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[Senate Hearing 110-16]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 110-16
 
                     ACCELERATED BIOFUELS DIVERSITY

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

                               CONFERENCE

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   TO

                 DISCUSS ACCELERATED BIOFUELS DIVERSITY

                               __________

                            FEBRUARY 1, 2007

                       Printed for the use of the
               Committee on Energy and Natural Resources

                                 ______

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          RICHARD BURR, North Carolina
MARIA CANTWELL, Washington           JIM DeMINT, South Carolina
KEN SALAZAR, Colorado                BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel
              Tara Billingsley, Professional Staff Member
          Frank Gladics, Republican Professional Staff Member

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Arvizo, Dr. Dan, Director, National Renewable Energy Laboratory..    79
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     1
Bostwick, Toby, President, New Mexico Sorghum Producers..........    24
Brown, Robert, Director, Vehicle Environmental Engineering, Ford 
  Motor Company..................................................    47
Burk, Lou, Manager, Alternative Energy and Programs Group, 
  ConocoPhillips.................................................    46
Burke, Edmund, Chairman, Dennis K. Burke, Inc., Representing the 
  Coalition of E85 Retailers.....................................    46
Conover, David, Counsel, National Commission on Energy Policy....     3
Davis, Dr. Michael, Pacific Northwest National Laboratory........    80
Detchon, Reid, Executive Director, Energy Future Coalition.......     2
Dinneen, Bob, President and CEO, Renewable Fuels Association.....     4
Drevna, Charlie, Executive Vice President, National 
  Petrochemicals and Refiners Association........................    61
Fitch, George, Mayor of Warrenton, VA............................    64
Foltz, Tommy, Vice President of Public Affairs, Earth Biofuels...    62
Fraley, Dr. Robert, Executive Vice President and Chief Technology 
  Officer, Monsanto Company......................................    22
Hushka, Niles, CEO, KLJ Solutions................................    37
Lehman, Jonathan, Verasun Energy.................................    66
McCauley, Ken, President, National Corn Growers Association......    23
Mears, Mike, Vice President for Transportation, Magellan 
  Midstream Partners.............................................    49
Melo, John, Chief Executive, Amyris Biotechnologies..............    33
Michalske, Dr. Terry, Sandia National Laboratory.................    81
Mitchell, Larry, CEO, American Corn Growers Association..........    20
Passmore, Jeff, Executive Vice President, Iogen..................    35
Perine, Lori, Executive Director, Agenda 2020 Technology 
  Alliance, American Forest and Paper Association................    38
Pershing, Dr. Jonathan, Director, World Resources Institute......     6
Pierce, John, Vice President of Research and Development, DuPont.    34
Plaza, John, President, Imperium Renewables......................    48
Prather, Dr. Kristala, Assistant Professor of Chemical 
  Engineering, Laboratory for Energy and Environment, MIT........    77
Rigas, Dr. Nicholas, Director, South Carolina Institute for 
  Energy Studies, Clemson University.............................    65
Standlee, Chris, Executive Vice President, Abengoa 
  Biotechnologies................................................    32
Taylor, Dr. Steven, Chair, Biosystems Engineering Department, 
  Auburn University..............................................    76
Terry, David, Governors Ethanol Coalition........................    21
Wald, General Charles F., USAF (Ret.) Representing Securing 
  America's Future Energy, Energy Security Leadership Council....     5
Whittington, Charles, President, Grammer Industries, Representing 
  the American Trucking Association..............................    25

                     ACCELERATED BIOFUELS DIVERSITY

                              ----------                              

                       THURSDAY, FEBRUARY 1, 2007

                                       U.S. Senate,
                   Committee on Energy & Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:38 a.m., in 
room SDG-50, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, chairman, presiding.

           OPENING STATEMENT OF HON. JEFF BINGAMAN, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. Why don't we get started? Thank you all for 
coming. This has been billed as a transportation biofuels 
conference. Senator Domenici is on his way, and indicated we 
could go ahead and start and he'll be here shortly.
    Let me just say in general I think you're going to see 
Senators coming and going during the day. We're scheduled for 3 
hours of discussion this morning and 3 hours again this 
afternoon, so we have about 30 people lined up to make 
presentations, and so we're going to have to do our best to 
stay on schedule and keep things moving along. I'm sure there 
will be a lot of things people will still want to be saying 
after this is over with, and we'll be open to the idea of doing 
more in the future, but thank you all very much for being here.
    We're focusing today on how we can fuel more of our 
transportation sector with renewable biomass. These homegrown 
fuel sources are currently our best hope of reversing the trend 
toward increased dependence on imported oil. We hope to learn 
about both the current state of the biofuels market and also 
about any policies that we need to be considering here in 
Congress to expand use of biofuels.
    We have, I said 30, this says 33 experts who are going to 
be speaking in the 6 hours that we have devoted to this. We 
hope that we can keep this informal and allow people to make 
the main points they want to make. Obviously the full 
statements will be made a part of our record and we can review 
those, and everyone else can as well, since they will be on our 
web site for people to see.
    I also want to particularly recognize Mr. George 
Sturzinger, who is from Silwa Gas in Atlanta, GA. He is also 
providing testimony to us today. He was not on one of the 
panels because of late information we got on that, but we very 
much appreciate his response to the various questions that we 
have laid out here, and appreciate his being willing to come 
and observe what the others are saying as well.
    So let me go ahead with the introduction of the first 
panel. I'll just introduce the five people on the panel and 
then have each of them take 2 or 3 minutes to describe who they 
are, what their involvement is, and if there's a few points 
that they want to make in that period, please do so. And then 
Senator Salazar and I will have questions, and others may be 
here by then as well.
    Reid Detchon is the executive director of the Energy Future 
Coalition, and he is going to talk to us today about 2525, as 
well as other issues, which we appreciate.
    David Conover is counsel to the National Commission on 
Energy Policy, which notes that EPAct 2005 support for biofuels 
research was a start, but obviously we need to do a lot more.
    Bob Dinneen, who is president and CEO of the Renewable 
Fuels Association, we very much appreciate him being here.
    General Wald was a witness here in this very room, before 
our committee, about 2 weeks ago, I believe, on a somewhat 
different issue, more of the global issues affecting our energy 
security. He is with Securing America's Future Energy, Energy 
Security Leadership Council, and we appreciate him being here 
again.
    Dr. Jonathan Pershing is director of the World Resources 
Institute, and we're very glad to have him here.
    Why don't you each just go in that order and give us your 
presentations. After each of you is finished, or after all of 
you are finished, we'll have some questions.

 STATEMENT OF REID DETCHON, EXECUTIVE DIRECTOR, ENERGY FUTURE 
                           COALITION

    Mr. Detchon. Thank you, Mr. Chairman. Thank you for holding 
this session and inviting us to participate. I'll summarize 
briefly. I am Reid Detchon. I'm the executive director of the 
Energy Future Coalition.
    For U.S. energy policy, two topics must be front and 
center--oil dependence and climate change. Both of these pose 
enormous risks to our economy, but if we deal with them 
together, the transition to cleaner, more secure energy 
technologies will create a new wave of economic growth and job 
creation, just as the computer and telecom revolutions did 
before.
    It is that promise that led the bipartisan Energy Future 
Coalition, together with 400 other partners, to support the 
2525 initiative, which would set a national goal of producing 
25 percent of America's energy from renewable resources by 
2025. Senator Salazar is one of our champions, and we hope that 
Congress will adopt it early in this session.
    With regard to energy security, our objective should be to 
minimize the role of oil in the economy so that the Nation is 
no longer hostage to a single commodity in its prices and 
politics. Alternative fuels must be the centerpiece of such a 
strategy.
    The near-term options that address both oil dependence and 
climate change are biofuels and electricity, together with 
increased vehicle efficiency to make those fuels go further. 
Alternative fuels that improve energy security but make global 
warming worse, such as liquid fuels from coal, are a dead-end 
street.
    Coal can become an important source of transport energy, 
but through electricity, not liquid fuels. Plug-in hybrid 
vehicles, operating first on clean electricity and second on 
biofuels, could all but eliminate the need for gasoline in 
light-duty vehicles, while reducing their global warming 
emissions by 90 percent.
    We welcome the President's leadership in proposing a 
greatly strengthened standard for renewable fuels, and ask for 
your support as well. It would do much to strengthen the 
investor confidence that's needed to finance a new generation 
of biofuels technologies.
    The Energy Policy Act of 2005 authorized many programs 
needed to advance biofuels, but it must be fully funded to be 
effective. We need to encourage the private sector to build 
multiple pioneer conversion plants, biorefineries, to 
demonstrate the use of different technologies on different 
feedstocks, because the technological competition remains quite 
unsettled. Not all of these will succeed, but those that do 
will create a new American industry.
    To offset the cost of those investments, Congress should 
place tax incentives for both oil and alternative fuels on 
sliding scale, and phase them out as oil prices rise and 
Federal support is no longer needed. Such a step would save 
many billions of dollars if prices remain as high as EIA now 
forecasts.
    Mr. Chairman, investments in energy efficiency and 
renewable energy can buy us time to develop more climate-
friendly technologies and an energy future that plays to 
America's strengths. We look forward to the opportunity to work 
with you toward that end, and thank you for having us here 
today.
    The Chairman. Thank you very much.
    Mr. Conover.

  STATEMENT OF DAVID CONOVER, COUNSEL, NATIONAL COMMISSION ON 
                         ENERGY POLICY

    Mr. Conover. Thank you, Mr. Chairman, and thank you for 
being here as well, Senator Salazar.
    I am pleased to appear here today on behalf of the National 
Commission on Energy Policy, which is a diverse and bipartisan 
group of energy experts that first came together in 2002 with 
support from the Hewlitt Foundation and several other leading 
philanthropies.
    In December 2004, the commission released a report entitled 
``Ending the Energy Stalemate: A Bipartisan Strategy to Meet 
America's Energy Challenges.'' Two key biofuel recommendations 
in that report are still highly relevant today. We need to 
increase funding for biofuels R&D, and we need to provide early 
deployment incentives for new biofuels technologies like 
cellulosic ethanol. I'm in agreement with Reid on this point.
    As you noted, Mr. Chairman, EPAct 2005 contained several 
key provisions on this front, and we are pleased that some of 
these provisions, notably the Section 932 grant program and the 
DOE Title 17 loan guarantees, are contained in the joint 
funding resolution for fiscal year 2007.
    At prevailing and projected petroleum prices, as Reid 
already mentioned, there are few economic challenges to the 
profitability of conventional corn ethanol. But the upper limit 
for conventional corn ethanol, at most 15 billion gallons 
annually, is far below what would be a significant contribution 
to displacing petroleum.
    Cellulosic material, on the other hand, whether derived 
from agriculture or other waste or produced from dedicated 
energy crops, holds the promise of providing sufficient 
feedstock to make a real dent in petroleum dependency while 
avoiding the food versus fuel debate we are hearing today. 
Deployment of cellulosic ethanol and other emerging biofuels 
faces significant economic challenges. We support the approach 
taken in EPAct 2005: reducing the costs of biomass and waste-
derived fuel production through a combination of targeted 
support for research and development and by creating incentives 
for first-mover commercial production facilities.
    Now, since the commission's report, we have come to several 
additional conclusions about biofuels policy. First--and I am 
again echoing Reid here--in light of EPAct's fuel mandates and 
the established nature of the corn ethanol industry, the 
commission believes that Congress should reevaluate and 
rationalize the current system of ethanol subsidies to direct a 
greater share of scarce public resources to more promising but 
not yet commercial options such as cellulosic ethanol and 
biobutanol.
    Second, where Federal incentives are appropriate, the 
commission strongly believes that Congress should seek 
technology neutrality. As you'll hear later this morning, new 
biofuels are moving quickly along the research, development, 
and deployment continuum. Policies should be crafted that do 
not unintentionally exclude emerging biofuels, the very 
technologies most in need of Federal assistance. Incentives 
should be structured to encourage the most energy-efficient 
conversion technologies to produce the lowest carbon biofuels 
possible.
    Finally, Government should partner with the biofuels, 
automotive, and refining sectors to seek flexible solutions to 
growing the biofuels market. For example, it may be the case 
that ethanol blends greater than E10 but less than E85 can be 
distributed through existing infrastructure and used in 
existing engines without major modifications to either.
    I see my time is up. Thank you for your attention. I look 
forward to participating.
    The Chairman. Thank you very much.
    Mr. Dinneen.

 STATEMENT OF BOB DINNEEN, PRESIDENT AND CEO, RENEWABLE FUELS 
                          ASSOCIATION

    Mr. Dinneen. Thank you, Mr. Chairman, Senator Salazar. It's 
an honor for me to be here today on behalf of the Nation's 
ethanol industry.
    I can tell you that Congress's effort to provide both a 
production push and a demand pull has created a very dynamic 
and growing renewable fuels industry that is reducing our 
dependence on oil, increasing rural economic development 
opportunities, and improving air quality in our Nation's 
cities. There are today 111 ethanol biorefineries in operation, 
capable of producing about 5.5 billion gallons of ethanol from 
almost 2 billion bushels of grain. Ethanol today is blended in 
45 percent of our Nation's fuel.
    But we're not done yet. The industry is growing rapidly. 
There are today 78 plants that are under construction in all 
parts of the country. There are plants that are going up in 
California, in Arizona, in Texas, in the Northeast. The 
industry is changing. The industry is improving. The industry 
is becoming more efficient. The industry is looking at new 
technologies and new feedstocks. And I believe the industry 
will be unrecognizable 5 years from now, from what it is today, 
because of the efforts that this Congress has put in place to 
create a viable and growing renewable fuels industry.
    Eighty-five percent of Americans, however, believe the 
Nation needs to do more to reduce our dependence on imported 
oil and to break the Nation's addiction to oil. And I would 
suggest that the industry believes the most important things to 
focus on is what has worked. Clearly, consistent and stable tax 
policy is going to be critical to ensuring the continued 
development of renewable fuels and ethanol, and to move the 
industry beyond traditional feedstocks to newer technologies.
    Second, I would think that as the industry grows, as we're 
blended in 46 percent of the Nation's gasoline already, and 
with more than 6 billion gallons of ethanol production capacity 
in construction today, the time when we will saturate the blend 
market for gasoline is rapidly approaching; and thus, 
incentives for flexible fuel technology for E85 are going to be 
critical to provide markets for cellulosic ethanol when it is 
commercialized. And I would encourage the Congress not just to 
put out incentives but to make sure that those incentives 
encourage auto manufacturers to optimize the vehicles for the 
fuel that's going to be used, so that there isn't a mileage 
penalty and so the economics of using ethanol in those vehicles 
can be addressed through technology. It's certainly possible.
    Finally, I would suggest that additional programs to 
encourage the commercialization of cellulosic ethanol are 
indeed going to be critical. The Congress has done a lot 
already through EPAct. Those programs do need to be fully 
funded, but Congress should look to other measures as well, so 
that we commercialize cellulosic ethanol as rapidly as 
possible.
    I thank you, Mr. Chairman, Senator Salazar, for your 
leadership on these issues in the past, and I look forward to 
working with this Congress as we move this agenda forward.
    The Chairman. Thank you very much.
    General Wald, welcome back, and go right ahead.

STATEMENT OF GENERAL CHARLES F. WALD, USAF (RET.) REPRESENTING 
 SECURING AMERICA'S FUTURE ENERGY, ENERGY SECURITY LEADERSHIP 
                            COUNCIL

    General Wald. Thank you, Mr. Chairman. Nice to see you 
again. Senator Salazar, thank you.
    The previous members all mentioned security and 
vulnerability. Obviously that's my expertise and interest, and 
how I got into this area was as the former deputy commander of 
the European Command, which includes 92 countries, mostly 
Europe, obviously; Russia; Africa; the Caucasus; as well as 
Israel.
    In our review of the strategic mission we had post-9/11, 
and obviously with NATO not having the mission to counter the 
Soviet Union, it became apparent we had to review whether we 
needed 115,000 troops in Europe anymore. And during our review 
it became apparent that there are obviously threats that still 
exist, we know that: terrorism, the proliferation of WMD 
potentially.
    But also it became apparent that energy security is a 
military mission. That's what we have been doing for years. In 
1980, then-President Carter announced the Carter Doctrine that 
said that oil from the Middle East was a vital interest to the 
United States and we would use military force to ensure that 
flow if we needed to. And I think that became pretty much the 
standard and we made that acceptable. Unfortunately, that 
became the standard for the rest of the world.
    About a year ago I was in Kazakhstan discussing critical 
infrastructure with several oil executives, and before we 
started to discuss where those vulnerabilities might be, one of 
them stood up and said, ``I'd like to thank you, General Wald, 
and the U.S. military, for ensuring the free flow of oil around 
the world.'' And I thought that was a nice comment, but 
telling.
    Ninety percent of all the oil in the world is owned by 
nationally-owned oil companies, most of those in unstable or 
unfriendly countries. And much of that oil that comes to the 
free world, fungible as it is, comes through very vulnerable 
straits. Matter of fact, almost 50 percent of all the oil in 
the world travels through places like the Straits of Hormuz, 
the Malaccan Straits, et cetera.
    Now we're starting to be the benefactors of oil from the 
Caspian Sea, which is a good place, but vulnerable, as well as 
the west coast of Africa. And predictions are within the next 
15 years we'll be importing 40 percent of our oil from the west 
coast of Africa. I've spent a lot of time there, and the west 
coast of Africa does not have the military capability to 
protect those assets.
    $100 billion of U.S. money from our industry will be 
invested in that area over the next 15 years. Again, the 
expectation I think will be that the U.S. military is ready and 
able to take up that mission of protection. I think that's a 
burden-sharing issue for the rest of the world.
    In the interim, I believe alternatives--and reducing our 
addition has been mentioned--is critical, and I still think 
that will take 10 to 20 years. So I would first of all applaud 
your efforts and thank you for your efforts in this, reducing 
the vulnerability, and I look forward to answering any 
questions you may have. Thank you very much.
    The Chairman. Thank you very much.
    Dr. Pershing, with the World Resources Institute, thank you 
for being here.

 STATEMENT OF DR. JONATHAN PERSHING, DIRECTOR, WORLD RESOURCES 
                           INSTITUTE

    Dr. Pershing. Thank you very much, Senator. I appreciate 
very much the opportunity for the World Resources Institute to 
participate in this session. We are a research think tank which 
focuses on global environmental problems, and to that end also 
look for policy solutions that can be pragmatic and successful.
    On the issue of biofuels, we believe that the biofuels 
offer enormous potential, but that our policies have to be 
carefully designed if we are to contribute to meeting both our 
environmental and our energy security goals. I want to make 
just three points.
    The first one is that we are not convinced that the current 
set of biofuels policies are being entirely correctly 
undertaken. For example, it's not clear we take account 
adequately of environmental damages, including water, 
fertilizer, soil, soil loss, erosion, diversity loss, in the 
design of the current programs. To a certain extent the focus 
on corn rather than cellulosic ethanol as a key feedstock 
creates some questions, but in other areas, things like our 
flexible dual fuel standards for vehicles, we create some 
perverse incentives around issues like efficiency.
    The second point I would like to make is that there are 
ways that we think we could do it right, that would be 
consistent with policy objectives that we hold closely. We 
should actively pursue the commercialization of cellulosic 
solutions, but we need to be careful. Not all cellulosic 
options are the same. Not all feedstocks are equal.
    We should invest in research to minimize the environmental 
impact of the crop choices. We should provide incentives for 
best management practice, such as conservation tillage. We 
should develop incentive policies that are based on the 
characteristics of the fuel that we want to encourage instead 
of the fuel itself. If we do these kinds of things, we would 
encourage what I would call good biofuel. We would meet both 
the energy and the greenhouse gas criteria that we hold, 
instead of developing a biofuel solution which meets neither.
    The third point, biofuels have to be part of a set of wider 
priorities, a portfolio that in the transport sector includes 
modal shifts, vehicle technologies, and other fuel options. The 
climate emissions and the energy security that we have all 
spoken to should be the guiding principles that give us those 
criteria. If we adopt those points and frame our solutions in 
that manner, we can have a significant impact in both areas and 
allow this to be a very successful policy outcome instead of 
one that is not as manageable.
    We look forward to participating with you and working with 
you as you work in this important area. Thank you.
    The Chairman. Thank you very much. Let me ask a few 
questions and then defer to Senator Salazar, and then we'll do 
another round if others haven't arrived.
    Let me start with this issue of too much focus on corn and 
not enough focus on cellulosic feedstocks. That seems to be a 
recurring theme in a lot of what I heard from you folks. We 
tried, in the EPAct 2005, at least at one place, to incentivize 
the development of cellulosic ethanol by saying that in 
reaching the goals for blending of ethanol into the fuels used 
in the country, we would give credit for cellulosic ethanol of 
2.5 gallons for every gallon of grain-based ethanol.
    Now, that became sort of a dead letter because obviously 
the development of ethanol generally has been so substantial 
that it looks like these goals are not a real concern of 
anybody. We're going to blow right past them. What else could 
be done, what else needs to be done to be sure we've got enough 
focus on development of these cellulosic feedstocks and don't 
get into a circumstance where we're putting all of our 
investment into corn-based ethanol?
    Now, Mr. Dinneen, I know this is an issue near and dear to 
your heart. Why don't you give us your view?
    Mr. Dinneen. Thank you, Mr. Chairman. First of all, I'd 
like to reject the notion that there are good biofuels and bad 
biofuels. I mean, biofuels in general are going to be better 
than gasoline, and I don't think that there's ever going to be 
a situation where cellulosic ethanol replaces corn-derived 
ethanol.
    Corn is going to continue to be an important domestic 
market for farmers. The corn ethanol industry today is 
revitalizing rural communities. When I go to an ethanol plant 
opening, and I have to go to them quite frequently these days, 
I look at 1,000 farmers that are gathered celebrating the 
opening of a new business, perhaps the first new business that 
has come to that community in 20 years. And it's a facility 
that they invested in, and they recognize that it is going to 
provide a tremendous economic stimulus to their area, that's a 
very positive thing.
    That's one of the reasons this policy has been so 
successful. To try to demonize corn-derived ethanol I think 
misses the bigger picture, which is that we need to be doing 
everything possible to promote all biofuels. Corn ethanol will 
certainly have a role. Corn ethanol can't do it all, but it's 
going to be a part of the future. There are limitations to what 
we're going to be able to produce from grain, and that's why 
there isn't a corn ethanol producer that I represent that 
doesn't have a cellulose-to-ethanol research program underway, 
because they know that that is a part of the future.
    The Chairman. To push back a little bit, I agree with you 
that there are not good biofuels and bad biofuels, but would 
you agree that there are good biofuels and better biofuels from 
the perspective of getting our energy needs met?
    Mr. Dinneen. I'm not in a position to disagree with you 
vehemently. How's that?
    The Chairman. All right. All right. Mr. Conover?
    Mr. Conover. Thank you, sir. I want to say that I would 
subscribe to much of what Dr. Pershing said. And I think the 
way to think about this, as you put it, is good biofuels and 
better biofuels. In addition to the ability to make a dent in 
our dependency issue, you've also got life cycle greenhouse gas 
emissions issues.
    There's a real possibility with cellulosic ethanol that you 
will have negative emissions on a life cycle basis, given the 
fact that you could use the lignan that is a byproduct of the 
process to actually power the plants themselves. So there are 
clearly better biofuels from an environmental standpoint.
    The point--and I certainly don't want to demonize corn 
ethanol because, as Mr. Dinneen points out, it is better than 
gasoline. There's no question about that. But one of my jobs in 
government was the director of the Climate Change Technology 
Program, and the issue for--it's sort of a philosophical 
issue--Federal subsidies really ought to be targeted at what a 
lot of people in the R&D community call the ``valley of 
death.''
    And that is where you've got a technology that has been 
brought to the near-commercial stage through research, 
development, and demonstration, and it needs to get out into 
the commercial marketplace to see if it will survive or not, 
see if it will be able to compete. That's where cellulosic 
ethanol is today. It can compete, but it can't compete on a 
level playing field with corn ethanol. Corn ethanol 
profitability is extremely high.
    Yes, there are issues of natural gas prices, there are 
issues of corn prices, but from a fiscal conservative 
perspective, you ought to consider directing the subsidies 
where they are needed the most. And the only downside to the 
current system is whether the fact that we are providing very 
generous subsidies to an established, mature industry is 
preventing us from providing the assistance we need to give to 
the emerging biofuels. It's not a matter of demonizing corn. 
It's a matter of where do you need to spend the Federal 
dollars.
    The Chairman. Dr. Pershing.
    Dr. Pershing. Just one short comment about it. I don't at 
all mean to demonize corn. What I'm suggesting is that we're 
looking at a significant expansion in the total market, and as 
we expand in that market, if we are to stay with corn, the 
question is where are we going to put it? Where are we going to 
grow it?
    Well, the place we grow it is by moving away from other 
crops. The place that we grow it is by moving away into 
conservation-reserved areas. The place that we grow it is 
moving into marginal lands. In all of those cases there are 
potential environmental consequences that we have to be careful 
about, we have to manage.
    It doesn't mean that corn is bad. It means we have to think 
about designing policies that let us move forward appropriately 
as we expand the market. Cellulosic ethanol offers different 
choices, an expanded set of choices which, on balance, seem to 
have more positives than expansion, simply thinking about the 
corn structure as it exists today.
    The Chairman. Yes, Mr. Detchon.
    Mr. Detchon. Mr. Chairman, I would just say I think that 
corn can be produced well or it could be produced badly, and 
cellulose can be produced well or it can be produced badly. We 
are trying to move toward better biofuels, but more 
importantly, more biofuels.
    And I think that if you think about how to incentivize 
that--you noted that the RFS has had little effect because the 
industry has way overshot the targets. But there is a general 
consensus, that I think Bob would agree with, that the corn 
industry is going to be limited to somewhere in the 
neighborhood of 15 billion gallons.
    If the Congress embraces the President's goal of 35 billion 
gallons by 2017 and puts that into a predictable ramp-up, now 
you are creating the investor confidence to make the next 
generation of technologies move forward, and that's the most 
important thing. There's a lot of money moving into this area 
in the private sector, but the need is to have some assurances 
to have a market. So the reverse auction that was contained in 
EPAct was a useful tool. And a higher RFS, too, that would go 
beyond the reasonable expectations of corn supply, will also 
drive us toward the cellulosic future.
    The Chairman. Let me call on Senator Salazar for his 
questions.
    Senator Salazar. Thank you very much, Chairman Bingaman, 
and thank you for putting the spotlight on biofuels and the 
importance of biofuels with respect to our energy future.
    I also want to just say thank you to the members of the 
panel who are here, who are interested in this issue, and to 
the members of the audience who are here. I saw my good friend 
Dan Arvizo, the director of the National Renewable Energy Lab, 
who is going to be on a panel later on this afternoon. We very 
much look forward to his vision on what the possibilities are 
of some of the things that we are talking about here.
    To the Energy Future Coalition and to all of you who have 
been involved in the 2525 effort with Senator Grassley and 
myself, I appreciate that very much. At this point we have, I 
think, 25 original cosponsors of that legislation, and I think 
it will continue to grow in terms of the kind of support that 
it has.
    I have a couple of questions for you. We probably have--
I've not counted the bills, but certainly there are dozens of 
bills that deal with energy. I think there is a general 
recognition here in this capital that energy is one of the top 
two or three signature issues of the 21st century.
    And I guess the first question that I would ask of you is, 
how far do you think we can go? Is the expectation, as set 
forth in our vision, of producing 25 percent of our energy from 
renewable energy resources by the year 2025, doable? Is it too 
modest and insufficient a goal? Could we do better? If we could 
do better, how could we do better? So I would ask you to all 
respond to that question very briefly.
    And the second question that I would ask you to respond to 
is a continuation to the set of questions by Senator Bingaman, 
and that is that there has been a lot of focus on corn and 
ethanol. In my State I see four plants today functioning that 
weren't there 2 years ago. I very much am a supporter and the 
No. 1 cheerleader of that effort, but I also know that as we 
transition from corn over to cellulosic ethanol, that there are 
some challenges before we can make cellulosic ethanol 
commercially available out there in the market, the way that we 
now use corn ethanol. And I would ask each of you to give, in a 
very short way, what your top two recommendations would be, to 
this committee and to this Congress, as we move forward, to try 
to incentivize and to encourage bringing onto the menu of 
renewable energies cellulosic ethanol.
    So why don't we start with you, Reid, and we'll just go 
down the table.
    Mr. Detchon. Thank you, Senator Salazar, and thank you 
again for your leadership on 2525.
    With regard to the doable question, I think that 2525 is 
clearly doable. I'm sure you are all familiar with the Oak 
Ridge so-called billion ton study that indicated that we could 
easily harvest more than a billion tons of biomass from 
America's lands without disadvantaging food, feed, and export 
markets. So the biomass is there.
    And on the electricity side, we have a range of 
alternatives, including solar, wind, geothermal, and 
hydroelectric. Just with respect to wind, for example, as I'm 
sure you also know, the administration set a target of 20 
percent of our electricity coming from wind. If you can get 
that much from wind, getting the next 5 percent is already a 
done deal. So 2525 is not a problem.
    But when you think about this in a context--and I'll give 
you the example on the transportation side--we're moving, in my 
opinion, toward electricity as being the fuel of choice for 
vehicles. The Chevrolet Volt, that concept vehicle they just 
had out in Detroit, is sort of the first edge of that. Built on 
an electric platform, so you don't have a conventional drive 
train, and using liquid fuels to recharge the battery as you're 
going along, so you have the range that you need.
    If you go that path, and you get clean electricity from the 
grid, supplemented by clean biofuels, petroleum is out of the 
picture completely and your greenhouse gas profile is very 
good. So that's a very attractive package to look at 
incentivizing. And toward that end, efforts to improve battery 
performance for those kinds of cars, I think, are the highest 
priority.
    With regard to what we need to do, I think that the loan 
guarantees providing in EPAct are a very important first start. 
As Dave said, it's very important that that got covered in the 
CR, and we're very pleased about that. We think the reverse 
auction is a very attractive mechanism for early entry fuels, 
and again, EPAct authorized that but we don't have 
appropriations to it.
    And then, last--and I think a lot of you have been thinking 
about this--probably the slowest-moving piece of this puzzle is 
the availability of fuel to consumers. It would be natural for 
the existing petroleum-based infrastructure to be less than 
enthusiastic about marketing an alternative product on their 
sites, but this is a problem that needs further attention.
    How do we get high-blend ethanol and other biofuels more 
available in the market to consumers? We now have more than 6 
million flexible-fuel vehicles out on the road today. Where are 
they going to get fueled? That's an important problem for 
further review.
    Senator Salazar. So you would say that one of the things 
that we could do in this Congress is to move forward to 
incentivize a change of the infrastructure so that these 
alternative fuels are in fact available to consumers all across 
the country, moving from a limited availability now to a much 
broader availability?
    Mr. Detchon. Yes, sir.
    Senator Salazar. OK. David.
    Mr. Conover. Thank you, sir. I again agree with much of 
what Reid said. The commission doesn't take a position on what 
a specific goal should be in terms of the use of renewable 
fuels, and in fact the commission is perhaps more concerned 
with the issue of zero-emitting sources of energy. And so, as 
Reid talks about plug-in hybrids, if a plug-in hybrid is being 
fueled by an IGCC coal plant that's fully sequestered and there 
are no emissions associated with it, that addresses the climate 
change and the international dependency issue as well as some 
of these other questions.
    So with respect to the most important things that this 
Congress can do, and staff hates to hear this, but yes, fund 
the things that this committee authorized. This committee did 
an outstanding job in crafting energy legislation that was 
signed into law in 2005. The Appropriations Committee needs to 
follow suit, and they need to fund those programs that you 
authorize. That will perhaps make the largest difference of 
all.
    I think an issue that maybe you won't hear a lot about 
today, that will also be important as we grow the ethanol 
industry, is consumer preference. Due to the lower energy 
density that ethanol has as opposed to gasoline, you will end 
up taking more trips to the gas station if our vehicle 
efficiency stays stable. And so one of the important things 
that this Congress can do is pass, reform, and strengthen a 
CAFE system that will in turn make ethanol fuel more attractive 
to consumers by increasing the range of the vehicles that are 
fueled by it.
    Senator Salazar. Bob.
    Mr. Dinneen. Thank you, Senator. I would say that if you go 
the route of looking at an additional standard, don't be shy 
about giving a big, bold number. When we had the debate over 
the renewable fuels standard 2 years ago, there were a lot of 
people that said, ``7.5 billion gallons, that's an awful lot of 
ethanol. How are we doing to get there?'' And there were a lot 
of doubters that the industry would be able to respond by 2012.
    Well, responding to the marketplace signal that was given, 
we're going to have 7.5 billion gallons by July 4 of this year, 
not 2012, and we're looking at a time when we will have 14 or 
15 billion gallons of ethanol from grain, but we do need to go 
beyond that.
    And indeed what the President established when he gave his 
State of the Union speech and he talked about a 35 billion 
gallon goal, that's a very aggressive goal, but one that would 
be eminently achievable if the right tools are in place to 
assure that the marketplace can respond. It is a goal that will 
indeed incentivize cellulosic ethanol and make sure that the 
marketplace responds with the necessary R&D----
    Senator Salazar. Is that goal high enough, Bob, or would 50 
billion be something that would be achievable? Would 60 
billion? What's the right goal?
    Mr. Dinneen. I'm not sure that I've seen a goal yet that I 
would say isn't high enough.
    Senator Salazar. So your point is, be bold with our goals?
    Mr. Dinneen. Yes.
    Senator Salazar. Be bold, then.
    General Wald.
    General Wald. Senator, I'm not a scientist and I'm not an 
expert on biofuels, other than I know we need energy. And I 
would say that a couple things come to my mind as I hear--the 
solutions I think are all admirable but, as was mentioned 
earlier, it's going to be multifaceted.
    But the thing that strikes me most of all is that even if 
we were to have an epiphany of commitment today by all the 
different types of alternate fuels, it would take us--as you 
point out in your support of the 2525 initiative--until 2025 
to get there, and then it's only 25 percent of what we use.
    So we're always going to have some dependency on oil, it 
appears. In my time in Europe or overseas, which was 15 years, 
I went to 125 countries and I've seen many things, but it's 
striking how vulnerable some of the places that much of the 
energy that we're dependent upon are to disruption or lack of 
security--in Georgia, in Azerbaijan, off the coast of Africa.
    I am encouraged by the fact that we have a commitment by 
Senators like yourself, and this country is mobilized now to 
address the problem, but it's going to be multifaceted. It's 
going to take huge national leadership, and I think we need to 
do this in the very near future, because what oil has become to 
this country is basically an asymmetric threat somewhat similar 
to terrorism. I don't want to be alarmist or overembellish 
this, but the fact that countries can now direct or drive what 
our foreign policy is is something we're not necessarily used 
to, and we're going to become more and more vulnerable to that 
in the future unless we take broad and immediate action.
    So thank you.
    Senator Salazar. Thank you, General Wald.
    Seeing that my colleagues are here and we only have about 
15 minutes left on the panel, I'll take your answer privately, 
Dr. Pershing, later on.
    I'll go ahead and yield, Mr. Chairman.
    The Chairman. Let me call on Senator Corker to ask his 
questions. He was the next here.
    Senator Corker. I'll yield to more senior members.
    The Chairman. Let me then call on Senator Domenici. He was 
right after you.
    Senator Domenici. Thank you very much, and thank you, 
Senator. You don't have to do that. There is no precedent here. 
If you have questions, you should go ahead and take them, but 
I'm most appreciative.
    I want to explain to my chairman and to all of you why I 
was late. I think what I say will apply to Senator Craig. We 
both were at the National Prayer Breakfast over here at the 
Hilton Hotel on--what is it?
    Senator Craig. Florida and Connecticut.
    Senator Domenici. Yes, Florida and Connecticut. And we got 
caught in traffic, I got caught in local traffic down here, and 
we apologize for being late, but not for where we went. It was 
a very outstanding place. We even had a gigantic scientist of 
our day speak as a believer, which was rather interesting. 
Usually you can't get anybody in the science community to talk 
as a believer, but he was the speaker and was very glad to do 
it.
    And he's a geneticist besides, one who works on genes and 
how it affects us, which is good.
    I'm going to try to be brief. I don't know what has gone on 
so far, or what is more appropriate elsewhere. You can tell me, 
Senator. How quickly could flex-fuel vehicles be introduced 
into the Nation's fleet of automobiles?
    And I'll just piggyback on that, the CAFE standards, as 
written, allow automobile manufacturers to receive credit for 
flex-fuel vehicles toward their CAFE obligations even if these 
vehicles never actually ran on biofuels. Should we eliminate 
this flex-fuel loophole, or is it a useful way to encourage the 
manufacturing of flex-fuel automobiles? I don't know, whomever 
is best at it.
    Mr. Detchon. Senator Domenici, one thing you missed by 
being absent was a fair amount of praise for the Appropriations 
Committee for including the loan guarantees in the continuing 
resolution, and I want to particularly recognize your 
leadership on that. It is much appreciated and it's going to be 
very important.
    Senator Domenici. You mean in the CR?
    Mr. Detchon. In the CR.
    Senator Domenici. We got $4 billion. Senator Bingaman and I 
have looked it over and we have seen how broad its application 
is, and we think they missed a zero. We think it should be $40 
billion. We'll be working on that.
    [Laughter.]
    Mr. Detchon. That's what I would call an aspirational 
target.
    Senator Domenici. We'll get a lot more than $4 billion 
before the year is out.
    Mr. Dinneen. Needs more prayer.
    [Laughter.]
    Senator Domenici. We'll get that, too. Dr. Pershing should 
answer my question.
    Dr. Pershing. Thank you, Senator. I would like to echo the 
comments made about the importance of the work you've been 
doing historically to move all of these issues forward. It 
makes a great deal of difference.
    The question you have asked strikes me as a critical one, 
and it comes down to the issue about where standards are set 
and how to make sure that we don't create loopholes that are 
unintentional. In this particular circumstance, what has ended 
up happening is that a trivial, small fraction of the vehicles 
that are labeled as flex-fuel vehicles use any form of biofuel. 
The vast majority are in areas where there is no gasoline 
station that sells ethanol.
    The consequence of that is that we have in fact lowered the 
standards, because those vehicles do not get the kind of 
efficiency that a gasoline vehicle would get. It seems to us, 
as we look at that, that as you develop your policy you want to 
create incentives that avoid that kind of perverse outcome, and 
there are ways to do it: Set up standards that are manageable 
across the board; think about things that move you to 
incentives that are life-cycle-based, not just ones that are 
exclusive to one technology; open up the doors so that when you 
look at these life-cycle questions, those issues don't 
contradict areas in other policy that we're seeking to move.
    I would highlight narrowly the question of efficiency. I 
think all the people on the panel have spoken about this being 
one part of our solution. Clearly we can get to a much higher 
level, to answer Senator Bingaman's question, a much higher 
level than a 25 percent share. We can much more easily do it if 
we have cut the total consumption in half through efficiency 
programs. Then it's actually a matter merely of moving the 
technologies we've all spoken to into the market, and those are 
the policies you're working on.
    Senator Domenici. Very good.
    Mr. Dinneen. Senator, if I could just briefly add to that. 
I agree with much of what Dr. Pershing just said, but I do 
think some credit needs to be given to the domestic auto 
manufacturers for the commitments that they have made in the 
production of flexible-fuel vehicles. A couple of months ago 
they made a commitment in the White House to produce as much as 
50 percent of their vehicles, beginning in 2012, as flexible 
fuel.
    There are 6 million FFVs on the road today. That's a small 
fraction of the total number of vehicles that are on the road. 
There are only about 1,000 E85 refueling stations across the 
country, a small fraction of the number of gasoline stations 
that there are.
    But you need three components to make the E85 market work: 
You need more vehicles, you need more infrastructure, and you 
need more ethanol. If you're going to be able to satisfy that 
market, you really do have to be able to produce significantly 
more volumes of ethanol that can be used to satisfy the blend 
market today, so you need to crack the code to be able to 
produce ethanol from cellulose.
    All of this is happening, but it really doesn't serve much 
of a purpose to criticize how little is happening today, 
because the marketplace is evolving, there are more vehicles 
coming on-line, and there are more stations all the time. We 
are working as hard as we possibly can to crack the code to 
produce ethanol from cellulose. It's not going to happen 
tomorrow, it's not going to happen next year, but in 7 years, 
in 10 years, you can indeed have a meaningful E85 market and be 
making a real dent in this.
    Mr. Conover. Senator, if I could on this, I agree with much 
of what Bob has said. The vehicle issue is less of a challenge. 
It's only roughly $100 to modify engines to be flex-fuel cells. 
Obviously when you multiply that by the number of vehicles out 
there, that's a big number, but it is not a big burden.
    The infrastructure issue is a bigger challenge, and one of 
the recommendations that we are making today is that we not be 
wedded to E85 as the next step. We don't have to go from E10 to 
E85 to grow this market. If we can go from E10 to E20, and if 
there are fewer impacts on existing infrastructure and delivery 
systems, then that will more quickly grow this market at a 
lower cost to consumers, at a much greater ease of 
technological sophistication. So we would urge this committee 
to examine that issue. What will it take to get us from E10 to 
E20 in a very near time?
    Mr. Detchon. A brief word in support of the existing CAFE 
credit. If you think about the problem of trying to introduce a 
high-blend ethanol into the market, it would be foolhardy to 
develop a major production industry and have no cars that can 
run on it. This has been an effective tool to get ahead of that 
problem, since we do have 6 million cars on the road and the 
automakers are willing to ramp up production very rapidly. What 
they feel constrained by is lack of demand for ethanol, just as 
everybody is concerned here. Let's address that problem by 
dealing with the infrastructure issues, and not figure out ways 
to penalize the automakers for doing the right thing.
    Senator Domenici. Thank you very much.
    Senator Bingaman, I might be prepared to yield, and you can 
go with whoever you think is next, but I was going to say to 
all of the Senators, but in particular you, if we are going to 
be continuously burdened by having a low level of numbers for 
our loans, for our guaranteed loans, and things like $4 billion 
get eaten up like nothing but they go to the wrong places, and 
it seems to be even $10 billion or $12 billion would go to the 
wrong places, it does make sense, it would seem, for some of us 
to ask the Secretary to work on the supply that he has so as to 
have dual purpose, so as to develop the technology but also put 
the technology that's most needed in the infrastructure arena, 
but that first. Otherwise, we could dot all over the place and 
still not do maximum infrastructure development with a short 
supply of loan guarantees.
    I talked to Larry, and I don't speak for him, but I think 
he agrees that the Government doesn't understand what we're 
talking about. The Government doesn't get hurt by these loans. 
They don't even lose any money. Why they can't just have a 
giant portfolio of them and watch them carefully, I don't quite 
understand. So we'll have to work. And if you agree with me, we 
just have to work on that.
    Thank you very much.
    The Chairman. Well, thank you very much. Let me just alert 
everybody. We're within 4 or 5 minutes of having to finish this 
panel, unfortunately, if we're going to stay somewhat on time. 
We have two other Senators who indicated they have questions. 
Let me call on each of them, and they can ask a question or 
two, and if we could get quick answers, that would sure help us 
a lot.
    Senator Cantwell.
    Senator Cantwell. Well, thank you, Mr. Chairman. I think 
Senator Craig walked in before I did.
    The Chairman. Oh, did he? OK.
    Senator Craig.
    Senator Craig. Well, all right.
    The Chairman. It makes no difference if we----
    Senator Craig. I will be brief. I have one question. Prior 
to asking that, General Wald, thank you for your message on the 
sense of urgency as it relates to security and energy. I 
started speaking out about petronationalism early last year, 
trying, at least to my audience, to say we have a very real 
problem here and it's getting worse, not better, and it will 
change the character of our foreign policy and our Nation if 
we're not helpful. Thank you for your message. I hope it's 
getting out. I think it is. I think people are beginning to 
listen.
    My question is for all of you, and you can answer it 
quickly and individually. DOE, because of its failure in coal 
to liquids, is scared to death of loan guarantees, and they are 
nitpicking and doing something that is frustrating to all of 
us, and I think Pete just referenced that. So is USDA a better 
place for this than DOE? They have been in that business for a 
long while. They seem to be able to handle it.
    We have a farm bill coming up, and we have an opportunity. 
Should we move exclusively or substantially in that direction, 
and away from an agency which has not done this well or is 
fearful? I don't see any losers here, but I will tell you we're 
missing windows of opportunity and at a time, in my opinion, 
that is critical to our country.
    Anyone want to respond to that observation?
    Mr. Conover. Well, sir, as a relatively recent refugee from 
DOE, I am going to say that there are a lot of folks over in 
that building that want to make that program work. And I think 
that there is room in this--as Senator Domenici pointed out, 
there is room in this market for a proliferation of loan 
guarantee programs, so I would very much encourage the Congress 
to beef up USDA abilities in this regard, as well as DOE's 
abilities in this regard.
    Senator Craig. General.
    General Wald. Senator, first of all, I am not an expert on 
bureaucracy, so whether it's in USDA or DOE, I would----
    Senator Craig. Neither am I, but I don't want to be a 
victim of it, either.
    General Wald. I agree, but I will say that I think you've 
asked the right question. That is one of the serious issues I 
think our country needs to face, how are we going to take 
advantage of coal. And I know it's a serious issue on climate, 
and I understand that, but from a security aspect, we have a 
huge opportunity to take advantage of coal.
    I had the opportunity to briefly discuss this with Senator 
Cantwell the other day by the train, and I mentioned that she 
asked during the last hearing why we don't help China with coal 
technology, from a climate aspect, and I think there's some 
benefit there.
    But my point would be that I think--as Senator Domenici 
mentioned, I think it becomes a governmental issue now on how 
are we going to assure that we can produce clean coal. The 
benefit of that asset would be hugely important to getting off 
this dependency on imported oil, and I think when the standards 
and regulations are established that say this is what the 
standard for that coal is, we're going to make a huge step 
forward in getting off that dependency. So thank you for that.
    Mr. Dinneen. Senator, if I could just add really quickly, 
DOE has had some reluctance, it seems, to move forward with 
their loan guarantee authority. I do think that that attitude 
is changing, and I do think they are certainly capable of doing 
it and they seem to have a new commitment to it. But I believe 
that USDA has had some expertise in this. They are enthusiastic 
about building a renewable fuels industry, and from my 
perspective, all the better.
    There are companies that have been waiting for years, 
literally, for a loan guarantee program to finally hit the 
streets, because they are ready with technology. All they need, 
as a first supplier of this new technology, is a loan guarantee 
from the Federal Government. So as soon as somebody hits the 
street with it, you are going to see commercial cellulosic 
ethanol facilities built, and it can't happen fast enough.
    Senator Craig. Thank you. I concur.
    The Chairman. Dr. Pershing, why don't you give us your 
view, and then we'll call on Senator Cantwell.
    Dr. Pershing. Just two very brief points. It strikes me--as 
you design your loan guarantee program, I personally believe 
that this will become a commercial technology. The loan 
guarantee program does not have to be permanent. It can be 
phased down over time.
    The second point is, with regard to the comment made by 
General Wald, I agree that we have to think about how we do a 
clean coal system. I do not believe that coal-to-liquids needs 
to be part of the transport infrastructure to do that. The 
effectiveness of a capture and storage program under the 
liquids solution is not very promising. We can use alternative 
technologies like the ethanol structure, like cellulose, like 
efficiency, like plug-in hybrids, which would allow us perhaps 
to use coal on the electricity side.
    The Chairman. OK. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman, and thank you, 
gentlemen, for the discussion this morning on what at times 
seems to be the chicken-or-egg discussion of which to do first 
to jump start this market to a full run.
    In the Northwest we certainly have developed a great deal 
of use for biodiesel--that is, public school buses, military 
vehicles, our ferry fleet, more cars per capita than just about 
anyplace else--so it's no surprise that we also sold out of all 
the biodiesel that we had, and that the largest biodiesel 
facility in the country didn't produce 100 million gallons all 
last year, and this facility will now produce that, because 
that market was there and demonstrating that capacity.
    So my question is on infrastructure. What should we either 
incent or mandate as it relates to the distribution of 
alternative fuels? And, second, do any of you think, given what 
you have already said this morning on the cap-out of U.S. 
production of ethanol, that we need to do something to further 
establish that market by getting other sources of ethanol?
    Mr. Detchon. Senator Cantwell, I think with regard to 
infrastructure, the----
    Senator Cantwell. And specifically mandates or incentives, 
if you could.
    Mr. Detchon. Yes. I think probably it's a combination. I 
would rather not make that choice. I think that I would 
recommend a dialog with the auto manufacturers who would like 
to partner up and identify areas where they have already sold 
substantial numbers of flexible-fuel vehicles. And maybe, once 
you reach a certain trigger level, there would be a mandate in 
that region for a certain percentage of refueling stations to 
be present. I think that there are flexible ways to do this.
    And I think that, in terms of biodiesel, the only thing I 
wanted to suggest there is that I think that the infrastructure 
for using and producing biodiesel from vegetable and animal 
fats is pretty well established, but there is a very large 
opportunity to use a wide range of organic material through 
gasification and conversion to liquid fuels, and I think that's 
an area we have underinvested in historically.
    Senator Cantwell. Thank you.
    Mr. Conover. Let me just quickly add, because I don't 
believe you were able to be here when I made the point earlier, 
the biggest mandate that's missing--and it was part of the 
commission's 2004 report--is fuel economy for vehicles. Given 
the lower energy density of ethanol, there's going to be 
consumer reaction, the more we grow this market, to the reduced 
range that they get in driving their vehicles with greater 
blends of ethanol. So increasing the Corporate Average Fuel 
Economy standards is one of the single most important steps 
this Congress can take to reducing our dependency on foreign 
oil.
    Senator Cantwell. I actually did catch that part of your 
comments. So do you support mandates or incentives for other 
infrastructure, or do you think we should just pass on that and 
focus on CAFE?
    Mr. Conover. Both have a place, mandates and incentives, 
but you've got strong elements of each of those in the Energy 
Policy Act of 2005, and the greater challenge there is ensuring 
that the Appropriations Committees on both sides of the Hill 
fund the programs you have authorized.
    Senator Cantwell. What mandates on infrastructure do you 
think are there, that say this is how many alternative fuel 
stations and infrastructure should be built?
    Mr. Conover. I think--this is not a commission policy, but 
I think it's instructive to look at Security America's Future 
Energy and their Energy Security Leadership Council's 
recommendations that came out recently, where they call for 
mandates on a growing percentage of fueling infrastructure at 
stations that are part of the branded family of stations. You 
don't want to put a mandate on the small mom-and-pop gas 
station, but for the larger businesses, a mandate may be an 
appropriate way to go.
    Senator Cantwell. Thank you.
    Mr. Dinneen. Senator, I think I have just a couple of quick 
points. One, I think the infrastructure that exists today is 
certainly capable of handling the market that is there today in 
terms of ethanol and biodiesel as a blend component in gasoline 
and diesel fuel. Ethanol today is blended in 46 percent of the 
Nation's fuel, and we are shipping coast to coast and border to 
border, and that infrastructure is there.
    When you start talking about much greater volumes of 
ethanol or other biofuels, if you're meeting a vision of 35 or 
60 billion gallons, then different infrastructure challenges 
certainly develop. But I think we're going to be a lot smarter 
because I think that we may not know as yet just what those 
infrastructure challenges are.
    As the ethanol industry is building, we're building far 
beyond the Grain Belt. We're building plants in Washington, in 
California, in the Southwest and the Southeast and the 
Northeast. Our industry is developing with smaller production 
centers all across the country. It's going to be a much 
different infrastructure challenge than what you have today, 
where much of our petroleum infrastructure is based off of a 
production center in the Gulf Coast.
    Senator Cantwell. So just to be clear--because I want to 
move on, because I want to get, Mr. Chairman, to have the next 
panel called--you are agnostic about mandates or incentives, or 
you're just wait and see what happens?
    Mr. Dinneen. There are different elements of this question. 
Are you talking about pumps----
    Senator Cantwell. I'm talking about infrastructure. I'm 
talking about the delivery system. I'm talking about ensuring 
for the producers that the delivery system exists.
    Mr. Dinneen. I think we need to understand how the market 
is going to develop, to understand what the needs are, to get 
the product from the production facility to the marketplace. 
There are incentives in place at the gasoline retail level that 
I think are sufficient and will develop further as the 
marketplace develops.
    Senator Cantwell. Dr. Pershing.
    The Chairman. Yes, Dr. Pershing, why don't you give us the 
final word, and then we'll go on to the next panel. Thank you.
    Dr. Pershing. Thank you very much, Senator. I wanted to 
only answer briefly the last of your questions about the 
international part of the community. It strikes me, as we look 
at the development of both cellulosic and corn and other forms 
of starch-based ethanol, we have significant environmental 
questions.
    As Brazil moves into expanding its reach, it's mostly doing 
so by moving into rain forest. As Indonesia moves into 
detropha, it mostly does so by cutting down the rain forest. As 
we look at China, which has proposed not to have any additional 
starch-based ethanol because it runs into food problems, 
they're looking now at cellulosic. If we could develop that 
technology, we could be an exporter of the technology and an 
importer of a much cleaner source of fuel without getting into 
these other environmental constraints that we should worry 
about.
    Senator Cantwell. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, and thanks to this panel. I think 
it's been very useful testimony.
    Why don't we have the second panel come forward. Could the 
witnesses please be seated, and we'll put the signs where you 
sit.
    Let me go ahead and introduce the panel, and then we'll 
have each of them take 2 to 3 minutes and give us the main 
points they think we need to understand, and then we'll go to 
some questions.
    First, we have Larry Mitchell, who is the CEO of the 
American Corn Growers Association. Second, Richard Moskowitz of 
the American Trucking Association. We appreciate both of them 
being here. David Terry, with the Governors Ethanol Coalition. 
Dr. Robert Fraley, who is the executive vice president and 
chief technology officer with Monsanto Company. Toby Bostwick, 
who is president of New Mexico Sorghum Producers. And Ken 
McCauley, who is president of the National Corn Growers 
Association.
    So we're glad to have all of you here. Why don't we just go 
across the table from our left to our right, please.

    STATEMENT OF LARRY MITCHELL, CEO, AMERICAN CORN GROWERS 
                          ASSOCIATION

    Mr. Mitchell. Thank you, Chairman, members of the 
committee. My name is Larry Mitchell. I'm with the American 
Corn Growers Association, but I'll tell you right off the bat, 
representing the corn producers, we will be the first to tell 
you that we think that ethanol must be much bigger than just 
corn and much bigger than just Midwestern. We believe that we 
can make ethanol out of just about anything in every State, and 
the key to this entire process is to decentralize and get 
diversity in the field stocks that we use. And to see where 
we're going, we need to sort of do a quick review of where we 
came from.
    I'm a fifth generation farmer from Texas, but I'm only the 
second generation to start out farming using petroleum as my 
energy source. A hundred years ago most U.S. farms used half of 
what they produced to fuel that farm, because we had a huge use 
of people power and, more importantly, horsepower. Also, a 
large percentage of the other half of what we produced also 
went for the local economy. So going to a local-based, farm-
based renewable energy system certainly isn't something new. 
It's something that we're finally returning to after 100 years 
of the petroleum age, an age that may well be half over.
    Also, a review. It was mentioned this morning about 
national security and international security, we are about to 
start our fifth year of a war in Iraq that is a war and we are 
there for many, many reasons. And one of those reasons of 
course is the liberty of the Iraqi people, but the other is the 
liberty of Americans and the liberty of our lifestyle and our 
energy systems.
    And so if we look back at previous conflicts, and realize 
that when FDR was building his arsenal of democracy to defeat 
the evil people at that time, he reached out to some very, very 
good people, his dollar-a-year men as he called them, and other 
folks such as Henry Kaiser, who figured out how to float a 
Liberty ship on a pretty regular basis. In fact, in 1943 he 
floated three of them a day. Now, any nation that can launch 
three Liberty ships a day surely can figure out how to launch a 
liberty fuel refinery each week.
    You see, if we work to expand our 100 ethanol plants to 
1,000 ethanol plants scattered all across the Nation, each of 
them producing about 60 million gallons apiece, we're at that 
60 billion gallon level, which doesn't alleviate our need for 
importing petroleum but it does alleviate our need to import 
petroleum from the Middle East. I think that that is a noble 
endeavor that we should pursue.
    A couple of things while I've got just another moment here, 
things to look at in the farm bill to help us get there. We 
need a national strategic grain reserve, just as we have a 
national strategic petroleum reserve. That reserve should be 
not only for national food security but now national energy 
security, and for international famine relief. We need a 
national cellulosic reserve similar to, but apart from, the 
Conservation Reserve Program, to help farmers have the 
incentive to move to those new energy crops that we're going to 
need in the future. And we need to retain and expand the energy 
title of the farm bill.
    Some other areas we need to look at. The tax incentives 
that are in place are very critical. We need some longer-term 
extensions of those so that we have more continuity for the 
people that are financing this new industry, and that would be 
for ethanol, biodiesel, and on a side issue, wind. The American 
Corn Growers has worked very hard for 6 or 7 years now on 
expanding wind understanding and application for farmers, 
because it's also a part of this overall goal.
    We need to expand and extend the renewable fuel standard. I 
was very pleased to find yesterday that the President has 
abandoned his move to eliminate the ethanol import tariff. I 
think that he has made a good decision in abandoning that 
course of action. And we need to extend the ethanol import 
tariff because, if for no other reason, that tariff pays for 
the ethanol splash blend incentive that we have.
    Given that, I will yield the rest of my time to my friends 
down the table.
    The Chairman. All right.
    Mr. Terry, welcome.

     STATEMENT OF DAVID TERRY, GOVERNORS ETHANOL COALITION

    Mr. Terry. Thank you, Mr. Chairman, Senators. I appreciate, 
on behalf of the Governors Ethanol Coalition, the opportunity 
to be here this morning. The coalition includes 37 Governors 
across the country, in all regions, from the coasts, and 
obviously, the center of the country as well. We focus on 
expanding ethanol production and use policies in the States to 
achieve those goals, to bring the benefits of ethanol from an 
environmental, economic, and security perspective to all 
regions of the Nation.
    I just want to take a few moments to summarize the 
Governors' policy recommendations that were recently adopted by 
the Governors and released. The first among those is an 
expansion of the Renewable Fuels Standard to 12 billion gallons 
beginning in 2010, expanding on a Btu basis to 15 percent at 
2015 and 25 percent of the transportation fuel base in 2025, 
equal to about 60 billion gallons.
    The second policy recommendation the Governors have adopted 
is establishing a timetable for infrastructure, E85 
infrastructure, focusing in particular on regional approaches, 
perhaps providing competitive cost-shared incentives to the 
private sector and State and local governments, focused on 
metropolitan areas, expanding infrastructure in particular 
regions or metro areas that it makes the most sense. Also 
providing incentives for ethanol production, particularly 
cellulosic ethanol production, monetizing the current Renewable 
Fuels Standard cellulosic ethanol credit in particular.
    And, finally, providing elevated and stable funding for 
research and development and demonstration programs. In 
particular we cite the Department of Energy's biomass R&D 
program; the genomics effort, also at the Department of Energy; 
the USDA program, the biomass research and development program. 
And expanded funding for infrastructure, some of the 
infrastructure policies that we have highlighted, we feel 
that's a particularly important area.
    I would just like to thank, on behalf of the coalition, the 
Senators for support of these issues, both in the Energy Policy 
Act, but more recently in the CR as well, with regard to the 
loan guarantees, as was previously mentioned. Thank you.
    The Chairman. Thank you very much.
    Dr. Fraley, thank you for being here.

 STATEMENT OF DR. ROBERT FRALEY, EXECUTIVE VICE PRESIDENT AND 
           CHIEF TECHNOLOGY OFFICER, MONSANTO COMPANY

    Dr. Fraley. Mr. Chairman and the committee, it's a great 
pleasure.
    As I sit here today, I just remind you that we are probably 
in the midst of the most remarkable technology revolution in 
the history of agriculture. Biotechnology will have the same 
impact on crop production, food production, as what we saw in 
the 1960's with computers and electronics that have changed our 
world today. This technology promises to increase yields and 
productivity in very remarkable ways.
    Many of the crops across the United States are benefiting 
from these tools, but I think the advances, particularly in 
corn, have been very remarkable. We're seeing tremendous yield 
gains that I think assure us of meeting both the opportunities 
that we see with corn for feed, for food, and for fuel.
    In fact, I fully expect that corn grain itself can provide 
10 percent of the Nation's gasoline requirements by 2015 and 40 
percent of the Nation's gasoline requirements by 2030. And I 
remind you that in addition to the grain, that corn is also, 
through its stems and leaves, the stover, an excellent source 
of biomass for cellulosic ethanol production.
    And to put this in context, when my dad was farming 40 
years ago, the average yield for corn in this country was 75 
bushels per acre. In 40 years, we've doubled that. The average 
today is 150 bushels per acre. With these new technologies, 
based on knowledge of the corn genome and using molecular 
breeding tools, using biotechnology to introduce new genes into 
corn that can allow the corn plant to literally resist insects, 
resist weeds, provide drought tolerance, better fertilizer 
efficiency, we see the opportunity to double corn yields in the 
next 20 years, going from an average today of 150 bushels per 
acre to as much as 300 bushels per acre by 2030.
    I think it's important that there are lots of tools and 
technologies involved. There's lots of research going on in 
companies and government labs. We work with institutions like 
Sandia and others to bring these tools together in an 
integrated way. And I remind you that it's the knowledge, the 
sophistication, and the dedication of our farmers that make all 
of this possible as we bring these tools to the farm.
    We think these tools can not only increase yields, but they 
can allow for agriculture to have an even more benign effect in 
terms of its environmental impact by reducing the amounts of 
fuels and fertilizers and pesticides that are used for 
production. And of course by increasing farm productivity, we 
are increasing farmer profitability, and that is absolutely 
key.
    This country has had a great history of improving crop 
yield, as I said, having doubled corn yields in the last 40 
years. Using these new tools that are available, I fully expect 
that we will double that again in the next 20. Thank you very 
much.
    The Chairman. Thank you very much.
    Mr. McCauley, we welcome you. Thank you.

        STATEMENT OF KEN McCAULEY, PRESIDENT, NATIONAL 
                    CORN GROWERS ASSOCIATION

    Mr. McCauley. Thank you, Mr. Chairman, members of the 
committee. It's a privilege to be here today speaking for the 
National Corn Growers.
    I'm a farmer from White Cloud, KS. I represent the National 
Corn Growers Association as their president. It's truly a 
privilege to be here today.
    I represent the producers who produce the feedstock for the 
ethanol industry today and the future. At NCGA we have a 
mission statement that says ``to create and increase 
opportunities for corn growers.'' That's what we're doing with 
the ethanol industry. I represent 33,000 dues-paying members 
and I represent 300,000 corn growers across the country.
    At NCGA, over 2 years ago, we had a vision of 15 billion 
bushels of corn produced going into 15 billion gallons of 
ethanol. Also, when we get through with the ethanol production, 
we still have 10 billion bushels of corn left to do the things 
we're doing today, to satisfy our markets of food and feed in 
the livestock industry.
    NCGA would like to see the continuation of the ethanol 
incentives that we have today and also the ethanol tariff, just 
because we don't feel like we're mainstream yet. We feel like 
we will be. Also, research into potential cellulose feedstocks, 
such as corn stover and fiber, will be very vital to increasing 
the ethanol production in the future.
    Specifically, NCGA sees incremental acreage shifts from the 
cropland we have today and the advances in biotechnology, 
looking at the yield curves that we have today and in the 
future. These will all be key components in getting to the 15 
billion bushels that we're projecting. The National Corn 
Growers Association believes that we can continue to satisfy 
the markets we have today of food and feed, and look forward to 
the tremendous opportunities that we have for rural 
development, new farm income, and opportunities for young 
people in the addition of fuel to our mix of products that we 
produce for.
    I look forward to answering any questions that you have, 
and thank you for the opportunity to be here today.
    The Chairman. Thank you very much.
    Next is Toby Bostwick, who is the president of New Mexico 
Sorghum Producers. Thank you for being here. We're glad to have 
New Mexico represented on this panel.

   STATEMENT OF TOBY BOSTWICK, PRESIDENT, NEW MEXICO SORGHUM 
                           PRODUCERS

    Mr. Bostwick. Thank you, Mr. Chairman and Senator Domenici, 
especially for all your work in the past in renewable energy.
    We typically raise 3,000 acres of sorghum on our family 
farming operation. I plant sorghum because New Mexico, like 
most of the Sorghum Belt, is in the semi-arid region of the 
United States. That means we receive less than 21 inches of 
rainfall a year. Sorghum is one of the most drought-tolerant 
crops in the country, and is an integral part of our farming 
system.
    The sorghum industry believes that New Mexico can be a 
leader in the renewable fuels industry despite its semi-arid 
climate. Because of its diverse plant genetics, sorghum can 
play an important role in the renewable fuels industry and the 
farming operations.
    There are several ways in which ethanol can be produced 
from sorghum: from starch sources, such as grain sorghum or 
corn; from sugar produced from sweet sorghum or sugarcane; or 
from new technologies like cellulosic ethanol, which uses 
biomass from many sources. Sorghum is truly unique in that it 
can play a role in all three of these different ethanol 
schemes, which distinguishes it from any other crop being 
researched for ethanol production.
    Regarding the starch industry, the Abengoa plant in 
Portales has used sorghum solely as its feedstock for the past 
18 years. In fact, one bushel of sorghum is equivalent to one 
bushel of corn in ethanol production. Sweet sorghums are a crop 
that we could be using now, along with grain, to produce 
ethanol.
    China and India have robust programs that convert the high-
sugar juices extracted from sweet sorghum into ethanol. Though 
most people grow these specialty crops in sorghums for 
molasses, sweet sorghum can be grown from Florida to Virginia 
and would also grow well in New Mexico.
    Forage sorghums and sorghum-sudan grasses have the 
potential to produce a tremendous amount of biomass. Sorghums 
with the brown midrib trait could potentially convert more 
biomass to ethanol per acre, but more importantly, forage 
sorghums make good use of the limited natural resources--for 
instance water--while still producing high yields.
    DOE has stated that the ideal crop for ethanol would be 
drought-tolerant, have low lignan, high cellulosic composition, 
require limited inputs, have a seed industry that can supply 
the needed seed, have known agronomics, and have a genome that 
will be sequenced. We raise that crop, Mr. Chairman. It's 
sorghum. It meets these requirements and needs little 
modification to work in a robust, diverse ethanol industry. We 
just need a stronger commitment to research.
    In conclusion, my neighbors and I want to make sure that 
the renewable fuels industry does not pass by the semi-arid 
regions like New Mexico and the Sorghum Belt. We see the 
potential economic development that goes with the local ethanol 
plant with local feedstock. We want to be a part of the 
solution, and produce local ethanol that will benefit the State 
and give us real security for my family, my country, and for 
generations to come. Thank you.
    The Chairman. Thank you very much.
    Our final witness on this panel is Charles ``Shorty'' 
Whittington, who is with Integrity Biofuels, representing the 
American Trucking Association. Thank you for being here.

     STATEMENT OF CHARLES WHITTINGTON, PRESIDENT, GRAMMER 
   INDUSTRIES, REPRESENTING THE AMERICAN TRUCKING ASSOCIATION

    Mr. Whittington. Thank you very much, Mr. Chairman and 
members of the committee, and thank you for inviting me to 
share the information on the subject of transportation of 
biofuels. My name is Charles ``Shorty'' Whittington. I'm the 
president of Grammer Industries, a for-hire trucking company 
headquartered in Grammer, IN, which is in central Indiana. I 
also own Integrity Biofuels, a 10 million gallon per year 
biodiesel production facility located in Morristown, IN.
    I'm here today as the vice-chairman of the American 
Trucking Association, and past chairman of the Agricultural and 
Food Transporters Conference, a component of the ATA. My 
remarks are directed to the production, distribution, and use 
of biodiesel, which may be used as an additive to extend our 
supply of diesel fuel.
    As the owner of both a biodiesel plant and a trucking 
company, I'm interested in promoting the use of biodiesel while 
making sure biodiesel does not create operational problems for 
the end user. The increased voluntary use of biodiesel is an 
acceptable means to extend the supply of diesel fuel, reduce 
diesel particulate emissions, and lessen our dependence on 
foreign sources of oil.
    As the largest consumer of diesel fuel, however, the 
trucking industry is concerned over the absence of federally-
enforced biodiesel quality standards. I can tell you firsthand 
that while biodiesel is relatively simple to manufacture, high 
quality biodiesel is very difficult to produce consistently. 
States are not doing an adequate job of ensuring biodiesel 
quality. For this reason, any program to expand the use of 
biodiesel must include a Federal component that ensures that 
only high-quality fuel enters the marketplace.
    The trucking industry is also concerned with the growing 
proliferation of State-implemented renewable fuel mandates 
which distort the market, limit competition, and result in 
higher cost to consumers. A Federal approach to increased 
biodiesel use is far superior to a patchwork quilt of State 
boutique biodiesel mandates.
    While the trucking industry supports the use of biodiesel 
as a means to extend the diesel supply, we remain concerned 
over the higher costs associated with biodiesel use and 
operational challenges that biodiesel blends of more than 5 
percent create for the trucking industry. These include cold 
weather performance and lower fuel economy.
    In summary, we believe that the Federal Government has a 
role to play in ensuring the growth of the biodiesel industry: 
first, to ensure that all biodiesel entering the marketplace 
meets acceptable minimal quality standards; second, ensure that 
biodiesel is used as part of a single national fuel standard, 
preempting State boutique biodiesel mandates; third, enact 
appropriate financial incentives to ensure that the cost of 
using biodiesel is comparable to the cost of using petroleum-
based diesel, and that these incentives not reduce the amount 
of money needed to support and expand the Nation's highway 
infrastructure; and, last, ensure that biodiesel blends are 
appropriately labeled so that the end user may make an informed 
decision on usage.
    Thank you again for the invitation to attend today's 
conference and I'll be happy to respond to any questions. Thank 
you very much.
    The Chairman. Thank you very much. Let me go ahead with 
Senator Domenici and then Senator Craig, and we'll take as many 
questions as people have here.
    Senator Domenici. Thank you, Mr. Chairman. I'll try to be 
brief.
    Mr. Whittington.
    Mr. Whittington. Yes, sir.
    Senator Domenici. How does the choice of an energy crop, 
whether it's corn or switchgrass or wood chips, for example, 
affect the environmental impact of ethanol production?
    Mr. Whittington. The new technology that's in the 
marketplace today is going to change that, the results of that 
question, on a daily basis, I believe. If you look at the 
technology in the ethanol industry today versus 5 years ago, it 
has changed rapidly, and the conversion tables are much greater 
now than what they used to be.
    The use of cellulose and switchgrass and all those things I 
think is a good possibility as we move forward in the future. 
But once again, the cost compared to--it's sad to say, the 
American people are interested in what the cost of the products 
that they use on a daily basis might be, and until we come up 
with some new energy efficiency conversions of some of these 
things, it will be some time before we get to that degree.
    Senator Domenici. It seems that there is a real need for 
greater quality control in biodiesel.
    Mr. Whittington. Very much so. That's a real problem in the 
industry that we have today. The biodiesel industry is the 
small baby in this equation today. Ethanol has approximately 18 
to 20 years on the biodiesel industry. Up until a year ago we 
didn't have a Federal standard.
    In 2004 there was only 25 million gallons produced on a 
yearly basis, with about 50 producers. Today, in 2006, that 
number has jumped to almost 175 to 200 million, depending on 
what you look at, and the capability out there to produce 
biodiesel today has already reached 800 million gallons. But we 
don't have anybody checking what the quality standards are in 
certain locations, which is a real problem to a trucking 
industry that can consume over 700 million gallons of 
biodiesel. But if the trucks won't run on it, why buy it?
    Senator Domenici. Are loan guarantees more appropriate for 
the cellulose ethanol refineries?
    Mr. Whittington. I would say that loan guarantees are 
important, but we in this country have been very competitive 
and very, very active in gathering money to make products that 
make other people money. I think that we have to be careful of 
how we spend the money. Your group in the Senate has been very 
good in appropriating money, but as we take that money and put 
it down the line, having different agencies to distribute that 
money in the way that they see that you want it spent has been 
a real problem in the biodiesel, industry as we look at it 
today.
    Senator Domenici. Could I ask our New Mexico witness these 
questions, if he has answers, and then I'll yield to Senator 
Craig.
    Some analysts predict a glut in the ethanol market, saying 
that we have increased biorefinery capacity too quickly. Do you 
believe this is the case?
    Mr. Bostwick. No, sir, I don't I think there will be demand 
throughout the next 10 years. I know they're saying in 2008, 
2009 that glut will happen, but I don't believe that the 
production will meet the demands.
    Senator Domenici. If we are headed for a glut in the 
ethanol market, could we alleviate the problem by increasing 
the percent of the ethanol blended into gasoline?
    Mr. Bostwick. You bet. I truly believe if we went to an E15 
or even an E20 mark, I don't think infrastructure-wise or 
elsewhere there would be any problems.
    Senator Domenici. Is this projected glut truly national, or 
is it regional? In other words, could we address this problem 
by building infrastructure to serve additional regions of the 
country rather than considering it to be national?
    Mr. Bostwick. Yes, sir, I think we could increase our 
infrastructure to supply additional regions with ethanol, and 
that would be a big bonus to the problem.
    Senator Domenici. Well, I want to say to you, from a New 
Mexico standpoint, because we have a drought kind of climate, 
your sorghum development is much welcomed. We hope to work with 
you, and we hope that it can do all the things you are hoping 
it will do, because of its condition, which has changed 
drastically. That is, the product has changed by working with 
the university and others who are working in that field. I 
thank you for that.
    Mr. Bostwick. Thank you, Senator Domenici.
    Senator Domenici. I think you wanted to go, Senator Craig.
    Senator Craig. Gentlemen, thank you all for participating, 
and the insight and thoughts you bring to this committee.
    So we have gone from $2.06 corn to, let's see, $4.08 now a 
bushel? And my cowboys are screaming, but Monsanto is going to 
fix that.
    And how long will it take, and what is our trade deficit 
going to be when we diminish the export of our No. 1 export 
commodity, corn, and blend it all or consume it largely in the 
domestic market of both ethanol and the human food chain? Corn 
producers, talk to us about that. We're about to write a farm 
bill, and there's going to be great pressure from other 
interests to limit your use of corn in the ethanol market.
    Mr. Mitchell. It's an excellent question, Senator. Corn 
drives the price of almost all of the other commodities. Corn 
has been underpriced for way too long. Corn farmers have been 
losing money on every bushel they have produced for the last 
decade.
    In the area that we're in now it's getting close to our 
cost of production. Prior to this crop year, which saw a 26 
percent increase in the farmer's expense just for energy, prior 
to that, the cost of raising corn was around $3.20, so we're in 
the cost of production area. This is going to present some 
challenges for the livestock industry.
    That's why in this next farm bill we should probably work 
toward establishing a floor price at about the levels we're 
looking at now, to help us on the downside of prices for corn 
farmers and other farmers, but also establish a national 
strategic grain reserve, to have the reserve in place to help 
damper what could be $8, $9, and $10 corn. But the other silver 
lining here is, as I mentioned, corn has been dramatically 
underpriced for way too long, and I think at $3.50 and $4 corn 
there's still profitability in the ethanol industry for corn-
based ethanol, but it also gives more incentive to move toward 
cellulosic ethanol production.
    Senator Craig. Good points. Ken.
    Dr. Fraley. I'd just like to make the point that the United 
States enjoys this position because of many years of 
investments by universities and the Government in the basic 
technology that is now opening the door for tremendous and vast 
improvements in crop productivity. We are certainly sensitive 
to the pricing issues that you talked about, and I think the 
key is to be able to drive yields, as we both are selective, as 
we expand the acreage of the crop, but also take full advantage 
of the technology that is now possible, that is driving and 
fueling the productivity of our production acres.
    Senator Craig. Thank you.
    Mr. McCauley. Thank you, Senator. We at National Corn 
Growers feel that the market prices will prevail if we let the 
market work. The livestock industry understands cycles. They 
understand the way this high-priced corn will usually lead to 
low-priced corn, and how the corn prices, feed prices, fit into 
their cycles. But one thing that we really have looked at hard 
is the trend line yields and the accelerated trend line yields 
that we have today, due to the seed companies and the 
biotechnology, that have really improved our yields.
    One other thing that we really feel you can't measure is 
the profitability out there on the farm, how that gets your 
attention. If the farmer, looking at $1.50 corn and higher 
government payments, just really didn't get with it, buy the 
high quality seed, get out of bed in the morning, really get 
after it. I guarantee you the wives of the country are looking 
at this price and saying, ``Let's get going,'' because it's a 
real factor when you start looking at the profitability of the 
farm.
    So we think those factors really will make a difference and 
we can produce enough corn for the export market as well. 
Because if you look at the 5 billion bushel number going into 
15 billion gallons, you still have more corn than we had to 
deal with even a year ago. So that's really important to 
remember when you hear the livestock industry talking.
    And one thing that's really important at this stage of the 
game is, we now do something to affect the producer's decision 
for this year's crop, because the prices are calling and 
showing the profit potential for corn to be grown. We think 
that's very important.
    Senator Craig. Yes?
    Mr. Whittington. Senator, I grew up on a farm. We do farm 
also, besides having a trucking company. And I think that one 
of the things, as we look at value added for an agricultural 
commodity, is we build wealth throughout the United States on 
value added from a production crop. The other thing is that 
some of the offal of the ethanol plant can be used to produce 
biodiesel. Some of the offal of an ethanol plant can be used to 
cheapen the ration for a cattle feed operation.
    And as we look at other opportunities of some of the waste 
products coming off of these renewable energy places, it 
certainly enhances and reduces some costs. In the 
pharmaceutical industry, the glycerine price alone has dropped 
from 90 cents a pound down to 20 cents a pound because of the 
availability of the waste coming out of these things. So we 
have a really neat circle going on out here if it's handled in 
the right way.
    Senator Craig. Well, I don't disagree with any of you. I 
grew up farming and ranching, although cattle was our dominant 
income. And I do agree markets level out and profitability is a 
phenomenal incentive out on the farm or ranch to do things 
better, differently, and even get greater levels of production. 
So I do believe it will level out and adjust accordingly, and 
we ought not get too busy about fouling up the marketplace. 
Some would argue we already have by the incentives we're 
creating that are making these changes. At the same time, that 
kind of diversity is important.
    Thank you all.
    Senator Domenici. Mr. Chairman, what is your pleasure 
regarding the schedule?
    The Chairman. Well, I was going to ask these folks two or 
three questions and then bring on the third and final panel for 
this morning, and hear from them and ask questions to the 
extent we have questions, and then adjourn for lunch and come 
back at maybe 2:15 or so. So we're going to have one more panel 
right now after I ask this panel some questions, and then have 
three panels this afternoon.
    Senator Domenici. Well, Mr. Chairman, I want to try to be 
with you on all of them, so I would like to ask you if I could 
make an observation and then leave for the rest of this panel 
and come back for the next one.
    The Chairman. Go right ahead.
    Senator Domenici. I want to say to all of you, starting 
back about 5 or 6 years ago, when we started a little tiny bit 
of a move toward ethanol, and then it grew each year and it got 
pretty much a big, big swell, it seemed to me that for one 
Senator and a number of Governors that I read about, they had 
focused their attention on trying to build back some life, 
economic life, into their rural communities.
    If you know my State, you have Albuquerque and the Rio 
Grande Valley with another couple of cities, and you have the 
State split by that, and the rest of it is rural New Mexico 
like you've never seen it, long distances between cities. You 
can't get industry started, and you just work like the devil to 
get one or two new job-producing companies.
    But it's quite obvious that while we're not the best 
agricultural State, one of the solutions is that this rural 
part of my State, much less every rural State, has a chance of 
capitalizing on the new economic regeneration that's going to 
come from ethanol and related products being grown out on the 
rural plains and in the rural areas in my State and other rural 
areas. I believe it is the second crop which will revitalize 
rural America, if those looking at it and watching it will get 
with it and watch it and participate.
    I don't want to waste your time. Our chairman is moving 
rapidly, and I share his concern. But I am quite sure from 
listening to your testimony that subject to your own 
conditions, you would agree with what I have said, that 
ethanol, methanol, diesel, and bio can be the regeneration of 
rural America in ways we could never do by economic 
development, EDA, and farm programs that tried to generate 
economic life into rural America.
    That's what I think of it, and I think we need to help, at 
the origin, with loan guarantees to get technology and new 
plants built, and we'll see within 10 years a rather dramatic 
change. Thank you for giving me this time, and thank you for 
letting me bore you.
    Dr. Fraley. Senator, I would very much echo your comments. 
I've been in the ag industry for 26 years, and I travel 
extensively across the country, speaking with farmers, and I 
would tell you that this has probably been the best input to ag 
policy that these growers have ever seen.
    The Chairman. Let me just follow up on that one and ask one 
question. Then we'll move to the next panel.
    But, Dr. Fraley, obviously we have a lot of people out 
there growing corn. We have now finally come to the realization 
that we can use this corn to produce fuel, that as a feedstock 
it is very valuable, and you have indicated your company is in 
the process of substantially improving the productivity per 
acre of corn, and that's all very positive.
    It strikes me, though, that long-term there may be other 
crops that are more productive from the perspective of being a 
feedstock for biofuels, and that the productivity per acre of 
those other crops will exceed the productivity per acre of 
corn, even if your company is able to double the productivity 
of corn per acre. Do you agree with that, or disagree, or what 
are your thoughts?
    Dr. Fraley. I think all of us in the industry share the 
view that the more biofuels that are available, the better this 
country and all of our consumers are served.
    What I believe as a scientist is that we will see, 
ultimately, the advances in the enzymes that enable the 
cellulosic sources. We will put in place the types of 
transportation, distribution, and storage infrastructure to 
take advantage of those other alternative sources of cellulose.
    I think realistically, though, we all see that in the next 
10 to 15 years the bulk of that need and opportunity will need 
to be addressed by corn and grain sorghums and other crops. And 
so I think we see this as being the start, the priming of the 
pump that enables the renewable fuel industry to really get off 
the ground and bring with it the necessary changes of 
infrastructure.
    You know, my view is that we will reach the 10 percent 
ethanol goal with the capabilities that are in place today. The 
real question becomes, where do we go beyond that, both in 
terms of the next generation of cellulosics, but also the 
infrastructural investments that it will take to ensure that we 
have the automotive engines that can take advantage of these 
renewable fuels, as well as the systems of tanks and pumps and 
distribution to ensure that we have access across the country.
    The Chairman. Well, thank you all very much. We have been 
informed that there are going to be three votes starting at 
11:45, which means that we need to go ahead and move to the 
next panel and hear from them, and then hopefully we will have 
some time for a few questions of them before we have to leave 
for those votes. So thank you all very much.
    Thank you all for being here. Let me introduce this panel, 
and then we'll go ahead and hear from each of you.
    Chris Standlee, thank you for being here. He is vice 
president of Abengoa Biotechnologies, which has a plant in our 
State--we're very glad to have them there--and I understand 
also has a demonstration cellulosic ethanol plant under 
construction in Spain. So we're glad to have you here.
    Mr. Standlee. Thank you, Senator.
    The Chairman. John Melo of Amyris, thank you for being 
here, another industry leader in cellulosic ethanol production. 
Mr. John Pierce with DuPont. Of course DuPont has been working 
in partnership with our Department of Energy to do a great many 
things in this area. We appreciate your willingness to testify. 
Jeff Passmore is the executive vice president of Iogen. Thank 
you for being here. Mr. Niles Hushka is with KLJ Solutions, 
which plans and develops renewable fuels plants in North 
Dakota. Thank you for being here. And Lori Perine is with the 
American Forest and Paper Association, which supports private-
public investments in forest product biorefineries. Thank you 
very much.
    Why don't each of you give us 2 or 3 minutes of your views 
as to what we need to be doing by way of Federal policy in this 
area. We appreciate your willingness to testify.

STATEMENT OF CHRIS STANDLEE, EXECUTIVE VICE PRESIDENT, ABENGOA 
                        BIOTECHNOLOGIES

    Mr. Standlee. Thank you very much, Mr. Chairman. My name is 
Chris Standlee. As you indicated, I am the executive vice 
president of Abengoa Bioenergy. We appreciate the opportunity 
to be here today.
    We are one of the world's largest producers of ethanol, 
with six operating grain ethanol facilities in both the United 
States and Europe, two more under construction, and several 
more in a development stage. Our Portales plant has been 
producing starch-based ethanol for 18 years, and we're very 
proud of our renewable fuels economic footprint in the State of 
New Mexico.
    More importantly for the purposes of this committee, 
Abengoa Bioenergy is a world leader in research and development 
related to renewable fuels, and particularly ethanol. For 
example, the company has two ongoing cost share projects with 
the Department of Energy, which were competitively awarded 
projects and have resulted in our company committing to spend 
over $150 million on research and development of ethanol 
technologies, particularly focusing on cellulosic ethanol 
technologies.
    We have almost completed construction of a cellulosic pilot 
plant in Nebraska, as well as simultaneously working on and 
almost completing construction of the world's first commercial 
demonstration cellulosic plant in Salamanca, Spain. Those 
completions are expected by midyear. Actually the plant in 
Nebraska should be finished within the next 2 months.
    Additionally, we have submitted an application most 
recently in response to the Department of Energy's 
demonstration cellulosic plant solicitation. We have high hopes 
for that grant, and believe that the funding of those grants is 
one of the most important steps that Congress can take to 
support this cellulosic effort within the States.
    We've heard a lot of talk about loan guarantees, and we 
certainly appreciate the efforts of this committee and of the 
Congress on loan guarantees. We think they're an excellent tool 
to expand the implementation of technology after some level of 
development. But we believe that the funding of the grants such 
as the DOE's cellulosic demonstration plant projects are 
critical initial steps to establish that technology.
    Additionally, our company encourages this committee to 
ensure funding for the programs that this committee has already 
authorized, such as the prior Energy Policy Act; certainly, as 
I mentioned, the DOE's cellulosic demonstration plants and loan 
guarantee programs. I think, also, a key priority has to be 
extending the existing ethanol tax credits, and providing 
independent incentives to develop both ethanol from the 
standpoint of promoting the development of cellulosic 
feedstocks and promoting the development of cellulosic 
production.
    Thanks for the opportunity.
    The Chairman. Thank you very much.
    Mr. Melo.

STATEMENT OF JOHN MELO, CHIEF EXECUTIVE, AMYRIS BIOTECHNOLOGIES

    Mr. Melo. Good morning, Mr. Chairman, and thank you for the 
opportunity. My name is John Melo, and I am the chief executive 
of Amyris Biotechnologies. Climate change and energy security 
are two of the most important issues facing our country and the 
world. We believe that innovation can help to address these 
problems and that our company can play a role in these efforts.
    Innovation often comes from very unpredictable places. 
Until recently, Amyris was completely dedicated to solving 
another significant global problem, the malaria problem that 
plagues many of the children in the world today. With funds 
from the Bill and Melinda Gates Foundation, we have spent the 
past several years developing technology to reduce the cost of 
the world's most effective malaria drug by an order of 
magnitude, so that it can be made available and affordable to 
those in the developing world that need it the most. Based on 
our success to date, we expect this drug will be available to 
these individuals in 2010.
    The same innovation which enables this low-cost 
antimalarial is now being applied to create high-performance, 
low-cost biofuels that could significantly reduce our petroleum 
consumption. While corn ethanol and conventional biodiesel have 
provided an important and necessary start for biofuels in the 
United States, neither is sufficient to adequately address 
climate change and energy security. The global supply and 
demand challenges that must be overcome to meaningfully impact 
climate change and energy security must and can be addressed 
through innovation in two areas.
    Feedstock innovation will increase the potential scale, 
decrease the cost, and improve the greenhouse gas benefit of 
biofuels. Product innovation that results in improved biofuel 
properties will increase customer demand and largely eliminate 
the need for infrastructure investments that are necessitated 
by ethanol and conventional biodiesel. Innovation in both areas 
can dramatically and synergistically decrease soil, water, and 
air pollution while improving energy security.
    Amyris is developing a gasoline substitute that contains 
more energy than ethanol, will result in lower-cost-and-less-
pollution biofuel blends, and is fully compatible with today's 
infrastructure in our petroleum system and also with today's 
vehicles. We are also developing a diesel substitute that can 
achieve lower costs and much greater scale than vegetable-oil-
based biodiesels. Our next generation biodiesel is inherently 
stable in cold temperatures and does not break down during 
storage and transport.
    Both our gasoline substitute and our diesel substitute will 
be made from the same feedstocks and production plants that are 
used today to make ethanol, and thus add value to the 
investments that have been made by America's farm community. I 
was so struck by the potential of Amyris's technology that I 
left an executive position in the oil industry, where I was 
leader of one of the world's largest petroleum marketing, 
trading, and transport businesses.
    The cost and risk for America to achieve any penetration 
target for renewables beyond 2010 will be significantly reduced 
if alternative biodiesels and feedstocks are allowed to compete 
fairly with corn ethanol and conventional biodiesel. Existing 
incentives, such as State mandates and Federal tax credits, 
unfairly advantage ethanol and conventional biodiesel solely 
because they happen to be first to market. As such, existing 
incentives actually make it more difficult for better 
alternatives to emerge in a timely manner.
    In order to realize the potential benefits of new biofuels 
technologies, Congress must ensure that mandates or financial 
incentives follow the model that EPA established in their RFS 
rulemaking by focusing on desired attributes and performance 
standards as opposed to chemical formulas. Furthermore, it's 
critical that mandates or incentives established by Congress be 
of sufficient duration to encourage private sector investment 
into research and development.
    Finally, we recommend that incentives be inversely 
proportional to global oil prices. In such an environment, we 
are confident that the innovations in feedstock and product 
being carried out in our labs and many others will help America 
achieve energy security.
    My last thought for you is, remember that looking at 
cellulosic ethanol and calling it under the same name is like 
calling a computer the Microsoft computer. We have feedstocks 
and we have products, and we have a significant opportunity in 
the next 2 to 3 years to have significantly new products that 
actually use all the current farm infrastructure, ethanol 
infrastructure, and petroleum infrastructure to really make a 
difference in the environment and the adoption of biofuels 
throughout our country and the world.
    The Chairman. Thank you very much.
    Mr. Pierce.

   STATEMENT OF JOHN PIERCE, VICE PRESIDENT OF RESEARCH AND 
                      DEVELOPMENT, DUPONT

    Mr. Pierce. Thank you, Mr. Chairman. My name is John 
Pierce, and I lead the group of researchers at DuPont who are 
actively engaged in bringing high-performance biofuels 
technology to the marketplace. We are leveraging our technology 
and science across the entire biofuels value chains, from 
almost 150 pioneer high fermentable starch corn varieties that 
are sold into ethanol production markets, to advanced 
cellulosic technology primarily focused on corn stover 
presently, as well as next generation biofuels such as 
biobutanol.
    We had the pleasure of hosting the President in Wilmington 
last week, and I would like to share a few thoughts I told him 
while he was there. We first demonstrated and developed our 
biotechnology capabilities and know-how by commercializing a 
high-end polymer called Sorona from cost-competitive corn-based 
feedstock, and we won the Presidential Green Chemistry Award 
for that effort. There are many similarities to this type of 
effort in the production of biofuels, and we are taking that 
metabolic engineering expertise gained from developing this 
feedstock and applying it to biofuels.
    Working with the DOE and others, we have developed a 
cellulosic ethanol technology that employs corn stover, using 
the corn plant rather than the grain to produce ethanol, and we 
hope to demonstrate that technology at commercial scale soon, 
with the Broin Companies, under a cellulosic biorefinery grant 
from DOE. With this Broin partnership and assistance from the 
DOE, we plan to build and operate an economical commercial-
scale cellulosic ethanol facility in a few short years.
    We're also developing a next generation, high-performance 
biofuel in partnership with BP, called biobutanol. Biobutanol 
is one of what I believe, as the previous speaker mentioned, 
are a number of future fuels that will come to bear that are 
renewable and have interesting properties for use.
    Biobutanol itself is fully compatible with ethanol, comes 
from the same feedstocks, has some significant performance 
benefits either as a cold blend with ethanol or on its own. It 
has a higher energy density, better mileage, keeps fuel 
volatility low, and butanol-gasoline blends can be distributed 
using existing gasoline infrastructure, including pipelines. It 
improves the properties of ethanol-gasoline blends.
    Now, to ensure companies like DuPont and Amyris continue to 
dedicate the resources to bring these technologies and products 
to market, I'd like to echo the comments of the previous 
speaker and encourage that incentives be scaled to desired 
performance, such as lower carbon footprint or higher energy 
density, and that you also keep in mind that this matter of 
innovation and bringing multiple technologies and integrated 
science to bear is not some linear process that stops with 
research and then moves to development and then moves to 
commercialization. These occur all the time, right up to the 
end. There is continuing innovation right at the start of this 
biotechnology revolution, and R&D funds need to continue to be 
made available on a matching grant basis to develop those 
technologies to commercial reality.
    With that, I would like to thank you for the opportunity to 
participate, and look forward to discussion.
    The Chairman. Thank you very much.
    Mr. Passmore, thank you for being here.

  STATEMENT OF JEFF PASSMORE, EXECUTIVE VICE PRESIDENT, IOGEN

    Mr. Passmore. Thank you, Mr. Chairman, and thank you so 
much for the invitation. It's a privilege to be here.
    As I was thinking, looking over the panel this morning at 
all of the distinguished supporters of cellulose ethanol, I was 
wondering what I might be able to say that would be useful, and 
I thought I would just tell a little bit of the Iogen story, 
starting with the fact that yesterday, when I drove to the 
airport, I drove in my Chevy Impala, cellulose-powered, E85. We 
have a whole fleet of 12 cellulose E85 vehicles. We also power 
two Government of Canada fleets, the Natural Resources and the 
Agriculture Departments.
    The reason I'm telling you this story, Chairman, is that we 
have been producing cellulose ethanol from our demonstration 
plant for the last 3 years, started in the spring of 2004. We 
have spent about $40 million on that demo plant, and we're 
ready to go. We're ready to go commercial. We've got 320-some 
farmers signed up for straw contracts for a facility in 
southeast Idaho, and in fact we have taken the options on the 
land there.
    So what's the problem? Why aren't we just getting going, if 
we're that close to getting going? Well, there's three legs to 
this stool. One of course is the technology leg. The other two 
legs are financing and government.
    So the technology leg, in our estimation, is ready to go. 
The financing leg, you cannot get lenders, if you're imagining 
doing a conventional project finance with a combination of 
equity and debt. We have the equity players at the table. You 
probably know that our partners are Shell and Goldman Sachs. 
But if you're going to do debt financing, lenders will not take 
the technology risk. Lenders simply do not lend to technology 
that has not been built at that scale before, unless that debt 
is guaranteed by a strong credit rating, such as the 
Government. And that's where the Government role comes in.
    So you have the technology leg, the financing leg. You're 
going to do the equity, you're going to do the debt. Well, the 
Government's role is to guarantee the debt financing, and 
indeed, in EPAct 2005, this committee recognized that was a 
role for government. You recognized that market failure and put 
in place loan guarantees for emerging technologies, not just 
cellulose ethanol but, the next generation of nuclear and coal-
to-liquids and so on. And so as part of that process, the DOE 
issued, in addition to the grant applications that the previous 
speakers have talked about, the loan guarantee preapplications.
    And what I would urge this committee, going forward, is not 
to lose that momentum. You have an important oversight role to 
play to make sure that commercialization doesn't get delayed.
    The other comment I would make in terms of a possible role 
for this committee is that beyond initial commercialization 
there needs to be assurances in the market, some type of market 
signal that there's going to be a significant market share 
there or a market for cellulose ethanol.
    Let me explain what I mean by that. I think we've heard 
from previous speakers that there's a huge potential for corn; 
and indeed, corn could potentially meet the E10 market. You 
could get 15 billion gallons from corn, and 15 billion gallons 
would be 100 percent market penetration of E10 across the 
United States. So the committee needs to be thinking about 
increasing the RFS too, whether it's an E20 or an E30, or if 
all vehicles can take E85, and you gradually, gradually ratchet 
it up. But the market is going to want to know that there's 
going to be an opportunity there to achieve that, whether it's 
a 30 billion or 35 billion gallon target of the President's or 
some other target.
    And I guess my last comment would be, please, Chairman, 
there are three flights a day from Dulles to Ottawa. If your 
committee wants to come up and tour a functioning demonstration 
plant and see these 1,000-pound square bales of wheat straw 
coming in through the facility, we invite you to come for a 
tour.
    I would agree with the previous two speakers. Abengoa 
commented on funds that the committee has already authorized. I 
certainly echo that. And I also want to echo the comment from 
DuPont that this is not a linear process. People say, ``Well, 
how much more research needs to be done?'' We're ready to go 
commercial now, but we'll never stop doing research. Research 
is--listen, we've all been driving cars since the early 1900's 
but we still are improving vehicle technology, so it's not a 
linear process.
    The Chairman. Thank you very much.
    Mr. Hushka.

         STATEMENT OF NILES HUSHKA, CEO, KLJ SOLUTIONS

    Mr. Hushka. I thank you. I lead a regional firm that 
envisions, engineers, and constructs conventional alternative-
energy projects, facilities that provide financial returns 
acceptable to investors. We also design sustainable-value 
chains to produce biofuels. Today's emerging biofuels 
technologies can spur energy independence, but parallel system 
improvements at the macro level of the value chain are 
required.
    Development processes require 12 to 18 months of narrowing 
options as we customize input streams and output markets. 
Investors require that risks be tolerable, and we create 
investor security through production guarantees. A 50 million 
gallon a year plant must produce 50 million gallons. Each new 
process integration needs a guarantor, an entity that will 
invest continuously until guaranteed delivery rates are met. 
Underwriting risk is required.
    Ensuring input streams is difficult today because farmers 
have many options. Our average farmer is near 60, and does not 
see the same opportunity that I do to change his business 
model, to begin again to pay off the new equipment for the new 
crops. High-energy grasses require 2 to 3 years to mature, 
which is a long time to expect no revenue in a very hot farm 
market. It is difficult to build processing plants with no 
assurance of input crops. Farmers will require emerging 
technology to supply input markets.
    In the heartland, our transportation systems are 
historically focused on moving low-priced, bulky commodities. 
These systems were designed to move raw commodities whenever 
the railroad had capacity. Products are not processed here 
generally, just grown. Today we are in the midst of a crisis, 
and the bulk commodities are now locally converted to high-
dollar consumables requiring just-in-time delivery. We are 
asking overloaded transportation systems to double their 
output, to first ship the liquid portion, the biofuels, and 
then the solids, the animal feed. New transportation corridors 
using emerging technologies are essential.
    Our public focus is primarily product output, but project 
feasibility always lies with secondary product utilization. We 
are presented with the opportunity to create a very new system 
of both efficient food and a biofuel production model--
America's energy island, where livestock are fed oilseed meals, 
adjacent to vertically integrated crushing and biofuels plants. 
Manure from livestock will be biodigested, creating methane, 
firing boilers to firm wind energy and produce heat for the 
biofuels utilization.
    Utilizing waste, heat, and captured CO2, we can 
grow oil-producing algae and send that back through our 
crushers to produce biodiesel. Revenue streams from secondary 
plant outputs ensure sustainable biofuel markets. Emphasis must 
be placed on emerging technologies for the secondary product 
market, also.
    Emerging technologies at the primary plant level create 
significant stresses within existing markets. Groups that 
utilize existing technologies are today working to eliminate 
emerging technologies from the market through legislative 
controls. The Government should not select winning 
technologies, but rather encourage innovation. Moving forward, 
we must revamp inefficient systems as we integrate emerging 
technologies into America's energy island.
    Thank you.
    The Chairman. Thank you very much.
    Ms. Perine, you're the final witness on this panel. Please 
go ahead.

   STATEMENT OF LORI PERINE, EXECUTIVE DIRECTOR, AGENDA 2020 
   TECHNOLOGY ALLIANCE, AMERICAN FOREST AND PAPER ASSOCIATION

    Ms. Perine. Thank you very much, Mr. Chairman, and thank 
you to the other members of the committee as well. As you know, 
I'm Lori Perine. I'm the executive director of the Agenda 2020 
Technology Alliance with the forest products industry. This is 
an alliance of government and academia with the industry for 
collaborative and precompetitive research and development.
    I am here because the forest products industry has an 
economic and strategic commitment to playing a strong role in 
establishing a domestic production capacity for renewable 
fuels. We can do this by transforming our existing 
manufacturing infrastructure into what we like to call 
integrated forest products biorefineries.
    These integrated biorefineries are created by incorporating 
new emerging technologies into our existing infrastructure, 
thereby establishing geographically distributed facilities that 
can process both forest and agricultural materials and produce 
green liquid transportation fuels, as well as other bioenergy, 
such as renewable power, and has the potential to produce 
chemicals and other bioproducts as well. If these technologies 
are fully realized, there are significant energy and 
environmental benefits as well as economic benefits for the 
industry and for the Nation as a whole.
    We are conservatively estimating at the moment that the 
industry has the potential to produce up to 2 billion gallons 
of cellulosic ethanol each year, another 10 billion gallons of 
other renewable transportation fuels, and some coproduction of 
20,000 megawatts of renewable power. This is possible using the 
wood that we already use in production of our pulp and paper 
products and our wood products, so it's not inconceivable to 
think that the actual production capacity of this industry 
could be double or even triple the estimates that I've given 
you here today.
    Now, the technologies that we have been using are a 
combination of some of the technologies that you have heard 
from some of the previous speakers on the panel. Like our 
colleagues, who are looking at corn stover and switchgrass, we 
have a fermentation platform or a fermentation pathway that we 
are pursuing as well.
    This involves us taking the wood chips that would normally 
go into pulp and paper manufacturing, actually processing those 
first to pull out a material called hemicellulose. That is a 
complex sugar that can then be fermented into fuel-grade 
ethanol. But what that does is it then allows us to take those 
extracted chips and put those back into the manufacturing 
process, and so we're getting two very good products for the 
price of one, ethanol and pulp and paper out of the same batch 
of chips.
    That's a technology set that we are actually developing 
along with CleanTech Partners in Wisconsin, a couple of enzyme 
companies, the national labs, with support from the Department 
of Energy. We would like to see more of those types of 
technologies in development, because they will help not only 
the forest products industry but our agricultural colleagues as 
well.
    A second technology area that we're very strong in is 
gasification. And you've heard quite a bit about gasification 
from some of the other panels, I'm sure. In our case we're 
looking at gasifying both residuals and waste materials from 
our mills, the idea being that we're trying to create new value 
out of materials that previously have had no economic value.
    In doing that, we're finding that we have a synthetic gas 
that can provide a variety of products, some of them in use in 
transportation markets, such as converting the syngas through a 
Fischer-Tropsch process to motor gasoline, distillate fuel, or 
waxes. We can also be using techniques to create ethanol, 
methanol, dimethyl ether, that can be used to produce diesel or 
LPG, or going into production of synthetic natural gas and 
supporting other applications as well.
    What is key for us is making sure that there is continued 
and sustained funding for the research and development, and 
demonstration, in particular, that is needed to make sure that 
these technologies actually come into use. But also important 
for us is the fact that we need to understand--and it's 
important to understand--that the biomass resources that we're 
all talking about here today actually have competing uses.
    That is all the more true in the forest products industry, 
where the very wood that we're looking at for renewable fuel 
production is going into production of our pulp and paper, wood 
and composite products. Thus, we are hoping that Congress will 
work with us to find market-based ways to promote biofuels and 
biofuel conversion, but at the same time make sure that wood 
and other biomass materials are not drawn into biofuel markets 
at the disadvantage of the existing manufacturing industry. 
It's actually rather ironic, because this potential that I have 
outlined for you today is not possible unless we've got the 
existing manufacturing infrastructure in place.
    So I thank you, Mr. Chairman, for this opportunity to 
speak.
    The Chairman. Thank you. Thank you very much.
    We unfortunately have three votes starting up, we're told, 
pretty much right away. So let me just call first on Senator 
Tester, if he has a question to put to the group. And if we 
have time, we'll have every Senator ask a question.
    Senator Tester. I apologize for not being here earlier to 
hear the first two speakers speak, so I'll just direct this to 
anybody who wants to answer it.
    There has been some debate on ethanol using some grain 
products and energy out of the net, sometimes even a net loss 
in energy. Cellulosic ethanol, is it a net energy gain in the 
end?
    Mr. Pierce. Senator, let me take a stab at that. There has 
been a lot of debate about that. In my opinion the debate is 
settled, however, and all forms of grain-based and cellulosic-
based energy production are positive. And if you compare them 
to fossil fuel energy inputs, if you compare them to petroleum 
inputs, they're dramatically positive. Cellulosics, based on 
petroleum inputs, is off the charts.
    Senator Tester. The byproduct from the cellulosic ethanol, 
does it have a value as a feedstuff, or is there some other 
value?
    Mr. Pierce. There's a joke about lignan, which is some of 
the glue that holds all the plants together, helps them stand 
up. There's a joke that says you can make anything from 
lignan--except money. But one thing you really can do with 
lignan, it's very high energy content, and very much of the 
cellulosic-based processes depend on having the lignan as a 
separate component which is then burned--you make steam. That 
drives the energy to make the plant run.
    Mr. Passmore. If you would construct a biorefinery, 
Senator, that would have a whole host of associated coproducts, 
so you would have ethanol, power, heat and steam from the 
lignan, other associated coproducts, fertilizer, 
CO2, acetic acid.
    Senator Tester. Good, good. It wouldn't be associated--at 
least in my mind, it seemed like some of the stuff from the 
grain ethanol is used as animal feedstuff. The cellulosic is 
not in that same line, though. It's more of a direct energy for 
steam or whatever.
    Mr. Passmore. Correct.
    Senator Tester. In my neck of the woods in Montana we've 
got an incredible amount of acreage of CRP that has all sorts 
of different grasses in it, none of which is to my knowledge 
called switchgrass, unless switchgrass is generic to all 
grasses. I mean you've got wheatgrass, you've got all sorts, 
with a little alfalfa mixed in some of it. I hear a lot about 
cellulosic ethanol made from switchgrass. Is it cost-effective 
to make cellulosic ethanol from grass of all sorts of different 
varieties that might be in a CRP mix?
    Mr. Passmore. As long as it's high in cellulose content, 
then you can make cellulose ethanol out of it. I mean, 
switchgrass is a native prairie grass that used to grow back in 
the days when the buffalo roamed. And I think what's going to 
happen is that farmers are going to be more comfortable 
initially--rather than planting a bunch of switchgrass or even 
going with a CRP, they're going to want to see ag residues used 
first. Then, once they're comfortable with the technology and 
everybody is convinced that it works and there's a market there 
for the product, then they might start switching over to 
switchgrass.
    Senator Tester. OK. And the cellulose residue is just--it's 
a fiber product, right? So it's basically dry biomass, this 
cellulosic product, right?
    Mr. Passmore. I mean, what's in wheat and barley after you 
harvest the grain, the straw is cellulose.
    Senator Tester. Right.
    Mr. Passmore. Or cobs and stalks and leaves, commonly 
referred to as corn stover, that's cellulose. And somebody 
referred earlier to hemicellulose. I mean, both of those are in 
fiber.
    Senator Tester. The last question, and I think it was Mr, 
Passmore that talked about marketing the product once you get 
it done. Are you talking about a market that is a market that 
has our automobiles capable of accepting the product, or are 
you talking about a market that's driven more at the pump, 
where we have an energy portfolio perspective--anybody can 
answer this, by the way--an energy portfolio perspective where 
we're going to require a certain percentage of renewable energy 
in our petroleum energy?
    Mr. Passmore. I was talking about increasing the RFS so, if 
you can get--different numbers are out there, but you will hear 
that you could get possibly 15 billion gallons from corn, you 
could get another 15 billion gallons from ag residues and 
another 15 billion gallons from switchgrass. And I'm not even 
talking about the forest residues that Lori spoke about. So the 
question is, where is all that ethanol going to go? And I think 
the market pool needs to be created through a more aggressive 
RFS.
    Senator Tester. And what's RFS?
    Mr. Passmore. Sorry. Renewable Fuels Standard. Right now 
it's set at 7.5 billion gallons, and I think that's--I mean, 
people argue that's a floor, not a ceiling, but the investors, 
before they invest in a plant, want to know that there's going 
to be a market there for the product.
    Senator Tester. OK. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Domenici.
    Senator Domenici. I pass.
    The Chairman. Let me call on Senator Dorgan--who came 
first? Bob? Bob, why don't you go ahead. I think you were here 
before Senator Dorgan.
    Senator Menendez. Thank you, Mr. Chairman.
    I want to thank the panel.
    I want to ask Mr. Pierce, I think you talked a little bit 
about butanol, and that there are some advantages to butanol 
over ethanol. Could you give us a sense of what those are?
    Mr. Pierce. Right. Butanol is an alcohol-like ethanol. It's 
got four carbons instead of two carbons. It has a higher energy 
density, so you get more energy per gallon. That means for a 
certain gallon you can drive more miles. It doesn't absorb 
water as well as ethanol, so it's more compatible with existing 
infrastructures. And there are a variety of other differences.
    But the point I wanted to make is that this thing with 
ethanol and butanol, sometimes it gets framed as an either/or 
type of thing. It's absolutely not. I mean, ethanol is there 
today because it could be made by yeast, that we have known to 
make bread and beer for years and years. New biotechnologies 
will bring newer fuels that are also useful, and all of these 
fuels will coexist and find their place in the right niches of 
our fuel infrastructure.
    Senator Menendez. Is there a downside to butanol?
    Mr. Pierce. The downside right now is that we can't make it 
cost-competitively with ethanol because we don't have the kind 
of experience that we have with the ethanol game, so we're 
pushing very hard to get to that point.
    Senator Menendez. Is it the experience or the incentives, 
the way in which we treat incentives for ethanol?
    Mr. Pierce. Well, I frankly am not as up to speed on all 
the various policies and incentives as many people in this 
room. I would say, however, that it seems logical to me that 
however you structure incentives, they ought to be structured 
on what you want.
    So, for instance, if you have a very highly energetic fuel 
that gets you further miles per gallon, having incentives on a 
gallon basis is a little bit odd, because if you get further on 
a gallon then that ought to count. So again I would suggest 
that incentives be structured on what Congress and the country 
is looking for, that is to say, low carbon and replacement of 
various petroleum fuels.
    Senator Menendez. If that's the case, if you're saying 
we'll meet the goals that we want and this particular energy 
source has higher output, then it seems to me that we should be 
looking at how we incentivize this within a mix.
    Mr. Pierce. I agree with you, and I would say that butanol 
is the example we're talking about now. I tell you there will 
be others. We are on the opening gambit of biofuels. So if you 
do it on an energy basis, in the case of butanol, I can't 
remember the numbers, maybe 12 percent or 15 percent more 
energetic than ethanol. If you did it on an energy basis, it 
would attract an incentive approximately that much higher.
    Senator Menendez. Thank you, Mr. Chairman.
    The Chairman. Senator Dorgan hasn't had a chance to ask 
questions. Why don't you go ahead, and then we'll probably have 
to adjourn after that to go make these three votes.
    Senator Dorgan. Mr. Chairman, thank you very much. I regret 
I have not been able to listen to the presentations. I've been 
over in the Commerce Committee, and was just able to leave 
there.
    But let me thank Mr. Hushka, Niles Hushka from North 
Dakota, for coming and participating. He has a vast knowledge 
of all of these issues and is involved in virtually every facet 
of them.
    I want to ask a question that I raised in North Dakota with 
those that are interested in biofuels. I was involved in the 
7.5 billion gallon renewable fuels standard that we now have. 
We created a 7.5 billion gallon standard by 2012. It looks like 
we'll be producing 10 billion gallons by 2010. Just guessing, 
but that's where it looks like we're headed. People talk about 
35 billion gallons or more.
    We use 140 billion gallons of fuel in this country. If you 
blend 10 percent ethanol or biofuels with every gallon, you've 
got a market for 14 billion gallons. It seems to me that unless 
you find ways to put E85 in gas tanks or have blend pumps at 
20, 30, 40, 50 percent, we're going to build a bunch of 
biofuels plants and then we're going to find at some point 
we're going to have a supply that far exceeds demand, unless we 
find a way to require those fuels to go in at a much greater 
rate than 10 percent.
    In my State, for example, we have 16,000 flex-fuel vehicles 
and 24 pumps. In a State 10 times the size of Massachusetts, 24 
pumps where you can pump E85. Think of it, 16,000 vehicles, 24 
places, in a State 10 times the size of Massachusetts, where 
you can get E85. Well, clearly that's not working, is it?
    And so I'm wondering if any of you have the same concerns I 
do. Are we going to produce and produce--and nobody is a bigger 
fan of producing biofuels than I am--but are we going to 
produce and produce and produce, only to discover that because 
there are no E85 pumps out there, there's no incentive, in fact 
there's a disincentive for the major branded stations to put 
them in, and there's no blend pumps. Are we going to find we've 
got a real problem? Who wants to tackle that? Niles, do you 
want to?
    Mr. Hushka. Senator, I think that you are hitting on 
something that's extremely important, not only at that level 
but at other infrastructure levels. As you know, today in our 
State we have one source to get our fuel to the market, and 
that's a single railroad, and they are already overloaded.
    As we produce more and more fuels in the heartland, we have 
to put infrastructure systems in place that allow for the 
adequate distribution of those fuels into the population 
markets, and I think that that will become one of the major 
criteria for how we can easily and readily make access with 
fungible fuels.
    There are also new technologies that I believe are 
important, especially in our cold technologies, cold locations. 
There are generation-two biodiesels that are coming out. Neste 
Oil, for instance, in Finland will begin producing 55 million 
gallons a day of the product which has cold flow capabilities 
down into the negative 30 degree range instead of negative 5.
    Those are the types of technologies that can be integrated 
more readily. This is a fungible fuel, so it can be used in 
existing pumps. It can be used in existing vehicles without any 
modifications. I think our emphasis should be placed on 
fungibility, and I do not believe that we will have to worry 
about levels at that point.
    Senator Dorgan. Just on that point, I ran into a young man 
about 20, 22 years old, in Valley City, ND. He said he had been 
living on the West Coast. He said, ``I just came back to North 
Dakota driving a pickup truck with vegetable oil, using 
vegetable oil as fuel.'' He's a young man very interested in 
alternative fuels. I said, ``Well, how did it go?'' He said, 
``It was fine until I reached Montana. Then it was too cold.'' 
The vegetable oil coagulated, I guess. Does that happen? So 
there are a lot of people out there looking at alternative 
fuels, and vegetable oil is a portion of it, but it's the issue 
you raised with respect to at what temperature can you use it.
    Mr. Passmore. Senator, you touched on a question that I 
raised in my opening remarks, and I think it's a very real one. 
I think the committee should look at it from two perspectives, 
low-level blends and then flex-fuel E85s. So how high can we 
push the low-level blends? In Brazil they run, apparently, cars 
that run on up to E24 in the low-level blends, so you need to 
talk to the car companies about that and find out how much 
protest you would get.
    But imagine a situation where all the vehicles gradually 
were flex fuel. Then you would have vehicles that could take 
E15, E20, E30, E40, because they can take up to E85. But 
definitely our investors want to be assured that there's going 
to be a market for ethanol beyond 15 billion gallons.
    Senator Dorgan. Thank you very much.
    The Chairman. Thank you very much.
    Senator Craig, you have a final question, I was told?
    Senator Craig. Well, thank you very much, because I'm not 
going to be able to return after the vote, and I did want to 
ask Jeff Passmore of Iogen a couple of questions, because from 
what we've heard from other panels this morning, ethanol, corn-
based, is moving very rapidly now into production, the 
competitive nature and the importance of cellulosic, and of 
course the research and the work that Iogen has done.
    Jeff, I understand you have applied for a loan with DOE?
    Mr. Passmore. Yes. There are two programs. There was the 
grant application process and then the loan guarantee pre-app. 
We have submitted under both of those with DOE.
    Senator Craig. And that occurred when?
    Mr. Passmore. Well, the closing for the loan guarantee pre-
app was December 31, and the grant application was back in the 
summer of 2006.
    Senator Craig. OK. The reason I'm establishing this 
timeframe for the committee is, we passed EPAct in August 2005. 
If you had a loan guarantee today, how soon would it take you 
to build a commercial production facility?
    Mr. Passmore. We had hoped to get the shovel in the ground 
on the facility in the spring or fall of this year, so starting 
in 2007. There has been a slight delay in the appropriations 
for the loan guarantee authorization, so it appears that--
though I was encouraged by the fact that the House passed the 
bill yesterday, and we're certainly looking forward to being 
able to charge forward, Senator, I'm not sure how many months 
we've lost. We may not be able to go with the fall of 2007 but 
slip to the spring of 2008.
    We'll see how fast this--when you were out of the room, 
Senator, my encouragement to the Chairman was that this 
committee make sure that we don't lose any momentum with the 
DOE with respect to the implementation of the intent of 
Congress.
    Senator Craig. What were you going to build, sir?
    Mr. Passmore. We're going to build a cellulose ethanol 
plant based on barley straw and wheat straw. Again, in my 
opening remarks I mentioned that we already have 320 farmers 
signed up for straw supply for a facility in southeast Idaho, 
and we're ready to go. We've taken options on land and just 
want to get going.
    Mr. Standlee. Senator, Chris Standlee with Abengoa. I would 
like to point out that our company also, as with Iogen and 
others, is one of the companies that has submitted a response 
and a proposal in connection with the DOE solicitation. Again, 
we're in pretty much the same boat. We have demonstration 
facilities under construction now, pilot plant facilities in 
operation, and our estimation is that once the grants are 
funded, as we certainly hope that they will be soon, we 
certainly could have cellulose production in effect by 2008 for 
sure.
    Senator Craig. It's also my understanding that once the 
money is made available, we're still looking at potentially a 
6-month window in DOE to get their process refined and ready. 
Are you hearing that?
    Mr. Passmore. Well, we understand they're going to go to 
regulations, which is apparently--according to the bill in the 
House yesterday, they have been told to get that in place 
within 6 months. But, Senator, if concurrent with that they 
were reviewing the loan guarantee pre-apps that have already 
been submitted, then if those could move forward concurrently--
as I understand the DOE process, they are then going to review 
the pre-apps and invite actual applications for loan 
guarantees, and those actual applications could be submitted 
while they're developing the regs.
    Senator Craig. For both of you, to bring plants into 
production, what type----
    The Chairman. Let me just interrupt to say I think I'm 
going to go to make these three votes.
    Senator Craig. I think we should.
    The Chairman. If you wanted to stay and ask----
    Senator Craig. I'll ask one last question, and then I'll 
shut the committee down, if you want me to.
    The Chairman. OK. Why don't we do that. Let me thank all of 
you for testifying, and Senator Craig can close the hearing. 
We'll start again about 2:15.
    Senator Craig [presiding]. Thank you. In relation to the 
capacity that we're offering through this CR--and Senator 
Domenici prompted me to ask a question I think appropriate--in 
relation to the loan guarantees we're looking at, what size are 
you looking for in guarantee? I'm asking that of both of you. 
If you were awarded this kind of guarantee, based on what we 
have provided, are we building enough capacity into the system 
to assure these kinds of new production facilities coming on 
line in both commercial and experimental----
    Mr. Passmore. As I understand it, the proposed cap is $4 
billion, and certainly that has enough room in it for several 
cellulose ethanol plants. I mean, we might be looking for 
something in the $350 million range.
    Mr. Standlee. Senator, I think the loan guarantee program, 
as I mentioned in my opening remarks, is an excellent program 
to help further the implementation of the technology after 
development, but frankly I think the initial step that's even 
more sorely needed is the funding of the grants for the biomass 
demonstration facilities that the DOE has proposed and 
solicited. So I think that's probably the most important first 
step.
    Senator Craig. Thank you.
    To all of you, again, thank you very much. I'm going to 
miss a vote. They're not holding them these days, so they're 
prompting us to be a little more attentive. Gentlemen, thank 
you all, and Lori, thank you for your testimony.
    The committee will stand in recess.
    [Recess.]
    The Chairman. OK, I think we'll startup. As I understand 
it, Senator Domenici is delayed with another meeting, but 
Senator Cantwell and I will go ahead.
    This is the fourth panel, and we have six witnesses. Let me 
just briefly introduce them, and then we'll just go from our 
left to our right and hear your points of view. Again, if you 
could do that in about 3 minutes, we would sure appreciate it.
    Edmund Burke is representing the Coalition of E85 
Retailers, and we appreciate you being here. Lou Burk, who 
manages alternative fuels for ConocoPhillips, is here, and we 
appreciate your presence. I think they're getting you a name 
tag. Robert Brown is the director of vehicle environmental 
engineering for Ford Motor Company. Thank you for coming. John 
Plaza of Imperium, this is the Nation's largest biodiesel 
refinery. Thank you very much for being here. Mike Mears, who 
is the vice president of transportation at Magellan Midstream, 
thank you very much. And Charles Drevna, Charles is the 
executive vice president of the National Petrochemical and 
Refiners Association. We very much appreciate you being here.
    Why don't you start, Mr. Burke, and we'll be glad to hear 
from all of you.

  STATEMENT OF EDMUND BURKE, CHAIRMAN, DENNIS K. BURKE, INC., 
          REPRESENTING THE COALITION OF E85 RETAILERS

    Mr. Burke. Good afternoon. Thank you very much for inviting 
me, Senator. I appreciate it. My name is Ed Burke. I'm chairman 
of the board of Dennis K. Burke, Inc. We're a very large, 
family-owned distributor in New England, just outside of 
Boston--Chelsea, MA. We have distributed biodiesel for 10 years 
now, and we are just starting up on E85 and trying to retail 
it, but I do have the capability of loading it on trucks, and 
along with General Motors, I've filled a lot of vehicles that 
are going to various fairs, demonstrating the vehicles.
    The Coalition of E85 Retailers is relatively new, just 
formed to try to solve some of the issues involved. Some of 
them are fire safety--and don't get me wrong, some of my 
problems are not really complaints. Health and safety is 
certainly a priority, and we need the UL certification or 
similar on some of the equipment.
    But I wanted to address, we have some conflicts, like EPA 
has recommended that States give waivers for Stage II, which is 
a vapor recovery phenomenon, but all the flex-fuel vehicles are 
equipped to handle vapors. It's $20,000 and a lot of time for 
one little pump. I'm \1/10\ the size of North Dakota, which was 
referenced earlier. Massachusetts is \1/10\ the size of North 
Dakota, and to my knowledge I'll be the first retail outlet 
running in the Northeast, never mind just Massachusetts.
    And I own an E85 Chevy Impala. We have an Avalanche on loan 
from General Motors. So there's a lot of frustration. Again, 
it's a harder turnkey operation than was biodiesel because 
we're dealing with a much more flammable product that has 
various mechanical issues as well as the health and safety 
issues.
    Mostly I would be pro some kind of incentives. I liked the 
discussion earlier on the loan guarantee kinds of things, as 
opposed to individual mandates. I've had peers that want to 
have one standard for biodiesel blends across the country, and 
it's just fundamentally crazy, because south of the Mason-Dixon 
Line, cold weather is much less of an issue that it is in half 
the States that are represented in this room.
    And I would save the rest of the time for questions and 
dialog. Thank you very much again.
    The Chairman. Thank you very much.
    Mr. Burk, go ahead.

STATEMENT OF LOU BURK, MANAGER, ALTERNATIVE ENERGY AND PROGRAMS 
                     GROUP, CONOCOPHILLIPS

    Mr. Burk. Thank you, Mr. Chairman and committee members. My 
name is Lou Burk. I run the Alternative Energy and Programs 
Group at ConocoPhillips. My group focuses on all forms of 
future energy and also biofuels.
    Most of our work on biofuels is actually on technologies to 
look at ways to utilize existing infrastructure to better 
facilitate introduction of biofuels into the marketplace. We 
are one of the largest blenders of biofuels. We are a developer 
of biofuels technology, and we are a biofuels manufacturer in 
Europe with a technology called renewable diesel which we would 
like to introduce into the United States.
    We are also extremely active in the industry groups that 
work on setting the standards that Mr. Burke next to me was 
talking about, working with UL on pump standards, working with 
ASTM on quality standards, and all the things that we need to 
do to make sure the fuels that are in the marketplace, whether 
or not they have renewable content, meet the customers' 
expectations.
    We're looking at two general tracks for biofuels 
development. The first one is, are there ways that we can 
broaden the feedstocks we use in our existing infrastructure to 
make gasoline and diesel fuel that are renewable in their 
contents. Some of this is thermochemical conversion, some of 
this is using different feedstocks into existing equipment, and 
those are very interesting and exciting opportunities for us.
    The other thing we look at are novel, out-of-the-box 
technologies, whether that be cellulosic ethanol, whether that 
be biomass-to-liquids, and those sorts of technologies as well. 
We think that modifying existing refineries to process a 
variety of renewable feedstocks that will utilize the existing 
infrastructure, because it will make gasoline and diesel fuel, 
will facilitate biofuels penetration much quicker.
    As you contemplate how to create an environment that will 
encourage continued growth of renewable fuels, you have to make 
sure we don't pick winners and losers. With the aspirational 
goals that have been set and discussed, we don't know what the 
fuels will look like that best fit those. So we would, we say, 
let all flowers bloom. Make sure you don't pick winners and 
losers, and let the technologies go forward.
    And, finally, we have to make sure that as we introduce 
these fuels, we do not backslide on the different environmental 
standards and climate goals that we have set or are setting. 
Backsliding in these areas should not be tolerated.
    Again, I thank you for your invitation and look forward to 
your questions.
    The Chairman. Thank you very much.
    Mr. Brown, we're glad to have you here.

  STATEMENT OF ROBERT BROWN, DIRECTOR, VEHICLE ENVIRONMENTAL 
                ENGINEERING, FORD MOTOR COMPANY

    Mr. Brown. Thank you. Good afternoon, and thank you for 
providing me the opportunity to participate in this conference.
    Diversifying our transportation energy supplies, and in 
particular expanding America's use of biofuels, is an important 
issue to Ford and the American people. The instability of the 
world's oil supply, the growing worldwide demand for oil, the 
fragility of our domestic infrastructure, and increasing 
political pressure on climate change, are all leading to 
renewed interest in finding alternatives to oil and in finding 
more efficient ways to use the oil we have.
    At Ford, we recognize that we have a responsibility to do 
something to help address America's energy security needs, and 
we are accelerating our efforts to develop innovative 
solutions. We are bringing to the marketplace a range of 
advanced vehicle technologies that are increasing fuel 
efficiency and diversifying our vehicle fuels away from 
petroleum.
    Ford Motor Company has been building flexible-fuel 
vehicles, or FFVs, for over a decade, and we are an industry 
leader in this technology. FFVs are a great alternative for our 
customers, because they provide an option to choose between E85 
and gasoline, as desired. Last summer, Ford, along with GM and 
DaimlerChrysler, voluntarily committed to double the production 
of FFVs by 2010. In November, we expanded that commitment to 
include half of our vehicles produced each year, beginning in 
2012, provided there are sufficient amounts of fuel and retail 
facilities to support customers.
    But there is a limit to what we can achieve on our own. We 
believe that our Nation's energy challenges can only be 
properly addressed by an integrated approach, a partnership of 
all stakeholders, which includes the automotive industry, the 
fuel industry, government, and consumers. There is no silver 
bullet that will diversify our transportation fuels, and this 
is not a short-term problem.
    Longer term, Ford has endorsed the 2525 campaign, which 
sets the goal of getting 25 percent of U.S. energy needs from 
renewable sources by 2025. To achieve this level of biofuels in 
transportation, we need, first of all, to expand the ethanol 
feedstock diversity; second, increase ethanol production; and 
third, accelerate infrastructure development on a national 
scale. These are all critical building blocks that will lead to 
competitive E85 pricing and customer convenience.
    The challenges are considerable, but not insurmountable, 
and there is an enormous amount we can achieve at a lower cost 
and in a shorter timeframe if we act together in an integrated 
manner. All of us have the opportunity to do something about 
energy diversity and independence.
    Thank you again for the opportunity to participate.
    The Chairman. Thank you very much.
    Mr. Plaza, please go right ahead.

    STATEMENT OF JOHN PLAZA, PRESIDENT, IMPERIUM RENEWABLES

    Mr. Plaza. Mr. Chairman, I first want to convey my 
appreciation for the invitation to speak at this. This is a 
tremendous opportunity for a new industry such as ours. And 
then I have to give credit to Senator Cantwell, who has been 
just a tremendous leader in our State and in our Nation for 
renewable fuels, but biodiesel especially.
    My name is John Plaza. I'm the president and founder of a 
company called Imperium Renewables. We're building the Nation's 
largest biodiesel plant in a pulp and paper town that's sort of 
decimated by the old timber industry, looking for new industry. 
We're building a 100 million gallon a year facility. It's about 
6 months into construction. It will be done in about 4 months. 
Using vegetable oil from around the world.
    We started out in Seattle, with the recognition that 
Seattle has the highest per capita consumption of biodiesel. 
It's one of the easiest forms of alternative fuel to integrate 
in. It has a very good life cycle analysis balance, from the 
EPA point of view, of 3.2 to 1 unit of energy. It's one of the 
best renewable fuels, very low carbon. It's got a lot of 
benefits and integrates in quickly.
    As recognized, the Pacific Northwest has huge demand. We 
decided to go forward with our business plan, mimic the 
petroleum industry to locate facilities that give us 
operational flexibility for logistics, transportation in and 
out, not be dependent on rail alone. We use marine logistics, 
barge logistics.
    We're extremely well-funded. We've received more than $100 
million in equity into the company. We've had no direct 
subsidies or funding to the company from the Federal 
Government. We of course enjoy the tax credit of $1 a gallon 
for biodiesel and methyl esters, which is critical to the long-
term success of this industry.
    As we have developed our company, we've seen a lot of 
interest in biodiesel, so we're excited about the opportunity. 
We think it can be a tremendous amount of renewable energy, due 
to the fact that 20 percent of America's petroleum usage is in 
diesel. Ninety-four percent of our goods that travel by truck, 
travel by diesel. It's a 5.4 billion gallon home heating oil 
market. There are a variety of different uses for diesel, and 
biodiesel integrates immediately and effectively right into 
that existing infrastructure, we believe.
    We certainly think that the opportunity to grow this 
industry is tremendous. We have opportunity in alternate 
feedstocks other than soy. We can look at any different oil 
seed. Today we're just announcing the first and largest oil 
seed contract in the State of Washington, for about a million 
gallons of canola oil. Although it's only 1 percent of our 
facility, it's a tremendous sort of show of what direction this 
industry can take and bring new agricultural commodity business 
to the farming community that's solely dependent on wheat in 
the Pacific Northwest.
    There's just a tremendous sort of path forward. There's a 
version of a crop that we can grow that's the equivalent of 
cellulosic, called algae. It has carbon sequestration, energy 
production, ethanol production, and biodiesel production 
available to us. So it's a tremendous opportunity, and I 
appreciate the chance to be here.
    The Chairman. Thank you very much.
    Mr. Mears.

  STATEMENT OF MIKE MEARS, VICE PRESIDENT FOR TRANSPORTATION, 
                  MAGELLAN MIDSTREAM PARTNERS

    Mr. Mears. Well, thank you, Mr. Chairman and members of the 
committee, for the opportunity to speak to you today. My name 
is Mike Mears. I'm vice president of transportation for 
Magellan Midstream Partners, headquartered in Tulsa, OK. I also 
currently serve as the chairman of the Association of Oil 
Pipelines, but I'm testifying today in my capacity as an 
officer of Magellan.
    Magellan owns and operates the Nation's longest refined 
products pipeline system, as well as 81 refined products 
terminals. Our pipeline system stretches through the heart of 
the country, from the Texas Gulf coast to Minnesota. In several 
Midwestern States we provide transportation and distribution 
services for the majority of gasoline and diesel fuel consumed.
    We do not currently transport ethanol or ethanol blends in 
our pipeline system today, and in general, the industry has 
very limited experience in this area. We do have ethanol 
storage and blending capabilities at 26 of our terminals, and 
we have four more under construction in the State of Missouri. 
We have provided these ethanol blending services for customers 
since the early 1980's, and we have also recently, within the 
past year, invested in biodiesel blending infrastructure in 
many of our terminals in Minnesota, North Dakota, and Iowa.
    I am here today to address the potential transportation of 
ethanol in our multiproducts or dedicated pipeline system. 
Pipeline is an efficient, safe, economic, and reliable way to 
transport large volumes of liquid fuels. However, there are a 
number of operational, technical, and economic issues 
associated with the potential transportation of ethanol in 
pipeline systems. These include the practices and equipment to 
minimize water content and impurities, compatibility of 
existing seals and gaskets used in the valves and pumps and the 
other equipment on the system, and the potential for stress 
corrosion cracking of pipelines and tanks.
    Substantial research into the causes of and solutions for 
these items, particularly the stress corrosion cracking issue, 
is needed. It is our responsibility to prevent pipeline leaks 
and protect the environment, so a complete understanding of 
this issue will be necessary before we are comfortable in 
considering ethanol transportation by pipeline. Targeted 
industry research on this matter is already underway, and we 
have left some materials on that research on the table outside.
    It is conceivable that limited opportunities to transport 
10-percent ethanol blends in existing pipelines may prove to be 
technically feasible due to the low concentration of ethanol in 
the product. However, we believe the most likely opportunity to 
transport fuel-grade ethanol will be in a dedicated pipeline 
built for that specific purpose. This position is based on the 
assumption that the solutions to the operational and technical 
issues described earlier may be unachievable or cost-
prohibitive on an existing multiproducts pipeline.
    We face a number of economic and commercial variables when 
considering a dedicated pipeline for the transportation of 
ethanol. For example, a line from the Midwest to the East Coast 
could be a $2 billion or more project. Key variables in a 
project of this nature would include the ability to develop 
secure long-term throughput commitments from ethanol producers 
or end users; the development of aggregation systems within the 
producing region, since it could take up to dozens of 
individual plants to baseload a pipeline; the development of 
distribution systems at the terminus of the pipeline; and the 
definition of regulatory authority associated with ethanol 
pipeline oversight. Since we have not conducted a study on 
these issues, we don't have the answers to all of these 
questions yet.
    In closing, to address the major issues associated with 
ethanol and pipelines, we believe Congress should provide 
funding to study the technical concerns related to pipelining 
ethanol. Second, Congress should pass the Ethanol 
Infrastructure Expansion Act of 2006. This bill focuses 
attention on existing barriers, market risks, regulatory 
issues, and financial incentives, using a range of ethanol 
production levels.
    Thanks again for the opportunity to speak here today, and I 
look forward to your questions.
    The Chairman. Thank you very much.
    Mr. Drevna, go right ahead.

STATEMENT OF CHARLIE DREVNA, EXECUTIVE VICE PRESIDENT, NATIONAL 
            PETROCHEMICALS AND REFINERS ASSOCIATION

    Mr. Drevna. Chairman Bingaman, Senator Cantwell, Senator 
Thomas, good afternoon. I am Charlie Drevna, executive vice 
president of NPRA, the National Petrochemical and Refiners 
Association. We are a national trade association with over 450 
members, including those who own or operate virtually all U.S. 
refining capacity, as well as most of the Nation's 
petrochemical manufacturers with processes similar to those of 
refiners.
    There is no doubt that biofuels is a growing--and will be a 
growing--component of the Nation's transportation fuel mix. And 
let me unequivocally state that NPRA does not oppose the use of 
biofuels. What we do oppose, however, is the mandated use of 
biofuels. And in saying that, what we do support is the 
sensible and workable integration of biofuels into the 
marketplace based upon market demands.
    So during my time today, I would like to walk you through 
some of the challenges that we face as refiners using biofuels. 
First, as relatively new biofuels enter the market, increased 
transportation and logistical issues are likely to arise, and 
some of the folks here on the panel have already gone through 
some of those.
    As Mr. Mears said, ethanol is not distributed through 
pipelines because of problems with water contamination and 
corrosion. So because of this, ethanol must be blended with 
gasoline or the appropriate blendstock at the terminal or as 
close to the final consumer as possible. This makes the 
delivery and distribution of ethanol expensive because it 
requires more expensive transportation modes such as truck, 
rail car, barge, or even ship.
    Ultimately, mandating biofuels costs consumers. One example 
is--I want to talk about E85 for a second. E85 has a 
substantially lower energy content per gallon than gasoline, 
only about approximately 70 percent of the gasoline's energy 
content, which translates into a significant fuel economy 
penalty.
    So in order for the retail customer to cover the same 
distance they would get using gasoline at the same cost, the 
retail price of E85 would need to be approximately 25 to 30 
percent less than that of gasoline. As reported by the EIA, 
similar results for biodiesel show that they have a lower fuel 
economy than regular petroleum diesel.
    Now, mandates will not cure that. Mandates will exacerbate 
that problem--not the technical problem but the cost problem--
because if every drop that is produced is mandated, there is no 
reason for the marketplace to decide how best to use the 
product.
    Second, we believe that Congress should preempt State 
biofuel mandates. The present enthusiasm for renewable fuels 
has resulted in several States and even municipalities adopting 
mandates. Local mandates will impose additional requirements on 
the ethanol distribution system and increase costs for shipping 
and storage. The existing Renewable Fuels Standard, or RFS, 
mandate, with its credit-trading provisions, contains a degree 
of freedom that allows the distribution system to operate at a 
low-cost optimum by avoiding infrastructure bottlenecks such as 
lack of storage or rail capacity. Mandating ethanol or other 
biofuel usage in specific areas will force a distribution 
pattern that is less flexible and therefore has less capability 
to minimize cost. Again, these additional costs will be borne 
by the consumers.
    Third, biofuels should be developed with the full 
realization of their impact on air quality. Congress should 
defer any support for an additional renewable fuel mandate 
until it completes an analysis of the ozone impacts of 
ethanol's additional summer volatile organic compound, or VOC, 
emissions and the potential impacts on maintaining attainment 
with the 8-hour ozone national ambient air quality standards, 
or the NAAQS.
    If, however, Congress decides to continue its support for a 
renewable fuels mandate after completion of these additional 
studies, the EPA should, one, announce the list of ground-level 
ozone insensitive areas to the country, where the increased use 
of gasohol would be environmentally safe, and two, for such 
areas, list how additional gasohol could be used without 
causing additional respiratory problems or contributing to 
other ozone-related kind of problems.
    In closing, NPRA recommends that Congress avoid mandating 
increased volumes of biofuels or a hastened implementation 
schedule for biofuels beyond that of the existing Federal RFS. 
The goals of the biofuels industry, including corn-based and/or 
cellulosic or biodiesel, should be economic parity or better 
with that of refined products, while not adversely contributing 
to air quality or the manifestation of other unintended 
consequences.
    Again, thank you for the opportunity to appear today, and I 
look forward to hopefully answering any questions you may have.
    The Chairman. Well, thank you all very much for your 
testimony. Let me ask a few questions, and then I'll defer to 
Senator Thomas and then to Senator Cantwell here. Senator 
Domenici just came in. We'll defer to him first, before the 
other two.
    Let me just ask, on this issue of standards for biodiesel, 
some of the earlier testimony, as I understood it this morning, 
was that one of the advantages of ethanol is that there's a 
consistent standard that is present for ethanol. And there's no 
question as to performance and that sort of thing. Nothing 
similar exists with regard to biodiesel at this point. I took 
the testimony to suggest that the Government needed to step in 
and do something to bring that about.
    Now I gather, Mr. Burke, you said that obviously you have 
concerns because of different weather in different parts of the 
country. You don't think one size fits all. I guess the other 
question, though, is even if that is true, should there be a 
standard in your region of the country, perhaps a somewhat 
different standard somewhere else, or should we just let it go 
the way it is?
    Mr. Burke. It's very much a matter of experience and common 
sense. The previous speaker, when he alluded to economics, said 
don't forget the cooking grease phenomenon. There are a lot of 
places across this country that are converting cooking grease, 
and the cost--people can do it their back yard for 70 cents a 
gallon.
    But to answer your question, in May, ASTM revised 6751. 
They revised it again in August. It's getting there. There's a 
few funky things, without getting into the chemistry of it, 
monoglycerides, triglycerides. It's kind of like you going to 
the doctor. But the issues are being solved.
    My point is that if you're south of the Mason-Dixon Line, 
in January, you may be very successful using a B10 or even a 
B20, but if you're up in Minnesota or Wyoming or somewhere 
where it's cold, you drop down to a lower percentage. In my 
case, my company, we avoid B20, with a few exceptions where 
some grant deals are involved. We sell B5 from Halloween to St. 
Patrick's Day, but we won't do B20. The people who are on B20, 
we drop them down to B5, which is 5 percent biodiesel.
    But the specs are being--it's not fair to put people's feet 
to the fire on the specs. They are evolving and they're 
learning as they go. It's a very new business. In Hawaii, you 
would be interested to know, they had a problem with the Maui 
landfill catching on fire, and a guy with an electric generator 
company--they asked people to solve it. No one did. He went 
online. He took the name. He's the same fellow that's building 
plants worldwide, including the one President Bush visited last 
May in Virginia.
    So the market will take care of a lot of things. I'm 
generally a market guy and an incentive guy, but believe me, 
thank God we're sitting here. Thank God we had 1992 EPAct. That 
was when Federal, State, and utilities had to buy a certain 
percentage of alternatively-fueled vehicles. That's where the 
whole biodiesel thing began.
    Costs are coming down. We have bigger quantities being 
shipped. The economies of scale in oil are very large. When I 
was first selling biodiesel, the rule of thumb was a penny a 
gallon upcharge for each percent of biodiesel, so you're 
selling stuff for 20 cents a gallon more than the equivalent. 
That's a pretty hard sell.
    But the alternative fuel credits made it such that somebody 
could spend that 20 cents and trade the credit in for the 
alternative fuel. You could use half your requirement by using 
the fuel. So maybe you need a declining subsidy or a declining 
incentive, but as the scale kicks in--I mean, you see every day 
the amount of plants being announced. It's getting to be a real 
win.
    The Chairman. Let me see if anyone else wants to comment on 
that. Mr. Brown, did you have a comment?
    Mr. Burke. Yes. First of all, Ford products are designed to 
operate on B5, or 5 percent biodiesel. There is a joint effort 
underway that includes the Government, the OEMs, auto 
manufacturers, and the fuel industry, to come up with a 
specification for biodiesel, because there is a problem in both 
warm and cold weather. In warm weather, it's a stability 
problem that can cause acid to form and corrode the system and 
affect the fuel filters. And in cold weather, you get wax 
particles that form, which again plug the system. So we 
recognize there are challenges, but there is an effort underway 
hopefully to resolve those challenges.
    The Chairman. Mr. Plaza, did you have a comment?
    Mr. Plaza. Yes. I think it's important, Mr. Chairman, to 
recognize that there actually is an American Society for 
Testing and Materials specification for biodiesel. It has been 
in place since the dawn of biodiesel. It certainly is being 
refined as we grow as an industry. In 2004 we produced 30 
million gallons. In 2005 it was about 50. Last year it was 
about 150 million gallons. So it's still small, but there is a 
standard in place.
    And we can look to others for examples of how to grow and 
learn. The petroleum industry certainly had problems with 
quality, and they figured those out a long time ago. We are 
blessed to not have as many quality issues with petroleum.
    Europe also uses a billion gallons of biodiesel a year 
without issue, so it's not as if there are not standards. The 
standards are there. They're improving. What it really takes is 
large-scale, quality production, at a larger scale, similar to 
the petroleum industry, and I think that's what we're starting 
to see in the industry.
    The Chairman. Mr. Mears and then Mr. Drevna, and then I'll 
call on Senator Domenici if he has questions.
    Mr. Mears. Just briefly, our experience I think coincides 
with what Mr. Plaza had to say. We started blending biodiesel 
in the State of Minnesota in the fall of 2005. They have a 2 
percent biodiesel mandate. Our standards for accepting 
biodiesel, our quality control standards were being developed 
at that time, and our first winter up there was not a success. 
We had a lot of problems with biodiesel blending in the State 
of Minnesota. Over the course of last year we refined our 
product quality specifications, and this winter we've had no 
problems whatsoever with biodiesel blending in Minnesota. So I 
think it's a process of trial and error, and it's still early 
on in the process, but I think it's progressing well.
    The Chairman. Mr. Drevna.
    Mr. Drevna. Senator, we, as the refining industry, are one 
of the most heavily regulated industries in the country, in the 
world, and our specifications are very, very, very tight and 
very, very, very strict. Unfortunately, as an industry we don't 
have the luxury of saying, ``OK, we can give you some time. 
We're going to blend some stuff into our product, but if it 
doesn't work, well, it will work next week, or their new 
standard will be developed.''
    My point is, again, we support biodiesel, it's fine, but as 
I think maybe the first Mr. Burke down there said, people can 
make this stuff out of their garage and sell it. I don't know 
if those folks are going ASTM anything, but somehow or another, 
that stuff's going to end up in the product stream. So my 
industry is very, very concerned that before we mandate any 
significant levels of this stuff, we understand the full 
ramifications of this before we mandate it. That's the only 
thing we're asking.
    The Chairman. All right. Thank you.
    Senator Domenici.
    Senator Domenici. Senator Thomas was first.
    The Chairman. Senator Thomas, then.
    Senator Thomas. Thank you. I'm glad we're having this 
hearing and appreciate your being here. This is obviously a 
very important issue. Everyone agrees that we need a change and 
we're going to have to have a change, but all we hear basically 
are ideas and fairly small amounts of change, 5 percent. We're 
talking about the year 2025 before we can really get there. 
We're going to have to emphasize the production of our current 
products pretty strongly in order to fill this gap, it seems to 
me.
    Whoever would like to respond, what do you think is 
necessary to reach this goal of alternative fuels, with respect 
to the market, with respect to the Government, with respect to 
the refiners and the requirements and so on? Very simply, what 
should be done besides talk about it?
    Mr. Burke. I think--and I'm not going to get into 
incentives and mandates because I think Mr. Drevna represented 
our position fairly well, but I would say that as we look at 
how--because we have the blending obligation. We're the second 
largest refiner in the United States. The blending obligation 
to comply with the RFS and then comply with all the different 
State mandates lies with us.
    And we look at how we are going to hit targets, and we have 
run scenarios since the State of the Union, saying how would we 
possibly hit these targets and what sorts of things would 
happen. And what we find out is that the only way to get to 
those sorts of volumes are to make sure that we leave the doors 
open to multiple technologies. This is not a silver bullet, 
which I think Mr. Brown talked about. There isn't one.
    It's the idea that we will have to build this. There's 
going to be a corn-based ethanol piece. There will be a 
cellulosic ethanol piece. There will be a biodiesel piece, a 
biomass-to-liquids piece. And public policy should make sure 
that no one pathway gets blocked now while we're trying to find 
out what's going to be the most cost-effective way to bring 
fuels to the marketplace and not overly burden the consumer.
    Senator Thomas. Yes, but you mention you're reaching the 
mandates. That implies that what's going to happen is rules or 
laws; is that right?
    Mr. Burke. Well, we are blending to meet the mandates 
today, yes. Because right now----
    Senator Thomas. But I hear others of you saying, ``We don't 
want any restrictions. We don't want any requirements.'' And 
yet that seems to be what you're doing, is meeting 
requirements.
    Mr. Burke. We're meeting the requirements because we have 
to, to sell the fuel, because the basic economics do not----
    Senator Thomas. What would you do if we didn't have 
requirements?
    Mr. Burke. We would make the products that the marketplace 
would want to pay for.
    Senator Thomas. OK. Then you're saying the marketplace 
would do this. Anyone else want to comment on that?
    Mr. Drevna. Yes, sir, Senator. If you look at what's going 
on right now, we're not only meeting the mandate that Congress 
passed in 2005, in EPAct, we're exceeding it. And we will be 
exceeding that, those target numbers, all the way through the 
period. And the reason is, in all deference, we are supply 
short. There's no question we're supply short in the country. 
We see ethanol and biodiesel--as a refining industry, we see it 
as a valuable blendstock. It keeps additional volumes coming 
in.
    So what we're saying is, the marketplace is a pretty good 
thing. It dictates where and when and how best to use these 
things. And we're very confident, as our counterparts in the 
renewal fuels industry should be confident, that this is going 
to be a growing thing.
    And just to expand upon what Mr. Burke from ConocoPhillips 
said there a minute ago, when you focus your attention on one 
aspect or one particular element of the biofuels in a mandate, 
it really inhibits innovation. The box that we work in, the 
innovation box, so to speak, shrinks, because there are 
constraints.
    Now I'm not saying that my industry--we always reserve the 
right to be a little smarter tomorrow than we are today, but it 
inhibits us in what we can do and what we should do if we're 
facing something in costs that----
    Senator Thomas. What I keep hearing is that maybe we can 
get to 25 percent alternative use by 2025.
    Mr. Drevna. Senator, it's----
    Senator Thomas. That's a long time.
    Mr. Drevna. That's a long time, but unfortunately for 
refiners, we have to make business plans for 2025 today.
    Senator Thomas. But we may have to make plans for something 
different before that. I think that's the issue.
    Mr. Drevna. But the thing is, we have this ever-changing 
target. We had a target set in 2005 of 7.5 billion gallons. Not 
2 years later, we're talking about moving that target. We have 
to make business plans.
    Senator Thomas. I appreciate it, and I understand. My time 
has run out, but my point is, I guess, we all want 
alternatives. I think we know we're going to get there, but we 
talk about them a lot. We're not really making a lot of 
progress in terms of the percentage change, or even in our 
prognosis for the percentage change.
    And so we either have to decide what we do to innovate that 
a little more quickly, or else make sure we continue to support 
the needs through our traditional sources. And sometimes we 
forget about the traditional sources when we keep talking about 
alternatives, but alternatives are not going to take over for 
quite a while. My time is up.
    The Chairman. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman.
    Mr. Plaza, do you want to comment on that, since you've 
seen a five-fold increase in what the United States produced 
last year just in your facility? And what else do you need, 
from an infrastructure perspective, that would help in the 
delivery and growth of your particular product?
    Mr. Plaza. Absolutely. Thanks for the chance.
    First of all, Senator Cantwell, I appreciate your asking 
the question, because I actually do believe as a new industry 
we can address these supply sort of concerns with new crops. 
For example, we have 60 million acres of fallow land that we 
don't grow on in the United States. We have existing land that 
we don't grow energy crops in. Washington alone could grow 100 
million gallons of canola oil, rotating it in with wheat.
    There are next generation feedstocks. There are studies 
that show that with algae, we could grow all the world's liquid 
transportation needs on .2 percent of the world's land mass. 
All of this data is out there. Companies like ours that are 
new, small, innovative, and looking to break into the energy 
market, are having vision to that, and are going there quickly 
and making the investment from the venture capital world, the 
hedge funds of the Nation investing in us, looking to that next 
generation, not being focused on corn-based ethanol or soy-
based biodiesel.
    But what are the next steps? Those are out there. They're 
identified. There's investment going into this industry to meet 
that, so it's not impossible. It's actually quite achievable. 
What makes it work, we believe, is a long-term, stable 
environment that takes into account we have to help support 
these new industries, just like we've done with petroleum, 
nuclear power. All the energy sources that we've seen, all have 
received support from the Federal Government, so we're asking 
for the same level of support as we grow this new industry. 
We're bringing jobs to communities that are decimated by the 
old timber industry.
    We're supposed to be talking about infrastructure, and I 
want to address that, because we've heard a lot about ethanol, 
but we haven't heard much about biodiesel. Twenty percent of 
the Nation's petroleum usage is diesel. Biodiesel is a one-for-
one replacement for diesel, and most studies show it's about a 
2 percent loss of overall energy, versus the 11 percent we've 
heard. That's with soy-based. With canola-based, it's actually 
an increase in efficiency over petroleum diesel.
    The other component is, it works in the existing 
infrastructure with no change. We can go into a terminal 
operation with biodiesel, 100 percent, through pipelines, 
through barge economics, which we have at our facility. We'll 
be able to take a 83,000-barrel barge from our facility, load 
it, and transport it to California, to western Washington, into 
the existing infrastructure. The only thing that's preventing 
us from entering into that infrastructure is really acceptance 
from that terminal operator.
    So we see it as not a barrier of actual technology but a 
barrier of acceptance. We don't feel that there really are a 
lot of problems in taking this industry where it needs to go, 
other than education, awareness, and acceptance as a Nation, 
and as bigger industries accept a smaller sort of up-and-coming 
opportunity. We think there's a tremendous opportunity and very 
little actually blocking the implementation of it, other than 
knowledge.
    Thanks.
    Senator Cantwell. Mr. Brown, thank you for the flex-fuel 
initiative in Brazil. We heard yesterday--I think it was 
yesterday--from Honda, who branded themselves at the hearing as 
the technology leader in the automobile industry. How is Ford 
looking at diesel cars and the potential for looking at a 
variety of sources of biofuels, including that one?
    Mr. Brown. Well, let me say, first of all, that we do have 
a portfolio approach that will deal with, from our perspective, 
energy security as well as climate change as well as air 
quality, and clean diesel is part of our portfolio. So we are 
not only researching technologies that lead to the use of 
advanced diesel in the field, but also the type of fuel that's 
required.
    Just recently EPA, working with the fuel industry as well 
as the OEMs on the auto side, issued rules for ultra-low-sulfur 
diesel. And we have begun that roll-out. We have technology 
that will coincide with the delivery of that fuel. And we 
expect there will be air quality benefits, as well as fuel-
efficiency benefits, but clean diesel is only one of the 
products in our portfolio.
    Senator Cantwell. Are you seeing a play--because the 
Europeans, with this 1 billion biodiesel--they're at 80 times 
what we are, I think. Anyway, they have established that, and 
so some of their European auto manufacturers are making big 
plays in diesel. Do you see that competition?
    Mr. Brown. Well, of course there's competition, but in 
Europe the air quality standards allow greater use of diesel. 
And we have been working with the Environmental Protection 
Agency here in the United States to resolve some of those near-
term challenges, as well. So, yes, diesel offers an immediate 
CO2 benefit. The challenge has been, where do you 
set the air quality standards, from a tailpipe perspective?
    Senator Cantwell. Thank you.
    The Chairman. Senator Domenici.
    Senator Domenici. Mr. Chairman, Senator DeMint arrived, and 
he has been delayed most of the day. I would yield my time to 
him. I know we don't want to----
    Senator DeMint. Senator, I'm actually introducing someone 
in the next panel, so I would rather listen to you and the 
gentlemen here.
    Senator Domenici. Well, you might have to wait a long time, 
then.
    Senator DeMint. OK.
    [Laughter.]
    Senator Domenici. In fact, we have a lot more to do before 
him. The Chairman has a half hour, I have 30 minutes. That 
would be an hour. I don't know, what do you have, Senator, 20 
minutes? Come back in an hour and 20 minutes.
    [Laughter.]
    Senator Domenici. Anyhow, I'm going to be very quick, but I 
wish I knew a little bit more about the history of the 
automobile and the fuel that fuels our engines that have been 
part of the evolution of the automobiles taking us around with 
the combustion engine. But I would assume that we just didn't 
bust into, all of a sudden, nationwide, using an internal 
combustion engine, six or eight cylinders, that all used one 
kind of gasoline. That didn't happen just overnight, all at 
once, did it? Any of you enough of a historian to say that it 
came in in bits and pieces, and arrived at parts of the country 
and then other parts? Is that a fair assessment? Who knows?
    Mr. Brown. Yes, that's a very fair assessment.
    Senator Domenici. OK.
    Mr. Brown. But, Senator, I would point you to just the 
experience with, let's just say, unleaded fuel and the 
catalyst-equipped vehicle. That took about 2\1/2\ decades to--
--
    Senator Domenici. Just for that?
    Mr. Brown. Just for that.
    Senator Domenici. Well, it seems to me that we have to be 
careful here when we're talking about the system that had 
imposed upon it--this national system. There were some 
impositions, but it was still a national system. Except for 
California, for the most part, I guess. All of a sudden we know 
so much, we have some big news about what might work better in 
terms of conservation, right? A new way to produce the product 
that will run the engines or that will be different, so we will 
save a lot of petroleum product as we move our vehicles. And 
we're going through the stretches of ``How do we go from where 
we are to the next and the next?'' Is that correct?
    Mr. Plaza. I'd like to just sort of tell an anecdotal story 
that got me interested in this as an entrepreneur.
    Senator Domenici. Go ahead.
    Mr. Plaza. If you look at the automotive industry, because 
I am somewhat of a fan of history, the original Ford, the Model 
A, was designed, if I understand correctly, to run on alcohol, 
ethanol. The original diesel motor was designed by Rudolf 
Diesel to run on peanut oil, vegetable oil.
    Senator Domenici. On what?
    Mr. Plaza. On peanut oil. It was modified to use petroleum. 
So we're almost coming full circle back to the original source 
of our energy. So for us to dismiss these as inconsequential or 
minor is foolish, and it also prevents America from being 
leaders in the world and using our land mass to grow our 
energy. There's tremendous potential there. We need the 
support, long-term, of the Federal Government, such as the 
extension of the tax credit and others.
    Senator Domenici. OK, that just gets me to the question. 
All of you are important, so if one of you said this, it's 
important. I can't remember which one talked about the fact 
that we ought to get on with using one regulation and one 
system, and not have--not be imposing multiples on the industry 
or the people that make the liquid we call petroleum. Who said 
that?
    Mr. Burke. Actually, I think Charlie was the one who talked 
about a single national standard, but when you market in 
multiple States, and we distribute, it gets difficult when 
different States have different standards or mandates. The 
State of Washington is implementing a new Renewable Fuels 
Standard that is different than the State of Oregon's in their 
timing and their implementation. We have a terminal in Portland 
that serves the greater Portland area, both sides of the 
Columbia River. It's difficult for us to have a fuel that works 
on both sides when there is discontinuity between the States.
    Senator Domenici. Let's get back to this issue, and then 
I'll quit. We're not talking about the difference in two States 
choosing. We're talking now about how we are going to implement 
a variety of new products into the system that are going to be 
imposed on the system because they--say there are conservation 
issues or something like that, and we've got to get them into 
the system. Now, we're going to have to ask the system to 
adjust to that, right, and do it in an orderly manner. That 
isn't going to be done by one overpowering regulation, when we 
see all these different new products coming on. Am I correct in 
that assessment, or am I looking out the wrong kind of windows?
    Mr. Drevna. Senator, I think I know what I said. What I 
meant to say is--and I apologize for any confusion, but I was 
referring to the biodiesel side of the equation.
    Senator Domenici. OK.
    Mr. Drevna. But if you look at ethanol, it's distilled. 
It's ethanol, and it's pretty much a singular product. In the 
biodiesel end of the business, there are so many different 
kinds of potential feedstocks for it. It goes from oils to 
animal fats to anything in between.
    So the point I was making was, until the time where there 
are actual standards set, a biodiesel standard, it must contain 
X, Y and Z, before we, as refiners, feel comfortable in 
blending it into our diesel, that's what we are looking for. 
And I think they're saying we are on our way and we're doing 
it, and we have some bugs to maybe get out of the system. Well, 
that's all fair and well, but we, as an industry, as the 
refining industry, we can't afford to have things put into our 
product that we don't know if they will pass the test. That's 
all I was saying. We're going to use biodiesel, but let's make 
sure we're using the component that will operate the best 
through the system.
    Senator Domenici. Thank you, Mr. Chairman. I think by 
coincidence it has some application to what we'll be doing, 
nonetheless. Thank you.
    The Chairman. OK. Well, thank you, and let me thank this 
panel very much for your testimony. I think it's been very 
useful. And we will bring forward the next panel.
    OK, if everyone could take their seat, we'll go ahead and 
get started with this panel. Let me just introduce each of the 
panel members. Senator DeMint, you wish to introduce one of 
panel members yourself. Why don't we call on you right now to 
do that, and then I'll introduce the other four.
    Senator DeMint. Thank you, Mr. Chairman. I do want to thank 
you--really, all the members--for holding this conference today 
and extending an invitation to Dr. Nicholas Rigas to 
participate. It's a privilege to introduce Dr. Rigas, a fellow 
South Carolinian, at this conference, but it shouldn't be a 
surprise. South Carolina has been leading the way in the 
development of alternative energy technologies, whether it's 
hydrogen, wind power, biofuels, and then integrating them into 
our everyday lives.
    As director of the South Carolina Institute for Energy 
Studies, he has been a key advocate for new ways of meeting our 
Nation's energy needs and helping diversify our energy 
portfolio. I look forward to hearing his testimony. Dr. Rigas, 
I appreciate you being here, along with all the other 
panelists.
    Thank you, Mr. Chairman.
    The Chairman. Well, thank you very much.
    Welcome, Dr. Rigas. We're glad to have you here. Also we 
have Don Paul, who is the vice president and chief technology 
officer for Chevron. Don, thank you for being here.
    Mr. Paul. Thank you, Senator.
    The Chairman. I remember seeing you out there in Idaho, as 
I remember.
    Tommy Foltz is with Earth Biofuels. Thank you very much for 
being here. George Fitch is the mayor of Warrenton, VA. Thank 
you for coming today. And Jonathan Lehman is with VeraSun, 
which is the Nation's second largest ethanol producer. Thank 
you for being here.
    Why don't we start with Mr. Paul and just go across from 
left to right, and then we'll have some questions.

  STATEMENT OF DON PAUL, VICE PRESIDENT AND CHIEF TECHNOLOGY 
                        OFFICER, CHEVRON

    Mr. Paul. Thank you, Mr. Chairman, and members of the 
Senate Energy Committee. Chevron appreciates the opportunity to 
participate in this conference. We believe that it's essential 
to U.S. energy security to diversify our fuel supply system, 
and biofuels are integral to that diversification.
    I'll briefly make a few points regarding biofuel 
infrastructure growth and its integration in the fuel system. 
First off, as we expand and integrate biofuels into the fuel 
supply system, we believe it is essential to do so in such a 
way that it continues to provide the same quality, reliability, 
and efficiency of the fuel supply system that we all count on 
every day.
    Second, to achieve this objective, we believe that the 
infrastructure required to support increased use of biofuels 
needs to incorporate three key principles that I call the three 
S's: scale, standards, and sustainability. Let me comment 
briefly about these.
    Scale. As we heard in the last panel, one of the challenges 
that we're facing is, the fuel system is enormous. The one we 
have took the better part of a century to build, and today, to 
give you a point of reference, basically half a gallon is used 
for every human on Earth, in the global system, every day. This 
is an enormous system. And this requires, to meet where we're 
going, a robustness and a diversity of feedstocks to meet this 
scale as we grow the biofuels systems, including, in our own 
efforts, cellulosic sources that we focus a lot of effort and 
R&D on.
    Standards. We have heard about standards, critical not just 
for the fuel standards themselves but standards in the 
equipment to build out the supply chains themselves. This is a 
new industry with respect to biofuels, and the standards are 
yet being developed. Standards are required to induce customer 
confidence that the fuel they're going to have is going to meet 
their expectations every time they show up to fill up. And 
then, third, standards are required to ensure that the 
environmental performance of the fuel, not just the fuel in 
use, but the infrastructure that supplies it, that the plants 
themselves meet the environmental standards and safety 
standards we've come to expect from the fuel system.
    Third, sustainability. And what I mean by this is that 
energy infrastructures, once in place, live not just for years 
or decades but generations. In fact, some part of our current 
system is 100 years old. So when we make choices and we grow 
this infrastructure, and we're talking about growing it 
significantly to meet the envisions that have been discussed, 
we're going to live with it a very long time. And I think the 
key that we would say is, let's make the right choices. Let's 
evolve the standards. Let's recognize the scale where we need 
to get to, so that we can go down the road and build this 
diverse, robust, and secure energy system we all need.
    Thank you again for the opportunity to contribute to this 
biofuels conference. Chevron is committed to being involved in 
the biofuels business through a number of activities in 
research as well as infrastructure, construction such as we're 
doing in Galveston Bay. Thank you for the opportunity. I would 
be glad to respond to any questions you have.
    The Chairman. Thank you very much.
    Mr. Foltz, why don't you go ahead.

  STATEMENT OF TOMMY FOLTZ, VICE PRESIDENT OF PUBLIC AFFAIRS, 
                         EARTH BIOFUELS

    Mr. Foltz. Thank you, Chairman Bingaman. I want to thank 
the committee for recognizing the importance of this issue and 
holding this conference. I'd also like to thank my home State 
senator, Senator Lincoln, for all that she has done on this 
issue. She has been out front and unwavering in her support and 
we appreciate that.
    For all of us who have children or grandchildren, it's 
almost impossible not to think about the future. And that's 
obviously what this conference is about, the future: our future 
environment, our future economic well-being, and our future 
security. I think we all agree with that or we wouldn't be 
sitting here today. But there are some lessons from the past 
that I think that we can use as well.
    I have been in this business for about 14 years now. I 
started at the Energy Department in the Clinton administration 
as the co-director of the Clean Cities Program. I was the vice 
president of a company called Blue Energy that sold compressed 
and liquified natural gas to the vehicle market. And I'm a co-
founder and shareholder of Patriot Biofuels in Stuttgart, AK, 
which is a biodiesel plant. So I've seen this industry from a 
lot of different angles.
    Right now I am the vice president of public affairs at 
Earth Biofuels. Earth is a publicly traded company that 
currently has an operational biodiesel plant in Durant, OK, 
that's got a capacity of about 10 million gallons per year. 
We're also the largest supplier of transportation-grade LNG in 
Southern California, which we liquify at Earth LNG in Topock, 
AZ. And that's about a 31 million gallon per year plant. And we 
recently announced acquisition and upgrades to an ethanol plant 
in Moses Lake, WA, which should have the capacity to produce 36 
million gallons by the first quarter of 2008. I look forward to 
working with Senator Cantwell on that.
    I want to get into a specific issue and try to keep it 
brief, but I want to just make three broad comments, and that 
is that for the most part we would rather see incentives than 
mandates in a policy, going forward. We saw very well last 
summer that when the economics are right on alternative fuels, 
there are plenty of buyers out there. There were a lot of 
biodiesel plants out there that literally could not make enough 
biodiesel to supply the market last summer. That's because the 
economics were there.
    So if we're going to push incentives, they need to be 
sustainable. They need to be much more long-term. They 
basically need to be able to outlast a bank loan, in terms of 
creating investor confidence in the industry. And I think that 
obviously, for those of us in the biofuel business, President 
Bush's comments in the State of the Union about 35 billion 
gallons a year of biofuels was a great boost to everyone who 
frankly are in the middle of a struggling industry right now. 
We're kind of almost polar opposite from where we were last 
summer.
    But what I would say in terms of setting a goal is, we 
obviously have to have goals and we have to be shooting for 
something, but let's not let the goal get in the way of good 
public policy. And what I mean by that is that in the past--the 
Energy Policy Act of 1992 comes to mind, and that is where 
essentially the Department of Energy was allowed the 
flexibility to either impose or not impose the private and 
local fleet mandate based on whether or not imposing that or 
implementing that fleet mandate would get to the goals of the 
Energy Policy Act of 1992. When it was determined that going 
with those mandates would not achieve the goal, then they did 
not impose the mandate.
    Again, we're not really for mandates, but I would say that 
on incentives, in any way, I think that what we might see from 
the detractors out there is that they say, ``We can't ever get 
to 35 billion gallons, so why try?'' And you have a hard time 
convincing me that if we made it to 28 million gallons or 30 
million gallons--or billion gallons--that the country would be 
a worse off place. So Rome wasn't built in a day, and neither 
will the widespread alternative fuels market be.
    On regional infrastructure, I think we heard in the 
previous panel that it's pretty unlikely that biofuels are 
going to be transported by pipeline in any big amount anytime 
real soon. So I think that the biggest thing that can be done 
on regional infrastructure is to increase the amount of 
biodiesel storage and blending at the pipeline terminals.
    I'm echoing what was said in the earlier panel, but just to 
give you an idea of not what it is but what it is not, the 
Little Rock, AK, school district was a B20 user, and they will 
be again, but as they got into their plan, their diesel 
distributor had to go through North Little Rock, pick up 6,000 
gallons of straight diesel, drive 35 miles to the closest bulk 
plant that had B100, splash in 1,500 gallons of B100, close the 
lid, drive 35 miles back to Little Rock, just to supply B20 to 
the school district. That added about 20 cents a gallon to the 
overall process. It works perfectly fine as a fuel to do it 
that way, but the logistics, and therefore the economics, are 
not viable with that.
    When you have pipeline terminal blending, the jobber is 
able to pull up, put unleaded gasoline in one compartment, 
straight diesel in one compartment, B20 in one compartment, B5 
in one compartment, then go on about his business without 
spending 1 extra minute of labor or 1 extra mile of 
transportation.
    The Chairman. Could you summarize the remainder of your 
remarks?
    Mr. Foltz. That is the remainder of my remarks.
    The Chairman. OK. Well, thank you very much. We'll have 
some questions.
    Mayor Fitch.

       STATEMENT OF GEORGE FITCH, MAYOR OF WARRENTON, VA

    Mr. Fitch. Thank you, Mr. Chairman. I am the mayor of 
Warrenton, the seat of Fauquier County, about 50 miles west of 
here. We are dedicated to becoming self-sufficient in renewable 
energy. Toward that end, we have embarked on a plan for an 
integrated biorefinery at our landfill that will use different 
types of waste: our municipal waste at our landfill; 
construction and demolition waste, broken pieces of drywall, 
broken kitchen cabinets, tops and bottoms of wood posts. We 
will also use agricultural residue, primarily corn stover, a 
bit of wheat straw, and some soybean stubble.
    Woody biomass, forest residue--40 times a year, thinners go 
into the woods, private and public, in Fauquier County, and 
thin them out. They don't really take them anywhere. In 
addition to that, you have all the tree thinnings by the 
private contractors, the leaves. There's a lot of woody biomass 
material right in our back yard.
    We're horse country, so we have horse manure in addition to 
cow manure that's been composted. We also operate a sewage 
treatment plant. We have 2,000 tons of sewer sludge. We pay 
$40,000 a year for someone to come in, pick that up, take it 
out of the county and drop it on somebody's farm, I'm sure much 
to the chagrin of the neighbors. We could get paid $40,000 by 
selling it to a biorefinery plant.
    So we're using a multitude--at least the plan is to use a 
multitude of different types of waste. We have sized this, at 
this particular stage, for about a 350 to 400 ton per day 
facility that would then produce about 8 megawatts of 
electricity, of which about 3 or 3\1/2\ megawatts would be used 
internally for process heat and steam. The balance we would put 
on the grid, and in so doing, electrify every single household 
in Warrenton.
    Now, I didn't come here to shine the light on Warrenton, 
but I'd like to point out to the committee what I think is an 
overlooked stakeholder in this whole debate, in trying to reach 
this very laudable goal of using renewable energy, and that is 
local governments like mine. There must be hundreds if not 
thousands of Warrentons across the country with a lot of 
different types of waste in their back yard, that should be 
encouraged to use that in a biomass facility. Even though the 
ledger says that small scale biorefineries are not economical, 
we believe we can show that they are.
    I think what's fascinating is that in this case a local 
government can actually be efficient, and in so doing, shatter 
that oxymoron where local governments are ineffective. Because, 
just like Chevron and the major integrated oil companies, we 
can control or certainly influence the stream of the product, 
the downstream, the midstream, and the upstream. We, as a local 
government, in conjunction with the private sector--I'm not 
proposing the local government should be in this business, but 
just to facilitate the development, to take it to a stage that 
will attract the private sector to come in under a public-
private partnership.
    We influence the permits. We can enter into PPAs with a 
utility company. We can work best with our farmers. We can work 
best with the forest residue. So we are uniquely positioned to 
facilitate the development of what I believe is an untapped 
resource, and that is local communities contributing on a very 
large scale. For example, the numbers I gave you, 10 million 
gallons for a small area like Warrenton, 55,000 people in our 
county, times hundreds and thousands of communities like that, 
can really make a valuable contribution toward not only 
ethanol, but renewable diesel, as well as green electricity.
    Now, I have had a chance to talk to farmers in my community 
and throughout Virginia and colleagues of mine in other 
counties, and based on those discussions and finding out what 
is holding them back, I have come up with two specific 
suggestions that I would like to make to your committee that 
would really provide a big, important kick start to get local 
governments and the stakeholders in the community to get 
motivated, to get involved in what we're doing.
    First is to provide an incentive production payment of $20 
per ton for agriculture and forest residue used in a 
biorefinery. Congress has a Section 210 to provide a $20 
payment, but that is strictly for forest residue on tribal land 
and at-risk forest land. Extend that to any forest land, and 
extend that for agricultural residue. Farm land in Virginia is 
basically idled. Half of our farm land, half of 8 million acres 
of Virginia farm land is idled. It is not being used. It is 
marginal. We have farmers that are prepared to try switchgrass.
    Quickly, my second point would be the whole area of 
infrastructure--the collection, the gathering, the harvesting, 
the storage--needs a lot of help according to the farmers that 
I've talked about.
    Those are two of my suggestions. Thank you, Mr. Chairman.
    The Chairman. Thank you very, very much.
    Dr. Rigas.

   STATEMENT OF DR. NICHOLAS RIGAS, DIRECTOR, SOUTH CAROLINA 
        INSTITUTE FOR ENERGY STUDIES, CLEMSON UNIVERSITY

    Dr. Rigas. Yes. Thank you, Senators, for this opportunity 
to discuss biofuels and regional infrastructure integration. My 
name is Nick Rigas, and I am the director of the South Carolina 
Institute for Energy Studies at Clemson University. I serve as 
the chairman of the newly formed South Carolina Biomass 
Council, and lead a commission focused on promoting alternative 
transportation fuels sponsored by the South Carolina General 
Assembly.
    Many organizations, including Clemson University, the 
Savannah River National Laboratory, the Palmetto State Clean 
Fuels Coalition, the South Carolina Biomass Council, and 
others, have been working together to develop statewide 
programs to promote a sustainable biofuels industry in South 
Carolina. My comments today are a result of this collaborative 
effort, and represent the thoughts and ideas of many of the 
individuals throughout the State.
    Development of the biofuels industry has been based on the 
successful corn and soybean model that capitalized on the 
existing regional infrastructure in the Midwest. Although the 
model has been very successful where grain yields are high, 
this model would be less successful where grain yields are 
lower, and in many cases, a grain deficit exists.
    Most of the biomass potential in South Carolina and the 
Southeast resides in the form of cellulosic materials which 
will require a different regional model in order to develop a 
viable and sustainable biofuels industry. First, the diverse 
nature of the cellulosic feedstocks will require a regional 
infrastructure to support the growing, harvesting, collection, 
processing, and delivering of these feedstocks.
    Studies are needed to, a, identify the regions and the 
feedstocks that will support a sustainable and competitive 
industry; b, examine the synergies within the existing regional 
infrastructure, including agriculture, forestry, and other 
industries; and c, identify the infrastructure and methodology 
gaps that exist to efficiently grow, harvest, process, and 
deliver these feedstocks.
    Second, the biofuels industry will require a large regional 
distribution network. The industry, due to the nature of the 
feedstocks, will be decentralized, and therefore, cannot be 
developed on a centralized distribution model as exists for 
petroleum fuels. Biofuels will require a regional model that 
reliable and cost-competitive services demand.
    Incompatibility with the existing petroleum fuel 
infrastructure will add to the complexity of the supporting 
infrastructure. Studies should focus on developing distribution 
systems that service this regional demand and capitalize on the 
respective regions' strengths.
    And, third, the technology to produce the cellulosic 
biofuels will require a regional focus, due again to the 
diversity of these feedstocks. The capacity of these units and 
the technology that these facilities utilize will be dependent 
on the regional feedstock. Research will be required to 
identify and develop the best feedstocks and technologies to 
convert these regional feedstocks into biofuels. Projects 
should be wholistic, funded through regional centers, and 
should address the entire supply chain from growing the biomass 
through delivering the fuel to the customer.
    Thank you, Senator, and I look forward to your questions.
    The Chairman. Thank you very much.
    Jonathan, we're glad to have you here. Go right ahead.

          STATEMENT OF JONATHAN LEHMAN, VERASUN ENERGY

    Mr. Lehman. Thank you very much, Mr. Chairman and members 
of the committee. I really appreciate the opportunity to 
participate today in this very important hearing.
    We're very fortunate, because of your hard work and the 
Energy Policy Act of 2005, to be looking at what we do next. 
For several years we were looking at pushing a renewable fuels 
standard to get to 7.5 billion gallons of ethanol. Because of 
your hard work, we're going to be surpassing that in the not-
too-distant future.
    As you heard this morning, there are 70-plus ethanol plants 
under development and construction which will add 6 billion 
gallons of ethanol into the United States. That allows us to 
look at where we go next. We're going to easily meet the near-
term demand of the 10 percent blend market, and it allows us 
the opportunity to see where we go next to spur renewable 
fuels. To that end, we really appreciate the President's 
statement during the State of the Union setting the goal of 35 
billion gallons of ethanol, and we believe that is eminently 
reasonable.
    VeraSun Energy is one of the Nation's leading producers of 
ethanol. We have two operating facilities, three under 
construction, and one under development. When complete, we'll 
have 670 million gallons of ethanol capacity each year. In 
addition, VeraSun has spent the last 24 months on an aggressive 
E85 strategy. We have partnered with Ford and GM to spur 
additional E85 locations across the country. To date, we have 
more than 80 locations offering VeraSun E85 in eight States.
    VeraSun believes that the long-term outlook for renewable 
fuels includes a robust E85 market as well as additional lower 
blends such as E20. From our experience, there are several key 
steps that are necessary to achieve large-scale E85 and a 
robust cellulosic ethanol market.
    First, in the near term, we need to maintain the E10 
demand. And to do that, we should look at increasing the RFS as 
well as extending the existing ethanol tax credits. This gives 
us the opportunity to springboard to higher blends.
    In the mid-term, we believe that E20 is the catalyst to 
move to an E85 infrastructure in the United States. E20 
provides the near-term demand driver necessary to continue to 
move to E85. It will double the amount of ethanol demand in the 
current blend market, and this is important because it provides 
incentives for the ethanol industry to continue to grow as well 
as to work to develop E85. It ensures a continued investment in 
research and early stage development of cellulosic ethanol.
    Finally, in the long-term our experiences indicate in order 
to spur additional investment in E85, we need to do several 
things to change the economics of E85. Today E85 is sold at a 
discount because current FFVs are not designed to take 
advantage of E85's high octane. This results in fewer miles per 
gallon run on E85 versus conventional blends, and it has to be 
priced accordingly.
    Additionally, refiners take advantage of ethanol's high 
octane to increase refinery output, so ethanol is valued more 
highly as a blend component than a move to E85. These two 
factors mean that currently ethanol is blended in E10 versus 
E85. We need to change those economics today to start spurring 
an additional E85 infrastructure across the country.
    Second, we should provide incentives for the automakers to 
increase the production of advanced fuel-efficient vehicles. We 
truly appreciate their commitment to increase the number of 
FFVs on the road. We believe that we should work to decrease 
the mileage penalty and create FFVs that have comparable fuel 
efficiency standards as existing automobiles.
    And, finally, our experience indicates that we should 
increase the incentives for retailers to offer E85 from 30 
percent to 50 percent, to try to spur additional E85 stations 
across the country.
    With that, I'm happy to take your questions.
    The Chairman. Thank you very much.
    Senator Lincoln has arrived, and she has not had a chance 
to ask questions during today's conference. Let me defer to 
her. She can take my place in this round of questions.
    Senator Lincoln. Well, thank you, Mr. Chairman. I 
appreciate that, and certainly knowing that chivalry is not 
dead around here. I'm very grateful to you for that.
    And I want to say how proud we are to welcome Tommy Foltz 
here today in the committee. Tommy is an Arkansasan, and has 
done tremendous legwork in bringing about the reality of 
renewable fuels in our home State of Arkansas. So we're very 
grateful to him and grateful that he is spending time with the 
committee, and we look forward to working with you.
    Mr. Foltz. Thank you. I appreciate that.
    Senator Lincoln. Just a couple questions, if I may, Mr. 
Chairman. One of the things that I have focused on, that I 
think is really important for us as a legislative body to 
recognize when we look for incentives that are really going to 
jump start the industry of renewable and alternative fuels, is 
to ensure that we get them out to the consumer as quickly as we 
can.
    And for me, in looking at this process, one of the things 
that has been most relevant has been making sure that rural 
communities have the tools that are necessary. They are the 
likely place where this has to occur, obviously, and they need 
the tools to build the infrastructure to produce and distribute 
the fuels. It makes all the sense in the world. Obviously we're 
not going to jump start an industry if it costs them more to 
use an 1-wheeler burning petroleum diesel to haul their 
feedstock from one place to another and it becomes cost-
ineffective.
    It has long been recognized that one of the most efficient 
models for getting this industry off the ground is small 
facilities serving a local area. And the industry represents an 
opportunity, I think, also, from my standpoint representing a 
rural State, to revitalize many of our rural communities. I 
think we must all work hard to ensure that we can take 
advantage of that.
    My hope is that Mr. Foltz, who was a real pioneer in 
Arkansas, could help us in that conversation. I know the 
multiple different entities that we worked with Mr. Foltz and 
the others in bringing about the partners to make this happen. 
It also took time. And if there are ways that we here in the 
legislative body can jump start some of those or even reinforce 
some of those areas, I know it was patching together grants, 
working with wonderful nonprofits like Winrock International 
and different types of groups to put together what was 
necessary to actually start a facility.
    Maybe you might expand on that, in terms of those different 
components that really brought us to the reality of having 
Patriot Fuels in Stuttgart, AR. I think that would be 
enormously helpful.
    And then my second question--and certainly this is to the 
entire panel, any of you who would like to jump in on that 
question and the next one--is really looking at diesel 
vehicles. They are so common in Europe, as we know, and in many 
cases preferred, but here in the United States, consumers are 
not as assured of a diesel vehicle product. They're still wary 
of whether a diesel car is going to be as clean, despite the 
rapid advancements that we've seen in diesel technology and 
certainly much better fuel mileage.
    So maybe in discussions here we can look at how we 
encourage Americans to give a second look to diesel 
automobiles, because I think that really has an effect on the 
market. Or maybe perhaps you might want to talk about what 
effect that would have on the market for biodiesel and other 
types of diesel fuel.
    So, Mr. Chairman, those would be my two questions, for 
starters, if I may. Thank you.
    Mr. Foltz. I think I would like to take the second question 
first, because I think I can explain it more quickly.
    From my personal experience, when I was with Patriot 
Biofuels, we had a company car. And essentially we were 
relegated to a Volkswagen Jetta, which is a very good car. We 
would have rather had an American-made car, but they don't--
American automakers don't really make passenger diesel 
vehicles.
    But the thing that strikes you the most with the Volkswagen 
Jetta, at least, is when you walk on the lot there, if you want 
the gasoline version, it gets 32 miles to the gallon, which is 
excellent, but if you want the diesel version, it gets 41 miles 
to the gallon. So we talk a lot about hybrids, which are very 
positive for the marketplace and on a number of different 
levels, but without even trying, diesel is more efficient than 
gasoline.
    I don't think that we're going to replace all the gasoline 
with diesel, but Europe made a transition primarily for 
greenhouse gas reduction strategies. I believe that in 1991 or 
1992, about 10 percent of the new vehicle registrations were 
diesel, and now it's about 50 percent. So if you combine the 
inherently better fuel efficiency that you get with a diesel 
vehicle with biodiesel, which according to the Department of 
Energy and the Department of Agriculture gets about a 78 
percent reduction in greenhouse gases on a life cycle basis, 
that's a good place to be.
    Unfortunately, and this is where the right hand doesn't 
know what the left hand is doing, that Volkswagen Jetta is not 
available in diesel in the 2007 model year because it's 
slightly over the NOX requirement. So from a ground-
level ozone perspective, it's worse than a gasoline-powered 
Jetta, but from a greenhouse gas production strategy, it's far 
better, and from an energy security standpoint, it's far 
better. I think that we would do well to look from a very 
comprehensive approach to our policy, in that it's not just 
about air quality, it's not just about greenhouse gas 
reduction, it's not just about energy security.
    I said I would make it short, but I didn't, so I apologize.
    Senator Lincoln. That's OK.
    Mr. Foltz. In terms of the teamwork to put together Patriot 
Biofuels, I think that we were fortunate to find some pretty 
enlightened investors. Those don't exist everywhere, but I 
think that one of the reasons that our investors were willing 
to invest is because they didn't see the biodiesel tax credit 
going away. We felt like, in the post-9/11 world, it's more 
likely that that gets extended than gets sunsetted. And we hope 
that that's the case, because the biodiesel industry needs that 
$1 blender's credit in a very, very big way.
    As I said in my opening statement, having long-term, 
sustainable incentives that are out there, that create investor 
confidence, if what we're trying to do is build a biofuels 
industry, we need investors and so we've got to create that 
investor confidence. But downstream you've got people like 
Winrock and the Arkansas Oil Marketers, et cetera, that are 
very helpful to the process.
    You know, we talk about the Arkansas Oil Marketers or the 
Texas Oil Marketers or Oklahoma, and you think they're going to 
be against us. They're not. They move really all of our product 
into the marketplace. They are interested in selling liquid 
fuel, and it doesn't really matter exactly what it's made out 
of.
    The Chairman. Why don't we go ahead and ask Senator 
Domenici to ask questions, and then I know Senator DeMint also 
had some questions.
    Senator Domenici. Senator, I want to tell you as Chairman 
how good this symposium has been and how good the record will 
be to help us. I'm sorry that more Senators didn't come and 
spend more time, but that's the way it is here. I did my best 
to find time, and I'm hopeful that I have been constructive. I 
think having one of our new Senators here, I want to let him 
ask a couple of questions and then I'll go about and do 
something else.
    I want to thank all of you particularly for the good 
testimony you gave us, and just ask this one question. As new 
kinds of fuels and new kinds of engines requiring in many 
instances, different infrastructure and different service, as 
they start entering this gigantic market, how do you see this 
melding together? Is there going to be a problem? Have we 
created any problems by pushing when we shouldn't or pulling 
when we shouldn't, and therefore we have automobiles trying to 
get into the market or the things that feed them trying to get 
space when it doesn't fit anywhere else? Do you understand what 
I'm talking about? Would somebody just answer for us as to how 
things are going out there in that regard?
    Mr. Lehman. Senator Domenici, VeraSun's perspective is that 
E85 is a long-term goal and flexible-fuel vehicles will meet 
the needs of our transportation fuel system. That's going to 
take some time in order to change the fleet from the 
conventional vehicle to a fuel-efficient FFV. And our belief 
is, in order to get there you have to sequence the items.
    Today we have E10, and we're going to meet that demand from 
the 10 percent blend in the not-too-distant future. We need a 
stepping stone and a catalyst to get from E10 to an E85 
structure in a robust, nationwide system. It's our belief that 
an E20 system that can run in our conventional automobiles can 
be that catalyst to get us to the next generation flexible fuel 
vehicle.
    Senator Domenici. Dr. Rigas.
    Dr. Rigas. Yes, Senator. If you look at biofuels, we're 
talking about a liquid fuel here, similar to our petroleum fuel 
infrastructure, which is one of the beauties of biofuel. I 
don't view biofuel as competing with the new plug-in or hybrid 
technology. They're actually complementary technologies. One 
really promotes energy efficiency in terms of getting more 
miles per gallon out of that fuel, whether it's a gasoline, a 
biodiesel, or a bioethanol.
    I think that is one of the things we're talking about here, 
is diversifying our liquid fuel resources, not just being 
strictly reliant on one, which we have been for many, many 
decades, which is petroleum. And so I think with the right 
resources and the right focus, the integration will be fairly 
smooth, because we are still talking about a similar type of a 
fuel. We're talking about a liquid fuel here, again, whether 
it's bioethanol, biodiesel, gasoline, or diesel.
    Mr. Paul. I see this diversification as an essential part 
of strengthening our energy security. We are early in the 
beginning of this, so there will be adjustment factors and 
there will be learning as we go along, but I think the 
diversification of the fuel mix to include blends, to include 
traditional petroleum products, to include pure bio products, 
as well as vehicles that take advantage of them, I think we are 
in a more diversified area.
    There are some key things that we all need to work 
together--government, private sectors, local, national, and 
State governments together--so that the standards can be put 
together to let this infrastructure evolve efficiently. Because 
you are going to need to leverage the existing infrastructure, 
as opposed to building an entirely new one alongside it. That 
would probably be the one thing that would create problems in 
the long run. But I think we can do that.
    Mr. Foltz. And I think also, just from a diversity 
standpoint, again, Earth Biofuels, we're in the ethanol, 
biodiesel, and LNG business. Now, Southern California needs the 
emission reductions badly, so LNG works. It's one of the few 
places that it really works in as robust a way.
    And I think what we need to understand is that it may make 
more sense to make biodiesel out of cottonseed oil in the South 
rather than soybean oil, and I think we need to be open to the 
idea that different feedstocks, as long as they spit out a 
biodiesel that meets the standards--there was a lot of 
discussion about that in the previous panel. There is a 
standard, it's ASTM. I can't think of the number, but you've 
got to meet that standard. It doesn't matter what you're making 
it out of. And I think we need to understand that we can't get 
where you all want us to get and where the President wants us 
to get based on one feedstock. It's just not real possible.
    The Chairman. All right. Senator DeMint, why don't you go 
ahead with any questions you have.
    Senator DeMint. Thank you, Mr. Chairman.
    Mayor Fitch, you kind of stimulated my thinking here. I 
know when you were talking about local fuel production you were 
primarily talking about fuel for the generation of electricity, 
but it did make me think. We're looking at a major paradigm 
shift in fuels in the country, and it seems that we are 
assuming that we are going to send these new fuels through the 
same infrastructure.
    Before we put new wine in old wineskins, or assume that 
maybe we do need this infrastructure that Dr. Paul was talking 
about, I would just like to question the panel on the idea, as 
we look at biofuels, we're looking at really a decentralization 
of the production of the fuel source itself, the raw material. 
In effect, it would become very much a cottage industry. And as 
I think was just said, maybe in different parts of the country, 
different fuel sources--cottonseed may be better, and sawgrass 
in another, sugar beets in another. It could become very 
diversified.
    And I think it seems like we're assuming that we're going 
to take all this feedstock to some central distribution center, 
we're going to use all the fuel to get it there, we're going to 
use all the fuel to distribute it like we're doing now with 
petroleum. And I just wonder, as we think about what Mayor 
Fitch was talking about, I know from years of working with our 
local communities, the infrastructure for roads, we've got 
sewer plants that serve multiple counties, we've got reservoirs 
of water that may serve a small region. Electricity, you've got 
this regional area. You've got cable that is--I just wonder, as 
you think about this, should we assume that we need major 
centralized refining and distribution, or can we possibly look 
at more and more localized actual refining capability and 
distribution that may not require the dependency on a major 
infrastructure in a centralized system?
    Obviously, the ability for our country to sustain some kind 
of major terrorist attack that could destroy a large part of 
our fuel production, if we have hundreds of mini biofuel 
refineries and the ability for local communities to cooperate, 
share fuel, it just seems like maybe we should be talking about 
that paradigm, or at least exploring if that may be possible, 
because that would create a whole lot more energy security and 
may take a whole lot of trucks off the road.
    Dr. Rigas.
    Well, Mayor, I'll yield to you, since I have referenced you 
here.
    Mr. Fitch. You did a much better job of selling what I came 
here to sell, which is that local communities like ours are the 
answer, the decentralization, the cottage industry. When we use 
basically what's in our back yard, that nobody else is using--
the waste, the urban waste, the sludge, the municipal waste, 
the corn stover, the soybean stubble--we're small, and 
hopefully the economic modeling will show that we will not lose 
money, that you can have a small scale biorefinery.
    We will make 10 million gallons of ethanol. We will lean on 
a couple service stations to have a dedicated underground 
ethanol tank, to make it available to our local residents. If 
not, we don't have to go too far, to Arlington County, which 
has a mandate to use renewable fuel, to sell it. And of course, 
as I said earlier, the electricity generated will go on the 
local grid.
    This is exactly why I came here, Senator, was to present 
this idea of, ``Don't forget about local communities as being a 
major player and contributor in the effort to generate more 
renewable energy.'' What I didn't think about was your idea of 
the security aspects of it, too, so I'll have to use that next 
time I make a presentation.
    Senator DeMint. Thank you. We've helped you cover it.
    Dr. Rigas.
    Dr. Rigas. Yes, Senator, you're absolutely correct. And I 
agree with Mayor Fitch, it is going to be a distributive system 
that we're talking about in the future, for several reasons. 
First of all, the feedstocks are now decentralized, so 
therefore they don't come out of the ground from large 
reserves, similar to our petroleum industry. Therefore, 
locating small plants to produce the biofuels near the 
feedstocks is going to be the way it's going to be done, 
similar to the way it has been done in the Midwest. That's how 
the ethanol industry and the biodiesel industry came out of the 
Midwest, which was a very successful model.
    Second is that the markets are regional, too. We're not 
making a product here that we have to take to the coast to 
export or do whatever. There is a regional demand in the local 
area for that product, therefore, local production and the 
local regional demand feeds exactly into what you're saying, 
into a distributive, decentralized type of infrastructure.
    Senator DeMint. Any other comments?
    Mr. Paul. I would agree. I think our view is that it's 
going to take--this will be the hybrid. They'll be distributed. 
Biomanufacturing, I think that's the nature of it, combined 
with the existing underlay of the larger petroleum system that 
can also serve the very dense urban areas.
    Mr. Foltz. I mean, one thing that I would add to that as 
well, it's not that we have to take it to the coast, it's that 
we can't take it to the coast. Typically, your economies of 
scale that you get from going big are outweighed by the freight 
that it costs to get it to a much bigger market. At some point 
you saturate your local area, and so you really need to size--
you want your plant close to feedstock, but you also want it 
sized appropriately to the market because the freight is going 
to kill you.
    Mr. Lehman. You're seeing that today in the new ethanol 
plants that are under construction. They are coast-to-coast. 
They're not just centralized in the upper Midwest, where they 
were 10 years ago. So you're seeing this regional diversity 
come into play already.
    Senator DeMint. Right.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman. Thank you, 
gentlemen, for your discussion of biofuels and the distribution 
of biofuels. I wonder if you could comment on the current 
energy language that allows for $30,000 of tax incentives for 
those facilities to actually have alternative fuel pumps on 
their site, and whether you're finding that a success. Or 
Chevron, I don't know if you are motivated to install lots of 
alternative pumps at that particular point or what else we need 
to do. So maybe Mr. Lehman, and then Mr. Paul, if you could 
address that.
    Mr. Paul. Yes, Senator, I would be glad to give our 
perspective. Since we blend more than 300 million gallons a 
year at such large volume, especially in major urban markets 
such as California, we basically consume all of the ethanol 
that we can get in the blending of gasoline at the volumes that 
we do. So I think that over time, where you have more 
production, and especially distributed production that may come 
from cellulosic ethanol, which will allow you to distribute the 
feedstocks, I think that would shift.
    So I think, from our perspective, where we're managing a 
very large fuel system, we may have a different perspective on 
it than local retailers may have, and I think my colleagues 
here might have other comments on that.
    Senator Cantwell. So basically you're saying that isn't 
motivation?
    Mr. Paul. For us, no. For us it's not a motivation.
    Senator Cantwell. Mr. Lehman.
    Mr. Lehman. Our experience has shown that it's kind of 
threefold. You need to have E85 and you need to have FFVs in 
order to spur the retailer to put in the E85 pump. So it's a 
combination of the incentive of the 30 percent--we would say 
increase that level to give the retailers a little bit more 
incentive to do it, while we increase the number of FFVs and 
the amount of E85 that's available. You need all three 
components in order to spur the siting of new E85 stations.
    Senator Cantwell. So have you had a lot of interest from 
people?
    Mr. Lehman. We've been at this for 24 months, and we have 
locations in 8 States. Over 80 stations have put in these 
facilities. And it has taken a public awareness campaign. We 
work very closely with Ford and GM in different roll-outs in 
order to make consumers aware that they may actually own an FFV 
or they can go out and purchase an FFV. And once we get to a 
critical mass, the retailer makes a decision: ``OK, I'll knock 
out a premium or a midgrade and put in E85 capacity.'' So you 
need those three pieces.
    Senator Cantwell. Mr. Rigas, I noted you wanted to comment 
on this.
    Dr. Rigas. Yes, Senator Cantwell. I just want to give you 
an example of a local retailer, a very large local retailer, 
Spinx Corporation, in upstate South Carolina, in the Greenville 
area, who have taken advantage of what you talked about. They 
have really led the State in introducing bioethanol, E85, 
biodiesel, to their stations in the upstate. Now, he is 
concentrated in the upstate, but it is again an example of 
local, regional people taking advantage of the incentives being 
offered.
    Unfortunately, he has to import all his bioethanol and 
biodiesel from the Midwest. He is still waiting for bioethanol 
facilities and biodiesel facilities. Even though there are some 
biodiesel facilities going up in South Carolina, there are no 
bioethanol facilities currently.
    Senator Cantwell. What kind of dealer is he?
    Dr. Rigas. He's a retailer of--a local retailer. He has I 
think it's over 40 or 50 stations in the upstate, and he has 
introduced bioethanol and biodiesel to his service stations in 
the upstate.
    Senator Cantwell. But is he, in those 40 stations, a 
specific dealer of Chevron----
    Dr. Rigas. No, no, no.
    Senator Cantwell. What?
    Dr. Rigas. He's an independent. He's an independent, 
Senator.
    Mr. Paul. Senator, I would like to comment on--we're 
involved in a very important demonstration project with the 
State of California having E85 facilities. These are 
demonstration facilities with General Motors, in order to 
validate the key issues with respect to specific emission 
requirements that exist in California, E85. So we are involved 
in that, but as your question was for specific conventional 
retailing, no.
    Senator Cantwell. Mr. Chairman, I see my time is almost up, 
but I think this is an interesting point, and that is that the 
one person who has taken advantage of this is an independent 
dealer with 40 stations. Given what has transpired in the 
challenges of individual retailers versus company-owned stores 
at the retail level, I think that poses a particular challenge 
for us as we try to roll out things that are incentives that 
might be usable. So I think it's something that we should look 
at further.
    The Chairman. I agree. I think that's a very good point.
    We have one other panel. Let me just ask if either Senator 
DeMint or Senator Sessions wish to ask some additional 
questions of this panel, or should we dismiss them and go on to 
the next panel?
    [No response.]
    The Chairman. Well, thank you all then very much, we 
appreciate your good testimony.
    And we will ask that the sixth panel come forward, please. 
If the witnesses would go ahead and take their seats, I'll go 
ahead and introduce the panel and then we'll go to their 
statements. First, on my left, is Dr. Steven Taylor with Auburn 
University, which, as I understand it, will have demonstration 
biorefineries running throughout Alabama later this year, and 
we're anxious to hear about that. Maybe Senator Sessions wishes 
to say something else in introduction of Dr. Taylor before I 
introduce the remainder of the panel.
    Senator Sessions. Well, thank you, Senator Bingaman. Thank 
you for your leadership and the time that you have committed to 
this, this year. I think this is the kind of attention that's 
required, and I thank you for it.
    Dr. Taylor and his team at Auburn have an alternative fuel 
initiative. He is the chair of Auburn's Biosystems Engineering 
Department. Auburn has had a tremendous reputation as a land 
grant institution, that has been its heritage, with decades of 
experience in agriculture, forestry, and engineering. I visited 
their switchgrass program over a decade--I guess a decade ago. 
They have studied it intensively and have seen its 
possibilities before the product became as well known as it is.
    Dr. Richardson, Auburn's president, saw that Auburn could 
play a role in helping meet the important issues facing our 
Nation regarding alternative energy. He launched the 
alternative fuels initiative. He has committed $3 million, at 
least, already to developing a center there, using university 
money to help augment our Nation's energy supplies.
    We in the Southeast have an abundant growing season and a 
great deal of rainfall, and properly utilized, I think we have 
some special capabilities to contribute to our Nation's energy 
system. Mr. Chairman, the more I read and I understand from the 
hearing today, there's a growing understanding that corn cannot 
meet all our needs for ethanol, and the cellulosic breakthrough 
is what's needed to take us to a higher level, and I think 
that's what Auburn in working on. I've been pleased to work 
with them.
    Thank you for letting me have those few minutes.
    The Chairman. Thank you very much. Let me introduce the 
rest of the panel. We have four of our Nation's excellent 
laboratories represented. Dr. Kristala Prather with MIT's 
Laboratory for Energy and Environment, welcome to you. Dr. Dan 
Arvizo, who is the head of the National Renewable Energy 
Laboratory. He used to be in our State of New Mexico, and we 
are glad to have you here, Dan. Dr. Michael Davis with the 
Pacific Northwest National Laboratory, from the part of the 
country Senator Cantwell hails from. And Dr. Terry Michalske, 
who is of course from Sandia National Laboratory, where Senator 
Domenici and I hail from.
    So we're glad to have all of you here, and look forward to 
hearing your views, particularly focused on what we need to be 
doing in the research area to get to the goals we've been 
talking about today. Dr. Taylor, why don't you start and give 
us about 2\1/2\ or 3 minutes of your views, and then we'll go 
across the panel.

 STATEMENT OF DR. STEVEN TAYLOR, CHAIR, BIOSYSTEMS ENGINEERING 
                 DEPARTMENT, AUBURN UNIVERSITY

    Dr. Taylor. Thank you, Mr. Chairman, and special thanks to 
Senator Sessions for his longstanding support of Auburn 
University.
    I am here representing Auburn University's alternative 
energy program, and as such, I really speak for a diverse group 
of scientists and researchers. For example, among our faculty 
is a researcher with decades of experience in growing energy 
crops like switchgrass, other scientists are world leaders in 
the technologies for producing and harvesting forest biomass, 
and we have nationally recognized experts in the conversion of 
synthesis gases to liquid fuels.
    To build on our intellectual wealth, Auburn University is 
investing significant resources, our own resources, into 
research and education on bioenergy and bioproducts that can be 
created from our abundant natural resources. We're here today 
with two primary messages. First, a sustainable biofuels 
industry must be based on a balanced portfolio of regionally 
appropriate biomass feedstocks and biofuel conversion 
technologies. And, second, the creation of a successful 
biofuels industry will only be possible through significant and 
sustained funding of research and development that identifies 
technologies to make biofuels cost-competitive with petroleum 
fuels.
    We recognize the significant strides that the corn-based 
ethanol and soy-based biodiesel industries have made for 
acceptance of biofuels. We believe, however, that to achieve 
U.S. energy security goals, we'll need additional biomass 
feedstocks and fuel conversion technologies. Like many others, 
we believe various forms of cellulosic and ligno-cellulosic 
material hold great promise for expanding our biofuels industry 
and should therefore be emphasized in our national R&E funding 
priorities.
    For example, in the Southeast United States, abundant woody 
biomass, energy crops, and agricultural waste like poultry 
litter should be major sources of our feedstocks. In other 
regions of the United States, different biomass feedstocks are 
going to be more appropriate and more cost-effective.
    In a similar fashion, we believe it's critical to fund the 
development of a balanced portfolio of fuel conversion 
technologies, not just ethanol production. Auburn's energy 
initiative is currently emphasizing the thermochemical 
approaches and gas-to-liquids technologies that will make 
synthetic diesel fuel, aviation fuel, and gasoline directly 
from biomass.
    For our Nation to create a sustainable biofuels industry, 
we recommend emphasizing the following four principles in 
research and development funding: First, utilize this diverse 
suite of biomass feedstocks and fuel conversion technologies. 
Second, use a systems approach from the farm or forest all the 
way to the fuel pump. Yesterday in a meeting with Energy 
Assistant Secretary Karsner, he commended Auburn's approach 
using systems approaches to solving problems. Third, we must 
ensure long-term sustainability of the production systems. And, 
fourth, we must demand cost-competitiveness with petroleum 
fuels.
    With focused R&D, these technologies will be ready for 
commercialization in 2 to 5 years, by using Auburn's 
partnership approach with industry and government agencies. You 
know, regardless of our actions, we're all leaving a legacy for 
our children and grandchildren. At Auburn University, we hope 
that part of our legacy will be a secure, sustainable energy 
supply for America.
    Thank you again, Mr. Chairman, for inviting us, and thank 
you, Senator Sessions.
    The Chairman. Dr. Prather, go ahead, please.

   STATEMENT OF DR. KRISTALA PRATHER, ASSISTANT PROFESSOR OF 
 CHEMICAL ENGINEERING, LABORATORY FOR ENERGY AND ENVIRONMENT, 
                              MIT

    Dr. Prather. My name is Kristala Jones Prather. I'm an 
assistant professor of chemical engineering at MIT, and I'd 
like to start by thanking Chairman Bingaman and the rest of the 
committee for this invitation to speak to you on behalf of MIT 
on the topic of R&D for transportation biofuels.
    You may or may not be aware of a major initiative we do 
have at MIT in the area of energy. We have a major energy 
initiative, which was launched by our new president almost 2 
years ago. And at the same time that she announced a major 
effort in energy, she also announced that we should spend time 
working toward the further integration of life sciences and 
engineering. And so it's particularly appropriate to talk about 
transportation biofuels, because we do believe that it combines 
both of those areas very nicely.
    Let me start by saying we do think of this as a grand 
challenge in technology. I heard one of the panelists earlier 
say that he doesn't think there's a single silver bullet in 
terms of identifying one biofuel, and we also believe there's 
not a single technological hurdle that can be overcome in order 
to make all of this a reality.
    Instead, as Dr. Taylor has already said, this is certainly 
a systems problem. It requires integration, from planting of 
the crops, identifying what those crops are in the first place, 
all the way through toward separation and end use of the fuel. 
And so while it's helpful to think about specific technological 
hurdles, we don't want to forget about the fact that each 
individual decision we make is going to impact both what's 
happening upstream and what's happening downstream.
    I would like to highlight a couple of areas where I think 
biotechnology, this integration of life sciences and 
engineering, can play a role, and the first one is on the side 
of biomass production. You've heard lots of talk about corn-
based ethanol, and you are, I'm sure, very aware by now of a 
lot of the debate regarding the energy balance associated with 
it. A recent MIT study concluded that it was essentially too 
close to call, that it really depends on what your inputs are 
and the system boundaries.
    On the other hand, cellulosic ethanol is generally agreed 
to be very positive in terms of the energy balance. The 
problem, from a technological perspective, is that it's more 
difficult to convert into useful biofuels. So where we think 
biotechnology can play a role is in helping to develop crops 
that are easier to grow, requiring less energy input, and 
easier to convert into the biofuels that we're interested in.
    Second, on this conversion scale, we want a process that's 
going to have very high yields and have high productivities, 
and we're limited in that capacity currently by our ability to 
really convert all of the sugars that are available to us and 
to deal with the toxicity issues. Again, we have work at MIT in 
this area. A recent paper from a research group in Science 
showed increased tolerance of both bacteria and yeast to 
ethanol, which would presumably give us higher productivities.
    I've been talking about biotechnology because we again are 
interested in that, and it's my own area of expertise, but I do 
want to also emphasize what Dr. Taylor has said, in that there 
are chemical methods as well that should be examined in terms 
of how you can convert biomass-derived carbons into biofuels. 
Likewise, we can take advantage of chemistry and chemical 
engineering for the separations part of this process, and that 
tends to be typically very energy-intensive and also cost-
intensive as well. So if we can have some novel chemistry and 
chemical engineering methods to help us to purify the fuels 
that we get, usually in fairly dilute solutions, this can help 
in the economic balance.
    I want to end by making two points. First of all, I don't 
think we should confuse biofuel with ethanol or biodiesel. I 
think that point has been made, but I want to emphasize it 
again, that we need to be considering lots of different 
options.
    Certainly ethanol is the most advanced, and biodiesel as 
well, from a commercial perspective, but there are lots of 
challenges associated with them, including the low energy 
density relative to gasoline and the infrastructure issues 
which you've already heard about. So we should be thinking 
longer term about alternatives, some of which I believe you 
heard about this morning; and as well, not forgetting about 
this systems problem, we should think about how new fuels or 
alternative fuels would integrate into both our existing 
vehicle infrastructure and distribution infrastructure.
    Let me end by saying that I think this is a big problem. I 
think it's a problem we can solve. We can do it as scientists. 
We can do it as a country, if our government shows the will and 
puts the full support of our country behind it. I like to think 
of the Manhattan Project and the Apollo Program as examples of 
great technological challenges which we met, as long as we had 
the support for it. What we don't need is the up and down, on 
again, off again investment in the R&D for alternative energy. 
Instead, we need a sustained commitment for it.
    As far as a timeline, I think we'll see cellulosic ethanol 
at a commercial scale within 10 years. Alternative fuels are 
going to take longer, but it can certainly be done.
    Thanks very much for the time, and I look forward to 
questions.
    The Chairman. Thank you very much.
    Dr. Arvizo, welcome.

   STATEMENT OF DR. DAN ARVIZO, DIRECTOR, NATIONAL RENEWABLE 
                       ENERGY LABORATORY

    Dr. Arvizo. Thank you, Mr. Chairman. It's great to be here, 
and I do appreciate the leadership that's exhibited by this 
committee. It is clearly a very robust topic and we've had a 
great day already in terms of informing, I think, the 
discussion and debate.
    I'm the director of the National Renewable Energy 
Laboratory, and I want to acknowledge the faithful and 
tenacious commitment that Senator Salazar has provided to our 
laboratory and to this topic in general. I commend him for 
that. We are the home of a number of technology opportunities, 
one of which is the National Bioenergy Center, and it is, in 
fact, the Nation's only pilot-scale cellulosic ethanol 
laboratory. I had the opportunity and the privilege to brief 
the President while he toured that facility last year.
    I think this is a unique point in time and we have great 
opportunities in front of us. What was striking about the 
discussion today thus far is the enormity of the task. And 
while the technology research, certainly from our perspective, 
is required, so is resource development and utilization 
research, ensuring that the integrity and the fuel supply have 
validity to them, vehicle and transportation system integration 
with fuels, impacts on water and environment, and 
infrastructure requirements, among a number of other things 
that are necessary and in play to get to where we need to be.
    So what we need first and foremost is a comprehensive, 
integrated program for biofuels development that takes into 
account the critical factors both individually and 
collectively. And to do this, I propose that we have a national 
needs assessment to be undertaken with haste and that it be 
comprehensive, a report and study that would analyze our long-
term needs and take into account the full range of needs, on 
the demand side, on the supply side, on the infrastructure 
supply, on what is required to meet the goals that we have set 
out for ourselves.
    Second, we need to look beyond today's research. We have a 
robust research program, but much more needs to be done. We 
need to carefully plan to embark on the broadest portfolio. 
We've heard that recurring theme today. And we need to work, as 
we have worked with the producers and people who have pioneered 
these areas and the scientific and technologic community and 
providers in the energy business. It's very clear that we need 
a multifaceted approach to biofuels development, and that will 
serve the country well. We need to do that in close 
collaboration with industry. We manage, at the national 
laboratories and certainly at NRL, portfolios that are very 
much hand-in-glove with industry, so that the technologies that 
emerge are market-relevant.
    Third, we need to make necessary investments in our 
research capabilities. I think having adequate research 
capabilities is important. The Nation's world class laboratory 
system and leading academic institutions need to be retooled 
for this mission, and I think we can do that. We need to draw 
on the regional research and educational capabilities.
    And while we are confident that the current focus on 
developing technology to quickly enable the development of 
cellulosic ethanol in this country is a correct and prudent 
first step, I think we need to go much beyond that. History has 
shown that by setting out the broadest research courses, we can 
best guarantee that we're going to get to the place we need to 
be as the market evolves, as the technologies evolve, and 
provide choices from which policymakers, industry, and the 
marketplace can make wise decisions to have sustainable 
industries, going forward, and maintain U.S. leadership in what 
I consider to be an area that's going to have fierce global 
competition.
    I'll be happy to take questions at the appropriate time. 
Thank you.
    The Chairman. Thank you very much.
    Dr. Davis.

  STATEMENT OF DR. MICHAEL DAVIS, PACIFIC NORTHWEST NATIONAL 
                           LABORATORY

    Dr. Davis. Thank you, Mr. Chairman, members of the 
committee. Also, Senator Cantwell, who actively engages the 
full resources of the Northwest in terms of these important 
issues, we thank you for that.
    I like to keep in mind the two big challenges. One is 
energy security, the other is climate change. Energy security 
is much more of a domestic issue. Climate change is much more 
of a global issue. We have got to get our policy right 
domestically to meet both challenges. There is no question 
about it.
    We also have heard a lot about infrastructure today. We 
really need to get clear on our point of departure. We're in an 
85 percent dependent situation on hydrocarbons, domestically 
and globally. That is an incredible infrastructure and 
dependency, and that fundamentally is a hydrocarbon dependency. 
Biomass is just another form of hydrocarbon. It might be very 
young, but it's another hydrocarbon.
    So I think we need a much greater focus on conversion 
efficiency across the whole board. Anything we convert, we've 
got to convert more efficiently. As long as we're dealing with 
hydrocarbons, we need a much more aggressive program on carbon 
capture and management, and I don't think we've done near 
enough yet on end-use efficiency. If we save a gallon there, do 
the math, it's two or more gallons of production.
    So with respect to biofuels, it's still a hydrocarbon. I 
think there is sufficient focus on corn and bioconversion 
technology. I think we need much greater focus on broadening 
the feedstock base, and certainly municipal waste is an 
example. We have not aggregated a lot of the biomass waste. We 
certainly have aggregated a lot of municipal waste. We put a 
lot of money into aggregating it. We ought to be thinking about 
how to better convert it. And we need more work on conversion 
technology, particularly in the thermochemical conversions 
base.
    I think there is sufficient focus on ethanol, and I think 
ethanol remains a very substantial infrastructure challenge. 
While I think the overall goal is right, I think we ought to 
think very carefully about how much of that goal we actually 
try and meet with ethanol.
    I think we need much greater focus on other products. 
Certainly biodiesel is one; DME; there's others. We should be 
much more careful, I think, about what products we actually can 
derive, what their price points are, and what their market 
entry points are. There's an awful lot we can do with biomass 
besides going directly to commodity fuels. I think we should 
anticipate more electricity into the transportation sector, and 
be equally as enthusiastic as we are with ethanol in terms of 
electricity.
    I think we need to use existing infrastructure to the 
maximum extent possible. We've got 1,000 biomass stations--or 
ethanol stations, if you will. We've got 170,000 fueling 
stations. We've got something like 5 million flex-fuel 
vehicles. We need something like 55 million if you wanted to 
consume all the ethanol that you're talking about producing. We 
also need much more focus, as I said earlier, on vehicle 
efficiency.
    I would echo what Dan said. He was the first guy all day, I 
think, that mentioned water. We need to pay much more attention 
to water, both for processing and also realize that these 
feedstocks are hydrogen-deficient. The hydrogen has got to come 
from somewhere.
    I would be very careful with incentives and subsidies, and 
avoid biasing either the conversion technology or the product. 
Then, finally, I would say that we should do everything we can 
to encourage public and private R&D partnerships, because all 
the R&D we're doing, we should really work hard to have the 
best market channel we can to get that research to the 
marketplace as quickly as possible. So please reinforce the 
public-private partnerships and research.
    Thank you.
    The Chairman. Thank you very much.
    Dr. Michalske is the clean-up hitter here on this whole 
conference. Go ahead.

  STATEMENT OF DR. TERRY MICHALSKE, SANDIA NATIONAL LABORATORY

    Dr. Michalske. Thank you. It's a great honor for me to be 
here representing Sandia National Laboratory. Sandia is managed 
and operated by the National Nuclear Security Administration of 
the Department of Energy, and the Sandia Corporation, which is 
a subsidiary of Lockheed Martin.
    On behalf of Sandia, I'd like to begin by thanking Chairman 
Bingaman and the members of the committee for organizing this 
conference, and I'd also like to thank both Senators Domenici 
and Bingaman for their leadership in passage of the Energy Act, 
which provides important new policies in the biofuels area.
    Now, I think everything we've heard in the course of the 
day would confirm the potential for biofuels to have an 
important impact on reducing our Nation's dependence on foreign 
oil, and also reducing the level of greenhouse gas emissions, 
which makes this an important and high-priority area for 
government investment. And we think the Government investment 
ought to be focused in a number of areas: first, in supporting 
long-term and sustained fundamental research--there are 
difficult challenges here that will need to be addressed over 
the long haul; providing key incentives that speed the 
development of infrastructure for production, distribution, and 
the utilization of biofuels as they come into the market; we 
also think the Government needs to play a role in establishing 
innovative mechanisms that promote public and private 
partnerships in the research, development, and deployment; and, 
finally, in assessing and enacting policies that will ensure 
the protection of our environment, land and water resources.
    So the challenges that lie before us really sit at the 
intersection of science, technology, economics, and social and 
political interest and support. And these challenges have to be 
met in a world of fluctuating oil prices, where free market 
principles don't necessarily apply, and our environmental 
constraints are frequently changing. There is no question that 
success is going to depend on the development and deployment of 
some advanced technologies and engineering systems that simply 
don't exist today.
    To meet these challenges, the investment should be 
systematic, with a focus on driving critical, fundamental 
science, understandings that are directed at achieving dramatic 
cost reductions and efficiency gains. In this regard, I think 
it's going to be very important that we look at innovative ways 
to focus together the strengths of industry, academia, and the 
Government laboratories, to bring those talents together to 
focus on these critical problems. Just as SEMATECH demonstrated 
the value of public-private partnerships in advancing our 
competitive advantage in the semiconductor industry, I think 
those same kind of models will be very important as we go 
forward here.
    We believe that in the near-term the focus on ethanol 
moving toward the technologies for cellulosic biomass 
conversion are going to be very important, but in the longer-
term, we need to evaluate the broader range of biofuels and 
biocrude as it may be produced from novel biomass sources such 
as algae or microorganisms. And again we're going to have to 
focus on the entire energy system, including the distribution, 
the utilization, and that's going to mean investments in 
materials, engineering, and combustion and engine design.
    But as we move forward, we must be mindful of the water 
resources. Because biomass-based fuel production requires water 
both for growth and for processing, biofuels will have 
significant impacts on our water resources. For this reason, 
investments in technologies to address those challenges must be 
prioritized in the context of these interdependencies.
    So thank you again for the opportunity, and I look forward 
to questions.
    The Chairman. Thank you very much. Let me just ask one 
question. I'll start with Dr. Arvizo, and any of the rest of 
you who want to comment can do so.
    You talked about the need for a comprehensive plan. I think 
you stated we need a national needs assessment in this area. I 
recall when the semiconductor industry came up with--I think 
working with some of our Federal laboratories participating, 
came up with a road map for the development of the 
semiconductor technology that they thought was needed to move 
ahead. Is that what you're talking about, a road map for where 
we need to make breakthroughs and where we need to concentrate 
resources in the research field and the development field? Is 
that what you're describing?
    Dr. Arvizo. Yes, sir. In fact, it has a lot of the flavors 
of that old SEMATECH that you're talking about, which is really 
a private sector road map and partnership that would go 
forward. In the 2002 Biomass R&D Act--I'm sorry, in the 2000 
R&D Act, there was a biomass R&D board that was formulated to 
coordinate activities across agencies, and I think that maybe 
is the start of where we can plug a national needs assessment 
type of thing into it.
    But we need an architecture, we need a framework around the 
entire--as my colleagues have said, a systems approach to the 
entire fuel-to-transportation chain--a value chain, if you 
will. And what I envision would happen would be something of a 
network that is coordinated centrally, but it is very 
regionally distributed in terms of trying to get at the 
regional specifics of some basic tenets regarding what are the 
attributes we need out of a future energy economy that has a 
much more robust acceptance of biofuels.
    Biofuels touch so many different things. We've got to worry 
about everything from sustainability to the way financial 
markets work, the way the players work, the way the 
infrastructure is all formulated, and it does inform an R&D 
agenda in that process.
    The Chairman. All right. Let me defer to Senator Domenici. 
Why don't you start, Senator Domenici, and then I'll come back 
to this side over here.
    Senator Domenici. Thank you very much. And I'll be brief, 
because it is late.
    I at least want to thank you, all of you, especially for 
waiting so long. By the time you get up here, not only are you 
tired, but it's quite obvious everybody up here is tired. We 
just hope you had a fine afternoon in spite of all that.
    We're glad to have you, and we know a couple of you pretty 
well. You've been at this kind of thing for quite some time, 
and we're very proud of you. Some not so long, only because you 
aren't very old; some a long time, because you are very old, 
like me. No aspersions. I'm old, too, and I still think I know 
what I'm doing, but you know that's questionable. In any event, 
let me thank you all.
    But let me ask Dr. Arvizo just one follow-up on Senator 
Bingaman's question. I don't quite get it. Why is it more 
important that we do a road map for this when we have so many 
other alternative energy sources that are entering the arena 
that are going to be--in terms of quantity, that are going to 
be just as big as this, and we're not doing road maps on them? 
Is this something special here, or am I misstating the 
question?
    Dr. Arvizo. You're not misstating it. I would offer that we 
need road maps in a much broader and more comprehensive way. 
You know, in our laboratory we look at the renewable areas, 
renewable fuels, renewable electricity. I think you need road 
maps on both. The kind of impacts that are required, the kind 
of investments in the private sector that are going to be 
required, are in the trillions of dollars, and to do that, I 
think government has a role to play that can help facilitate 
market mobilization of capital. And that's really what is I 
think at the origin of this.
    Senator Domenici. Let me ask one for you, Dr. Prather, and 
then I'll yield to the chairman. You stated that cellulosic 
ethanol is 10 years away from commercialization; did I read 
that right? Didn't you say that?
    Dr. Prather. Yes. The estimate of that is actually less an 
estimate of the demonstration of technical feasibility, and 
includes actually bringing up biofuels-dedicated crops, so that 
includes the entire process timeline. The demonstration of 
actually being able to convert cellulosic materials to ethanol, 
that is already happening, but in terms of getting something up 
to scale, where we would actually see competition with corn-
based ethanol and actually having the appropriate agricultural 
infrastructure in place in order to do that, I do think is 
closer to a 10-year timeline.
    Senator Domenici. Well, the President is asking for 35 
billion gallons by 2017 from this particular fuel. Is the 
President's goal attainable, given the state of research, if 
alternate fuels were limited to cellulosic ethanol?
    Dr. Prather. Let me make sure I understand the question. 
Are you saying, if we are only looking at cellulosic ethanol, 
is it possible to do that in 10 years?
    Senator Domenici. Right.
    Dr. Prather. If we're looking at cellulosic, if we look at 
it in combination with corn-based ethanol, I think that's 
realizable. I'm less confident that we're going to go 
completely from a corn-based ethanol system to a cellulosic-
ethanol-based system, and we're going to stop making ethanol 
out of corn, in a 10-year timeframe.
    I do think what we'll see--and I will also say again this 
is not my area of expertise, but I think what we'll see is a 
gradual introduction of cellulosic-based ethanol into the 
market. The benefit to that is, as the cost of that comes down 
to be competitive with corn or better than corn, you may see 
some displacement of what is made from corn, but I think you'll 
see a combination of both of those for some time before you 
actually get the net benefits that are available from 
cellulosic.
    Senator Domenici. OK. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman.
    I want to follow up on Senator Domenici's question, because 
I think there is a bit of irony here. Obviously my two 
colleagues from New Mexico and the lab that is there and the 
Pacific Northwest lab remember the history of our country, when 
we had a mandate from a President who said in a very short 
period of time he wanted us to, I think, go from about $2,000 
of research into becoming a plutonium-producing Nation, and we 
did that in about 3 of 4 years. I can't believe the challenge 
of cellulosic is more daunting than that.
    And so my question is, in this process--and maybe, Mr. 
Taylor, your 6 years on switchgrass can give us some insight as 
to this issue, enzymes versus gasification of materials--what 
really is the focus of what we need to do on breaking through 
on cost-effective production of cellulosic material so that we 
can expedite this time period? Anyone who wants to answer.
    Dr. Davis. I'd like to comment on that, because I think 
there are technologies today, particularly gasification, where 
we can break down any hydrocarbon and we can synthesize what we 
break it down into, into the molecules we want, and we can 
actually do that at a massive scale. It's back to focus. We've 
focused for 20 years on bioconversion. I think we've made 
progress. I think we need to continue to work.
    I think we forgot about the thermochemical conversions, and 
that's our world today, and we do it because we can do them at 
very large scale and they're quick conversions. So 
thermochemical conversions open up the market substantially.
    I'll say again that I don't think the only product we ought 
to be trying to produce is ethanol. I think we ought to let the 
market sort out the product, and I think we ought to broaden 
the technology base we're using to produce them. And I only 
want to, at some risk, chide Senator Domenici because, if he 
remembers, in a prior life he actually confirmed me for a 
position in DOE, so you're partly to blame, sir.
    Senator Domenici. Somebody did tell me that recently. I 
wouldn't have remembered, but now I do. It's a long time ago.
    Dr. Davis. Right.
    Senator Cantwell. So, Dr. Davis, just to clarify, you're 
saying we could go faster with the focus? It's not the science 
that's prohibiting us; Is that what you're saying?
    Dr. Davis. I think we can go much faster than what's 
conventional wisdom.
    Dr. Taylor. Can I add to that, Senator Cantwell?
    Senator Cantwell. Yes, go ahead.
    Dr. Taylor. We both talked about thermochemical conversion. 
The technologies are there. The oil industry is investing very 
heavily in that to take natural gas to liquid fuels. The 
technologies are there, and they're fairly well known. There 
are some small process control variables that we've got to work 
out.
    Take an example: If you're feeding poultry litter into 
that, as your feedstock, into that gasifier, you know there are 
some things we've got to work out there. If you're feeding wood 
chips from Washington State versus Alabama, there's probably 
differences in how we control that process. So the things that 
we need to know, the technologies, are there, and we think 
there's a fairly quick horizon to be able to commercialize 
those and produce a significant amount of fuel.
    I guess our message is: Have a balanced portfolio, don't 
just put all your eggs in one basket. Let's look at cellulosic 
ethanol. That's fine, but let's also broaden that to bring in 
other technologies that are----
    Senator Cantwell. Well, I'm definitely not for picking 
technology winners and losers, but at the same time, I'm not so 
sure that the security threat is any less than it was during 
this previous decade in there where the United States wanted to 
shift strategy in investment. We have a very big challenge and 
we're very dependent, and it could be a lot more drastic 
scenario than just trying to talk the Chinese into putting more 
pressure on Iran for nuclear proliferation. So, to me, 
expediting this is a national security issue.
    Dr. Arvizo. Senator, if I may comment on that, we 
frequently get asked that question: ``So what can you do in 
what kind of timeframe?'' And it really is about the timeframe. 
We have run some models. And I'll grant that the models for 
predictions in these areas are very inadequate, but the best 
models that we have suggest that over the course of the next 10 
years the upper limit for cellulosic ethanol is on the order of 
6 billion gallons. Now, that's a small fraction of what the 
President's goal is, maybe a sizable fraction from some 
circles, but it doesn't meet the whole goal. And part of what--
--
    Senator Domenici. How many was that, Doctor? How many?
    Dr. Arvizo. Up to 6 billion. In fact, we've run models, a 
very aggressive scenario, assuming a variety of things in terms 
of how you mobilize capital, and it's 5 to 6 billion gallons by 
2017. Now, the way you accelerate that is, you make assumptions 
about more aggressive public policy. Now, we're not modeling 
anything, but some of what we've considered to be more basic 
kinds of instruments, the mechanisms for--we don't have the 
first cellulosic ethanol plant in production yet, and it's not 
because--as we heard earlier today, it's not because we don't 
have the technology to actually begin the pilot testing 
program. We simply don't have investors willing to take the 
financial risk to make that happen. Loan guarantees, as you 
offered earlier, are a way in which we can accelerate.
    So there is a technology component, there is a market 
component, and there is a policy component, and I think it is a 
matter of national will as to how quickly we want to get to 
those goals.
    Dr. Michalske. If I could add to that. This challenge, it 
is quite a large challenge, but I think what's inspiring is 
that there are a set of tools now in the world of biosciences 
that give us a completely new way to go about this. These tools 
have the ability to learn how to genetically modify plants so 
that they actually are easier to break down, to develop through 
nanotechnology and biotechnology better ways to extract the 
energy and then convert it into a useable fuel.
    And one of the things that's very difficult now is that 
there are many process steps along the way. This is a very 
intensive process of conversion. The opportunities are to 
really gain great efficiency advantages by combining those 
steps, and using these technologies to have single process 
steps that do multiple functions and really streamline the 
cost-effectiveness. So I think we can do the processing now, 
but the potential to be able to do it in a much more cost-
effective way is what the science and technology investments 
really need to focus on.
    Senator Cantwell. And that's a U.S. economic advantage?
    Dr. Michalske. Absolutely.
    Senator Cantwell. I mean that what you just said about 
nanotechnology and other things is an advantage we have in the 
production of these biofuels that the Europeans or Chinese or 
other people don't have; right?
    Dr. Michalske. It's an advantage that we need to capitalize 
on.
    Senator Cantwell. Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Senator Sessions.
    Senator Sessions. Thank you. If you would just, Dr. Taylor, 
clarify for us. You take a product like switchgrass, Dr. 
Bransby's field--I've seen it--and we talk about how many 
gallons per acre, if you had a good conversion system. But what 
I really am curious about is, how do you take this dry 
cellulose, this cornstalk, and convert that to a fuel that we 
can utilize?
    And I understand there are two ways to do it, through 
biochemistry and hydrolysis and through heat or a thermal 
process. Can you explain the differences? And then I know 
you're going to be building some bio plants this year, Auburn 
University is; are they going to emphasize these technologies?
    Dr. Taylor. Yes. You've got two or three questions there. 
I've got to remember all of them.
    Senator Sessions. Yes, I do.
    Dr. Taylor. The investment that Auburn is making this year 
is really emphasizing that thermochemical approach, so we're 
putting in larger laboratory-scale gasification, gas-to-liquids 
equipment. Auburn has had a longstanding history of gas-to-
liquids technology research at a fairly small laboratory scale 
to work out some really neat new breakthroughs in the gas-to-
liquids technologies. And so we're going to a larger scale that 
will let industry come in and partner with us and take the 
results and scale that up to an industrial process.
    Senator Sessions. Now that you have concluded, I think it's 
fair to say, from what I understand, that the prospect for 
thermoconversion gasification is better at this point than 
the----
    Dr. Taylor. We think so. Both approaches, the biochemical 
approach versus thermochemical approach, I guess if you look at 
the billion ton report, the assumption that's in there is a ton 
of biomass might make 60 gallons of ethanol or 60 gallons of 
fuel. We think those are fairly conservative estimates. By 
really increasing our efficiency, increasing the technology 
there, maybe you double that.
    Theoretically, if you look at the carbon that's there, 
theoretically we might be able to produce 200 gallons per ton, 
we think. So let's say you take that 60 gallons per ton and you 
double it. That's a significant increase in the amount of fuel 
that we might be able to produce.
    Those are the kind of things that we need to answer in both 
the biochemical and thermochemical approaches. The 
thermochemical approach gives us some other advantages.
    Senator Sessions. Can you say basically, just for the 
layman, how the heat will convert a dry cellulosic product to 
become a fuel?
    Dr. Taylor. In those thermochemical approaches, typically 
you would gasify the material, and that's an incomplete 
combustion process that gives you--it takes that cellulose, 
lignon, all the hemicellulose, and you get a synthesis gas that 
has primarily carbon monoxide and hydrogen molecules in it. And 
then you can take those into the gas-to-liquids technologies or 
other catalytic conversion technologies and re-form those or 
put them into a new molecule that might be a diesel fuel, 
gasoline, or other paraffins, olefins, other higher value 
chemicals that come out of that stream at the end of that.
    Senator Sessions. And you will test that this year?
    Dr. Taylor. Yes.
    Senator Sessions. And one more thing. How much, and how 
many kinds of switchgrass cellulose can be produced in an acre 
of land?
    Dr. Taylor. If I remember right, Dr. Bransby, your good 
friend, I think his record is about 15 tons per year, per acre. 
Does that sound right?
    Senator Sessions. So at 60 gallons per ton, 15 tons an 
acre, that's a good bit of fuel.
    Dr. Taylor. Several gallons per acre, that's right.
    Senator Sessions. If you can make the conversion process 
work, you should be able to have a pretty good source of 
energy. Now, the thing about switchgrass is, everybody is 
talking about it, but the advantage, if you see it, is you just 
cut it like you do regular grass. It grows up to 10 feet tall. 
And you can go in and cut it, but you don't have to replant it. 
I believe Dr. Bransby has cut the same fields for 10 or more 
years, never had to replant, don't have to break the soil up, 
and does not fertilize at all or very little. So it's a pretty 
tough, hardy-growing product, if you could make the conversion 
work.
    Dr. Davis. Senator Sessions, if I might add a comment, I 
think we're not trying to put thermochemistry or biochemistry 
against each other. Keep in mind that we need conversion 
technology that both scales up to massive scale and scales down 
to a distributed scale, that works for a wide variety of 
feedstocks. That's pretty challenging.
    We just got back from 10 days in China, and they are 
building gasification technology on a massive scale, but 
they're not producing it to make ethanol. They're basically 
building it to make fertilizer and to make methanol as an 
intermediate for chemical activities. And, in fact, we have 
agreements now to work with them to campaign some of our 
technology on their gasifier, because I'm not ready to ask the 
committee for enough money to build a new gasifier at PNL, but 
I'd like to do that. So with that cooperation, we'll be able to 
campaign a number of important technologies on large 
gasification systems this year.
    Dr. Taylor. If I can just tack onto it, I guess our 
approach is, let's keep our slate open. Let's consider a 
balanced portfolio of those fuel conversion technologies. 
Thermochemical just happens to be one of those that we have 
some expertise in, and that's what we're emphasizing.
    Senator Domenici. Mr. Chairman?
    The Chairman. Yes, Senator Domenici.
    Senator Domenici. I know we don't have a DOE official here. 
I guess maybe you come closest, being from Sandia. Or I guess a 
couple of you do, three of you do. Anyway, I want to lay this 
before you, because I know about it and I think you would be 
interested in getting the facts for us.
    It would seem kind of strange that the President of the 
United States would be giving a State of the Union address and 
be talking about such a large quantity of ethanol in the 
future, when you are sitting before us today talking about the 
fact that we don't know how to make it yet, we don't know how 
to make that second breakthrough which will create big 
quantities.
    But the Department of Energy has let three contracts or 
loans or whatever the instrument is, Senator Bingaman, $160 
million each. That's out there, and I don't know where they are 
in status, but I think it would be good, if you would think so, 
that we write DOE and ask them. Because it would seem that our 
committee, we started it by authorizing it in our bill, and 
then they took it and they found the money for it. They didn't 
find the money for some of the other things, which I'm glad 
for, but I think it would be good for us to know where it is. 
It seems rather important that we pursue it with some degree of 
vigor.
    The Chairman. I agree. I think we should inquire from the 
department how we get from here to 35 billion.
    Senator Domenici. It's a good point.
    The Chairman. Yes.
    Senator Domenici. Very simple.
    The Chairman. Since that's what we're supposed to be doing.
    Let me call on Senator Salazar.
    Senator Salazar. Thank you very much, Senator Bingaman. And 
I know it's late in the day, so I will be short.
    Let me just first say that I congratulate each of you and 
your institutions for all that you do in the laboratories. I am 
particularly fond of NRL, and thank you for greeting the 
President and Secretary Bodman and myself and others, Senator 
Allard, over the last year and a half.
    I have a question that I'd like each of you to just take a 
quick minute and a half to answer. I heard Dr. Arvizo's 
response to several of the questions here: that we are limited 
perhaps in even reaching the President's renewable fuels goal 
here at 35 billion gallons by 2017. And I thought I heard Dr. 
Arvizo say we have the technology issues and the market issues 
and then the public policy issues that we deal with. And I 
think your concluding statement was that an aggressive public 
policy might make a difference in terms of your modeling how 
much alternative fuel we can produce by 2017, 10 years out. So 
my question to all of you--and I would like you to spend less 
than 2 minutes on this each, 1 minute maybe, because otherwise 
the chairman will get mad at me. So at the end, he said an 
aggressive public policy could accelerate us achieving these 
goals, an aggressive public policy. What would be the two 
things that we could do in this U.S. Capitol on that aggressive 
public policy, to accelerate what we are doing now so that we 
can achieve and perhaps surpass the President's goals? Terry, 
we'll start with you and go down the table.
    Dr. Michalske. I think that currently we are investing a 
shockingly small amount of our resources to achieve this goal, 
and that if we're going to take on a challenge like that, I 
believe we can make it. But we can't make it on a shoestring. 
We're going to have to take that challenge seriously in how we 
support the research all the way through the development that 
will allow this to go forward.
    Senator Salazar. Do you have a quantum of what that would 
be? I mean what kind of money we're talking about. When you say 
it's on a shoestring now, how much more do we need to get the 
acceleration done that you're talking about?
    Dr. Michalske. Senator, I don't have a good quantitative 
estimate for that.
    Senator Salazar. But your conclusion is, right now we're 
operating on a shoestring budget to essentially reach this goal 
that is a visionary goal.
    Michael, let's go to you.
    Dr. Davis. I'd like to do a ``don't'' along with a couple 
``dos''. Don't require the 35 billion gallons to be all 
ethanol. I don't think that's a good solution. Do more on 
vehicle efficiency. The math is for you. You save a gallon on 
the consumption side, you're saving more than two on the 
production side. Allow for some electricity to be a part of 
this solution.
    We're spending--the whole DOE research budget on energy is 
$2.5 billion. We spend $1 billion on oil every day. If I was 
buying insurance, I'd spend a hell of a lot more than $2.5 
billion on energy research in this country, period. So I don't 
think we've even begun to understand the challenge, relative to 
the total budget.
    And then we fracture that budget pretty substantially 
because all these issues have some merit. We don't set 
priorities well enough to manage the resources we do, and I 
think we can make the case that we're underinvested, aside from 
the wishes of the committee. We certainly appreciate your 
support.
    Senator Salazar. Thank you, Dr. Davis.
    Dr. Arvizo.
    Dr. Arvizo. Yes, I think first of all we're talking about 
all the wrong scale here. I think we need to have--earlier in 
the presentation or during the day, Senator Domenici said we 
got the zeros wrong. I think we've got the zeros wrong here. I 
agree with Dr. Davis regarding underinvestment in our energy 
future. Our future energy economy requires a lot more 
investment than we've had to date.
    If I just focus on this one area, biofuels, the one thing I 
will say is that right now, under Ray Orbach's program for 
bioscience centers, we have scheduled two essentially 
bioscience centers that will be funded at something on the 
order of $50 million a year for 5 years. These are formidable 
efforts. There are actually five major bioregions of the 
country where you have feedstocks that are similar in nature. 
We ought to have five bioscience centers, not two. That would 
be a huge step forward in getting regionalization and getting 
an infrastructure.
    I think there is some science to be done. Clearly it can be 
aided by public policy. I think in this case, looking at more 
robust feedstocks that are for the purpose of energy 
production, we have to get out of this quandary that we have 
that we're affecting food prices because we're trying to 
develop energy, liquid fuels.
    Again, taking a holistic approach back to this road map 
that I was talking about earlier, we really do need to look at 
this thing in its broadest perspective. I think we'll find more 
than enough challenges to spend an enormous amount of money on, 
only a little bit of which will be really, really effective in 
terms of meeting the needs.
    The difference between this and the Manhattan and the 
Apollo programs is that we've got to do this at an achievable 
and sustainable market price. We didn't have that particular 
dynamic overlaid on those other grand challenges. This is a 
grand challenge of unprecedented proportion, so it needs that 
kind of attention.
    Senator Salazar. Thank you, Dr. Arvizo.
    Dr. Prather.
    Dr. Prather. I think I'll kind of piggyback exactly on that 
point, that I think there's a difference between ``can we do 
it'' and ``can we do it at a price that makes it realistic.'' 
So I'll leave it at that.
    I apologize for not remembering the writer's name, but 
there was a professor at the University of California at 
Berkeley who did an analysis in terms of economic investment in 
R&D and concluded that what we need is a ten-fold increase in 
investment, governmental investment, in the energy area. And 
this included renewable energy altogether, it wasn't specific 
to transportation, biofuels.
    But his analysis concluded that it was a factor of 10, and 
that through historical analysis you could do that ten-fold 
increase in investment without significantly affecting the R&D 
efforts of other major initiatives. One of the concerns is 
always if you overfund in one area, you're going to underfund 
significantly someplace else. And he also argued in this 
analysis that historically what we've seen is when the 
Government does ramp up its investment in major R&D issues, the 
private sector follows, so a ten-fold increase from the 
Government actually ends up being more than that because 
private industry steps in as well. So I'll try to give that 
number.
    The second point I'll make in terms of what to do is 
diversification, to really get the conversation going beyond 
``Can we make 30 billion gallons of ethanol?'' to ``What does 
it really mean to have renewable, sustainable energy?'' And 
think about going much broader than that.
    Senator Salazar. If you can find that article, I'd 
appreciate it if you could get it to us.
    Dr. Prather. Sure. I have it in my backpack back there.
    Senator Salazar. Thank you, Doctor.
    Dr. Taylor.
    Dr. Taylor. Dr. Kammen, I think, at UC-Berkeley, is who 
you're thinking about.
    Dr. Prather. Yes.
    Dr. Taylor. A couple of things. I guess maybe our goals--we 
could rethink our goals a little bit. Instead of saying so many 
gallons, let's say that our goal is to create a biofuels 
industry that's cost-competitive with petroleum. If it's 
competitive, consumers will buy it. You know, if it's the right 
price, we're going to buy that and put it in our cars and 
trucks. So let's fund the R&D that will make the technology 
that will make the industry cost-competitive and sustainable at 
the same time. You've got to have both of those.
    Long-term environmental sustainability is what we want, but 
if it's cost-competitive, we're OK. The money, I don't know how 
much we spent on the Apollo missions or other things like that, 
but if we elevate it to a level of a national priority, let's 
really look at how much money was invested in those and that 
will give us some perspective on how much we should invest 
here.
    I know the farm bill has a bioenergy, bioproducts research 
initiative in it, proposed. That's wonderful, but I'm not sure 
that that's enough.
    Senator Salazar. Thank you very much.
    And thank you very much, Mr. Chairman.
    The Chairman. Thank you.
    Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman. I just want to 
thank you for today's various panels. And the organization of 
the committee into this biofuels day I think has been very 
helpful to the committee and to the Senate, so I thank you for 
your leadership on this issue.
    I wanted to follow up with Dr. Davis.
    You mentioned electricity a couple of times, and the notion 
that electricity, in and of itself, is a fuel. I know that the 
lab just came out with an analysis that 70 percent, I believe, 
of the cars, trucks, and other vehicles could be powered off of 
our current electricity grid capacity. That is, if we had plug-
in cars, with that plug-in capacity, batteries could be 
recharged with the current supply of today's grid.
    Dr. Davis. That's correct.
    Senator Cantwell. If that's the case, what do we do to 
enhance the use of current energy that's already available?
    Dr. Davis. There are a couple of important aspects to that. 
We looked at the 150 control regions of the country, and we 
looked very carefully at the installed electric-generating 
infrastructure, transmission and distribution. If you look at 
the amount of energy that could be produced off-peak, that's 
available, largely from coal plants, then it gets very specific 
in terms of different regions, but it does look, in aggregate, 
like something on the order of 70 percent of the entire fleet, 
on an energy-equivalent basis, could be powered with 
electricity.
    The infrastructure is there to generate it and deliver it. 
You're going to use more fuel. You've got to use that 
electricity off-peak, because you can't compete with peak 
demands, where we're essentially using the infrastructure for 
delivery. What's going to require that to be unlocked is the 
right kind of technology on board vehicles, electric vehicles, 
plug-in hybrid vehicles, battery technology. Those are 
challenges as well, but those challenges might be a shorter 
path to victory than some of the other challenges.
    As to Dan's point, I think I would look at a study that 
gets at how we move things, not just biomass in particular, but 
what are the options for us to gain energy security and address 
climate change issues in terms of how we move things? And I 
think you come up with a broader suite of answers, and some of 
them get you there faster than what we're talking about with 
just ethanol.
    Senator Cantwell. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Senator Sessions, did you have additional 
questions?
    Senator Sessions. I would just add, I believe Auburn is 
looking also at garbage, waste-to-ethanol. Is waste and 
newspaper and traditional garbage also potentially a source of 
ethanol?
    Dr. Taylor. It is another one of those cellulosic forms of 
material, yes. I think that we have some partnership agreements 
with an industry partner and we are working together there.
    Senator Sessions. Thank you.
    The Chairman. Well, I thank this panel very much. I think 
it has been very useful testimony, and we appreciate everyone 
who has participated in today's conference. The hearing is 
adjourned.
    [Whereupon, at 4:55 p.m., the conference was adjourned.]

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