and support. 

In the coming weeks, as you once again take up Farm Bill legislation, we urge you to ensure that the energy title is structured 

and funded to match both the challenge and the opportunity facing 

our Nation. 

Thank you again for this opportunity to appear today, and I hope 

you will look to us as a resource as you move forward with the 

Farm Bill, and I would be pleased to respond to questions later. 

[The prepared statement of Mr. Smith can be found on page 133 

in the appendix.] 

Chairman HARKIN. Thank you very much, Reed. And again, we 

look forward to having that. You say you will have that by February? 

Mr. SMITH. Yes. 

Chairman HARKIN. Hurry. 

Mr. SMITH. We are. 

Chairman HARKIN. OK. We need that. 

Next we turn to Dr. Pacheco. Dr. Pacheco I hope I pronounced 

that right. 

Mr. PACHECO. Yes, you did, Senator. 

Chairman HARKIN. Thank you. 

Dr. Pacheco joined the National Renewable Energy Lab in January of 2003 to serve as the Director of the National Bio-energy Center. This center was established the Secretary of the United States 

Department of Energy in 2000 and it is headquartered at NREL. 

As the center Director, Dr. Pacheco provides strategic guidance, 

technical direction, and management oversight of the National Bioenergy Center at NREL. Dr. Pacheco is also responsible for helping 

14

DOE coordinate bio-energy research activities supported by DOE 

and carried out at the five national laboratories. 

Dr. Pacheco, welcome to the Committee, and we look forward to 

your testimony. 

STATEMENT OF MICHAEL PACHECO, DIRECTOR, NATIONAL 

RENEWABLE ENERGY LABORATORY, GOLDEN, COLORADO 

Mr. PACHECO. Senator, thank you very much, and in the opening 

remarks, when you were talking with Dr. Sharp about the Class 

of 1974, I was also a member of the Class of 1974, but that was 

the graduating class of Montville High School. 

[Laughter.] 

Chairman HARKIN. Wait a minute. How old am I? 

[Laughter.] 

Mr. PACHECO. Thank you, Mr. Chairman. And thank you, the 

Committee, for this opportunity to discuss how rural America can 

improve our Nation’s energy security. I direct the National Bio-energy Center, as you said, at the National Renewable Energy Laboratory in Golden, Colorado. NREL is the U.S. Department of Energy’s primary laboratory for renewable energy and energy efficiency, and I am honored to be here today. 

The Committee is to be commended for examining the role that 

agriculture and forestry can play in reducing our dependence on 

imported oil. This is a crucial subject for our Nation. Biomass is 

the only renewable option that we have for liquid transportation 

fuels. 

Let me begin by emphasizing that the biomass resource base in 

our country is huge. Every State in the Nation can benefit economically from an expanding biofuels industry. A recent study by USDA 

and DOE found that the U.S. could produce annually 1.3 billion 

tons of biomass dedicated to fuels. As illustrated in my written testimony, this amount of biomass holds as much energy as 3.5 billion 

barrels of oil. That is 60 percent of the oil that we use in the 

United States each year. Already today, our Nation produces 5 billion gallons a year of ethanol from corn grain, and the industry is 

growing about 30 percent annually. 

Corn ethanol can ultimately produce about five to 10 percent of 

the liquid fuels that we need. To move the biofuels industry to 

where we need it to be, we have to go beyond corn grain as the primary resource. We need to move to cellulosic biomass: trees, 

grasses, non-edible materials, some of which are residues from existing industries. That is the focus of our research at NREL and 

of the biomass program within the Department of Energy. 

Our goals are to make cellulosic ethanol as cheap as corn ethanol 

within the next five years, also, to make cellulosic ethanol cost 

competitive with gasoline by the year 2030. While these goals are 

aggressive, and they will require revolutionary approaches for producing, collecting, and converting the biomass, we believe that both 

of these goals are achievable with adequate research support and 

a focused R&D effort. 

The encouraging progress that we have had to date with cellulosic ethanol lends credence to our longer-term targets. As illustrated in my written testimony, the past five years of DOE’s research have drastically cut the cost of making ethanol from celVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
15

lulosic biomass. In partnership with two of the world’s largest enzyme manufacturers, we have been able to reduce the cost of the 

required enzymes more than tenfold, and we have reduced conversion costs by another 30 percent over those five years by improving 

the biomass conversion process itself. 

Critical to our progress at DOE are our many partnerships with 

industry on the development of what we call biorefineries. NREL, 

together with our partners, are developing technology for fully integrating facilities that can use biomass instead of petroleum to 

produce fuels, power, and chemicals, virtually everything that we 

make from petroleum today. We are partnering with ethanol technology providers, ethanol producers, biotech companies, chemical 

companies, and companies in the agriculture, forestry, and oil industries. We are working to increase the yield of ethanol from existing facilities, develop new biofuel technology options, and expand 

the slate of feedstock to include cellulosic biomass. 

The emergence of cellulosic biorefineries from our existing facilities is one of the reasons that we believe, at NREL, that the cellulosic ethanol industry will not replace today’s corn and grain industry, it will evolve from it. 

There are other important biofuel technologies, including 

thermochemical gasification and pyrolysis of cellulosic biomass. 

These technologies can convert a wider range of feedstocks. They 

can also reduce the costs of the biofuels, and they may ultimately 

lead to an entirely new generation of biofuels. 

This week, the Department of Energy, yesterday and today, is 

hosting a 2–day workshop with industry, and there are 33 different 

companies at that workshop. In order to better define what research is needed in order to utilize these thermal technologies to 

produce biofuels, in addition to the technology that we are working 

on in ethanol today. Developing all of these different technology options is important to maximize the benefit that biofuels will bring 

to the rural economies, and to ensure worldwide competitiveness of 

U.S. industry. 

Ethanol, biodiesel, and other biofuels definitely reduce our dependence on petroleum. Cellulosic ethanol can supply a large portion of our overall demand for gasoline, and we can expand our resource base and our biofuel options in the future as required. 

As the Director of our Nation’s Research Center on Bio-energy, 

I can assure you that your investments in biofuels research today 

will provide sustainable benefits for all future generations. Biofuels 

are an environmentally and economically beneficial way for us to 

bridge the gap between rising energy demand and peaking oil production, while reducing our U.S. dependence on imported oil. 

Thank you, Mr. Chairman. 

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

114 in the appendix.] 

Chairman HARKIN. Thank you, Dr. Pacheco. Thank you very 

much for your statement. 

We will turn to 10–minute rounds of questions, now. And I will 

just start with Phil Sharp. Again, I want to get that Chart 4, the 

Chart 4 that we talked about that I looked at last night. 

You have cellulosic ethanol equivalent to about 100–let me get 

it out here and look at it again. You have cellulosic ethanol equivaVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
16

lent to about $120 to $140 per barrel of oil, shale oil equivalent to 

$55 to $80 per barrel of oil. Now, since neither of these are being 

produced in volume today, how do you get those numbers? 

Mr. SHARP. Well, I did not compile the numbers. Dr. Richard 

Newell got it from a whole bunch of studies and projections that 

have been done. The truth is, I think nobody knows for sure on 

these kinds of things. 

Chairman HARKIN. Okay. 

Mr. SHARP. But those are guesstimates as to what those kinds 

of costs are. Obviously, you have provided subsidies that helped 

bring down, potentially, over time those costs. 

Chairman HARKIN. OK. I wanted to——

Mr. SHARP. But I think the oil companies probably have come 

forth with a lot of information that would suggest that the oil shale 

are in those numbers. So my suspicion is that we have a more likely accuracy on those numbers than on the cellulosic biomass. 

Chairman HARKIN. Dr. Pacheco, do those numbers mean anything to you? Have you looked at that in your research at all? 

Mr. PACHECO. Absolutely, and those numbers concur, currently, 

with best available technology. We believe that the cost of producing cellulosic ethanol today is in the low $2.00 range, around 

$2.30 is typically the number that we use, but there are large error 

bars on that, since it has been pointed out. 

Chairman HARKIN. $2.00 of what? 

Mr. PACHECO. That is per gallon of ethanol. 

Chairman HARKIN. Per gallon. 

Mr. PACHECO. So to put it on barrels, you would need to need to 

multiply that by about 40. 

Chairman HARKIN. So that is a little bit cheaper than what they 

got. 

Mr. PACHECO. That would be barrels of ethanol. 

Chairman HARKIN. That’s right. 

Mr. PACHECO. Again, from a technical point of view, there is another correction, because ethanol has less energy per barrel, about 

30 percent. So you would need to multiply it by another factor, 

about 1.3. 

Mr. SHARP. These numbers, I believe, are corrected for the energy content. 

Mr. PACHECO. They do sound correct, Senator. 

Chairman HARKIN. I see what you are saying. 

Mr. PACHECO. And consistent with our numbers.

[The range of cost for producing ethanol from cellulosic 

biomass that Dr. Sharp shows in Chart IV of his testimony 

is $120-140 per BOE (barrel of oil equivalent.) This cost 

range is actually about 30 percent lower than NREL’s current cost estimate for cellulosic ethanol. NREL currently 

estimates cellulosic ethanol at about $2.20/gal ethanol, 

which would correspond to $170 per BOE. Significant technology improvements are needed to make cellulosic ethanol cost-competitive with ethanol made from corn.]

Chairman HARKIN. I see. Well, again, my point is that in both 

cases, technological improvements may well lower the production 

costs. In your judgment, Phil, which of these alternatives is likely 

17

to see the largest production cost reductions from research and development? 

Mr. SHARP. Well, I am not a very good one to answer that, Senator. I think that it is very hard to say. I think it is going to depend on where the emphasis gets placed. Each has its own specialty. I mean, shale oil in Colorado depends heavily on other environmental considerations as to whether the huge investments get 

made there or do not. The investments that were made in the 

1970’s and 1980’s all crashed when the oil price crashed, but a lot 

was learned in which these companies now are willing to come 

back and say, we will try again. 

If they are successful and they get into the marketplace first, it 

only compounds the competitive situation for these other fuels like 

cellulosic biomass and cellulosic ethanol. 

Chairman HARKIN. Keith Collins, in the Biofuel Security Act of 

2007, which we introduced last week with Senator Lugar and others, we called for increasing biofuel production levels to 60 billion 

gallons per year by 2030. That is a little bit less energetic than the 

25 X 25 is, but still up there. We all expect that we need to be producing biofuels from cellulosic feedstocks. We were talking about 

that. We cannot get it all from corn, for example. 

So my question for you is, how do we steer the economics of ethanol production so that we support and protect the role that grainbased ethanol plays now in the future, but also nurturing the development and commercialization of cellulosic ethanol? Do you understand what the point of my question is? Obviously, a lot has 

been invested in corn ethanol. A lot has been invested in these 

plants, but we know we have to move on. So how do we protect our 

initial investments and keep a market there for corn and while promoting and encouraging the commercialization of cellulose? 

Mr. COLLINS. That is an enormous challenge, Senator Harkin. It 

strikes me that, for some years to come, the investments in grainbased ethanol will be well-protected. Their cost of production, as 

just noted, are substantially below current estimates of cellulosic 

ethanol. I think those investments could be stranded only if those 

costs of cellulosic ethanol production were to plunge sharply below 

the costs of grain-based ethanol production. That could possibly 

happen. I do not particularly see that. I have had a chance to see 

some confidential business information of firms that are planning 

on building demonstration cellulosic ethanol plants, and they have 

some projections of their cost structure now and out into the future. And they have their cost structure coming pretty much in line 

with corn-based ethanol. 

So it strikes me that there is a prospect here that we go from 

dominance of corn-based ethanol to a rise in cellulosic ethanol, and 

the two proceed to grow together for some time to come. So I think 

that would be sort of the Goldilocks world of ethanol, I guess, 

where you could continue to turn on your corn-based investments, 

but you would not be putting such pressure on a corn acreage base 

that you would be jeopardizing the livestock sector. 

And I think that is the kind of goal that the research community 

has in mind, that the public policy community has in mind. And 

I think that is what a lot of the programs that are promoting the 

18

development of cellulosic ethanol have in mind as well. And so 

hopefully we can stay on that kind of successful, ideal path. 

Chairman HARKIN. The question I have for you, again—I would 

like each of you to respond to this, if you want to, and that is the 

chicken and egg situation we find ourselves in. There are some who 

say biomass plants will not be built without existing contracted 

supplies of biomass to guarantee that the plants have the raw material to process. The producing side says, we are not going to shift 

to producing it until we have a market for it and we have the 

plants there that will take it. How do we break that down? 

Mr. COLLINS. I have a lot of faith, sort of, being an economist, 

in the market overcoming these chicken and egg situations. It overcomes them all the time. And I think if the technology is there for 

profitable production of cellulosic ethanol, entrepreneurs will, in 

fact, spur the planting and the harvesting of biomass. 

And that is going to come in so many different forms. Obviously, 

the low-hanging fruit here are residues and waste materials. There 

is already a lot of work being done on that. And there is the plant 

in Iowa, the Broin company plant, that is just starting construction 

and using corn stover as well as corn in the same plant to increase 

their ethanol production. 

So the early transition here is going to be the existing ethanol 

facilities, corn-based facilities, that also start using cellulosic material. This does not happen overnight. This is going to happen over 

time. We do not even have a demonstration cellulosic ethanol plant 

in operation in the United States today. You have to go from a 

demonstration plant to a commercial plant. This is going to take 

time. 

And so, as that ramps up, then I think you are going to see these 

opportunities for farmers to plant and harvest this stuff. And of 

course there are all kinds of ideas for the 2007 Farm Bill on how 

you could stimulate some farmer production of biomass to get going 

down that road. 

Chairman HARKIN. Yes. Senator Chambliss and I, as well as 

many others, have talked about this. How do we start that process? 

And that is going to be a part of this bill, I can assure you. I do 

not have the answer right now. 

Mr. COLLINS. Well, there was an answer in Iowa, the Chariton 

Valley project. 

Chairman HARKIN. Yes, we have someone here on the second 

panel. John Sellers is here to testify what they have done out 

there. 

Anybody else in response to my chicken and egg question here? 

Mr. SMITH. Senator, I will submit that our implementation plan 

of 25 X 25 will include components around the chicken and the egg 

issue regarding the production of dedicated energy crops. And I 

think in our vision of 86–plus billion gallons of ethanol and biodiesel, it certainly includes a very large percentage of that will be 

from biomass. Certainly late generation corn ethanol plants may be 

converted, eventually, to biomass as this comes in. 

In fact, our UT study indicates that by 2012 when cellulosic ethanol is fully incorporated into the industry that we may actually 

see a decrease in corn acres due to the redirection of ethanol to cellulosic versus corn. 

19

Chairman HARKIN. I want to follow up on that, maybe in my 

next round. 

But Dr. Pacheco, just, again, getting back to the cellulose plants. 

As I understand it, and I could be wrong in this, that the only real 

commercial-size cellulose plant is in Canada someplace. That is 

what I was told. I have not been there. I forget the name of the 

company. 

Mr. PACHECO. Iogen has a demonstration plant in Canada? 

Chairman HARKIN. Pardon? 

Mr. PACHECO. Iogen has a demonstration plant in Canada? 

Chairman HARKIN. That is what I am thinking of, yes. 

But is the technology ready to be scaled up and tested at the 

commercial plant levels? 

Mr. PACHECO. On a technical basis, absolutely yes, Senator Harkin. All of the technology pieces are in place, and many of our industry partners feel that the technology is technically viable, as Dr. 

Collins from USDA has pointed out, and I agree entirely with him. 

The problem is that the costs are quite a bit higher; almost double 

the cost of making ethanol from the food resources. 

So I think to come back to your root question, I think what is 

really needed is a combination. One is a continued, aggressive technology development program together with policy drivers that will 

incentivize the use of cellulosic materials rather than food resources. 

Chairman HARKIN. I think we need to put more money into this 

research end of it, but now you say DOE is doing this research. 

Mr. PACHECO. Both DOE and USDA. 

Chairman HARKIN. Do you feel that they are coordinating well 

enough? 

Mr. PACHECO. Absolutely. 

Chairman HARKIN. And where is the coordination taking place? 

Who is overseeing this? 

Mr. PACHECO. It takes place both at the laboratories and at the 

Technical Advisory Committee, where both the USDA and DOE 

partner in leading an advisory committee where members of industry, together with universities and a number of other institutions 

come together. It is about a 30 panel member that helps guide the 

two agencies, together with workshops that we jointly participate 

in. 

Chairman HARKIN. I need to understand personally—I just need 

to understand that structure better, and how much DOE is putting 

into and how much Department of Agriculture is putting into it, 

and how much the private sector is putting into it, and how that 

is all coordinated, because that is going to be one important component, I think, of our Farm Bill that we are going to be putting out. 

It is just looking at that research and how much research money 

do we need to put in there to continue that tenfold decrease. 

Mr. PACHECO. Absolutely. 

Chairman HARKIN. To really get it down. 

Mr. PACHECO. Absolutely. And there are other approaches and 

other fuels that we could work on that would benefit farmers and 

foresters that today, because of budgets, we are limited to focusing 

on the cellulosic ethanol, but there are certainly other approaches 

that we can pursue as well. 

20

Chairman HARKIN. Thank you all very much. 

And now I turn to our Ranking Member, Senator Chambliss. 

Senator CHAMBLISS. Thank you very much, Mr. Chairman. Gentlemen, thank you for being here to enlighten us on an issue that—

am I doing something, Bob? 

I realize I got radioactive seeds to cure my prostate cancer, but 

I did not know that it did that. 

[Laughter.] 

Senator CHAMBLISS. Keith, thanks for always coming up and 

sharing your thoughts with us. You have been a great asset to us 

down at USDA. And a couple of years ago, I asked you to do a 

study on this issue, and thank you for your prompt attention to 

that and thanks for the report that you issued. And due to the 

changing nature of this business, I want to hand you a letter this 

morning just asking you to update that study that you did and 

come back to the Committee and give us the updated ideas and 

thoughts that you have on that. 

Mr. COLLINS. Yes, sir. 

Senator CHAMBLISS. And Keith, I want to just follow up on the 

last response you gave there to the Chairman’s question. I want to 

talk about this food versus fuel debate, which is a frequent topic 

among policymakers, and let me ask you four questions and just 

ask that you give a general discussion on this issue. 

First, if oil prices remain high for the foreseeable future, would 

this provide additional incentives to the corn ethanol industry to 

expand capacity? 

Second, if corn prices continue to rise and ethanol plants outbid 

U.S. animal agriculture food processors and the export market, 

would traditional users of corn reduce consumption or would we expect to see a new wave of consolidation in those industries? 

Third, where do you expect to see shifts in corn production where 

it is not presently occurring today? 

And then, fourthly, what are the constraints on farmers exiting 

the CRP to increase corn production? 

Mr. COLLINS. I hope I got them all. Senator Chambliss, you can 

remind me. 

First, if oil prices stay high, will that provide incentives to continue ethanol expansion? The answer is generally yes, but ethanol 

expansion depends on the profitability of ethanol, and that is just 

not a function of the price of oil. The price of ethanol can vary quite 

substantially compared with price of oil or the price of gasoline. Historically, there has been a $0.35 or more premium of ethanol 

over the price of gasoline, largely due to the tax credit and the 

scarcity of ethanol. As ethanol becomes much more abundant and 

goes beyond the E10 market, if there is not another option for ethanol, such as exports or E85, it is highly possible, as already mentioned, with the Btu value of ethanol being two-thirds the Btu 

value of gasoline, you could see ethanol prices fall below gasoline 

prices. So yes, high crude prices will continue ethanol expansion, 

but the price of ethanol in relation to gasoline will also be a factor 

in that expansion over time. It looks to us like we are going to see 

that expansion continuing for some time to come. 

What will happen if ethanol plants outbid traditional users? This 

is what markets do. Prices ration a fixed supply. If the supply is 

21

being outstripped by demand, then prices will go up and it will ration the use among users. I think that ethanol plants, at least in 

the current environment, can bid quite high for corn. And so the 

adjustment will come from those sectors of the demand sector that 

are most responsive to prices. That might be exports. That might 

be certain users. 

So yes, there will be some adjustments in use. There could be 

some adjustments in feed use as well. And feed use would mean 

higher production costs, which would get reflected into lower livestock returns and some slower growth in livestock production or 

maybe even some declines, depending upon how high corn prices 

might get. 

I have forgotten the third one. Oh, it was where corn production 

would shift. 

Senator CHAMBLISS. Shifts in corn. 

Mr. COLLINS [continuing] I think the obvious one is going to be 

soybeans, and I would expect over the next couple of years we are 

going to need a lot of acreage in corn. And I would expect most of 

that is going to come from soybeans. 

And you can think back 1five years ago, we had 60 million acres 

of soybeans, last year we had 75 million. It is not unthinkable to 

see soybeans going back down to the 60’s and even the low 60’s. 

That would not jeopardize our domestic use of soybeans. It would 

reduce our export of soybeans, I think, more than anything. But 

there you have Brazil and Argentina have been tremendously increasing their soybean production and could be an offset there. I 

would expect that to happen. 

So I would expect to see corn go into soybeans—soybeans go into 

corn, rather. So we will see more corn on corn production, year 

after year corn in the heart of the Corn Belt. I would expect to see 

corn migrate west to some extent, north to some extent, as genetic 

changes in corn have made that more possible. I would also expect 

to see some cotton areas shifting into corn as well. We are already 

hearing that. 

There has been some early work in December surveying farmers 

on their intentions of acreage for 2007. And one survey showed 

farmers plan to plant about 86 million acres to corn. Last year they 

planted 78.6. So farmers are responding to the higher prices, and 

I would expect that to occur. 

Last, constraints on exiting the CRP. I think they are not real 

hard constraints, I do not think, for a lot of acreage. Of course, a 

lot in the CRP is highly erodible land. If you leave the CRP and 

go back into production, if you want to participate in farm programs—you have crop acreage base, you want to participate in the 

Market Assistance Loan Program, you have to farm highly erodible 

lands according to a conservation plan. So you would have to farm 

that land according to an approved NRCS conservation plan. 

Secondly, it depends on the practice the land is in, and there are 

lots of practices in the CRP. It could be woodland. It could be waterway. It could be a construction practice. It could be anything. 

Depending on the practice, that is going to determine how hard it 

is to convert that land into production crop land. But I see grassland CRP acres in the heart of the Corn Belt as probably not that 

hard to convert. You might have to drill soybeans in the first year 

22

and go to corn in the second year as the soil quality makes it more 

adaptable to corn. 

So I do not see big barriers there. But I also do not see a lot of 

CRP acreage coming into corn over the next few years. There are 

just not that much CRP acres that could potentially come out of the 

CRP. 

Senator CHAMBLISS. USDA annually gives us the projection on 

yields on all crops, particularly in light of weather conditions which 

are so critically important. I doubt that you have had time to do 

that for this year, but would you please just make sure that this 

Committee gets that projection as soon as possible, as soon as you 

complete that report for this year. 

Mr. COLLINS. Well, the next report we are putting out would be 

the date of the President’s budget release, February 5th, in which 

we put out what is called our CCC Estimates Book, which is a detailed, year by year 10–year projection, crop by crop. And that goes 

out February 5th. 

We have a much more detailed international assessment, our socalled baseline, we are releasing on February 14th. On March 1st 

and 2nd, we have our outlook forum, and we will be updating all 

of those numbers at our outlook forum. So we have a series of releases coming out over the next month which will fill the media 

with one conflicting number after another. 

[Laughter.] 

Senator CHAMBLISS. We will look forward to all of the above, 

Keith. 

The transportation infrastructure for renewable fuels is evolving 

as quickly as the industry itself. And for the most part, product is 

moving where it needs to go on time, but ethanol production is 

transforming the agriculture economy. And some time in the near 

future we might see the need to import corn into States such as 

Iowa and Nebraska which have historically exported a large portion of their crop. 

Given the tremendous changes occurring, are you confident 

USDA is providing updated and timely information that can accurately advise policymakers on this evolving issue, and does USDA 

have any outside studies underway to assist the understanding of 

the transportation situation and the outlook? 

Mr. COLLINS. In answer to the question, are we providing sufficient information, we provide more macroscopic information. We 

tell the world every month what we think is going to happen in 

global agricultural markets. We do not usually take it down to the 

State level, but we hope people in the State area can use that information for decisionmaking. 

I would say that this issue about Nebraska and Iowa, the land 

grant universities in those States are doing a lot of work on this. 

I see lots of reports coming out of the land grant universities. 

We, in fact, have contracted with the Center for Agriculture and 

Rural Development at Iowa State University to look at the implications on rural areas as a result of the ethanol expansion. I have 

a meeting next week or the week after next with the Dean of Agriculture from the University of Nebraska. So we are in consultation 

a lot with States that are facing the big increase in ethanol production. But it is pretty much, I think, a function of the land grant 

23

universities to look at some of these local issues, like whether a 

particular State might become a deficit region or not. 

The transportation issue is an important one. To my knowledge, 

we do not have a study going on transportation implications of the 

expansion in ethanol. We do have a transportation division at 

USDA, in the Agricultural Marketing Service. They put out a 

weekly transportation market update. And I have talked with them 

in the past and I know that they are focused on ethanol. And, in 

fact, I think it was four or 5 weeks ago, they had an article on ethanol in the transportation update. So that part of the USDA, the 

transportation part of the USDA is following this very closely. 

I might also say that related to this project that we have with 

CARD, at Iowa State, I was also speaking with the National Grain 

and Feed Association, and they are interested in piggybacking on 

the work that we are doing and having a transportation study 

done. That would not be our study. That would be their study, but 

we are talking with them about that. So the transportation issue 

is a big one and we are thinking about that. 

Senator CHAMBLISS. Dr. Pacheco, your testimony cites technological developments beyond those that we are most familiar with 

such as fermentation and distillation. I am curious about your comments about the integration of thermochemical technologies. Are 

there technologies available to produce biofuels that can use the existing fuel infrastructure that currently exists for hydrocarbons? 

Mr. PACHECO. Absolutely, Senator Chambliss. In fact, I would 

like to compliment both the University of Georgia and Georgia 

Tech for working on this area. Georgia Tech, as you know, has a 

very active program in this area and is working closely with the 

Chevron Corporation to develop technologies that can use thermal 

approaches and existing hardware and existing equipment in the 

oil industry to convert some forms of biomass. 

Just, very quickly, a couple of examples, and one that I know 

that Georgia Tech is working on and we are working on as well at 

NREL, and partnered with industry, is to use pyrolysis to make an 

intermediate crude oil that is actually made from, for example, 

woody resources, which is a very good fit for the Southeastern 

United States. The plantation pine could be chopped up just like 

you do for paper mill, pyrolized, and this is a process, for those that 

are not familiar with it, it is a very simple process where you heat 

the material up in a fraction of a second very hot, to about 500 degrees centigrade. And you shatter all of the polymers: the cellulose, 

the hemicelluloses, the lignin, and convert a black liquid. The challenge that we have, Senator, and the problems that we are working 

on at NREL with our partners, and that Georgia Tech is working 

on, is to produce an oil that is of better quality. 

We can produce that oil today for something on the order—it is 

equivalent to about $30 or $50 a barrel of crude oil, but the quality 

is very poor. So it is like a very low quality crude oil, but it is all 

biomass-drived, 100 percent renewable. It is a very different oil. It 

is something that the petroleum industry is not used to, and we 

need to work with them to understand if that technology could be 

developed so that—you know, the United States is 25 percent of 

the world’s refining capacity in this country. If we could utilize that 

to make biofuels, it will benefit not only the rural communities that 

24

are producing the biomass, but it will also benefit the existing infrastructure that we have for producing fuels and getting them to 

the marketplace. 

Another example that we are working on very closely, and it is 

a subject of the workshop this week, is that there are approaches 

to actually use gasification and then produce ethanol and other alcohols from the synthesis gas. That technology fits very nicely with, 

say, a corn ethanol plant, or a cellulosic ethanol plant. And we can 

use the other parts of the biomass, particularly the lignin components, that scientifically we do not know how to make ethanol from 

a fermentation route. 

So all of these different technologies can really reduce the cost. 

They can open up new options for foresters and farmers to get their 

biomass into the fuels industry. And all of these starting materials 

are not food materials. They are not edible biomass, so they completely avoid the food versus fuel issue. But the challenge, as Dr. 

Collins pointed out earlier, and I definitely agree, technically, we 

do not know how to do it cheap enough yet. We are at, roughly, 

double the cost, and we need to get those costs down. And it is possible that there could be some policy instruments that could help 

seed that industry. And as the industry were to grow, more and 

more private dollars would go into the R&D, together with the Federal dollars and the State dollars, to accelerate the development of 

these technologies. 

Senator CHAMBLISS. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Chambliss. 

And for our new Senators, the tradition has been on this Committee, for a long time, that we will recognize Senators in their 

order of appearance here at the Committee. So it was Senator Roberts, he is not here right now, and then Senator Klobuchar. 

Welcome to the Committee. 

Senator KLOBUCHAR. Thank you, Chairman Harkin, I appreciate 

it. It is great to be on this Committee. I am very excited to be a 

part of it. And I also thank you, Chairman, for your many visits 

to Minnesota. I think it is you and your wife that would come for 

some anniversaries because we are such a romantic place, I know. 

[Laughter.] 

Chairman HARKIN. You know, my wife is from Minnesota. 

Senator KLOBUCHAR. Exactly. We have opened up a new bed and 

breakfast near Pipestone where the packages—you get up and look 

at a wind turbine. So that might be a lot of fun for you. 

[Laughter.] 

Senator KLOBUCHAR. Combine work and. 

Chairman HARKIN. My wife is from out that way. 

Senator KLOBUCHAR. Right. Anyway, I was pleased, also, that 

you had the first topic here about renewable energy, which is so 

important to Minnesota’s economy. We have 16 ethanol plants now 

in Minnesota, which produce more than 500 million gallons of ethanol in 2006. We have a number of biodiesel plants as well. We 

have been a leader in the area of renewable energy, and we also 

have 306 of the 1000 gas pumps at our gas stations that actually 

provide ethanol, not that we are counting, but we are very proud 

of that work that we have done as well, and I think that is a major 

part as we go forward. 

25

I was thinking about this issue the other day. My daughter, 

when she was in the sixth grade, she did a report on ethanol for 

her end of the year report. And she did a big display of ethanol and 

she interviewed a number of farmers, and she interviewed a farmer 

from Pine City, and she drew a map of the State of Minnesota. On 

it were two little dots that said Minneapolis and St. Paul, and then 

a huge circle, Senator Coleman, Pine City, home of farmer Tom Peterson. And I thought that is the future for ethanol. And it is such 

a big part of our rural economy. In addition to the other benefits 

that have been talked about today for renewable fuel with the clear 

implications for our national security as well as the environment. 

So I thank the witnesses for being here, and I just had two questions. One was for you, Dr. Collins, and it was from your testimony 

about the issue of some of the rising production costs related to 

natural gas costs. I think in your testimony you talked about how 

in 2000—that the natural production costs of ethanol has risen 

from about $0.95 per gallon in 2002 to $1.45 now. And one of the 

plants that I toured in Benson, Minnesota actually used gasified 

corn stover in place of natural gas to run the facility. And I wondered what you thought of those kinds of innovations and how that 

could help us as we go forward. 

Mr. COLLINS. I think those kinds of innovations are terrific and 

I think we are going to see more of them. I think one of the exciting things—I know there was a plant in Canada and I think there 

is one under construction in the United States, there may be others, that are combining livestock feeding operations with ethanol 

production, where they are using the manure to produce electricity 

to heat the ethanol plant instead of natural gas, and then they are 

using the Distiller Dried Grains, wet, to feed the livestock. 

These kinds of economies, I think are very, very important for 

ethanol, and it represents a terrific way to reduce energy costs 

which are significant for ethanol plants. Some ethanol plants are 

doing lots of different things to try and reduce those, so I think 

that is really welcome, and it is creative, and I hope we will see 

more of that. 

Senator KLOBUCHAR. Thank you. 

And then, Dr. Pacheco, biodiesel industry, also very important in 

Minnesota. I think we are the third largest producer of soybeans 

in the country. I think the one State ahead of us is to our southern 

border, but we are very interested in expanding that, and I know 

in your testimony you talked about the fact that there are issues 

about ensuring that the 20 percent biodiesel blends are compatible 

with some of the new generation of diesel engines that we are seeing. Could you elaborate on the work that your organization is 

doing in this area? We see this as very important that we have 

compatible engines as we go forward with our biodiesel industry. 

Mr. PACHECO. Certainly, Senator Klobuchar. You are very well 

informed, and it is a very key issue. One, unfortunately, that I feel 

that we are not doing enough work. Our staffs are trying to keep 

up with the innovations in the advanced diesel engines, but right 

now, because biodiesel is such a small component of the diesel market, the equipment manufacturers are not really incentivized to 

deal with those issues and to research those issues. So we are 

doing some work at NREL, but a lot more work needs to be done. 

26

It is a major concern of the National Biodiesel Board, as you may 

know, that the higher blends of biodiesel will be compatible with 

the newer, more advanced, high efficiency engines that are being 

developed by the auto manufacturers. So it is an area that needs 

more work. We are doing some, but not nearly enough.

[Testing of biodiesel in advanced diesel engines is a key 

issue, one that NREL experts in this area feel we are not 

doing enough work on. Our researchers are trying to keep 

up with the innovations in advanced diesel engines, and 

perform the testing on biodiesel that the diesel engine industry and EPA needs to see. Some work in this area is 

proceeding at a modest level at NREL with support from 

the biodiesel industry, and the diesel engine manufacturers are assisting with this effort. However, the engine 

manufacturers have had to commit their resources to developing engines that meet the very strict new emission 

standards that are coming into effect now and over the 

next few years. The engine manufacturers are counting on 

the DOE and the biodiesel industry to perform compatibility of biodiesel. So, while we are doing some work at 

NREL, alot more work needs to be done. It is a major concern of the National Biodiesel Board, that the higher 

blends of biodiesel be compatible with the newer, more advanced, high efficiency engines that are being developed by 

the auto and engine manufacturers. It is an area that need 

more work.]

Senator KLOBUCHAR. OK, thank you, and thank you, Mr. Chairman. 

Chairman HARKIN. I like the standard that you just set. You did 

not even use all of your time. Amazing. Thank you, Senator 

Klobuchar. 

Senator KLOBUCHAR. Might not be a standard for the future. 

[Laughter.] 

Chairman HARKIN. And then another new member we welcome 

to this Committee, again, who served admirably on the House Agriculture Committee, like both Senator Saxby and I have. So let us 

welcome another former House Agriculture Committee member to 

the Senate Agriculture Committee, Senator John Thune of South 

Dakota. 

Senator THUNE. Thank you, Mr. Chairman. And I welcome the 

opportunity to serve with you under your leadership on this Committee, and with the ranking Republican, Senator Chambliss, as 

you noted, that I served with in the House. And I appreciate all 

the important subjects we are going to get to deal with in this next 

year. 

In my three terms in the House, we did have the opportunity, in 

2002, to write that last Farm Bill, and that, like every Farm Bill, 

was a challenge, and something that took us a good amount of 

time, I think, to work through, but one that I think the outcome 

was very satisfactory. And I think most people in agriculture farm 

country would argue has been a success. 

What is interesting to me about all that, of course, is in my State—it is a State where agriculture contributes about $17 billion 

27

to our economy. It is the No. 1 economic engine in South Dakota. 

And if you look at the last Farm Bill and what it has done, we obviously have focused in the past on food and fiber when we talked 

about foreign policy, but I really think this Farm Bill was food, 

fiber, and fuel. And I think it is—I was in a sale barn not too long 

ago in South Dakota and I got an earful from a bunch of livestock 

producers about the high cost of corn and what that was doing to 

feeder prices. And as has already been noted, that is an issue that 

people in the livestock industry are concerned about. 

But it occurred to me, what a high-class problem to have, that the demand for corn is pushing corn prices up to over $3.00 a bushel. And we used to send it to the export marked for $1.50 or thereabouts, or less, per bushel, and now we are getting over $3.00 a 

bushel. And the other attendant result of that is we are reducing 

the amount of money that the taxpayer is putting into farm programs, because when prices are high, as was, I guess, a point in 

the last Farm Bill, you know, those subsidies reduce. So we are not 

making LDP payments and we are not making counter-cyclical 

payments, and that is a great outcome for the American taxpayer, 

and something that I do not think gets talked about near enough 

when we talk about the Farm Bill and we talk about the importance of renewable energy. 

We hear a lot of the critics of renewable energy talk about the 

cost, and the subsidy, and everything else, but if you think about 

how many billions of dollars we have been saying in terms of LDPs 

and counter-cyclical payments that are not being made, that is also 

something I think we ought to be talking about when we highlight 

this. 

But I think this Farm Bill, as you have noted, Mr. Chairman, 

really ought to be very much about renewable energy, because it 

is so important, not only to the economy of agriculture, but also to 

our national security, our energy independence, environmental 

quality, all the things that have been talked about this morning. 

And I think the challenge that we face on this Committee and in 

the Congress in terms of this Farm Bill is what can we do in terms 

of policies that will further the growth of this industry, that will 

take us to what I would hope is 50 million gallons by 2025. I know 

it messes up the 25 X 25, but I think it ought to be 50 x ’25, because I think the capacity is there. 

As you noted, Mr. Pacheco, in your comments, if we have 60 percent of our total fuel usage in this country that can be produced 

by biomass products in this country, that is—we used about 140 

billion gallons this year of fuel, that is about 84 billion gallons that 

we could make out of biomass materials. And I know that there is 

a limit to what we can do with corn-based, but as we move into 

switchgrass, and cellulosic ethanol, and other types of biomass materials that can go into ethanol production, I think the sky is the 

limit for this industry, and it is just, frankly, the right thing to do. 

So I think we have to be looking at, what are those policies that 

can take us to that point? Is it increasing the renewable fuel standard? Are there other things—the tax incentives, obviously, have 

been very important in terms of growing this industry, but I look 

forward, Mr. Chairman, to working with you to identifying those 

types of policy incentives that will enable us to continue to grow 

28

the renewable fuel industry in this country, which, again, is great 

for American agriculture. It is a good return for the taxpayer. And 

it also lessens the amount of money that we use to fund terrorism, 

because when we send our dollars to the Middle East to buy oil 

from countries that turn around and use those dollars to fund terrorist organizations that kill Americans, that has to be a very serious concern, I think, for all Americans. So I do not—as you can tell, 

I am a big fan of bio-energy and I just think that we have to continue to move forward with policies that will grow this industry. 

But nevertheless, I have a couple of questions that I will get to, 

and I appreciate Senator Klobuchar’s economy when it comes to the 

use of time. I think the longer that she is in the Senate she will 

realize that is not the way it works here. You have to use all of 

your time. 

[Laughter.] 

Senator THUNE. And then beyond. But in any event, I do have 

a couple of questions. 

I would like to get at this question on—and I know that the technologies are emerging that will promote cellulosic ethanol and, as 

you mentioned, both Broin and Varison in South Dakota are finalists in a research program that DOE has that would allow research 

dollars to go into that, and we need to get that commercialized. 

And I do not think it is very far away. But I guess my question 

is, and some of you have touched on it, and my colleague from 

Georgia is concerned about the livestock industry, and what is that 

level of corn production that we can get to before we run out of 

corn that could go into feed for livestock? Is that a 10 billion gallon? Is it a 15 billion gallon renewable fuel standard? Assuming 

that we are talking about corn-based ethanol, what is that level 

that we get to where—and I guess this probably more for you, Dr. 

Collins. I know you study these things and you model these things. 

Where could we set the renewable fuel standard before we create 

a real dislocation for livestock? 

Mr. COLLINS. Senator Thune, that is a good question. It is one 

that has been hotly debated, too, as people have talked about alternative RFS levels, understanding that an RFS level could be met 

from several sources. It could be met from corn ethanol. It can be 

met from cellulosic ethanol. It can be met from ethanol imports as 

well. So to think that we would want to adjust the current RFS 

level to another level would have to take into account the potential 

production from all of those kinds of sources. 

For corn ethanol, I think we are probably—as I mentioned earlier, I think we are on track to produce something like 12 to 13 billion gallons by 2009. I know the National Corn Growers Association has done a pretty credible analysis that suggests by 2015 we 

can readily produce 15 billion gallons of ethanol without jeopardizing the food side of the equation. On the track we are on now, 

we might be able to do a little more than that by 2015 and still 

not jeopardize the food side of the equation. 

It is difficult to answer the question, what is an acceptable or unacceptable adjustment cost imposed on the livestock sector, because 

the livestock sector has adjustments all the time. I mean, we have 

drought, and we have pasture problems, and we have had excess 

production, which has caused huge price collapses like the pork deVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
29

bacle in 1998. So there have been lots of adjustments in the livestock sector over time. So this is another adjustment, and the industry can adjust. The worry is that you do not want to impose 

such a huge adjustment that it might cause wholesale consolidation 

as Senator Chambliss mentioned. 

I think one of the things here is that we are sort of on a predictable path. This is not like an unexpected drought which causes 

corn production to drop by 30 percent or something. We are on a 

predictable expansion path here. There are opportunities to plan, 

and to hedge, and things like that. So while I am concerned about 

this, I do think we can move up to that 15 billion gallon range before the next decade is out and comfortably accommodate that. 

Senator THUNE. And I expect we are going to see shifts from soybean production to corn production, and we are seeing yields going 

up all the time because of technology. They are going to grow that 

universe of corn production that. 

Mr. COLLINS. And if I may say, the USDA has been conservative 

on its yield approach. I am conservative on this. I work in crop insurance a lot, and our actuaries always say to me, I cannot tell you 

anything without 30 years of data. So if I use a 30–year trend line 

for corn, I am going to show corn yields going up a couple bushels 

an acre per year. 

On the other hand you can look at the work of some of the seed 

companies. They are doing yield forecasts based on their knowledge 

of what is in the pipeline technologically. And they are 10 to 15 

percent above us by the time you get out to 2015. Well, 10 to 15 

percent above us is a huge difference in needed acreage for corn. 

So you are right to point out the corn yield thing. It is going to play 

very heavily over the next few years in what kind of a land resource we need to produce corn ethanol. 

Senator THUNE. We appreciate that about you, that you take a 

conservative tact on all these things. And there are a couple things 

that I think—I have a bill that I have been trying to promote that 

would provide incentives for retailers to install 85 pumps, which I 

think is important, too, because we have got the production side 

and we have a market with the RFS, but we have to connect the 

two with—and I am hopeful to get that moving at some point, Mr. 

Chairman. 

One last question, if I could. Some of my colleagues on the House 

side are suggesting that we increase, as a point in this debate, CRP 

acreage, putting more—you know, your, blue stems, your 

switchgrasses, whatever, in CRP, then using those, harvesting 

those, for energy production. And I guess my question is, maybe for 

you, Dr. Collins, or anybody who cares to comment on this, is that 

workable? Does that work? And you continue to have the benefits, 

conservation benefits, wildlife production benefits, all the things 

that come as a result of the CRP program and be able to convert 

that, because that is our future. I mean, switchgrass and other 

types of materials that we can make cellulosic ethanol from are 

really where this is headed. 

Is that a possible scenario, where we actually not decrease, but 

increase the amount of CRP acreage, with the stipulation that it 

be planted in these grasses that can be used for energy? 

30

Mr. COLLINS. Well, I haven’t clearly figured out how to do this, 

but I think the concept is valid. There are a couple of issues there, 

and one, of course, is people who are concerned about the adequacy 

of our commercial supply of food products. If you increase the size 

of the CRP, perhaps that is diverting more land away from grain 

production and marketing. 

On the other hand, we also need to figure out how to spur farmer 

production of biomass for the coming cellulosic industry, and that 

could be a way to do it. There are a lot of concerns with it, though, 

if you are going to make it part of the current Conservation Reserve Program. We have had some pilots in the past where we have 

allowed harvesting of biomass in CRP for economic use. Generally 

that went to the coal-fired electrical generation plants. And so we 

have some knowledge about how to do this from those pilots. 

And so I think this could be done. Part of the concern with this, 

and I do not want to go far off in another direction, but there are 

WTO issues related to this, too. You have to figure out if you are 

going to pay somebody for economic use for production. CRP is considered, under the WTO, a structural adjustment program, which 

is considered green box because land is retired from production. So 

if you are going to start harvesting on it, that raises WTO questions about that. I think that can be overcome. It is just a question 

of how you design such a program. 

So there are a lot of issues there. I am just saying they would 

have to be thought through. But I think it is a feasible proposal 

and I look at it as a way to help sort of jumpstart the supply side 

of the biomass industry. 

Senator THUNE. Thank you, Mr. Chairman. I apologize for going 

over. I borrowed from Senator Klobuchar’s time. 

[Laughter.] 

Senator THUNE. I am sure she will return the favor at some 

point. 

Chairman HARKIN. Thank you very much, Senator Thune. 

Now we turn to a valued member of our Committee, returning 

Senator from neighbor to the west, Senator Nelson from Nebraska. 

Senator NELSON. Thank you, Mr. Chairman. And thank you to 

the panel. 

I know, as we talk about green box, I want to make sure that 

we do not put agriculture into the penalty box. So we need to find 

ways to be able to achieve compliance that still preserves the profitability of American agriculture, and perhaps this is one of the 

ways to be able to do that. 

Now as we begin our work, or continue the work, on the Farm 

Bill for 2007, given all the discussion about food, fuel, and security, 

I would hope that we would think of it as a food and fuel security 

act of 2007, because that is really what we are aiming at. Since 

Senator Chambliss left the room, I need to advocate for fiber, as 

well. 

I think as we look to the future, we recognize that we are in the 

process of expanding the importation of food to meet our growing 

food needs. And if we are not careful and we do not support American agriculture in an appropriate fashion, if we like importing 50, 

60, or 70 percent of our fuel needs, we will love importing 50, 60, 

31

or 70 percent of our food needs. So we have to think about this in 

terms of security. 

Back in the old days of the farm programs, it was called the Food 

Security Act, because we focused on never being short. That is why 

all the grain bins are all over the country. We wanted a surplus. 

Today, it is probably a just-in-time theory dealing with American 

agriculture. But as we contemplate what needs to be done, I do 

hope we think about it in terms of security for the American consumer and the American economy. 

As we turn to ethanol and cellulosic ethanol, we have to look a 

little bit back in history. I remember becoming Governor in 1991 

we had one ethanol plant in Nebraska. I think it produced 30 million gallons. When I left, we had 7, and 350 were sitting somewhere with 12 to 14, depending on whether the last couple have 

gotten into production, with maybe 7 more on the drawing board. 

Moving into plants that produce biodiesel as well as ethanol. And 

the future is clearly there. 

It is good to be talking about what challenges there are for, let 

us say, the price of corn and the overproduction of ethanol versus 

where we were 16 years ago looking at an uphill curve of imports 

of foreign oil versus American production on some sort of rational, 

reasonable standard. I would like to be where we are today looking 

up at how we bring down the cost of some of the production because of the increase in technology. 

As a matter of fact, we are importing ethanol right now. There 

is about a $0.54 tax per gallon of it coming in as a tariff and for 

future development and other uses. I propose for that money from 

the tariff, the $20 to $30 million that we generate, go into the further research and development for new technologies for switchgrass 

and other kinds of cellulosic material. There is not an area of our 

culture today that does not have some agricultural product, whether it is forestry or whether it is American agriculture with grow 

crops or cotton, whatever it may be, that would not have an alternative energy source if we had the means to convert it, whether it 

is sugar cane in Hawaii, in the Northeast, Northwest—wherever 

we are, that is what it is. So I really look forward to the further 

development of ethanol and cellulosic use, as well as biofuels. 

I have a couple questions that I would like to ask. I hear a lot 

of the concerns from livestock producers about feed costs, and I 

think it is great that the ethanol industry is helping to improve the 

prices for crops, but we are concerned about effectively balancing 

these needs as we must. 

Now, someone has asked the question, as they always do, about 

the chicken and the egg. I do not think we have to decide which 

comes first. I think we need both, and sometimes you can do both 

at the same time, and that is what I think we are doing. Is it possible to establish stands of switchgrass in advance so that we can 

help investors and people looking to build the plants? You have already said, Dr. Collins, you have not figured out quite how to do 

that, but my question is, are you working on it to the point where 

something definitive could be available so that we are not always 

in research and development here on how to go about doing it, with 

transportation issues, bundling issues, storage issues, so that we 

32

could look at it in a just-in-time fashion, because that is one of the 

best ways to make it profitable at the outset? 

Mr. COLLINS. Senator Nelson, yes. I would say that has become 

a high priority issue at the USDA. 

Senator NELSON. Do you have a time table that you might be 

able to tell us more? 

Mr. COLLINS. I do not. A lot of that work is being done in our 

Agricultural Research Service. We do some of that work, as mentioned, in the joint program we have with the Department of Energy under the Biomass Research and Development Act Initiative. 

But the Agricultural Research Service, for years, has had a focus 

on grain-based ethanol, and over the last year has really re-oriented—they have reorganized and put their focus on cellulosic ethanol. One of their four top priority areas is management of the production and the harvesting, handling, and storage practices. So we 

do have a lot of work going on in that area. 

I thought Mr. Thune’s idea of a biomass reserve of some sort, is 

another way to get at that. There may not be commercial use for 

that biomass, but perhaps there would be commercial use for some, 

maybe some others, but it could also be used as a research area 

as well. 

So I think these are ideas that seem to me to be in play for the 

2007 Farm Bill and I think you are right, that there is no reason 

why, at the same time that we are expanding E85 pumps and promoting E85 and ethanol consumption, that we could not also be 

starting to build the biomass infrastructure. 

Senator NELSON. Now, we do not have to wait until corn goes to 

$7.00 a bushel for that to happen. Is that fair to say? 

Mr. COLLINS. I think that is very fair, yes. 

Senator NELSON. What about grain sorghums to be used as well 

in the production of ethanol? It does not all have to be corn-based. 

Mr. COLLINS. No, we do have other ethanol plants. We have very 

small ones that use dairy waste. We have wheat. We have grain 

sorghum. I know that Texas A&M University has published some 

articles on different types of ethanol plants utilizing grain sorghum 

that show very low costs of production. So I think that there are 

other commodities as well. Almost all ethanol today is from corn, 

but there are these other crop opportunities as well. 

And you mentioned sorghum. As we look down the road and talk 

about biomass, I know that our researchers in the Agricultural Research Service are very high on sweet sorghum as a feedstock for 

ethanol production. 

Senator NELSON. Some of us here at the table from Minnesota, 

and Nebraska, and the Dakotas, and I guess eastern Wyoming 

have a lot of sugar beet which we would love to see as an alternative crop—an alternative use for the crop, being in the production of ethanol in a similar fashion that is done in Brazil. 

Mr. COLLINS. Yes, sugar has been a very interesting issue related 

to ethanol. Of course, raw sugar itself is—you know, we have a domestic marketing allotment program for that, but there is certainly 

nothing preventing, under our domestic programs, the production 

of sugar cane or sugar beets for conversion into ethanol. It has just 

simply been the economics of it that have made it costly to do. 

33

I know I came up to the Hill some months ago to give a little 

briefing on sugar conversion and I pronounced that it was not economically feasible. And the next day I was reading the Wall Street 

Journal, and there was a little ad in the Wall Street Journal for 

someone who was soliciting investors to produce ethanol from 

sugar cane in the United States. So it shows you that there are 

venture capitalists out there that think otherwise. 

Senator NELSON. I would like to see that chart, Chart 4, show 

a conversion rate in the cost of sugar as well as oil shale and the 

other uses that are listed there. 

Mr. COLLINS. Right. Right now, we think it is a fair amount 

higher than corn-based ethanol. 

Brazil, of course, has a much lower cost because they get a pretty 

good conversion out of their sugar cane. They have much lower 

labor costs. They have much lower land costs. So that has been 

their advantage. But this is something that technology can address 

over time as well, I think. 

Senator NELSON. Well, and import, as long as we do not undercut 

the domestic production of ethanol with lower prices coming from 

other locations. 

Well, thank you very much. I appreciate it. Thank you, Mr. 

Chairman. 

Chairman HARKIN. Thank you, Senator Nelson. 

Next is a valuable member of our Committee. She was here for 

our last Farm Bill. We have heard a lot of talk about feed costs for 

livestock, mostly people thinking about cattle and hogs. I am sure 

Senator Lincoln might have some views on the cost of poultry, also. 

And since they buy a lot of corn from the State of Iowa to feed 

those chickens. 

Senator LINCOLN. That’s right. 

Chairman HARKIN. Senator Lincoln. 

Senator LINCOLN. Well, thank you, Mr. Chairman, and we are all 

so grateful for you putting this together. A timely hearing on an 

issue that really does need to be a priority in the biofuels industry 

for our Nation. So many of us have said for many years now that 

biofuels can certainly play an important role in not only bringing 

down the cost of fuel and reducing our dependence on foreign oil, 

but also recognizing the value in cleaning our environment as well 

as rural development, which is in tremendous need from States like 

Arkansas and other places. 

So we see now that the market for oil is probably more competitive than it has ever been before and it is not going to be slowing 

down any time in the future. So our hope is that we will seize the 

ownership of this problem as a Nation. That we will look at all the 

tremendous benefits that we gain from dealing with this problem 

and dealing with it in an effective way, and I am proud that the 

Committee is really embracing it early on as a priority. 

You know, we, as a Nation, have, in many, many ways, have 

faced great technological challenges that we have confronted and 

we have overcome. And obviously, there is much here that has been 

talked about in terms of technological growth, and how we make 

things cost effective, and how we move them forward. 

But we did not, Mr. Chairman, we did not put a man on the 

moon by just talking about how important it was. We developed a 

34

plan; we committed resources that were necessary to achieve that 

plan, whether it was through technological investments, or certainly investments in education. And I hope that as a Nation we 

will seize the opportunity here in the biofuels industry and the renewable fuels industry to do the same thing and to seize it wholeheartedly and really move forward quickly. 

I am certainly interested in the promise of the cellulosic ethanol 

and what it can to reduce our dependence, but what we can do to 

further that issue. I hope that today, working with this great panel 

and the other panel, as well as my colleagues, that we can really 

move forward. 

I am pleased, Dr. Sharp, I got to serve at least one term on the 

House Energy and Commerce Committee with you. You made such 

tremendous contributions there and we are so grateful that you are 

here now. We look forward to all of the panel being able to work 

with us as we move forward. 

This industry is clearly off the ground and I think it is running, 

but I think that we as a Nation, and that the consumers of this 

country want us to move more rapidly in getting it closer to them 

than just the developmental stages. So we look forward to working 

on that. 

Just a couple of questions. Dr. Pacheco, right? 

Mr. PACHECO. Correct. 

Senator LINCOLN. My questions are a little similar to Senator 

Chambliss. And, as Senator Nelson noted to me, we are the only 

two on the Committee that can get at least two or three syllables 

out of the word, ‘‘Oil.’’ So maybe that is the similarity in our 

States, and some of the things that we bring to focus on here in 

the Committee. But I wanted to talk a little bit about the co-processing. You talked a little bit about woody biomass and some of 

those potentials. They are great potentials for places like Arkansas 

in the South, where we do have a tremendous potential in our 

wood forest products industry. There have been a lot of things on 

the drawing board down there that I have seen that have really 

gotten me excited about the potential that exists there for co-generation, for a lot of different things that our processing facilities in 

the wood products industry can do, but they need to know that, 

again, that the investment will be there, and that the chicken and 

egg question that has been discussed a great deal has somewhat 

been resolved, and I think that is really important. 

But I would also like to talk about co-processing feedstocks at 

traditional oil refineries. I understand that co-processing of feedstocks to produce diesel fuel is already being done at refineries in 

Ireland, and Australia, and several other countries. Is it possible 

to accurately measure the volume of renewable diesel fuels that are 

produced in this type of co-production process? And where are we 

going with that, the possibilities? 

Mr. PACHECO. Senator Lincoln, you are very well-informed. The 

technology that you are referring to comes under several different 

names. Some companies refer to it as green diesel. It is being practiced in Brazil. In fact, Petrobras has announced that they will convert all six of their refineries to be able to process soybean oils and 

make what some refer to as green diesel. The Brazilians refer to 

it as H bio oil, and the largest facility is the recent facility that 

35

Nesty built in Finland. It is also being practiced in Germany and 

in other parts of Europe because the European tax incentives do 

not differentiate between the different forms of renewable diesel, 

whether it is biodiesel or whether it is the green diesel type. 

We have looked at this very closely. We issued a report in 2004 

summarizing the technology and the advantages that it has. It is 

a very competitive technology to biodiesel. It is one that the free 

economy is going to have to play out and decide which is the better 

fuel in the end. 

Both technologies, the production of biodiesel and the production 

of this green diesel use the same starting material. What they use 

is are the triglycerides from food resources. This could come from 

soybeans. It could come from rape seed. It can also use the waste 

greases from McDonalds. But they take these oils and they process 

them in a refinery, which is known as a hydroprocessing unit. It 

is a unit that is used to take sulphur out of diesel fuel, for example, 

in petroleum. That very same equipment, same catalysts, same 

hardware, can take soybean oil and it can make an extremely good 

quality diesel fuel. 

It could be very beneficial to the soybean growers, because if the 

technology is cheaper then the price that the refiner would be willing to pay for this starting material might actually be higher because there is more value to be gained in the overall process. The 

fuel is very good quality. It is essentially zero sulphur. It has a cetane that is unachievable by petroleum. 

Senator LINCOLN. I am sorry. You said what? 

Mr. PACHECO. A cetane that is unachievable by petroleum. Typical petroleum stocks have a cetane of about 40 to 50, whereas the 

cetane from these biomass oils is in the neighborhood of 80 to 90. 

So it is a phenomenally good diesel oil. And that is why so many 

other parts of the world are looking at it. 

I do know, because we have had an inquiry from the Department 

of Treasury, I do know that this is being looked at in the United 

States to see whether or not this technology would qualify for the 

same renewable diesel standard, but I think that is an issue for 

Congress to address, as to whether that should be the case. 

It is very sound technology. To go back to your question as far 

as the yield, we do know from a scientific point of view how many 

gallons of diesel fuel is being produced. So you can track how many 

gallons of fuel is actually coming from the biomass, because the refiners have the option, they can run this fuel in conjunction with 

petroleum, right in the same unit, or they could run it in what they 

would call, ‘‘blocked out,’’ where they would run it in a separate 

unit, separate from the petroleum. But in either case, scientifically, 

they can track how much actual diesel fuel they are making from 

the biomass. 

Senator LINCOLN. So you said scientifically, too, that the fuel derived from this process is of a very decent quality. 

Mr. PACHECO. It is extremely good quality. 

Senator LINCOLN. OK. 

Mr. PACHECO. It is actually a better quality diesel than what we 

know how to make with petroleum. Keep in mind, my background 

is both on the biotechnology side and on the petroleum side, so I 

am familiar with that technology. 

36

Senator LINCOLN. And you said the study you did was in 2002? 

Mr. PACHECO. We issued that study and can make that annual 

report available to the Committee if you would like. 

Senator LINCOLN. I think that would be great. I also have one 

of your other studies from 2004 on the biomass-oil analysis, which 

I think—both those studies would be beneficial to enter into the 

record, Mr. Chairman. 

Senator LINCOLN. Just in closing, particularly in regard to our 

poultry, but what processes are currently being developed that 

could take advantage of animal waste such as chicken litter as a 

primary feedstock, and what are the real barriers that exist in 

terms of their implementation? I know I hear all of these grand 

plans and talk, and other things. It is something that we would 

love to get rid of and make it productive. 

Mr. PACHECO. My first job, as a 14–year-old in rural Connecticut 

was working on a chicken farm, and so I am very familiar——

Senator LINCOLN. You well know, then. 

Mr. PACHECO [continuing] With wanting to get rid of it. In fact, 

my mom used to make me keep my boots in the garage rather than 

bringing them in the house. 

Senator LINCOLN. Yes, I do not blame her. 

Mr. PACHECO. But I agree wholeheartedly with Dr. Collins in his 

earlier comment. One of the most attractive technologies that is 

being deployed right now in a number of States is what is referred 

to as the ‘‘closed-loop technology.’’

Senator LINCOLN. Yes. 

Mr. PACHECO. Where poultry litter can be fed to an anaerobic digester and then the gas from that digester can either be used to 

produce electricity, as Keith said, or can be used directly in the 

ethanol plant as a source of heat to replace natural gas. This is a 

wonderful solution, because it not only improves the economics, but 

it reduces the amount of fossil energy that goes into producing corn 

ethanol, which, as you know, is a hotly debated point. 

So it is a wonderful technology. And then, to finish the closed 

loop, the DDGS from the corn plant could be used as feed for the 

livestock. It works very well with cattle, and there are a number 

of organizations working to try to increase the percentage of DDGS 

that could be fed to hogs and poultry as well. 

Senator LINCOLN. Well, thank you, Mr. Chairman, my time is up, 

but I appreciate—and there are so many other questions that we 

have for you all. I do hope that we will see a return to be able to 

continue on this issue. Thank you. 

Chairman HARKIN. Thank you very much, Senator Lincoln. 

Again, another valuable member of our Committee. Is there an unwritten rule that there have to be two Senators from Minnesota, 

always, on this Committee? 

[Laughter.] 

Chairman HARKIN. It has been so since I have been here. 

Senator COLEMAN. I hope so. 

Chairman HARKIN. Because Dave Durenberger was on the Committee when I first got here, and there were always two Minnesotans—so anyway, Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. Thank you for 

holding this first hearing on this critically important issue. And I 

37

welcome my colleague from Minnesota from the other side of the 

aisle. 

I think one of the things that I am sure that she will see, as we 

have seen here, is with all the frustration about harsh partisanship 

and the inability to work together, that is not what you see on this 

Committee. I probably co-authored more letters with Ms. Lincoln 

than anybody in the Senate. These issues are Minnesota issues, 

they are Midwest issues, they are America issues. I am certainly 

proud to serve on this Committee. 

I apologize. I have been at this big hearing on Iraq in Foreign 

Relations, that I serve on. So I have been shuttling back and forth. 

But it is interesting, as I reflected on the reality of what we are 

dealing with here; this is a national security issue. We put money 

in the pockets, petro dollars in the pockets of thugs and tyrants: 

Chavez in Venezuela, and Ahmadinejad in Iran, that if we could 

really fully see some potential, beyond what we have today, this is 

a national security issue. It is an environmental issue, it is an economic security issue, and so it kind of encompasses all. 

And I would note that, as I travel around the State of Minnesota 

and have a lot of hearings and discussions, one of the things about 

this that we do not talk about enough is optimism. There is a sense 

of optimism among American producers and growers that you do 

not see at a lot typically. Most of us, we get in the room with four 

farmers, you have five people mad at you about something. And 

you travel around the State today and you see real hope and real 

opportunity. I think our challenge, then, is, what do we do to support that, to encourage it, and as this next Farm Bill will create 

some opportunity to do that. 

I just want to touch on sugar for a second, because I have—in 

the Foreign Relations, I chair the Western Hemisphere Subcommittee. I have traveled to Brazil a number of times and seen 

what they have done there. Their production costs for ethanol, I 

think, is about $0.81 per gallon. Our production cost for cane-based 

sugar is about $2.40 a gallon, sugar-based, $2.35 a gallon. So we 

have some price difference there, but they have been at this a lot 

longer. And I would hope that what we do is we do not say, well, 

that is the barrier today. Instead we do what Ms. Lincoln talked 

about. We have our land a man on the moon by the end of the decade commitment. We have a Marshall Plan commitment. 

We face a real problem with that sugar from Mexico is a result 

of some of the agreements made on NAFTA, and we have not seen 

the impact of that. And it would make sense to me if we were in 

a position to take that sugar that is going to be coming and turn 

that into energy, and then allow the Americans to continue with 

a sugar program does not cost taxpayers any money. I think we 

have to, not look at the barriers today but look beyond and see 

where we are going. 

Would it be fair to say, Dr. Collins that—first, as we look at the 

last Farm Bill, it is probably coming anywhere from, what, $12 to 

$17 billion under budget. Are those figures accurate? 

Mr. COLLINS. Yes, sir. That is probably right. 

Senator COLEMAN. And would it be fair to say that certainly the 

growth of renewable fuels has played a part in keeping prices up 

38

and ultimately lowering the cost to the American taxpayers of the 

Farm Bill? 

Mr. COLLINS. Tremendously. I mean, if you look at the fiscal year 

2006 corn program, the cost was about $8.5 billion. That would be 

related to the 2005 crop. Shift forward 1 year to the 2006 crop, 

which would be the fiscal year 2007 costs, about all we are going 

to have is direct payments, $2.1 billion for corn. So $8.5 billion 

down to $2.1 billion, and that is a savings that is far more than 

the decline in general tax revenues due to the $0.51 tax credit. 

Senator COLEMAN. Would it be fair—Senator Lincoln and I co-authored a letter to the President about the Farm Bill signed by a 

number of members of this Committee. One of the things that we 

said in that letter is that we are confident that a robust new investment in renewable fuels would not only further our Nation’s 

energy independence, but it would also further increase budget savings under U.S. foreign policy. Would you say that is a fair statement? 

Mr. COLLINS. Probably. Once you get the corn price above $2.63, 

which is the target price, and it is well above it now, you have 

about achieved all the savings you are going to get. But your statement is certainly true that you reduce the risk of incurring farm 

program costs again. 

Senator COLEMAN. And if we make the investment, particularly 

there is a lot of discussion about cellulosic—it is interesting, because on Foreign Relations we had a hearing last Congress on renewable, and we had Alan Greenspan in front of the Committee 

and we talked about the geopolitical implications of energy dependency, and he cited what was actually a study I saw coming out of 

Wall Street that said we could be doing 60 billion gallons of cellulosic energy. I would take it that would then provide opportunity 

in Kittson County where we have grass seed, it is tough farming 

up there, but I would take it if we unleash cellulosic that there is 

a whole range of things that we could be doing. 

Mr. COLLINS. I think both Mr. Smith and Mr. Pacheco, from their 

perspectives have talked about this, the 25 X 25 study that was 

commissioned and the so-called billion ton study. The billion ton 

study, for example, in their high-yield scenario, by 2030 said you 

could have 110 billion gallons—there is source material for 110 billion gallons of ethanol, with about 80 billion of that from agriculture and 30 billion from forestry, and similar numbers came out 

of the 25 X 25, although a little less. 

So, yes, numbers that you are talking about are there, the biomass resource is there. Now, there is a lot of work to be done to 

sort out the economic adjustments that take place to achieve that 

and a lot of technology gains have to be achieved to get there as 

well. But as sort of an accounting exercise, you can add up the 

sources and you can come up with big numbers like that. 

Senator COLEMAN. But a lot of the technology gains are going to 

depend on our commitment to the research and development. And 

so what I am saying is, if you have a vision out there that the numbers say this is something we could get to, it would seem to make 

sense to me that what we should be doing in a Farm Bill with a 

major energy piece that this Chairman and Ranking Member comVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
39

mitted to, would have an R&D component in there that would 

move us along, and move us along much faster. 

And again, I get to the geopolitical national security implications; 

we are doing 5 billion gallons of ethanol today. We are consuming 

140 billion gallons of gas. Our dependence on foreign oil is going 

up in spite of all we are doing. This offers a chance to change that, 

doesn’t it? 

Mr. COLLINS. It certainly does, and I would point you toward the 

Agricultural Risk Protection Act of 2000, which created the Biomass Research and Development Act, it was part of that, and that 

Act was not funded until the 2002 Farm Bill. So there is a mechanism there that could bear some scrutiny as a vehicle for taking 

a look at these research challenges. 

Senator COLEMAN. Mr. Pacheco, did you want to add something 

to that? 

Mr. PACHECO. I would certainly underscore the comments that 

the real challenge is to get the technology to where the costs are 

competitive, and then a lot of the incentives that we are using to 

seed this industry can be reduced. So I think that is the point that 

we all want to get to as quick as we can. There is certainly a lot 

more that we can be doing at the research laboratories, not just 

NREL, but all of the laboratories across the United States to accelerate the rate of progress, if more research funding were available. 

Senator COLEMAN. Including land grant universities? 

Mr. PACHECO. Absolutely. 

Senator COLEMAN. Mr. Chairman, I will follow the lead of my 

junior colleague from Minnesota. Change is in the air, and so I am 

going to yield back the balance of my time. 

Chairman HARKIN. Thank you very much Senator Coleman. 

I am going to ask that Senators now restrict their questions to 

5 minutes. We are supposed to have a vote at noon, and I would 

like to be able to send the second panel up and hear their testimony before we go vote and come back. 

And with that, I welcome another new member to our Committee, former member of the House of Representatives from the 

great State of Ohio, Senator Sherrod Brown. Welcome to the Committee. 

Senator BROWN. Thank you, Mr. Chairman. I am thrilled to be 

on the Committee, and especially to work with you and Senator 

Chambliss. Thank you for that and thanks for your commitment 

and discussion on energy and food security and how important that 

is for our country’s economy and national security. 

Dr. Sharp, nice to see you and thank you for joining us. I am 

sorry I was not here for the opening statements, but having read 

your statement and looked at it, your discussion on production of 

gasoline from coal, your discussion of CO2 and greenhouse emissions, would you just talk through briefly, especially in light of 

some calling for lowering tariffs for ethanol coming from Brazil? 

Would you talk through for me, just for a couple of minutes, about 

the CO2 emissions and energy consumption to produce, in a general sort of way, various kinds of cellulose, ethanol, and what that 

all can mean together, if you would. 

Mr. SHARP. Well, if you look at Chart 4, it sort of simplistically 

outlines that for you. If you look at the center line there, that is 

40

sort of the baseline of what we are getting in terms of carbon emissions right now out of our gasoline. All of the fuels to the left, 

which are cellulosic ethanol, biodiesel, and corn ethanol, certainly 

improve, from a greenhouse gas emissions point of view our gasoline supply, if they substitute for current gasoline. 

On the right side of that scale, what you see is the other kinds 

of fuels that are also under development in this country and elsewhere which are petroleum related, which actually, because of 

their fuel use, are going to expand per gallon of gasoline we use 

in the country, the CO2 emissions. 

If you look in terms of the costs up and down on that chart, you 

see, compared to current expectations on oil roughly where the estimates—in many of these cases, they are very crude estimates—are 

of what it would cost to produce, right now, these other forms of 

fuel. And what you quickly see is some of the ones on the right side 

of the chart, which are high-intensity carbon are actually more in 

the marketplace. 

As I have testified, what is missing in this chart, however, is the 

work that you folks have already done in terms of the subsidies 

that are in play right now to help advance corn ethanol and biodiesel in particular. Cellulosic ethanol has been discussed here. It 

still remains down the pike. But those other fuels are clearly within these market ranges, and therefore have the opportunity to compete. But no one should misunderstand that the world oil price can 

also drop, as well as the way it goes up. That has been our experience for the last 30 years, and that can quickly undercut things 

and undercut political support, as we have seen in the past, at 

least, for various proposals. 

So I think if there is any lesson in the last 30 years it is that 

we have to maintain—if we think we are going to change the picture of what the market would do for us otherwise, we have to 

maintain strong, consistent policies through multiple years. And I 

am sure some of your investors are saying to you, what is going 

to be the tax credit five and 10 years out? We need to know now. 

And that is something that you folks can help and make clear. 

Senator BROWN. And about the tax credit, talk, Mr. Smith, if you 

would—I was the sponsor in the House of the 25 X 25 legislation 

talk if you would, for a moment, about sort of incentive structures. 

Go beyond, I know there is not much time left, but go beyond, if 

you would like, biodiesel development. One of the things that Dr. 

Sharp just mentioned, in terms of predictability for investors, talk 

about that for a second, if you would. 

Mr. SMITH. Well, as I shared with the Committee earlier, we are 

in the process of developing recommendations along the full range 

of renewable, as far as the incentives that will help this Committee 

and all of Congress to incentivize renewable energy sources from 

wind and solar to the biofuels and biomass, obviously. 

I think we are very excited about some of the things we are currently working on. I shared with Chairman Harkin that we should 

have that report in February, and it will help this Committee and 

others hear from those 400 organizations that have endorsed 25 X 

25. And it is our collective thoughts. It is not any individual sector 

of renewable energy, but rather the feeling of the whole. And these 

are some of the very key areas that we are scoping in on, is what 

41

incentives and what policy is going to be necessary to help these 

emerging technologies along. We are excited about this process, 

and hopefully we will have something in your hands very soon. 

Senator BROWN. Thank you. And I would simply add my last 10 

seconds, Mr. Chairman, how important the permanent tax credit—

I know that Senator Grassley, and his Committee’s jurisdiction, 

that is their issue, but to just urge them to build some permanence 

into so investors can build a solar and wind-powered industry in 

this country. 

And I would just close with that I represented, when I was in 

the House, Overland College, and there was the largest building in 

the country on any college campus that was fully powered by solar 

energy, and the builder of that bought all their solar panels from 

Germany and Japan because we do not have a sophisticated large 

enough industry to support that sort of production and installation, 

so thank you very much. 

Chairman HARKIN. Thank you very much. I turn to my colleague 

now, from Iowa, a valuable member of this Committee, a good 

friend who has used his position, not only in this Committee, but 

also on the Finance Committee, to help promote our biofuels industry in this country, and I can say is a very, very strong supporter 

of all the efforts we have made in biofuels in the past. I just want 

to note for the record that we are blessed on this Committee to 

have both Senator Grassley and Senator Baucus, Chairman and 

Ranking Member on the Finance Committee. So I think a lot of the 

things we are going to be talking about are in their jurisdiction, 

and hopefully we have a good working relationship with the Finance Committee in this are. So, again, with that, I turn to my colleague from Iowa, Senator Grassley. 

Senator GRASSLEY. Well, Senator Harkin, I thank you for having 

this hearing, and I followed very closely a lot of things you have 

said about energy and the upcoming Farm Bill. I appreciate very 

much what you have said, and agree with you. And I think this 

hearing is an indication you are going to put your actions where 

your words have been and I compliment you very much on that. 

Five minutes will be adequate for me. I will start out with Dr. 

Collins. Earlier this week an environmental group here in Washington, D.C. stated that the U.S. Department of Agriculture’s estimates have vastly understated the number of ethanol distilleries 

under construction and the amount of corn that will be dedicated 

to ethanol production during the next two years. 

So I hope you are familiar with that allegation. If not, you probably cannot answer my question, but what is your response to the 

allegation? And also, how does the U.S. Department of Agriculture 

predict that agriculture’s industry will handle the competition between corn demand for ethanol and demand for livestock feed or 

food. 

Mr. COLLINS. Senator Grassley, yes, I saw that release. I actually 

was a little disappointed in it in that they picked on USDA. They 

could have easily picked on the Department of Energy or many 

other entities because we are not alone in having underestimated 

the pace of ethanol production. We all pretty much depend on the 

same set of resources. 

42

There are groups like Renewable Fuels Association, BBI, and 

others who compile lists of ethanol plants in operation, and under 

construction, and expanding, and there is a fair amount of agreement on those. Those plants can be verified. 

There is a problem however, when you look at the plants that 

have been proposed, that are in somebody’s speculative imagination, for which no permits have been pulled and there is no way 

to verify them. These plants might be owned by venture capitalists 

who do not want to tell you what they are going to build and where 

they are going to build it. So there is really no way to know for 

sure what is out there beyond those plants that are in operation, 

those that are under construction, and those that are expanding. 

And it just so happens that a number of plants that have been proposed have started construction over the last 6 months, 4 billion 

gallons worth of capacity came from the speculative realm to the 

construction underway world. So no, we did not fully anticipate 

that. 

So we have been updating our numbers. We have been playing 

catch up, as have most people. However, I would say that group 

also put out some very specific numbers that I think are beyond 

what I think is possible to happen in the short time period that 

they forecast. They had an estimate of 16 billion gallons of ethanol 

production by September of 2008, and quite frankly I think that is 

just a little too high. So that is in response to part one of your 

question. 

Part two was, how is the industry going to handle this balance 

between demand for corn for ethanol and demand for corn for livestock, and that is a challenge. I laid that down in my opening oral 

comments that I felt over the next three to 4 years we have a very 

critical period facing us. We do not have cellulosic ethanol in commercial production probably over the next three to 4 years, yet we 

have tremendous investment interest in corn ethanol production. 

And so we are seeing a huge amount of capacity coming online and 

that is going to demand corn because there is not really a good alternative to that. And that is going to propel higher corn prices. 

And so livestock producers, whether they are cattle, or hog, or poultry, or dairy are going to end up paying more for feed. 

This is not unlike other periods in our history. In the 1970’s 

when we had this huge expansion, year after year after year of increased exports due to the Soviet Union coming into the world 

grain markets and propelling up prices. It is not unlike droughts, 

when prices go way up. So the livestock industry will have to be 

resilient to this. And I think the markets can adjust to this. We 

can see this coming online, and it is important, as implied by the 

accusations that we have underestimated ethanol production, it is 

important that we try and stay ahead of this so we can alert everyone as to what is happening and so that proper planning and adjustment and hedging can take place. 

Senator GRASSLEY. And before my time is up, a question for Mr. 

Pacheco. Following on the same question of Mr. Collins, you spoke 

a great deal in your opening statement regarding the research 

being done on cellulosic ethanol production. You stated the goal of 

producing cellulosic ethanol at a competitive rate with corn in five 

years. 

43

How do you see the growth of corn ethanol on the competing use 

of corn affecting the advancement of cellulosic and other types of 

ethanol production? 

Mr. PACHECO. Well, I do not see, Senator Grassley, I do not see 

a direct impact on the increased demand for corn on the development of cellulosic ethanol technology, not directly, anyway. The cellulosic ethanol technology, at the point where it starts to become 

competitive with corn can have a large impact the other way. 

Investors, when they are looking at investing in new projects, 

would be probably making the decision as to whether or not to 

build a facility that is capable of handling cellulosic ethanol, which 

would be a very different facility. As you know, it would require 

very different equipment and a very different design philosophy 

from a chemical engineering point of view. 

So I do not see the growth in corn ethanol directly affecting the 

cellulosic ethanol, but definitely the other way around. As the technology becomes close, I could see that affecting maybe the slowdown in the construction of corn ethanol facilities and a shift toward constructing facilities that are capable of feeding the cellulosic ethanol. 

Senator GRASSLEY. Thank you, and thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Grassley. And I thank all 

the Senators for this. 

I thank the panel. As you can see, there is a great deal of interest in this Committee in this whole area of the biofuels and renewable energy. I want to thank you all for your testimony, for your 

written statements. I look forward to further contact with each of 

you as we progress on this in the coming months, and hope that 

you will feel free to be in contact with us and with our staff on 

these and any other issues that could be coming up in this area on 

the Farm Bill. 

Any last things from any member of the panel before we dismiss 

you? 

Thank you again very much for being here. 

Now we will call our second panel. Ron Miller, Roger Webb, Gene 

Gourley, Loni Kemp, and John Sellers. 

Chairman HARKIN. All right. I do not know if there is anybody 

still out in the hall there, but I asked them to come on in and take 

their seats, and I know there was a great crowd out there at the 

beginning, and I just want them to come in and get situated. 

We were told that we were going to have a vote around noon, but 

we will do whatever we can to get as far into the statements before 

we have to go vote and then come back. 

First, we will turn to Ron Miller, President and Chief Executive 

Officer of Aventine Renewable Energy. A graduate of Southern Illinois University, with his degree in Engineering. He got his Master’s degree in Business Administration from the University of Illinois. A long and distinguished career beginning with Texaco, the 

Pekin Energy Company, the Williams Companies that purchased 

the Pekin Energy Company, and the Morgan Stanley, capital partners, purchased Williams Bio-energy, which became Aventine, as I 

understand it. And now Mr. Miller currently serves as Aventine’s 

President and Chief Executive Officer. 

44

Aventine is the Nation’s second largest producer and marketer of 

ethanol, and a global provider of bioproducts. And Mr. Miller is 

Chairman, also, of the Renewable Fuels Association. 

So again, we welcome you, Mr. Miller. And again, as you probably heard earlier, we ask that you keep your statements to five 

to 6 minutes, hopefully, and then we will proceed with questions, 

but we will hear the whole panel first before we open for questions. 

So Mr. Miller, welcome very much and please proceed with your 

testimony. 

STATEMENT OF RON MILLER, PRESIDENT AND CEO, AVENTINE RENEWABLE ENERGY HOLDINGS, LLC, PEKIN, ILLINOIS 

Mr. MILLER. Thank you, Mr. Chairman. I will keep my comments 

brief. Good morning, members of the Committee. 

Again, as you mentioned, I am Ron Miller, President and Chief 

Executive Officer of Aventine Renewable Energy, and Chairman of 

the Renewable Fuels Association. 

Aventine supplies more than 700 million gallons of this Nation’s 

growing ethanol needs annually through its wholly owned plants in 

Pekin. It is a facility in Nebraska, in Aurora, Nebraska, and it has 

business relationships and marketing alliances. 

This is an important and timely hearing, and I am pleased to be 

here to discuss the growth in the domestic ethanol industry in the 

increasing important role of agriculture in rural America in ensuring our Nation’s energy security. 

Ethanol today is the single most important value-added market 

for farmers. Today’s ethanol industry consists of more than 110 biorefineries located in 19 different States, with the capacity to process more than 1.8 billion bushels of grain into 5.3 billion gallons 

of high octane, clean burning motor fuel and more than 12 million 

metric tons of livestock and poultry feed. There are currently 73 

biorefineries under construction. With 80 existing biorefineries expanding, the industry expects more than 6 billion gallons of new 

production capacity will be in operation by the end of 2009. Today 

ethanol is blended in more than 46 percent of the Nation’s fuel, 

and is sold virtually from coast to coast and from border to border. 

In addition to providing a growing and reliable domestic market 

for American farmers, the ethanol industry also provides the opportunity for farmers to enjoy some of the value added to their commodity by further processing. Farmer-owned ethanol plants account for about half of the U.S. fuel ethanol plants. 

This dynamic and growing industry is also empowering more of 

Americans to have a vital role in this Nation’s infrastructure. If a 

farmer in Des Moines does not want to invest in a local co-op, he 

can choose to invest in a publicly traded ethanol company such as 

ours through the stock marked, as can a school teacher in Boston 

or a receptionist in Seattle. Americans coast to coast have the opportunity to invest in our domestic energy industry, and not just 

in ethanol, but in biodiesel and bioproducts as well. 

U.S. agriculture is evolving in important ways, and rural America is primed to take advantage of these opportunities. Over the 

past several years the ethanol industry has worked to expand a virtual pipeline through aggressive use of the rail system, barge, and 

45

truck traffic, moving product quickly to those areas where it is 

needed. Many ethanol plants today have the capability to load unit 

trains for shipment to ethanol terminals in key markets. Railroad 

companies are working with our industry to develop infrastructure 

to meet future demand for ethanol. 

Looking to the future, proposals like that of the Chairman to 

study the feasibility transporting ethanol by pipeline from Midwest 

to East and West Coast is also critical. The only more astonishing 

than the growth in the ethanol industry is the technological revolution happening at every biorefinery and every ethanol construction 

site across the country. Biorefineries today are using such innovations as no-heat fermentation, corn fractionation, and corn hull extraction. 

Wit today’s natural gas prices, biorefineries are looking toward 

new energy sources, including methane digesters and biomass gasification. To continue this technological revolution, however, continued government support will be critically important. Competitively 

awarded grants and loan guarantees provided by DOE and USDA, 

many of which were included in the energy policy of 2005 have 

played a very important role in developing new technology. The 

ethanol industry encourages Congress to full appropriate funds for 

these critical, competitive solicitations during the fiscal year 2007 

budget process. 

To date, the ethanol industry has grown almost exclusively from 

grain processing. As a result of steadily increasing yields and improving technology, the National Corn Growers Association projects 

that by 2015, corn growers will produce 15 billion bushels of grain. 

According to NCGA analysis, this will allow a portion of the crop 

to process into 15 billion gallons of ethanol without significantly 

disrupting other markets for corn. 

In the future, however, ethanol will be produced from other feedstocks, such as cellulose. While there are indeed limits to what we 

will be able to produce from the grain, cellulosic ethanol production 

will augment, not replace, grain-based ethanol. Ethanol from cellulose will dramatically expand the types and amounts of available 

material for ethanol production, and ultimately dramatically expand ethanol supplies. 

Many companies, including ours, are working to commercialize 

cellulosic ethanol production. For example, we are putting on both 

our facilities to break down the corn fiber into ethanol, increasing 

our yields by about 15 percent. Indeed, there is not an ethanol biorefinery in production today that does not have some sort of a program looking at cellulosic ethanol research. 

Ethanol today is largely a blend component with gasoline, adding 

octane, displacing toxic, and helping refineries meet Clean Air Act 

Specifications, but the time when ethanol will saturate the blend 

market is on the horizon, and the industry is looking forward to 

new market opportunities such as E85. Enhancing incentives to 

gasoline markets to install E85 refueling pumps will continue to be 

essential. Today there are approximately 6 million flexible fuel vehicles capable of using E85, representing less than 3 percent of the 

total U.S. motor vehicle fleet. 

U.S. auto manufacturers have made significant commitment to 

FFE technology, and their commitment is increasing. By 2015, 

46

FFEs on the roads will exceed 35 million, creating a potential demand for E85 of more than 21 billion gallons. 

The Energy Policy Act of 2005 and several other policies enacted 

by the 109th Congress clearly put our Nation on a new path toward greater energy diversity and national security. The continued 

commitment to the renewable fuels industry by the U.S. Agriculture Committee in the 110th Congress can all contribute to ensuring America’s future energy security. Thank you. 

[The prepared statement of Mr. Miller can be found on page 109 

in the appendix.] 

Chairman HARKIN. Now, to introduce our—excuse me, our vote 

was just called, but we have a little bit of time here to introduce 

our next witness. I call on our Ranking Member. 

Senator CHAMBLISS. Thank you, Mr. Chairman. I am very 

pleased to introduce to the Committee Dr. Roger Webb who is Director of the Strategic Energy Institute at Georgia Tech. Dr. Webb 

and his folks at Georgia Tech are doing some truly amazing things 

that he is obviously going to be able to talk about today and 

present to the Committee. And it is particularly important in our 

part of the country. We do not grow corn in the abundance that you 

do in the Midwest and we have to look for other alternative resources for ethanol. And Dr. Webb and his colleagues are thinking 

outside the box and developing new markets for our producers, 

which is truly exciting for us. 

So I am very pleased to have him here and to introduce him to 

the Committee. 

Chairman HARKIN. Thank you very much. 

Dr. Webb. 

STATEMENT OF ROGER WEBB, DIRECTOR, STRATEGIC ENERGY INSTITUTE, GEORGIA INSTITUTE OF TECHNOLOGY, 

ATLANTA, GEORGIA 

Mr. WEBB. Good morning. Thank you, Chairman Harkin and 

Senator Chambliss for the opportunity. I have been truly impressed 

with the interest that you have expressed in this topic. 

As Senator Chambliss said, I represent the Strategic Energy Institute at Georgia Tech, an organization which is devoted to facilitation energy research at Georgia Tech, particularly focusing on defining high potential impact topics, projects, conducting pre-commercial research in order to enable the deployment of those things, 

and then facilitating the deployment of the research in the commercial marketplace, usually in concert with industrial partners. 

One project we have been very interested in is that of creating 

ethanol from southern pine pulpwood. And it is that topic that I 

would like to address. And I would like to make these five points. 

One is that you can make ethanol from southern pine effectively 

and efficiently. We have produced ethanol in three different laboratories with very good yield rates, and approaching 70 percent of the 

theoretical limit, and we think that can be improved. The conversion efficiency for southern pine to ethanol, a gallon of ethanol is 

worth about 76,000 Btu of energy. It takes about 16,000 Btu of energy to produce that amount of ethanol from a pine tree. So it is 

a very efficient conversion process. We think with existing techVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
47

nologies today, we could produce ethanol at about $1.30 a gallon, 

and we see there are opportunities to reduce that considerably. 

The second point is that southern pine is an abundant resource 

in Georgia and throughout the Southeast. Historically that comes 

about because pulpwood became an agricultural product in that 

part of the country as a result of the pulp and paper industry moving south several years ago. Currently in Georgia there are 24 million acres planted in pulpwood. The annual harvest is about 55 

tons per year. 37.5 tons of that go into the pulp and paper industry, which, by the way, is a declining industry in our State. That 

leaves about 17.5 tons available for conversion to other things. 

That is equivalent to roughly 700 million gallons per year of ethanol. And if you extrapolate those numbers across the region, the 

Southeastern region, it looks like an available resource, with current technology, with the existing surplus in pine, of about 4 billion 

gallons per year, which could be a significant contribution that 

overall ethanol makes. 

The third point is that infrastructure exists largely due to the existing pulp and paper industry. That is, the State Forestry Commission of Georgia has a seedling program to provide seedlings to 

replenish the crop. The trucking and harvesting industry is there. 

So, basically, the transportation and harvesting infrastructure is 

already in place to facilitate an ethanol industry in the State and 

across the region. 

There are apparent areas for cost reduction. It was mentioned 

earlier, a gentleman from NREL, about significant decreases in 

costs of producing enzymes. We expect that decrease to continue. 

There are some obvious technologies that can be applied to the distillation process, which will bring the cost down. We think it is 

quite likely to get the cost of ethanol down to below a $1.00 a gallon with improved technologies. And we think the whole thing 

could be commercialized relatively near-term, like 2010. That gets 

a bit to the chicken and egg thing that you all brought up earlier, 

and probably would require some participation by the government 

in reducing the risk in the investment of new plants. 

A cellulosic ethanol plant is more complex than a plant that produces ethanol from corn. The corn process is well-defined. The risk 

is known. With cellulosic ethanol, there is not a plan out there, and 

so the risk is high, and some participation in reducing that risk 

would probably go a long way toward getting investment in the 

program. 

So, in short, we think the resource is there. We think ethanol can 

be produced in large volume. And it looks like a very productive 

thing for the rural South in terms of economic development. We appreciate your interest in listening to us. 

[The prepared statement of Mr. Webb can be found on page 141 

in the appendix.] 

Chairman HARKIN. Well, I can assure you, we have a lot of interest in this. I do not want to get into questions right now, but this 

is fascinating. I do have some knowledge of what has happened to 

the paper and pulp industry, but this could be a great thing. That 

was great testimony. I will have some questions later on. 

Are we on our second bells? 

48

We have about 7 minutes left. Why don’t we recess now, Gene, 

and then we will be right back. So if anybody has to take a break 

to visit a room around here, down the hallway or someplace, come 

back. We will be gone—we will recess for about—we will be back 

in about 10 minutes. 

[Recess.] 

Chairman HARKIN. The Committee will resume its sitting. 

Our next panelist is Mr. Gene Gourley, a pork producer from 

Webster City, Iowa. Gene was born and raised just south of Webster City on a farm. He is active with his three brothers in their 

farrow-to-finish family operation and farm about 3000 acres of corn 

and soybeans. 

Gene obtained his Bachelor of Science and his Master of Science 

from Iowa State University. He is the General Manager of the Nutrition and Research Division of SGE, which is 95 percent owned 

by several Iowa farmers, and collectively they own 25,000 sows, finishing 0.5 million pigs per year throughout the State of Iowa. Gene 

is responsible for feed rations and formulation on all SGE farms. 

Furthermore, he coordinates research projects and technology 

transfer for the research and development team, and has been with 

SGE for twenty years and is also a general partner. 

Gene is testifying today on behalf of the National Pork Producers 

Council and the Iowa Pork Producers Association. Mr. Gourley, 

welcome to the Committee and please proceed. 

STATEMENT OF GENE GOURLEY, NATIONAL PORK PRODUCERS COUNCIL, IOWA PORK PRODUCERS ASSOCIATION, 

WEBSTER CITY, IOWA 

Mr. GOURLEY. Thank you, Senator Harkin. 

I just have to kind of, being the token livestock person, I looked 

at my Far Side calendar on Monday as I was writing my testimony 

and I saw the two bears in the forest with the circle and the scope, 

with the cross-hair on the one bear, and the one bear, you know, 

shoot him when he is on the spot. So I sure appreciate the opportunity to visit with you today. 

Chairman HARKIN. So you got one of those calendars for Christmas, too. 

Mr. GOURLEY. Yes, I did. 

Chairman HARKIN. So did I. 

Mr. GOURLEY. But I appreciate the invite to testify today regarding the use of Distiller Dried Grains and swine diets. I do use my 

Master’s degree in Nutrition on a daily basis as a partner with my 

three brothers, and also at Swine Graphics. I am testifying on behalf, as you mentioned, the NPPC and Iowa Pork Producers, and 

I belong to both those organizations. 

The pork industry is of immense importance to the country in my 

home State of Iowa. Nationwide, more than 67,000 pork producers 

marketed more than 103 million hogs in 2005, and those animals 

provided total gross receipts of $15 billion in more than 550,000 direct and indirect jobs. Nearly 9,000 Iowa pork producers create 

more than 86,000 jobs for fellow Iowans, and contribute $3 billion 

in annual payroll, and generate $12 billion in annual economic activity in the State. And our pigs consume nearly one-third of Iowa’s 

corn and soybean crops. 

49

So first let me say that the U.S. pork industry supports the development and use of alternative and renewable fuels as a way to 

reduce our country’s dependence on foreign oil, but pork producers 

face some challenges created by the rapid rise in ethanol demand, 

including the use of DDGS, Distiller Dried Grains with Solubles, a 

major co-product of the ethanol production process. 

Some would have us believe that all the feed problems created 

by using a substantial portion of the Nation’s corn supply for ethanol production are irrelevant because of the production of DDGS. 

I am here to let you know that this product does little to allay the 

concerns of pork producers regarding the future cost of availability 

of feedstuffs. Just remember that the ethanol production process 

uses 56 pounds of corn, removes the main ingredient, starch, our 

pigs’ energy source, and yields only 17 pounds of DDGS. 

There are several issues with regard to feeding. I have run several trials, actually within our own operation and with other nutritionists around the country. The No. 1 problem that we say is basically the inconsistency from ethanol to ethanol plant of DDGS, and 

even within the same plant you will have inconsistencies. One 

would be variability of the nutrient content, the protein, the fat, 

the phosphorous, the other nutrients varied. And that is partially 

due to the corn that comes into the plants, and so that is not all 

controlled by them. If they change, though—if there are changes in 

their fermentation or the drying, it could impact the digestibility 

of those nutrients to the animals. And there is potential presence 

of micotoxins, which can cause pig performance issues. 

Corn oil is increased in the DDGS by threefold over normal corn, 

and that can increase the iodine value in our pigs which creates 

soft fat issues from a sliceability and a carcass rancidity for shelf 

life potential. It can also decrease the yield. Typically it declines 

when you use higher levels of the DDGS, and that is probably most 

likely due to the fiber fraction that is in DDGS. 

There are several other issues that I have listed in the written 

testimony that I will not spend a lot of time on now, but finally 

DDGS are far more useful in diets for beef and dairy cattle than 

they are for pork and poultry, meaning that for pork producers 

DDGS will not be as cost effective an ingredient because beef and 

dairy can pay more for DDGS, and this is already occurring today. 

While the pork industry appreciates the opportunity to discuss 

DDGS, the most important issue regarding ethanol in livestock are 

the availability of corn, the potential loss of rural jobs, and the cost 

of feed. The combination of high oil prices and government policies 

create an industry in ethanol that can pay roughly $4.00 per bushel for corn. The ethanol industry received government subsidies of 

a $1.53 per bushel corn, a blender’s tax of $0.51 per gallon, and 

their Federal mandate on ethanol production. 

These incentives have the ethanol industry growing at an almost 

unbelievable pace. New plants are springing up everywhere. I have 

eight plants within 50 miles of my doorstep today that were not 

there 3 years ago. And we are using a lot of corn through those 

plants. The Renewable Fuels Association now estimates that 4 billion bushels of corn will be used by the ethanol plants that will be 

online as of January 2008. Former USDA economic Bill Tierney 

predicts that an annual usage rate will be over 10 billion bushels 

50

by the end of 2009 if all the ethanol plants currently under construction that are planned actually come online. 

The pork industry uses about 1.1 billion bushels, and the entire 

livestock industry uses just over 6 billion bushels. Corn growers 

produced about 10.7 billion bushels in this last harvest of 2006. 

There is also a job component. While 100 million gallon ethanol 

plant creates approximately 80 jobs, if we divert that from pork 

production the corn needed to produce that ethanol, it would cost 

800 on-farm jobs. And this is an economic analysis from Dr. John 

Lawrence at Iowa State University. 

Of course, competition for corn is driving up its price, increasing 

livestock producer’s feed costs. This time last year, production costs 

were about $40 per 100 pounds, and economist Ron Plain at the 

University of Missouri now calculates that with feed price increases, the producers have already seen their production costs 

rise, and will be around $50 per 100 pounds. This represents about 

a 25 percent increase in cost. 

Finally, corn availability and prices would also be adversely affected if we have a short crop or drought in either of the next two 

seasons. Mr. Chairman, more details about pork producers’ concerns regarding feed availability and costs, and the use of DDGS 

are included in the written testimony which I ask to be included 

in the record. Thank you again for this opportunity, and the U.S. 

pork industry stands ready to work with Congress on solutions to 

the challenges that face pork producers from the rapid rise in ethanol production. Thank you. 

[The prepared statement of Mr. Gourley can be found on page 89 

in the appendix.] 

Chairman HARKIN. Mr. Gourley, thank you very much. And I will 

have a lot of questions, because this is something to consider. You 

heard earlier witnesses talk about this and we have got to really 

figure this one out and make sure we do not make mistakes in this 

area as we go forward on the Farm Bill. I thank you for that and 

I have some follow-up questions. 

Next is Loni Kemp, and I just want to state that Senator 

Klobuchar just saw me on the floor and said, I wanted to come over 

to introduce Ms. Kemp to the Committee, but she has a Members’ 

Meeting off the floor right now and cannot be here. So let me just 

apologize that she could not be here to appropriately introduce her 

fellow Minnesotan. 

Loni Kemp is Senior Policy Analyst at the Minnesota Project 

where she has worked on agriculture and environment issues since 

1979. She is on the board of the National Campaign for Sustainable Agriculture. She shares its stewardship committee. She is active in the Midwest Sustainable Agriculture Working Group and 

Sustainable Agriculture Coalition. Ms. Kemp was a Food and Society Policy Fellow, a national program to inform and shape public 

policy on sustaining family farms and food systems. 

Well, there are a lot of things she belongs to and does. I would 

be here for all afternoon if I read them all. So we welcome you, Ms. 

Kemp, to the Committee and look forward to your testimony. 

51

STATEMENT OF LONI KEMP, SENIOR POLICY ANALYST, THE 

MINNESOTA PROJECT, CANTON, MINNESOTA 

Ms. KEMP. Thank you, Mr. Chairman. I really want to thank you 

for the opportunity to come here today. 

I want to particularly address the topic of sustainability of renewable energy. The significant question for the next Farm Bill, as 

for all Farm Bills, is what do we want for the future of agriculture? 

What policies will bring about an agriculture that benefits our children and future generations? 

We believe we are undergoing a fundamental shift in the American perception of farmers. Definitely they want our food and fiber 

produced, but now farmers are also called upon to produce renewable energy, and clean water, and a more stable climate. We need 

to design the polices that simultaneously meet objectives for energy, the environment, and rural prosperity. If we do it right, we 

can continue food production and expand the pool of biomass feedstocks in a way that achieves all of these objectives. On the other 

hand, if we do it wrong, we may find that environmental tragedy 

and rural decline will overwhelm the hopes of renewable energy 

and maybe even create a backlash against the ethanol industry and 

farmers. 

The right way is to prepare for agricultural production of cellulosic biomass on a major scale. We need to shift the policy from 

annual energy crops to perennial crops so that we have the opportunity to buildup soil quality, use fewer chemicals, and manage 

habitat. 

Switchgrass, I guess this has been mentioned today—switchgrass 

is a popular phrase but it is not the only feedstock. There are different cellulosic materials appropriate to every region of the country, and it might include prairie grass mixtures, alfalfa hay, and 

woody crops like poplar trees, willow, hazelnuts, southern pines. 

While ethanol is the likeliest way to use biomass, we have also 

been hearing today an important point that there are other types 

of conversions that can be used with biomass. So we must also 

keep in mind that direct burning, gasification, conversion to electricity, methanol, hydrogen fuel cells, butanol, and even fertilizer 

may be produced by biomass. 

Perennial biomass crops can be a triple winner at slowing climate change. And that is a very important focus, I think, for the 

Farm Bill. That is, if we do it properly. First, burning renewable 

fuels does not increase carbon emissions at all because the carbon 

going into the air was just taken out of the air when the crop was 

growing. 

Second, we can grow the biomass crop in ways that reduce the 

total carbon in the atmosphere by capturing carbon in the soil. 

Untilled soil with perennial grasses, or no-till annual crops, can 

capture the carbon that was held in the roots, leaves, and stalks 

that are left on the soil. 

The third way for biofuels to be part of the global warming solution is by producing ethanol in plants powered by renewable fuels 

instead of fossil fuels like coal and natural gas. As Senator 

Klobuchar was telling you about, we have two plants in Minnesota 

that have moved in that direction. 

52

We recognize that none of this can happen overnight, but the fact 

is that the next five years, which is the duration of the next Farm 

Bill is precisely the window of opportunity that we need to accomplish the necessary transformations for biomass energy to blossom, 

just as wind and corn ethanol are blossoming now in response to 

previous policies. 

So a few comments on the sustainability of biomass. We suggest 

that cellulosic crops should be prioritized according to their sustainability. The most sustainable option is perennial plants like 

grass mixtures that mimic the prairies, and deliver high production 

with low inputs, while also contributing to water quality and wildlife habitat. 

On the other hand, conservationists are growing quite concerned 

about the potential for overly aggressive removal of crop residues, 

like corn stover, maybe wheat straw. Scientists at the USDA Agricultural Research Service recommend that corn stover should never 

be harvested from highly erodible acres, from plowed fields, or from 

corn-soybean rotation acres. Even on corn land with no tillage, continuous corn, only 20 to 50 percent of that residue is safe to remove 

if you want to retain the organic matter and keep healthy soils. So 

that is an important thing we have to keep in mind as we go forward. 

A couple of policy options that we are suggesting. First is the 

Conservation Security Program. It is perfectly designed as a working lands program to deliver incentives to encourage farmers to 

plant energy crops. We need to design a major new enhancement 

payment, or incentive payment, that is part of this program, for establishing perennial energy crops according to a conservation plan. 

We think the basic goal should be to get farmers to start the transition to perennials so that when the market appears in a few 

years, some farmers will be producing, others will have seen their 

neighbors do it, and they can quickly learn and grow these crops 

to supply the supply chain. 

CSP has proven its popularity on the 16 million acres already enrolled, but it needs full funding in order to offer this opportunity 

for renewable energy. Some folks are eyeing the Conservation Reserve Program for biomass harvests, but we would like to suggest 

that might not be an appropriate approach, to compromise the conservation values for which this land retirement program was designed. 

Furthermore, we probably ought not to think about biomass as 

something that you grow primarily on marginal land. Cellulosic 

ethanol must compete with oil and corn ethanol, and it probably is 

going to pencil out best with good productivity on reasonably good 

lands. On the other hand, land already coming out of CRP should 

receive incentives to keep that land in perennial cover, including 

biomass crops. 

We also are very interested in supporting initiatives that focus 

on locally owned, community-based production of renewable fuels. 

Rural communities need to have an equity stake in emerging agriculture energy industries in order to participate fully in the wealth 

that will be generated. 

So thank you very much. 

53

[The prepared statement of Ms. Kemp can be found on page 103 

in the appendix.] 

Chairman HARKIN. Thank you very much, Ms. Kemp, for that 

statement. I went through your written statement yesterday 

evening. 

And now we have Mr. John Sellers. He and his wife, Jean, own 

and operate a 360 acre farm near Corydon in south central Iowa. 

They have a forage cow-calf and custom grazing operation. They 

have, I am told, over 100 acres of native grass plantings for biomass production and wildlife habitat. 

John is the Coordinator of the Grassland Agricultural Program 

with the Leopold Center for Sustainable Agriculture at Iowa State 

University. He is a longtime Soil and Water District Commissioner, 

a member of the Iowa State Soil Conservation Committee. He 

served twice as the President of the Forage and Grassland Council, 

and as a producer/member of the American Forage and Grassland 

Council Board of Directors. He has recently been elected to another 

term as a producer-member of the board. 

He is also active in the renewable energy and sustainable agriculture arenas, and of course I knew a John, well, from the 

Chariton Valley Project. Welcome to the Committee, John. It is 

good to see you again. 

STATEMENT OF JOHN SELLERS, FARMER-MEMBER OF IOWA 

STATE SOIL CONSERVATION COMMITTEE; MEMBER, BOARD 

OF DIRECTORS, AMERICAN FORAGE AND GRASSLAND COUNCIL, CORYDON, IOWA 

Mr. SELLERS. Thank you, Senator Harkin, and thank you for this 

opportunity to appear before this Committee today. The discussion 

today is agriculture and rural America’s role in enhancing national 

energy security. 

I would preface all of my remarks with two principles. No. 1, the 

producers and landowners must be an equal stakeholder in all policy and value relationships. Too many times, the stakeholder or the 

landowner is the last considered in any policy. They need to be a 

part of the partnership. 

And No. 2, that now is the time to think beyond corn ethanol or 

soy biodiesel, the paradigm of that. Bio-energy threatens to eclipse 

food, feed for livestock, livestock production, grasslands, forest 

products, and fiber production as the major driver of American 

rental rates and record—I have gotten ahead of myself here. 

Farmers face enormous risk from price volatility, skyrocketing 

land rental rates, and record input costs. 

The environment faces risk from intensive and accelerating focus 

on one crop. There are alternatives to creating a grain-based transportation fuel economy. When facing price uncertainty, price and 

policy goals should be to use just enough fuel ethanol to support 

corn prices and farm income, but not so much that it disrupts the 

world food economy. Meanwhile, a much greater effort is needed to 

produce ethanol and bio-energy from cellulosic ethanol or cellulosic 

sources. 

As I have stated earlier, I have nearly a decade of experience 

managing switchgrass biomass for energy. Several of those years 

were as filed coordinator for the Chariton Valley Biomass Project, 

54

which co-fired switchgrass with coal to produce electricity. I coordinated establishment, stand improvement, fertility, research support, harvests, storage, and transport of this biomass on nearly 

4,000 acres of CRP ground. 

The project not only performed all of the physical functions of 

growing, harvesting, transporting, and processing switchgrass biomass, it also provided the resources for research that addressed the 

economics of establishment, stand maintenance, optimum fertility 

levels, harvest efficiency, machine adaptability, soil erosion, carbon 

sequestration, water quality, and one that I found very important 

was harvest impact on various wildlife species, and cultivar adaptation. We looked at what—could we bring the lowland varieties 

from Georgia up to Iowa and have them survive our harsh winters? 

They have much higher yield potential. 

The knowledge and experience gained from this project will be 

quite valuable to the future projects, and has shown that, with government support and risk mitigation, demonstration projects and 

farmer groups can grow and deliver a feedstock necessary for the 

future commercial-scale renewable energy ventures that we hope to 

stimulate. 

In order to assure a dependable multi-year supply of feedstock, 

we need to create some sort of a reserve of feedstock available for 

local projects and commercial ventures. I am calling it an energy 

reserve. It could be a dedicated energy feedstock program. But I am 

calling for about 5 million acres of these to come from the CRP on 

a voluntary basis. 

We have these contracts in place at a given rate. We know what 

that rate is going to be for the next 10 or 1five years. We would 

not have to go on the open market and compete with cash rents 

that have escalated enormously. In northern Iowa, I am hearing reports of $285 per acre. We cannot cash rent on that basis. 

Anyway, I feel the landowner should have the voluntary opportunity to do this. I am not saying take it out, let the landowner—

and then see what the interest is in renewable energy. We found 

terrific response from our farmers in southern Iowa when we started our Chariton Valley Project several years ago. 

This would also very much facilitate the research that is going 

to be needed to be done. I have also got some real concerns of treating crop residue basically as another low-cost commodity producer. 

We are going to have some real challenges with harvests. 

And also, we need some herbicide labeling restrictions lifted for 

the production of biomass. Right now, we do not have the tools 

available to cultivate and manage biomass switchgrass. 

Mr. Chairman, thank you again for the opportunity to testify before this Committee, and I will attempt to answer any questions. 

[The prepared statement of Mr. Sellers can be found on page 120 

in the appendix.] 

Chairman HARKIN. Thank you very much. In fact, as you heard 

Keith Collins say earlier, the Chariton Valley Project may have 

been the only one, I think, in the United States where we have all 

that knowledge base that you just talked about. That could be very 

helpful for us. 

I will just start and go down the panel. For Mr. Miller, again, 

and I am going to say a little bit about this with Mr. Gourley, also. 

55

I have heard concerns that the ethanol industry is just growing too 

fast. It is just growing too fast. It is a boom, and booms like this 

tend to bust. There is concern that there could be a big expansion, 

and then a collapse. A collapse would put a damper on everything 

for a while. Investors and others would turn away from ethanol 

and invest elsewhere. 

I just want to know what your view is on that. Is there going to 

be enough corn for ethanol and animal agriculture? And will there 

be adequate markets for ethanol at profitable prices? What is your 

view on whether it is growing too fast or not? 

Mr. MILLER. I think in any short cycle, you can look at sort of 

a boom/bust, is it growing too fast over a period of two or 3 years. 

Over the long run, I am not too concerned about, because those 

things tend to equal out. Things naturally occur that smooth cycles 

out. 

For example, there are only so many builders or so much steel 

going into the ground at one time. You have to go through your 

permitting process. We are in the process of developing three additional facilities in addition to the two that we own, and getting 

through the permitting process is going to take a year in many 

cases. And we are looking at 18 months, that has slowed down. 

So I think some of these situations sort of take care of themselves. In the long run, I am not too concerned about it. I mean, 

we are trying to penetrate a 150 billion gallon gasoline market, and 

we are only 5 billion gallons today. Even if we get up to 15 billion 

gallons, it is only 10 percent. So we have a lot of opportunity there. 

I think up to about 15 billion, we are probably in good shape with 

corn, again, depending upon how fast we get there. 

If you talk to companies like Monsanto, I mean, we are talking 

300 bushels an acre in twenty years, just the natural yield increases. The yield increases that I have seen in the last couple 

years where I live, where we have a drought condition, and we 

have a near-record crop. It is just simply amazing. 

So I am not too concerned about corn availability in terms of food 

and fuel. And certainly DDGS is a good product. We have not had 

any issues with it. I do think going on to the next generation, we 

do need to look at cellulose. That is why our company is involved 

in taking the corn fiber and trying to break that down. And we envision bolt-on facilities to the corn-based facilities, where we would 

start off with corn fiber, and you can also, once you have the technology proven out, you can bring in other products. 

Chairman HARKIN. The plants you are involved in, and I get this 

question a lot and I do not exactly the answer to it. Existing ethanol plants are being built right now. Can they adapt to cellulose 

conversion also? 

Mr. MILLER. Well certainly. I think what you are looking at is 

a bolt-on to an existing facility. For example, at Pekin, where we 

have—fortunately we are a wet mill on about two-thirds of our 

plant there. We have a very pure fiber strain. It has got a lot of 

starch to it, which is great. We can break that down and put a bolton facility right there at our Pekin facility, which can take advantage of all the infrastructure, the grain inbound, the outbound load 

out. And I think for these cellulose plants to be successful, a transiVerDate 0ct 09 2002 15:44 Apr 13, 2007 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 C:\DOCS\34149.TXT SAG2 PsN: SAG2
56

tion mode is to bolt them on to an existing plant where there is 

plenty of infrastructure available. 

So that is where we see the market developing for cellulose probably over the next five and 7 years, as bolt-ons to existing facilities. 

And then you can get scale for the facilities to stand on their own. 

Chairman HARKIN. The question I want to ask, first of all—when 

I am finished with everyone here, I am going to go back and revisit 

one question, and that is this, if you could write one or two provisions into this Farm Bill to promote the use of biofuels, while simultaneously protecting our livestock industry, what would they 

be? 

Also, another question you might think about, all of you, I asked 

this to Mr. Miller, is: what do you think about the idea of tying the 

blender’s tax credit to the price of oil inverse by? In other words, 

a counter-cyclical payment. Right now the credit is $0.51 per gallon, but there are those who say we do not need this credit right 

now because the demand for ethanol is there. The price of oil is 

high so the tax credit could be lower. But as the price of oil comes 

down, what does that do to the ethanol market? Well, if you had 

an inverse payment, as the price of oil went down, the blender’s tax 

credit would go up. As the price of oil went up, the blender’s tax 

credit would come down. That way, there would be absolutely no 

incentive for, say, OPEC and others to say, we will just start cutting prices. 

I just want to know what you think about that idea. It has been 

floated around and I am looking at it. 

Mr. MILLER. Well, Senator, I have been in this business for 2five 

years, and there are times when the tax incentive has not been 

enough, and then there are times when it is probably been more 

than plenty. You have to tell me what the price of oil is going to 

be, and what the price of ethanol versus oil is going to be, and also 

the price of corn. I think, from that standpoint, the concept is a 

good one. I think in practical reality, it is going to be difficult to 

manage a variable tax credit. What is it on a given day? That could 

affect the value of ethanol which could affect the price. 

Chairman HARKIN. Well, it would be based just on the price of 

oil. 

Mr. MILLER. Well, then you have the price of corn. That is another big variable. So it is my price of corn and my price of ethanol, 

and ethanol is priced somewhat relative to oil, but not exactly. We 

have seen periods of time where it has actually inverted the price 

of gasoline. It has gone below that. And we have seen times, for 

example, when the oil industry pulled out 2 billion gallons of 

MTBE demand here in the spring where we saw very high prices 

for ethanol that sort of decoupled. 

So there is a market for ethanol in its own right. It is tied to oil, 

but—and while you could say that, yes, I could inversely relate 

that to the price of oil, you would almost have to put a factor of 

corn in there. And then you would have to come up with a mechanism that is manageable. And I think it is the mechanism where 

it is going to be somewhat difficult. 

On the long run, the tax incentive has about done what it was 

intended to do. For the long run it has been about right. It has 

been adjusted through history. It has been as high as 60. It has 

57

been as low as 40. So it has worked, and it certainly has driven 

what we want to do. 

I heard in the previous panel, we have reduced foreign payments by $6 billion. That is far more than the value of the tax credit loss. 

So it is a good program the way it is. Again, while that is a good 

idea, I think the mechanical workings may prove difficult. 

Chairman HARKIN. It is just an idea that has been floated 

around. I do not have one view or the other. I am just trying to 

solicit views on it. 

Dr. Webb, as you have probably heard here, there is a broad consensus, I think, that we want to accelerate, and we want to do 

what we can in this next Farm Bill to accelerate the commercialization of ethanol from cellulose. Is ethanol from a woody biomass in the Southeast ready for commercialization? If not, what 

are looking at an earliest timetable for that, in your judgment? 

Mr. WEBB. Well, the number that we have in our report is 

commercializable by 2010. That is a process that we are going 

through where we would first build prototype plants of various 

sizes, scale them up, measure what the problems are, and then go 

to a major plant. 

That could be accelerated, I think. I think the technology is 

there. Prudence would say the first thing you do is establish a prototype plant and see what the outcomes are. You can probably 

shorten the process to a full-scale production plant with proper investment incentives. But I think 2010 is a reasonable number. 

That can be shortened some. 

Chairman HARKIN. Well, we need to know from you, what are 

the most important policies and programs that we could address 

here? You know, as I have said earlier, we have people on this 

Committee and also on the Finance Committee and the tax writing 

assignment. And, unless I miss my bet, I do not think I will on this 

one, some of this Farm Bill stuff that we are developing will have 

jurisdictional oversight or say so by the Finance Committee. 

Mr. WEBB. Yes. 

Chairman HARKIN. And I have already discussed that both with 

Senator Grassley and with Senator Baucus. So what are some of 

the things we need to do? 

Mr. WEBB. Well, I do not have all the numbers firmly in mind. I think 100 million gallon a year corn ethanol plant is about $100 

million. A similar sized plant, cellulosic to ethanol probably costs 

twice that much. And as I had mentioned earlier, there are some 

unknowns about that process that have to be measured so that the 

investment capital to create such a plant is somewhat is risk. 

So I think any policy that could be developed that would reduce 

the risk to investors in creating the initial plant is the most important thing that can be done. 

Chairman HARKIN. OK. So you need a demonstration plant? 

Mr. WEBB. Yes. 

Chairman HARKIN. Nothing is on the drawing board right now. 

Mr. WEBB. Not in terms of a full-scale facility. 

Chairman HARKIN. I do not know why, but I read that Iogen was 

thinking of building a plant in Georgia. 

Mr. WEBB. Not that I know of. 

Chairman HARKIN. No? 

58

Mr. WEBB. Iogen has facilities in Canada. There are facilities in 

Scandinavia that produce ethanol from. 

Chairman HARKIN. I just read that someplace. Maybe it was just 

one of those little blurbs in the paper or something. But I am really 

excited about this, because we need to move on this. 

Are there other species besides pine that could be used? I was 

always told fast growing poplars. And what is the harvest cycle for 

these pines? What is the cycle on that? How many years? 

Mr. WEBB. The pulp and paper industry typically uses a turnaround time of 1five years, planting to harvesting, to create paper. 

I am not aware of a study that says what is the optimal time to 

harvest the pine tree to produce ethanol. That study needs to be 

done. There is clearly some time in the life cycle of the pine where 

it is optimally usable to create ethanol. But I think 1five years is 

a target for the turnaround time. 

Chairman HARKIN. Well, you have to think about the cycle thing 

and get that done, too, but this is one are that we really want to 

address and move ahead on. So any suggestions you have along 

that line. 

Mr. WEBB. The other point is the competing utilization of the resource is pulp and paper throughout the Southeast, but that industry is declining. In the 3–year period from 2001 to 2004 in Georgia, 

that industry declined 25 percent, and that is continuing. 

So without any new planting or anything, it looks like the available resource is going to increase, and there are clearly opportunities to plant more. There are clearly opportunities to enhance the 

energy value of the pine through genetic manipulation and so forth. 

So I think there is potential well beyond the 4 billion gallon that 

I mentioned. 

Chairman HARKIN. That is exciting. 

Mr. Gourley, I thank you for your testimony. You really honed 

in on some things that we are more and more becoming aware of 

as of late, and that is the impact of ethanol production on the livestock industry in many different ways. Not just from the price of 

corn, but just, as you pointed out, something that I had not previously been too much aware of, and we have to look more at 

DDGs. And we need to talk to the ethanol industry, Mr. Miller, 

about this also. And that is the quality of the DDGS that come out. 

And they vary, as you say, from plant to plant, and maybe within 

the plant. 

So when a hog producer wants to get feed, they have to have that 

consistency, so what can we do? This is something that we really 

need to look at, because we need to utilize that feed source. Now, 

for cattle it has been pretty good, but on hogs it has been not so 

good. 

Now, was it the University of Minnesota showed that they if 

were prepared and marketed the right way, hog producers could 

use 20 percent or even more in their hog-feed ration. Yet in your 

testimony you were saying about 10 percent. I guess, is that difference because of quality and consistency and that type of thing? 

Mr. GOURLEY. Not so much. Ten percent is kind of just the golden rule that the industry is using right now, partially on the variability issue. It just comes down to economics of formulation. It is 

another product that has been provided to us to try and use as a 

59

byproduct coming into our formulation. So you will balance that 

against soybean meal price. There is a protein and price point. You 

balance against corn as the energy source. You balance it against 

animal fat. All the combinations of these—the phosphorous in it, as 

well, can go against dicals or inorganic phosphorous that we formulate with. 

So as it comes in the formula, 10 percent is kind of the safe ration. As you go to that 20 percent, the issues I mentioned about the 

corn oil increase, because it is three times higher. We feed that 

amount late in finishing, where the pig consumes most of the feed, 

we can run into a soft fat issue, is what it is called, with the packing plant. And that gets into the sliceability of bacon and some of 

those things. I know the Southeast ran into it with poultry fat, basically, feeding that back, that you can get softer fat carcasses. 

So those are some of the issues—and I know that some of the 

ethanol plants are talking about fractionation. So they will pull the 

oil out, leave the protein, and that will improve our feeding of 

DDGS. In actuality, and I am working with Broin on this. Broin 

has looked at that combination, and the amino acid makeup, or the 

protein fraction that is left over is still not very ideal for swine. We 

still would have to add other synthetic amino acids. And really, 

soybean meal is still the choice on a protein standpoint. But it 

leaves some of that soft fat issue that I just talked about, but it 

also may not be as high a value product just because the protein 

is not quite what we need. 

And again, I am talking swine specifically here. Beef, you know, 

you do not get into the amino acids, the protein, as much. They just 

need the urea for the nitrogen, and they can digest fiber as well. 

Chairman HARKIN. I thought Iowa State University was doing 

some research, and maybe other universities, too, in this area. 

Mr. GOURLEY. You bet. They are. Dr. Trinkle, I actually called 

him a couple of days before I came down here. At Iowa State University he is doing research on that. And one of your points of asking, what can we do? One thing he mentioned is, I wish I had more 

funds to get into some of the issues of enzymes being used and 

feeding that with the beef side of it, for utilization of the product 

better. And just getting funds, period, to do the research that needs 

to be done on the beef and the dairy side of it. It was one his comments, that it would be nice. 

He sees a lot of dollars going toward the cellulosic, which, totally, 

we need, and obviously it is very evident today. He just does not 

see as many funds available for him to try and get the beef work 

done that needs to be done to feed the byproduct. 

And just as a side note on that, again, you cannot blame the ethanol industry. The main product they are selling is the ethanol. 

You talk to a lot of plants, and they say, look, we just want to get 

rid of this stuff. The bottom line dollars to them, DDGs mean very 

little to them. That is the way it has been. And so there are issues 

when you talk to some plants. 

Chairman HARKIN. Well, what can we do? Again, help me think 

this thing through. Help us. Do we need to work with the ethanol 

industry to provide some kind of standards or something that they 

should meet with with regard to DDGS or some incentives to encourage standardization? I don’t know. How do we approach this? 

60

It seems to me that this is a valuable byproduct. I understand their 

main product is fuel, but DDGSthat is still a very valuable byproduct. 

I do not know. I will ask Mr. Miller. 

Mr. MILLER. Well certainly, Senator. It has become important 

enough that we have a full-fledged committee within the Renewable Fuels Association, a feed committee looking at standards, consistency. 

Consistency is very important. And as the industry has grown, 

you have different technologies. And it is correct, ethanol is our primary product. This is a byproduct, but there are things that plants 

can do to be more consistent. One example that I could point to 

would be at our Nebraska plant where we can run milo or corn. 

We found we had a much more consistent DDGS product if we ran 

all corn and the market would pay us for it. 

Some of this is market related, too. If you produce a higher quality, consistent product that nutritionists can use, then the marketplace is going to value your product more. And I think as we become larger in the marketplace, the market forces begin to take 

over. And there will be those who are producing a more consistent 

product and a higher quality product, and that will be who the people go to first. And if you are not producing a consistent product, 

you are going to be the supply of the last resort. 

In the areas like toxins, for example, we test for toxins all the 

time. We export a lot of our feed product to Europe. Europe is very 

tight on toxins. And we know—we have known for 2five years or 

more how important it is not to have aflatoxin or any of the toxins. 

We test consistently for it. We run consistent tests. When we have 

high aflatoxin periods, we are sampling every truckload that comes 

in. Our elevators know if they try to provide some higher toxin material to us they are going to get embargoed. We will not buy from 

them. And that is a pretty powerful statement when you are buying 50 million bushels a year in a local economy. 

So those are some tests that we do, and I know a lot of others 

do. Anybody who is in the export market is going to be doing that 

and I would say most of the domestic guys are, as well. 

So I do think this is an evolutionary process, and we are going 

to have to try and get our arms around it through the feed committee within the RFA. 

Chairman HARKIN. I appreciate that. Again, market forces, yes, 

I understand it, that could help. But I still understand that, even 

with the market out there, that we get this inconsistency and stuff 

out there. But we got to figure this one out, on how we—and I 

think we do need more research money into that, both on how you 

make these DDGS more applicable for swine, but also how do we 

use other enzymes and stuff to help the swine digest and utilize 

that stuff. I guess that is the kind of research we need to do more 

of; is that right? 

Mr. GOURLEY. I did—I actually conducted one of those research 

projects with an enzyme company and they were working on some 

solid state fermentation is what it is called, to deal with enzymes 

and digestibility of some of the energy and proteins in the DDGS. 

Our first shot at it was not very successful through the pig trials, 

but they are back to the drawing board. They are not giving up, 

61

and they are a substantial company that is going to try and put 

some efforts toward to that. 

But I mean, even—we try to look at it. We pull the oil out. The 

issue on the swine side is that even if we put 10 or 20 percent, the 

corn is still 75 to 80 percent of my ration from an energy basis. 

What the ethanol industry pulls out from the corn is exactly what 

I needed from the corn to start with. And that is the challenge as 

a nutritionist is balancing. They can give me this back. It has got 

some oil in it that helps. It has some protein in it, but the bottom 

line is that the energy that I needed to grow the pig is what they 

took out for the ethanol production. 

So again, I understand that is the way that process is, and I am 

trying to, as a nutritionist—we try to balance, now, what is my 

new energy source? And corn is king. I do not know what other energy sources to try and bring in to fill that ration up. Poultry is 

in the same boat as swine, as well. 

And so that is kind of where we are at. It is a struggle. So it 

comes down to availability of acres. 

Chairman HARKIN. Comes down to what? 

Mr. GOURLEY. Availability of acres. 

Chairman HARKIN. For production. 

Mr. GOURLEY. Yes. 

Chairman HARKIN. Well, the other thing, of course, as we have 

heard testimony from, and we know this, the productive capacity 

of corn—it is mind-boggling how much production we are getting 

out of corn now per acre. 

And you think, well, is there a limit to this? Well, not during my 

lifetime there has not been. My gosh, we are getting up to 200 

bushels an acre now, and I have been told that it is going to be 

even more. 

Mr. GOURLEY. We were 170 bushels 3 years ago. We were 180 

last year. We are 185 this year. So five bushels an acre. The thing, 

for my family’s operation, those five extra bushels in that year 

amounted to 3 days worth of feed for our pigs. That five bushel increase was on 3 days worth of——

Chairman HARKIN. Only 3 days? 

Mr. GOURLEY. Yes. I mean, it takes a substantial—and again, 

those are big steps. I know that there is 300–bushel corn coming 

that he mentioned, and I hope it does, because we are going to 

need the supply. 

Chairman HARKIN. Initially, we certainly will need a lot of corn 

for ethanol production, but the development and implementation of 

cellulosic ethanol should start to balance thngs out. 

Mr. GOURLEY. Hope so. 

Chairman HARKIN. But again, we have to be very cautious on 

what we do here. And this is one of our big concerns, as you know. 

So we look forward to working with you. 

Mr. GOURLEY. You bet. 

Chairman HARKIN [continuing] We must make sure to balance 

all of these interests cna concerns on our bill. 

Ms. Kemp, I appreciate your comments on the Conservation Security Program. As you know, I developed CSP, and we were able 

to implement it in the last Farm Bill. I think it has proven its 

worth. It has been accepted by farmers all over the country. Of 

62

course, it was never designed to be on a watershed basis. It was 

designed to be on a national basis. But we will get to that. I mean, 

I do not mean to belabor anyone here on that right now. But it was 

designed to be a conservation effort on productive lands. The existing paradigm of conservation was always, to take conservation land 

out of production. Well, I wanted to challenge that paradigm and 

say, well couldn’t we have conservation payments based upon 

working lands, not just based on how much you produce but how 

you produce. Can we measure clean water, air, and sustainability 

as products, just like corn? That is what we set out to do, and I 

think it is working. 

Now, again, I, perhaps, had not thought about this at the time—

I am talking about 10 years ago when we first started developing 

CSD, but now it seems to me that this paradigm may be applicable 

to the production of cellulosic material for ethanol as well. It seems 

to fit perfectly. You can have sustainable agriculture. You can grow 

switchgrass or whatever it might be, and do it in a sustainable 

manner, and get a conservation security payment. This program 

could also help farmers who want to transistion from ontype of 

farming to another. If a farmer wanted to transition from some 

crops to cellulosic crops, well, it would be pretty hard right now because there is not much incentive there to do that. But if you have 

a CSP program that dovetails with that, that could be a good transition payment. 

I do not know if you have any idea of what level of payments are 

needed, but we need to have some idea of what we need to encourage biomass production under CSP. In other words, what payments 

would provide enough economic incentive, in addition to whatever 

market value there is out there for these biomass products? 

This could also help us with this chicken and egg problem we are 

having here. If you give farmers incentive payments through CSP 

for the production of biomass crops, well, that could start moving 

that. And then the investors and the plants that want to be built 

will say, OK, now we are going to have the supply. 

I am just thinking, if you have any thoughts about what kind of 

a payment system might be applicable for this. If you do not, if you 

have it later on, we would like to hear from you about what level 

of payments would be needed? 

Ms. KEMP. Well, just a couple thoughts. You did have the foresight to include energy as a major purpose of the CSP. So we already have the incentive payments now for if a farmer uses renewable energy, if they produce electricity, and if they reduce their net 

energy use on the farm. So we just have to add the other element 

of producing feedstocks for renewable fuels. 

Chairman HARKIN. Producing energy, right. 

Ms. KEMP. I do not have any estimates for what it is going to 

take, but I will just point out that the CSP sets a really high bar 

for conservation for farmers to get into the program. And so there 

would be a combination of—one would be an enhancement payment 

specifically for establishing a perennial crop with high conservation 

standards. But then also built into the program itself is you would 

get a reward for improving your soil quality and your soil conditioning index by establishing perennials on land that used to be 

crop land, for example. 

63

So it is built into the program to both be rewarded for the inherent environmental benefits of cellulosic crops, and then what we 

can add in is an extra transition payment for the transition costs, 

and the fact that we know there is some experimentation going on, 

and trying seed varieties, trying management techniques. 

And in fact we should probably build research into this first generation of CSP energy crop contracts to make sure that we are getting the best information to those farmers and that their experience then gets translated out to others. But we will help work on 

setting the numbers. That is hard. 

Chairman HARKIN. Yes, because this is—switchgrass gets a lot of 

attention, and it should, because from everything that I have read 

and seen, this could be a very valuable biomass resource for ethanol. 

But there are other things, too. There is alfalfa. There are other 

grasses. Alfalfa has the benefit, it has feed quality too, not for hogs, 

but for cattle and other things. That could be used and still get the 

cellulose out of that. I am not certain if there is any feed value in—

well, yes, there is feed value in switchgrass, too. 

Now this brings me to Mr. Sellers. Now you are probably one of 

the few individuals in this country that has actually had a project 

of growing, and harvesting, shipping, using a biomass product, 

switchgrass, at the Chariton Valley Project. 

So, you know, you have done all of this. What are some of the 

unsolved problems we have left? I mean, you have been doing this 

Chariton Valley Project for what? How many years now? 

Mr. SELLERS. Nine. 

Chairman HARKIN. Nine years. 

Mr. SELLERS. Yes. 

Chairman HARKIN. So what more do we need to know? I mean, 

you have a lot of data and stuff. What more do we need to know? 

You know how fast it grows. You know the types and stuff for our 

area. What are some of the unsolved problems that we need to 

know about switchgrass? 

Mr. SELLERS. We need, No. 1, to really define the fertility that 

is actually needed, just some more work on fertility over a long 

term. We need to do some more work on pH. We need to look at 

take out rates so that we might pull the harvest a little bit earlier. 

We do not dare pull it too much earlier than 10 days after killing 

frost because of the nature of a C4 grass. That goes back into the 

roots getting ready for next year. If we take it off too soon, that 

will weaken the stand. Right now, seed is running about $20 a 

pound. So it would take $200 an acre to establish a new stand. 

Chairman HARKIN. So you have to wait after a killing frost to 

harvest the grass? 

Mr. SELLERS. Right, which makes a very short, very intense harvest period. I am quite enthusiastic about some of the cool season 

grasses and some of the polycultures so that we could stretch out 

this harvest window. 

You talk about the pine in Georgia. They also have a boatload 

of fescue down there. All of our States through the Kentucky and 

Tennessee region, Missouri, they have a lot of fescue that could be 

utilized. 

64

So we have some real good cool seasons that could be utilized 

along with it to stretch out the program. The main problem is distance that we have to transport it, and then basically build in a 

preprocessing locally, and then take a more, and if I can use the 

term, densified product, on to the conversion facility. 

Chairman HARKIN. There is also the need to think about storage? 

Mr. SELLERS. Absolutely. 

Chairman HARKIN. I have been told that something like 

switchgrass can be stored on the farm in round bales with a plastic 

cover or something like that. Is that so? 

Mr. SELLERS. That is so, but you run into transportation problems with that round bale. 

Chairman HARKIN. Yes. 

Mr. SELLERS. We in the Chariton Valley Project looked long and 

hard at that, found the optimum package was a 3 x 4 x 8 square 

bale that gave us the optimum ability to truck it legally and safely 

and a machine could take it and work with it in a processing facility. So we ended up with a square bale. That brings up moisture 

considerations. These bales weigh approximately 1,000 pounds a 

piece. This takes plastic twine to hole the knot together. There are 

so many adaptations. 

Chairman HARKIN. A 3 x 4 x 8 bale weighs how much? 

Mr. SELLERS. Switchgrass, about 1,000 pounds. If you were 

pumping alfalfa into that package that, that would weigh about 

1,400 to 1,500 pounds. 

Chairman HARKIN. So it is really compacted. 

Mr. SELLERS. Right. We have the ability to squeeze that down 

and densify it physically about two to one. But still, what good does 

that do you when you drive it 100 miles and you have to break it 

all apart to process it? I am thinking, or hoping, that the technology of pyrolysis, where we could turn this into a biofuel locally, 

and then take tankers to a biorefinery would sure help our energy 

life cycle as we produce the cellulosic ethanol or the bioproducts. 

Chairman HARKIN. Well now that opens a whole new area that 

we had not looked at before. I think most people are focusing on 

how you stimulate the production of switchgrass and things like 

that, and then the transportation. But I do not know that anyone 

has been looking too hard at localized—what did you call it? 

Mr. SELLERS. Preprocessing. 

Chairman HARKIN. Preprocessing plant. I do not know what that 

does to the economics of it. I have no idea. Do you know? 

Mr. SELLERS. The farmers and I that work in this arena feel that 

this would have a lot of value. It would include us in the value 

chain to some extent. And it would lower the cost delivered to the 

regional biorefinery. One of the problems we run into—we have got 

Murphy’s Law working here. It only takes one machine to break 

down to cause an awful lot of havoc. If you have got ten local storage facilities, a tractor breaks down, the other nine are still going 

to be sending material to the biorefinery. That principle is going to 

work as we go into the biorefinery era. It is not going to take much 

to interrupt the whole processing flow. 

Chairman HARKIN. I had one other question. I will get it to you 

in writing. I just noticed it is really getting late. But the question 

65

I asked earlier, if you had one or two things to put in the Farm 

Bill, what would you do to move us in this direction? 

Mr. MILLER. Well, Senator, the fact that there is an energy title 

in the Farm Bill itself, I think we owe you a debt of gratitude for 

that, your leadership there and the fact that we are sitting here 

talking. And it has worked quite well. I think, as far as what we 

could do to improve it, I think Dr. Webb hit it on the head about 

investment in—cellulosic technology is very expensive. It is going 

to be several more dollars per gallon than what it is going to cost 

to do corn-based ethanol. And it is hard for venture capitalists or 

investors to spend that kind of money on something that is a little 

bit risky. So any support in terms of either loan guarantees or 

something like that would go a long way. 

Chairman HARKIN. Good suggestion, Dr. Webb? 

Mr. Webb. I have already made that same suggestion. The other 

thing is continuing support for research in enhancing the processing processes. 

Chairman HARKIN. Research in processing, Gene? 

Mr. GOURLEY. Yes, we talked about some of the research on 

DDGS. Obviously, there is still a lot of work to do on types of corn 

genetics and how that can—corn genetics could be developed. I 

know they have developed corn genetics for high-extractable fermentation in the ethanol plants. Maybe there is an opportunity to 

look at the protein makeup for that corn that actually would be 

more ideal for poultry, that then going through an ethanol plant 

would put out product that would turn around and be a more usable or higher useable product for us. 

There are probably others, Senator Harkin. For me to speak specifically on those, I think I would really like to work on our industry to come to you and to your Committee and try and offer any 

solutions or input we can. 

Chairman HARKIN. Well, and we are asking all of you to do that. 

Please give us your best thoughts and your best suggestions on 

that, Ms. Kemp, what would you put in the Farm Bill? 

Ms. KEMP. Well, I think we can prevent a lot of the problems if 

we integrate conservation into the process right up front. We have 

most of the tools we need already in the conservation programs we 

have, but we have to figure out to really aggressively target them 

to the emerging biofuels industry. So, you know, funding all of the 

cost share programs that we have, and specifically designing them 

so that they are useful to farmers who are getting into new crops 

but want to do it right. 

Compliance, conservation compliance. Maybe we should consider 

increasing the reach of compliance to cover anyone that is getting 

any kind of benefits related to renewable fuels. Maybe it should 

cover more than just highly erodible acres, but all acres. Of course 

we would need to make sure that it is actually implemented and 

enforced as well. 

Another area is conservation planning. We would like to see a lot 

more funding available for technical assistance for farmers. At the 

time they are getting into designing this new crop for part of their 

farm, starting it out on a certain field, that is the time to work 

with their agronomist, to work with professionals to develop a conservation plan for that land right up front. So they know what the 

66

opportunities are, how to deal with residue removal, runoff, all 

those kinds of things. 

One kind of novel idea is to consider whether we should require 

the ethanol plants that purchase residues, corn stover in particular, for them to require conservation plans from the farmers 

they purchase from. That way they would know that the land that 

supplies both the corn and the stover is not being degraded over 

time. 

So I am not sure we need a new conservation program, but we 

need to tweak all of them to make them apply right up front as 

we move forward. 

Chairman HARKIN. As you said, on the CSP, we did do the other 

things but we did not do it on the production end. 

Ms. KEMP. Yes. I did not mention that now because I did before, 

but that is No. 1, is to realize the CSP. 

Chairman HARKIN. We have to do that. John, what would you 

put in the Farm Bill? 

Mr. SELLERS. Well, I would go along with Ms. Kemp. CSP is a 

wonderful vehicle if we all had access to it, the United States. That 

would be a real good start. But No. 2 is the risk involved for someone—when you start, you have a known technology, as in raising 

corn in the Midwest. And someone comes and asks you to risk this 

opportunity for an unknown without a market, it is going to take 

a lot of incentive to get you to smile when the guy asks you to say 

yes. 

That is why I was looking more at the new CRP contracts that 

have just been signed for 2007 for 10 years. Those are in our government inventory. We have budgeted for those. That cost will not 

rise. It is just like the native grass seed business, we can look at 

the price of it and it is like an oscilloscope. Every time there is a 

change in FSA or USDA rules or they let more folks in, it skyrockets. This would be the time we are trying to stimulate feedstock production, and it would cost us the most. 

Chairman HARKIN. You are saying using some portion of the 

CRP for biofuels production. 

Mr. SELLERS. Right. Give the folks a voluntary. 

Chairman HARKIN. But permitting them to still get a payment 

for it, as long as they do it in a conserving matter. That type of 

thing, right? 

Mr. SELLERS. Yes. You are getting all the benefits of CRP, just 

like we achieved in the Chariton Valley Project, we are just expanding it across the country rather than a four-county area in 

southern Iowa. So that other areas could use their natural resources to. 

Chairman HARKIN. How about the concerns of Pheasants Forever, Ducks Unlimited, or hunters, or wildlife people who are concerned about this in terms of destroying wildlife habitat? 

Mr. SELLERS. My experience as a farmer and a wildlife enthusiast is it would do nothing but enhance. You take cool seasons, 

you harvest it at the right time, the next year you have got nearly 

a perfect habitat for young sport birds, quail and pheasants. 

The same way in switchgrass. We found that if you leave blocks 

along the end, we actually enhanced the pheasant population on 

our harvested fields. 

67

Chairman HARKIN. Interesting. 

Mr. SELLERS. We could do what is being asked of us in mid-contract management, which is disk up a third of it every year, or 

spray and kill a third of it every years so that we could have some 

manual fjords, we are getting to the same point, only we are doing 

a lot more for national security producing energy. 

And it can be, as Loni said, there could be conservation plans on 

this, and set-asides, just like I plant food plots for the wildlife on 

my farm. It is the same thing. 

Chairman HARKIN. These are all great suggestions. I thank you 

all for being here. I thank you for your patience, and for your input 

into this process. 

As we bring this hearing to a close, again, I just wanted to repeat 

what I said at the beginning. I wanted to have the first hearing 

on energy to sort of plant the flag, if you will, to say that energy 

is going to be the engine of this Farm Bill. It is going to be the 

engine of this Farm Bill. Make no mistake about it. 

And we have to be careful. We want to do it right. I know we 

always make mistakes. We probably will make some here, too, but 

we will try and minimize those mistakes. But I think the public 

wants it. I have talked to my colleagues on both sides of the aisle 

on this. It is not a partisan issue. I think you see everybody coming 

together on this for national security and for rural America. Just, 

as I said, it is a win-win for everyone. And we just have to step 

up to the challenge and really sort of push the envelope on this in 

this next Farm Bill. 

I have talked to my colleagues on the House side and they are 

proceeding in the same manner. So as I said in the beginning, this 

is not going to be your old Farm Bill that you knew in the past. 

This is going to be quite different. And we are going to start making some changes so that we have a transition. 

Now, that is not to say that we are going to drop the production 

of agriculture. That is not what I am saying at all. I am just saying 

that there is going to be a new aspect brought into this that we 

have not considered before. 

So we just need your help, your best thoughts, you have given 

us some today. As we proceed, please feel free to be in contact with 

my staff, or me, or anyone else on our Agriculture Committee and 

give us your best thoughts on this. And as we move ahead in the 

drafting stage and stuff, of course your organizations and you will 

all be able to look at it and give us the benefit of your thoughts 

as we proceed on this. 

So again, I thank you all very much, and the Committee will 

stand adjourned subject to the call of the Chair. 

[Whereupon, at 1:28 p.m., the hearing was adjourned.] 

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