1 ENVIRONMENTAL PROTECTION AGENCY 1

PUBLIC HEARING FOR THE 2014 STANDARDS FOR THE 2

RENEWABLE FUEL STANDARD PROGRAM 3

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Thursday, December 5, 2013 7

9:04 a.m. 8

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Hyatt Regency Crystal City 20

2799 Jefferson Davis Highway 21

Arlington, Virginia 222 02 222 PARTICIPANTS 1

EPA MEMBERS: 2

CHRISTOPHER GRUNDLER, Chair 3

PAUL ARGYROPOULOS 4

DALLAS BURKHOLDER 5

JOHN HANNON 6

DAVID KOROTNEY 7

PAUL MACHIELE 8

KARL SIMON 9

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SPECIAL PANEL: 11

BOB GOODLATTE , U.S. Representative from Virginia 12

PETER WELCH , U.S. Representative from Vermont 13

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PANEL 1: 15

MIKE BROWN 16

JOHN BULLOCK 17

BOB DINNEEN 18

CHARLES DRE V NA 19

JUDD HULTING 20

JEREMY MARTIN 21

223 PARTICIPANTS (CONTINUED) 1

PANEL 2: 2

BRUCE BRALEY 3

R. TIMOTHY COLUMBUS 4

BOB GRECO 5

JEFF JOHANNESMEYER 6

JAN KONINCKX 7

ANNE STECKEL 8

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PANEL 3: 10

ROBERT ANDERSON 11

JOHANNES ESCUDERO 12

JONATHAN LEHMAN 13

PETER MATRAI 14

PAT PATTERSON 15

JOHN URBANCHUK 16

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PANEL 4: 18

TERRY BRANSTAD 19

RICHARD HANSEN 20

MARK LEONARD 21

RANDY OLSON 224 PARTICIPANTS (CONTINUED) 1

PANEL 4 (CONTINUED): 2

MARK RECKER 3

ROGER ZYLSTRA 4

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PANEL 5: 6

CHRIS BLILEY 7

GRANT MENKE 8

JEFF REAMY 9

ALLEN RIDER 10

MARK WIGANS 11

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PANEL 6: 13

PAIGE ANDERSON 14

DAVID BIDERMAN 15

KATIE CAMPBELL 16

MIKE CUNNINGHAM 17

MAURICE FEY 18

JOHN REESE 19

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225 PARTICIPANTS (CONTINUED) 1

PANEL 7: 2

AVERY ASH 3

SCOTT FENWICK 4

GLENN JOHNSTON 5

LETICIA PHILLIPS 6

ALEX RINDLER 7

STEVEN SHIMBERG 8

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PANEL 8: 10

RAMON BENAVIDES 11

KENT ENGELBRECHT 12

BOB HUTCHISON 13

ERICK LUTT 14

RON MARR 15

JOHN MCKNIGHT 16

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PANEL 9: 18

MICHELE BOYD 19

CURT FRIESEN 20

DAN GILLIGAN 21

DON LOREN 226 PARTICIPANTS (CONTINUED) 1

PANEL 9 (CONTINUED): 2

DAVID WHIKEHART 3

MICHAEL WHITNEY 4

CRAIG WILLIS 5

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PANEL 10: 7

R. BROOKE COLEMAN 8

SANDRA FRANCO 9

CHRISTINE HARBON HA NSON 10

BRANDON HUNNICUTT 11

JOHN KASBAUM 12

BEN MCMAKIN 13

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PANEL 11: 15

KENNETH HAAPALA 16

MITCH MILLER 17

JEFF OESTMANN 18

CHARLES SPANO 19

ALAN WEBER 20

KRISTIN PEARSON WILCOX 21

227 PARTICIPANTS (CONTINUED) 1

PANEL 12: 2

MARK BEEMER 3

DAVID HOWELL 4

STEVE HOW E LL 5

SCOTT LONIER 6

STEFFEN MUELLER 7

AAR ON WALSH 8

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PANEL 13: 10

CLINTON ENSIGN 11

GARY HAER 12

CONNIE LAUSTE N 13

RICHARD SCHWARCK 14

BRYAN TALIAFERRO 15

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PANEL 14: 17

DAVID DURHAM 18

KEN HARTMAN 19

CHRIS HESSLER 20

MARK KENT 21

BRUCE VOLLAN 228 PARTICIPANTS (CONTINUED) 1

PANEL 14 (CONTINUED): 2

OWEN WAGNER 3

NICOLE PALYA WOOD 4

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PANEL 15: 6

K EVIN ANDERSON 7

JOEL BRANDENBERGER 8

BILL BUSHONG 9

DAYNE DELAHOUSSAYE 10

STEVE FOGLESONG 11

BILL LAPP 12

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PANEL 16: 14

JEFF JETER 15

TIMOTHY KEAVENEY 16

DENNIS MCNINCH 17

BRIAN SIU 18

MARK THOMAS 19

SCOTT VINSON 20

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229 PARTICIPANTS (CONTINUED) 1

PANEL 17: 2

CHIP BOWLING 3

JENNIFER CASE 4

MIKE CLEMENS 5

THOMAS CORLE 6

GARY EISCHEID 7

NICK YAKSICH 8

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PANEL 18: 10

JOHN CAUPERT 11

JOHN DAVIS 12

KEVIN POTAS 13

DWAYNE SCHAD 14

KIP TOM 15

STEPHEN WARD 16

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PANEL 19: 18

DAVID DERAMUS 19

GARY HUDSON 20

RANDY HUGHES 21

ANDREA KAVALER 2210 PARTICIPANTS (CONTINUED) 1

PANEL 19 (CONTINUED): 2

MIKE MOREHOUSE 3

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PANEL 20: 5

MARK BORER 6

TOM BROOKS 7

JAMIE JAMIESON 8

STEVE PITTMAN 9

JOSEPH SINCAVAGE 10

H. GRANT TROOP 11

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PANEL 21: 13

RICH HANSON 14

BRUCE LUTES 15

ROB MACKIE 16

BRIAN MCCLARREN 17

ROBERT MORTON 18

JAY SCHUTTE 19

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2211 PARTICIPANTS (CONTINUED) 1

PANEL 22: 2

SPARKY CROSSMAN 3

TIM FRENCH 4

J OEL GRAMS 5

WAYNE PRESBY 6

MILES STEPHENS 7

TIMOTHY V ERVAECKE 8

BEN WOOTTON 9

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2212 P R O C E E D I N G S 1

MR. GRUNDLER : Good morning, everybody. I think 2

we'll get started. Please take your seats. 3

(Pause.) 4

MR. GRUNDLER : Well, welcome, everyone. This is 5
the public hearin g for the proposed 2014 standards and 6

2014 and 2015 biomass

- based diesel volume standards 7

under the Renewable Fuel Standards P rogram. 8

My name is Chris Grundler. I'm with the 9

Environment al Protection Agency. I'm the Director of 10

the Office of Transportatio n and Air Quality. 11

I'd like to start by introducing some colleagues 12

of mine who I consider just extraordinary public 13

servants who have been working in this policy area for 14

many years and doing an outstanding job. To my right 15

is Paul Machiele , and David Ko rotney and John Hannon t o 16

my left , from our Office of General Counsel. 17

In the audience today are Paul Argyropoulos and 18

Karl Simon. Dallas Burkholder, I think, is maybe still 19

out front. But they will be here all day and will be 20

available to answer questio ns as well. 21

I also want to note that EPA is doing its job to 2213

address the financial crisis by choosing this venue 1

today. I hope you find it all comfortable. We got a 2

very good rate on it. So

-- 3

(Laughter.) 4

MR. GRUNDLER : So today , we'll be hearing 5

testim ony on our proposal for the 2014 standards under 6

the RFS p rogram. This proposal was signed by the 7
Administrator on November 15th and was published on 8

November 29th. 9

The proposal, we call an NPRM, proposes 2014 10

volume requirements for cellulosic biofuel, b iomass

11

based diesel, advanced biofuel, and total renewable 12

fuel. It also proposes the 2015 volume requirement for 13

biomass

- based diesel. 14

We recognize that these volume standards are 15

important to a very wide variety of stakeholders, as is 16

exhibited by the t urnout we have for this public 17

hearing, for which we are, by the way, very, very 18

grateful. We're inviting comment on all aspects of the 19

rulemaking, and we have specifically asked stakeholders 20

to provide us relevant and up

- to

- date data and analysis 21

on the many issues that we lay out in the proposal, 221 4

either today or subsequently through the comment 1

period. We're very eager to have this information so 2

we can make the best decision. 3

So we're looking forward to our continued 4

engagement after this hearing, as w ell as working very 5
closely with our colleagues at the Department of 6

Agriculture and the Department of Energy as we move 7

toward a final decision. 8

So under the Clean Air Act, we are required to 9

determine the renewable fuel standard s every year, as 10

all of yo u certainly know. While the Congress 11

specified volumes for each year for all four categories 12

of renewable fuel, Congress also provided the authority 13

to EPA to change those volume requirements under 14

certain conditions. 15

The cellulosic biofuel standard must be based on 16

the volume projected to be available using information 17

from EIA, the Energy Information Agency, and 18

assessments of production capability from the industry. 19

The applicable volume of biomass

- based diesel must be 20

determined for 2013 and beyond, a s the statute does not 21

specify the applicable volumes for years after 2012. 2215

The biomass

- based diesel volume requirement can be no 1

lower than 1.0 billion gallons, but it can be higher 2

following an analysis of a number of factors listed in 3

the law. 4

With reg ard to the total renewable fuel volume, 5
our proposed approach uses a combi nation of the 6

available authorities to ensure that all ethanol that 7
can reasonably be expected to be consumed in 2014, 8

given the legal and practical limitations, is included 9

in the r equired volumes that we're proposing. 10

In addition to these projected ethanol volumes, 11

the proposed total renewable fuel volume requirement 12

also includes the projected volume of all known sources 13

of non

- ethanol advanced and conventional biofuels that 14

can re asonably be expected to be produced and consumed. 15

Thus, our proposed volume requirement of 15.21 billion 16

gallons of total renewable fuel includes both the 17

projected ethanol consumption and a consideration of 18

the volumes of non

- ethanol renewable fuel that are 19

projected to be available in 2014. 20

For the advanced standard, as part of addressing 21

the limitations in ethanol use by consumers, we base it 2216

on a combi nation of volumes of all cellulosic biofuel 1

and all non

- ethanol biofuel, including bio diesel , in 2

exces s of 1.28 billion gallons. While the proposed 3

approach to advanced biofuel addresses the limitation 4

in both availability of advanced fuels and ethanol use 5
by consumers, our proposal also describes several 6

alternative approaches for how to establish the 7

ad vanced biofuel standard, and we are requesting 8

comment on all of them. 9

I also want to point out that our proposal 10

includes volume ranges for all categories of renewable 11

fuel, and we do this in order to, first, address the 12

uncertainty in trying to project t hese volumes into the 13

future, but also to provide all of you and people who 14

aren't here an opportunity to give us this more up

- to

15

date information so that we can make the accurate 16

decision, as well as to provide everyone meaningful 17

comment. 18

So, again, I wa nt to repeat we specifically asked 19

for data and analysis that will help inform our 20

estimates of the production and use of renewable fuels 21

for the final rulemaking. As I noted, there's also an 2217

important opportunity, I should say, to send us written 1

comment s. So today is not the only opportunity for the 2

public to tell us what you think. And this written 3

comment period will close on January 28, 2014. 4

Now let me just go through some procedural 5
requirements for this hearing. We're conducting this 6

hearing in accordance with Section 307(d)(5) of the 7
amended Clean Air Act, which requires EPA to provide 8

interested persons an opportunity for oral 9

presentation, in addition to written submissions. 10

The official record of this hearing will be kept 11

open for 30 days to provide for submission of rebuttal 12

and supplemental testimony. I'll be conducting this 13

hearing informally, and formal rules of evidence do not 14

apply. 15

I am the presiding officer of today's hearing, and 16

as such, I will strike statements from the record whic h 17

are irrelevant or needlessly repetitious and will apply 18

reasonable limits on the duration of a statement of any 19

witness. And we do so so we get

-- have an opportunity 20

for everyone to be able to present some testimony. 21

Because we have a very long list of those wishing 2218

to testify, we request that each person keep their 1

verbal testimony to no more than 4 minutes. We have 2

some helpful timers on the table to assist you. And, 3

but we will be here as long as it takes so everyone can 4

have a chance to say someth ing. So we do expect it 5
will be a long day, but all of us will stay until the 6

last person is heard. 7
To make things as efficient as possible, we're 8

using a panel format for today's testimony. So six 9

people at a time will sit at tables up front and will 10

pr ovide their testimony in succession. Again, for 11

austerity reasons, we only have three microphones. So 12

we're going to ask people to share so the court 13

reporter will be able to accurately hear what you're 14

saying and record it. 15

Please state your name and af filiation prior to 16

making your statement. And when each witness has 17

finished his or her presentation, the EPA panel will 18

have an opportunity to ask questions related to the 19

testimony. Witnesses are reminded that any false 20

statements or false responses to a question may be a 21

violation of law. 2219 In order to streamline the process, we've asked 1

members of each panel to be in the room in advance of 2

their projected panel time and should make their way to 3

the staging area to the side of the panel tables while 4

the previous panel members are finishing their 5
testimony. So we have an on

- deck row, not an on

- deck 6

circle, there in front for you to be seated. 7
If any of the members of the audience wishing to 8

testify have not already signed up, please do so. We 9

have a sign

- up sheet outside the room. Please submit 10

your name at the registration table, and we'll try to 11

accommodate everyone who wants to testify. Everyone 12

attending should sign the registry whether or not 13

you're testifying. 14

So, with that, I'd like to call up th e first panel 15

of witnesses. Thank you again for coming. 16

So on Panel 1 , we have Mr. Charles Drevna, Mr. 17

John Bullock, Mr.

-- I should say Dr. Jeremy Martin, 18

Bob Dinneen, Mike Brown, and Judd Hulting. 19

(Pause.) 20

MR. GRUNDLER : Mr. Drevna, when you're ready. 21

M R. DREVNA : Good morning. I'm Charlie Drevna, 2220

president of the American Fuel and Petrochemical 1

Manufacturers, AFPM. We are a trade association 2

representing high

- tech American manufacturers of 3

virtually the entire supply of U.S. gasoline, diesel , 4

petroche micals, et cetera. 5

EPA's r ecognition of the ethanol blend wall and of 6

potential adverse effects on consumers is a very 7
welcome first step. However, EPA's actions are short 8

term in nature and really point to the need for 9

Congress to address the severely fl awed and outdated 10

renewable fuel standard

. 11

The statutory quantities of ethanol exceed the 12

technical limitations of many engines in service today. 13

The vast majority of exist ing vehicles and 14

infrastructure simply cannot handle a gasoline supply 15

containing m ore than 10 percent ethanol , E10 , which 16

leads to what is referr ed to as the E10 blend wall

. 17

EPA's proposed waiver attempts to reconcile the 18

reality of the blend wall with the unrealistic 19

renewable volumes in the statute and is necessary to 20

prevent the RFS from artificially limiting the supply 21

of transportation fuel available for U.S. consumption. 2221 Renewable identification numbers, RINs, are the 1

currency used for RFS compliance. The number of RINs 2

available for compliance depends not on production of 3

domesti c ethanol , but on consumption of these renewable 4

fuels. 5
As the RFS mandate exceeds the ability of the 6

underlying fuel supply to use additional ethanol , there 7
will be a shortage of RINs for compliance in the 8

marketpla ce. Neither E15 or E85 or drop

- in renew able 9

fuels will fill the RIN gap in the necessary timeframe. 10

The blend wall is here now. 11

Since RINs operate as permits to sell 12

transportation fuel, if there are not sufficient RINs, 13

obligated parties will have to reduce their obligation 14

to comply with the law. Obligated parties can only 15

legally supply as much gasoline and diesel for U.S. 16

consumption as they have RINs to meet the obligation 17

that supplying the fuel incurs. 18

Unless EPA takes action to reduce the mandates to 19

levels compatible with vehicles and infrastructure, the 20

result could be to reduce imports, increase exports, 21

and reduce domestic production. 2222 In AFPM's August 2013 waiver petition, we proposed 1

a 9.7 cap on ethanol in gasoline because it is the 2

minimum EPA action necessary to retain a supply of pure 3

gasoline required for some engines and account for 4

historical differences between the EIA projections of 5
gasoline demand and actual demand and promote liquidity 6

in the RIN market. EPA's proposal maintains ethanol 7
consumption at about the same leve ls as consumed in the 8

past 2 years, which means there will be no actual 9

reduction in ethanol consumption. 10

To date, the advanced biofuel requirement has 11

functioned as a de facto mandate for hundreds of 12

millions of dollars

-- hundreds of millions of gallons 13

of sugarcane ethanol imported from Brazil. This is not 14

what Congress intended. EPA should consider only 15

domestic supply when setting the advanced biofuel and 16

total renewable volumes. 17

EPA is required by the Clean Air Act to publish 18

annual renewable fuel v olumes by November 30th of the 19

preceding year. The agency was, unfortunately, 9 20

months late in setting the 2013 volumes and will be at 21

least 7 months late in finalizing the 2014 volumes, 2223

causing additional uncertainty in the transportation 1

fuel markets. 2

E PA was required to set the biomass diesel volume 3

for 2014 by October 30th of '12 but missed the 4

statutory deadline by more than a year. There is a 5
consequence for being late. EPA does not have the 6

authority to increase the volumes for biomass

- based 7

diese l for 2014 or 2015. Therefore, it cannot 8

promulgate a volume for biomass

- based diesel for either 9

year that is higher than 1.28 billion gallons, the 10

regulatory value for 2013. 11

MR. KOROTNEY : Mr. Drevna, you're going to have to 12

wrap up. 13

MR. DREVNA : The law is clear on this point. One 14

last thing. The cellulosic mandate, while EPA 15

recognizes statutory levels, those simply don't exist 16

and made a downward adjustment. You can't be 17

aspirational. You have to be realistic in setting 18

those numbers. 19

Thank you ver y much. 20

MR. GRUNDLER : Thank you. Next is Mr. John 21

Bullock. 2224 MR. BULLOCK : My name is John Bullock. I'm the 1

chief strategy officer for Darling Inter nation al. 2

Darling Inter nation al is one of America's oldest and 3

largest green companies. We have a signifi cant stake 4

in the biomass

- based diesel area, as we produce both 5

renewable diesel and bio diesel

. 6

I am here today because we believe that the rule, 7
as proposed by the EPA, fails to enact the clear 8

directive of Congress and, what is more troubling and 9

more im portant to us, seems to choose a path forward 10

that misses what looks to us like to be an easy 11

opportunity to further the development of what has been 12

one of the most successful aspects of RFS 2

-- biomass

13

based diesel

. 14

For the last several years, we have wo rked with 15

our outstanding partner, V a lero Energy Corporation, to 16

design and construct Diamond Green Diesel . Diamond is 17

the largest renewable diesel plant in North America. 18

It is located in New Orleans, Louisiana, cost almost 19
$400 million to build, and st arted production in June 20

of this year. 21

Today, Diamond uses animal fats, used cooking 2225

oils, and distiller s corn oil to make over 140 million 1

gallons annually of renewable diesel

. Renewable diesel 2

is a high

- quality diesel fuel which reduces greenhouse 3

gas e missions by over 80 percent. That's well above 4

the mandate for cellulosic and more than most 5
cellulosic fuels have that are on the market today. 6

Darling made the Diamond investment decision 7

solely because of RFS2

. It took over 2.2 million man

8

hours to pr oduce

-- to make Diamond, and it currently 9

employs over 50 people in high

- paying, quality jobs. 10

Diamond uses American

- made feedstock and markets 11

greenhouse gas

- reducing biofuels to the American 12

consumer. We believe Diamond is exactly what Congress 13

intend ed when it passed RFS2. 14

We disagree with the conclusions reached in the 15

proposed rule that biomass

- based diesel requirements 16

should be maintained for '14 and '15 and that the 17

advanced biofuel RINs should be reduced from the 3.75 18

billion mandate of 2014. I t appears to us that the 19

proposed rule has two fundamental rationales for its 20

basis. 21

The first is that cellulosic biofuels are simply 2226

not available in the quantities needed at this time, 1

and the second is the potential impact that Brazilian 2

ethanol , being imported to meet the advanced biofuel 3

requirement, is having on U.S. ethanol production, t he 4

so - called "blend wall." 5
I would like to quickly address why I don't 6

believe either of those are a reason why you should not 7

increase biomass

- based diesel and maint ain the 3.75 8

billion RINs for '14. 9

While cellulosic will not meet the targets 10

established for 2014, the biomass

- based diesel 11

industry, which makes a fuel that i s better than the 12

required drop

- in

-- in

-- the required drop

- in 13

lifecycle emissions, is ready t o meet these goals. In 14

the proposed rule, the EPA actually acknowledges that 15

the production, distribution, and feedstock supply is 16

there for somewhere between 1.6 and 1.9 billion gallons 17

of biomass

- based diesel

. 18

The proposed rule spends a great deal of ti me 19

trying to determine the impact of the existence of the 20

tax credit on whether or not bio diesel production will 21

happen. The analysis concludes that without the tax 2227

credit, the industry will not produce at or near its 1

capability. 2

In our view, it is neithe r appropriate nor wise 3

for the EPA to engage in determining whether capacity 4

that exists and is capable of meeting the requirements 5
established by the law should not be used when there is 6

no harm associated with using that capacity and the 7

clear goals of t he law can be achieved by using that 8

capacity. It is important to remember that in 2012, 9

when the tax credit didn't exist, the industry produced 10

at above its mandate that year and only stopped 11

producing and declined producing when the mandate was 12

fulfille d during that year. 13

Likewise, the concerns of the blend wall are 14

easily alleviated if the EPA were to increase the 15

biomass

- based diesel requirement to the level that its 16

own analysis says exists today. If that path were 17

chosen and American industry would produce in excess of 18

3 billion advanced biofuel RINs with no impact on the 19

ethanol blend wall. 20

In fact, if the EPA would revise the biomass

- based 21

diesel requirement to 1.9 billion gallons, the 2228

renewable fuel standard could be increased to 16 1

billion gallon s with no danger of Brazilian ethanol 2

having any impact on U.S. ethanol production and 3

providing the same level of U.S. ethanol production as 4

is prescribed by the proposed rule. 5

It looks to us like there is an easy -- 6

MR. KOROTNEY : You're going to have to wrap up, 7

please. 8

MR. BULLOCK : Not a problem. And the EPA should 9

use it by increasing the biomass

- based diesel to 1.9 10

billion and maintaining the advanced RINs at 3.75 11

billion RINs for 2014. 12

Thank you. 13

MR. GRUNDLER : Thank you. A question from Mr. 14

Hanno n. 15

MR. HANNON : Mr. Bullock, you probably heard that 16

Mr. Drevna raised a legal issue, and you're suggesting 17

that we raise the biomass

- based diesel standard up to 18

1.9 billion, and Mr. Drevna suggests that we don't have 19

any authority to raise it above 1.28 b illion. 20

It would be useful for you or other members of 21

that industry to provide written comments on your legal 2229

views. It will really help the agency. There are a 1

lot of legal issues in this rulemaking. It will help 2

the agency to have them fully explored by all the 3

commenters, and I'd say that broadly to all witnesses. 4

MR. BULLOCK : Be glad to. 5

MR. GRUNDLER : Dr. Martin? 6

DR. MARTIN : Thank you for the opportunity to 7
testify today. 8

My name is Jeremy Martin, and I'm a senior 9

scientist working on biofuel s at the Union of Concerned 10

Scientists. 11

UCS strongly supports the oil

- saving and climate 12

goals of the renewable fuel standard , and we're 13

encouraged to see the EPA use its authority to 14

administer the RFS in a flexible manner. However, the 15

proposed 2014 renewab le volume obligation is just the 16

first step towards putting our biofuel s policy on the 17

right track to deliver on its long

- term oil

- saving and 18

climate goals. 19

The 2014 RVO reflects a clear reality. The 20

existing roadmap guiding the RFS is obsolete. The 18 21

b illion gallon target for 2014 and the 36 billion 2230

gallon target for 2022 are no longer plausible, and 1

without more realistic goals, the policy creates, 2

rather than reduces, uncertainty. 3

The 2014 RVO proposal wisely grapples with the 4

real challenges facing t he implementation of a policy 5
in the near term, particularly the infrastructure 6

constraints. But while slowing down and proceeding 7
with caution is well warranted, the EPA's proposal cuts 8

too deep and threatens to s tifle the investment 9

required to realize the long

- term goals of the RFS. 10

The final 20 14 RVO should carefully balance near

11

term challenges with the need to make progress on the 12

oil

- saving and climate goal for the policy. So we'll 13

submit more detailed technical comments on several 14

points later, bu t today I'll specifically address the 15

E85 assessment and suggest a path forward beyond the 16

2014 RVO. 17

So the proposed RVO underestimates the ability of 18

existing i nfrastructure to distribute biofuel . The 19

ethanol blending challenges are real, but with 15 20

mil lion flex

- fuel vehicles on the road and more than 21

2,085 pumps, the physical infrastructure to use as much 2231

as a billion gallons of additional ethanol as E85 is 1

already there. 2

The barrier to using this infrastructure has been 3

the pricing of E85, but the RFS can, has, and should 4

influence the pricing of E85 through the functioning of 5
the RIN number system or mechanism. RIN prices alter 6

fuel prices at existing E85 stations, and that can 7
happen rapidly. And over time, expanded consumer 8

demand for E85 will supp ort investment in addi tional 9

fueling infrastructure. 10

In parallel, RIN prices support investment in the 11

production of competing alternatives like drop

- in 12

biofuel s. All of these changes are needed to realize 13

the oil

- saving and climate goals of the RFS, but for 14

this process to work effectively, the market must have 15

confidence in the future mandates over multiple years, 16

including 2014 and beyond. 17

So confidence in future mandate levels will not be 18

secured if EPA takes the passive approach to 19

determining the wai ver level that has been proposed. 20

In effect, guessing what level of use would prevail in 21

the absence of a binding mandate and then setting the 2232

mandate at this level. 1

This passive approach will ensure that it's never 2

the right time to make a multiyear inve stment in 3

advanced or cellulosic biofuel production capacity or 4

in fue l distribution infrastructure and will make the 5

failure of the RFS a self

- fulfilling prophecy. 6

The blending constraints are real, and so the 7
schedule must be adjusted. But the adjustmen ts should 8

provide predictable and steady growth over the long 9

term to keep moving us towards the oil

- saving and 10

climate goals of the RFS. 11

The RFS was designed with a roadmap out to 2022 to 12

provide precisely the long

- term policy stability that 13

would facilit ate investments that will change our fuel 14

production and distribution infrastructure. But with 15

the approach EPA proposes in the 2014 RVO, the policy 16

will no longer provide that stability. 17

Tweaks to the 2014 RVO, while needed, are not 18

adequate to address t his challenge. Rather, EPA needs 19

to revise the mandates for the next decade of the RFS, 20

at least out through 2022 and perhaps further. EPA is 21

already obliged to make some of these schedule 2233

adjustments in light of past waivers, but we urge EPA 1

to seize th e opportunity to lay out a realistic roadmap 2

that will reduce uncertainty in the next phase of RFS 3

implementation. 4

EPA should finalize a revised 2014 RVO 5
expeditiously. And when it does, it should open an 6

off

- cycle rulemaking to update the mandate levels 7
between 2016 and 2022. This rulemaking should look 8

more broadly at the implications of different mandate 9

levels for food prices, trade, land use, climate, and 10

fuel distribution infrastructure, and set ambitious, 11

but realistic targets for the 2016 to 2022 timeframe. 12

An up

- to

- date roadmap will make the annual

-- 13

MR. KOROTNEY : You'll need to wrap up, please. 14

DR. MARTIN : Okay. Will make the annual RVO 15

process more predictable and provide the stability that 16

will support investments needed to ultimately deliv er 17

on the oil

- saving and climate goal s of the RFS. 18

On behalf of UCS and all of our supporters, I urge 19

you to finalize the RVO expeditiously and open the off

20

cycle rulemaking. Thanks very much for the important 21

work that you're doing to protect human healt h, clean 2234

our air, and create a more sustainable future. 1

MR. GRUNDLER : Thank you. Mr. Dinneen? 2

MR. DINNEEN : Thank you, Mr. Grundler and the 3

others at EPA that are here. Thank you for holding 4

this hearing. 5
We believe that the RFS is, in fact, working. I t 6

is reducing our dependence on imported oil. It is 7
stimulating investment in new technology. It is 8

lowering the consumer cost of gasoline, and it is the 9

only program that we have that addresses global climate 10

change. 11

Now you will hear throughout the day our deep 12

concerns about the backward step that the proposed RVO 13

represents. There will be environment al backsliding as 14

a consequence of this rule. We estimate that as much 15

as 5.0 million metric tons of CO2 will be added as a 16

result of this proposal. It will increase the price of 17

gasoline between 6 and 8 cents, costing consumers about 18

$10 billion. 19

It will have a devastating impact on farmers 20

across this country, lowering the cost of grain below 21

the cost of production and upsetting the new 2235

equilibrium tha t had been found in our grain markets. 1

And it will tell the investment community don't invest 2

in cellulose. Don't invest in advanced biofuel s. We 3

need to continue to frack our way to energy 4

independence. It is sending a horrible signal to the 5

investmen t community

. 6

Now at the root of all of these concerns isn't 7
really the number that's required. It's the integrity 8

of the RIN market. Rising RIN trade is not a sign of a 9

broken program. It's, in fact, a sign of a program 10

that is working. 11

Rising RIN value s tell investors that there will 12

be a market for cellulose, a market for advanced 13

biofuel s, and this is the place to invest. Rising RIN 14

values create the value proposition to allow the 15

investment in infrastructure for E85, to encourage 16

marketers to offer E15 or E85 to marketers. It assures 17

consumers choice at the pump. 18

Rising RIN values drive down the blend wall, 19

breaks the blend wall. We saw it happening this 20

summer. As RIN values were trading, you saw increased 21

E85 marketing. You saw increased E85 in frastructure. 2236 It was working

. 1

Boils down to this. You can have a growing 2

biofuel s market, or you can have low RIN prices. You 3

can't have both. The RFS was designed to drive 4

investment in new technologies, to drive innovation, to 5
drive new market opport unities. It was not designed to 6

be convenient for the oil compan ies. 7
The RFS is forcing market change. It's telling 8

the oil companies business as usual can't happen. And 9

the market mechanism to assure that is the RIN, and 10

what you've done with this prop osal is rip that market

11

forcing mechanism away, returning us to more petroleum, 12

fewer choices at the pump, more costly gasoline. 13

I would add that rising RIN values do not impact 14

consumer gasoline prices. There is no correlation 15

between rising RIN values a nd gasoline prices, and 16

we'll submit a lot of data on this for the record. 17

But I implore you, throughout the day, listen to 18

those people that are concerned about what this program 19

does for rural America, what this program does for 20

consumers, what this prog ram does for investment in new 21

technologies, and revise this rule. 2237 Thank you. 1

MR. GRUNDLER : Thank you. Any questions? 2

(No response.) 3

MR. GRUNDLER: Mr. Brown? 4

MR. BROWN : Good morning. My name is Mike Brown, 5
president of the Nation al Chicken Council, an d we 6

represent 95 percent of the broiler chicken production 7
in this country. 8

My best wishes are with the panel today, and 9

gratitude. I know you're in for a long day. 10

We're thankful for the recent action taken by the 11

agency and appreciate the 1

- year volume reduction. But 12

quite frankly, chicken producers need a much longer

13

term and permanent solution. Congress created this 14

mess, and ultimately, Congress can fix it. 15

One can quibble over when the law was passed and 16

what the economy held at the time, it's cle ar I think 17

you'll hear today that it is now a bad idea. 18

Last year, more than 40 percent of the nation's 19

corn crop went to ethanol production, not for food or 20

feed. This rising demand for corn has artificially 21

inflated prices for the commodity, up by nearl y 40 2238

percent since 2005, to the detriment of U.S. food 1

producers and hungry families. The volatility and 2

uncertainty in the market has been equally damaging for 3

poultry producers. 4

Let's put that percent into perspective. That's 4 5

acres out of 10 acres of corn produced in this country, 6

4 out of 10 farms you drive by of near equal size, corn 7
going into your gas tank. Four out of 10 rows or, for 8

those that don't get beyond the grocery store, 4 out of 9

10 ears. Significant. 10

As corn comprises nearly 70 percen t of the feed 11

given to chickens, our single largest input cost, 12

rising prices directly affect farmers' bottom lines. 13

Since the RFS was aggressively escalated in 2007, 14

average annual feed costs hav e skyrocketed by $8.8 15

billion. 16

The RFS has also meant prici er trips to the store 17

for consumers. Chicken, beef, pork, egg, and fish 18

prices have collectively increased 79 percent since the 19

policy's establishment. Last year, the average U.S. 20

family of four faced a $2,000 increase in food cost due 21

to higher corn pri ces brought on largely by the RFS. 2239 We're experiencing a bumper crop this year, but we 1

heard similar forecasts in June of last year, and we 2

all know the role that mother nature played in the 3

drought and the waiver that we applied for at EPA. The 4

law provid es for a waiver to the RFS when such action 5

is in the nation al economic interest. But if the 6

waiver was not warranted in 2012, how much more 7
economic damage can an industry incur for a law to 8

work. 9

The insecurity and volatility for those of us who 10

depend on corn and mother nature has caused much 11

devastation for U.S. chicken producers. Since 2007, 12

more than a dozen poultry companies have filed for 13

bankruptcy, been sold, or simply closed their doors 14

altogether, due in large part to the high feed cost 15

brough t on by the RFS. 16

I want to emphasize that we are not against corn 17

ethanol . We're not against ethanol . What we are 18

against is the hand of Government directing into this 19

market and giving it false signals. 20

Congressional action to repeal the RFS remains the 21

most viable pathway to allowing all users of corn to 2240

have equal standing in the marketplace. Let the free 1

market work. Come on in. The water is warm. 2

And before I conclude, I'd just like to take 3

special note of the extreme diversity of folks that are 4

t estifying today, well over 20 panels. But you can go 5
through the names of all the individuals and 6

organization s, and you can put them in three buckets

-- 7

k ing corn, ethanol blenders, and the rest of the U.S. 8

economy and consumers. 9

Thank you. 10

MR. GRUNDLER : Thank you. Mr. Hulting? 11

If I could also ask the second panel members to 12

start making their way to the on

- deck row so we can 13

keep moving? 14

Please proceed, Mr. Hulting. 15

MR. HULTING : Good morning. My name is Judd 16

Hulting. I'm the commodity manager for Pa triot 17

Renewable Fuels in Annawan , Illinois. 18

I'm here today to respectfully object to this 19

proposal, and I'm doing that on behalf of Patriot 20

Renewable Fuels. We believe what has been proposed is 21

a step backwards and really is not what Congress 2241

envisioned b ack in 2005 and 2007. I just want to give 1

a brief history about Patriot and kind of put it back 2

to a personal and company perspective. 3

When we started, we were started by the Henry 4

County Economic Development Committee . We're just a 5

small county clear ou tside of Chicago, right on 6

Interstate 80, and we started small. We didn't have 7
much money, but the county started this project. We 8

raised funds, and then over time, we got eventually 9

200

- plus investors, local community people there, and 10

we started Patrio t. 11

I came back home as a graduate of the University 12

of Illinois with a bachelor's and a master's degree and 13

thought this was a perfect opportunity to promote 14

renewable fuels, lessen our dependency on foreign oil, 15

and provide jobs back in our small town of only 900 16

people. You know, it took us 2 years to build. I was 17

the project coordinator and did that, and then we've 18

been operating now 5 years. 19

We started in '08, the fall of '08, and just now 20

we celebrated our 5

- year anniversary with what our 21

investors e nvisioned was a long

- term program that's 2242

been laid out. And I think you know all the benefits 1

of that, and that's what our investors still believe 2

in, and I do personally as well. 3

We've added 50 jobs or we've created 50 jobs. 4

Last week, another personal event at Patriot. We had a 5

ground

- breaking ceremony, and we announced we're adding 6

a bio diesel production facility onto our ethanol plant. 7
So we're using that same bushel of corn not only to 8

produce ethanol . We're going to be producing 9

bio diesel

. 10

That's a $10 million investment, again for our 11

small, independent company. We think that's a big step 12

and a step forward. We're quite proud of that fact. 13

We're a grassroots company, and we're, again, returning 14

profits and money back into the local economy the re in 15

Henry County. 16

Now that additional facility will create at least 17

10 more jobs. We'll probably go closer to 70 people. 18
Again, it's a $10 million investment, and our original 19
investment 5 years ago was over $175 million. 20

So just our individual company is a story you'll 21

hear a lot about, but I think it's not unlike many 2243

others that really have done good things. Over 5 1

years, we've produced over half a billion gallons of 2

ethanol . Every day, we've produced over 1,000 tons of 3

feed. 4

My family still farms there. I grew up raising 5
corn, soybeans, hogs, and cattle. And again, this 6

1,000 ton of feed that we produce I don't think gets a 7
lot of positive press. But it does happen, 1,000 tons 8

every day. 9

So I guess, in conclusion, I would respectfully 10

request th at you revisit this decision and kind of work 11

it back towards what was envisioned. 12

MR. KOROTNEY : Could you wrap up, please? 13

MR. HULTING : Thank you. 14

MR. GRUNDLER : Thank you very much. 15

Do we have any questions for this panel? 16

(No response.) 17

MR. GRUNDLER : I'd like to invite the second panel 18

up, and I want to thank everyone for taking the time on 19

Panel 1 to present testimony. 20

MR. KOROTNEY : Just a quick note. We're going to 21

make one small change to the schedule. Panels 3 and 4 2244

are going to be reversed. S o those folks who are on 1

Panel 4 will actually be coming up after Panel 2

. 2

(Pause.) 3

MR. GRUNDLER : Welcome. I'm going to ask the 4

congressman to present first. Congressman Braley, 5

welcome. 6

MR. BRALEY : Thank you very much. 7
My name is Bruce Braley. I repr esent Iowa's First 8

District. My parents both grew up on Iowa farms during 9

the Great Depression. My dad managed grain elevators, 10

and I used to dry corn after playing football on Friday 11

nights. 12

One of the reasons we're here today is to talk 13

about the long

- term benefits of renewable energy and 14

its emphasis on innovation, and a lot of people who 15

don't understand the history of biofuel s don't realize 16

that ethanol , like the digital computer, was invented 17

in Ames, Iowa, during the Great Depression. It's been 18

ar ound that long. 19

Ethanol and other biofuel s have been commercially 20

available since the late 1970s in Iowa, and yet we are 21

constantly being told about all of the adverse impacts 2245

of biofuel s based on campaigns of misinfor mation like 1

this ad that appeared in T he Hill yesterday. And the 2

thing that's important to notice is in the fine print 3

at the bottom, it says who paid for this ad, the 4

American Petroleum Institute. 5
That the reality is, is that we've been using 6

biofuel s in our cars in Iowa since 1970, and ther e is 7
no evidence, no empirical data of any adverse effects 8

on vehicles in Iowa that's significantly different than 9

in any other part of the country. We've been investing 10

in energy independence in this country as a result of 11

this mandate, and it's having p rofound impacts on our 12

economy. 13

The POET ethanol plant in Emme tsburg, Iowa, and 14

the developing Du P ont cellulosic plant in Nevada are 15

both the type of advanced biofuel s that we have been 16

talking about promoting in this country. And if we 17

reduce this mandat e, we're going to lose the incentive 18

to keep innovating. 19

People never talk about all of the byproducts of 20

biofuel s productions, but this is me standing at the 21

POET plant in Hanlontown, Iowa, in Worth County, 2246

holding dried distillers grains in my hand, whic h is 1

one of the significant feed byproducts of biofuel s 2

production. But I was also in Shenandoah, Iowa, last 3

week at a very exciting plant, the biofuel s algae 4

plant, where they're taking CO2, one of the most pure 5
forms of commercially available carbon dio xide coming 6

off those ethanol plants, and using it to generate 7

advanced biofuel s in algae that are being used for 8

biofuel s, animal feed, and aquaculture, which is 9

exactly the type of innovation we had hoped would 10

happen from investments in the RFS and movi ng to next

11

generation biofuel s. 12

We are seeing the incredible economic impact of 13

that investment in innovation, and by scaling back the 14

RFS, we are going to lose the incentive to go to these 15

next

- generation biofuel s that we've all been talking 16

about as a pa thway to energy independence. This has a 17

profound impact in my State, where there are already 41 18

existing facilities, producing 3.7 billion gallons 19

annually. More under construction. 20

This supports 60,000 jobs in Iowa

-- t hat's 4 21

percent of our GDP

-- 365 ,000 jobs nation ally, and $40 2247

billion of impact to the U.S. GDP. 1

One of the things that's often left out of this 2

conversation is all of the additional side benefits 3

like we're seeing with this advanced algae production. 4

This is happening in the Midwest, n ot on the west 5

coast. It's happening with linear strands of material 6

in long tunnels that are being used year

- round to do 7
advanced algae production that has a host of benefits 8

in pharmaceuticals, in healthcare and animal research, 9

and that's why scaling b ack the RFS is the exact wrong 10

message to send. 11

In fact, most of the critics of this RFS have 12

never set foot in a biofuel s production facility, and 13

that's one of the things I would invite anyone here who 14

is complaining about what's happening with the RFS t o 15

come to States that are doing some of the cutting

- edge 16

technology, learn more about this industry and the 17

enormous positive impacts it's having on other parts of 18

our economy. That's the message we need to be focusing 19

on today. 20

I want to thank you all fo r giving me the 21

opportunity to address you. I know you have an 2248

important job. We appreciate your efforts. 1

MR. GRUNDLER : Thank you, Congressman. Thank you 2

for coming. 3

Next I'd like to invite Jan Koninckx to speak from 4

Du P ont. 5

MR. KONINCKX : Good morning . Good morning. My 6

name Jan Koninckx. I'm the global biofuel s business 7

direc tor for Du P ont. 8

I'm here to raise major concerns with the proposed 9

2014 RVO rule and to suggest a different path forward, 10

a path consistent with the goals outlined in the 11

renewa ble fuel standard

. 12

The proposed rule is a major step backwards. It 13

would not only

-- it would undo the incredible progress 14

the industry has made over a few short years and would 15

jeopardize U.S. leadership in this innovative sector. 16

Most troubling, however , is that it sends a signal 17

to investors that the U.S. can't play a long game 18

anymore, that as a nation , we cannot envision a better 19

future and stick with it long enough to see it through, 20

that we're not serious about opening a marketplace for 21

new fuel tec hnologies, and that perhaps their money is 2249

better spent somewhere else. 1

I interact with all types of investors interested 2

in our technology all over the world. These are 3

business people that want to license our technology and 4

build their own plants. And while discussions are 5
progressing with several inter nation al companies, deal 6

flow in the U.S. has lost momentum. I attribute this 7

to two factors, the Amer ican Petroleum Institute's 8

well

- funded and highly coordinated campaign against the 9

RFS and the uncert ainty created by EPA's proposed rule. 10

It wasn't always this way. The administration 11

showed courage and leadership in the face of strong 12

opposition from the status quo. Several programs and 13

policies promoted growth in the indus try through 14

multiple agencie s. 15

The President stated with more research and 16

incentives, we can break our dependence on oil with 17

biofuel s, but t hat clean air breakthroughs will only 18

translate into clean energy jobs if businesses know 19

that there will be a market for what they're selling

. 20

With full encouragement of the administration, 21

companies like DuP ont stepped up and invested hundreds 2250

of millions of dollars of private money and years of 1

dedicated research to build this new

- to

- the

- world 2

technology that offers a leg

- up in energy securi ty, the 3

environment , and rural economies. 4

The benefits are real today and get even better 5
tomorrow, but only if the annual RVOs are set on an 6

increasing trajectory. Removing demand signals after 7
the private sector has made major resource commitments 8

in re sponse to a policy need is nothing short of 9

reversing course midstream, and frankly, it's a poor 10

choice. 11

This will lead immediately to job and tax revenue 12

loss. Longer term, we may have a front seat watching 13

as technologies we develop here are exported ov erseas 14

to build industries of the future while America treads 15

water in the past. 16

Furthermore, the EPA has incorrectly interpreted 17

the general waiver provision, and with the rule, the 18

agency would exceed its authority. EPA's current 19

interpretation of the p rovision is contrary to the 20

plain wording of the statute. EPA's description of the 21

general waiver provision in the 2010 RFS2 regulation 2251

and the legislative history and intent of the 2007 1

energy bill also stand in strong opposition to this 2

proposal. 3

The Co ngressional Research Service paper titled 4

"Waiver Authority u nder the Renewable Fuel Standard" 5
provides further substantiation of this position. The 6

EPA's incorrect interpretation of the general waiver 7
provision will undercut the biofuel s industry's abili ty 8

to deliver rural economy growth, climate benefits, and 9

energy security. 10

The goal for RVO rulemaking is to make renewable 11

fuels more widely available and competitive. 12

Therefore, the best course of action is for EPA to 13

abandon this proposed rule, go back to the drawing 14

board, and issue a new proposal based on the best

15

available input from both biofuel and petroleum 16

industries. 17

We recommend that EPA starts with the volumes from 18

the 2010 RFS2 rule and exercise its cellulosic and 19

advanced biofuel waiver auth ority, setting cellulosic 20

volume based on an objective evaluation of projected 21

supply so that no capacity that comes online during a 2252

year is unused. 1

DuP ont recommends that the cellulosic volume be 2

set at about 30 million gallons, and the advanced pool 3

redu ced in proportion to the cellulosic volume to about 4

2 billion gallons. 5

Thank you for the opportun ity to submit our 6

concerns. DuP ont will provide additional analysis and 7
recommendation as part of the comment process. 8

MR. GRUNDLER : Thank you. One question

. 9

MR. HANNON : Your testimony is about the loss of 10

investment push. EPA made a specific very clear 11

signal, tried to make a very clear signal in the 12

proposal about cellulosic, that there was absolutely no 13

reduction in cellulosic. The cellulosic was not a 14

subject of the waiver authority. It was purely a 15

decision of what will be

-- can be produced in 2014. 16

In your comments, it would help to try to 17

differentiate, to the extent that you can, is your 18

concern over the adjustment in the advanced standard or 19

in t he cellulosic standard ? Because EPA tried to 20

approach them differently. 21

MR. GRUNDLER : Thank you. Mr. Greco? 2253 MR. GRECO : Good morning, and thank you for the 1

opportunity to testify today. I am Bob Greco, 2

downstream group director at the American Petroleu m 3

Institute. 4

API is the nation al trade association representing 5
all segments of the U.S. oil and natural gas industry. 6

The over 550 members of API include the obligated 7
parties under the RFS who are required to meet the 8

standard s. 9

Our members' primary RFS concern is the ethanol 10

blend wall. There are serious vehicle and retail 11

infrastructure compatibility issues with the usage of 12

gasoline containing ethanol in excess of 10 percent by 13

volume. Left untouched, the statutory mandates could 14

cause fuel rationin g, drive up the cost of diesel by 15

300 percent and the cost of gasoline by 30 percent by 16
2015, and lead to a $770 billion decrease in the U.S. 17

GDP and a $580 billion decrease in take

- home pay for 18

American workers, according to a study by NERA Economic 19

Consu lting. 20

The RFS mandates are based on the flawed 21

presumption that gasoline use would continue to rise 2254

well into the future when, in fact, the opposite is now 1

occurring. These rigid requirements are obsolete and 2

have no place in today's energy market. 3

API i s encouraged that for the first time, EPA has 4

acknowledged that the blend wall is a dangerous reality 5
that must be addressed to avoid negative impacts on 6

America's fuel supply and to prevent harm to American 7

consumers. However, we will continue to call on 8

Congress to repeal the RFS to protect consumers from 9

this outdated and unworkable program. 10

While the agency's proposal is an important first 11

step in the right direction, the proposal does not go 12

far enough to address the blend wall. Based on the RFS 13

volu me ranges proposed by EPA, the resulting ethanol

14

to

- gasoline blending ratio could be as low as 9.8 15

percent or as high as 10.3 percent. 16

As stated in our general waiver petition submitted 17

earlier this year, API recommends that EPA set the 18

ratio at no more th an 9.7 percent ethanol to ensure a 19

fungible RIN market and to preserve a market for those 20

consumers that choose E0, or clear gasoline. 21

The proposed standard s represent a significant 2255

challenge if finalized and would leave no tolerance to 1

account for the dif ficulty of blending ethanol into 2

each and every gallon. As a result, some of the 3

negative impacts of the blend wall may not be fully 4

avoided. We urge EPA to set the 2014 RFS volumes so 5

that the ethanol

- to

- gasoline blending ratio stays 6

sufficiently below 10 percent. 7
EPA also needs to take statutory deadlines 8

seriously and issue timely rules. EPA's continued 9

tardiness has real adverse effects on our industry. 10

Obligated parties need this information ahead of the 11

compliance period to make operational, logis tics, and 12

investment decisions. 13

A biomass

- based diesel standard for 2014 should 14

have been issued well over a year ago. At this point, 15

EPA does not have the authority to increase the 16

stringency of the biomass

- based diesel standard before 17

2016. 18

The uncertai nties created by the ethanol blend 19

wall this year are enormous, and EPA is only adding to 20

the uncertainty with retroactive rules. The Clean Air 21

Act recognizes the need for regulatory certainty and 2256

clearly defines these nondiscretionary deadlines. 1

Finally, the Clean Air Act clearly requires EPA to 2

determine the mandated volumes of cellulosic biofuel s 3

each year at the "projected volume available." The 4

D.C. Circuit Court vacated the 2012 cellulosic 5

standard , and EPA is taking appropriate steps to 6

correct the invalid 2011 cellulosic standard

. 7
However, EPA's proposal for 17 million gallons of 8

cellulosic biofuel is once again aspirational and 9

unreasonable. It shows that EPA did not heed the D.C. 10

Circuit's admonishment to change its failed "self

11

fulfilling proph ecy" approach to one which employs a 12

neutral methodology for setting future cellulosic 13

biofuel mandates. It is patently unfair and improper 14

for EPA to set unrealistic cellulosic mandates only to 15

revise them after the compliance year in response to 16

court a ction. 17

This year, EPA suggests an improved methodology. 18

But the use of spurious statistical simulations based 19

on unrealistic parameters is a feigned attempt at 20

legitimacy. Continuing to main

-- 21

MR. KOROTNEY : Mr. Greco, you're going to have to 2257

wrap up. 1

M R. GRECO : Sure. We will submit additional 2

comments on your Monte Carlo analysis. 3

But in closing, you've taken positive steps to 4

address the RFS, and we need you to quickly

-- move 5
quickly to finalize this. And also, I'd also encourage 6

people to go to en ergy tomorrow.com to get the true 7

facts on some of the RFA's assertions. 8

Thank you. 9

MR. KOROTNEY : Thank you. A quick question. 10

Both you and Mr. Drevna before you have made 11

reference to aiming for something like 9.7 percent 12

ethanol for the pool

- wide gasoli ne ethanol content, and 13

my question is, is that assuming that there is zero E15 14

and E30 and E85? 15

MR. GRECO : That's presuming that we also don't 16

know what EIA's actual

-- what the actual volume will 17

be used next year. We're basing a projection on

-- 18

we're basing a mandate now on a projection for the end 19

of next year. We need to make sure that EPA h as enough 20

head room to predict. 21

So it's both based on providing E0 on the market 2258

and also preserving the ability to recognize that we 1

don't know what gasoline d emand will be next year, and 2

we haven't done a very good job of predicting it in the 3

past. 4

MR. GRUNDLER : Ms. Steckel? 5

MS. STECKEL : Hello. My name is Ann e Steckel, and 6

I'm the vice president of federal affairs at the 7

Nation al Bio diesel Board. We represe nt the U.S. 8

bio diesel industry, and I'm here to urge you to 9

reconsider the proposed rule for the renewable fuel 10

standard volumes for biomass

- based diesel and advanced 11

biofuel s. 12

Just last month, President Obama highlighted 13

renewable fuels as helping the nat ion , for the first 14

time in two decades produced more fuel domestically 15

than it is importing from foreign countries while 16

reducing carbon pollution. I mention this because I 17

think it illustrates quite powerfully why it is so 18

disappointing to see this admin istration, one that has 19

supported and encouraged the development of renewable 20

fuels for 5 years, to suddenly turn its back on 21

progress we have made. 2259 And the progress is clear. Many of you will hear 1

from people today based on the clear signals and 2

supports sent by this administration, who invested 3

their time and resources, often their life savings, to 4

build bio diesel plants that would assist in meeting the 5
target set by the RFS. Bio diesel is an unmitigated RFS 6

success story. It is the first EPA

- designated advanced 7

biofuel being produced on a commercial scale across the 8

country. 9

The industry, along with the help of strong energy 10

policy, has crossed the billion

- gallon threshold for 3 11

consecutive years. And this year is on pace for a 12

record year of more than 1.7 billion gallons. Gallon 13

for gallon, according to EPA's own calculations, 14

bio diesel is reducing greenhouse gas emissions by 57 to 15

86 percent. 16

All of this is happening, by the way, as bio diesel 17

blends at the pump, usually of 5 percent or less, are 18

savi ng consumers money. Because of all the benefits of 19

bio diesel , 32 bipartisan members of the United States 20

Senate recently sent a letter to the administration 21

stating their support for an increased biomass

- based 2260

diesel number of at least 1.7 billion gallons

. 1

We, as an industry, are proud of this success, and 2

as you will hear from many of us today, bio diesel 3

producers from across the country, large and small, 4

were shocked, truly shocked to see the EPA's proposed 5

retreat on advanced biofuel s. 6

I want to be clea r because it appears that some in 7
the administration view the proposed bio diesel volumes 8

as status quo from last year. I am here to tell you 9

that the decision that you make would cause bio diesel 10

producers to go out of business and jeopardize 11

thousands of jobs. 12

As I mentioned, bio diesel production is on pace 13

for at least 1.7 billion gallons this year, enough to 14

fill the vast majority of the advanced biofuel 15

requirement. Since July, the industry has been 16

producing some 170 million gallons per month, or at a n 17

annualized rate of 2 billion gallons. 18

This clearly could continue into 2014 and would if 19

the EPA proposed a stable biomass

- based diesel number 20

of at least 1.7 billion gallons and an advanced biofuel 21

consistent with the statute at 3.7 billion gallons. 2261

Ye t this proposal would dramatically cut back 1

production to 1.28 billion gallons. And with potential 2

carryover of excess 2013 volume into 2014, we could 3

really be looking at closer to 1 billion gallons. 4

Obviously, cutting an industry from 2 billion 5

gallon p roduction rate down to close to 1 billion 6

gallons would cause incredible harm. Plants would 7

close. People would go out of work, and the goals that 8

President Obama has so forc efully embraced would be 9

hurt. 10

Further, you have proposed this cut for 2014 and 11

2015, for 2 years, sending a terrible signal to 12

investors and entrepreneurs who are poised to continue 13

building this industry. 14

Before I close, EPA is required to consider six 15

factors. At 1.7 billion gallons, at current 16

production, we exceed every requirem ent. We meet every 17

test. And the clear intent of the law is that when we 18

do meet every test, the volume should be increased. 19

So, in closing, as a representative of the U.S. 20

bio diesel industry, I urge you to reconsider this 21

proposal to look closely at the impacts it will have on 2262

the goals that Congress established when it created the 1

RFS

-- to create jobs, to boost our energy security

-- 2

MR. KOROTNEY : You'll need to wrap up, please. 3

MS. STECKEL : -- and to reduce emissions. The 4

bio diesel industry has pro ven it can continue to 5
produce at a rate of at least 1.7 billion gallons next 6

year, and we urge you to finalize a rule that reflects 7

that success. 8

Thank you very much. 9

MR. KOROTNEY : Thank you. A quick question

-- or 10

not a question so much, a statement. 11

I t would be helpful in your written comments if 12

you could provide any data or analyses that describe 13

how in 2013 with a standard of 1.28, what were the 14

factors that contributed to the industry getting to 1.7 15

billion gallons, and how does each factor com pare to 16

the other in that story? 17

Thank you. 18

MR. MACHIELE : And just a follow

- up on that. And 19

then you stated that our proposal would force you to 20

cut back to 1.28 in 2014 or even 1 billion or less

. 21

W hat is it about 2014 then that's different from 2013? 2263 If y ou're at 1.7 in 2013 with a standard of 1.28, why 1

are you going to be cut back to 1.28 in 2014? 2

So in your written comments. Thank you. 3

MS. STECKEL : I'm happy

-- I'm happy to address it 4

now, or would you rather it be written? 5

MR. MACHIELE : We'd rather w ritten comments. 6

Sorry, we just want to keep going. 7

MS. STECKEL : Understood. Happy to address it. 8

Thank you. 9

MR. GRUNDLER : Mr. Johannesmeyer? 10

MR. JOHANNESMEYER : Good morning. And I 11

appreciate the opportunity to be here today, and I 12

appreciate the EP A's efforts to make this happen. So 13

thank you very much. 14

My name is Jeff Johannesmeyer. I'm president and 15

general manager of Western Iowa Energy in Wall Lake, 16

Iowa, a rural community in northwest Iowa with a 17

population of 850 people. 18

We're a multi

- feedst ock , biomass bio diesel 19

producer. In our draw area a lone, we have 4 major 20

soybean crushing facilities, 5 pork processing 21

facilities, 3 beef packing facilities, and 4 billion 2264

gallons of ethanol production all within 120

- mile draw 1

radius of our plant. 2

Wester n Iowa Energy , as I mentioned, is in Wall 3

Lake, Iowa, a rural area of 850 peopl e. We've 4

established 30 full

- time, well

- paying, highly trained 5
jobs in that community . We generate $1 million in 6
annual payroll revenue, and we've invested in over $25 7

million of private equity from local individuals in the 8

community into that plant. Along with those 30 full

9

time jobs, we support over 100 indirect jobs in a 10

community of less than 1,000 people. 11

Western Iowa Energy 's draw area alone in the last 12

2 years, those 4 billion gallons of ethanol production, 13

90 percent of those have started to extract corn oil as 14

a byproduct from their ethanol production. Of that, 15

they have made available to me in the market 3 billion 16

pounds of corn oil for bio diesel production, which is 17

equivalent to 418 million gallons of bio diesel just 18

within my draw area. 19

Since 2011, with the clear signal from the 20

administration on our renewable fuels policy, Western 21

Iowa Energy has invested over $2 million to upgrade 2265

infrastructure. We've invested o ver $1 million in 1

plant upgrades to improve pro cess technology and 2

efficiency. 3

Today , we've lowered our production cost by some 4

25 percent through these investm ents over the last 2 5

years alone . During that time, our feedstock prices 6

have dropped over 40 p ercent. So the current run rate, 7
as has been pointed out, makes our volumes very 8

attainable going forward in an increased production. 9

Bio diesel in our area is the cleanest, safest, and 10

most economical renewable fuel out there today. And 11

based on the admi nistration's directive in 2005 and 12

again in 2007, we've continued to invest and grow our 13

business. This area in rural Iowa needs to send a 14

clean signal to not only our employees, but our bankers 15

and our community as a whole. 16

And I thank you for the opport unity to express our 17

views. 18

MR. GRUNDLER : Thank you. Mr. Columbus? 19

MR. COLUMBUS : Thank you. My name is Tim 20

Columbus. I'm a partner at Steptoe & Johnson. 21

I appear today on behalf of our client, the 2266

Society of Independent Gasoline Marketers of America. 1

SIGMA is a trade association comprised of approximately 2

270 independent marketers and chain retailers of motor 3

fuels, whose sales collectively comprise about 30 to 35 4

percent of the retail market for motor fuels in the 5

United States

. 6

As such, their member s have a substantial amount 7
of individual experience with consumers of blended 8

fuels s ome of ou r other colleagues don't have. SIGMA's 9

members don't manufacture what they sell. They buy. 10

So we like long, deep, broad, diverse markets behind 11

us. It makes us more efficient buyers. As such, we 12

have supported the renewable fuel standard and oppose 13

its repeal. 14

Having said all that, I tell you I commend EPA and 15

for those of you who've had to put up with me for all 16

these years, I normally come to bury you, not praise 17

you. This waiver proposal is the right thing to do. 18

We advocated it, and we appr eciate your positive 19

response. 20

We believe the waiver is important to avoid what 21

could have been a severe shock to the fuels market next 2267

year when we hit the blend wall . The blend wall is a 1

real threat. The compliance mechanism here is for 2

RINs. RINs have become a commodity, and this summer we 3

saw what happens when people in commodities markets 4

think there is a chance that a market will actually go 5
physically short. 6

T rying to balance the RVOs, as I believe you've 7
done, against the probable ability of the market to 8

absorb the fuels that you're requiring is the best 9

thing you can do to sustain the program over a long 10

term. 11

The fact is that demand for motor fuels in gener al 12

is down, and you all understand that. E10 is 13

fundamentally ubiquitous in the marketplace today. So 14

if we're going to go pi the numbers to hit the 15

statutory number, you're going to have to have higher 16

blends. It is my job to tell you that, as of today at 17

least, my client's members do not see the demand that 18

would push you to tho se higher numbers. 19

Two weeks ago yesterday, I was in a room with 20

about 200 marketers of motor fuels from across the 21

country. I asked them how many of them sold E85. Most 2268

hands went up. I believe we had over half the E85 1

pumps represented in that room. 2

I asked them what percentage of a retail outlet's 3

sales have been generated in E85? And the answer was, 4

with the exception of one guy in San Diego, who has 5
some magic sauce I do n't understand, but everybody else 6

didn't get past 2 percent, 1.5 to 2 percent. And that 7
is pricing at very attractive levels in most markets. 8

As a consequence, I think you have to remember 9

nobody who is a consumer, other than fleets who are 10

governmentall y mandated to buy, has to buy a drop of 11

this, has to buy a drop of it. If consumers won't 12

come, we can build all the infrastructure we want, and 13

we won't move any greater volumes. 14

What's going to have to happen for the program to 15

expand, and we certainly would support the expansion of 16

the program as the market permits it, is to get rid of 17

some practical impediments. We do have some 18

infrastructure issues. There is a regulatory problem 19

that we perceive with E15 and E85 specifically in EPA's 20

misfueling regs , and you could address that in a way 21

that would take away some of the angst that retailers 2269

have in selling these new fuels. 1

The other thing we could do is we could actually 2

go forward , as we discussed when you did the E15 3

waiver , on an education program f or consumers. The 4

last thing is you're just going to have to wait for the 5

market to turn over, and I realize

-- 6

MR. KOROTNEY : Can you wrap up, please? 7

MR. COLUMBUS : -- the red light is blinking. So 8

I'm going to stop, and I'm happy to respond to any 9

que stions my testimony may have raised. 10

MR. HANNON : A quick question. Do you have any

-- 11

since you're representing gasoline marketers, do you 12

have any thoughts on the market for E0? That's come up 13

a couple times today. 14

MR. COLUMBUS : Yeah, okay. Primarily in

-- there 15

is a demand for E0. It's become a specialty product, 16

and as with all specialty products, you're going to 17

find that it's more expensive than the fungible unit. 18

This is primarily in markets where you have a 19

marine engine interest. If there's a big powerboating, 20

if you're in Florida, if you're near the lakes in 21

different parts of the country, folks like E0, first 2270

and foremost, because it doesn't screw around with 1

their marine engines. 2

There is also a demand for E0 in areas where folks 3

are convin ced that putting E10 in their power tools is 4

a bad thing for them. 5

MR. HANNON : To the extent you can in your written 6

comments , it would be useful to have some estimate of 7

nation al volume. 8

MR. COLUMBUS : Of E85? 9

MR. HANNON : Yeah. 10

MR. COLUMBUS : Oh, I wish you luck on that. 11

MR. HANNON : I'm sorry. It'd be E0. 12

MR. COLUMBUS : E0

-- 13

MR. HANNON : E85 as well, of course. 14

MR. COLUMBUS : I have no idea how we find out what 15

the volume is of E0. I'll do what I can for you, but

- 16

- 17

MR. HANNON : I appreciate it. 18

MR. COLUMBUS : -- I don't hold out a lot of hope 19

there for you. 20

MR. MACHIELE : Those are

-- both the E85 and the 21

E0 were two of the sort of data areas

-- or two of the 2271

data areas in the proposal that to the extent you and 1

your members have any information you can provide, we'd 2

welcome that. 3

MR. COLUMBUS : You know, Paul, it's going to be 4

anecdotal. But we'll give you what we can. 5

MR. MACHIELE : Thank you. 6

MR. GRUNDLER : Thank you to all of you for taking 7
the time to come today. We really appreciate it. 8

I'd li ke to invite the next panel up, which is 9

Panel 4, so there's no confusion. 10

(Pause.) 11

MR. GRUNDLER : Welcome, Mr. Governor. Please 12

proceed. 13

GOVERNOR BRANSTAD : Thank you. 14

Good morning. My name is Terry Branstad . I'm the 15

Governor of the State of Iowa. I'v e traveled over 16

1,000 miles today to bring a message on behalf of the 17

people of Iowa. 18

You've already heard from one of our congressmen. 19

I think his views are similar to all the congressmen 20

and Senators from Iowa, as well as myself, the 21

Lieutenant Governor , the secretary of agriculture, and 2272

the vast majority of people of our State. I'm here to 1

share my strong opposition to this harmful proposal 2

from the EPA and to emphasize the tremendous economic 3

importance of the renewable fuel standard on our 4

nation's a griculture, agribusiness, and biofuel s 5
industry. 6

I'm proud to call the State of Iowa my home. I 7
share that pride with 92,000 farmers, dozens of 8

thriving inter nation al agribusiness companies, and a 9

large variety of bioscience leaders. I've been a 10

relentle ss supporter of biofuel s from the very 11

beginning, back in the 1970s when I was in the 12

legislature and we called it "gasohol." 13

It's truly incredible to see how this industry has 14

grown and the impact that it's had on communities all 15

over our State. That str ong evolution is a result of 16

the efforts of many hard

- working and determined 17

Americans and through the use of corn and soybeans and 18

other biomass produced in our nation

. 19

Iowa is proud to be the number

- one corn and 20

soybean producing State in the nation , and the 21

leadership that helps us to be a top biofuel provider 2273

as well. This proposed rule by the EPA would have a 1

direct impact on the 41 ethanol plants, the 13 2

bio diesel plants

-- you've heard from some of them 3

already

-- located in our State, and the thous ands of 4

Iowans that are dependent on good

- paying and vital jobs 5

in these biofuel facilities. 6

It's estimated that this EPA proposal will cost 7
45,000 jobs in this n ation . We don't need to drive the 8

number of people employed down. We need to drive it 9

up. F orty

- five thousand families would face undue 10

financial hardship and stress simply at the hands of 11

the EPA catering to big oil, and they're not satisfied. 12

They won't be satisfied until you repeal it 13

altogether. 14

Many have the misconception that corn is stil l $8 15

a bushel. I can tell you it's not. Last year, during 16

the drought, we saw those kind of prices. Beginning of 17
this year, corn was about $6 a bushel. It's now 18
dropped to close to $4 a bushel. 19

This proposal, if adopted, is estimated by Iowa 20

State Univ ersity, will drop it another 25 cents a 21

bushel, which will result in corn prices below the cost 2274

of production and result in a large drop in the value 1

of farm land, a huge loss for farm machinery dealers 2

and main street businesses, and unbelievable negative 3

ripple effect all through rural America. 4

This is also a time when the Congress has failed 5
to pass a farm bill. I was Governor during the farm 6

crisis of the 1980s, a time that brought incredible 7
hardship to farm families and rural communities all 8

across A merica. I will never, ever forget the 9

challenges endured during those times, and the last 10

thing we want to do is to again trigger this n ation 11

going into another farm crisis. 12

After decades of efforts to reduce our dependency 13

on foreign oil and increase far m income with policies 14

like the RFS, the EPA is now caving in to the demands 15

of big oil, who has always resisted renewable fuels 16

from the very beginning. It's something they don't 17

control, and they don't ever want to see renewable 18

fuels continue to grow. 19

The 1990 Clean Air Act required the use of 20

oxygenated fuel because of the heavy pollution in many 21

of these cities. In States like Iowa and other 2275

Midwestern States, we embraced ethanol as the best 1

additive to enhance octane and oxygenate our fuels. 2

Unfort unately, the oil companies convinced many States 3

in this country, especially on the east coast and west 4

coast, that they had a better product, called MTBE. 5

Remember that? 6

It became evident after a number of years that 7

M TBE was creating massive ground water pollution, and 8

eventually, it was banned. At that time, the oil 9

companies said, oh, no, ethanol cannot replace the use 10

of MTBE. They were wrong then, and they're wrong now 11

when they say we can't use higher blends of fuel. And 12

in Iowa, we are living pro of of it. 13

Since then, MTBE has been replaced with the use of 14

ethanol , and that has led to the momentum that we've 15

seen behind the renewable fuel standard , and many of us 16

have personally invested in creating jobs in ethanol 17

and bio diesel plants all across t his nation . And I'm 18

one of them. I'm proud of it. 19

I hope the EPA has learned from the mistakes of 20

the past and will use good common sense and continue 21

the progress that has occurred ever since 2005, when 2276

the renewable fuel standard started. E15, E85, an d 1

blender pumps are part of achieving the progressive 2

goals that are set by the renewable fuel standard

. 3

And if you don't believe it can't be done, go to 4

Brazil. Go to Brazil, where they're making ethanol out 5

of sugarcane and soon going to be doing it out of corn, 6

and they h ave virtually all, all flexible

- fuel vehicles 7

in their fleets. 8

In Iowa, we recently launched a new program called 9

Fueling Our Future. This program, through the use of 10

CMAQ funding from the EPA, provides financial 11

incentives for retaile rs to install blender pumps with 12

higher blends of ethanol at their station. 13

E30 appears to be the sweet spot to get the 14

greatest fuel efficiency. Retailers in Iowa know the 15

importance of biofuel s in our State and have installed 16

many blender pumps, which r esult in lower

- cost ethanol

17

blend fuels for their consumers. In some cases, E85 in 18
Iowa sells for as much as $1 a gallon less than 19

conventional regular gasoline. 20

Today, as I was going to the airport in Des 21

Moines, the price of gasoline, regular gasoline w as 2277 $3.22 a gallon. Compare that to what you're paying on 1

the west coast and the east coast. E10 was selling for 2

3 0 cents a gallon less at $2.92. 3

When consumers have the choice, like they do in 4

Iowa where the oil companies don't have a stranglehold, 5

overw helmingly consumers choose renewable fuels. The 6

oil companies are preventing some other parts of the 7
country from doing what we're doing in Iowa in giving 8

consumers the choice, and people are paying for it with 9

much higher cost for their fuel. 10

To make sur e you see this message clearly, I would 11

encourage you to come and see this firsthand in the 12

State of Iowa. Joining me today are several farmers 13

and industry leaders. We know that your decision will 14

affect them and their families. It will affect their 15

ch ildren and their grandchildren and the future economy 16

of rural America. 17

As a State that would be one of the hardest hit by 18

this proposal, I respectfully request that the EPA come 19

to Iowa and host a hearing in the heartland, where 20

people know about the impa ct that this has and know the 21

truth and the facts. And I could tell you, I'll be 227 8 following this up with a letter, and I believe the 1

entire congressional delegation, the Lieutenant 2

Governor, and the secretary of agriculture will join me 3

in this. 4

The people of Iowa deserve an opportunity to make 5

our case for our livelihoods and the well

- being of our 6

State and the future of our country. As Governor of 7
Iowa, I urge the President and Administrator Gina 8

McCarthy and the EPA to continue to support robust and 9

str ong renewable fuel standard s, as you have in the 10

past. 11

The President launched his campaign in Iowa. He 12

got the support of renewable fuel people in our State, 13

and people today are feeling betrayed. 14

Thank you for giving me this time. I hope to have 15

the opp ortunity to see you all again in Iowa in the 16

near future. 17

(Applause.) 18

MR. GRUNDLER : Thank you, Governor. And thank you 19

for traveling here to present your views. 20

Mr. Zylstra, y ou're up. 21

MR. ZYLSTRA : Thank you. My name is Roger 2279 Zylstra . I am a grain and hog farmer from central Iowa 1

and the president of the Iowa Corn Growers Association. 2

On behalf of thousands of farmers members in the 3

association, I thank you for the opportunity to be here 4

today, but it is also on their behalf that it is 5

critical that I speak against the Environment al 6

Protection Agency's proposal to reduce ethanol use in 7

the renewable fuel standard for 2014. 8

Each year, our farmer members develop policy that 9

impacts them at the farm gate level. Policy positions 10

relative to the RFS include we believe Federal energy 11

policy should be stepped up to a higher level. We 12

support the national renewable fuel standard to promote 13

a more aggressive energy policy that would move the 14

United States closer to energy independence. 15

We will work to ensure th e best rules possible for 16

implementation of the Federal renewable fuel standard

. 17

We support promoting the expanded use of ethanol and 18

the use

-- and use the development of renewable 19

alternative fuels, such as E85, E

- diesel , bio diesel , 20

and ethanol

- based av iation fuel. We support consistent 21

treatment of E15 and E10 with regard to summer blends, 2280

vapor pressure caps, and waivers. 1

So you might be asking what kind of effect will 2

this proposal have on me personally? With the corn 3

prices again at cost of product ion, my son, who just 4

started his farming career, will have a difficult time, 5
as I did when I started in the 1980s. For years, no 6

one wanted to come back to farming, and we were 7
encouraging our kids to move to town for better jobs 8

and opportunities. 9

For t he first time in decades, it's the opposite. 10

We are encouraging our children into agriculture, 11

whether it's directly in farming or the broader ag 12

industry. This is serious. Serious as anything I've 13

dealt with in my 33 years as a farmer. 14

As a corn grower , I see the ethanol market as a 15

homegrown, value

- added opportunity. As a hog feeder, I 16

see the high

- quality feed from ethanol production. It 17

is a delicate balance today, and just one slight change 18

in the system can produce a domino effect that quickly 19

br ings down our agricultural industry. 20

This isn't just a corn farmer issue. It is much 21

larger than that. When farmers are squeezed, they 2281

aren't able to spend money. When their money isn't 1

circulating through local economies, town square 2

businesses close d own, and soon communities are 3

struggling to keep people in town and students in the 4

school. 5
We know what happens. It depresses agricultural 6

times. It happened in the 1980s. The Federal 7

Government estimates that farm land values plummeted by 8

nearly 60 pe rcent in the Midwest in just 4 short years. 9

In that same time, record production brought very low 10

prices. It also limited exports. Our exports 11

decreased by 20 percent. 12

I don't have a crystal ball, but research and some 13

real

- life 1980s experience tells m e that we aren't 14

nearing a proposed blend wall. We are, rather, sending 15

farmers crashing into the wall by reducing our market 16

growth through ethanol production. 17

We've been listening to Secretary Vilsack and 18

Administrator McCarthy and even the President te lling 19

us about their commitment to ethanol , bio diesel , and 20

advanced renewable fuels. Talk about a broken promise 21

from the Government and this administration. This is 2282

absolutely not acceptable. 1

For the last 2 years, everyone has been saying, 2

"Grow more co rn. Just grow more corn." Farmers 3

responded, and we have a record corn crop, even under 4

another tough growing

-- year of tough growing 5

conditions. 6

MR. KOROTNEY : You're going to have to wrap up , 7

please. Thank you. 8

MR. ZYLSTRA : Thank you. I do not beli eve that 9

this EPA is still committed to biofuel s. I ask you , 10

respectfully , to set the RFS for 2014 at 14.4 billion 11

gallons. 12

Thank you. 13

MR. GRUNDLER : Thank you, sir. Mr. Recker? 14

MR. RECKER : Thank you for t he opportunity to 15

speak today. 16

I'm Mark Recker. I'm a farmer. I grow corn and 17

soybeans in northeast Iowa, and I'm also speaking as 18

chairman of the Iowa Corn Usage and Production 19

Committee . We oversee ethanol and ethanol

- related 20

issues in the industry, but we look at it from a corn 21

farmer's perspectiv e. 2283 On behalf of Iowa's farmers, I cannot stress 1

enough the vital importance that the renewable fuels 2

industry has had on our businesses. Corn turned into 3

ethanol was originally used in Henry Ford's, that's 4

Henry Ford's Model T as a renewable source of ene rgy
. 5
Today, the same is true. It is still renewable , and it 6

is

-- make no mistake. It is the only viable 7

alternative solution we have to our energy needs. 8

The biofuel s industry is incredibly important to 9

our State and the Midwest and the country. It's 10

allowed kids to come back to the farms and take over 11

the family business. It's allowed other kids who don't 12

have a farm to go to to get involved in agricultural 13

business

-- career of their choice. It's allowed 14

businesses to open up doors on main streets in small 15

towns or rural communities, mine and the one next door. 16

I've been farming for 20 years. In that time, 17

I've seen a lot of technological advances that have 18

made me a better steward of the land and a better 19

conservationist. I've seen mechanical inn ovation 20

that's made me more efficient and made my job a world 21

easier. But the biggest impact I've witnessed in the 2284

past 20 years I've been farming is the impact that the 1

ethanol industry has had on demand for my product. 2

Back when I started farming in the '90s, we did 3

what you would call " we farmed for the Government " 4

program. We waited until corn price got as low as it 5
could, then we claimed the biggest subsidy we could 6

get, and that's how we made a living. 7
But that system is only good for the people who 8

buy corn. The entitled people who think that they need 9

to live off Government subsidies, they want cheap corn, 10

you'll probably hear from some of them later today. 11

But that's changed. Now we farm for the market. The 12

system is better. Farmers are bette r off. Agriculture 13

is better off, and the country is better off for it. 14

We're planting and harvesting corn with options on 15

where it can go. I haul mine to my local ethanol 16

plant. It's built with local investment, supplied with 17

corn by farmers in my area , turned into ethanol and 18

livestock feed, a great livestock feed that a lot of 19

livestock producers use. 20

The current RFS has done the job that it was 21

created and intended to do

-- decrease reliance on a 2285 single energy source, decrease greenhouse gas 1

emission s, positively impact rural ag economies, and 2

increase our energy independence. Why in the world 3

would we turn the clock back now? 4

It is a fact that ethanol has displaced imported 5

oil to the tune of 462 million barrels in 2012 , s ome of 6

that, frankly, from countries who just don't like us. 7

And I can tell you that, as farmers, we take a lot of 8

pride in knowing that we are replacing oil with 9

renewable fuel produced here in the United States

. 10

We

-- after decades of searching, we finally have 11

an energy policy t hat works. Why would we reverse 12

course and sacrifice more of our country's blood and 13

treasure when we simply don't have to? 14

We have E15 pumps installed in Iowa, and where 15

they're at, they have great demand. But we are 16

fighting a bully, one with more mone y and more 17

influence than we have. One that doesn't want to see 18

cleaner, cheaper alternative fuels in the markets 19

because they want their own product out there solely 20

because they know if they blend and get to E15, that's 21

wha t consumers are going to want. 2286 Iowa is many miles from Washington, D.C., but 1

those miles are covered by many hard

- working farmers 2

like me, who are about to be squeezed by policy limits 3

that limits our ability to farm. Policy decisions

-- 4

MR. KOROTNEY : You have to wrap up, please. 5

MR. RECKER : -- with this magnitude and of this 6

nature should not be taken lightly. 7
The current statute requires 14.4 billion gallons 8

of conventional ethanol , and the EPA should demand it. 9

We can meet it by blending more E15 and E85 to 10

consumers and making i t available. 11

We've got the corn to do it. We've got the plants 12

to process it. We just need the EPA to do the right 13

thing, stand up, and back it. 14

MR. GRUNDLER : Thank you, Mr. Recker. 15

Mr. Hansen? Thank you for coming. 16

MR. HANSEN: Thank you. 17

Hello. My n ame is Rick Hansen. I live in 18

northwest Iowa, a little town called Hinton . My family 19

has farmed there for over 100 years. Today, I own and 20

operate an operation called Hansen Feedy ards. It's a 21

5,000 head DNR

- approved feed yard. We have five full

- 2287

time em ployees, and many have been with us for years. 1

Now I could stand up here and tell you that the 2

byproducts from the ethanol plants have been great for 3

our business, and for the first time in years, I see 4

renewed optimism in the Midwest cattle feeder. Or I 5

could mention how for the first time in decades, the 6

farmers are making a living without the help of 7

Government farm payments. 8

Also, the number of young farmers and young 9

livestock producers that are returning to their home 10

place to follow their dreams. H owever, I'm going to 11

talk about my thoughts and reason I love ethanol

. 12

For many years, I watched our small towns die and 13

wither. My friends and family leaving the Midwest 14

because they could not make a decent living. Today, 15

that has all changed. I see re newed optimism in our 16

towns and new businesses being opened, all that due to 17

the ethanol business. 18

And once again, I meet my friends and neighbors on 19

the street, and they are damned proud to say they are 20

farmers. Wow, what a change this ethanol industry h as 21

made in our lives. 2288 Now my reason for being here. Today is for young 1

people

-- m y two daughters, their husbands, and my 2

grandkids. See, I want to watch them follow their 3

dreams here in Iowa, if that's their choice. They need 4

that opportunity. I think it's our responsibility to 5
create jobs to keep our children and dreams alive. 6

But if , for some unknown reason, you choose to 7
change the laws and cripple the ethanol industry, 8

please keep in mind I truly believe this decision go es 9

a lot deeper than you thi nk. Once again, the Midwest 10

will start to dry up way worse than the drought we had 11

last year. 12

Please do what is right. Everyone who runs for 13

office always preaches jobs, jobs, jobs. Well, fellas, 14

we have that right here in Iowa. We have a thriving 15

farm community , a livestock industry, and a growing 16

business district, all due to the environment al

17

friendly ethanol industry. 18

I want to thank you for letting me here, and I 19

want to part with four things. One, a renewed optimism 20

in the livestock industry, tha nks to byproducts made by 21

ethanol

. 2289 Two, farmers for the first time in years can stand 1

proud. 2

Three, jobs, jobs, jobs. Our children can either 3

stay on the farm or work locally and make a dece nt 4

living. 5
And four, I want you all to know I'm not paid to 6

be he re. I'm speaking from the heart. I believe this. 7
If you take this away from us, it's going to cripple 8

us. Please don't, for my kids. 9

Thank you. 10

(Applause.) 11

MR. GRUNDLER : Thank you very much, Mr. Hansen. 12

Mr. Leonard, you're up. 13

MR. LEONARD : I'm Mark L eonard. I'm from 14

Holstein, Iowa. It's a little town in the far western 15

part of the State. 16

The renewable fuels industry and ethanol 17

production specifically have offered economic returns 18

to Iowa and the entire United States far in excess of 19

any real or per ceived downside. While many have made 20

negative statements regarding ethanol , the facts simply 21

do not bear out a net downside to ethanol production. 2290 As a cattle feeder, a cow herd operator, and a 1

banker in western Iowa, I have seen the benefits of 2

renewabl e fuels and the RFS in every facet of my 3

professional and personal life. Unfortunately, the 4

current EPA proposal to cut the RFS would see those 5

benefits reversed. 6

Ethanol usage has reduced petroleum consumption in 7

the nation's liquid fuel mix by about 10 percent, 8

allowing for reduced fuel cost for all consumers. 9

These fuel savings have come at the same time as total 10

corn acres in Iowa have decreased. That's right. Corn 11

acres in Iowa have decreased. There is fewer acres of 12

corn in 2013 in Iowa t han ther e was in the year 2000. 13

And in fact, there is fewer acres of corn in Iowa 14

in 2013 than what there was in 1948. The increased 15

conservation efforts on Iowa farms over the years, 16

coupled with advancing yield genetics in corn varieties 17

have allowed for increa sed production while utilizing 18

fewer acres. In fact, other than the weather

- reduced 19

crop in 2012, there has been more corn available for 20

non - ethanol uses every year since 2000 t han there was 21

the year before. 2291 Consider that of approximately 4 billion bushel s 1

of corn that's processed through ethanol plants, about 2

50 percent of the feed value remains as gluten feed or 3

DDGs and is used to replace significant amounts of corn 4

and soy bean meal in livestock rations. Any time a 5
report is given that 4 billion bushel s of corn have 6

been used in the ethanol industry, a follow

- up 7

statement needs to include that 2 billion bushels of 8

corn was saved i n the livestock feed industry. 9

Ethanol blends consistently sell for less than 10

straight petroleum

- based gasoline. And while t his 11

lower cost product has saved consumers nation wide 12

hundreds of millions of dollars on fuel costs, quite 13

likely the biggest savings to consumers is in the 14

supply

- demand equation itself. 15

Increasing supply of any product by 10 percent 16

will typically result in more than a 10 percent drop in 17

price, assuming demand remains static. A 10 percent 18

inclusion rate of ethanol in our nation's fuel supply 19

reduces the cost of the gasoline portion and 20

additionally reduces the cost of the blended product. 21

As a banker to agriculture and commercial business 2292

entities in western Iowa, I have seen the economic 1

activity generated as a result of renewable fuel and 2

especially ethanol production. Forty to 50 good, full

3

time jobs have been created in each production 4

facility, in a ddition to the additional transportation 5
and feed processing opportunities. 6

Local economies have grown with a multiplier 7
effect of revenue being generated locally and spent on 8

purchases made locally. Our feed mills, our livestock 9

equipment manufacturers, our veterinarians, the auto 10

dealerships, the restaurants, the movie theaters, the 11

hardware stores, and construction outfits have seen 12

increased and sustained vigor in their businesses. And 13

unemployment rates are near 0 percent in areas around 14

ethanol plan ts. 15

Iowa's economy is not based on growing corn. It's 16

based on using corn, and the benefits to our economy 17

are seen in the increased economic activity resulting 18

from using and processing our crops locally. 19

Livestock operations in general and cattle 20

operat ions in particular have reaped significant 21

economic benefits from reduced feed cost that come from 2293 feeding the co

- products of the ethanol industry. 1

Livestock numbers have increased near ethanol plants. 2

The DDGs coming out of an ethanol plant cost 3

typicall y 80 percent of the price of corn, yet have 20 4

percent more energy and 300 percent more protein. 5

MR. KOROTNEY : You'll have to wrap up, please. 6

MR. LEONARD : I will. I got one sentence left I 7
want to share with you. 8

The facts is when you see all the facts , you 9

realize ethanol is good for your vehicle. It's good 10

for the economy, and it's good for our environment , and 11

we need to keep the RFS. 12

MR. GRUNDLER : Thank you, Mr. Leonard. 13

Mr. Olson? 14

MR. OLSON : Good morning. My name is Randy Olson, 15

and I serve as executive director of the Iowa Bio diesel 16

Board, a State trade association focused on the 17

commercial success of bio diesel in Iowa. 18

I'm proud to say that our members are shining 19

examples of what this policy, the renewable fuel 20

standard , was intended to creat e. And I'm here to ask 21

that you reconsider the proposed rule for biomass

- based 2294

diesel and advanced biofuel s in 2014. 1

Quite simply, the 1.28 billion gallon biomass

2

based diesel target, as proposed, will likely mean a 3

reduction in bio diesel volumes for 2014 versus this 4

year's production and, importantly, send a signal to 5
the growing industry that the hurdles to compete with 6

entrenched petroleum interests are even higher than we 7
previously thought. 8

In Iowa, we have 10 operating bio diesel facilities 9

with a cap acity of nearly 350 million gallons a year. 10

Almost 5,000 jobs supported by bio diesel throughout the 11

value chain. You have already heard from one of these 12

facilities and will hear from others throughout the day 13

today. 14

Additionally, our State has abundant and growing 15

feedstock supplies from soybean oil, animal fats, corn 16

oil, and even recycled restaurant cooking oil. 17

Notably, the petroleum marketing sector in Iowa has 18

aggressively blended ever

- increasing amounts of 19

bio diesel into their offerings. These sm all business 20

owners have integrated a locally produced product, and 21

many have invested in new blending and distribution 2295 facilities. 1

Finally, we've had ambitious individuals look to 2

meet the needs of a new industry by starting businesses 3

that meet the gaps that are uncovered through this new 4

industry that's developing. We're an example of how 5
this industry can work all across the country, with all 6

sectors of the value chain participating. 7
And everybody loves bio diesel

-- row crop farmers, 8

livestock farmers, petroleum marketers, consumers, 9

folks who care about clean air, and the small towns who 10

need the jobs. Even engines love it. You'll hear 11

today how OEMs are endorsing higher bio diesel blends 12

each year. 13

Except maybe for the major oil companies who 14

dislike competition and prefer an oligopoly, there is 15

not a single segment of the value chain that objects to 16

bio diesel . And we thought that this administration 17

loved bio diesel , too. As well it should. Bio diesel 18

was helping to achieve RFS targets. M eeting or 19

exceeding our targets under RFS each and every year, we 20

are doing our part. 21

But what you need to know is that your proposed 2296

rule will take us a step backward. What those of us in 1

Iowa and the Midwest know is that bio diesel is a great 2

success story. It us es byproducts and co

- products and 3

creates additional value for these by meeting a need 4

our country has

-- cleaner burning, renewable 5
transportation fuels. 6

It's almost so obvious that it's too hard to 7
believe, but it's not a fantasy. It's not a dream. 8

It' s here. It's now. A nd this industry that didn't 9

exist but showed incredible promise 10 years ago is now 10

at risk of taking a terrible step backwards with your 11

proposed rule. 12

Please see the bio diesel industry for what it is 13

doing today and consider 2012 an d '13 numbers in your 14

calculations. And also, for what it can do for us in 15

the future, and don't harm its potential by cutting our 16

production in half next year. 17

I urge you to establish a volume requirement at 18

least consistent with this year's projected pr oduction 19

of 1.7 billion gallons. 20

MR. KOROTNEY : You'll need to wrap up, please. 21

MR. OLSON : Thank you for your time, and I'd be 2297

happy to answer any questions you'd have. 1

MR. GRUNDLER : Anyone have any questions? 2

(No response.) 3

MR. GRUNDLER : Thank you so m uch for traveling all 4

this way. We're really grateful to listen to you and 5

hear your stories. Safe travels. 6

We'd like to invite Panel 3 up now. Welcome. 7

(Pause.) 8

MR. GRUNDLER : Okay. We'll begin with Mr. 9

Escudero

. 10

MR. ESCUDERO : Good morning. Thank yo u again for 11

the opportunity to provide public testimony today. We 12

certainly appreciate all the hard work, the effort, and 13

the ongoing engagement th at the EPA and specifically 14

OTAQ staff have demonstrated to ourselves and our 15

members. 16

The Coalition for Ren ewable Natural Gas is a 17

nation al 501(c)(6) coalition dedicated to the 18

advancement and increased utilization of renewable 19

natural gas, which is biomethane, biogas, or RNG, for 20

the specific uses of renewable thermal heat, electric 21

power, and transportation f uel. Our members represent 2298

the developers, owners, and/or operators of all 39 1

high

- BTU landfill gas

- to

- energy projects that exist 2

nation ally today. 3

There are two additional projects that are 4
recently commissioned and/or under development as I 5

speak. But specifically, 39 of the 41 are currently 6

operating in production and producing biogas, 7
biomethane, or RNG. We currently qualify under the 8

advanced biofuel s category and recognize that today the 9

renewable natural gas sector is sort of caught between 10

a litt le less than friendly fire between large oil and 11

those who

-- proponents and opponents of ethanol

. 12

But we are seeking some protection in the middle 13

of the fray, and I think we can find that safely under 14

the cellulosic category, which we acknowledge and we 15

strongly continue to support the technical amendments 16

under consideration that would enable 100 percent of 17

volume of renewable fuels produced from certain 18

cellulosic feedstock, including landfill biogas from 19

landfills and wastewater treatment plants, to ge nerate 20

either D3 or D7 cellulosic RINs. 21

The only problem we would like to point out really 2299

is that the proposed 2014 cellulosic RVO is much too 1

low. We do understand that that volume is based on 2

EPA's current estimate of what will be produced in 3

2014, whi ch is why we also appreciate EPA OTAQ 's 4

commitment to consider public comments today before 5
setting the final cellulosic standard a nd , perhaps most 6

importantly, willingness to adjust the proposed volumes 7
as appropriate based on the latest information. 8

Agai n, we do note the slight uptick from 2013's 9

proposed 6 million to the 14 million ethanol gallon 10

equivalent volume in 2014. The Coalition for Renewable 11

Natural Gas has consistently, at each comment period 12

made available this year, advocated for a cellulosi c 13

volume standard range between 114 and 141 million 14

ethanol gallon equivalents. 15

Briefly allow me to explain why these volumes have 16

not previously or to date been available for the 17

market. Currently, only 39.7 million ethanol gallon 18

equivalents are being u sed for renewable CNG or 19

renewable LNG transportation fuel from existing 20

infrastructure. This represents just 6.4 percent of 21

the aggregate volume produced by our members in the 39 22100

aforementioned high

- BTU projects. 1

Because of the uncertainty surrounding pr ograms 2

like the Federal renewable fuel standard and various 3

State LCFS

- type programs, developers have not been able 4

to secure the necessary financing to develop projects 5

dedicated for transportation fuel purchases. As a 6

result, those projects, those 39 I mentioned, are 7
currently tied up under long

- term renewable electric 8

power agreements. 9

EPA estimates that 17 million gallons will be 10

produced in 2014. As I mentioned, this is a 11

significant jump from the 6 million estimated last 12

year, but a significant step back from what we know is 13

already being produced currently and will be dedicated 14

for transportation fuel in 2014. 15

Again, there are several factors that contribute 16

and provide a reason as to why the volumes will be 17

available in the new year. That 's the ex piration of 18

Self

- Generation Incentive Program , the SGIP program ; 19

t he expiration of many of these long

- term procurement 20

contracts for renewable electric power, coupled with 21

movement, as we're witnessing all here today, on the 22101

RFS. Incremental certainty and stability certainly 1

helps. 2

MR. KOROTNEY : You'll need to wrap up, sir. 3

MR. ESCUDERO : Absolutely. Just important to 4

share that six producer members of ours alone

-- and 5
we'll provide the exact details and quantities, the 6

available online dates in our wri tten testimony so that 7
you have all that comprehensive data on hand. But six 8

of our member producers alone represent a dedicated 9

146.6 million ethanol gallon equivalents of landfill 10

biogas that will be dedicated for transportation fuel 11

b ecause of availabi lity and expi ring contracts in the 12

new year. 13

T his does not include volumes from bio CNG, other 14

member companies

-- Waste Management, for example

-- or 15

an additional project that will be available January 1 16

of 2014, with an additional 29.5 million ethanol g allon 17

equivalents available in the new year. 18

So, in conclusion, our two

- part request is that 19

you continue and adopt the consideration to allow 100 20

percent of all volumes of renewable fuel from landfill 21

biogas to qualify to generate cellulosic RINs and also 22102

increase the proposed 2014 RVO for cellulosic to no 1

less than 1.76 million. 2

Thank you. 3

MR. GRUNDLER : All right. All right. Wrap it up. 4

Questions? 5

MR. HANNON : Just one quick question. On your 6

written comments, if you could please emphasize the 7
reality of your projections, the concrete details 8

supporting them. As was stated in prior panels, 9

there's a D.C. Circuit case that

-- that clearly 10

directs EPA to not be aspirational in setting our 11

cellulosic biofuel standard . So to the extent you want 12

us to con sider increasing, you need to support it with 13

very concrete evidence. 14

Thank you. 15

MR. ESCUDERO : Absolutely, and we'll do that as 16

the applications are in process, in many cases 17

registration completed. So we'll include all that data 18

for you. 19

MR. MACHIELE : And an extension on that. Again, 20

any information on

-- again, your information on long

21

term contracts, current contracts ty ing up into 22103

renewable electricity. But then the likelihood or 1

reality that they won't be renewed for renewable 2

electricity purposes

. 3

MR. ESCUDERO : Right. And the 176 million that we 4

represented today is dedicated, committed already for 5
transportation fuel purposes. We'll outline the 6

details in the written comments. 7
Thank you for your questions. 8

MR. GRUNDLER : Mr. Urbanchuk, welcome

. 9

MR. URBANCHUK : Thank you very much. 10

I appreciate the opportunity to testify this 11

morning. My name is John Urbanchuk. I'm the managing 12

partner and principal of ABF Economics. We're a 13

privately held agriculture and biofuel s consulting firm 14

located in D oylestown, Bucks County, Pennsylvania. 15

I'm an ag economist with more than 25 years of 16

experience in the economics of biofuel s. And over this 17

time, I've worked closely with the principal trade 18

associations representing the biofuel s industry, as 19

well as pri vate firms involved in ethanol and bio diesel 20

production. 21

I was commissioned by Renewable Energy Group, the 22104

leading U.S. producer of bio diesel , to examine the 1

production availability and economic impact of animal 2

fats, waste greases, and inedible plant oils or FOG 3

feedstocks in North America. The results of my work 4

complements other analyses that have been provided to 5
EPA, such as the analysis of the global supply of 6

bio diesel feedstocks prepared by LMC and other economic 7
analysis provided by the Nation al B io diesel Board. 8

These have been discussed with EPA prior to 9

announcement of the proposed RVO for 2014, and it's 10

dismaying to note that they appear to be

-- have been 11

disregarded by the agency in its proposal. If this 12

proposed rule stands, the U.S. economy will lose out on 13

billions of dollars of growth, thousands of additional 14

jobs, and an additional 8 billion pounds of greenhouse 15

gas reductions from a fuel that we know we can make in 16

abundance and consumers can easily utilize. 17

My analysis of the production of these FOG 18

feedstocks indicates that U.S. supply is projected to 19

increase from 12.7 billion pounds last year to nearly 20

19.4 billion pounds by 2022 and will be sufficient by 21

themselves, just these FOG feedstocks, to produce 22105

nearly 1.5 billion gallons of bio diesel

. 1

An additional 2 billion pounds of these feedstocks 2

are produced in Canada, and they would support about 3

140 million additional gallons of bio diesel as well, 4

most of which would come to the U.S. The most 5
significant growth in these FOG feedstock s is taking 6

place in waste greases and oils and distillers or 7

inedible corn oil due to improved yields resulting from 8

new technology. 9

A major development in this area has been the 10

increased recovery of inedible corn oil from the 11

ethanol production process. Now the recovery of 12

distillers corn oil benefits both ethanol and bio diesel 13

producers by adding 6 to 8 cents a gallon of revenue 14

for a dry mill corn ethanol producer and providing an 15

economically viable alternative feedstock for bio diesel 16

production. 17

The availability and use of these FOG feedstocks 18

has contributed significantly to the growth of the 19

bio diesel industry and the use of these feedstocks has 20

provided substantial benefits to the supplying 21

industries as well as the economy as a whole. 22106 The proposa l by EPA to maintain the RVO for 1

biomass

- based bio diesel at 1.28 billion gallons 2

essentially reduces current production and decreases 3

industry output to a level that's substantially below 4

capacity, thereby robbing the economy of output, 5
income, and jobs. 6

S ince the use of these feedstocks represents the 7
purchase of output from supplying industries, every 8

dollar spent on those inputs circulates throughout the 9

economy, generating broader economic benefits. For 10

example, the use of these FOG feedstocks currentl y 11

accounts for $1.4 billion of value added in the U.S. 12
economy, the entire economy, generates $690 million of 13

household income, and supports the direct employment of 14

nearly 1,200 full

- time equivalent workers. And that's 15

just the FOG feedstock component of this. 16

Moreover, higher demand for bio diesel increases 17

byproduct values and the value of slaughter animals for 18

both beef and hog producers, and they benefit from 19

this. 20

Finally, the failure to expand the RVO for 21

biomass

- based bio diesel and the reduction in the RVO 22107 for advanced biofuel feedstocks is likely to restrain 1

growth in the development of new feedstocks, which have 2

the potential to provide additional supplies of 3

inedible plant oils for bio diesel

. For example, there 4

is some promising opportunities for waste oil from 5
sorghum, which has been approved as an advanced biofuel 6

feedstock, and another

-- 7

MR. KOROTNEY : You'll need to finish up, please. 8

MR. URBANCHUK : I will do that. And that creates 9

potential opportunities. 10

We hope the agency takes common se nse actions to 11

increase the bio diesel RVO, which will result in wins 12

for both the economy and the environment

. 13

This completes my testimony. I'll answer any 14

questions, and thank you very much. 15

MR. GRUNDLER : Thank you, sir. 16

Mr. Matr a i? 17

MR. MATRAI : Thank y ou very much for allowing 18

Butamax to testify before here today

-- before you 19

today. 20

My name is Peter Matr a i. I am the chief operating 21

officer of Butamax. Butama x is a joint venture between 22108

DuP ont and BP, which was established in 2009 to 1

commercialize the biobutanol technology, which the two 2

companies have been developing together since 2003. 3

The goal of this privately funded effort was to 4

create a new biofuel technology that addresses key 5

limitations of ethanol and increases the benefits of 6

blending biofu el s. Specifically, biobutanol enables a 7
doubling of the renewable energy content of gasoline 8

within existing fuel specifications, improves gasoline 9

manufacturing economics, and is regarded as a drop

- in 10

biofuel

. 11

We are currently implementing the first phas e of a 12

retrofit of a corn ethanol plant in Lamberto n , 13

Minnesota. 14

MALE SPEAKER : Could you move the mike a little 15

closer, please? Thank you. 16

MR. MATRAI : EPA states in the proposed rule that 17

the EPA continues to support the objective of continued 18

growth in renewable fuel production and consumption, as 19

well as the central policy goals underlying the RFS 20

program -- r eductions in greenhouse gas emissions, 21

enhanced energy security, economic development, and 22109

technical innovation. 1

The EPA goes on to say the appro ach reflected in 2

today's proposal is consistent with these objectives 3

and is intended to put the RFS program on a manageable 4

trajectory while supporting continued growth in 5

renewable fuels. 6

We find these two statements impossible to 7
reconcile with the prop osed rule. We do not see how 8

the approach proposed in the NPRM is at all consistent 9

with the objectives of the RFS program or is supportive 10

of renewable fuels growth. 11

For example, example number one. EPA has 12

essentially based the RVO on the amount of eth anol that 13

can be accommodated by blending 10 percent volume 14

ethanol into gasoline, with only very minor allowance 15

for other products. Since gasoline volume can be 16

expected to decline for the foreseeable future, the 17

proposal fundamentally causes contractio n in renewable 18

fuels and not growth. 19

Second example, the EPA has been very conservative 20

in their estimates of the potential contribution of 21

E85. The proposal completely fails to reflect the 22110

demand growth in E85 that the RIN mechanism in the RFS 1

enables, a s demonstrated in 2013. While the EPA notes 2

the importance of E85 pricing , in setting the RVO as 3

proposed, the EPA would disable the very mechanism 4

designed to allow the market to set this price 5
appropriately. 6

Example number three. By accepting the blend wall 7
as a fundamental limit, the proposed rule disables the 8

RIN mechanism that was specifically created to enable 9

market forces to overcome this issue. An effective RIN 10

mechanism is absolutely essential to enable drop

- in 11

biofuel s to compete in the market

. 12

Number four. By defining biofuel s demand based on 13

a fixed percentage of a shrinking market, EPA would 14

remove all incentive for investment in new biofuel s 15

technology. The effect of the proposed rule would be 16

to lock in incumbent products and discourage investment 17

in innovative technology. 18

And finally, the major deviation by the EPA from 19

the mechanism defined in the RFS for setting the RVO 20

and the delayed and drawn

- out process for its 21

finalization cause major uncertainty that will affect 22111

investment decisi ons far beyond 2014. As such, this 1

proposal puts delivery of the policy objectives at 2

risk. 3

In order to reconcile the NPRM with EPA's stated 4

objectives, the total RVO must be set at a level that 5
at least continues the absolute growth in renewable 6

fuel vol ume. This is essential to maintain

-- this is 7

essential to maintain an environment where there is an 8

incentive to make the technology and infrastructure 9

investments needed to underpin this critical policy. 10

In closing, respectfully, I ask the agency to 11

rec onsider the NPRM proposal and draft an alternative 12

that is actually consistent with the objectives of the 13

RFS. 14

Thank you very much. 15

MR. GRUNDLER : Questions? 16

(No response.) 17

MR. GRUNDLER: Mr. Anderson, welcome. 18

MR. ROBERT ANDERSON : Thank you. 19

My name is R obert Anderson, and I'm the senior 20

fuel policy adviser for Chevron. Chevron is a major 21

refiner and marketer of petroleum products in the 22112

United States , and we are an obligated party under the 1

RFS. This proposed rule directly affects our 2

compliance requir ements for 2014. 3

Chevron believes that the current RFS program is 4

unworkable and should be repealed or significantly 5
reformed. The RFS was implemented when gasoline demand 6

was expected to increase over time. However, demand 7
has decreased to the point whe re the mandated volumes 8

of renewable fuel can no longer be accommodated in the 9

transportation fuel market. 10

As the RFS mandate continues to increase and the 11

supply of RINs remains limited, the pressure on energy 12

cost could have a significant negative impact on the 13

U.S. economy. In the absence of repeal, well

- designed 14

modifications to the RFS should be enacted. 15

In April 2013, Chevron provided written comments 16

to the EPA regarding the then

- proposed 2013 RFS 17

standards, and we highlighted three primary concerns

-- 18

the E10 blend wall, the cellulosic volume, biofuel 19

volume determi nation , and the annual RFS statutory 20

deadlines. I'd like to address each of these issues 21

briefly related to the 2014 proposal. 22113 We are pleased to see that the EPA has 1

acknowledged the fir st of these issues, the E10 blend 2

wall. Chevron is encouraged that EPA is proposing to 3

use its statutory waiver authority under both the 4

cellulosic biofuel waiver and general waiver 5
provisions. We believe that the EPA has the authority 6

to use these waive r provisions as described in the 7

proposal. 8

We also believe that it is appropriate for EPA to 9

reduce both the total renewable fuel standard and the 10

advanced biofuel standard to address the blend wall. 11

While the proposal recognizes these issues, we are 12

conc erned that the proposal may not go far enough and 13

may not address the full scope of the blend wall. 14

EPA should finalize renewable fuel and advanced 15

biofuel standard s that fully protects consumers from 16

the negative impact of the blend wall. 17

Regarding cellul osic biofuel s, we appreciate the 18

difficulty in predicting the future of the industry as 19

new plants are being built and brought online. 20

However, we are concerned that EPA's methodology for 21

setting the annual cellulosic biofuel volume is 22114

aspirational and co ntinues to overestimate the actual 1

production rate. 2

Finally, the timeliness of meeting the statutory 3

deadlines for establishing the annual program standard s 4

is still a significant problem. The 2013 standards 5

were not finalized until August 2013, more than 8 6

months past the statutory deadline. We are still on a 7
similar timeline for 2014. This has been a major 8

problem because timely promulgation of these rules and 9

standard s is critical for business planning and to 10

ensure compliance for all program particip ants. 11

In conclusion, EPA's proposed rule for 2014 is a 12

step in the right direction. However, it will only be 13

a temporary 1

- year fix to the RFS, one in which the EPA 14

must revisit each year. Congress needs to provide a 15

long

- term legislative remedy to avoid serious impacts 16

on America's fuel supply and to ensure consumers are 17

not harmed. 18

Thank you very much for allowing Chevron to share 19

our views today. 20

MR. GRUNDLER : Thank you. Mr. Lehman? 21

MR. LEHMAN : Thank you. My name is Jonathan 22115

Lehman. I'm speaking t oday at the invitation of the 1

American Coalition for Ethanol

. 2

I was asked to testify in part because of my 3

ongoing work with conventional and cellulosic biofuel 4

interests, who are relying on the RFS to drive 5
innovation. I was also asked to testify because as 6

counsel to Senate Majority Leader Tom Daschle, it was 7
my initial responsibility to c raft the RFS and 8

negotiate its language. You're welcome, I guess. 9

As part of that effort, I fought the attempts of 10

the oil industry to insert poison pills in to the RFS

. 11

Poison pill waiver language, so deadly to the RFS that 12

it would be soundly rejected by Congress. That poison 13

language, at the time championed by Tom Delay and Billy 14

Tauzin at the behest of the oil industry, was rejected 15

by Congress in 2005. 16

Now it sits before us in an early identical form 17

as a proposal of a Democratic administration. Today, 18

I'd like to put the RFS in context. When the RFS was 19

being c rafted as a replacement for the oxygenate 20

standard in the early 2000s, it was done for several 21

mutually beneficial purposes

-- to address the 22116 systematic poisoning of our country's drinking water 1

supply by MTB E contami nation , to drive competition in a 2

highly concentrated fuels marketplace, to drive 3

alternatives to petroleum that have inherent air 4

quality and climate benefits, and to help spur economic 5
development in rural America. 6

It didn't surprise me when the last two things the 7
oil industry tried to negotiate for in the RFS when it 8

was being crafted were MTB E liability protection and 9

provisions to undermin e the certainty of the RFS via 10

waiver provision poison pills. The basic takeaway 11

being they wanted legal protection to sell a product 12

they knew was a known pollutant to U.S. drinking water 13

supplies, while undermining any chance of replacing it 14

at a real s cale in the marketplace. 15

I was there when Congress rejected both attempts. 16

The MTB E liability, and they told the oil companies 17

that there wouldn't be any poison pills put into law to 18

undermine Congress's direction to transition away from 19

petroleum. As a result, MTB E was removed from the fuel 20

stream in a matter of months, and billions of dollars 21

flowed into the renewable fuels industry under the 22117

promise that the RFS would drive real change in the 1

marketplace. 2

And it's worked. Corn ethanol facilities are 3

b ecoming more efficient. Advanced and cellulosic 4

ethanol facilities are completing financing and coming 5

online and more to come, if the administration would 6

hold firm. 7
In 2013, the oil companies had a decision to make. 8

Either accept that their artificial and anti

9

competitive 90 percent share of the market would fall, 10

as required by the RFS, or try to undermine it. 11

Instead of choosing to continue to support the 12

renewable sector that is evolving to become more green, 13

the EPA proposal sides with oil companie s that want to 14

rely on an oil supply that is getting dirtier by the 15

barrel. 16

Congress considered and rejected the Delay

- Tauzin 17

oil company request to allow waivers based on lack of 18

infrastructure. They understood that providing this 19

proposed waiver based o n infrastructure was putting the 20

very fate of the RFS in the hands of industry bent on 21

destroying it. 22118 That the oil industry continues to seek this power 1

is no surprise to anyone in this room. That a 2

Democratic administration appears willing to grant it 3

th at pow er is no short of mind blowing. 4

Yesterday, the President made a speech describing 5
inequality as the defining challenge of our time, and 6

yet today's administration is contemplating a proposal 7
that would worsen the inequality. It would undermine 8

the s uccess that the RFS has made in driving jobs and 9

economic developments in areas of the country that have 10

been previously left behind. 11

And it will short

- circuit efforts to bring new 12

jobs and new economic development to more areas of the 13

country, all so oil companies can continue to protect 14

their market share and line their pockets. It would 15

give one of the most concentrated industries in the 16

nation , the oil industry, the power to choke the 17

renewable fuel sector anytime that sector threatens to 18

displace the oil industry's 90 percent stranglehold on 19

U.S. consumers. 20

Congress wisely rejected the oil companies. EPA 21

should do likewise. 22119 Thank you. 1

MR. GRUNDLER : Thank you. Mr. Patterson, welcome. 2

MR. PATTERSON : Members of the committee , my name 3

is Patrick Patter son. I'm the vice president of 4

business operations in the Americas for Novozymes. 5

On behalf of Novozymes and our thousand employees 6

across the United States in California, North Carolina, 7
Virginia, Nebraska, Wisconsin, and Massachusetts, I'd 8

like to thank you for the opportunity to have our voice 9

heard here today. Thank you. 10
We're a $2 billion technology company. Our 11

scientists are like detectives. We search in nature 12

for enzymes and microbes or nature's own technology, 13

and once we find those, we put the m to work, saving our 14

customers on raw materials, energy , water, and money. 15

Today, our enzymes and microbe technologies are at 16

work in more than 32 industries worldwide. Novozymes 17

and the EPA, we have many shared goals

-- addressing 18

climate change, improv ing air quality, reducing the use 19

of harsh chemicals, and increasing the use of America's 20

renewable fuels. Like many companies, we were inspired 21

by the RFS, and working with agencies like yours, we 22120 set out on an innovative, ambitious course to make it 1

com e true. 2

Over a 5

- year period, we brought down the cost of 3

enzymes for changing corn leaves, husks, energy crops, 4

and even trash by more than 90 percent. We put 150 5
scientists to work designing enzymes for the biofuel 6

industry, the single

- largest R&D inves tment in our 7

company. 8

These enzymes help make first

- generation plants 9

more efficient, getting more yield from the same 10

feedstock, and they help the second

- generation 11

customers convert agriculture waste into fuel. We 12

manufacture those enzymes right here in the United 13

States

. 14

In May 2012, we opened our newest advanced 15

manufacturing plant in Blair, Nebraska, with 500 jobs 16
and $200 million in private investment. Our enzyme 17

plant there is the largest of its kind and the most 18

sophisticated in the country. 19

We ha d choices, but we chose Blair and we chose 20

the United States over places like China. And a big 21

reason for that choice was the renewable fuel standard

. 22121 Strong, stable policy was a key to our investment 1

decision. 2

So you can imagine what it meant to our com pany 3

and our industry and companies like ours when the rules 4

of the game get changed from this proposal. It left us 5

to wonder about the years of progress we'd made, the 6

thousands of people who'd done the work, and the 7

millions of dollars that we'd investe d. 8

Today, we partner with many of the first movers in 9

the cellulosic space. Fiberight, our partner in 10

Lawrenceville, Virginia, is making fuel literally from 11

trash. The company is about to break ground on a 12

second plant in Blairstown, Ohio. 13

Chemtex, our p artner in Clinton, North Carolina, 14

is preparing to turn a field sprayed with hog waste, a 15

field with no other use, into an advanced renewable 16

fuel plant. Our customer POET, we're helping support 17

with advanced biofuel s in Emmet , Iowa, to complete 18

construct ion of their new plant called Project Liberty. 19

That commercial production is scheduled to start 20

within 6 months. 21

Our companies, companies like ours, we decided to 22122

put steel in the ground based on the belief that we'd 1

have a policy and a market to support us. Now that 2

policy and potentially that market is under threat. 3

We want the United States to lead the way with 4

investments like these, but it won't unless the EPA 5
returns to a strong, stable interpretation of the RFS. 6

Otherwise, these investments in tec hnologies, they'll 7
go somewhere else. So will the jobs. So will the 8

benefits to our climate. And so will the savings at 9

the pump. 10

The RFS was designed as a two

- part strategy. And 11

first was our industry's challenge was to bring 12

breakthrough renewable fu el technology to the market, 13

and we've done that. The second part was with the oil 14

industry to blend that fuel into the nation's fuel mix, 15

which they've naturally fought at every turn. 16

We believe the EPA should hold oil accountable and 17

ensure our shared g oals and the goals of the RFS are 18

met. First, the agency should return to the way it 19

previously carried out the policy, as well as to 20

Congress's intent. 21

The fuel produced up to the statutory volumes 22123 should be blended into the fuel supply by the obligated 1

parties. That's good for our drivers. That's good for 2

the environment

. 3

And second, we should also reinstate the integrity 4

of the renewable identification number system. That's 5
good for investment, and that's good for growth. And 6

it's especially good fo r second

- generation fuels, those 7
made from sources like trash and agricultural waste. 8

We've got investments all over the world, and we 9

want to keep working with the EPA. But uncertainty is 10

bad for investment, and uncertainty makes it hard to 11

work together

. 12

We have a saying that the future doesn't happen by 13

accident. Somebody has to create it. And I can tell 14

you that we're committed to helping create that future 15

together w ith our customers and the EPA. 16

Thank you very much. 17

MR. GRUNDLER : Thank you. I've got a question. 18

Could you clarify what you mean by EPA should 19

reinstate the integrity of the RIN market? 20

MR. PATTERSON : We're making just similar comments 21

to the rest of the speakers that mechanisms should be 22124

in place to keep spurring investment. 1

MR. GRUN DLER : Any other questions? 2

(No response.) 3

MR. GRUNDLER : I thank the panel for your time. 4

I'd like to invite Panel 5 to the table, please. 5

(Pause.) 6

MR. GRUNDLER : Good mor ning. We'll begin with Mr. 7

Men ke. 8

MR. MENKE : Good morning. On behalf of the 9

ethan ol and bio diesel producer members of the Iowa 10

Renewable Fuels Association, thank you for the 11

opportunity to comment. 12

We strongly urge EPA to reverse its proposal to 13

radically reduce the 2014 RFS volumes to levels below 14

the 2013 volumes. This proposal is n ot only a 15

significant step back for cleaner fuels, consumer 16

choice, and cutting petroleum dependence, but it is 17

also based on false premises and contrary to 18

congressional intent and the administration's stated 19

goals. 20

The most harmful aspect of the proposed rule is 21

the notion that a perceived lack of retail distribution 22125

today equates to a renewable fuel supply shortage next 1

year. It would set a dangerous and unlawful precedent 2

that gives the petroleum industry the power to dictate 3

future RVOs by failing to make investments in renewable 4

fuel infrastructure. Adopting such a justification 5
would literally turn the RFS on its head. 6

The proposal is based on false premises because 7
there is no E10 blend wall. I was proof of this. 8

Today, we have over 200 retailers that offer consumers 9

higher ethanol blends up to E85, including more than a 10

dozen retailers that offer E15 as a registered fuel. 11

The fact is that everywhere higher blends have been 12

offered, consumers have responded positively. 13

Recent sales data found the average ethanol 14

content for Iowa blender pump operators was around 25 15

percent. This is well beyond t he near

- term goals of 16

the RFS. 17

Similarly, third quarter E85 sales in Iowa this 18

year were nearly double the sales from the first 19

quarter , as RIN values wer e passed on to consumers 20

through lower E85 prices. There is not a single real

21

world data point to back up the contention that America 22126

can't sell enough biofuel s to meet the RFS as intended, 1

and there are thousands of data points to say we can. 2

Finally, th e proposal is contrary to congressional 3

intent and the administration's goals because it 4

prevents the U.S. from moving beyond 90 percent 5
dependence on oil, which was always intended, and it 6

specifically cuts the legs out from under the young 7

advanced biofu el s industry. For instance, EPA's 2014 8

proposal inexplicably stunts the growth of bio diesel , 9

the leading advanced biofuel

. 10

A 2014 RVO of at least 1.7 billion gallons is 11

needed to continue this success story. Without a 12

robust RVO, bio diesel plants will sh ut down and jobs 13

will be lost. 14

Similarly, the proposal snuffs out the life of 15

future cellulosic ethanol projects not because of the 16

proposed 2014 cellulosic RVO, but because the current 17

proposal clearly tells the marketplace the U.S. will 18

use 10 percent et hanol and no more. 19

You've already heard from the Iowa Governor and 20

farmers who can articulate my closing point with more 21

authority. But I grew up on a farm in Iowa. I know 22127 farmers who made planting decisions based on the RFS. 1

They knew there were those in Congress who wanted to 2

see a return to the days of Government

- subsidized cheap 3

corn prices for the benefit of non

- Midwestern livestock 4

producers. 5

But the Iowa farmers trusted President Obama to 6

keep his word, to live up to his campaign promises. 7

And th ose farmers feel betrayed. They feel lied to. 8

They are frustrated, and they are angry. 9

And although they would never use the word, they 10

are also scared. Scared that a gutted and useless RFS 11

will lead to either another farm crisis or a return to 12

Governme nt

- controlled farm policy where decisions are 13

based on Government farm programs instead of market 14

demand. 15

And this does not have to be. The EPA can 16

recognize it made a mistake. The fear of high gas 17

prices was a bluff from big oil. There is still time 18

to call that bluff and to uphold the RFS as it was 19

intended to operate. The result would be lower gas 20

prices, rural prosperity, cleaner fuels, less foreign 21

oil dependence, and a promise kept. And that is 22128

certainly a scenario worthy of consideration. 1

MR. GR UNDLER : Thank you. We've got some 2

questions on the panel. 3

MR. HANNON : Like several members of different 4

panels, you've described our proposal as gutting and 5
making the RFS gutted and useless in the context of 6

ethanol . Our proposal has a range of ethano l use that 7
we project for 2014 that looks almost identical to 2013 8

ethanol use. 9

Is your concern

-- are you saying that our 10

proposal is going to reduce the ethanol use, or is your 11

concern a failure to grow ethanol use? Could you be 12

more cle ar, either today or in comments? 13

MR. MENKE : Absolutely. Failure to grow ethanol 14

use, but the mechanism to get you to where you have 15

reduced the volumes. We believe that Congress 16

specifically rejected the infrastructure waiver that 17

you've chosen to employ for this propo sal in reducing 18

the conventional renewable fuel volume, and we just 19

believe the statute does not support that general 20

waiver authority. 21

MR. KOROTNEY : So my question is in 2013, the 22129

estimate of E85 consumption is somewhere in the 100 to 1

150 million gallons . The statutory volumes for 2014 2

would require something like 3.5 billion gallons of E85 3

to be consumed. So my question is do you have any 4

analyses or data information describing how you would 5
get that jump from 150 million to 3.5 billion gallons? 6

MR. ME NKE : I don't have specific analysis today. 7

Just anecdotally, the

-- as I described in my 8

testimony, when RIN prices went up, those costs were 9

passed

-- those savings were passed on to consumers in 10

the form of lower E85 prices, and our third quarter E85 11

s ales in Iowa doubled from the first quarter. We've 12

had several more, you know, applications for more 13

infrastructure to be invested. 14

And on the contrary, we've seen news reports of 15

large

- scale investments in E85 and higher ethanol 16

blends that have been sta lled as a result of this 17

proposal due to the uncertainty it created. 18

MR. GRUNDLER : Okay. Mr. Wigans

-- or Wiggans. 19

Forgive me. 20

MR. WIGANS : Thank you. 21

To say that Iowans, including cattlemen like 22130

myself, are disappointed with the EPA's initial 1

proposal for the RFS and its implied and significant 2

across - the

- board cuts in the 2014 RVOs would be a gross 3

understatement. In my testimony today, I hope to show 4

why now is not the time to roll back the RFS. 5

When the RFS became law in 2005, American farmers 6

and t he then

- fledgling domestic ethanol industry took 7
that as a sign from our Government that clean, 8

American

- made biofuel s were not only here to stay, but 9

the oxygenate of choice and America's renewable clean 10

energy of the future. 11

The expansion of the RFS in 2 007 gave us 12

confidence in our quest to build an industry from the 13

ground up and goals to be attained in meeting RFS 14

volumes. The build

- out of today's corn ethanol 15

industry and the bio diesel industry in those years in 16

the middle of the last decade is truly an amazing 17

American success story. 18

The billions in equity and debt financing put at 19

risk and rolled into not only the processing plants 20

themselves, but the attending infrastructure in 21

advancing sciences and technologies was truly 22131

incredible. The size and the scope of this build

- out 1

was something that rural America had never seen before. 2

Ethanol 's rising tide has lifted everyone's boat out 3

there wher e I'm from in flyover country. 4

In the 2012 State of the Union address, President 5

Obama called for an "all o f the above" strategy, an 6

economy fueled by homegrown and alternative energy that 7
will be designed in America and built by American 8

workers. I wholeheartedly agree, and the RFS can be a 9

large part of the foundation which the "all of the 10

above" strategy ca n b e built upon. 11

The proposed reductions in the RFS, both year over 12

year from statutory levels and

-- both year over year 13

and statutory levels of the conventional biofuel s will, 14

in my opinion, have a profound impact on the future 15

advancements in even clean er renewable fuels. 16

It will send a clear message to the risk takers 17

and the private researchers that the Federal 18

Government , through this administration , doesn't 19

consider the RFS the law of the land, but just a good 20

idea, a warm and fuzzy. 21

The RFS has some incentive in it and for good 22132

reason. Keeping the statutory RVOs intact would help 1

make folks make decisions in regards to building 2

additional infrastructure to deliver E15 and E85 to the 3

American consumer, ending the absurd notion of the so

4

called blend wall. 5
When you start tinkering around the edges of the 6

RFS, it leaves doubts. Who in their right mind would 7
risk equity, sweat, and tears to create cleaner, safer, 8

more innovative renewable fuels for our future and 9

security if this administration can't ke ep up its end 10

of the RFS? 11

Clearly, the RFS has worked in getting us to where 12

we are today, and it will lead us to further energy 13

security. The American farmer has stepped up to the 14

plate, producing a record corn crop this year to fill 15

the demand. The USD A confirmed recently that there's 16

more than adequate supplies of feed stocks of both 17

grains and fats and oils to meet the RFS. 18

Livestock producers in the Midwest, including 19

myself , have embraced distillers grains as a favored 20

feed ingredient. Customers who buy my calves from our 21

ranch and feed them out depend on a reliable and 22133

consistent supply of distillers co

- products for their 1

business success. 2

The Iowa ethanol plant that I and many other 3

livestock producers invested in sells over 500 tons of 4

dried dis ti ller s products every day of the week to 5
local feed markets. The hog and layer operations in 6

that area will not allow a ton of that to be shipped 7
elsewhere as they know the value of it for them and 8

their feed rations, and they buy all they can get their 9

ha nds on. 10

We've got a conventional biofuel s industry that 11

has the capacity and willingness to produce and a more 12

than adequate supply of renewable feed stocks. And the 13

RFS is what has made this a reality. Now is not the 14

time to roll back the RFS. 15

MR. GRUNDL ER : Mr. Bliley, welcome. 16

MR. BLILEY : Good morning. Good morning. Growth 17

Energy is a leading trade association representing 80 18

ethanol plants and thousands of ethanol supporters. 19

Our members produce ethanol from grain and are leaders 20

in innovating seco nd

- generation biofuel s. 21

We see the RFS as a modern American success story 22134

-- 1

MR. GRUNDLER : Hey, Chris. Would you move the 2

microphone a little closer? 3

MR. BLILEY : Sure. 4

MR. GRUNDLER : Thank you. 5

MR. BLILEY : -- that has created jobs, revitalized 6

rural Am erica, injected much

- needed competition into 7
the vehicle fuels market, lowered the price at the 8

pump, improved the environment , and made our nation 9

more energy independent. 10

Unfortunately, the 2014 proposal to waive the 11

statutory volume obligations would ev iscerate the RFS. 12

It would cause severe harm to farmers, the biofuel s 13

industry, and the nation's economy. 14

The RFS was approved by a bipartisan majority in 15

Congress and enacted into law nearly 6 years ago. 16

Since that time, the oil industry has used its 17

co nsiderable power to delay, litigate, and undercut the 18

RFS. Now, by refusing to take any steps to allow 19

higher biofuel blends into the consumer marketplace, 20

the oil industry is claiming the volumes of the RFS 21

cannot be met because of the so

- called blend wa ll. 22135 The EPA's proposal to waive the renewable fuel 1

volumes mistakenly accepts this logic. It ignores the 2

potential for E15, E85, and bio diesel . It ignores the 3

large surplus of RINs, which could be used in 2014, and 4

most fundamentally, it ignores congress ional intent in 5
creating the RFS program. This program was designed to 6

spur investment in renewable fuels, not to punish those 7
who invested while rewarding those who have impeded 8

development. 9

Since the RFS began, the ethanol industry has 10

produced ample bi ofuel to meet the statutory 11

obligations, and it has ample capacity to do so again 12

in 2014. With this proposal, EPA is waiving the 13

volumes, including for the first time the total 14

renewable fuel volume on the ground that there is 15

insufficient demand for hig her

- level blends, 16

notwithstanding the fact that the oil industry has 17

refused to give consumers a choice at the pump. 18

The volumes can easily be met if the oil industry 19

would simply comply with the original intent and allow 20

higher ethanol blends like E15 to be competitively sold 21

to consumers. While some have claimed that the 22136

infrastructure is not in place to dispense ethanol 1

blends above 10 percent, it's simply not the case. 2

The vast majority of gasoline dispensing equipment 3

made since 2008 is warranted for ethanol blends as high 4

as E15, and underground storage tanks made in the last 5

20 years are equipped to handle blends up to 100 6

percent ethanol . As for the market, nearly 80 percent 7
of the vehicles on the road today are approved by EPA 8

for E15, and there a re over 16 million flex

- fuel 9

vehicles that can consume even higher blends, up to and 10

including E85. 11

Also, EIA recently increased its gasoline demand 12

estimates, meaning even more ethanol can be blended as 13

E10. Clearly, there is the capacity and ability to 14

push through the so

- called blend wall. Now is not the 15

time to retreat from the goals of the RFS. 16

This proposal would also jeopardize the tremendous 17

success our nation's farmers have s een since the RFS 18

began. Net farm income has increased by 51 percent 19

wh ile Federal farm payments have decreased by 57 20

percent. Similarly, the proposal directly threatens an 21

American

- made biofuel s industry at a time when our 22137

nation can least afford to lose jobs. 1

Companies from all over the world have invested 2

billions of doll ars in first

- and second

- generation 3

biofuel s in the United States and are poised to do 4

more. Arbitrarily reducing the levels established in 5
the statute threatens investments that are making 6

commercial production of cellulosic ethanol a reality, 7
projects t hat will help achieve the significant 8

greenhouse gas reduction goals outlined in the RFS. 9

EPA should move the RFS forward, not backward. 10

EPA should not reduce the total renewable fuel volume 11

below the level that provides for 14.4 billion gallons 12

of conven tional ethanol and attainable levels of 13

domestically produced advanced biofuel

. 14

Thank you for the opportunity to appear today. 15

MR. KOROTNEY : Thank you. So I'll ask a similar 16

question to what I asked earlier. 17

Levels in 2013 appear

-- of E85 sales appear t o be 18

around 100, 150 million gallons. E15 is much less than 19

that. But in order to meet the statutory volumes, 20

including a 14.4 billion gallons of the conventional 21

ethanol , the non

- advanced, you would need to have 22138 something li ke 3.5 billion gallons of E85

. 1

So, yes, there can be more infrastructure. But in 2

the short time we have between now and 2014, we're 3

looking for information on how you could actually get 4

that kind of volume of ethanol sold, what it would 5
take. Is it just with the existing infrastruct ure, and 6

how do you incentivize all of the FFV owners to use it 7

under those circumstances? 8

MR. BLILEY : We'll certainly provide a lot of that 9

analysis in our written comments. But I mean, I think, 10

as I touched on, it's a combi nation of things. I mean, 11

yo u have infrastructure out there now that can take a 12

great deal of E15. You're seeing a lot more E85 into 13

the marketplace. 14

We think, frankly, EIA's data on E85 is lagging 15

behind sort of the real

- world circumstances. We will, 16

again, show much more detail i n our written comments. 17

But that's, obviously, where we're headed. 18

MR. MACHIELE : Thanks, Chris

. 19

I just want to follow up, though. Again, now or 20

in your written comments, I mean, the comments that 21

we're hearing is don't change the RFS. Don't change 22139

the RFS. And what we're asking here is if we're not 1

changing it, we're talking about 3.5 billion. 2

So if

-- so what

-- again, we're looking for 3

information that says if not 3.5 billion, then what is 4

possible? But if it's not 3.5 billion , it means we are 5

chang ing the RFS. So we want you to be very clear in 6

your comments if a change is needed, what is feasible? 7
What's possible? 8

Because if we're at a point where it's not 9

feasible or possible, then I'd also want you to respond 10

to what is the message to the oil c ompanies? Are they 11

to go into noncompliance? And what are the 12

implications of that on the fuel supply and economy? 13

MR. BLILEY : Okay. 14

MR. GRUNDLER : Mr. Reamy, welcome. 15

MR. REAMY : Thank you very much. 16

Good morning. My name is Jeff Reamy. I'm the 17

manag er of Federal Government affairs for Phillips 66 18

Company. We're an independent downstream energy 19

company. We own and operate 11 refineries across the 20

United States , and as a producer and importer of 21

gasoline and transportation diesel fuel, we're an 22140

oblig ated party under the RFS and are directly impacted 1

by this rulemaking. 2

We're concerned about the increasing end 3

feasibility of the RFS program, as laid out by Congress 4

in the Energy Independence and Security Act of 2007. 5
We have expressed this concern to EPA through meetings 6

with staff and through written comments on previous 7

proposals. 8

When this law was enacted, Congress envisioned the 9

continued increases in gasoline demand and chose to 10

require renewable fuel volumes to fill the projected 11

increase in dema nd. And as we know, this scenario has 12

not materialized, and in fact, gasoline demand has 13

significantly declined and is projected to continue to 14

decline. 15

This has resulted in an inability to consume the 16

mandated volumes of renewable fuels. We are joined 17

w ith others in our industry calling for Congress to 18

repeal the unworkable mandate. However, in the short 19

term, the situation necessitates action on the part of 20

EPA. 21

When EPA issued the proposed 2013 RFS standard s 22141

earlier this year, EPA chose not to reduce the advanced 1

or total renewable volumes in concert with the 2

reduction in the cellulosic volumes. And we know, the 3

market response to the proposed rule was a significant 4

and continued increase in RIN prices, an indicator of 5
the looming shortage of RINs. 6

Th e RIN price situation was abated only after EPA 7
issued the final rule signaling their intent to reduce 8

2014 volumes and further abated when the 2014 proposal 9

was issued. We're a member of both API and AFPM, as 10

you know, and as you're aware, the industry f iled a 11

waiver petition specifically asking EPA to use their 12

general waiver authority to reduce the congressionally 13

mandated volumes to avoid negative consumer impacts of 14

the E10 blend wall. 15

Specifically, that waiver petition requests EPA to 16

set volumes so that the ethanol percentage in gasoline 17

does not exceed 9.7 volume percent. This allows for 18

E10 blends while accounting for the variability in the 19

actual gasoline demand versus the forecasted demand 20

used to set the annual percentage standards. We 21

continu e to support that approach. 22142 EPA has missed the statutory deadline for 1

establishing the 2014 and 2015 biomass

- based diesel 2

volumes. EPA has proposed to maintain the biomass

3

based diesel volume at the 2013 level. We believe that 4

the statutory language requ iring EPA to set the 5

standard 14 months in advance prevents EPA from setting 6

a higher volume standard. 7
Establishing an annual cellulosic volume remains a 8

challenging exercise for EPA. As with any start

- up or 9

new project venture, there is great uncertainty 10

regarding production capability and economic viability. 11

Although we can appreciate the difficulty of this 12

task, we believe that the proposed 2014 cellulosic 13

volumes continue to be much higher than can be 14

achieved. Therefore, we believe it should be furt her 15

reduced. 16

In closing , the fuel supply infrastructure issues, 17

coupled with the vehicle warranty and compatibility 18

problems, result in real limitations on the amount of 19

ethanol that can be consumed. We are appreciative of 20

the fact that EPA has recognized the blend wall 21

constraints and has proposed volume reductions to avoid 22143

the detrimental impacts that would ensue absent this 1

relief. 2

We will be submitting further detailed comments on 3

the proposal, and we thank you for your time. 4

MR. GRUNDLER : Thank you, Mr. Reamy. Questions? 5

MR. SIMON : Yeah. I would encourage, Jeff, for 6

you and other parties, the proposal also asked for 7
comments on not just the things that we, you know, 8

aren't doing, but also things that the industry and 9

other stakeholders can do to gr ow this marketplace. So 10

we encourage you -- 11

MR. REAMY : Sure. 12

MR. SIMON : -- to look a little more positively in 13

terms of what options there are, both in the short and 14

long term as well. 15

MR. REAMY : Okay, sure. We'll definitely that 16

back. 17

MR. SIMON : Lo ok forward to that comment as well. 18

MR. REAMY : Sure, Karl. Thanks. 19

MR. GRUNDLER : Go ahead, John. 20

MR. HANNON : I have a question on the 9.7 percent 21

figure that's come up several times from oil industry 22144

representatives, and I understand the purpose of tha t 1

is to

-- I guess to assume there is no E15 or E85 and 2

to give a headroom for errors in the projection of 3

gasoline and diesel production. 4

I think it's pretty clear from our proposal that 5
EPA is attempting to balance two

-- two major ideas. 6

One is growth in the biofuel s industry, and the other 7
is a realistic ability to comply. 8

The 9.7 percent seems to assume that we should err 9

on the side of assuming the EIA will underestimate or, 10

I should say, overestimate, and that there will be more 11

of a compliance burd en. But it gives no weight to the 12

concern that EIA may be rolling the other way and going 13

-- and give less of an incentive for growth. 14

Can you, either here or in your comments, explain 15

why EPA should pick one side of that error bar versus 16

the other, as co mpared to trying to balance them? 17

MR. REAMY : Yeah, sure. We'll explore that 18

further for you. 19

MR. MACHIELE : Well, and as a follow

- up to that, 20

again in your comments, I know, based on your comments 21

and those we've heard from the petroleum industry so 22145 far, it is sort of 9.7 percent, you know, not 1

aspirational cellulosic. If the agency's final rule 2

isn't that, I'd encourage you to provide information as 3

well on what you think is feasible in terms of not just 4

that conservative, but what is a reasonable proje ction 5
for what could be accomplished in 2014? 6

MR. REAMY : Okay, certainly. 7

MR. GRUNDLER : Thank you. Dr. Rider? 8

DR. RIDER : Thank you very much. Apprecia te the 9

opportunity to be here. 10

My name is Allen Rider . I'm a member of the 11

Nation al Steering Committ ee for the 25 x' 25 Alliance, 12

which is an alliance that is seeking to have 25 percent 13

of the total energy consumption to be renewable by the 14

year 2025. That's the premise on which we operate. 15

The 25x'25 Alliance's preliminary review of the 16

EPA's proposed 20 14 standard s for the Renewable Fuel 17

Standard P rogram elicits an immediate and deep feeling 18

of disappointment. The EPA's proposed amendments to 19

the Renewable Fuel Standard s P rogram represent a 20

significant step back from the n ation 's previous path 21

towards a more diversified energy future and, if 22146

implemented as proposed, could deliver a vital blow to 1

the promise of bringing a new generation of clean, 2

domestic biofuel s to the driving public. 3

Since 2005, 25x'25 has been engaging stakeholders 4

and communicating h ow biofuel s improve energy security, 5
stimulate the rural economic development, and reduce 6

emissions from transportation fuels, among a host of 7
other benefits. However, to propose reducing the 2014 8

RFS requirements from slightly over 18 billion gallons 9

dow n to slightly over 15 gallons represents a reversal 10

of a carefully constructed energy policy that is 11

working. 12

The RFS has proven to be highly effective for 13

creating high

- quality jobs, strengthening our nation al 14

security through reduced oil imports, and red ucing 15

overall fuel prices for consumers. We must not pull 16

back on the reins and kill the momentum that is driving 17

to a stronger position in the global energy economy. 18

While we concede that the production volumes of 19

cellulosic biofuel s have not met the exp ectations as 20

set out in the regulations, the legislation authorizing 21

the RFS, the EPA has responsibly responded by using its 22147

authority under the existing statute to adjust RFS 1

implementation as needed in response to the financial, 2

technological, or product ion challenges. 3

However, the cellulosic and advanced biofuel s 4

energy is on the verge of significant breakthrough. 5
Three major cellulosic production facilities using 6

agricul tural residues and nonfood feed stocks are set to 7

open next year, two in Iowa and on e in Kansas. In 8

addition, smaller plants are currently operating in 9

Florida and Mississippi. If the EPA moves forward with 10

its proposed standard s, these could be the only plants 11

that we see for years to come. 12

Another success story is the resurgence of ou r 13

agricultural sector , driven in part by biofuel 14

production. After a devastating growing season in 15

2012, our nation's farmers responded positively by 16

growing and harvesting what the USDA is projecting to 17

be the largest corn crop and the third

- largest soyb ean 18

crop ever produced in our history. 19

Thanks to advances in crop genetics, technology, 20

crop management, and conservation, there are more than 21

enough agricultural commodities and other renewable 22148

biomass feed stocks to satisfy our food, feed, fiber, 1

and ener gy demands. EPA stood with agriculture and the 2

biofuel sectors in 2012 and held firm to its RFS goals 3

in 2013. We urge the EPA and the administration to 4

stand firm again this year and remove the proposed cut s 5

to the RFS volumes for 2014. 6

Diminishing the role of first

- generation 7

conventional biofuel s in 2014 will benefit no one 8

except the oil industry, and ramping down first

9

generation biofuel s will discourage the prospects for 10

billions of dollars of future investments in second

11

and third

- generation produ ction technologies in our 12

rural areas where jobs are absolutely crucial. 13

The RFS is a long

- term policy commitment by 14

Congress to drive innovation, expand research and 15

development, encourage investment, and open the door to 16

new markets. 17

MR. KOROTNEY : You'l l need to finish up, please. 18

DR. RIDER : I am. Thank you, sir. 19

The benefits of the RFS as envisioned by Congress 20

are now being realized. The 25x'25 Alliance strongly 21

believes that the current EPA proposal would 22149

essentially close the market and stop growt h in its 1

tracks. We urge you to withdraw this proposal and 2

reinstate the 2014 volume requirement s as laid out in 3

the legislation. 4

In the coming days, we will make more detailed 5
comments as you have requested on several other issues 6

to follow up. 7

Thank you very much for this opportunity. 8

MR. GRUNDLER : Thank you, Dr. Rider. 9

I would just reiterate the questions we were 10

posing to some of the other panelists. So if you have 11

analysis or information to show how these statutory 12

volumes could be met by the market place, that would be 13

very useful. 14

DR. RIDER : We will do that. Thank you very much. 15

MR. MACHIELE : As well as sort of the

-- your 16

comments said you conceded that biofuel s are not 17

meeting the levels of the statute. But then you said 18

we should hold firm wi th the levels in the statute. So 19

I'm looking for something in your comments to reconcile 20

those two statements. 21

DR. RIDER : We'll provide that. 22150 MR. GRUNDLER : Thank you for taking the time to 1

share your views. I'd like to invite Panel 6 up. 2

Thank you for your patience. 3

I'd also like to announce after the conclusion of 4

Panel 6 , we'll be taking a short break for the 5
panelists to stretch their legs, and we'll be breaking 6

for about 30 minutes for others to do the same. 7

(Pause.) 8

MR. GRUNDLER : Mr. Cunningham, we're ready for 9

your testimony. 10

MR. CUNNINGHAM : Thank you, and good morning. 11

My name is Mike Cunningham, and I'm a soybean 12

farmer from Bismar c k, Illinois, and a director on the 13

American Soybean Association. The ASA is a nation al 14

trade association represe nting nearly 600,000 soybean 15

producers, and I want to thank you for the opportunity 16

to testify today on their behalf. 17

The soybean farmers are extremely proud of the 18

major role we have played in the development of the 19

U.S. bio diesel industry, an industry th at has helped 20

diversify our fuel supply, reduce greenhouse gas 21

emissions, and creating jobs and economic growth, 22151

especially in rural America. Bio diesel has become an 1

important market for soybean oil, adding value to the 2

soybean co

- product and boosting the farm and rural 3

economy. 4

Soy oil would be a drag on demand for soy meal 5
protein, if not for the bio diesel market. There has 6

been an increased soybean production to meet the global 7
protein demand at the same time soy oil is being 8

displaced from food market s due to the move away from 9

trans fat. 10

Biomass

- based diesel and total advanced biofuel s 11

levels set forth in the proposal are unnecessarily low 12

and will stifle the growth and job creation potential 13

demonstrated by the bio diesel industry over the past 14

severa l years. ASA believes that there is no need to 15

limit the biomass

- based diesel obligation to 1.28 16

billion gallons in 2014 and 2015 or to limit the total 17

advanced biofuel s volumes to 2.2 billion gallons, as 18

EPA has proposed. 19

ASA sees no compelling reason no t to increase the 20

biomass

- based diesel volumes above the estimated actual 21

production for 2013, or at least 1.7 billion gallons, 22152

with the equivalent level of total advanced biofuel s. 1

Bio diesel is the most prevalent advanced biofuel 2

currently produced in the United States . The industry 3

has met or exceeded the RFS biomass

- based diesel volume 4

requirements each and every year they have been placed. 5
And 2013 production is expected to reach 1.7 billion 6

gallons. 7
Production and supply levels for soybean oil 8

combin ed with the increased amount of other feed stocks 9

being utilized for biomass

- based diesel production in 10

the case of the volume requirements of 1.7 billion 11

gallons can easily be achieved in 2014. Bio diesel 12

provides numerous benefits for consumers and societ y as 13

whole, including jobs, displacing petroleum, reducing 14

emissions, reducing soy oil cost for livestock 15

producer, providing a market for soy oil displaced from 16

the food markets due to trans fat issues. 17

It seems EPA and OMB are considering cost, but not 18

g iving bio diesel any credit for the benefits it 19

provides. What is the cost of reducing the value of 20

U.S. ag products? What is the cost of fewer jobs in 21

rural America? What is the cost of less domestic 22153

energy production and higher greenhouse gas emissions 1

for using only petroleum transportation fuels? 2

While it's difficult to isolate the net impact of 3

bio diesel biofuel s on the agricultural sector, 4

according to the income statement of the U.S. farm 5
sector published by the USDA from 2009 to 2013, a 6

period in which biofuel production has increased, the 7

U.S. farm sector has increased

-- experienced an 8

increase in cash receipts for both crops and livestock, 9

farm

- related income, gross cash income, and net cash 10

income. 11

Net farm income during this period has more th an 12

doubled. In addition, direct Government payments to 13

the farm sector has decreased. There are greater 14

factors beyond biofuel s that are contributing to this 15

success, but expanding bio diesel and other biofuel 16

production has had a positive impact on the 17

a gricultural output s and jobs and a positive net impact 18

on the agricultural sector. 19

When considering the dynamics of bio diesel and 20

soybean production, it is important to understand that 21

markets and prices for soybeans are driven by demand 22154 for soy meal as a protein feed source for livestock. 1

MR. KOROTNEY : You'll need to finish up, please. 2

MR. CUNNINGHAM : Okay. Bio diesel , in turn, 3

provides an important market outlet to utilize soy oil. 4

In recent years, demand for soy oil for food use has 5
declined significa ntly following the implemented trans 6

fat labeling requirements. 7
All this suggests that there is no need to limit 8

the biomass

- based diesel obligation to 1.25 billion 9

gallons in 2014 and 2015. Therefore, ASA supports a 10

reasonable biomass

- based diesel volume increase above 11

the estimate of actual production for 2013, or at least 12

1.7 billion gallons. 13

Thank you. 14

MR. GRUNDLER : Thank you. Questions? 15

(No response.) 16

MR. GRUNDLER : Ms. Campbell, welcome. 17

MS. CAMPBELL : Thank you. 18

My name is Katie Campbell, and I am with 19

Action Aid. We are an inter nation al development 20

organization working in over 45 countries around the 21

world. 22155 And at Action Aid, we have been monitoring the 1

impact of the RFS mandate on the communities and 2

countries in which we work. It has become clea r that 3

expansion of corn ethanol is putting a strain on land 4

and food supplies and contributing to hunger and 5
political instability across the globe. 6

The EPA's proposed reductions to the 2014 biofuel 7
blending requirements are a step in the right 8

direction, but much more urgent action is required if 9

we are going to reverse the damaging impacts of corn 10

ethanol expa nsion on global food security. 11

The share of U.S. corn crop diverted to biofuel 12

production has gone from 5 to 40 percent since 2000. 13

This amounts t o the diversion of now 15 percent of 14

global corn supply toward the meeting the mandates of 15

the RFS. 16

This diversion, as part of a dramatic global 17

expansion of crop

- based biofuel production, has, 18

without a doubt, led to increased food price 19

volatility. We h ave seen three dramatic food price 20

spikes in the last 5 years alone, which have been 21

linked to rioting and political instability in 22156

countries around the world. 1

This increased food price volatility has had a 2

particularly detrimental impact on developing cou ntries 3

where most people spend between 60 and 80 percent of 4

their income on food. In a 2012 study, researchers at 5
Tufts University calculated the exact cost of U.S. 6

ethanol expansion and found that net corn importing 7
countries spent $11.6 billion more in higher corn 8

prices over the 5 trade years ending in 2011, with more 9
than half that cost, $6.6 billion being borne by 10

developing countries. 11

In Guatemala alone, where half the population 12

lives below the poverty line and half of children under 13

the age of 5 ar e considered malnourished, the cost was 14
$91 million. This is the equivalent of what the U.S. 15

normally provides to food aid in Guatemala, which means 16

U.S. energy policy is effectively canceling out U.S. 17

foreign assistance objectives. 18

As long as the crop

- ba sed ethanol mandates of the 19

RFS remain in place, the risk that they will fuel 20

continued global food crises looms large. While this 21

1

- year proposed reduction is certainly welcome, 22157

congressional action is urgently needed to permanently 1

fix the broken RFS an d roll back the harmful mandates 2

for crop

- based biofuel s. 3

Thank you. 4

MR. GRUNDLER : Thank you. One question. 5

MR. HANNON : One quick question. If you submit 6

written comments, it'd be useful to try to identify to 7
what extent the food impacts are attributab le to the 8

RFS versus the marketplace for ethanol and gasoline. 9

EPA has gone through that process of modeling and 10

analyzing that in prior waivers and found, at least in 11

prior years, that there was absolutely no impact, in 12

fact, of the RFS on the ethanol us age or the corn 13

price. 14

And recognizing that I'm not at all commenting on 15

the relationship of food impacture on the world and the 16

use of ethanol and corn prices, just on the what is the 17

exact specific ro le of the RFS program in that? 18

Thank you. 19

MS. CAMPBELL : We're happy to provide that 20

analysis. Thanks. 21

MR. MACHIELE : I guess one

-- one other question. 22158 You said our proposal is a step in the right 1

direction, and I think you answered my question by 2

saying, you know, congressional action is needed to 3

permane ntly fix it. 4

But in your written comments, I guess, if there's 5
something about our proposal that is only a step in the 6

right direction and you're looking for something more, 7
please clarify that more in there. 8

MS. CAMPBELL : Sure. Will do. Thank you. 9

MR. MACHIELE : I can't control Congress. 10

MS. CAMPBELL : I know. I am aware. Thank you. 11

(Laughter.) 12

MR. GRUNDLER : Ms. Anderson, welcome. 13

MS. ANDERSON: Thank you. 14

My name is Paige Anderson. I'm with the Nation al 15

Association of Convenience Stores. Thank you so much 16

for having us here today and holding this hearing and 17

letting all interested parties share their views with 18

you. 19

NACS will be submitting written testimony after 20

this. So I'm only going to be highlighting a few of 21

our -- our members' views on this proposed rule. 22159 NACS represents the fuel retailing industry. We 1

have, as of 2012, over 149,000 stores that are 2

convenience store operators. Almost 60 percent of 3

those stores are only single store operators. Folks 4

confuse us that everybody are the big gu ys. But the 5
majority of our industry are single store operators. 6

Eighty percent of the fuels consumed in the United 7

States are sold by the convenience and fuel retailing 8

industry. Our daily fill

- ups, in 2012, we had 33.5 9

million fill

- ups per day. Though $700 billion in sales 10

in 2012 were from our stores, 70 percent of those sales 11

come from fuel sales. Our net

-- our pretax profit for 12
most stores averages about $46,000. 13

In general, NACS believes the RFS program, we do 14

not at this time support repeal. Bu t we do think there 15

are some challenges and some things that can be done to 16

improve the program as we move forward. Specifically, 17

with the proposed rule, we believe that the volumes 18

that EPA has proposed are a positive step in the right 19

direction to give us the time to hopefully work on some 20

o f those issues and challenges. 21

The blend wall issue is real. It is urgent, and 22160

we need to deal with it. It's not a made

- up economic 1

fallacy. It is

-- it is facing us, and it's facing us 2

now. 3

There are legal and inf rastructure and economic 4

impediments that are a challenge now and will remain a 5

challenge unless we can fix them. A nd it's imperative 6

that we do do that, if we want to move forward with the 7

RFS. 8

Some of the market challenges that we're facing, 9

obviously, the economic assumptions that Congress used 10

in 2007 have not borne fruit and those need to be 11

adjusted. But really, from our perspective, our 12

retailers, we sell what the consumer wants. We're 13

agnostic on fuel types. If a consumer wants E10, E15, 14

E85, na tural gas, electric vehicles, our folks wil l 15

provide it and will sell it. 16

The biggest challenge we really have is consumer 17

awareness. The information that most consumers are 18

getting is that E15 and E85 is bad. So even if they're 19

purchasing a flex

- fuel ve hicle, they're not necessarily 20

at our stations fueling it up with E85 for those stores 21

that offer it. 22161 So the reality is our retailers will provide the 1

fuel that the consumer wants, and the majority of our 2

stores and retailers are not seeing the demand that we 3

were hoping that they would see with higher blends of 4

ethanol . There have been some of our retailers that 5
have had positive experience. It's been a mixed 6

reaction. Some areas have done well, but the majority, 7
again, have not done as well as we had h oped. 8

Our concern is though flex

- fuel vehicles are 9

increasing, and there is more demand for those 10

vehicles, again, it doesn't mean that they're taking it 11

to the next step at our stations. There are some 12

infrastructure challenges, which we will put in our 13

written testimony, having to do with compatibility of 14

the equipment and misfueling liability issues, which 15

has been mentioned before. And we will put more of 16

that in our written statement. 17

But the one thing that we want to get across today 18

is, you know, i t's our folks that are the ones that 19

have to sell whatever fuel is determined that EPA, 20

Congress, and others want to have. And it's very 21

difficult in a limited space and only with so much 22162 financial resources to sell something that a consumer 1

doesn't want. 2

MR. KOROTNEY : You have to finish up, please. 3

MS. ANDERSON : And that's what our consumers are 4

facing. But we believe that the volumes that you've 5
proposed are a positive step in the right direction for 6

us to work on some of those challenges. 7

Thank you. 8

MR. GRUNDLER : Questions? 9

MR. MACHIELE : Just ask you to clarify in your 10

written comments what you mean by "a positive step in 11

the right direction," as opposed to, you know, what you 12

would be looking for. 13

MR. HANNON : You said a couple times that your 14

asso ciation members will provide whatever consumers 15

want. We heard from several panelists from Iowa and 16

other States that consumers in those areas were quite 17

willing to purchase E85, largely driven, it sounded, by 18

the marketing decisions made by the retailer on the 19

pricing of the E85. 20

In your comments, could you address the market, 21

th e marketing decisions made by your members in selling 22163

E10 versus E85? And for example, you could easily 1

envision a situation where you can make more profit 2

selling E10, a gallon of E10 than a gallon of E85 at a 3

reduced price, and that very well may drive the 4

marketing of E85 as much or more than what the consumer 5

awareness is. 6

Not at all negating the fact that consumer 7

awareness is a critical element of it, but it strikes 8

me that the marketing decisions by the retailer are 9

important as well. Information on that could be very 10

helpful. 11

The other thing that would be useful is several 12

panelists talked about big oil interfering with the 13

retail sale of E15 or E85. Any comments you have on 14

that would be appreciated as well. 15

MS. ANDERSON : Right. We haven't seen it, but 16

we're happy to put that in our written testimony. 17

MR. GRUNDLER : One more question. We also heard 18

from prior panelists that the infrastructure to sell 19

E15 exists today. To the extent that your organization 20

has information on that would be also quite useful. 21

MS. ANDERSON : Okay. 22164 MR. GRUNDLER : So we're hearing

-- we're hearing 1

conflicting concerns about on the one hand, we've got 2

liability issues and tank issues and infra structure 3

issues, and then we heard from another panel that those 4

didn't exist or that large volumes of E15 could be sold 5

today and E85 could be sold today. 6

MS. ANDERSON : I'd be happy to provide that. 7

MR. GRUNDLER : If you have information from your 8

membe rs, that'd be good. 9

MS. ANDERSON : Absolutely. Thank you. 10

MR. GRUNDLER : Thank you. Mr. Fey, welcome. 11

MR. FEY : Now we're done passing the buck. Thank 12

you for permitting me to share my thoughts on this 13

important subject. 14

I believe that reducing or elimi nating the 15

renewable fuel standard from the 10 percent blend in 16

gasoline should be done, and the sooner , the better. 17

Let me explain. 18

Ethanol came into the nation's fuel mix a 19

generation ago when America's import levels of 20

petroleum were very high and our proven recoverable 21

reserves were fast shrinking. We should also note that 22165

the average fuel consumption of cars and trucks was a 1

lot higher then than it is today. 2

At the time, it was recognized that substantial 3

Federal subsidies were required for ethanol f acilities, 4

as were tax credits for each gallon blended into 5
gasoline. The subsidies were justified as they were in 6

the nation al interest. 7

A corn

- based ethanol industry flourished, and 8

blends of 10 percent in gasoline became the standard. 9

America's corn c rop mushroomed, but now about 40 10

percent of it is diverted to produce ethanol . Corn 11

shot up in price. Supplies for livestock feeds and 12

food products shrank, and we all pay higher prices at 13

the supermarket as a result. 14

Today, America's fleet of vehicles i s much more 15

efficient than it was then. Petroleum is being 16

produced in vastly increased quantities from the 17

enormous fields previously thought unfeasible. Doing 18

so has resulted in a remarkable rise in domestic 19

supplies. 20

From a technical and economic poin t of view, it's 21

difficult to make the case for corn

- based ethanol 22166

unless it is subsidized. When burned, ethanol 's heat 1

release is much lower than that of gasoline, decreasing 2

an engine's fuel economy. It requires more total 3

energy to produce than gasolin e and more than is 4

released when it is burned. 5

When natural gas used to produce needed crop 6

fertilizers and the energy required for ethanol 7
production are added, the carbon footprint of a 8

gasoline

- ethanol blend is higher than the footprint of 9

unblended gas oline. The increased runoff of 10

fertilizers from farms further pollutes America's 11

rivers and streams. Therefore, ethanol is bad for the 12

environment that we so strive so hard to protect. 13

And finally, automobile producers state that some 14

blends of ethanol a nd gasoline have a damaging effect 15

on the engines in our cars. While ethylene

- gasoline 16

blends may have been a worthy endeavor in years past, 17

it is my belief that they should now be phased down and 18

out. 19

Ethylene is not needed to fuel America's fleet for 20

al l the reasons I stated above. Let us return the all

21

important production of corn to its intended use, 22167

providing food products and livestock feeds and, 1

ultimately, to feeding the Earth's increasing human 2

population. 3

Malnutrition stalks far too many people here at 4

home and around the world. Let us use this precious 5
resource for its much higher purpose, feeding our 6

fellow man. 7
Thank you for your time. 8

MR. GRUNDLER : Thank you, sir. 9

Mr

. B iderman? 10

MR. BIDERMAN : Good afternoon. My name is David 11

Biderman. I'm general counsel and vice president of 12

government affairs for the Nation al Waste and Recycling 13

Association, and we appreciate the opportunity to 14

testify here today. 15

The Nation al Waste and Recycling Association, 16

formerly NSWMA, represents the private waste and 17

recycling collection, processing, and management 18

industry. Some of our members own and operate 19

renewable energy projects at landfills for a variety of 20

end uses, including electric power generation and 21

transportation fuel. 22168 Many of these renewable energ y projects are 1

possible due to the aggressive RFS standards. Biogas 2

from landfills, known as landfill gas, has been 3

recognized as a renewable fuel by the EPA for many 4

years. As private companies in our industry and others 5
begin converting their fleets to compressed natural gas 6

and liquefied natural gas, they can utilize this 7

renewable fuel. 8

Within the waste and recycling industry, about 9

half of the new trucks that were sold this year in the 10

United States are powered by natural gas. By switching 11

from foss il fuel to renewable fuels, these companies 12

reduced their carbon footprint and greenhouse gas 13

emissions. 14

Further, the transition can occur smoothly, often 15

utilizing the very same pipeline that carries 16

non renewable natural gas. This achieves the Federal 17

Go vernment 's expressed aim to reduce greenhouse gas 18

emissions and expand the nation's renewable fuel sector 19

while reducing reliance on foreign oil. 20

Last month, EPA proposed new volumes for 21

cellulosic biofuel of only 17 million gallons based on 22169

its projection of availability. These projections fall 1

significantly below the statutory target for 2014 2

specified by Congress. 3

Congress specified large volume increases to 4

encourage the growth in renewable fuels from cellulosic 5

biofuel s. Because the volume for the ce llulosic 6

biofuel is so low, the original intent of supporting 7
this growth will be diminished. Landfill gas dedicated 8

to transportation fuel qualifies for renewable fuels in 9

the advanced biofuel category. However, proposed 10

changes to the RFS Pathways II a nd technical amendments 11

to the RFS2 Pathways II rule would change that, putting 12

it in the cellulosic biofuel category. 13

When this change occurs, there will be 14

significantly greater volumes of cellulosic biofuel 15

available than is proposed. For example, one of our 16

members operates a single project that produces 4 17

million RIN gallons , almost one quarter of the total 18

volume. Therefore, although the proposed volumes of 19

cellulosic biofuel may be currently adequate, it should 20

be modified to account for volumes th at will be 21

considered cellulosic when the Pathways II rule is 22170 finalized. 1

The Coalition for Renewable Natural Gas has stated 2

that their members estimate they will produce between 3

114 and 141 million ethanol

- equivalent gallons of 4

cellulosic biofuel under the revised Pathways II

. 5
However, many facility owners do not belong to the 6

CRNG, which means this estimate is probably a little 7

low. 8

The Natural Waste and Recycling Association 9

recommends that the cellulosic biofuel category volumes 10

be increased to at least 120 ethanol

- equivalent gallons 11

in 2014 to account for both existing producers and the 12

potential new producers with the implementation of 13

Pathways II . This will encourage project development 14

in this category. 15

Again, we appreciate the opportunity for 16

testi fying here today and look forward to providing 17

w ritten comments to the agency. 18

Thank you very much. 19

MR. MACHIELE : We'll welcome the data that you 20

provide in your written testimony on the volumes and 21

from where and then how it's used for transportation 22171

pur poses. 1

MR. GRUNDLER : Mr. Reese, welcome. 2

MR. REESE : Thank you. Good morning. It's still 3

morning. Oh, good afternoon. It's gotten past the 4

noon hour. 5
So I'm John Reese. I'm responsible for fuels 6

regulations for Shell, and I've been doing this a long 7
time. I've been involved in fuels regulations since 8

1991. 9

Shell is an obligated party under the RFS, but 10

we're also more than that. We are the world's largest 11

distributor of biofuel s. We played a key role in the 12

expansion of ethanol and bio diesel use he re in the U.S. 13

Through a joint venture, we are a biofuel producer, 14

and we're working hard towards the commercialization of 15

cellulosic biofuel s. 16

I put together a few slides making some key points 17

that I've given to the panel. I've got some extra 18

copies fo r anybody that wants it. I also have a one

19

pager there that explains the blend wall problem that 20

I've given to the panel, and I have extra copies. 21

So please enter those into the record, but I'll 22172

just summarize a few key points here. Ultimately, it's 1

Shel l's view that Congress needs to act to reduce the 2

RFS mandates to levels that are compatible with 3

vehicles and infrastructure and that also provide 4

appropriate incentives for the cellulosic biofuels. 5

But in the meantime, EPA has to act to address the 6

blend wall problem, using its existing authority in 7
order to avoid severe adverse impacts on consumers in 8

the economy. So we generally support your proposal. 9

But as you've heard from others this morning, we 10

actually think that you should go a little bit farth er 11

down to that 9.7 level to provide a little bit more 12

flexibility. 13

We do believe that you clearly have the authority 14

to make these adjustments, and I'll talk about that a 15

little bit more. But we do not think that you can 16

increase the biomass

- based diesel requirement before 17

2016. 18

I've talked about the blend wall quite a bit this 19

year. I started the year off back in February going to 20

the Nation al Ethanol Conference, where I talked about 21

the blend wall issue. And I continue to come across 22173

quite a bit of mi sunderstanding of how the RFS works 1

and the blend wall, and I think it's important to kind 2

of discuss that a little bit here so that there is a 3

good understanding of it because it also bears on EPA's 4

authority to make adjustments. 5
Basically, the way the RF S works is EPA takes the 6

volumes in the law. It divides it by the expected 7
gasoline and diesel demand, and that gives a percent 8

RFS standard. Then obligated parties multiply that by 9

the amount of gasoline and diesel that is supplied into 10

the U.S., and th at's our renewable volume obligation. 11

That tells us how many of these R IN credits that we 12

need, okay? 13

Now all's you have to do is a little bit of 14

algebra here to rearrange the terms, and you realize 15

that RINs are essentially permits to supply gasoline 16

and diesel to the United States . We can only supply as 17

much gasoline and diesel to the United States as we 18

have RINs to meet the obligation that supplying that 19

fuel incurs, okay? 20

And really important part here is that the RINs 21

that count, the ones that count towards compliance 22174

depend on the consumption of renewable fuels, not on 1

the production of renewable fuels. So I've summarized 2

that on the slide. 3

Now what happens then when the mandates in the law 4

exceed the ability to consume the renewable fuels? 5

Well, the first thing that happens is the RIN price 6

reacts, and that's what we saw earlier this year. But 7
then, actually, it will get worse unless the Government 8

takes action to fix it because, ultimately, these RINs 9

are permits to supply. And as we hit the bl end wall 10

and it gets worse, we will limit the supplies of 11

gasoline and diesel to the United States

. 12

So you might say, well, we just need more RINs. 13

You know, what are the options there? Well, neither 14

E15, E85, biomass

- based diesel , or drop

- in cellulosic 15

fuels are going to supply the RINs needed in the 16

timeframe necessary. The comment has been made a 17

couple of times today already you'd have to go from 18

about 1.5 million gallons of E85 up to 3.5 billion 19

gallons to fill that RIN gap. 20

So it's a big problem. The blend wall is here 21

now. There is no solution that is apparent to supply 22175

the RINs, and I really want to emphasize this last 1

point, and that is that noncompliance is not an option. 2

I heard it, I think, stated earlier today, you know, 3

well, if there's n o changes, then the obligated parties 4

have to fall into noncompliance. 5
That's not an option. We do not get to knowingly 6

violate the Clean Air Act. The blend wall problem is 7
what happens when we have to take action to comply in a 8

situation that is infeasi ble? 9

So let me just summarize a few key points. I 10

mean, we think that EPA is really on the right track 11

here to make adjustments. We think that you have the 12

authority to make these adjustments. You've got the 13

authority to adjust the advanced and general renewable , 14

as you adjust the cellulosic, but you also have your 15

general waiver authority, which is really quite broad. 16

It's not

-- the law says "inadequate domestic 17

supply." It does not say inadequate domestic supply of 18

renewable fuels or , as some people here are arguing , of 19

the ability to produce renewable fuels. 20

MR. KOROTNEY : I'm sorry. You're going to have to 21

finish up. 22176 MR. REESE : Okay. Just, well, that takes me about 1

to the end, actually. Let me just say that, you know, 2

we think that also your int erpretation of your 3

authority is a reasonable interpretation of the 4

statute. We think you have the authority. We think 5
you need to exercise it. 6

And let me just close by saying we think the law 7
is very clear that it's not possible to increase the 8

stringen cy of the biomass

- based diesel st andard until 9

2016 at the earliest , and you have to, of course, meet 10

all those requirements in the law. 11

Thank you. Sorry if I went over. 12

MR. GRUNDLER : Thank you very much, panel. 13

Appreciate the time you've given us today. 14

We will reconvene at 12:40 p.m. 15

(Break.) 16

MR. GRUNDLER : Mr. Shimberg, welcome. 17

MR. SHIMBERG : Thank you, sir. 18

MR. GRUNDLER : Ready when you are. 19

MR. SHIMBERG : All right. Well, thank you very 20

much. I appreciate the opportunity to testify. 21

I am Steve Shi mberg, and today I'm appearing 22177

before you on behalf of a coalition of merchant 1

refiners

-- okay. Coalition of merchant refiners, all 2

of whom are obligated parties under the RFS. The six 3

companies that endorse the testimony today are Monroe 4

Energy , Philad elphia Energy Solutions, Holly Frontier, 5

CVR Energy , A lon USA, and Ergon. 6

Merchant refiners, as many of you know, have a 7
unique

-- have unique compliance issues with the RFS 8

program and, as a result, bring a unique perspective to 9

this discussion. For the m ost part, they produce and 10

deliver unfinished gasoline to blenders. They cannot 11

control how much renewable fuel is blended into 12

unfinished gasoline. 13

Unlike integrated refiners who produce finished 14

gasoline and can separate RINs when they blend the 15

renewab le fuel, merchant refiners must buy RINs on the 16

secondary market. Their relatively small market share 17

makes them price takers rather than price setters for 18

both their blend stock and RINs, and as a result, high 19

RIN prices have a disproportionate adverse i mpact on 20

them. 21

At the outset, I want to emphasize our 22178

appreciation for EPA's recognition of the blend wall 1

and the proposal to reduce the RFS mandate for 2014 and 2

put in place a program and approach for future years as 3

well. I also want to urge EPA to com plete this 4

rulemaking as quickly as possible because, as you know, 5
the 2014 rule will have an impact on compliance options 6

and costs for both 2013 and 2014. 7
As EPA grapples with estimating and projecting 8

fuel use over the coming year, I would urge you to k eep 9

in mind that the risk associated with overestimating 10

ethanol use is extremely high. And conversely, the 11

risk of underestimating the ethanol use is not high at 12

all. And the reason for that, the high, if you 13

overestimate on the high end, it obviously h as a 14

serious impact on the cost of RINs, which then impacts 15

the merchant refiners and ultimately will impact the 16

consumers. 17

If you underestimate on the low side, the market 18

is well established for E10, and people are going to 19

keep producing and using E10, as close to E10 as they 20

can. So the downside risk is pretty low. 21

My written statement notes that there are at least 22179

three parts of the proposed rule where EPA needs to 1

make adjustments, and I'm going to address just two of 2

those today. The first is calcu lation of the blend 3

wall, and you've already heard about this from a number 4

of the prior witnesses. 5

In our view, the calculation of the blend wall is 6

too high for a number of reasons. Particularly, we 7
think the agency underestimates the amount of E0 that 8

is used. It might overestimate by a small amount the 9

amount of E85 that's likely to be used. It 10

overestimates the accuracy of blending measurement 11

devices. The notion that we can get right at 9.9 or 10 12

percent is just unrealistic, given the measurement 13

sensitivities. And it fails to account for the EIA's 14

history of overestimating gasoline use. 15

The result is a projected blend wall that leaves 16

no room for error and does nothing to ensure liquidity 17

in the RIN market. As we're seeing, D6 RIN prices are 18

sti ll too high, and unfortunately, they've been moving 19

higher since the 2014 proposal was released. In our 20

view, this is evidence that the market views the 2014 21

proposal for ethanol use as overly optimistic and, 22180

unless modified, could lead to a continued sho rtage of 1

D6 RINs. 2

The second issue I'd like to address is

-- has to 3

do with RIN prices and E85. In both the 2013 final 4

rule and the 2014 proposed rule, EPA asserts that high 5
RIN prices may subsidize the price of ethanol sold as 6

E85, and we've heard other witnesses this morning talk 7

about that as well. 8

But the credit system created by Congress and the 9

RIN market created by EPA were not designed to be used 10

as a subsidy for more expensive fuels. EPA, when they 11

set up the rule in 2007, talked about giving obl igated 12

parties a flexibility to use renewable fuel in the most 13

economical ways possible and explained that the RIN 14

system would allow the fuels market to continue 15

operating according to natural market forces. 16

Nothing could be further

-- nothing could be mo re 17

antithetical to natural market forces than the use of 18

Government mandates to force the payment of a subsidy 19

for more expensive fuels. 20

MR. KOROTNEY : Excuse me. P lease complete your 21

testimony. 22181 MR. SHIMBERG : Okay. And then there's the 1

question of who u ltimately pays for the subsidy

. 2

Merchant refiners cannot continue to absorb the cost. 3

So, ultimately, consumers who buy E10 are going to be 4

paying the subsidy. 5
And do we really want to be telling the vast 6

majority of consumers who buy E10 that they're pa ying 7
more for their gasoline so someone else can pay less 8

for their E 8 5? 9

Thank you. 10

MR. GRUNDLER : Thank you. Any questions for the 11

panel? 12

MR. MACHIELE : Yeah. Just a couple of follow

- up 13

questions. One, I guess, narrow one. If you could, in 14

your writte n comments, maybe provide more information 15

on your point on measurement accuracy? Because that 16

does not ring true with my knowledge of ethanol 17

blending. 18

MR. SHIMBERG : I'd be happy to do that. 19

MR. MACHIELE : Secondly, how do you square your 20

statement that if we overestimate on the low side, the 21

E10 market is relatively , you know, established, 22182

there's no risk against the

-- what we're hearing from 1

other testimony on the risk to the advanced biofuel s 2

that are just

-- they're looking for investor s. 3

They're t aking off. They've built plants, new plants, 4

investments. 5

And if we underestimate on the low side, aren't we 6

undercutting all those investments that have been made? 7

MR. SHIMBERG : Well, my view is that the market

-- 8

you've heard from some of the other wit nesses earlier 9

on, the consumer demand drives what is actually 10

produced and delivered. And so, if the market wants 11

more of those fuels, they will be delivered. 12

My comment went to the notion of the E10, that 13

you're not going to see a falloff from E10 to, l et's 14

say, E5 or E4 if you underestimate because ethanol is 15

still cheaper than gasoline. So it's in people's 16

interest to be using as much ethanol as they can. 17

Given the limit on the vehicles on the road right 18

now, E10 is the predominant limit on that. And so, 19

people

-- blenders and suppliers still have an 20

incentive. 21

MR. MACHIELE : Well, I guess that relates to a 22183

third question, which is, quite simply, your statement 1

that, you know, RIN prices, the RFS was not designed by 2

Congress to be used to subsidize le ss economic fuels. 3

The RFS is a mandate for higher volumes of renewable 4

fuels established by Congress. 5
So I don't know how you square that statement with 6

the statute we've been given. 7

MR. SHIMBERG : Well, it has

-- part of it has to do 8

with who is the prop er obligated party? Where is the 9

pressure likely to produce the desired outcome? 10

And as I outlined earlier, as merchant refiners, 11

we don't influence what the blend is. We are not in a 12

position to be investing in new infrastructure for 13

delivery of E85 or E15. So we don't think that just 14

imposing the higher RIN prices on our refiners actually 15

will accomplish the goal. 16

So all you've done is either shift the cost to 17

consumers or driven out merchant refiners from the 18

market. So it's

-- I don't know how you s quare the

-- 19

yes, the statute was designed to encourage more 20

alternative fuels use. But we do not see anything in 21

the credit system that was set up or in the regulatory 22184

history of the RIN program to suggest that the RIN 1

program is the way to do that. 2

MR. MACHIELE : Thank you. 3

MR. GRUNDLER : Mr. Fenwick? 4

MR. FENWICK : Good afternoon. Thank you. 5
My name is Scott Fenwick, technical director for 6

the Nation al Bio diesel Board. I've been involved with 7
the production, distribution, and application of fuels 8

for t he last 25 years, including the management of 9

several independent fuel testing labs. I also happen 10

to currently ser ve as an officer over the ASTM D0 2 11

committee that has jurisdiction over the methods and 12

specifications for petroleum products, liquid fuels, 13

and lubricants. 14

I'd like to take a moment to discuss specific 15

inconsistencies and misconceptions between the NPRM and 16

operational examples from the field used to limit the 17

RVO for bio diesel . Within the proposed rule, 18

specifically page 126, it discusses t he inability to 19

use bio diesel blends as low as B5 due to cold weather 20

constraints. 21

The estimated cloud point for a B5 blend of 22185

bio diesel made from soybean oil is 5 degrees 1

Fah renheit. While this is correct, it's also the same 2

cloud poi nt for a typical Num ber 2 ultra low sulfur 3

diesel fuel. The addition of 5 percent bio diesel has 4

very little, if any, impact on the reported cloud point 5

of that fuel. 6

The rationale that B5 blends cannot be consumed 7
anywhere in which the 10th percentile temperature falls 8

below that cloud point would then also rule out the use 9

of diesel fuel as well. 10

The State of Minnesota has the lowest 10th 11

percentile temperatures across the country. This is 12

the same State that's been operating under a B5 mandate 13

since May 1st of 2009. 14

The co ld weather performance of bio diesel blends 15

are not limited to B5 either. The State of Illinois 16

has a tax incentive that leads to blends of B11 being 17

utilized throughout the year, which means that for at 18

least the last 5 years, most gallons of diesel fuel in 19

Illinois have been blended with at least 11 percent 20

bio diesel

. Illinois is another cold weather State, and 21

B11 performs as well as diesel fuel cars in cars and 22186

trucks across the State. 1

Without regard to bio diesel , petroleum

- based 2

diesel fuels will also gel in colder weather. The 3

Department of Energy 's Nation al Renewable Energy Lab 4

has data from a number of studies looking at the cold 5
weather performance of bio diesel blends. 6

The most recent data shows no significant impact 7
of blending up to 5 percent bi o diesel . However, there 8

are a number of ways the fuels industry has at its 9

disposal to mitigate the risks associated with cold 10

flow performance. 11

Regardless of the presence of bio diesel , the 12

industry routinely relies on additives, heated systems, 13

and the a dditional blending of Number 1 diesel fuel to 14

improve the cold weather performance of ULSD. Each of 15

these scenarios works well with the inclusion of 16

bio diesel as well. 17

The facts are simple when it comes to cold 18

weather. At 30 degrees below zero, it's har d to drive 19

any diesel vehicle, which is why a number of fuel 20

distributors switch to Number 1 diesel fuel in the 21

winter time. 22187 In every case, cold weather education of the user 1

is important, which is why the NBB, as a trade 2

association in conjunction with th e fuels industry, has 3

produced a number of documents and informational 4

sources regarding cold weather usage. Much of this 5
technical support information includes handling and use 6

guidance, a study on cold weather blending, and many 7

additional fact sheets f or fuel distributors. 8

In addition to the technical support available, 9

the Nation al Bio diesel Board provides testimonials from 10

customers successfully using bio diesel blends in cold 11

climates year round. Several of these customers 12

include Yellowstone Nation a l Park, cities of Ann Arbor, 13

Michigan, and Denver, Colorado, where it reached minus 14

12 degrees today. 15

As you know, fuel quality is addressed through 16

ASTM Inter nation al, and the current specifications that 17

govern the quality of diesel fuel, ASTM D975, do no t 18

have a current limit for cloud point. Instead, the 19

entity offering fuel into the marketplace is 20

responsible for the quality necessary to achieve a fit 21

for purpose fuel for the locale and season of its use. 22188 For example, what may be perfectly fine in Hous ton 1

would not necessarily work in Inter nation al Falls, 2

Minnesota, which can be said about both diesel fuel and 3

bio diesel , and that's why we've worked so hard to 4

educate users about the handling and use guidance for 5

fuels. What we know for sure is that bio diesel blends 6

have demonstrated their ability to perform in Minnesota 7

and elsewhere under the coldest conditions. 8

MR. GRUNDLER : Can you wrap it up? 9

MR. FENWICK : Yes, sir. Just as diesel fuel has 10

with proper handling and storage. This approach has 11

serve d the fuels industry well over the last several 12

decades and has not hindered the use of either 13

petroleum diesel fuel nor bio diesel during the winter 14

months. 15

Thank you. 16

MR. GRUNDLER : Thank you. Any questions? 17

(No response.) 18

MR. GRUNDLER : Mr. Johnston, we lcome. 19

MR. JOHNSTON : My name is Glenn Johnston. I'm 20

executive vice president for Gevo . Today, I'm here on 21

behalf of the Advanced Biofuels Association, as I chair 22189

the Regulatory Committee

. 1

So on behalf of the Advanced Biofuel s Association, 2

I want to than k you for the opportunity to provide 3

testimony on the proposed 2014 renewable volume 4

obligations. ABFA represents nearly 50 companies that 5

produce advanced and cellulosic biofuel s as well as 6

renewable feed stocks. 7
This 2014 proposal will pull the rug out f rom 8

underneath our advanced biofuel s sector and will 9

destroy the industry. It is a significant departure 10

from the previous years and from a clear congressional 11

intent to steadily increase the target for advanced 12

biofuel s year after year. 13

EPA's proposal to put the target below the current 14

production of advanced biofuel s by torturing a 15

mathematical model or flipping its own public arguments 16

on waiver authority from one year to the next is a 17

major violation of the statute and the commitment of 18

Congress and th is administration to GHG reductions 19

through advanced drop

- in biofuel s. 20

There are many concerns, which we will address in 21

our written comments. These oral arguments will only 22190 focus on three. First, EPA's proposed RFS reductions 1

fall disproportionately on advanced biofuel s. For the 2

first time ever, the RVOs are leaving behind 3

congressional intent and moving outside the volume 4

mandates that were written into law. 5
EPA is proposing to cut volume requirements for 6

advanced biofuel s by more than 40 percent, comp ared to 7
the requirements that are currently written in the RFS 8

statute. In contrast, EPA is proposing to cut less 9

than 10 percent reduction off of conventional biofuel s. 10

We're left scratching our heads and wondering why 11

EPA would deliver such a disproport ionate large blow to 12

a category of renewable fuels that reduces GHGs the 13

most. This directional change is counterproductive to 14

Obama administration's stated goals of reducing climate 15

change. 16

Point number two, the EPA Monte Carlo model. This 17

process, whic h you have selected to set the RVO targets 18

using a mathematical model system as Monte Carlo, is 19

driving this nation to an average. We have for the 20

past years driven ourselves to be leaders in the world 21

on biofuel s, not average performers. And through thi s, 22191

we have exceeded the yearly RVO targets in the overall 1

advanced pool. 2

To not consider various items during the modeling 3

such as the RIN carryover, the actual gallons produced 4

in the biomass

- based diesel pool, as well as the actual 5
gallons produced in th e advanced pool, and the impact 6

of individual State policies such as the low carbon 7

fuel standard in California, is torturing the model to 8

gain the predetermined result that you want. 9

For our evolving industry, such policy will ensure 10

a continuous oversupp ly of advanced biofuel s compared 11

to what the EPA model forecasts and would deflate any 12

value in the RIN system. We need EPA to stop looking 13

in the rearview mirror at these averages and start 14

concentrating on the road ahead because you're missing 15

all the s igns that this industry is not an average 16

performer. 17

Point three, the EPA should set the RFS standard s 18

that encourage production. And for an administration 19

that is committed to addressing climate change, this 20

proposal sets the consumption targets way belo w what we 21

actually produced. 22192 So, in conclusion, whether intended or not, this 1

rule has sent a chilling signal to the financial 2

markets everywhere. This administration has spent over 3
$500 million from the DOE alone to develop advanced 4

biofuel s industry. I t's counterintuitive that EPA 5
would undercut the very companies you funded, continue 6

to fund to develop these fuels. 7
Option one may be an improvement, and we will 8

provide detailed comments on it. But many other 9

concerns will be in our written submission. We look 10

forward to working with you during the comment period 11

to revise this proposal to align with the statute's 12

intent and show the administration's continued support 13

of the growing advanced biofuel s industry. 14

Thank you. 15

MR. GRUNDLER : Thank you. Mr. A sh, welcome. 16

MR. ASH : Thank you. 17

Good afternoon. I'm Avery Ash, director of 18

Federal relations for AAA

. 19

As North America's largest motorist organization , 20

AAA has advocated for more than 100 years to ensure 21

that our more than 54 million members and all Ame ricans 22193

have access to transportation fuels that are safe, 1

reliable, and affordable. 2

With this focus in mind, AAA applauds the EPA for 3

putting consumers first with their proposed 2014 RFS 4

standards. The proposal will support continued 5

development of altern ative fuels while also recognizing 6

the needs of millions of Americans who drive every day. 7
To be clear, AAA is not opposed to the use of 8

ethanol , and we're not opposed to the RFS. However, 9

more realistic targets must be set to protect drivers, 10

especially from the increased use of potentially 11

damaging E15 gasoline. The vast majority of cars on 12

the road today are not designed to run on gasoline 13

containing more than 10 percent ethanol

. 14

Ethanol has the potential to support the economy 15

and reduce the reliance on fossil fuels. However, it 16

is irresponsible to mandate more ethanol than cars can 17

safely use. More 90 percent of vehicles currently on 18

the road are not approved by manufacturers to use E15. 19

This includes most vehicles made between 2001 and 20

2013. 21

While new model vehicles can increasingly use E15 22194

gasoline, previous makes and models were never designed 1

to use the fuel and are often not covered to use E15 2

under warranty. This puts motorists and our members in 3

the difficult and confusing position choosing a fuel 4

for their vehicle that may be approved for use 5
according to EPA, but not according to their 6

manufacturer. It will likely take another decade 7

before the bulk of the fleet will be able to use

-- 8

will be E15 compatible, as approved by manufacturers. 9

I want to thank you for this opportunity today, 10

and we urge the agency to act swiftly to finalize 11

specific targets that both support ethanol use while 12

also helping to protect drivers nation wide. We look 13

forward to submitting more extensive comments during 14

the comment period. 15

MR. GRUNDLER : Thank you very much. Questions? 16

(No response.) 17

MR. GRUNDLER : Mr. Rindler, welcome. 18

MR. RINDLER: Thank you. 19

My name is Alex Rindler. I'm a policy associate 20

at the Environment al Working Group. Thank you for 21

giving me the opportunity to testify today. 22195 EPA's proposed rule recognizes that the renewable 1

fuel standard isn't working as designed and that action 2

must be taken to address the ethanol blend wall. The 3

Environment al Working Group strongly supports a Federal 4

mandat e tha t drives the development of low carbon 5

biofuel s that do not pit our energy and food security 6

needs against the environment and public health. 7
But as long as the RFS remains the de facto 8

mandate for corn ethanol , these low carbon , second

9

generation bio fuel s will not have a viable market in 10

which they can compete. That is why EPA should place 11

more emphasis on cellulosic ethanol and drop

- in 12

biofuel s and de

- emphasize corn ethanol , which has 13

proved to be disastrous for the environment

. 14

The proposed 2014 st andard s lower the overall 15

mandate enough to stave off the blend wall, but this 16

reduction will do little to weaken corn ethanol 's 17

chokehold on the market, and it won't help the 18

cellulosic ethanol industry gain a foothold in the E10 19

pool. 20

The more we learn o f corn ethanol 's harm to the 21

environment , the more difficult it is to justify a 22196

renewable fuels policy that mandates its use. Since 1

Congress expanded the RFS in 2007, we've witnessed a 2

dramatic increase in the demand for and production of 3

corn to burn for fuel. The hope that corn ethanol 4

could greatly lower the carbon footprint of the 5
transportation sector died as it became clear that its 6

growth carried a heavy price. 7
The yardstick we now use to measure corn ethanol 's 8

impact is not the gallons of foreign oil it supposedly 9

replaces. It is the acres of wetlands and grasslands 10

that have been plowed under to plant corn. EWG's 11

analysis of the USDA's crop land data layer found that 12

from 2008 to 2011 the corn ethanol mandate contributed 13

to the loss of 23 millio n acres of vegetation, an area 14

the size of Indiana. 15

In places where the loss of wetlands has been 16

greatest, namely the wildlife

- rich prairie pothole 17

region of the upper Midwest, corn accounts for most of 18

this conversion, 68 percent, or more than 236,000 19

ac res. In addition, the rapid conversion of wetlands 20

and grasslands has driven up greenhouse gas emissions 21

by releasing huge amounts of carbon stored in the soil 22197

and increasing the use of fertilizer s that emit nitrous 1

oxide. 2

EPA's own lifecycle analysis fou nd that corn 3

ethanol produced more greenhouse gas emissions than 4

gasoline in 2012 and will continue to do so in 2017. 5
According to your analysis, corn ethanol produced in a 6

natural gas

- fired or dry mill plant results in 7
emissions that are 33 percent highe r than gasoline's 8

and 66 percent higher when the ethanol comes from a 9

coal

- fired dry mill plant. 10

Even though corn ethanol contributes to climate 11

change, virtually all corn ethanol production is 12

exempted from the greenhouse gas reduction standard s of 13

the RF S, standards that second

- generation biofuel s like 14

cellulosic ethanol must meet. With that kind of uneven 15

playing field, it is no wonder that corn ethanol 16

continues to dominate the market at the expense of 17

better biofuel s. 18

Corn ethanol also increases emiss ions of harmful 19

air pollutants, including particulate matter that 20

contributes to respiratory illnesses. The Nation al 21

Academy of Sciences concluded in 2011 that the effects 22198

of ethanol fuel on air quality would be more damaging 1

to human health than those fr om gasoline use. 2

Even worse, as the acreage dedicated to corn 3

production has increased in recent years, more nitrogen 4

from fertilizer has washed off farm fields, polluting 5
waterways and contributing to low oxygen dead zones 6

lethal to aquatic life. The Nat ion al Academy also 7
highlighted these harmful effects on water quality, 8

noting that the increase in corn production contributes 9

to both hypoxia and harmful algal blooms. 10

The verdict is in. The RFS isn't generating 11

environment al benefits because it relies o n a fuel that 12

increases greenhouse gas emissions, worsens air and 13

water pollution, and scars America's landscape, a s this 14

grim reality comes at the expense of cellulosic 15

producers at the very time their first commercial 16

gallons enter the marketplace. 17

Unfor tunately, Federal law limits EPA's ability to 18

address the long

- term flaws of the RFS and provide the 19

cellulosic ethanol industry the certainty it needs to 20

succeed. 21

MR. GRUNDLER : Could you wrap it up? 22199 MR. RINDLER : We, therefore, hope EPA will support 1

cong ressional efforts to reform Federal biofuel s policy 2

in order to restore the agency's ability to advance the 3

innovative low carbon fuels of the future. 4

Thank you very much. 5

MR. GRUNDLER : Thank you. Any questions? 6

MR. MACHIELE : Just a request that, I gues s, in 7
your written comments that you

-- I mean, I thank you 8

for your testimony, all the information provided. But 9

then , as you prepare your written comments, if you 10

could translate that into what you would encourage the 11

agency to finalize in the context o f what we propose as 12

far as option one, two, three and the volumes 13

associated with it. So

-- 14

MR. RINDLER : We'll be happy to do so. Thank you. 15

MR. MACHIELE : Thanks. 16

MR. GRUNDLER : Welcome, Ms. Phillips. Please 17

proceed. 18

MS. PHILLIPS: Thank you. 19

My name is Leticia Phillips , and I'm the North 20

American representative for the Brazilian Sugarcane 21

Industry Association, UNICA. I thank you for the 22200

opportunity to testify here today. 1

UNICA is the leading trade association for the 2

sugarcane industry in Brazil, re presenting 60 percent 3

of the country's sugarcane production and processing. 4

Sugarcane ethanol production in Brazil uses only 1.5 5

percent of the country's arable land, reduces GHG 6

emissions by 90 percent on average compared to 7
conventional gasoline, and he lps move beyond fossil 8

fuels. 9

For over 6 years, UNICA has been working closely 10

with EPA and the U.S. renewable fuel industry. Since 11

the beginning of the RFS program, EPA had been a strong 12

supporter of the modest, but important role that 13

Brazilian sugarcan e ethanol plays supplying Americans 14

with sustainable fuel. In 2010, the agency certified 15

that Brazilian sugarcane ethanol cuts CO2 emissions by 16

more than 60 percent and classified it as an advanced 17

renewable fuel. 18

Following congressional intent, EPA has e ncouraged 19

advanced biofuel s because they are the renewable fuel 20

with the greatest GHG reductions. So it came as an 21

extraordinary shock and it is deeply concerning to us 22201

that EPA has proposed to drastically reduce the volumes 1

of advanced fuels for the 2014 RFS. 2

This last and next year's target for advanced 3

biofuel s is a huge step backward from the Obama 4

administration's goals for decreasing GHG emissions and 5
improving the energy security. Advanced biofuel s, 6

including Brazilian sugarcane ethanol , are a prov en 7
solution for addressing climate change. Yet EPA's 8

proposed formula for setting advanced biofuel s targets 9

ignores its own estimate that 650 to 800 million 10

gallons of sugarcane ethanol can be supplied to the 11

U.S. market in 2014. 12

EPA's proposal pulls the rug from under the 13

advanced biofuel industry, not just Brazilian sugarcane 14

producers. EPA is proposing to cut advanced biofuel s 15

volume by more than 40 percent while proposing a less 16

than 10 percent reduction to volume requirements for 17

conventional biofuel s, which include a number of 18

grandfathered facilities that may not meet the minimum 19

requirement of 20 percent reduction. 20

EPA should set renewable fuel standard that 21

encourage production and consumption of all available 22202

advanced biofuel s because the domesti c market for 1

advanced biofuel s in America is growing rapidly. While 2

EPA originally projected that U.S. would import around 3

600 million gallons of Brazilian sugarcane ethanol to 4

meet the 2013 RFS, we will end this year with about 450 5
to 500 million gallons , not because Brazil has 6

exhausted its capacity for export, but because American 7
production of advanced biofuel s is expanding quicker 8

than EPA forecast. 9

Congress clearly intended to encourage greater use 10

of advanced biofuel s year over year in order to achi eve 11

the largest GHG reduction possible. That's why UNICA 12

supports EPA's option one , which would set the advanced 13

biofuel volume requirement based on the availability of 14

advanced biofuel s plus carryover RINs. 15

We also encourage EPA to consider implementatio n 16

of California's low carbon fuel standard when setting 17

the RFS targets. California considers Brazilian 18

sugarcane biofuel s the low carbon fuel with the best 19

performance today, and the only fuel available at 20

commercial scale to contribute to meeting its lo w 21

carbon fuel standard

. 22203 We also urge the administration to consider the 1

repercussions for trade policy. Europe has already 2

assessed dumping charges on some U.S. biofuel s, and the 3

last thing the global biofuel s market needs is policy 4

reversals that flood o ther countries with unwanted 5

products. 6

Our association looks forward to commenting 7
further on the proposal and will continue to play an 8

active role in the RFS rulemaking process. Brazil will 9

continue to be a strong, dependable partner, helping 10

America mee t its clean energy goals. 11

Thank you very much. 12

MR. GRUNDLER : Thank you. Questions? 13

I have one. Did I hear you say that you recommend 14

that EPA considers the California standard in setting 15

the

-- our standard ? 16

MS. PHILLIPS : Yes. It's just what we mean i s 17

that California will continue to demand Brazilian 18

sugarcane ethanol to meet their low carbon fuels

-- 19

their low carbon fuel standard . And this fuel will 20

come in, and this fuel could be generating RINs. 21

So we will explain further in our written comments 22204

what we mean by that , b ut this is essentially what we 1

have in mind. 2

MR. GRUNDLER : Thank you. 3

MS. PHILLIPS : You're welcome. 4

MR. HANNON : Both yourself and a prior speaker 5
referred to a 40 percent reduction in the advanced 6

biofuel compared to a 10 percent in the conventional. 7
That's also clearly in a context where all the

-- 8

almost all of the growth in advanced was coming from 9

cellulosic , not from non

- cellulosic advanced , but from 10

the cellulosic advanced

. 11

So the 40 percent reflects, to some extent, that 12

di sproportionate growth that Congress mandated that was 13

unrealistic, as we all know, not just a clear 14

overemphasis on advanced compared to conventional. I 15

think in the proposal, EPA describes it as the actual 16

volume drop in conventional to be greater than t he 17

volume drop in non

- cellulosic advanced

. 18

So, in both of your comments, it'd be useful to 19

address that and explain why the 40

-- if you consider 20

the 40 percent the important percentage for us to 21

consider, why that is the important percentage in the 22205

contex t of the cellulosic growth. 1

The

-- that's it. Thank you. 2

MS. PHILLIPS : Thank you. 3

MR. MACHIELE : I have one follow

- up question, I 4

guess going back a few speakers. But more , I gue ss, 5
again, in written comments

-- Glenn, I assume you'll 6

put it in written comments anyway. But just to 7
request, I was asking Steve Shimberg, sort of asking 8

him about the implications of EPA overestimating on the 9

low side. 10

I assume you will be addressing that in your 11

written comments as it relates to your advanced biofuel 12

produc ers? 13

MR. JOHNSTON : Yes, we will. 14

MR. GRUNDLER : Again, thank you so much for 15

spending the time sharing your concerns. Well worth 16

it. Thank you. 17

Panel 8 , come on up. 18

(Pause.) 19

MR. GRUNDLER : Welcome. Mr. Hutchison, you're up 20

first. 21

MR. HUTCHI SON : Good a fternoon. Thank you for 22206

this opportunity. 1

My na me is Robert Hutchison , and I farm with my 2

two brothers, a son, and a nephew on our family farm in 3

Cordova, Maryland. And although we're not directly 4

involved in the production of agriculture, I've been a 5

st rong proponent of ethanol for more than 20 years and 6

believe it has been extremely important in allowing 7
American farmers to move away from farm support 8

programs to making market

- driven decisions. 9

The actions that you are proposing to reduce the 10

renewable fuel standard by 1.4 billion gallons from 11

conventional ethanol can change all the hard work that 12

-- and investments that farmers across the nation have 13

done to develop an important economic driver for the 14

rural community and for agriculture. 15

More important ly, EPA is sending a message to 16

investors that making financial decisions based on 17

Government policy is a bad idea in the long run, and it 18

will diminish investments in second

- generation in 19

cellulosic biofuel production. 20

We have no ethanol production in Mar yland today, 21

but we do see an opportunity in the future with the 22207

production of switchgrass, which can be raised in 1

buffer areas and to serve as both the cellulosic 2

biofuel renewable fuel and a way to protect the 3

Chesapeake Bay. But I, for one, would not i nvest in 4

such an opportunity if by the whim of a Federal agency 5

any required use of a fuel could be eliminated. 6

Today, cellulosic ethanol is considered the 7
preferred option, but in 2007, corn

- based ethanol was 8

considered an immediate solution to fulfill th e first 9

15 billion gallons of production. No one at that time 10

suggested that once that level was reached, the plug 11

would be pulled and investors would just have to deal 12

with it. 13

In the early 2000s, Maryland Grain Producers 14

Utilization Board investigated b uilding an ethanol 15

plant. As a corn deficit State and with a strong 16

desirable poultry industry, we did n ot want to use corn 17

as our feed stock. Instead, we investigated using 18

barley, a crop we can grow in a 2

- year, 3

- crop rotation 19

in conjunction with corn and soybeans. 20

This would enable us to produce domestic fuel 21

locally, grow a winter cover crop to help protect the 22208

Chesapeake Bay, and maintain the same corn and soybean 1

production for the poultry industry. We believed it 2

was a win

- win concept, and althoug h we decided not to 3

move forward with our project, the idea did res ult in 4

construction of a barley to ethanol plant in Hopewell, 5
Virginia. 6

I mention this to demonstrate that Maryland grain 7

farmers have made their decisions in an effort to 8

protect the poult ry industry, which is our biggest 9

customer, and also to protect the water quality of the 10

Chesapeake Bay. 11

Ethanol is one of the best tools we have to fight 12

air pollution from vehicles, and there is no other fuel 13

available today that matches ethanol 's abilit y to 14

improve overall environment al quality compared to 15

gasoline. In 2012, the 13.2 billion gallons of ethanol 16

produced reduced greenhouse gas emissions on road 17

vehicles by 33.4 million tons. That's equivalent to 18

removing 5.2 million cars and pickups or r emoving all 19

the cars and trucks registered in Maryland from the 20

road every year. 21

According to the Maryland Department of 22209

Environment , results of 2012 air quality monitoring 1

data showed continuing improvements in the State's air 2

quality, thanks to sustained and continued strong 3

support for Maryland's air quality programs by Governor 4

Martin O'Malley. These improvements have been made 5

since the introduction of E10 blends after the use of 6

MTBE was eliminated and could

-- 7

MR. GRUNDLER : Could you please conclud e your 8

remarks now? Could you wrap it up? 9

MR. HUTCHISON : Okay. And co uld be improved more 10

with E85. 11

On a personal note, the policy decision

-- excuse 12

me. On a personal note, the policy decisions have 13
reduced the income on our family farm by about $63,0 00 14

if you take the price when the announcement was made 15

and today's price and apply it to our production. 16

The current price of corn is below our cost of 17

production, and my cost of production is somewhere 18
between $4.30 and $4.80, and the current price is 19

so mewhere around $4.30 to $4.50. 20

So thank you. Appreciate your time. 21

MR. GRUNDLER : Thank you for your time. Mr. Marr? 22210 MR. MARR : Thank you very much. 1

I kind of laughed this morning when Iowa Governor 2

said he flew 1,000 miles to come here. I spent 18 3

hour s trying to get through Chicago O'Hare yesterday. 4

I'm with the Minnesota Soybean Processors. We're 5
own by about 2,500 local investors, located in a little 6

500

- person town of Brewster, Minnesota, in southwest 7
Minnesota. We process soybeans into soybean me al for 8

animal consumption and in edible soybean oil, and about 9

half that oil goes into bio diesel refining. 10

We began operations in 2003. We began refining 11

bio diesel in 2005. We have about 80 employees, 20 12

specific to bio diesel . These are fully benefitted 13

jobs. We're known as the best employer in a 100

- mile 14

radius. 15

We'll provide detailed written comments later, but 16

briefly today, it appears that EPA is basing 2014 17

biomass

- based diesel fuel requirements upon some 18

strange, contrived relationship to the abili ty to 19

produce cellulosic ethanol . Last August, you required 20

2.7 billion gallons of advanced biofuel s for 2013. We 21

will easily exceed those volumes. 22211 So it's extremely troubling to us that because 1

we're an advanced bio diesel producer why you would take 2

act ual wet gallons of the advanced biofuel bio diesel 3

that doesn't affect the gasoline pool out of the 4

marketplace. It just doesn't make Midwest sense if 5
your goal is to replace petroleum with advanced 6

biofuel s. 7
The proposed rule focuses almost entirely on th e 8

retail cost to consumers, but it really missed the mark 9

on bio diesel because today bio diesel is less expensive 10

than diesel fuel, and in 2014, with or without the tax 11

credit, we anticipate being extremely competitive with 12

diesel fuel prices. We can't pre dict the future. We 13

can only model it, and our models have been more 14

accurate than EPA's. 15

When you modeled feed stock prices in 2012, you 16

predicted feedstock prices would increase by at least 3 17

cents a pound. You were wrong. Feedstock prices have 18

decreas ed dramatically, and with the abundance of 19

available oils in the marketplace due to the 20

development of qualifying feedstocks, we anticipate the 21

feedstock cost will drop even further in 2014. We 22212

remind you again that our product, bio diesel , plays in 1

the di stillate pool, not in the gasoline pool. 2

On October 21, the Wall Street Journal had an 3

article, "Gasoline Prices Skid as Diesel Burns." And 4

in that article, it said refiners are still running at 5
high speed because they are earning fat profits 6

exporting di esel , which is made using the same process 7
that converts oil to gasoline. We submitted that 8

article to you. 9

The article further states U.S. diesel exports 10

surpassed 1 million barrels a day for the first time 11

this past summer, doubling from the start of th e year. 12

In 2010, U.S. diesel exports averaged just 300,000 13

barrels a day. 14

The article further goes on and states that 15

Marathon's Garyville, Louisiana, refinery and V a lero, 16

all three refineries are spending money to increase 17

diesel fuel production on the G ulf Coast, production 18

that can be exported. And exports of petroleum fuel 19

actually reduce the RVO for that specific fuel. In the 20

case of diesel , the export reduces the RVO for diesel

. 21

B y keeping the biomass

- based diesel fuel 2221 3

requirement at 1.7 billion in reality could allow 1

obligated parties to offset some of their RVO, ethanol 2

RVO with biomass

- based diesel RINs. Essentially, 3

bio diesel producers are providing crude oil refineries 4

nearly 2 billion gallons of free distillate refining, 5

dis tillate that's bei ng exported. 6

We remind EPA that biomass

- based diesel is today 7
the only commercially produced advanced biofuel and is 8

produced from multiple feedstocks, nearly all 9

nonedible, especially important when you consider the 10

recent FDA proposal to eliminate all tr ans fat oil and 11

products. 12

We strongly urge EPA to reanalyze the relationship 13

between ethanol RVOs and the ability of bio diesel to 14

temper the so

- called ethanol blend wall. But really, 15

we're here today to personalize the economic impact 16

these proposed rules could have on our employees. It 17
will reduce our payroll by at least $500,000, brings 18
uncertainty to our investors. It's $500,000 that 19

doesn't go up Main Street , USA. 20

I'm not here to pick on major oil, but in major 21

oil's 2012 SEC proxy shows five named e xecutives 22214

receiving $117 million in compensation, and they 1

proudly note on their Web site, "As we develop oil and 2

gas resources to meet the world's growing energy needs, 3

we work to build and sustain local economic growth and 4

improve social conditions." Bu t apparently, that 5
doesn't apply to their fellow Americans. 6

Thank you. 7

MR. GRUNDLER : Thank you, Mr. Marr . Questions for 8

the panel? 9

MR. BURKHOLDER : Yeah, you mentioned the 10

decreasing feedstock costs to the bio diesel industry as 11

well as cost of bio diesel being less than petroleum

12

based diesel . Just appreciate any information you 13

could provide in your written comments on those two 14

issues. We'd like to take a look at that. 15

MR. MARR : We'll be glad to provide that. Thank 16

you. 17

MR. GRUNDLER : Okay. Mr. McKn ight, welcome. 18

MR. MCKNIGHT: Thank you. 19

My name is John McKnight. I work for Nation al 20

Marine Manufacturers Association. I appreciate the 21

opportunity to speak today, and we'll be submitting 22215

written comments by the deadline. 1

A little bit about the recreat ional marine 2

industry, you guys have been regulating us for years. 3

So you already know it. But we got, you know, 12 4
million registered boats. It's a $121 billion economic 5
impact. And the nice thing about recreational boating 6

is it is a strong U.S. manu facturing business. We got 7
over 340 jobs that we create, and they are jobs in the 8

United States

. 9

NMMA commends the EPA on behalf of marine 10

manufacturers and boaters for proposing to lower the 11

renewable fuel obligations for 2014. Boating industry 12

continue s to experience a damaging effect of high

13

ethanol blends and appreciates EPA's steps to ensure 14

that low

- level ethanol fuel remain available. 15

NMMA members to the Department of Energy 's 16

Renewable Labs studied the effects of E15 on marine 17

engines, and the res ults unequivocally show significant 18

engine damage, poor engine runnability, performance, 19

and difficulty starting. Additional oxygen that we 20

find in E15 makes the fuel burn hotter, and the higher 21

temperatures can reduce the strength of the components. 22216 In a ddition, the ethanol can cause compatibility 1

issues with other materials in the fuel system. Our 2

testing proves utilizing high

- ethanol blends can lead 3

to significant issues for marine engine consumers and 4

can resul t in premature engine failure. 5
The negati ve effects of E15 are not only seen in 6

marine engines, but there's been testing to show it on 7

other small and off

- road equipment. The overwhelming 8

majority of nonroad engines , from chainsaws to weed 9

trimmers to lawn mowers , operate similarly to 10

recreation al marine engines with open loop systems and 11

with fuel systems that are set at the factory and 12

designed to be, as required by EPA, tamper proof. 13

The 2014 proposed renewable fuel standard s will 14

help ensure that safe fuel remains a viable source for 15

marine c onsumers. Many marine consumers prefer 16

ethanol

- free gasoline for their engines, particularly 17

our legacy products. The proposed RVOs help ensure 18

that E0 will be available to consumers, which totaled 19

somewhere around 3 percent of the fuel production in 20

201 2. 21

Most critically, the proposed RVOs for 2014 will 22217

allow the continued availability of E10 in the 1

marketplace. Marine engine products are designed, 2

calibrated, and tested so they can run on E10 fuel. 3

Our engines are specifically prohibited from operatin g 4

on E15 fuel, as established by this agency's partial 5

waiver. 6

This agency needs to ensure the continued 7
available fuel for the millions of marine products, 8

small engine equipment, and older cars that rely on it. 9

The rulemaking will help ensure that E10 f uel is 10

available for the short term. 11

NMMA is not opposed to ethanol or renewable fuels 12

in general, but simply opposes to any fuel blend that's 13

going to ruin our engines. Our engines present the 14

worst

- case operating condition due to their infrequency 15

of us e, the start and stop running conditions, and the 16

interaction with surrounding water. 17

NMMA and our members pride ourselves on innovation 18

and testing new fuels to safely and effectively operate 19

our marine engines. We will also continue to explore 20

the alter native biofuel s, such as isobutanol. We'll 21

continue to invest in testing that reveals exactly how 22218

ethanol is hurting marine engines so that we c an better 1

inform our customers. We have been working with the 2

Department of Energy and have done a lot of eval uation 3

and studies to looking at isobutanol and other effects 4

of ethanol

. 5
While NMMA commends the EPA's 2014 RVO proposals, 6

we understand that this is merely a short

- term fix 7
which fails to ensure the long

- term market reliability. 8

What we really need is f or Congress to go back and 9

without delay and amend the renewable fuel standard

. 10

The RFS is currently a broken law, which sets a totally 11

unrealistic fuel mandate, and we believe that Congress 12

needs to address the RFS with head

- on legislation. 13

I appreciate the opportunity to be able to come 14

before you today and testify, and I'm certainly 15

available to answer any questions. 16

MR. GRUNDLER : Thank you. 17

MR. BURKHOLDER : Just a clarifying question. If I 18

understood you correctly, you said that all of your 19

marine en gines are designed to run and operate on E10 20

fuel? Is that correct? 21

MR. MCKNIGHT : To accommodate. 22219 MR. BURKHOLDER : To accommodate an E10 fuel blend? 1

MR. MCKNIGHT : Yeah, what we do is we'll do like 2

certification of E0, and now it's moving to E10. So 3

wit hin the fuel ratio, we calibrate the engines to run 4

within that band of 0 to E10. When you start going up 5
to E15 and you're increasing the amount of oxygen in 6

the fuel, that affects the combustion chamber, and we 7

run a lot hotter. 8

We saw wit h the tests th at we did with NRE L, with 9

DOE funding, we saw temperatures 100 to 150 degrees 10

higher than we normally run on E10 using E15, and 11

that's what caused the damage. 12

MR. BURKHOLDER : Okay. Thanks. 13

MR. ARGYROPOULOS : A follow

- up also. I just want 14

to make sure I heard you correctly, and maybe we can 15

read it in your testimony, but did you say that these 16

engines consume about 3 percent of the fuel, nation's 17

fuel or

-- 18

MR. MCKNIGHT : No, no, no. Oh, no. I'm sorry. 19

Was I getting really fast, and I stayed in the tim e. 20

MR. ARGYROPOULOS : That's okay. 21

MR. MCKNIGHT : But what I'm saying is, okay, you 22220

go over to the Eastern Shore. I was there a couple of 1

weeks ago. I pull up to a gas pump, and I can get E0. 2

MR. ARGYROPOULOS : Right. 3

MR. MCKNIGHT : Some places you can g et it. That 4

was the point. I'm trying to say right now in the U.S. 5

fuel supply , from the data that we've seen, 3 percent 6

of the fuel out there

-- I guess in entertainment 7
areas, people sell it for marine. 8

Because I pulled up to the pump , and I go to the 9

guy -- I went to fill, and he goes, "You don't want 10

that. That's ethanol free." It's going to cost you a 11

little more because, obviously, supply and demand. But 12

right before me w as a boater filling up his boat with 13

it. 14

So it's out there. We would like t o see it 15

maintained out there. But I mean, there's another 16

issue, too. Most of your boaters that fill up their 17

truck and then they fill up their boat, t hey're putting 18

E10 in there, and we're okay wit h E10. We can 19

calibrate that. 20

We can't get to that nex t range unless, you know, 21

we make some decision here as to, okay, we're going to 22221 start calibrating these engines to that. But then 1

we've got to start talking about

-- 2

MR. ARGYROPOULOS : Well, any data you have kind of 3

o n that would be useful as well. 4

Than k you. 5

MR. MCKNIGHT : Thank you. 6

MR. GRUNDLER : Mr. Ben a vides? 7

MR. BENAVIDES : Thank you, Mr. Chairman, and thank 8

you for allowing me to testify today and to the 9

distinguished members of the board and colleagues. 10

My name is Ramon Ben a vides, and I'm the pre sident 11

of Global Renewable Strategies and Consulting, a 12

strategic business development company. I'm also a 13

founder/shareholder of two biomass

- based diesel 14

facilities and now a new owner of a third advanced 15

fuels refinery that is scheduled to open in 2014. This 16

facility will produce a unique renewable , high

- energy 17

density liquid based upon DoD technology. 18

The proposed renewable fuel volumes represented in 19

the NPRM today are yucky, regressive, and represent 20

stag nation for a 2

- year period, and I oppose them. I 21

understand the methodology the agency is proposing, and 22222 I'm appreciative of the agency's decision to remain 1

open to any evidence that suggests the numbers may be 2

larger than proposed and its willingness to review that 3

data as presented. However, I am concerned that the 4

official data for 2013 issued by other regulatory 5
agencies will not be available at the time of comment 6

closure and may lead to incomplete analysis. 7
It is clear the proposal has had an adverse effect 8

on the market for both fuel and RINs. Regardless of 9

prior statements that the agency is not responsible for 10

market conditions, the E I SA authorizes credits, 11

volumes, waivers, and relegates authorities to the EPA. 12

In reality, this means the agency is the market maker, 13

and because of those aut horities, no other party, 14

entity, or business has this power. 15

The proposed numbers sent a strong signal to the 16

investment and producer community that indicates growth 17

will be stagnant that will result in loss of investment 18

opportunity and jobs. The public ly traded companies 19

have already experienced a share loss on the markets, 20

and others are reassessing their expansion plans. 21

How can the agency derive that M&A will occur when 22223

investment monies have vacated the sector? It's akin 1

to the scenario that when m onies run out, governments 2

shut down, credit downgrades occur, and I'm sure the 3

agency can correlate with my question. 4

Despite the agency assumption that the tax credit 5
will have an effect on the industry, an historical 6

review of production data provided b y the EMTS and the 7

Energy Information Agency for the prior lapsed tax 8

credit periods indicates that the domestic bio diesel 9

volumes were sustained and subsequently grew. 10

The U.S. facilities achieved greater efficiencies 11

that resulted in lower cost to compet e with the diesel 12

prices, and that was not reflected in the NPRM. Two 13

major events that directly coincided with diminishing 14

RIN values were in part based upon actions or perceived 15

actions of the agency. 16

The first incident extended the annual compliance 17

da te beyond the traditional 28th of February, and the 18

second was the leaked 2014 volumes. The markets have 19

not recovered from those events, and the influences of 20

the agency's actions were not discussed as factors that 21

influence or

-- and potentially impede the production 22224

of a renewable fuel. 1

I remain standoffish about Monte Carlo models 2

because the initial data the agency has selected may be 3

based on less than credible information that is not 4

evidentiary based. These models worked very well when 5

historical, factual, and finite data is used. 6

When legislation or rules that are designed to 7
grow businesses and industries, such as the E I SA and 8

the RFS, become an impediment to growth, then that 9

legislation or rule is obsolete and counterproductive 10

to the true busi ness, regardless of the intended 11

purpose. In regards to the biomass

- based diesel and 12

advanced category, the agency is going the wrong 13

direction as it fails to recognize growth. 14

Thank you for the consideration of my brief 15

testimony at this hearing, and hap py holidays to those 16

of you who are still gainfully employed. 17

MR. GRUNDLER : Thank you. Mr. Engelbrecht? 18

MR. ENGELBRECHT : My name is Kent Engelbrecht. 19

I'm with ADM Bio diesel Group, and I'd like to thank you 20

very much for the opportunity to discuss the E PA's 2014 21

RVO proposal and its impact on the future of American 22225

bio diesel

. 1

Archer Daniels Midland Company has been producing 2

bio diesel in the United States since 2006. Today, we 3

manufacture and market more than 200 million gallons 4

every year, produ ced fro m a wide variety of feed stocks, 5
including soy and canola oils. 6

In 2005 and again in 2007, Congress took important 7

steps to ensure renewable fuels would have a permanent 8

place in the American landscape. As a producer that is 9

helping make this commitment a reality, we appreciate 10

the EPA's efforts to work closely with the bio diesel 11

community . In the past, your understanding of the 12

market and its potential help ed to set accurate and 13

constructive bio diesel goals. 14

That is why we are so disappointed to learn of 15

EPA's proposal to reduce the volumes of the RFS across 16

the board and to hold bio diesel constant for next year. 17

It is important to understand that for bio diesel , 18

constant is actually a cut. We've heard that several 19

times today. 20

Setting the RFS at 1.28 bil lion gallons for 2014 21

will lead to a surplus of RINs since production this 22226

year is actually expected to top the 1.7 billion 1

gallons that we and other stakeholders have advocated 2

targeting for 2014. Between 2012 and 2013 , with an 3

increasing RVO that offere d the financial incentive to 4

run at maximum capacity and the insurance that demand 5
will be in place to support further investment, we 6

reduced our operating cost by 25 percent by 7
streamlining operations, increasing efficiencies, and 8

enhanced processing tech nique at a time when feedstock 9

costs declined by 30 percent. 10

ADM is a producer of bio diesel on an inter nation al 11

scale, with facilities in North America, South America, 12

and Europe. The United States is currently blending 13

bio diesel at a rate of less than 2 percent of total 14

diesel demand. This pales in comparison with other 15

countries. 16

For example, in Europe, they are currently 17

blending at a rate of 5.7 percent. In Argentina, 18

currently 7 percent and increasing to 10 percent in 19

2014. Brazil, likewise. Curre ntly 5 percent and 20

in creasing to 7 percent in 2014. 21

Indonesia, currently 5 to 7 percent and increasing 22227

to 10 percent in 2014. Philippines, currently 2 1

percent, although they were contemplating an increase 2

to 5 percen t prior to the recent typhoon. 3

Even cou ntries in colder climates maintain higher 4

blend rates than the United States . Western Canada is 5
at 2 to 4 percent blend rate. Norway is currently 6

blending at a 5 percent rate. 7

In conclusion, bio diesel has been a great success 8

story. 2014 was poised to b e a breakout year. We 9

believe the market came back

-- can get back on track, 10

but it needs a clear signal from the EPA that bio diesel 11

-- that the bio diesel market can support a 1.7 billion 12

gallon standard. 13

Through conversations like these and by 14

collaborat ion with all the stakeholders, we believe 15

that we can help craft an RFS that will continue to 16

strengthen America's rural economies, protect our 17

environment , and diversify our fuel supply for years to 18

come. We look forward to the opportunity to work with 19

E PA to help construct a strong RFS and preserve 20

America's commitment to biofuel s. 21

Thank you. 22228 MR. SIMON : Thank you, Mr. Engelbrecht. 1

Appreciate your comments on the blend rates in 2

different parts of the world. 3

If you have information that 's part of your 4

of ficial submittals in terms of where those biofuel s 5
are coming from? Are they domestic, or are they being 6

imported, and where are the markets and how the 7
interaction is, that would be very helpful for us as 8

well. 9

Thank you. 10

MR. ENGELBRECHT : Thank you. 11

MR. GRUNDLER : Mr. Lutt? 12

MR. LUTT: Yes, thank you. 13

Good afternoon. My name is Erick Lutt. I'm a 14

policy director at the Biotechnology Industry 15

Organization, or BIO. Can you hear me now? Oh, 16

thanks. 17

BIO is pleased to have the opportunity today to 18

comment o n EPA's proposed renewable fuel volumes for 19

th e 2014 RFS. BIO is the world's largest technology 20

trade association representing biotechnology companies 21

across the U.S. and 30 countries. BIO represents 22229

nearly 90 companies leading the development of new 1

tec hnologies for producing conventional and advanced 2

biofuel s. 3

Through the application of the industrial 4

biotechnology, BIO members are improving conventional 5

ethanol processes, enabling advanced biofuel production 6

technologies, and speeding development of ne w, 7

dedicated energy crops. To date, these companies have 8
invested more than $5.7 billion in private capital here 9

in the U.S., building the advanced and cellulosic 10

biofuel s industry. 11

Our membership includes four companies EPA cites 12

in its proposed rule as producing commercial gallons of 13

cellulosic biofuel s in 2014. Our member companies are 14

deeply concerned that the proposed rule is a 15

fundamental change in direction, and it sets a 16

troubling precedent for the RFS in 2014 and beyond. 17

EPA's proposal to waive v olumes of the advanced 18

and total renewable fuel volumes for 2014 is 19

inconsistent with past regulatory practice. This 20

regulatory inconsistency will undermine investors' 21

confidence in the progr am, short

- circuiting our 22230

companies' efforts to commercialize new technologies 1

that are highly dependent on investment capital. 2

For regulatory consistency and to ensure stable 3

and sustained growth in the advanced and cellulosic 4

biofuel s industry, EPA should revise the proposed rule 5
to be consistent with past practice in setting volumes, 6

EPA's interpretation of waiver requests, the plain 7
language of the statute, and congressional intent. 8

EPA should also revise the advanced and overall 9

renewable fuel volumes in the proposed rule to reflect 10

the levels required by the statut e for 2014 and follow 11

actual production and availability of renewable fuels 12

coming on the market, rather than focu s on distribution 13

constraints. 14

BIO is concerned the proposed rule is designed to 15

grant regulatory relief to obligated parties that is 16

not warr anted. The rapid rise and fall in renewable 17

identification number, or RIN, prices that occurred 18

throughout the year was caused by refiners who refused 19

to comply with the spirit of the law, instead look ed 20

for escape clauses. 21

It should also be noted since R INs are bought and 22231 sold among competing refiners , consumers are protected 1

from the cost, a fact reflected in the refiners' 2

quarterly statements. The final rule should ensure the 3

RIN market continues to work in incentivizing fuel 4

market stakeholders to mak e the necessary investments 5
in infrastructure for greater deployment of biofuel s
. 6

BIO recognizes the challenges associated with the 7
RFS. However, codifying a 10 percent blend wall is 8

inconsistent with the statute and congressional intent. 9

The RFS serves as the solution to the oi l industry

10

erected blend wall. BIO would encourage EPA to use 11

regulatory flexibility inherent in the law to 12

facilitate the transition over the blend wall without 13

decreasing volum e obligations. 14

The RFS was designed by Congress to p rovide a 15

supportive environment for private companies to develop 16

new technology, new production infrastructure, and new 17

energy crop supply chains. Our companies have acted on 18

this, investing billions of dollars in private capital 19

in conjunction with Feder al and State grants to launch 20

this new industry. 21

The proposed rule will strand existing investments 22232

in advanced biofuel s, curtail any further investment in 1

development of future facilities, and put hundreds of 2

thousands of existing and future jobs at risk. It will 3

undercut commercialization of other biotechnology 4

research and development, such as the burgeoning 5

renewable chemical industry, that are following the 6

growth of the biorefinery platforms encouraged by the 7

RFS. 8

This proposal will leave us ever mor e dependent on 9

oil, which is increasingly coming from volatile regions 10

of the world or is extracted in an environment ally 11

detrimental way, such as Canadian oil sands or 12

deepwater drilling. Setting the 2014 RFS obligations 13

lower than 2013 levels would mean that American will 14

use 100 million additional barrels of oil next year 15

alone. This would result in more than 30 million added 16

tons of greenhouse gases going into the atmosphere. 17

In conclusion, this proposed rule, if finalized 18

and carried into the future, will stymie the growth of 19

advanced and cellulosic biofuel production, discourage 20

additional innovation in the biotechnology industry, 21

harm economic growth, undermine U.S. energy security, 22233

and enable significant backsliding of the nation's 1

environment al go als. 2

Thank you for your time, and look forward to 3

working with you guys through the comment period. 4

MR. GRUNDLER : Thank you. 5

MR. MACHIELE : Just I guess in your written 6

comments, if you could elaborate on how the proposal 7
stymies cellulosic especially, I' d appreciate that. 8

MR. LUTT : Yeah. No, we'll expand on that. 9

MR. GRUNDLER : Thank you, Panel 8

. 10

Panel 9 , welcome. 11

(Pause.) 12

MR. GRUNDLER : Mr. Willis, we're ready when you 13

are. 14

MR. WILLIS : Okay. Hello, everybody. I'm Craig 15

Willis, vice president of eth anol with ADM. We'll be 16

following up the testimony today with comments in the 17

60

- day period. 18

I'd like to say thank you very much for the 19

opportunity to discuss EPA's 2014 RVO proposal and the 20

path forward for American ethanol . In 2005 and again 21

in 2007, Congress took important steps to ensure 22234

renewable fuels would have a permanent place in the 1

American landscape. Archer Daniels Midland Company has 2

been producing ethanol since 1979 . Today, we 3

manufacture and market 1.7 billion gallons of corn

4

based ethan ol at 6 plants in the United States

. 5
These six plants directly support more than 800 6

jobs at ADM and have created stability and opportunity 7
for countless American farmers. That is why we were 8

disappointed to learn of EPA's proposal to reduce the 9

volumes o f the RFS across the board. 10

Thanks to the renewable fuel standard , the use of 11

biofuel s has not only driven down cost for drivers at 12

the pump but has also served as a check against price 13

volatility in the oil markets. We want to make certain 14

that any EPA r ule does not undermine these consumer 15

savings, nor cut short the other benefits of the RFS, 16

including a positive effect on rural economies, job 17

creation, and the reduction of greenhouse gas emissions 18

at the tailpipe. 19

Corn

- based ethanol is the foundation of today's 20

American renewable fuels industry. Even in difficult 21

years, like last year's historic drought, we have met 22235

the standard and still delivered ethanol cheaper than 1

gasoline. I'll repeat that. Even in a drought like 2

last year, the worst since the m id 1950s, we met the 3

standard and still delivered ethanol cheaper than 4

gasoline. And in boom years, corn

- based ethanol has 5
not only met demand but has played a critical role in 6

absorbing corn volumes and providing certaint y to the 7

markets. 8

2014 can be a w atershed year, one in which we 9

overcome the volume constraints in the marketplace due 10

to insufficient infrastructure investment. Blending 11

economics should provide sufficient incentive to 12

deliver biofuel s to market in growing volumes. We were 13

very close t o reaching this point last fall, but people 14

lost faith once the draft, the EPA draft was leaked. 15

The market can get back on track with a clear 16

signal from the EPA. Unfortunately, the proposal, as 17

written, does not provide that signal. Worse, it sets 18

a le gal precedent that would make waivers far easier to 19

achieve, regardless of real

- world economic or market 20

conditions. 21

In conclusion, as we look forward

-- as we look 22236

toward the future of biofuel s, we believe that the EPA 1

should consider additional steps to address their 2

concerns while still maintaining a clear path for 3

biofuel s. Amongst the many avenues , EPA should 4

consider addressing the RVP issue to help ensure 5
greater adoption of E15 by abolishing the 1

- pound 6

waiver or granting it up to 15 percent. 7

Throu gh conversations like these and by 8

collaboration with all the stakeholders, we believe we 9

can help craft an RFS that will continue to strengthen 10

Americans' rural economies, protect our environment , 11

and diversify our fuel supply for years to come. We 12

look forward to the opportunity to work with you and 13

the administration to reach this important goal. 14

Thank you. 15

MR. GRUNDLER : Thank you. Any questions? 16

MR. BURKHOLDER : Yeah, I just wondered if you 17

could elaborate briefly. You mentioned that in 2014, 18

you pr oject blending economics would provide sufficient 19

incentive for additional ethanol without higher 20

standard s. If you'd just elaborate, I guess, on the 21

importance of the standard s in that case? 22237 MR. WILLIS : I just think it helps

-- it gives a 1

retailer, the RFS , an incentive or he knows long term 2

that th e program is going to be place. Y ou know, those 3

blending economics are volatile, obviously. But it 4

gives them the confidence to go forward and spend money 5
on infrastructure to offer E15 and higher

- level blen ds. 6

MR. SIMON : Mr. Willis, we would encourage you 7
also as part of your written testimony or written 8

response that on the issue of the 1

- pound waiver, to 9

address that in light of the fact that there is a 10

congressional requirement on top of the regulatory 11

r equirement, and that would need to be managed as well 12

to

-- 13

MR. WILLIS : We will certainly do that. 14

MR. SIMON : Thank you. 15

MR. GRUNDLER : I just want to underscore this 16

blending economics questions, and we'll need to 17

understand it a little bit more than ju st it will 18

happen. If you could provide data or evidence or 19

analysis that would suggest that in 2014, that would be 20

a lot different, I'd be grateful. 21

MR. WILLIS : Okay. Thank you. 22238 MR. GRUNDLER : Okay. Next on the list is Mr. 1

Whikehart. Welcome. 2

MR. WHI KEHART: Thank you. 3

My name is Dave Whikehart. I'm the director of 4

product supply and optimization for Marathon Petroleum 5

Company, LP. 6

MR. GRUNDLER : Let me just remind everybody to 7
please bring the microphone closer. 8

MR. WHIKEHART : I'm responsible for o ur company's 9

purchase and distribution of biofuel s, including our 10

compliance with the renewable fuel standard. 11

Our company has been one of the nation's largest 12

blenders of biofuel s for nearly three decades. We are 13

the nation's fourth

- largest refiner and p roducer of 14

roughly 10 percent of the nation's gasoline and diesel 15

fuel. Simply put, we are a major obligated party under 16

the RFS2. 17

In its 2014 proposed rule, EPA recognized the 18

realities of the E10 blend wall. That's a good start. 19

However, there are man y other realities that the EPA 20

fail to deal with in its proposal. Specifically, three 21

significant issues need to be addressed by EPA. 22239 The first and most important of these issues is 1

the unsustainable blending requirements proposed for 2

2014 that will requi re the consumption of a significant 3

quantity of D6 RINs carried forward from 2013. The 4

second issue is the assumed rapid escalation of E85 5
consumption, and the third issue is lack of accounting 6

for significant customer demand for ethanol

- free 7
gasoline. 8

Ea ch of these issues contributes to increased cost 9

to consumers of gasoline and diesel fuels. I want to 10

discuss each of these three issues, and if I have time, 11

I have a couple more to get to. 12

Marathon briefed EPA on the E10 blend wall in May 13

of 2009. At th at time, we accurately predicted the 14

timing and impact of hitting a hard limit on ethanol 15

blending into gasoline. While EPA acknowledged the E10 16

blend wall as a significant issue, the agency has not 17

addressed it with a sustainable approach to setting 18

blen ding mandates. 19

The 2013 standard was set too high and without a 20

consideration for what the blending mandates might be 21

in 2014 and '15. As a result, we have run full speed 22240

into the E10 blend wall, and now EPA must reduce the 1

blending mandates in 2014 to av oid an infeasible 2

outcome. 3

The Clean Air Act limits the EPA's waiver 4

authority to a single year. This limit, coupled with 5
EPA's failure to consider the implications of an RVO 6

decision in the current year on subsequent years, 7
demonstrates the infeasibility of the RFS. 8

The EPA's unrealistic projections on E85 demand 9

must be reconsidered. E85 sales in the first half of 10

2013 totaled just 35 million gallons. The EPA 11

extrapolated this data point into a projection of more 12

than 100 million gallons of E85 demand for the full 13

year 2013, and then 300 million gallons of E85 in 2014. 14

Marathon's Speedway retail chain is a significant 15

E85 seller in the Midwest. Based on our experience, 16

the reality is that E85 sales growth has diminished in 17

the second half of 2013 and i s not likely to increase 18

in 2014. We have seen the same patterns at our E85 19

rack sales at our ethanol production facilities. 20

The inflation of projected 2014 E85 sales is 21

misleading at best and at worst obscures the number of 22241

carry - forward RINs that will b e needed for compliance 1

when these erroneous E85 sales numbers fail to 2

materialize. EPA must discontinue basing ethanol 3

blending requirements on aspirational E85 projections. 4

In this proposal, EPA failed to recognize that 5

many consumers demand ethanol

- fre e gasoline and that 6

their use of ethanol

- free gasoline is not discretionary 7
but is required for the safe operation of their 8

engines. Our customers own boats, antique cars, and 9

many other vehicles and equipment that use small 10

engines. 11

EPA claims there is a lack of data on the sales of 12

ethanol

- free gasoline, but careful analysis of EIA data 13

shows that more than 3 percent of gasoline leaves major 14

terminals free of ethanol . Recreational marine 15

gasoline sales account for more than 1.5 percent of all 16

gasoline s ales, and it is our experience that nearly 17

all of this fuel is ethanol free. 18

Based on our experience, the 3 percent volume for 19

nation al ethanol

- free gasoline sales does not seem 20

unreasonable. EPA, in partnership with EIA, needs to 21

conduct a due diligence analysis of ethanol

- free 22242

gasoline volumes. The demand for ethanol

- free 1

gasoline, coupled with the unrealistic E85 demand 2

projections, limits the total ethanol blending content 3

to 9.7 percent or less of the total gasoline pool in 4

order to avoid the E10 ble nd wall. 5
Well, I see my time is up. So I just want to say 6

in closing, I would like to emphasize the absolute 7
importance of EPA meeting the statutory deadlines. The 8

current practice of retroactive rulemaking creates 9

uncertainty in the market and confusion for market 10

participants. 11

The fact that EPA has not been able to meet its 12

statutory deadlines further demonstrates the 13

infeasibility of this standard. 14

MR. GRUNDLER : Thank you. Mr. Friesen? 15

MR. MACHIELE : Oh, could I

-- 16

MR. GRUNDLER : I'm sorry. I'm sorr y. Jumping 17

ahead. 18

MR. MACHIELE : I would like to ask a question. 19

MR. GRUNDLER : Please do. 20

MR. MACHIELE : Thank you. Actually, I guess more 21

of , like often, a request. If you could follow up in 22243

your written comments. You talked both about our 1

projection s on E85 and our projections and information 2

on E0, both of which are areas that we are seeking 3

comment and seeking information on. 4

As you can tell in the proposal, these are both 5

areas where data is

-- complete data on the nation al 6

picture are hard to com e by. If you could at least

-- 7
if you would be willing to provide us in your written 8

testimony information specific to your experience with 9

Speedway

-- E0 sales, E85 sales, how you said based on 10

your experience with E85 how it is less in the second 11

half o f 2013, what is the trend, and what was the 12

pricing that might have gone along with that. 13

Any information that we can use in a way to 14

actually then project going forward would be greatly 15

appreciated. 16

MR. WHIKEHART : We'd love to work with you on 17

that. Tha nk you. 18

MR. MACHIELE : Thanks. 19

MR. HANNON : Like other panelists, you've brought 20

up the 9.7 volume percent figure. And in your context, 21

it's on the idea of E0 and overestimating E85. Can you 22244

please address in your comments, I would imagine, how 1

that fits in a situation where there is more than 2

ethanol as a renewable fuel. 3

Diesel is the other major renewable fuel. There's 4

2 billion gallons of it, RIN gallons anyway, being used 5
this year. There are carryover RINs from 2013 to 2014. 6

What is the context of isolating ethanol separately 7

from the entire renewable fuel pool? 8

I think that's an important factor to take into 9

account , if you could , in explaining why 9.7 percent 10

would be the appropriate outcome. 11

MR. WHIKEHART : Yes. We'll do that. 12

MR. GRUNDLER : Mr . Friesen, welcome. 13

MR. FRIESEN : Good afternoon. I'm Curt Friesen, a 14

corn farmer from Henderson, Nebraska, and vice chairman 15

of the Nebraska Corn Board. And I thank you for this 16

opportunity to testify in opposition to the reduction 17

in the ethanol requir ements of the renewable fuel 18

standard

. 19

The renewable fuel standard is a Federal policy 20

that has done exactly what it was intended to do. It 21

has created American jobs. It has revitalized rural 22245

communities. It has reduced greenhouse gas emissions 1

and clea ned up our air. 2

It has reduced our dangerous and expensive 3

addiction to imported oil and helped improve America's 4

energy security. And of course, it has helped spur a 5

renaissance in rural America that has reverberated 6

across the heartland and all across o ur n ation

. 7
My farm sits in the very heart of Nebraska corn 8

country. There are 6 ethanol plants within a 50

- mile 9

radius of my operation. This has provided me with 10

numerous competitive options for marketing my grain, 11

options that exist because of the promi se and the 12

commitment that Congress made in establishing the RFS. 13

These 6 plants represent a capital investment of 14
more than $500 million in my part of rural Nebraska. 15

The investments by ethanol production companies and 16

their shareholders, including farme rs themselves, have 17

been predicated on the nation al strategy of increasing 18

our domestic fuel supply through the renewable fuels, 19

such as ethanol and bio diesel

. These companies and 20

investors have committed themselves to long

- term 21

viability of renewable fue ls based on the commitment 22246

that Congress made in establi shing the RFS. 1

Before these ethanol plants were built, a high 2

percentage of our corn in our area was exported to 3

domestic or inter nation al markets, shipped out as raw 4

corn sold at the going price. No w virtually every 5
bushel is transferred into fuel and feed, adding 6

consi derable value to every kernel. That value is 7
captured and multiplied several times throughout the 8

communities in my area, generating economic vitali ty 9

and tax revenue. 10

The economic vi tality that the RFS has spurred in 11

rural America extends well beyond my farm. I see the 12

impact of increased tax revenue for our county to bu ild 13

roads and provide services. I see main street 14

businesses with customers in the aisles. I see 15

entrepreneurs st arting new ventures, many of which are 16

based in agricult ure and food production.. 17

We're also seeing a shift in demographic trends in 18

rural America. In fact, my daughter and son

- in

- law 19

have recently returned to the family farm, thanks to 20

the optimism and p otential that exists in large part 21

because of new markets and demand created by the RFS. 22247 Currently, I will be planning my next corn crop 1

that will be marketed in 2015. Until now, the RFS 2

provided some certainty that there will be a growing 3

market for my c orn. 4

But if the RFS is revised downward, American 5
agriculture and rural communities will be left to 6

wonder what might happen next. This uncertainty erodes 7
confidence, undermines potential investment, and 8

generally stifles the robust growth that we've seen in 9

America's heartland. 10

Corn ethanol never was supposed to be the answer 11

to America's energy needs, but part of a diverse 12

portfolio of renewable fuels made here at home. We 13

need to maintain our commitment to corn ethanol , which 14

has broadened our fuel cho ices and provided even 15

greater choice in energy security. 16

The RFS is a commitment that Congress made to 17

America, a commitment to develop our own domestic fuel 18

supply. Instead of retreating, as the EPA proposes, 19

America should be advancing toward a broader portfolio 20

of domestic renewable energy and the fueling 21

infrastructure to support this growth. We must take a 22248

long view of our n ation 's energy portfolio, and we 1

cannot be swayed by temporary market conditions or 2

voodoo science or the influence of those wh ose market 3

share is threatened by our growth. 4

Yes, corn farmers have benefited from the growth 5

in the ethanol industry that the RFS has fostered, but 6

maintaining our resolve to stay the course, to maintain 7
the volume requirements prescribed in the RFS is a bout 8

securing greater economic growth, cleaner air, and 9

energy security for every American. 10

MR. GRUNDLER : Thank you. Mr. Gilligan? 11

MR. GILLIGAN : Yes. Well, thank y ou for inviting 12

us here today. 13

My name is Dan Gilligan. I'm president of the 14

Petroleum M arketers Association of America. PMAA is a 15

nation al federation of 48 State and regional trade 16

associations representing approximately 8,000 17

independent petroleum marketing companies. We are not 18

big oil, and the vast majority of our PMAA companies 19

qualify as small business under SBA rules. 20

Every PMAA member company stores and dispenses a 21

wide variety of fuels, liquid fuels such as gasoline, 22249

E85, diesel , bio diesel , heating oil. These companies 1

and their customers benefit from the plentiful supply 2

of liquid fuels. Therefore, we're very supportive of 3

the important supply benefits of ethanol and bio diesel

. 4

And early on in my remarks, I want to say we have 5

no concerns with bio diesel RVOs. They could actually 6

be raised. We think that would be a good thing. 7

E xpanded production of both bio diesel and ethanol would 8

be a good thing. 9

My primary purpose for speaking today relates to 10

E15 in the RFS. Many of our member companies would 11

very much like to offer E15. However, legal and 12

regulatory barriers keep them from doing so. 13

In our view, the single greatest barrier to E15 is 14

legacy underground infrastructure at the retail level. 15

The most obvious infrastructure barrier is the typical 16

two

- tank system found at most gas stations. Very few 17

retailers can justify elimina ting premium or E10 to 18

sell E15. 19

The l ess obvious and least understood 20

infrastructure barrier is legacy underground equipment , 21

such as piping, submersible pumps, leak detectors, 22250 floats, adhesive seals, sensors, probes. EPA requires 1

U SDA equipment to be co mpatible with the product 2

store d . However, most legacy equipment is certified 3

compatible with ethanol blends no greater than 10 4

percent. 5
EPA's Office of Underground Storage Tanks recently 6

publish guidance for retailers to certify legacy 7
equipment as E15 c ompatible. The guidance calls on 8

equipment manufacturers to voluntarily certify their 9

E10 components for E15. There are two problems with 10

this approach. 11

First, most retailers lack the detailed records to 12

necessarily identify all the components of their 13

u nderground system. Remembe r, they're underground. 14

They can't see them. 15

Second, when identification can be made, 16

manufacturers will not

-- not all manufacturers will 17

offer the E15 certification for fear of product 18

liability if they fail. Additionally, ma nufacturers, 19

obviously, are motivated to sell new equipment that is 20

certified for E15. 21

We applaud EPA's Office of Underground Storage 22251

Tanks for efforts to provide an alternative method for 1

determining compatibility. However, the guidance 2

offers no realist ic pathway for retailers to prove that 3

the legacy equipment is compatible with E15. 4

We support EPA's proposal to lower the 2014 corn

5

based ethanol mandate because exorbitant RIN prices 6

could incentivize retailers to take risks they would 7

not normally take. A study performed by UL and NREL 8

demonstrated some UST s ystem components might fail when 9

subjected to E15. EPA should not be incentivizing 10

retailers to take risks with environment al protection. 11

Another reason to lower the mandate is to prevent 12

the loss of neat premium in some markets. We are 13

already seeing some refiner suppliers blending E10 14

premium, eliminating consumer choice to purchase fuel 15

without ethanol . There are circumstances where 16

ethanol

- free gasoline is essential. 17

For example, a lot of abov e ground storage tank 18

owners, they have to have a non

- ethanol gasoline to 19

prevent what

-- the alcohol phase separation that 20

occurs with water in above

- ground tanks. If RIN values 21

are exorbitant, ethanol

- free gasoline could become 22252

totally unavailable in th e markets, a very negative, 1

unintended consequence. 2

Several times today I've heard folks suggest that 3

big oil has failed to invest in infrastructure for 4

higher ethanol blends. Well, big oil owns less than 6 5
percent of the gas stations in the United States . Our 6

members own 94 percent. 7
They're small business. They don't

-- we 8

calculate today's infrastructure to be approximately 9
$300 billion in underground infrastructure. To replace 10

that, to upgrade it is a very

-- is a very daunting 11

challenge. 12

Thank you. 13

MR. GRUNDLER : Thank you. Questions? Paul? 14

MR. ARGYROPOULOS : Dan, just let's say the 15

obstacles were removed

-- the infrastructure issues and 16

things like that

-- you indicated that your members 17

would like to sell E15. In your comments, could you 18

put tha t in some context in terms of what volume that 19

might equate to? Because that would be important in 20

terms of , you know, setting the standards at least in 21

the future. 22253 MR. GILLIGAN : I will do that, and I would simply 1

say there are some underperforming gas s tations that 2

retailers would like to convert to E15 to make them 3

more functional and more profitable. 4

MR. ARGYROPOULOS : Having the context in terms of 5

volume would be helpful. Thank you. 6

MR. GILLIGAN : Sure. Okay. 7

MR. GRUNDLER : Mr. Whitney, welcome. 8

MR . WHITNEY : Great. Thank you. Thank you, 9

gentlemen. Thanks for having me here today. 10

My name is Michael Whitney. I'm the general 11

manager of renewable fuels at Musket Corporation. 12

Musket Corporation is a wholly owned subsidiary of 13

the Love's Travel Stop s and Country Stores. We operate 14

a nation wide chain of retail truck stops and 15

convenience stores, 305 travel centers altogether in 39 16

States. 17

Like so many in the fuel retail business, the 18

renewable fuel standard matters to us because it 19

matters to our cus tomers. So full stop, we're here to 20

talk to you about the impact that it will have on fuel 21

prices to our customers. 22254 Our customers basically are small businesses, and 1

it's a rolling profit center for them to move goods to 2

and from

-- to the markets, et cet era. So the fuel 3

price is an extremely important thing to these guys. 4

And the reason why we put bio diesel into diesel fuel is 5
it is cheaper than diesel for us, full stop. 6

We don't have any environment al pretensions. We 7

don't really look at greenhouse ga s reductions, et 8

cetera. We use this fuel because it is cheaper than 9

diesel fuel. 10

We gladly shoulder these concerns, and we make it 11

our responsibility to manage the fuel supply on account 12

of our customers. Under the renewable fuel standard , 13

Musket is not an obligated party. So we don't have to 14

do this. 15

We don't have to buy RINs and turn them into the 16

EPA at all. But we have to buy, sell, and move 17

bio diesel and, therefore, RINs because it's part of our 18

commitment to provide more competitively priced dies el 19

fuel to our customers. 20

Let's take a real quick look at some rack prices 21

here and see that this discount is real in the 22255

marketplace. Alexandria, Minnesota, ultra low sulfur 1

diesel , $3.21. B5, $3.12. The same rack you have a 2

cheaper price for B5. And if we don't go and buy this 3

fuel and give it to our customers, they are going to 4

pay a higher price. 5
You'll hear today from many public policy virtues 6

the shortcomings of the renewable fuel standard . We're 7
not here to discuss those nuances, what Congress may or 8

may not have intended. We're here to talk about the 9

impact and why it matters to our customers. 10

We must give purchasers a variety of bio diesel 11

from various producers throughout the country, and we 12

take that product directly to our truck stops where we 13

can manage and control our quality, and we blend it 14

directly into diesel fuel. We've done investments in 15

over 30 States over the last 3 years so that we can 16

bring this fuel to our customers and provide them more 17

competitively priced diesel

. 18

We're also a major manager of risk in this process 19

because of the RIN credits. We hear a lot of people 20

here talking about what RIN credits are worth or what 21

they're not worth or what's exorbitant or not, and I 22256

doubt anyone on this table has probably actually traded 1

a single RIN to help manage their fuel risk related to 2

this product. 3

I'm the guy that actually does that. We take B100 4

with RINs. We blend it below B80. We separate the 5
RINs from the physical product, and we take that RIN as 6

a currency of sorts, and we sell it to obligated 7
parties. And that transaction makes bio diesel cheaper 8

than diesel fuel for us. 9

Our point of being here is and has been echoed by 10

a lot of people on the panel is that a 1.28 billion 11

number is actually a step backwards, and if you do n ot 12

have an increasing RVO or it stagnates, what is going 13

to happen? Quite simply, to our customers, their 14

diesel fuel will be more expensive. 15

So that's pretty much all I have to say, and if 16

you have any questions about pricing, et cetera, I can 17

give you m ore examples of racks and discounts that we 18

see on B5. And our concern here is keeping diesel 19

prices from going higher. 20

Thank you. 21

MR. GRUNDLER : Thank you. Questions? 22257 MR. BURKHOLDER : Yeah, I want to ask a clarifying 1

question. When you said that bio die sel is cheaper than 2

diesel fuel, you then referred to a diesel price versus 3

a blended B5 price. Is that the context in which that 4

statement is true, or is it also true for the B100, for 5

example, versus a petroleum diesel ? 6

MR. WHITNEY : That's the context is really what we 7
buy at the rack. So B100 is cheaper if you take into 8

account the various aspects of it. The RIN price is 9

embedded in that B100. So when you buy B100, you get 10

1.5 D4 category RINs. 11

So we take all that into account when we look at 12

it. S o you can't just say, well, does B100 cost more? 13

Well, it does, but the RINs are attached to it, and 14

the RINs have value. 15

MR. ARGYROPOULOS : And again, any data that you 16

have and trend data on that would be useful, too, in 17

the context of looking at this. 18

MR. GRUNDLER : Ms. Boyd, welcome. 19

MS. BOYD : My name is Michele Boyd. I am the 20

government relations manager for Abengoa Solar. Today , 21

I am here making these comments on behalf of Abengoa 22258

Bio energy
. 1

Abengoa is an inter nation al company that develops 2

and im plements sustainable technologies in the energy 3

and environment al sectors. Our Bio energy Division is 4

one of the largest inter nation al producers of renewable 5
fuels, including both ethanol and bio diesel . We have 6

15 commercial

- scale biorefineries in operati on on 3 7
continents and production capacities exceeding 800 8

million gallons per year. 9

Largely because of the promise of the RFS, we have 10
invested over $2 billion developing our 8 U.S. ethanol 11

production facilities, including a cellulosic pilot 12

plant and one of the world's first commercial

- scale 13

cellulosic ethanol plants, which we expect to complete 14

and start up within the next several weeks. 15

We currently employ over 600 full

- time , permanent 16

employees in the U.S., plus over 1,000 full

- time 17

construction worker s at the site of the new cellulosic 18

facility, located in Hugoton, Kansas. As of today, 19

based upon EPA's decision to backtrack on its support 20

of the RFS, we have placed all future biofuel s 21

investments in the U.S. on hold until final resolution 22259

of this RVO issue. 1

We are here today to urge the EPA to reconsider 2

its proposed RVO for 2014, which we believe would be 3

disastrous for the future of biofuel s in this country. 4

Implementation of this proposed rule would undermine 5
the primary purpose of the RFS, which w as to provide 6

steadily increasing amounts of alternative renewable 7
fuels in this country, even if petroleum refiners and 8

gasoline distributors chose not to voluntarily give up 9

their monopoly on our fuel supply. 10

The benefits of the RFS are clear. Within ju st a 11

few years after passing the 2005 and then the 2007 RFS 12

programs, dramatic growth led to support for hundreds 13

of thousands of jobs. Ethanol

- blended gasoline became 14

significantly cheaper than unblended gas, and 15

Government expenditures for farm programs were able to 16

be reduced. 17

Private companies like Abengoa have invested 18

billions of dollars in new technologies based upon this 19

promise, and the next generation of biofuel s is 20

breaking out and starting commercial production. But 21

the primary market driver i s being shown to be 22260

unreliable an d inconsistent in its support. 1

The EPA proposal essentially validates the 2

mythical blend wall, rather than encouraging the fuel 3

industry to offer more blending options to the consumer 4

and overcome the hurdles of infrastruct ure, as the RFS 5
intended. This action substantially rewards that 6

failure to prepare for compliance with a loosening of 7
the rules that indicates that the law has no meaning 8

and that future compliance will never be required. 9

There is no way to separate the advanced and 10

cellulosic biofuel s industry from the conventional 11

ethanol production. Taking actions that negatively 12

impact the market for conventional biofuel s will weaken 13

the market for second

- generation fuels and reduce the 14

financial ability for the most likely first adapters to 15

build second

- generation facilities. 16

Most importantly

-- more importantly, taking 17

actio n s that constitute a failure of consistent support 18

for the RFS will be a clear signal to future investors 19

that there is no reliable expectation of a market for 20

these fuels and no reason to take the risk of that 21

investment. If the EPA implements its proposed RVO, 22261

the following consequences will result. 1
First, consumers will pay $8 billion more for 2

gasoline, increasing oil compan y profits by a simi lar 3

amount. 4

Second, 1.4 billion gallons of existing ethanol 5
production capacity will be shut down, potentially 6
closing 15 large plants, stranding $4 billion of 7
investment, and resulting in direct job losses for 8

roughly 1,000 employees. 9

Third, rural economi es that are about to produce a 10

record corn crop and rebound from a 50

- year record 11

drought will find corn prices much closer to production 12

costs, increasing the need for farm subsidies. 13

Fourth, investment in new biofuel s technologies 14

will virtually stop in the U.S., as there is no policy 15

or market consistency. Future investment will likely 16

to go other countries with more supportive policies. 17

And finally, fifth, greenhouse gas pollution from 18

the transportation sector will increase. 19

We ask the EPA to take the actions needed to avoid 20

these negative consequences and to reevaluate the terms 21

of the proposed RVO rule for 2014. 22262 Thank you. 1

MR. GRUNDLER : Thank you. Any questions? 2

MR. MACHIELE : At least one. I guess I'd like to 3

ask the question, I mean, it's widely acknowledged that 4

in 2013, we hit the blend wall already. So my question 5
is you said that near the beginning of your testimony 6

that our proposal has put all future investments on 7
hold. What is it about our proposal that's done that 8

relative to what's al ready playing out in 2013? 9

Because our proposal is taking every source, every 10

projected source of cellulosic biofuel and putting that 11

as a standard for cellulosic . That's the exact same 12

thing we did for 2013. It's the exact same thing we 13

did for 2012. W hen it comes to cellulosic , we have not 14

changed one iota of our approach from 2012 or 2013, 15

except for responding to court rulings on how 16

aspirational we were being. 17

Which, but again, we are still including every

-- 18

you know, all the sources of cellulosic , including 19

ethanol . So if you could please

-- what is it that 20

changed for your business for

-- with our 2014 21

proposal? 22263 MS. BOYD : We can go into more details in our 1

written comments. 2

MR. MACHIELE : I'd appreciate that. And now also 3

probably in your writt en comments, we asked the 4

question earlier about if we don't change the RFS 5
volume for 2014, we're looking at a growth from, you 6

know, 100 million to 3.5 billion gallons of bio diesel

. 7

MALE SPEAKER: E85. 8

MR. MACHIELE : Oh, I'm sorry, of E85 in 2014. 9

Again , we'd like you to address in your comments what, 10

you know, how do we

-- how does

-- how is that 11

possible? 12

MS. BOYD : Yes. 13

MR. GRUNDLER : Admiral, you have the last word on 14

this panel. 15

Did you have a question there? Okay. 16

ADMIRAL LOREN : Thank you very mu ch. Thank you 17

for the opportunity to appear here today, and I've 18

submitted a written statement already, and this is much 19

more pleasant than being on the Hill doing this. So 20

thank you. 21

MR. GRUNDLER : Same for us. 22264 (Laughter.) 1

ADMIRAL LOREN : I'm Don Loren. I'm a retired 2

United States Navy Rear Admiral, former senior Nation al 3

Intelligence Service executive with the Director of 4

Nation al Intelligence. In the previous administration, 5
Deputy Assistant Secretary of Defense for Homeland 6

Security Integration. 7

I'm here today on behalf of Veterans for Energy , a 8

grassroots organization present in 26 States in the 9

nation who are committed to the concept that energy 10

policies are inexorably linked to sound nation a l 11

security and not just merely military, all the facets 12

o f nation al power that make up nation al security in 13

accordance with the National Security Strategy of the 14

United States , dated May 2010. 15

Unlike some other veteran groups that have 16

recently made some appalling claims concerning the RFS 17

proposal, " it equates to killing our soldiers, " we find 18

that offensive and, in fact, denigrating to the men and 19

women who serve in uniform today, and partisan. We, at 20

Veterans for Energy , believe in a common sense, all

21

encompassing approach to energy policy, not partisan, 22265

not single issue, but well

- balanced energy policy that 1

ensures primacy and prosperity and military efficacy of 2

the United States of America. 3

We very much salute an EPA decision to recognize 4

the blend wall. Along with Congress, American 5

businesses, the America n consumer, and the 21.8 million 6

veterans in our nation today, we support rethinking the 7
impact of an ill

- planned and ill

- executed shift to E15. 8

In addition to the many consequences described 9

here today concerning automobile engines, maritime 10

engines, and small engines, the economic impact to the 11

consumer and business of an ill thought out RFS policy , 12

also please remember that the thousands of petroleum 13

product

- fueled engines in the military

-- whether they 14

be large vehicles, pumps, lifesaving devices, or 15

h omeland security devices within Department of Homeland 16

Security

-- will be affected if we do not execute this 17

policy in a well thought out manner. 18

The impact of a poorly conceived shift to higher 19

ethanol blends will have devastating impact on our 20

military, as well as a defense budget that is not 21

currently prepared to bear the financial burden 22266

associated w ith the impacts of that shift. 1

We, at Veterans for Energy , advocate a complete 2

energy policy that includes development of renewable s, 3

development of oil an d gas resources, nuclear, hydro, 4

geothermal, and all sources of energy that make us 5

energy independent, promote a vibrant economy, and 6

ensure that we are the most prosperous and military 7

capable nation on the globe. And we believe we can do 8

that while bei ng good s tewards of the planet as well. 9

We veterans have sworn to support and defend the 10

Constitution of the United States , which has as its 11

Preamble clearly states, is predicated to provide for 12

the common defense, promote the general welfare, and 13

ensure t he blessings of liberty f or ourselves and our 14

posterity. 15

Sound energy policies that ensure American 16

independence and prosperity are key elements of doing 17

that. They must be strategically planned and 18

strategically executed, and we support the current EPA 19

p roposal. 20

Thank you. 21

MR. GRUNDLER : Any questions? 22267 (Applause.) 1

MR. SIMON : Thank you, Admiral. Appreciate your 2

views. 3

Maybe in terms of if you have a follow

- up or if 4

you'd like to answer now. I think your position on E15 5
was relatively clear. If you had a view on E85 or

-- 6

and other mechanisms that we've asked for in comment in 7

the proposal, that would be very helpful for us. 8

ADMIRAL LOREN : Okay. Thank you. 9

But I must say that it would probably be more 10

appropriate for the Department of Defense and those 11

currently serving the n ation to answer those types of 12

questions. I can give you thoughts and opinions. 13

MR. GRUNDLER : Thank you for your comments, 14

Admiral. Thank you for your service. 15

MR. MACHIELE : If I could ask one follow

- up 16

question? 17

MR. GRUNDLER : No, you're out of time. 18

MR. MACHIELE : No? 19

MR. GRUNDLER : Go ahead. 20

(Laughter.) 21

MR. MACHIELE : Actually, going back to Curt 22268

Friesen. If in your written comments, and this applies 1

not just to you, but I think some of the speakers 2

earlier in the day, our RF S proposal, especially when 3

it comes to corn ethanol , a lot of the testifiers are 4

characterizing it as we are cutting

-- well, we're 5
reducing volumes from the 2014 RFS volumes that 6

Congress set, but we're not really reducing below what 7

2013 volumes are, 20 12 volumes , a ctual production 8

volumes. 9

So I want to make sure that in your written 10

comments, you

-- they're written in a way that reflects 11

that sort of reality, as opposed to just looking at the 12

reduction below the level that the Congress set. 13

MR. FRIESEN: I guess I was just

-- I'm more 14

concerned with the precedent that you're setting, 15

looking forward as to what might happen in future years 16

so that we can have more certainty. 17

MR. ARGYROPOULOS : And just one other follow

- up in 18

that context as well. I mean, the act has 15 billion 19

gallons corn ethanol for the standard there. So, I 20

mean, incrementally, I mean putting aside Paul's point, 21

there is still only a little bit more to go. So 22269

putting that in the context of kind of the nation al 1

impact, if you will on growth in that particular 2

category would be useful as well. 3

MR. GRUNDLER : Thank you very much. 4

It's a good time for me also to remind the 5
audience that we are accepting written comments as 6

well, and the comment period will go to January 28, 7

2014. 8

Panel 10 , come on down. 9

(Pause.) 10

MR. GRUNDLER : Okay. Mr. Hunnicutt, ready when 11

you are. 12

MR. HUNNICUTT : Good afternoon. I'm Brandon 13

Hunnicutt, a corn farmer from G i ltner, Nebraska, and a 14

member of the Nebraska Corn Growers Association. 15

I appreciate this opportu nity to testify in 16

opposition to the proposed changes in the ethanol 17

requirements of the renewable fuel standard

. 18

America's corn farmers spent decades watching the 19

price of their product tread water, as input costs 20

rose. So they decided to do something ab out it. They 21

invested check

- off dollars and formed collaborative 22270

partnerships with other advocacy groups to develop the 1

ethanol industry and pushed hard for Federal policy to 2

ensure a place for renewable domestic alternatives in 3

our n ation 's transportatio n fuel supply. 4

The renewable fuel standard created a number of 5

benefits for our nation

-- increased energy security, 6

new jobs, rural development, cleaner air, and lower 7
gasoline prices. And yes, it created a new mark et for 8

America's corn farmers. 9

Farmers have responded to the increased demand for 10

corn by producing more, and we're not plowing up virgin 11

land to do it. We're simply changing what we plant on 12

the acres we already have based on market conditions. 13

Recently, we've seen misleading news stories 14

acc using farmers of turning Conservation Reserve 15

Program, or CRP, land into corn production to meet 16

ethanol demand. Here is the truth. As part of the 17

2008 farm bill, the cap on CRP acreage was dropped from 18

39.2 million acres to 31.3 million acres beginning in 19

2010. 20

So CRP enrollments fell. It had nothing to do 21

with ethanol . The limited amount of CRP acreage that 22271

has returned to production is actually decreasing 1

Federal spending, and those dollars have been directed 2

to protecting the most environment ally se nsitive land. 3

Ethanol has been blamed for an increase in food 4

prices due to higher corn prices. First, higher corn 5
prices have been driven primarily by 2 years of 6

drought, not ethanol demand. Second, corn comprises a 7

small percentage of the cost of the f ood product. 8

For example, you would think that the highest cost 9

in a box of corn flakes would be the corn itself, 10

right? In fact, at today's prices, the amount of corn 11

in an 18

- ounce box of corn flakes is just 6 cents. 12

That's right, 6 cents. 13

As corn pric es have recently headed downward 14
toward $4 a bushel, very near the cost of production 15

for us U.S. corn farmers, American consumers have not 16

seen a corresponding decline in food prices. So it's 17

pretty clear that ethanol and corn prices have not been 18

the cu lprit they've been made out to be. 19

But one thing is certain. American consumers have 20

seen cost savings at the pump, thanks to ethanol in our 21

fuel supply. And the higher the blends of ethanol , the 22272

more American consumers can save. 1

Here is the rub. Instea d of leveraging the RIN 2

market to expand fueling infrastructure and inc r ease 3

the availability of higher ethanol blends, the EPA 4

proposes to use the 10 percent blend wall as an excuse 5

to cut back on ethanol . This plays right into the 6

hands of the oil indus try, which has resisted the 7

growth of renewable fuels and invested huge amounts of 8

money to protect its market share. 9

Continuing our n ation 's commitment to a diverse 10

and domestic fuel supply is good for all Americans. 11

It's good for our economy, our energy security, our 12

environment , our rural communities, and American 13

agriculture. Reducing the amount of ethanol in our 14

fuel supply is good for one group, the oil industry. 15

I urge you to come down on the side of what's good 16

for the majority of Americans and Am erica herself by 17

rejected the proposed reductions in the ethanol 18

requirements for the RFS. 19

Thank you. 20

MR. GRUNDLER : Thank you. Questions? 21

MR. MACHIELE : I guess if in your written 22273

testimony

-- I don't expect you to do all the math now. 1

But I mean, you a nd other testifiers have talked 2
about, you know, corn prices down around $4 a bushel. 3

Who knows where they'll stay or where they'll go. But 4

that should also then correspond into reduced ethanol 5
prices, which , regardless of RINs, should then 6

translate int o reduced E85 prices at the pump, or at 7
least the ability to have reduced E85 prices at the 8

pump. 9

So , in your testimony, if you could go into what 10

might the role of reduced corn prices now have on the 11

potential for increased volumes of E85 next year? 12

MR. H UNNICUTT : Okay. I'll make sure of that. 13

MR. MACHIELE : Thank you. 14

MR. GRUNDLER : Ms. Hanson, welcome. 15

MS. HANSON : Thank you for t he opportunity to 16

speak today. 17

My name is Christine Hanson, and I'm the Federal 18

affairs manager for Americans for Prosperity , an 19

organization of grassroot citizen leaders committed to 20

advancing economic freedom and opportunity. AFP is 21

committed to promoting energy policies that promote 22274

affordability and reliability for all Americans. 1

On behalf of over 2 million AFP activists i n all 2

50 States, I'm pleased to have the opportunity to 3

comment on the proposed rule for the 2014 standard s for 4

the RFS. Let me state from the start that AFP 5
considers the proposed rule changes a strong step in 6

the right direction, and we strongly support efforts to 7
repeal the RFS entirely. 8

We have endorsed legislation currently in Congress 9

that does so. Our position is that energy technologies 10

should compete in the marketplace on their own merits, 11

not on political favoritism and Government mandates 12

such as the RFS. 13

In my prepared

-- in my written testimony, I 14

elaborate and express concern that the RFS leads to 15

higher food prices, restricts Americans' access to 16

affordable energy , and burdens small businesses. This 17

mandate encourages farmers to shift corn production 18

away from food and feedstock, as well as to scale back 19

their production of other commodities, such as soybeans 20

and wheat. 21

The ultimate result is higher prices for 22275

groceries, not only for corn, but also for everything 1

that corn goes into, as well as for other commodities 2

like milk, eggs, and meat. Recent research from Purdue 3

University shows that repealing the RFS would cause 4

overall food prices to fall approximately 13 percent. 5

Last year, the RFS caused food costs for the average 6

American house hold to increase by approximately $2,000. 7
Another way that the RFS strains household budgets 8

is by damaging vehicles. Most vehicles on the road 9

today are only designed to run on E10, a gasoline blend 10

containing 10 percent ethanol . Using E15 causes car 11

pr oblems like damaged valves and valve seats, misfires, 12

engine damage. It can also destroy cylinder heads, 13
which cost $2,000 to $4,000 to replace. 14

The RFS imposes high cost of compliance on small 15

business as well, particularly for gasoline refiners 16

and conv enience stores, the majority of which are small 17

businesses. The RFS requires refiners to purchase RINs 18

to demonstrate compliance or face a fine. The mandate 19

also requires gas stations to build new pumps. 20
Installing an E15 dispenser costs $100,000 while the 21
average gas station only makes $40,000 per year. 22276 I go into further detail in my prepared statement, 1

but overall, we consider this a step in the right 2

direction, and we're supportive. 3

Thank you. 4

MR. GRUNDLER : Thank you. Ms. Franco? 5

MS. FRANCO: Thank you. 6

My name is Sandra Franco, and I'm an attorney at 7
Bingham McCutchen. I'm here today speaking on behalf 8

of the Nation al Bio diesel Board, the nation al trade 9

association representing the U.S. bio diesel industry. 10

My testimony today will focus on EPA's leg al 11

obligations under the program with respect to the 12

advanced biofuel and biomass

- based diesel volumes. As 13

our oral testimony must be brief, the Nation al 14

Bio diesel Board's written comments will go into more 15

detail on these issues raised, as well as other aspects 16

of EPA's proposal and the petitions for waiver. 17

EPA's obligations and authority under the statute 18

must be considered in light of the overall statutory 19

structure. The Clean Air Act requires the EPA to 20

ensure that transportation fuel sold or introdu ced into 21

commerce in the United States contains at least the 22277

applicable volume of renewable fuel, advanced biofuel s, 1

cellulosic biofuel , and biomass

- based diesel

. 2

In NPRA v. EPA, the D.C. Circuit recognized that 3

"by including the authorizing phrase 'at lea st,' 4

Congress also signaled its intent that volumes not be 5

reduced, at least not in the first decade of the 6

renewable fuel program." 7

While in API v. EPA, the D.C. Circuit addressed 8

EPA's authority to reduce the cellulosic biofuel volume 9

based on projected production, it also found in 10

affirming EPA's decision to retain the full statutory 11

advanced biofuel volume that that unlike cellulosic 12

biofuel , there appears to be no great obstacle to the 13

production of advanced biofuel generally. And they 14

emphasized prod uction. 15

For advanced biofuel , Congress set an applicable 16

volume of renewable fuel at 3.75 billion gallons for 17

2014. EPA's proposal cites to no great obstacle to the 18

production of advanced biofuel generally to meet that 19

amount. 20

First, the cellulosic biofue l waiver provision 21

regarding advanced biofuel is not without some 22278

parameters. Provision in Section 211 (o)(7) must be and 1

can be read together. Incorporating the criteria from 2

the general waiver provision in Section 211 (o)(7) ( A ) 3

and assessing whether to r educe the advanced biofuel 4

volume under Section 211(o)(7)(D ) does not r ender any 5
provision superfluous, a s subparagraph (d) provides an 6

alternative basis for reducing the cellulosic biofuel 7
volume, as well as an alternative pro cedure to the 8

motion required

. 9

Regarding EPA's interpretation of that criteria, 10

the Nation al Bio diesel Board agrees that severe 11

economic harm is not applicable here , but disagrees 12

with E PA's reading of the criteria "in adequate domestic 13

supply. " EPA attempts to create an ambiguity in the 14

plain meaning of supply to incorpo rate considerations 15

of demand. 16

Moreover, EPA's assertion that it believes 17

providing flexibility to obligated parties to meet the 18

advanced biofuel standard ignores the statutory 19

provisions that Congress included to addr ess such 20

flexibility and is counter to EPA's obligation to 21

ensure the statutory volumes are met. Thus, the 22279

proposal fails under both S te ps 1 and 2 of Chevron v. 1

NRDC. 2

Moreover, the record shows that more biofuel 3

volumes can be produced than would be provi ded under 4

EPA's proposal. And EPA's proposal is a reversal of 5
EPA's prior determi nation s, including, for example, 6

that the bio diesel industry has met and exceeded 7
expectations when demand existed. 8

Thus, EPA's proposal to reduce the advanced 9

biofuel volume , particularly to the levels proposed, is 10

arbitrary and capricious on several grounds. For these 11

same reasons, among others, EPA's proposed methodology 12

to address volumes into the future is not consistent 13

with the statute and is arbitrary. 14

The Nation al Bi o diesel Board also believes EPA has 15

not complied with its statutory obligations with 16

respect to the proposal to keep biomass

- based diesel 17

volumes at 1.28 bil lion gallons for 2014 and 2015. 18

I see I'm running out of time. So I will try to 19

summarize. We bel ieve that the statutory factors are 20

outlined in the statute, and the proposed volume does 21

not give due consideration to the implementation of the 22280

program, which is a consideration that EPA noted in 1

2013 would help and assisted in setting its other 2

volumes. We believe the propos al ignores this 3

consideration. 4

We also believe that the record, even if you look 5
at the 2013 volume analysis, would support continued 6

increase in volumes, and so we think that there is 7
various grounds to support an increased volume f or both 8

2014 and 2015. 9

MR. GRUNDLER : Thank you. 10

MS. FRANCO : In response to concerns regarding the 11

timing of the EPA's proposal, we believe NPRA and EPA 12

also address this

-- 13

MR. GRUNDLER : Ms. Franco, you need to wrap it up, 14

please. 15

MS. FRANCO : -- in aff irming EPA's authority to 16

effectuate Congress's intent, even where it just misses 17

its deadlines. 18

We'll provide further detail in our comments. 19

MR. GRUNDLER : Thank you. Mr. Coleman, welcome. 20

MR. COLEMAN : Thank you, Mr. Grundler. 21

Gentlemen, hang in there. We're about half way 22281

done. 1

My name is Brook e Coleman. I represent the 2

Advanced Ethanol Council, and I want to talk about a 3

couple of things. We have a number of companies that 4

are going to talk about the specifics with regard to 5
how this proposed rule puts us in a very difficult 6

position at sort of the granular level. 7
First, I want to thank you to date for your 8

administration of the RFS. I think you've got the 9

right balance before this proposal between driving the 10

marketplace and reacting to very real market signals. 11

Obviously, we feel that the new proposal, we are 12

off track, and we've recalled far too much. We will 13

engage specifically with regard to data on a number of 14

key points, including 17 million gallons for 15

cellulosic . It's the right ballpark, but I think we 16

can -- we can work on a plus

- up there based on real 17

gallons. 18

We think your E85 data is woefully pessimistic, 19

and to the degree that this rule is going to reflect 20

that type of thing, we really need to get that data 21

updated. 22282 But with regard to the big picture, it's much more 1

important because the 17 million gallons does not 2

insulate us from the other decisions that have 3

apparently been made in this proposal, and that's 4

because the RIN programs are all nested together and 5
the signals that come o ut from the RFS are also nested 6

together. And so, for our investors, the bottom line 7
is for our investors to believe in this program and to 8

sort of stay out of social media and real estate and 9

actually want to enter into this marketplace, they have 10

to bel ieve in RINs. That's the game

- changer. 11

And the reason that's true is not because there is 12

this free market and this price

- driven marketplace, and 13

we should be able to exist on our own, and RINs just 14

give us a leg up. That's all not true. 15

So some of the t hings we've heard to my right, we 16

don't live in a world where we have a free market and a 17

competitive market. We live in a world where our 18

investors are modeling 2015, and they know that if they 19

make a pred iction about June 2015, that OPEC can sit 20

down in May 2015 and fundamentally change that model 21

via collusive activity. 22283 And so, the solution to that is we can either 1

break up OPEC, which is sort of challenging. We can 2

break up some of the consolidation that goes on in this 3

country with regard to the oil industry, which we've 4

done once a long time ago, but is also not part of the 5

RFS. 6

Or we can have this RIN program. And what the RIN 7
program does is it forces the Exxons of this world , who 8

ignore market signals and do not buy our fuel based on 9

price, to bu y a RIN. And when they buy a RIN and all 10

their friends in the market buy RINs, RIN prices go up, 11

and that encourages the non

- Exxons of this world to buy 12

ethanol , use the RIN, and sell it to the noncomplying 13

entity. 14

It's not a cost of compliance. It's the 15

noncomplying entity that's forced to buy a RIN. It's a 16

major, major leveling for the playing field because it 17

puts the Cumberland Farms and the Gulfs of this world 18

on equal footing with Exxon, and they actually are 19

rewarded for complying with the rule. 20

N ow it doesn't matter whether you believe in that 21

system for a D6 RIN, a D5 RIN, a D4 RIN, or a D3 RIN. 22284

Our investors have to know that that's how it's going 1

to go. And the EPA is not going to run away from high 2

RIN prices , and the White House is not goin g to pretend 3

that high RIN prices increase gas prices. 4

And if we don't, then our investors are not stupid 5
enough to invest against the power of Exxon and the 6

power of OPEC. And our biggest issue with this 7

proposal

-- and I see 40 seconds. So if you don't stop 8

me, I'll stop on time, I swear. 9

The biggest issue we have with regard to this 10

proposal is it depressurizes the RIN program to an 11

extraordinary degree, to a degree to which our 12

investors are no longer going to say we're going to 13

drive change because w e don't know if there's going to 14

be offtake. And so, we have got to move those numbers 15

up significantly, not unreasonably, but significantly 16

to put the pressure back in the program, or the 17

advanced biofuel s industry is going to have a very, 18

very, very dif ficult time surviving. 19

Thanks. 20

MR. GRUNDLER : Thank you. Questions? 21

MR. MACHIELE : I'll start, and John can follow. I 22285

would appreciate if, not now, but in your written 1

testimony, you reflect a little bit more on not just 2

RIN prices driving it, but really

-- because RIN prices 3

are a reflection of the relative value of the renewable 4

fuel versus the petroleum that they're replacing. 5
So, for example, if petroleum was very expensive 6

today or if corn ethanol becomes very inexpensive, the 7
RIN price could become very small, and it's a very good 8

investment for your investors. It doesn't need a high 9

RIN price, just like it didn't a year ago, to drive 10

investment if the renewable fuel is actually less 11

expensive than the petroleum it's replacing. 12

So I'd encourage you to make sure that in your 13

written comments, you don't focus too much just on 14

what's happening with RIN prices because, quite 15

frankly, the future is hopefully where the renewable 16

fuels are less expensive than the petroleum they're 17

replacing. 18

MR. COLEMAN : Y ou don't want me to respond now at 19

all? 20

MR. MACHIELE : No. In your written comments, 21

please. 22286 MR. COLEMAN : Okay. 1

MR. MACHIELE : But, well, you've got 30 seconds? 2

MR. COLEMAN : Yeah. I mean, the 20

- second 3

response is that's sort of the point that I'm tryi ng to 4

make is we can show up with a cheaper fuel. The 5

ethanol industry before us, we've been

-- the corn 6

ethanol industry has been cheaper than gasoline for the 7
better part of the last 20 years, and the oil industry 8

only really uses what the Government ma kes them use. 9

We don't go into these sort of wild price

- driven 10

marketplaces. We have a very difficult time with 11

regard to E85. So I hear what you're saying, but on 12

the other hand, it is RINs that change that equation. 13

So, but what you're asking me to do is focus on it, and 14

I will do that. 15

MR. ARGYROPOULOS : And just to follow up real 16

quick, Brook e . I mean, your last statement, I'd 17

probably challenge that a little bit. But if you have 18

some context for that, it'd be good. Because the 19

industry has been b lending way more ethanol than has 20

been required, and that's why there has been an excess 21

of RINs and low RIN prices as well. 22287 So to the extent that you can kind of put that in 1

context, it would be useful. 2

MR. COLEMAN : Yeah, I think it's an important 3

issue. 4

MR. HANNON : On cellulosic , there's also very 5
little history of the relationship with cellulosic RIN 6

prices to other category prices. But , one, so if you 7

could speak to that? 8

Because I think your testimony is an assumption 9

that RIN prices for non

- cellulo sic fuels will have a 10

big impact on investments in cellulosic fuels. And so, 11

if you could discuss that, the lack of history of the 12

r elationship with those prices. 13

Plus, the unique thing about cellulosic s is the 14

price

-- is the cap on RIN prices in the sta tute 15

through the waiver credits, if you could discuss that 16

in your testimony as well, your written testimony. How 17

that affects your projection that there needs to be 18

increasing RIN prices in order to incentivize the use 19

of specifically cellulosic biofuel when Congress set a 20

cap on -- through the waiver credit on the RIN, an 21

effective RIN price. 22288 MR. COLEMAN : I appreciate the comment. That does 1

speak to one of my fundamental points, and that is, is 2

that when our investors are looking at cellulose 3

because t he cellulose basket is really not activated by 4

the market yet, they're looking at advanced biofuel 5

RINs. Okay? 6

And so, that's the conversation they're having. 7

So that's why the 2.21

-- that's why the 17 doesn't 8

save us from the 2.21. That's the conversa tion they're 9

having with investors. 10

MR. GRUNDLER : Mr. McMakin, welcome. 11

MR. MCMAKIN: Sure. Thank you. 12

Good afternoon. My name is Ben McMakin. I'm here 13

today on behalf of Enerkem. And first of all, I want 14

to thank your entire team that worked so hard to stage 15

this event. It's obviously an important hearing. 16

Enerkem is a member of the Advanced Ethanol 17

Council, works closely with Brook e and his team. 18

Enerkem converts nonrecyclable municipal solid waste 19

and residual materials into ethanol , methanol, and 20

other chemicals. 21

Headquartered in Canada, Enerkem produces 22289

cellulosic ethanol from urban waste at its industrial 1

demonstration plant in Westbury, Quebec. Enerkem is a 2

private company backed financially by strategic 3

investors, such as Waste Management and V a lero. 4

Enerkem is currently completing the construction 5

of its first full

- scale commercial MSW to biofuel s 6

facility in Edmonton, Alberta. Enerkem will complete 7
commissioning this facility during the next few months. 8

When fully operational, this biorefi nery will have a 9

production capacity of up to 10 million gallons per 10

year. The company will register and participate the 11

Edmonton f acility under the RFS program. 12

Enerkem is developing other projects in North 13

America, including a commercial project in Miss issippi, 14

which has received support from both the DOE and the 15

USDA. The RFS, as Brook e noted, is the key driver of 16

the cellulosic and advanced biofuel s industry in North 17

America. 18

For a company like Enerkem, the RFS opens the 19

marketplace, creates the deman d, which then stimulates 20

private investment. Any signal to the investment 21

community that the EPA is weakening the RFS and its 22290

ability to drive change in the marketplace via 1

reasonable RIN prices will create huge uncertainty in 2

our sector, will slow down a nd limit capital investment 3

for building plants. 4

Enerkem is committed to selling and producing 5

cellulosic biofuel s in the United States . With that in 6

mind, we urge the EPA to maintain a strong RFS in the 7
following ways. 8

One, the RFS must maintain pressure on the 9

marketplace in order to work. The controversy over the 10

RFS boils down to a market share battle between a 11

growing biofuel s industry a nd the incumbent oil 12

industry. 13

In essence, the oil industry wants the EPA and the 14

Obama administration to make admi nistrative adjustments 15

to the RFS that would greatly reduce or eliminate the 16

drivers that facilitate more biofuel blending over 17

time. More biofuel s blending will ultimately lead to 18

price competition between the two industries at the 19

fuel pump, ultimately a good sign for consumers. 20

Two, the key to making the RFS work is the 21

deployment of improved higher biofuel blends in the 22291

marketplace. F orward

- looking volumetric requirements 1

and healthy and robust RIN markets are critical pieces 2

to this puzzle. From our perspective, the EPA cannot 3

attempt to use the very policy tool intended to 4

overcome the blend wall in order to avoid it. The RFS 5

was intended to incentivize, not circumvent , E85 6

deployment and higher blends such as E15. 7
Three, this is where I'm sounding like a broken 8

record following Brook e here. But three, weakening the 9

RFS will have a number of serious unintended 10

consequences. The RFS is engineered to address 11

challenges like the oil industry's reluctance or 12

noncompliance to blend more renewable fuels

. 13

Investors in the new generation of biofuel s 14

understand how the RFS and RIN values work to introduce 15

market access for advanced biofuel s. As such, any 16

perceived willingness on the part of the EPA to allow 17

the program to work would send a clear signal to the 18

advanced biofuel s marketplace that the RFS will not 19

promote change as promised. 20

The mere possibility of this increases investment 21

risk, which, in turn, drives capital away from the 22292

market and decreases the effective deployment of 1

advanced biofuel s. 2

Ene rkem wants to continue its expa nsion strategy 3

in North America

-- 4

MR. GRUNDLER : Please wrap it up, sir. 5

MR. MCMAKIN : -- p articularly given the 6

longstanding track record of favorable and consisten t 7

biofuel s policy. We encourage the administration, the 8

EP A to continue the pressure on the marketplace as 9

originally envisioned with robust RIN markets that 10

incentivize the blending of less costly biofuel s, 11

domestically produced biofuel s. 12

Thank you. 13

MR. GRUNDLER : Thank you. Questions? 14

(No response.) 15

MR. GRUNDL ER : Mr. Kasbaum, you have the final 16

word. 17

MR. KASBAUM: All right, thank you. 18

I'm John Kasbaum, senior vice president with KiOR , 19

which is a publicly traded company that produces 20

cellulosic drop

- in hydrocarbon gasoline and diesel

21

blend stocks at its first facility in Columbus, 22293

Mississippi. 1

In many ways, KiOR 's product embodies the vision 2

of the renewable fuels program . It's a drop

- in 3

hydrocarbon compatible with the existing vehicle fleet 4

and fuel distribution system produced from nonfood 5

cellulosic feedsto ck that is currently available in 6

large quantities with no changes in land use. Full 7
exploitation of this resource would result in the 8

creation of a large nondepletable domestic source of 9

transportation fuel at a price competitive with 10

petroleum

- based equ ivalents. 11

Moreover, this fuel would reduce greenhouse gas 12

emissions by at least 60 percent and potentially more 13

than 80 percent relative to the petroleum

- based fuels 14

it replaces while creating high

- paying, p ermanent jobs 15

in rural America. 16

KiOR and cellulos ic fuel in general have come a 17

long way in a short period of time. In less than 7 18

years, we have gone from concept through research pilot 19

demo and ultimately the start

- up of our and the 20

industry's first commercial

- scale cellulosic fuel 21

facility that began s hipping fuel in March of 2013. 22294 In 2013, we expect to produce around 1 million 1

gallons of ethanol

- equivalent cellulosic fuel, and in 2

2014, we will continue to work toward our goal of 3

ramping production towards target production capacity 4

of 12 to 14 millio n gallons. 5
We are currently working to raise funds for our 6

second facility and have identified and begun work on 7
selecting sites for additional facilities to be 8

constructed as soon as financing is secure. However, 9

we are concerned that the proposed rule m ay undermine 10

this progress, indeed the entire advanced and 11

cellulosic biofuel industries , just as real progress is 12

being demonstrated. 13

The 2014 RVO proposal has the potential to 14

significantly undermine future RIN values, and if RIN 15

values fall, investment in biofuel companies will drop 16

since there is a lower prospect of adequate returns. 17

While we are sympathetic to EPA's challenge of 18

forecasting future production, the proposed approach 19

systematically underestimates future volumes for us and 20

others in the c ellulosic fuels industry. 21

Moreover, it appears that the bias towards 22295

underestimation is built into the model such that EPA 1

would continue to underestimate future volumes as long 2

as this methodology is used. We believe there are ways 3

that EPA can meet its need to generate an unbiased 4

estimate of future volumes without risking the future 5
of the industry that the RFS is trying to enable, and 6

we look forward to working with the EPA to develop such 7
an approach before the rule is finalized. 8

From a macro level, I see three factors that 9

challenge the growth of commercial

- scale production of 10

cellulosic fuel. The first being technical, in that 11

cellulosic biofuel production is a new technology

. 12

C ommer cial

- scale production will only go as fast as 13

development, constru ction, and operation of new 14

technology will allow. Nevertheless, companies like 15

KiOR are showing that progress. 16

The second factor is economic. Companies like 17

KiOR derive revenue for gasoline and diesel from three 18

sources -- the value of the hydrocarbon, the value of 19

the RIN, and any additional value associated with a 20

positive environment al impact of the fuel. Since 21

cellulosic RINs are not traded at this point, the proxy 22296

or synthetic value is an advanced RIN plus a waiver 1

credit. 2

The price of the waiver c redit is capped in the 3

statute. Low volume projections impact both of these 4

values. Lower advanced RVOs result in lower advanced 5
RIN prices, and cellulosic RVOs below production 6

prevent KiOR and companies like KiOR from capturing the 7

full value of that w aiver credit. 8

The third factor is financial. What the financial 9

community needs to see is predictable and consistent 10

cash flows. For us, that means sales of fuel and 11

generation of RINs at a relatively predictable price. 12

If we cannot demonstrate cash flo w, it is more 13

difficult to obtain the financing required to support 14

the innovation and expansion that is a goal of the 15

statute. 16

Investors in particular are concerned with the 17

possibility that actual production will exceed the 18

number of RINs required to be available under the 19

proposed 2014 RVO program. If cellulosic or advanced 20

fuel production exceeds the number of RINs available in 21

the pool, the price of those RINs will collapse. 22297 This undermines the support the RFS provides to 1

producers like KiOR and makes it very difficult to 2

convince the financial community that we have a 3

reliable cash flow associated with the generation of 4

our RINs. We do not believe that a zero

- value 5

cellulosic RIN at levels of production well below the 6

statutory targets is what Congre ss had in mind when 7

they wrote the statute. 8

Given the potential damage underestimation does to 9

this program and the companies operating under it, we 10

believe EPA should and can do a better job of 11

developing better, closer to actual production 12

estimates, and KiOR would like to help EPA develop such 13

a methodology. 14

MR. GRUNDLER : Thank you. Questions? 15

MR. BURKHOLDER : Yeah, you mentioned and 16

characterized our approach in 2014 standards as 17

something you viewed as systematically underestimating 18

the cellulosic vo lumes. I'd just appreciate if, in 19

your written comments , you elaborated a little bit on 20

that, given the history and the challenged nature of 21

the start

- up of the cellulosic industry. 22298 MR. KASBAUM : Sure. Be glad to address that. 1

MR. GRUNDLER : Any other qu estions for the panel? 2

(No response.) 3

MR. GRUNDLER : Thank you very much, panel. 4

Appreciate your time and your comments. 5
Now I would like to invite up our special panel, 6

two m embers of United States Congress. 7

(Pause.) 8

MR. GRUNDLER : Gentlemen, welcome to our hearing. 9

Since we are in the State of Virginia, the privilege 10

goes to Mr. Goodlatte to go first. Congressman, when 11

you're ready. 12

MR. GOODLATTE : Well, thank you very much. I 13

appreciate the EPA holding this hearing and all of the 14

distinguished membe rs of the panel allowing us to 15

testify. It's a pleasure to join you all today. 16

Since the renewable fuel standard was dramatically 17

expanded in 2007, we saw almost immediately the market

18

distorting effects of the RFS on our economy. The EPA 19

has the tools t o ease this market distortion fuel e d by 20

the RFS. Members of Congress have asked several times 21

for EPA to use your authority to lower the RFS. 22299 Last year, we experienced one of the worst 1

droughts in our n ation 's history, severely impacting 2

the corn supply. Livestock and food producers were 3
confronted with corn prices as high as $8 a bushel due 4

to the drought and requirements of the RFS. 5
Last year, livestock producers were not just left 6

with the concern of price, but also legitimate concerns 7
over having enou gh corn to feed their animals and fear 8

that that livestock herds would shrink. EPA partially 9

acknowledged these concerns. In response to the waiver 10

request, the EPA's own analysis said that a waiver last 11
year would have provided relief of over $80 millio n to 12

the pork industry just in Virginia and North Carolina 13

alone , yet action was not taken. 14

This year, we are grateful to not be experiencing 15

a drought that compounds the market

- distorting effect 16

of the RFS, but we are still confronted with the 17

detrimental effects of the RFS. The imposition of the 18

2014 volumes now threatens to cause economic and 19

environment al harm. Perhaps the newest challenge would 20

be the imposition of the statutory requirement of 18.15 21

billion gallons of renewable fuels in 2014, of whic h 22300

approximately 14.4 billion gallons will be made up by 1

corn ethanol

. 2

In particular, the combi nation of rising ethanol 3

mandates and declining gasoline demand has exacerbated 4

the onset of the E10 blend wall, the point at which the 5
gasoline supply is saturat ed with the maximum amount of 6

ethanol that current vehicles, engines, and 7
infrastructure can safely accommodate. 8

I was pleased to join Congressman Peter Welch and 9

our colleagues Jim Costa and Steve Womack to lead a 10

letter with 165 of our colleagues asking the EPA to 11

lower the RFS mandate. And I ask to make a part of 12

your record this letter from 169 bipartisan members of 13

the U.S. House of Repr e sentatives from across the 14

n ation

. 15

Despite our frustration

-- and would add that if 16

you count members of the House who have either signed 17

that letter or signed last year's letter or cosponsored 18

either of the two bills that I have introduced, we are 19

now at 198 members of the House seeking relief in this 20

matter. And I'll get to the other alternatives in a 21

moment. 22301 Despit e our frustration that the EPA has failed to 1

recognize the detrimental effects of the RFS in the 2

past, we appreciate that the Environment al Protection 3

Agency has proposed a slight reduction of the RFS for 4

2014. While this is an acknowledgment that the man date 5
is unworkable, it is not enough to provide the much

6

needed relief businesses, farmers, and consumers need. 7
The RFS is clearly unworkable. The mandate 8

drastically manipulates the corn marketplace and 9

increases commodity and food costs across the suppl y 10

chain. Under the RFS, the Federal Government is 11

essentially telling a private industry that they must 12

buy one product, ignoring other groups who also depend 13

on that product and creating an artificial supply and 14

demand. 15

The RFS is the Federal Government disrupting the 16

marketplace by putting its heavy thumb on one side of 17

the scale, tipping it in favor of one side over the 18

other. In the debate over ethanol , the Government is 19

picking winners and losers. I urge the EPA to use your 20

authority to provide the maximum relief possible. 21

While it is imperative that the EPA provide the 22302

maximum relief possible, we must recognize that any 1

band

- aid relief that the EPA may provide does not fix 2

this broken policy. The volatility that the RFS has 3

imposed on our economy n eeds fundamental reform. 4

Congress created this artificial market that is 5
distorting the food and feed market, and now the fuel 6

market, and Congress must provide relief from its 7
unintended consequences. 8

Every one of my constituents, every American has 9

felt the additional cost of the RFS. Every cattle 10

producer who faces higher feed cost , e very family who 11

shops in a grocery store or dines at a restaurant , a nd 12

every motorist who fills up their tank at the gas 13

station pays the price of this unworkable policy. 14

I look forward to working with you to ease the 15

effects of the RFS for these everyday, hard

- working 16

Americans, and I again thank you for the opportunity to 17

be here today. 18

MR. GRUNDLER : Thank you, Congressman. 19

From the State of Vermont, Congressman Welch. 20

M R. WELCH : I think it's on. Thank you very much. 21

I appreciate, too, the opportunity to be here. It's 22303

tremendous to be here with Bob Goodlatte, who's been a 1

leader in Congress on that. 2

As Bob mentioned, we've got that letter signed by 3

165 of our colleagu es. Many others are supportive. We 4

fully do support the lowering of the volumetric 5
requirements for RFS, and we encourage you to go 6

further to ensure RIN prices remain stable and do not 7
inadvertently drive up the cost of gasoline. 8

You know, the bottom li ne, we've had some history 9

now with this policy, and it's time for us to be 10

straight with ourselves as well as the public. The 11

RFS, my view, it's been a well

- intentioned flop. The 12

EPA's decision to lower the mandate reflects the 13

growing consensus that th e mandate just isn't working. 14

The annual increasing mandate contained in the 15

RFS, it's created a bottomless appetite for more corn, 16

and the corn rush has driven up the price of food. 17

It's inflicted real environment al damage across the 18

wetlands and conserv ation lands, and it's wrecked a lot 19

of our small engines, and it's dealt brutal price 20

increases to livestock farmers. 21

Let me just talk first about the environment

. 22304

Since Congress passed the updated RFS in 2007, corn 1

plantings have exploded. Last year, fa rmers planted 15 2

million more acres of corn than before the ethanol 3

boom. These new plantings are coming at the expense of 4

conservation. 5

Prior to the RFS, the Conservation Reserve 6

Program, an incredibly important program to preserve 7
our agricultural base, that was growing. Farmers used 8

it. Now millions of acres are disappearing from that 9

program. 10

Worse, the new lands that are being plowed under 11

to make room for more corn include thousands of acres 12

of virgin land that's going to corn and soybeans. And 13

ev en if we ignore the damage being done to the land, 14

the environment al claims of the ethanol supporters are 15

pretty dubious now that the evidence is in. 16

Corn ethanol production, as you know, is very 17

energy intensive. It requires huge quantities of 18

water, and it's been found in some cases to have a 19

higher lifecycle greenhouse gas emission than gasoline. 20

One study found that ethanol 's greenhouse gas 21

emissions were 28 percent higher. 22305 Now I want to talk about the dairy, livestock, ag, 1

and corn price impact. The ethanol mandate has had the 2

unintended effect of driving up the price of corn, as 3

Bob has said. It's great for corn producers. I mean, 4

there are some winners here. But it's really bad for 5
livestock producers. 6

CBO has estimated that the increase is in t he 7
range of 28 to 47 percent in the price of corn, and a 8

10 to 15 percent increase in food prices. And that's 9

whether you're going out to buy dinner or buy at the 10

grocery store. And livestock across the country has 11

been really screaming for some relief. 12

My State, Vermont, which is a dairy State, is 13

being hammered with the cost of production. Farmers 14

are hanging on by their fingernails when they have 15

these cost increases due to the ethanol . That's one 16

contributing factor. 17

And you know that the price of c orn used to be in 18

the range of $ 2. Since RFS, it went up to around $ 8, 19
oftentimes around $6, coming down a little bit now, but 20

still propped up by the ethanol

. 21

So the corn farmers are doing good. You know , 22306

they were doing better with ethanol , there's no 1

question. But there's been a downside for other 2

farmers, obviously, who are entitled the same fair 3

consideration. 4

Engine damage. Corn ethanol , it really is 5
wrecking our engines. My own chainsaw, I've got a beef 6

about this, got wrecked, all right? Small engines 7
struggle with E10. 8

As you know, when ethanol sits in an unused engine 9

for a few weeks, it corrodes the machinery by oxidizing 10

the aluminum. I visited a little, small engine repair 11

shop in Colchester, Vermont, a while ago, and business 12

is booming for him, up 60 percent. A typical repair 13
runs from $50 to $400 because the damage can spread to 14

carb u retors and fuel lines. 15

And Adam Porter, the propriet o r, said most people 16

don't understand it until they're stung by it. If they 17

have lawn mowers or chain saws, it really ends up 18

hurting. So if we continue to follow the mandate and 19

drive towards E15

-- thank you for not doing that

-- we 20

could see dramatic engine damage continue to chainsaws, 21

boats, snowmobiles, and countless other engines. 22307 The blend wall in the ethanol industry. You know , 1

we understand why we're here. The EPA finally 2

recognized or did recognize, thank you, the blend wall 3

is a real problem. And that's going to get worse. 4

We've had advances made in the CAFE standard s that 's 5

driven down fue l consumption while the ethanol mandate 6

continues to rise. 7
Now the mere anticipation of the blend wall in 8

2013, as you know, caused the RIN prices to spike and 9

could have caused severe damage to the economy through 10

increased price

-- gas prices. We've got that short

11

term fix for 2014, thanks to the EPA. But Congress, 12

Bob and I note, needs to act. So we're going to 13

continue pushing hard for passa ge of our legislation in 14

2014. 15

You know, ethanol has been a boon for the corn

16

producing farmers and the industr y, but we really can't 17

continue a policy which is solely defended on the basis 18

that it props up one industry, and there ought to be 19

some other ways to help corn so they have some price 20

stability. So I encourage the EPA to hold firm in the 21

face of demands from the industry to even further 22308

reduce the blend levels for 2014 and en sure RIN prices 1

remain steady. 2

And just towards the end here, I want to note that 3

you took action on soy

- based bio diesel , and there is 4

growing concern about the demands on soy because of 5

bio diesel in 2014 and in the outyears of the RFS. 6

So I thank you for hearing Bob and I. I think we 7
represent the point of view I would say of the majority 8

of Congress. This is tough in terms of the transition, 9

but it's a dead

- end policy that has nowh ere to go. 10

It's wrecking engines. It's unfair to lots of farmers, 11

and it's not good for the environment

. 12

So thank you very much for your efforts. 13

MR. GRUNDLER : Thank you both for coming here and 14

presenting your views. While it's very tempting for us 15

to be able to ask you questions for a change, we will 16

resist that temptation. 17

Well, just one. Will we have a budget by January? 18

I'm just kidding. 19

(Laughter.) 20

MR. GRUNDLER : Thank you again for your time. 21

MR. WELCH : It's a fair question. 22309 MR. GRUNDLER : Oka y. I'd like to invite Panel 11 1

up. 2

(Pause.) 3

MR. GRUNDLER : Welcome, everyone. Mr. Web er, 4

we're ready when you are. 5

MR. WEBER : Very good, and good afternoon. My 6

name is Alan Weber. I'm a founding partner with Marc 7

IV. We have for the past 20 years or so provided 8

technical and economic support to the bio diesel 9

industry, and most of that time also serving as an 10

adviser to the Nation al Bio diesel Board. 11

More recently, I've been providing close technical 12

support to the NBB's RVO industry workgroup, and that 13

group, which consists of industry stakeholders, it 14

depicts all of the various aspects of the value chain. 15

So it includes feedstock providers, bioscience 16

companies, bio diesel producers, fuel markete rs, as well 17

as fuel end users. 18

And that particular group, their charge is to help 19

depict realistic economic conditions for our modeling 20

efforts, and then also to be able to commission that 21

work that needs to happen empirically to be able to 22310

quantify the impacts of a growing biomass

- based diesel 1

fuel market. We rely primarily upon a partial 2

equilibrium model that is maintained by waste. This 3

particular model has a domestic as well as an 4

inter nation al component to it, and it has a very 5

detailed biofuel s as well as a nested RIN structure 6

that's part of it. 7

So our approach economically is to assess the 8

systemwide impacts of various levels of production of 9

biomass

- based diesel fuel, and our work has concluded 10

beyond , at least in our minds , a shadow of a doubt that 11

there are sufficient feedstock supplies out there to 12

support an RVO of 1.7 billion gallons. And that the 13

RIN cost associated with that increase will actually 14

decrease whenever you look at all of the RIN values 15

together in summation from the program. 16

I think the fact needs to be made or possibly 17

restated fro m earlier this morning that the volumes 18

that we're talking about are equivalent actually to the 19

current run rate right now in 2013 of 1.7 billion 20

gallons. And in fact, that during this point in time, 21

the feedstock prices have not increased. They've 22311

actua lly decreased. 1

When we look back towards last year, soybean oil 2

was averaging close to 52 cents a pound. But if we 3

look at the markets that are trading right now, we're 4

closer to 40 cents a pound. Other feedstocks used for 5

bio diesel production

-- animal fats, yellow grease

-- 6

trading in a range of 25 to 35 cents. So we're 7
actually at record productions, and feedstock prices 8

are falling. 9

This same RVO workgroup has also commissioned 10

several other pieces of work. They've commissioned a 11

global assessment o f feedstock supplies. They have 12
commissioned a domestic input/output study to look at 13

jobs supported by the bio diesel industry, and other 14

testimony later today will document in detail some of 15

those works. 16

I'd also like to shift gears just slightly. We've 17

also looked empirically at the impacts of a growing 18

biomass

- based diesel fuel market in terms of the 19

livestock sector, and for those of us involved in 20

livestock, its profitability is the same as it is for 21

any other industry. 22312 We want to increase our revenu es. We want to 1

contain our cost, and we want to look for ways to be 2

able to mitigate risk, do diversification. And 3

realistically, that is what increased production of 4

biomass

- based diesel fuel does in all three aspects. 5
So the predominant feedstock utili zed in the 6

United States is soybean oil. And as we increase the 7
demand for soybean oil because of bio diesel use, 8

because of the co

- product nature, we're also increasing 9

the supplies of meal, which depresses prices. 10

Every study that we have evaluated or co mmissioned 11

has highlighted the exact same conclusion, and that is 12

that increased production of biomass

- based diesel fuel 13

will, in fact, lower the relative cost of protein for 14

livestock producers. 15

Second, we continue to rely upon animal fats more 16

and more a s we go. Although these byproducts are not 17

primary drivers in terms of the prices paid to 18

livestock producers, they do have an impact in terms of 19

the margin, in terms of byproduct drop values. 20

We commissioned work by Centrec Consulting Group 21

to look at th is, and they concluded that every 22313

livestock sector

-- pork, poultry, beef

-- all 1

positively impacted. So, for example, a livestock 2
producer could expect $10 to $12 more per head at 3

market based upon those increased values. 4

And finally, third, increased pr oduction of 5

bio diesel results increased supplies of crude glycerin. 6

Crude glycerin is a potential feed ingredient for 7
livestock producers. It has a tentative definition for 8

approval by AAFCO . It has been evaluated by multiple 9

universities in feedstock r ations, and it does, for 10

those of us as livestock producers, it provides an 11

additional energy source that we can consider. 12

So, in conclusion, we're experiencing a record 13

year in terms of production. Feedstock prices have not 14

increased. They're actually d ecreasing in terms of the 15

overall cost of production. Our empirical work that we 16

have done from a modeling perspective we believe is 17

very comprehensive and clearly details that there is 18

sufficient feedstock supplies to hit an RVO of 1.7 19

billion gallons. 20

A nd I appreciate your time. 21

MR. GRUNDLER : Thank you. Any questions for Mr. 22314

Weber? John? 1

MR. HANNON : In 2013, the volume production is 2

about 1.7 with a 1.28 billion standard. The fact that 3

there would be feedstock available to support 1.7 4

production is a separate question than what's the 5

bio diesel standard. It's one element of it, but it's 6

not the only. 7
We certainly analyzed that, and in fact, we 8

projected significantly higher than 1.28 would be 9

produced in 2014 with some issues about the tax or not 10

the tax. Has your modeling looked at what would be 11

produced in 2014 under the proposal based on the 12

advanced biofuel standard ? 13

MR. WEBER : The short answer is yes, and the long 14

answer is no. Because whenever we looked at various 15

scenarios, one scenario we d id not look at was to 16

actually reduce the advanced biofuel or the D5 RIN 17

category that much below the statutory levels. And so, 18

we will

-- we are in the process of rerunning those 19

models, and we'll provide that information in written 20

testimony. 21

But the di fference is, is that, you know, there's 22315

no head space between the D4 and D5 elements right now. 1

So growth above 1.28 would be severely limited under 2

the proposed rule. 3

MR. SIMON : And I would encourage you, Alan, in 4

terms of your written comments , to prov ide as much data 5
on the modeling that you're running that you can 6

because I think that will be very helpful for us as we 7

go forward. 8

MR. WEBER : Okay. Very well. 9

MR. SIMON : Thank you. 10

MR. GRUNDLER : Mr. Miller, welcome. 11

MR. MILLER : Thank you. Thank you for giving me 12

the opportunity to speak with the EPA today. 13

My name is Mitch Miller, and I am the CEO of 14

Carbon Green Bio energy , which operates and owns a 50 15

million gallon per year ethanol plant in Lake Odessa, 16

Michigan. I'm a 20

- year veteran of the etha nol 17

industry. I was in this industry at least a decade 18

prior to RFS1 and 2 and have seen the positive effects. 19

I'm here to express my concern and to request an 20

increase in the proposed 2014 RVO. RFS2 is working as 21

designed. It was designed to break the monopoly by 22316

creating competition a nd consumer choice at the pump 1

Big oil's scare tactics of rising gasoline prices 2

in the U.S. due to the inability to meet RFS2 is 3

fiction. They will sell gasoline to the highest bidder 4

regardless of the RVO level. The oi l monopoly has done 5
everything in their power to prevent E15, midlevel 6

blends, and E85 from reaching consumers. And now your 7
proposal rewards that behavior. 8

This comes at a time when obligated parties are 9

silently and quickly installing E85 pumps at hundr eds 10

of locations in order to comply with the rising RFS. 11

The DOE's alternative fuel infrastructure Web site is 12

missing at least 1,000 E85 fueling stations. See 13

E 85prices.com for the most accurate data, which lists 14

3,215 sites. 15

I also estimate that this s ite is missing up to 16

500 highe r - fueling, higher

- level blend locations that 17

have not been reported. 18

Your proposal reduces the required volume by 1.34 19

billion gallons compared to 2013. This is the wrong 20

direction and will stall investments in all sectors of 21

renewable fuel. The proposed rule will reduce 22317

American

- made conventional biofuel s by 799 million 1

gallons. If this becomes law, there are only two 2

outcomes. 3

The U.S. ethanol producers will either export 4

ethanol at the 799 million gallon level, or 16 etha nol 5
plants, equivalent to the one I operate in Lake Odessa, 6

will be shut down. Likely a combi nation of the two. 7
In both scenarios, the leverage needed to continue 8

expansion of higher

- level blends will be lost, and we 9

will be importing more crude oil. I a sk that you look 10

at Michigan as an example of the competition that is 11

being created by ethanol produced in our State and the 12

investment in bringing higher

- level blends to the 13

market. 14

On October 1, 2013, Carbon Green Bio energy 15

launched an intensive and comp rehensive program to 16

expand higher

- level blends in the State of Michigan. 17

We currently have 25 E85 fueling stations that are 18
achieving at least $1 discount to gasoline in the Grand 19

Rapids market. This price spread is being promoted 20

with an intense market ing campaign. 21

E85 sales at our stations are up 400 percent year 22318

over year, and just yesterday, local rack gasoline hit 1

an extreme low of 44 cents under RBOB. Ferrysburg , 2

Exx onMobil rack gasoline was 44 cents under RBOB. 3

Every consumer in our market is sa ving money at the 4

pump due to this competition. 5
Now I realize this is an isolated example, but 6

this can and will be replicated across the country 7
because we are going to make it happen. You can learn 8

more about our program at yellowhose.com. 9

Please stay t he course and raise the RFS, and we 10

will break through the so

- called blend wall that has 11

been fabricated and exacerbated by the oil industry to 12

protect their monopoly. 13

Thank you for your time and consideration. 14

MR. GRUNDLER : Thank you. Questions? 15

MR. MAC HIELE : Just encourage you to follow up in 16

your written testimony with more of that information, 17

including if you have any data on actually what 18

happened with the demand for E85 as the price 19

relationship changed. That would be very helpful to 20

us. 21

MR. MILL ER : Will do. 22319 MR. MACHIELE : Sort of how the volumes change with 1

pricing, and just FYI, most of here are located in Ann 2

Arbor, Michigan. 3

MR. MILLER : Okay. Great. 4

MR. MACHIELE : You're not a State fan, are you? 5

MR. MILLER : Say that again? 6

(Laughter.) 7

MR. GRUNDLER : We'd have to discount your 8

testimony if you went to Michigan State. 9

Mr. Haapala , you're next. 10

MR. HAAPALA : Thank you. I'm Ken Haapala , 11

executive VP of the Science Environment al Policy 12

Project. 13

Good afternoon, carbon

- based life forms. I'm gla d 14

to be here. 15

(Laughter.) 16

MR. HAAPALA : On numerous occasions, 17

representatives of SEPP have criticized regulations 18

proposed or implemented by EPA stating why the 19

regulations are not supported by rigorous science. I'm 20

here to thank the EPA for taking a bab y step in the 21

right direction. 22320 The renewable fuel standards are without 1

scientific merit. The mandate was passed by Congress 2

during a time in which its judgment was clouded by two 3

fears. One, that the United States would become 4

increasingly dependent on oil imported from unstable 5
regions of the world. Thus, nation al security was 6

threatened. 7

And two, human health and welfare are endangered 8

by unprecedented and dangerous global warming. 9

Subsequent events have shown that these fears are no 10

longer justified

. 11

In the first decade of this century, one could 12

look at charts comparing the falling U.S. oil 13

production and increased U.S. oil imports and possibly 14

conclude that the trends would continue indefinitely, 15

jeopardizing U.S. energy security. But the conclusi ons 16

were wrong. The U.S. and Canada had vast reserves of 17

oil waiting to be tapped if G overnment regulations, 18

technology, and economics would permit. 19

Things have changed. In recent years, we have 20

seen a dramatic increase in domestic oil production. 21

The W hite House recently released a report stating that 22321

in October, U.S. oil production exceeded imports for 1

the first time in 18 years. Also stable, Canada has 2

enormous oil reserves. The fear of reliance on oil 3

from unstable regions of the world threatening U.S. 4

security is outdated. 5
Global warming. Around the turn of the century, 6

this century, one could have possibly examined various 7
charts and conclude that humanity faced a future threat 8

of unprecedented and dangerous global warming from 9

carbon dioxide emi ssions, which the ethanol mandate may 10

reduce. 11

In 2009, the EPA asserted that greenhouse gases, 12

principally carbon dioxide, present such a threat. The 13

EPA stated that science supported its claims and 14

offered thr ee lines of evidence. 15

One, a distinct human f ingerprint, a hotspot in 16

the atmosphere centered over the tropics at about 17

33,000 feet. It doesn't exist. No one can find it. 18

Satellites and weather balloons have failed to find it. 19

Two, EPA claimed that surface global warming was 20

unprecedented and dang erous. It was not, and it 21

stopped 16 years ago. 22322 Three, EPA claimed climate models are reliable. 1

The climate models failed to predict that global 2

warming would stop. All of the 19 U.S. climate models 3

we examined greatly overestimated the warming for the 4

last 30 years by 2 or 3 times. As with the fear that 5

the threat to nation al security from increasing 6

dependence on oil imports from unstable regions of the 7
world, the fear of future threat to humanity from 8

human

- caused global warming is outdated. 9

Based on the best available technology and 10

empirical science, I urge the EPA to adopt the proposed 11

changes in regulations. They are a baby step towards a 12

policy based on reality rather than outdated concepts 13

and fears. Anything less would be as obsolete as 14

manda ting buggy whips for automobiles. 15

In addition, I suggest EPA request Congress to 16

reevaluate the entire renewable fuels program. 17

Thank you. 18

MR. GRUNDLER : Thank you. Questions? 19

(No response.) 20

MR. GRUNDLER : Okay. Next we have Mr. Oestmann ? 21

MR. OESTMANN : Oestmann

. 22323 MR. GRUNDLER : Oestmann

. 1

MR. OESTMANN : That's quite all right. It happens 2

all the time. 3

MR. GRUNDLER : That was the German pronunciation. 4

Proceed. 5

MR. OESTMANN : All right. Thank you. 6

Hello, and thank you for the opportunity today to 7

submit c omments to the EPA on a matter of nation al 8

importance. 9

My name is Jeff Oestmann . I'm president and chief 10

execut ive officer of East Kansas Agri

- Energy . It's 11

located in Garnett, Kansas. It's about a 45 million 12

gallon a year facility. It's in a rural comm unity of 13

Kansas, about 3,000 people. 14

Today, we find ourselves again debating the intent 15

of Congress, the administration, and the facts. I'm 16

here today to advocate for the status quo and keeping 17

the 2014 renewable volume obligation, and I come today 18

with a unique

-- unique perspective. Similar to my 19

colleague here on my right, I started in biofuel s when 20

there was less than a billion gallons being produced. 21

And the thought of reaching 10 percent, well, 22324

doggone it, it just seemed unreachable. And all the 1

ob stacles put in front of us from the petroleum 2

industry, the automotive manufacturing lobby, things 3

have changed a lot, I guess. 4

In addition to my years in biofuel s, I've also run 5

a bio diesel plant and spent a number of years on the 6

inter nation al scene. An d lastly, as a former United 7

States Marine, I view the efforts of my industry as key 8

to reducing our dangerous dependency on foreign oil. I 9

have been a leader and continue to have hands

- on, 10

boots

- on approach of the renewable fuels industry from 11

all perspe ctives. 12

So to say I have seen a lot is an understatement. 13

This industry has grown more than I could have ever 14

imagined, and it's all due to the renewable fuel 15

standard , adopted during the Bush administration. When 16

the RFS was established, it was always e nvisioned

-- it 17

always envisioned ethanol blends well over 10 percent. 18

So I sit here today and scratch my head. 19

The economic impact of the RFS has been 20

dramatically positive for the U.S. economy, 21

particularly in rural America and rural Kansas. In 22325

rural K ansas, the impact that the RFS has had on 1

production agriculture cannot be overstated. I have 2

witnessed the positive impact it has had on the local 3

economy in Kansas and throughout the Midwest. 4

Before our facility was built, Anderson County was 5

one of the poorest counties per capi ta in Kansas. East 6

Kansas Agri

- Energy has committed substantial investment 7
in the production of renewable fuels in And erson 8

County. East Kansas Agri

- Energy has helped the local 9

community grow and thrive, showing the n ation and t he 10

world that rural America and east Kansas is booming and 11

leading the area of innovation investment in future 12

energy technologies. 13

So this proposal has the potential to destabilize 14

rural economies like ours. Again, we must move 15

forward, not backwards whe n it comes to developing 16

alternatives to fossil fuels and foreign oils. 17

We all know that the RFS and biofuel s have created 18

jobs that cannot be outsourced, which have helped 19

ensure a robust r ural America. East Kansas Agri

- Energy 20

has continued to commit and invest in technologies and 21

make modifications to increase the efficiency of our 22326

production. 1

As we look toward the future and next

- generation 2

fuels , such as cellulosic ethanol and other advanced 3

biofuel s, East Kansas Agri

- Energy is very concerned 4

about the message this proposal is sending future 5
investment and rural innovation. Quite honestly, it 6

has already affected a decision that we have and 7

stalled our future work. 8

It will have an impact of stranding billions of 9

dollars of private capital invested in t he United 10

States by renewable fuel producers and related 11

companies who have brought the industry from infancy to 12

commercialization in just 5 years based on the 13

stability offered by the 15

- year policy adopted in law 14

in 2007. 15

In essence, when I look at this, it will increase, 16

not decrease , the risk of investment in low carbon 17

cellulosic and advanced renewable fuels, as well as 18

renewable fuel infrastructures. EPA must balance the 19

goals of all Federal agencies, elected officials, and 20

successful goals of previo us administrations. 21

The Obama

- led EPA will effectively circumvent all 22327 future growth and stamp out half of the goals of the 1

2007 RVO law. The impact, billions of dollars of idled 2

capital, wasted time and effort as the law has been 3

envisioned. I'm running close on time here. 4

So after years of success from the RFS, we must 5
not move backward. We must capitalize on current 6

success and continue to invest in future development 7

and commercial

- scale production of next

- generation 8

biofuel s. 9

MR. GRUNDLER : If you co uld wrap it up, sir? 10

MR. OESTMANN : Absolutely. So why are we even 11

here today? I guess I have to ask. It boggles the 12

mind to understand why we have a completely successful 13

program by any measure. All target s are being met, and 14

we have compliance by all RVO parties. 15

In summary, it's hard to come to Washington today 16

as our company is small and really can't afford my time 17

to be spent here today. Our investment in ethanol 18

solves energy security, provides high

- value markets for 19

our farmers, cleaner fuel, an d a superior U.S.

- based 20

solution to energy and transportation

. 21

Congress has created the RVO. It is EPA's job to 22328

implement the will of Congress, not the will of the 1

auto or petroleum industry. 2

Thank you very much. 3

MR. GRUNDLER : Thank you. Ms. Wilcox? 4

Oh, I'm sorry. Any quest ions? 5

(No response.) 6

MR. GRUNDLER : Ms. Wilcox, you're up. 7

MS. WILCOX: Thank you. 8

On behalf of the American Frozen Food Institute, 9

I'm Kristi n Pearson Wilcox. I'm vice president of 10

government affairs for AFFI, and I wish to convey o ur 11

support for EPA's proposal to reduce the amount of 12

corn - based ethanol that must be blended into our 13

nation's fuel supply under the RFS for 2014. 14

The frozen food sector contributes over $70 15

billion to the economy, supporting nearly 2 million 16

jobs. AFFI members help to feed and nourish Americans 17

and consumers around the globe. We believe food

- based 18

commodities should be used to fuel bodies, not vehicle 19

engines. 20

Most of the ethanol mandate today relies on corn, 21

and the biofuel proposed today

-- produced t oday relies 22329

on soybeans. EPA's proposal to reduce the 2014 RFS 1

mandate for corn ethanol by 1.4 billion gallons 2

compared to 2013 levels and to propose 17 million 3

gallons of cellulosic fuels, biofuel s be blended next 4

year is a step in the right direction. Both proposals 5
must be implemented, but much more needs to be done. 6

Corn is used in 75 percent of the food found in 7

the supermarket shelves. Corn and soybeans are key 8

animal feed ingredients, and feed accounts for 69 9

percent of the cost of livestock produ ction. As a 10

result, price volatility for corn and soybeans has a 11

tremendous negative impact on the cost of food. 12

Frozen food companies are vulnerable to rising 13

corn and soybean prices because we are major consumers 14

of these products. Frozen food depends on the price 15

and availability of meat proteins, dairies, wheat, 16

sweeteners, soybeans, corn, and specialty crops. These 17

ingredients are critical in preparing a diverse range 18

of popular, nutritious, family

- focused, and affordable 19

frozen foods, including ent rees suc h as frozen 20

casseroles, calorie

- conscious foods, pot pies, pizzas, 21

frozen foods prepared, and meals. 22330 When the RFS causes corn prices to rise, the price 1

of other major crops rise as well. This includes 2

horticultural crops, such as potatoes, strawbe rries, 3

vegetables for processing, sweet corn, and peas. 4

Shrinking supplies of corn grown for food consumption 5
has caused food prices to spike nearly 18 percent, 6

increasing the food cost for a family of 4 between 7
$1,300 and $2,600 per year, according to a study 8

conducted by the Nation al Council of Chain Restaurants. 9

Rising food prices are a significant challenge for 10

the poorest 20 percent of Americans, who spend about 11

one - third of their after

- tax income on food. In 2012, 12

despite the worst drought in 50 yea rs, the U.S. 13

diverted 40 percent of its corn crop to fuel to satisfy 14

the RFS, risking the rise of corn prices and food costs 15

across the country. 16

AFFI petitioned EPA to waive the mandate to save 17

consumers from predicted food price spikes. 18

Unfortunately, th e agency failed to act. Should EPA 19

fail to enact its proposed 2014 volume levels, the 20

ethanol and cellulosic biofuel s mandates will be set at 21

extremely aspirational levels. 22331 Here is just one example beyond the debate of 1

corn. If EPA does not make the appr opriate adjustment, 2

soy oil used for bio diesel will likely explode in 2016, 3

rising to 150 percent of all current U.S. soybean 4

production with demand exceeding production. 5
If the RFS mandates are not holistically examined 6

or repealed, we are expected to exp erience annual price 7
increases in beef and chicken over 7 percent, in eggs 8

over 11, in potatoes 13, according to a Nation al 9

Economic Research Associates October 2012 study. This 10

is not an outcome food makers or consumers want to see. 11

Consumers should be s hielded from the cost of 12

overly aggressive ethanol and bio diesel mandates. We 13

applaud EPA for this first step, and we urge the agency 14

to finalize their proposed volume levels and provide 15

relief to food makers and consumers. 16

Thank you. And we're happy to follow up with any 17

questions you have in our written comments. 18

MR. GRUNDLER : Thank you. Mr. Spano? 19

MR. SPANO : Thank you. Thank you for the 20

opportunity. 21

I speak today as an average senior citizen with a 22332 fixed income who owns two vehicles, both 8 years o ld. 1

I'd like to speak on three points

-- t he overall impact 2

on the environment , impact on less than new vehicles, 3

and hidden costs. And as a member of Energy Citizens, 4

I want to thank you for your stand on lowering the 5

volume of RFS. 6

Ethanol is an additi ve. It is a diversion of food 7
resources and may even be a net negative impact on the 8

environment , if a cleaner environment is the goal , d ue 9

to the infrastructure for the production of the corn 10

crop in the first place, such as the diversion of land 11

from ot her uses and the use of marginal land. 12

Studies in 2002 and 2004 , as reported by Ronald 13

Cook e , cultural economist writing for EVWorld.com, 14

contend, "If we evaluate corn ethanol as a fuel system, 15

we must add the hydrocarbon and poisons produced during 16

planti ng, growing, harvesting, conversion, 17

transportation , blending, distribution, and consumption 18

to the additional hydrocarbons released by corn ethanol 19

waste , a nd the hydrocarbon penalty from energy 20

inefficiency." 21

Cook e 's point that ethanol production and use is 22333

nowhere near a clear winner for the environment is 1

reinforced by University of California, Berkeley 2

ge oengineering professor Tad Patze k, who worked for 2 3

years and produced a 50

- page report taking into account 4

the many varied energy inputs. He conclud ed, "The 5

cumulative energy consumed in corn farming and ethanol 6

production is six times greater than what the end 7
product provides your car engine in terms of power." 8

If the purpose of creating the ethanol additive 9

market is to reduce carbon in the atmosph ere, it would 10

seem the production of corn for ethanol is a net loss. 11

If the corn went to animal and human food use, food 12

prices might at least stabilize, if not drop. 13

Domestic exporters of corn and corn products could 14

expand their markets to poor countrie s whose need for a 15

basic food crop is paramount. Our exporters of food 16

would gain, jobs would be created, and the importing 17

countries would have a stable food base. 18

It's clear to me that ethanol is a mixed blessing 19

at best for the larger environment and i s costly to 20

produce, supplying less energy output for engines than 21

gasoline. 22334 A 102

- page study for the Coordinating Research 1

Council, titled "Intermediate Level Ethanol Blends 2

Engine Durability Study" and dated April 2012, tested 8 3

common internal combustio n engines at 500 hours of 4

running with varying levels of ethanol gasoline mixes. 5
In all, 28 engines were tested, and 12, nearly 50 6

percent of the tested engines, failed in one respect or 7
another in performance attributable to ethanol blended 8

gasoline. 9

"Th e study has shown the two popular gasoline 10

engines used in light

- duty automotive applications of 11

vehicles from model years 2001 through 2009 failed with 12

mechanical damag e when operated on intermediate

- level 13

ethanol blends of E15 and E20." 14

This report would seem to show that many vehicles 15

on the road today, hundreds of millions, could be 16

subject to failure in valves and gaskets due to higher 17

blends of ethanol . According to a report in the New 18

York Times a few weeks ago, even the EPA would agree 19

that ethanol can damage vehicles. 20

"Most fuel pumps and vehicles are not equipped to 21

handle more than 10 percent ethanol ," the EPA said, 22335 "and there has been little demand for more." 1

Alternative fuels may present themselves, but more 2

ethanol at this time is not one of t hem. 3

Thank you. 4

MR. GRUNDLER : Thank you. Thank the panel, 5
particularly those who traveled here to present 6

testimony. Grateful. 7

I'd like to invite Panel 12 up. 8

(Pause.) 9

MR. GRUNDLER : I'd like to invite Mr. Steve Howell 10

to go first. 11

MR. STEVE HOWELL : Go od afternoon. My nam e is 12

Stev e Howell. I am the principal and co

- founder of 13

Marc IV Consulting. I serve d as the technical director 14

for the Nation al Bio diesel Board from 1994 to 2013 and 15

currently serve as a technical adviser for the Nation al 16

Bio diesel B oard. 17

I'm also the chairman of the ASTM Inter nation al's 18

Bio diesel Task Force, a position I've held since 1994. 19

I've received the Meritorious Service Award from the 20

American Nation al Standards Institute in 2008 for work 21

on inter nation al standards, and I'm the only person 22336

that has been honored as a fellow of the society from 1

both ASTM Inter nation al , as well as th e American Oil 2

Chemist Society. So I've been involved in bio diesel 3

for quite some time. 4

In the early 1990s, the OEM community made it 5

abundantly cl ear that fully vetted and approved 6

bio diesel ASTM standard s would be needed before they 7

would recommend bio diesel blends. With this in mind, 8

many millions of dollars of cooperative research and 9

testing over the last 20 years has occurred, and this 10

has pro vided sufficient data to secure ASTM standard s 11

for pure bio diesel , B100, used for blending. That's 12

ASTM D6751, which was first approved in 2001. 13

Standards for blends of 5 percent bio diesel or 14

less bio diesel , ASTM D975 , and blends for bio diesel 15

containing 6 to 20 percent bio diesel , ASTM D7467, were 16

approved in 2008. 17

Many major fleets and users, such as school buses, 18

municipal buses, and government fleets, have used B20 19

without incident since the mid 1990s. All OEMs doing 20

business in the U.S. now tell their customers it's 21

acceptable to use B5 and lower blends. Over 75 percent 22337

tell their customers using B6 to B20 blends meeting 1

D7467 standards is acceptable in all or a portion of 2

their diesel offerings, many going back as early as the 3

mid to early 2000s. 4

AST M specs for B20 are working, and users are 5
having a positive experience with B20 in both existing 6

and new diesel engines. This has been a real key and a 7
major basis for the development of bio diesel in the 8

volumes that have occurred over the past several y ears. 9

I also managed the NBB program that provided 10

health effects testing data to the EPA under the Fuels 11

and Fuel Additive Registration Program of Section 12

211(b) of the Clean Air Act. Based on the health 13

effects information submitted and the ASTM standar d s 14

for bio diesel , EPA has registered bio diesel B100 as a 15

legal fuel and a legal fuel blending component in the 16

U.S. under the Clean Air Act. 17

As a legally registered fuel in the U.S., use of 18

bio diesel in an existing diesel engine does not, in and 19

of itself, void an OEM warranty . OEMs warranty the 20

work manship of their parts, materials, and vehicles 21

they sell. OEMs don't sell fuel. So they don't 22338

warranty fuel. 1

If a legally registered fuel used in a diesel 2

engine causes a specific problem, whether that probl em 3

is caused by petroleum diesel fuel, conventional fuels, 4

or bio diesel , that problem is the responsibility of the 5
fuel supplier and not the engine company and not 6

associated with the engine company warranty. 7
The question for a bio diesel user, therefore, i s 8

not whether the use of bio diesel will void an OEM 9

warranty, it is whether they believe using a bio diesel 10

blend higher than that recommended or approved from the 11

manufacturer will, indeed, cause a fuel

- related issue. 12

We are hopeful that the cooperative ef forts of the 13

Nation al Bio diesel Board with the OEM community will 14

result in all OEMs issuing formal support of 15

recommendations for B20 blends in all of their 16

equipment moving forward. That is certainly our goal. 17

That's what we're working toward. 18

In the m eanwhile, the continually improving ASTM 19

standard s for bio diesel , industry commitment to fuel 20

quality, and the current recommendations from the OEM 21

community provide sufficient conditions to allow 22339 significantly higher levels of bio diesel penetration in 1

the market moving forward. 2

Therefore, based on this, there is no bio diesel 3

blend wall, as was inferred by the NPRM. And there is 4

no need for policymakers or others to consider limiting 5

the level of bio diesel based on the end use acceptance 6

or OEM support. 7

Th anks for the time today. 8

MR. GRUNDLER : Thank you. 9

MR. KOROTNEY : All right. Now it's on. All 10

right. So, Steve, well, yeah, we did talk about this 11

issue in the NPRM, and we don't have a really good 12

analysis of the actual makes and models in the in

- use 13

f leet and their associated B5, B20 warranties or what 14

that might be. 15

In other words, what we're really looking for is 16

some good data and analyses on for the in

- use fleet

. 17

N ot current sales, but for the in

- use fleet, what is 18

the breakdown between the volume of bio diesel that 19

could be B5, for instance, and is acceptable to engines 20

in the in

- use fleet? 21

What is the volume that is acceptable up to B10 or 22340

B50 or B20 or something like that? So if that's data 1

that you can get your hands on and submit it to us, 2

tha t would be great. 3

MR. STEVE HOWELL : We can certainly provide some 4

of that information, although the reality is for many 5
vehicles, the OEMs may not recommend levels higher than 6

B5, we have very successful use of B20. Have for many, 7

many years. 8

So I'm not sure that that analysis really would 9

have a determining factor on how much bio diesel we can 10

use in the market, but we'll be happy to supply the 11

information. 12

MR. GRUNDLER : Mr. Howell number two, proceed. 13

MR. DAVID HOWELL : Thank you, and we're not 14

related. Well, we probably are. Our 9th or 10th 15

great

- grandfather probably came to Long Island in about 16

1638, if our figures are right. But enough detail. 17

Good afternoon. Thanks for the opportunity to 18

talk about your recent EPA decision. 19

My name is David Howel l, and I'm a farmer from 20

near Muncie, Indiana. I'm here to talk about how the 21

proposed decrease in renewable volume ruling has

-- RFS 2234 1

will have a drastic negative impact on our family farm, 1

but also the people of Indiana and across all of 2

agriculture. 3

I'm fortunate to farm with three of our grown 4

children and their families. On our farm, we raise 5
corn, soybeans, processing tomatoes, and jack o'lantern 6

pumpkins. Many people at first glance would say we're 7

large farmers because we operate several thousand acres 8

over seven counties in Indiana. However, our farm 9

provides the only income for 4 farm families, and at 10

least half the income for 10 more families. 11

When many rural communities have struggled to 12

bring their best and brightest children back home after 13

going to college, we were fortunate that our children 14

chose to return to the family farm after college and 15

make agriculture their career. With degrees they 16

earned from Princeton and Texas A&M, Iowa State and 17

Purdue, they had many easier options than farmi ng. But 18

they love the Indiana land. They wanted to come back 19

and take care of it. 20

Our long

- term plans have been made, given their 21

decisions , with the knowledge that RFS standards, which 22342

we believe were written into the law. The last month 1

has been chall enging for our family and other family 2

farms as we try to plan for the future. 3

The EPA and the current administration made a 4

pledge to the American people to become energy 5
independent by developing an American

- based energy 6

sources, like corn ethanol and so y - based bio diesel

. 7
Farmers responded, growing enough corn not only for 8

fuel, but for also the livestock and the important 9

export markets. 10

The record yields of 2013 that we've obtained have 11

proven our abilities. There is no shortage of corn. 12

The food for fuel hysteria is inaccurate. 13

The industry responded by investing in 14

infrastructure across rural America, and today we have 15

a thriving renewable energy -- fuels energy . But now 16

the EPA and President Obama have pulled the proverbial 17

rug out from under Amer ica's farmers on the planned and 18

accounted for renewable fuels market. 19

There is no question this arbitrary decision from 20

EPA is what has caused the most recent drop in corn 21

prices to levels below cost of production in the 22343

outyear. This is the equivalent o f "If you like your 1

plan, you can keep your plan" for agriculture. 2

And some would argue it's a direct result of the 3

political pressure exerted by big oil. Many of the 4

input commitments for next year have started before the 5

RFS announcement. Many farmers offset their risk 6

through futures purchasing and forward contracting at 7
the time of planting. But since input prices are 8

locked in now, we are facing difficult financial 9

situation, planting a crop that we know will not 10

produce a profit , all due to the abr upt and somewhat 11

illegal

-- some would say illegal change in the RVO. 12

The math is simple. For us in Indiana, the 13

proposed reductions of 1.4 billion wipes out our 14

Indiana production of 1.4 billion bush

-- gallons. 15

It's just wiped out Indiana's entire prod uction. 16

In Indiana, we have 13 ethanol plants in 13 rural 17

communities, which have just been devastated by the 18

announcement. These plants are located in rural 19

communities that need the more than 600 direct jobs 20

created by the ethanol industry, as well $1.5 billion 21

in direct capital investment since 2006 and the 22344

increase to the gross S tate product by $520 million 1

attributed to ethanol . The ethanol has also 2

contributed $47 million to the State tax rolls. 3

When the OMB does their work, I hope they

-- I 4

don't t hink they have, but I wish they would consider 5
that benefit to us. Central policy goals underlying 6

the RFS program are reductions in greenhouse gases 7

emissions, enhanced energy security, economic 8

development, and technological innovation. However, 9

d oes d iminishing the use of U.S.

- grown renewable fuels 10

enhance energy security and spur investment in the 11

industry? 12

The environment is

-- that goes without question. 13

Farmers responded to increased demand by producing 14

more while using less ground than has been s tated by 15

most people. The change has been coming from other 16

crops and the

-- the CRP, the highly arable land that's 17

used has been so because of Government regulation, 18

cutting down budget constraints, rather than it has 19

been from taking it on. 20

And I know I 'm out of time. 21

MR. GRUNDLER : If you could wrap it up, please? 22345 MR. DAVID HOWELL : I'm an old man. I'm starting 1

on my 44th crop. Hopefully, I'll get through it. I've 2

started to see the patterns of things over the last 44 3

years. I think this decisions h as the potential t o do 4

every bit as much damage. 5

I've had droughts. We've had floods. We've had 6

the '80s that I survived, barely. But I think this 7
decision has drastic potential to be a huge impact to 8

the rural economy of the United States of America. 9

M R. GRUNDLER : Thank you, sir. Mr. Beemer? 10

Oh, I'm sorry. John? 11

MR. HANNON : I would ask that in your written 12

comments, you provide the analysis that leads you to 13

the conclusions that you're stating, for example, that 14

the drop in corn prices are attributa ble to our 15

proposal. Taking into account indications such as the 16

proposal discussion that we are projecting the same 17

volume of ethanol use in 2014 as in 2013. 18

MR. DAVID HOWELL : I'll do it in the written. But 19

the uncertainty, sir, is what I think is crea ting a lot 20

of our problems. If we have no certainty as far as 21
investment and/or in the market, we're

-- the thought 22346

that that would be done had major effect on it, but 1

I'll write it out. 2

MR. GRUNDLER : Thank you. Mr. Beemer, proceed. 3

MR. BEEMER : Good af ternoon, and thanks for 4

allowing me to testify today in front of the EPA. 5
My name is Mark Beemer. I'm president of Av e ntine 6

Renewable Energy

. 7

Av e ntine, I think, is the second

- oldest ethanol 8

producer in the United States behind ADM. We have both 9

wet milli ng and dry milling facilities located in 10

Pekin , Illinois, near Peoria. We have current capacity 11

of 460 million gallons per year. 12

We are currently operating 160 million gallons of 13

that in Pekin , and 4 other plants are currently idle as 14

a result of the 2013 drought and, frankly, the 15

uncertainty over the 2014 RFS standard

. 16

Ethanol is a fantastic and wildly successful story 17

about locally grown green transportation fuels for the 18

American consumer. It is story whereby American 19

agriculture is supplying 1 year ou t of every 10 years 20

of transportation fuels, excluding diesel fuel, to the 21

Ame rican consumer. 22347 Unfortunately, the new proposed EPA rules threaten 1

that type of successful program. The fantastic ethanol 2

story really is about American jobs and the reemergence 3

of rural America. It's clean and green, domestically 4

produced energy security, not being fought overseas in 5

the Mideast. 6

It is also the cheapest energy molecule that the 7
consumer has they can put in their gas tank. It also 8

has resulted in record net far m income. I got in the 9

business in 1988, and it was a disaster. Net farm 10
income was $40 billion. Last year, 2013

-- or 2012, it 11

was $131 billion. 12

It's also allowed for tremendous agribusiness 13

income. John Deere was making frames for motorhomes 14

back in 1988 because there was no demand for farm 15

equipment. There is new yellow, orange, green paint 16

going down the highways like crazy because of the new 17

investment. 18

I have two issues I want to discuss specifically. 19

One is the jobs and the impact locally if we were able 20

to, for example, open our two Aurora, Nebraska, ethanol 21

facilities in a town of about 4,500 people. The first 22348

thing that would happen, we would be adding $5 million 1

of payroll to the local community with 65 to 70 jobs. 2

We would be hiring and pa ying for about $5 million 3

of mill w right activity to repair and maintain these two 4

ethanol facilities. We would be spending another $85 5
million to buy enzymes, yeast, equipment, spare parts, 6

rolling stock, railcars, track mobiles. 7
But the big thing is that we would be spending 8

between $270 million and $300 million to buy local corn 9

in the Aurora, Nebraska, area. It's a benefit of 10

roughly $ 400 million to that local community . That's 11

why ethanol has been so successful because of the 12

impacts in rural America

. 13

Finally, the other topic I would like to discuss 14

very quickly is RINs. RINs are free. Every ethanol 15

producer in this room, when they sell a gallon of 16

ethanol , they transfer the RIN to the blender or to the 17

refinery for free. It's a zero

- sum game among the 18

obligated parties. 19

If the EPA waivers, the obligated parties will 20

have learned a successful strategy to circumvent 21

congressional intent. Congress was fully informed o n 22349

the blend wall issue with RFS 2 when it was established, 1

and the expectation was th at higher blends would find a 2

market and that rising RIN values would be the stick , 3

the stick

-- not the carrot, but the stick

-- embedded 4

into the legislation that would incentivize the 5

distribution of E85 and E15. 6

By the way, I have an 11

- year - old vehicl e, and 7
I've burned approximately 250,000 gallons of E85. It's 8

a wonderful energy molecule. 9

In closing, American agriculture has met the 10

challenges of the RFS2 and delivered on the RFS2 11

mandates. Fifteen billion gallons of ethanol capacity 12

and 2 billion g allons of bio diesel capacity have been 13

built in the United States at an investment of almost 14
1/10th of a trillion dollars, almost $100 billion. 15

Infrastructure, railroads, ethanol blending 16

capacities has been delivered, another deliverable, and 17

unit train r eceivers are moving ethanol into all the 18

markets. Agribusiness has delivered. 19

MR. KOROTNEY : You need to wrap up, please. 20

MR. BEEMER : And finally, the ethanol industry 21

delivered last year when it produced the mandated 22350

volume of ethanol in light of the wo rst drought since 1

the 1940s. I ask the EPA to reconsider your changes to 2

the mandate and restore the RFS2 to the original 3

congressionally mandated target levels. 4

Thank you very much. 5

MR. GRUNDLER : Questions? I would only ask in 6

your written testimony th e same question we've asked 7
other producers, which is your ideas or

-- on how the 8

industry and the marketplace could go from roughly 100 9

million gallons of high

- level E 85 consumption this year 10

to, if we do not make any adjustments, 3.5 billion 11

gallons in 2 014, over a very short period of time? 12

That's the information we'd particularly like to 13

get from you. 14

MR. BEEMER : Is that also then in combi nation with 15

E15? 16

MR. GRUNDLER : Sure. Sure, yeah. 17

MR. BEEMER : Because I mean, I don't

-- E85 is not 18

the only answ er to the calculus in the room, right? 19

MR. GRUNDLER : Yes. 20

MR. BEEMER : Okay. Thank you. 21

MR. GRUNDLER : Okay. Mr. Mueller? 22351 MR. MUELLER : Okay. I hope everybody can hear me. 1

Well, I am

-- well, thank you, first of all, for 2

giving me the opportunity here to testify. I'm a 3

researcher. I work for University of Illinois at 4

Chicago. I've been involved in greenhouse gas 5
lifecycle modeling for about 10 years. 6

I sat on the expert working group for the 7
development of the California low carbon fuel standard , 8

an d I'm a coauthor on the CCLUB Land Use Change 9

Interface to the Argon ne GREET Lifecycle Model. 10

Our research

-- m y research is generally widely 11

published in scientific peer literature. Our research 12

has demonstrated that today's average corn

- based 13

ethanol , a s well as bio diesel , do significantly reduce 14

greenhouse gas emissions compared to petroleum , even 15

when we take land use change emissions into account. 16

You know, in fact, if we look closer at land use 17

change emission, in 2007, land use change emissions 18

were at a metric of above 100 grams per megajoule , 19

right? That's the metric we are measuring that at. 20

One hundred grams of CO2 emitted per unit, heat unit of 21

ethanol

. 22352 Now, 5 years, 6 years later, we've updated the 1

models, updated the databases, updated the e missions 2

factor models. That number now in the latest Argonne 3

GREET model us ing certain modeling assumptions is down 4

to 9 grams per megajoule . And that's sort of 5
tremendous progress in just modeling, updating the 6

modeling. 7

In addition to that, ethanol pl ants are very 8

efficient in adopting new technologies. My team has 9

surveyed corn ethanol plants and also population in the 10

peer literature that showed that 2008 corn ethanol is 11

30 percent more energy efficient than 2001 corn 12

ethanol

. 13

So I heard earlier, yo u know, claims being made 14

about energy ratio and corn ethanol having

-- requiring 15

more energy to make than it releases. That was exactly 16

10 years ago, right, under certain conditions could 17

have happened, right? 18

Modern corn ethanol is a different animal, 19

s ubstantially different. And ethanol blends, even 20

since 2008, have further invested in energy - efficient 21

technologies, and we've also documented that. And we 22353

attribute this at least, this recent investment is 1

partially to the working renewable fuel standar d , 2

right, that created a stable environment for plants to 3

invest. 4

But new RFS2 modeling runs are needed in support 5
of the effectiveness of RFS2, right? We have to show 6

that corn ethanol is now much better because if you 7

look at the outdated RFS2 runs that were done for RFS2 8

to support the original RFS2, they're based on outdated 9

data, right? 10

We have to put in the new energy efficiencies for 11

the plants. We have new carbon models, right, that 12

take carbon stock changes into account on the 13

agricultural face t hat greatly reduces emissions from 14

land use change. We have to take those into account. 15

We have updated land use change databases, land 16

use models, since the RFS2 was originally conceived. 17

And we have emerging new air technologies that are not 18

reflected, right, a pplication of nitrification 19

inhibitors. 20

The removal of corn stover on the front end to 21

serve as an additional animal feed at feedlots is now 22354

really emerging in practice, and that's just as a co

1

product similar to the production of DDG animal feed at 2

the back end of a corn ethanol plant. 3

We have just recently modeled that a corn

- based 4

ethanol , meaning a blend of starch and cellulosic

-- 5

stover cellulosic ethanol will be more than

-- will 6

reduce on a gallon

- per - gallon basis greenhouse gas 7

emissions b y more than 50 percent in the year 2020, 8

which is

-- 9

MR. GRUNDLER : Sir, I need you to wrap up, please. 10

MR. MUELLER : -- the EPA target year. So, in 11

closing, I'm just reading this. In closing, we believe 12

that the RFS has provided an environment that 13

stim ulates technology adoption, both at the biorefinery 14

as well as the feedstock production level. This has 15

resulted in cumulative greenhouse gas benefits

. 16

Crucially, RFS2 modeling runs will need to be 17

updated to document the greenhouse gas reductions. Any 18

r eduction in the renewable volume obligation will slow 19

the cumulative greenhouse gas benefits that can be 20

achieved with biofuel s. 21

MR. GRUNDLER : Thank you, sir. Questions? 22355 MR. SIMON : Not a question, per se, but I would 1

encourage you to provide the modelin g and the 2

additional information in support of your comments for 3

the record. I think that would be very helpful for us 4

to look at. 5

Thank you. 6

MR. GRUNDLER : Mr. Walsh? 7

MR. WALSH : Thank you, everyone. 8

I am just a Lansing, Michigan, college student who 9

is appalled by the environment al atrocities of oil. I 10

am not currently employed or otherwise affiliated with 11

any pro - ethanol group, industry, o r lobby. 12

And like one of our Panel 11 members, I am also on 13

a fixed income, going to college, making car payments, 14

and I was largely unable to appear today because of the 15

high cost of driving here. However, I drove here 600 16

miles on E85. 17

I love ethanol because it is a renewable fuel that 18

is within my reach. I don't have to spend thousands of 19

dollars for a hybrid or e lectric vehicle. And unlike 20

hydrogen, the ethanol refueling infrastructure exists. 21

If the renewable fuel standard is reduced or, 22356

worse, repealed, the adverse environment al and societal 1

impacts from increased oil use will increase in 2

frequency and severity . Diluted bitumen

-- I'm not 3

sure if I pronounced that right

-- colloquially 4

referred to as "tar sands," is far denser and heavier 5
than conventional crude by a factor of roughly 10 6

times. 7
When spilled , tar sands will sink to the bottom of 8

a body of water instead of staying afloat like 9

conventional crude doe s. One instance in particular I 10

would like to describe is the March 2013 tar sand spill 11

from a ruptured pipeline in Mayflower, Arkansas. 12

Two dozen families come home to oil covering their 13

yards and flow ing down their street. None of these 24 14

families were aware that this pipeline ran behind their 15

neighborhood, 22 of whom remain out of th eir homes 16

today. ExxonMobil , the owner of the pipeline, has 17

repeatedly threatened to cut these residents off of 18

housi ng assistance. 19

Many who make the argument that ethanol is not as 20

good for the environment as it is touted to be 21

conveniently overlook the deplorable and atrocious 22357

impacts caused by oil and, more specifically , tar 1

sands, which recently has been touted as an answer to 2

our energy independence. 3

Another infamous spill I would like to talk about 4

real quick is in Calhoun County, Michigan, back in 5
2010, right after the Deepwater Horizon spill had just 6

ended . A lso the deforestation and the various other 7

environment al impacts , l ike I said, these catastrophes 8

only serve to increase in frequency and severity should 9

the RFS be scaled back or repealed. 10

Another point worth noting is that the oil and 11

natural gas industry, big and growing as they are, 12

stand to have no job i mpact if the RFS is kept intact 13

and as is. A common and misguided argument against the 14

renewable fuel standard is the dramatic increase in 15

food cost since the implementation of it. 16

First

-- or excuse me, it's true. Food prices 17

have, in fact, risen since the implementation of the 18

RFS. But those rises ha ve nothing to do with the RFS. 19

First, only 30 percent of the corn kernel is used 20

for ethanol production. The final 70 percent goes into 21

vegetable oil and a product called distiller s dried 22358

grains, or DDGs. This is a high

- protein, low

- cost 1

animal feed that, if anything, serves to decr ease food 2

costs under the RFS. 3

The smoking gun that few notice and I have not 4

hear d yet today, the rising transportation costs. How 5
is much of our food transported today? Truc king. 6

Which, as many of you know, is powered by petroleum

7

based diesel

. 8

This industry has nearly been crushed time and 9
again by $4 to even $5 per gallon diesel costs. 10

Additionally, out of every dollar, only 16 cents goes 11

to farming. The rest goes to mar keting, 12

transportation , and profits. 13
Today, corn is at $4.20 a bushel, near where it 14

was when the RFS was signed into 2007

-- signed into 15

law, excuse me. Also, there are 15

- plus million flex

16

fuel vehicles on the road today, mine included. These 17

vehicles can run on E85, thus increasing the use of 18

ethanol in satisfying the RFS without increasing 19

ethanol blends in conventional gasoline

- only vehicles. 20

We have gone in my 20

- year lifetime from less than 21

10 stations carrying E85 nation wide to over 3,200, 22359

accordi ng to E85prices.com. A fuel that doesn't work 1

for the American economy, doesn't have any promise, and 2

harms the consumer does not grow like that. 3

And also, I would like to address concerns that 4

have been brought up in the previous panels regarding 5
engine damage. First of all, I have been running a 6

lawn mower at home on E15 without any treatment or 7
anything like that all year, and I have not had a 8

single problem. 9

And also I have yet to hear from anybody that 10

there is such a thing as ethanol treatment, and this 11

treatment will help lubricate the engine and lubricate 12

the mower and the small engines so that they do not 13

feel the corrosive effects of ethanol

. 14

MR. GRUNDLER : You'll need to wrap up, please. 15

MR. WALSH : Thank you for allowing me to speak 16

today. 17

MR. GRUNDLER : Thank you. Can you state for the 18

record where you go to school in East Lansing? 19

MR. WALSH : I go to

-- 20

(Laughter.) 21

MR. WALSH : I go to Lansing Community College. 22360

Trust me. I do not enjoy the layout of East Lansing. 1

So I have no desire to go there at all. 2

MR. GRUNDLER : Questions. 3

MR. MACHIELE : No questions. But thanks for 4

driving down here from East Lansing. If I miss my 5
flight, can I get a ride back? 6

(Laughter.) 7

MR. WALSH : Sure. Sure, not a problem. 8

(Applause.) 9

MR. GRUNDLER : Thank you, Mr. Walsh. Well done. 10

Mr. Lonier ? 11

MR. LONIER : Thank you for allowing me to come 12

here to testify before you today, and also thank you 13

for calling an audible here 2 days on the eve before 14

the Big 10 championship. And kind of ironic that an 15

audible has be en called, and they're from Ann Arbor. 16

I'm from Lansing. He's from Lansing, and it's Michigan 17

State and Ohio State playing on Saturday. 18

So I have a question for you guys. Who are you 19

rooting for? 20

MR. GRUNDLER : Go green, go white. 21

(Laughter.) 22361 MR. LONIER : Your echoes are said in my voice as 1

well. 2

Thank you. My name is Scott Lonier. I am a fifth 3

generation family farmer. Together with my brother 4

Steve, we own and operate a 3,000

- acre farm in mid 5
Michigan that has been a family business of ours since 6

18 76. 7

I'm here today to urge you to reconsider your 8

decision to scale back the renewable fuel standard . My 9

brother's son recently , the past 5 years , quit his job 10

in the city and came back to work on the farm. Jake is 11

now the sixth generation in our family that has had the 12

honor and privilege of operating our family farm. 13

I have two boys who are 11 and 13 years old who 14

show interest in farming also. I would love for them 15

someday to have that same opportunity in the future to 16

come and work in our family busi ness. But without the 17

RFS, that hope could be in jeopardy. Allow me to tell 18

you why for a little bit. 19

When the renewable fuel standard was first adopted 20

in 2007, its most immediate impact was to help increase 21

revenues for family farms like ours. It help ed by 22362

bringing commodity prices to a realistic level that 1

allowed family farmers to become more independent from 2

Government subsidies while also growing and encouraging 3

an energy source that helped our nation become more 4

energy independent. 5

With increased revenue, my brother and I 6

reinvested in our local economy. We were able to build 7
up enough capital to buy our mother and father out of 8

the family business, allowing them to enjoy their 9

golden years. We've also invested millions of dollars 10

in new fuel

- eff icient, clean

- burning equipment with GPS 11

technology used to autosteer equipment back and forth 12

across the fields. 13

We also use this GPS technology for site

- specific 14

techniques like variable rate seeding and variable rate 15

fertilizing, allowing us to put just the right amount 16

of fertilizer and just the right amount of seed on a 17

particular acre of soil to maximize the capacity that 18

that soil is capable of producing. 19

We've also had in the past few years an 20

opportunity and the capital to buy farm land, which, as 21

many of you know, is only a once in a generation 22363

opportunity that you get and doesn't come along very 1

often. To date, through these investments, we are more 2

productive, growing more bushels on the same amounts of 3

land. 4

In addition to supporting our family farm and the 5
local economy, we've also been privileged to help young 6

farmers get a foothold in the business as well. Thanks 7
to the RFS, we are supporting Ross Meyer, a 19

- year - old 8

young man in our community whose lifelong dream was to 9

become a farmer. H is family happens to own 400 acres 10

of farm land in the area, but they have no equipment to 11

operate it. 12

Thus, we striked out a partnership with Ross, and 13

his family and we traded the use of our equipment on 14

their property for his labor helping us on our lan d. 15

This mentorship over the past 3 years is allowing Ross 16

to build up capi tal and credit in order to some day 17

purchase equipment of his own so he can operate his 18

family's ground. 19

Farming is not easy work, and it's not easy to get 20

into. Without at least a few million dollars of 21

capital, modern farming is out of the question for many 22364

young folks who want to do so, but just can't afford 1

it. With more revenue from the RFS, we can now afford 2

to help keep the tradition of family farming alive in 3

our community a nd extend that opportunity to others. 4

The RFS has provided a stable, realistic, 5
commodity

- based price that has helped American 6

agriculture become what it is today, and that is one of 7
the engines of our economy, especially in the rural 8

America. Without RFS , commodity prices could once 9

again plunge below loan rates. Family farming may no 10

longer become economically viable. 11

The next generation, like Ross Meyer, like my 12

nephew Jake, or even my sons, may not be able to 13

continue the family farming businesses. H owever -- or 14

also , housing developers will once again be the ones 15

that are purchasing the farm land because we can no 16

longer afford that land anymore, and that ground will 17

be taken out of production, and housing and businesses 18

will be located on that inste ad. 19

More people will be forced to sell and leave their 20

family farms, and a way of life will vanish. A source 21

of income and revenue driving the local economy in 22365

ru ral America will disappear. 1

The RFS is central to the discussion about energy 2

independence an d the future of agriculture. It is also 3

central to the discussion about whether we want to 4

support rural communities for whom ethanol has provided 5
a lifeline, or do we simply abandon them? 6

MR. KOROTNEY : We'll need to wrap up, please. 7

MR. LONIER : With le ss ethanol , the alternative is 8

more oil. Product will be imported from tar sands in 9

Canada or from countries who are often more hostile to 10

-- from countries who are often hostile to that of our 11

own. 12

For my brother and I, the alternative is much more 13

perso nal. It's about whether Americans choose to stand 14

up with families and businesses who work hard on their 15

family farms like ours that have been around for 16

generations, or does America turn its back on a 17

domestic, homegrown fuel that is supporting jobs and 18

opportunities in rural America? 19

I urge you to choose the first option and support 20

a robust renewable fuel standard. Thank you. 21

MR. GRUNDLER : Thank you. 22366 We're going to take a short break to allow our 1

court reporter and us to stretch our legs. We'll 2

recon vene at 4:30 p.m., 15 minutes. Thank you. 3

(Break.) 4

MR. GRUNDLER : We're ready to begin Panel 13. 5

We're halfway through already. 6

(Pause.) 7

MR. GRUNDLER : We're going to begi n with Ms. 8

Lauste n. Proceed. 9

MS. LAUSTE N: Thank you. 10

Good afte rnoon. My name is Connie Lauste n. I 11

have a small consulting firm, cLauste n, LLC. I'm here 12

on behalf of a couple small biomass

- based diesel 13

producers. 14

One in particular that I'd like to point out is 15

Viesel Fuel. Viesel is located in Stuart , Florida. He 16

employs 30 to 40 p eople, depending upon the season. 17

They produce around 5 million gallons per year of 18

bio diesel

. 19

So Viesel struggled through the tax definition 20

changes, RIN challenges due to fraudulent producers, 21

regulatory delays, and recently made a major personal 22367

invest ment in an enzymatic and resin bio diesel process. 1

And by doing this, it has lower energy requirements 2

than most other bio diesel processes and, hence, lower 3

greenhouse gas emissions. 4

The proposed level of biomass

- based diesel RVOs 5

and advanced biofuel , the reduction really, obviously, 6

caused a significant reduction in the RINs, and this is 7
devastating to Viesel and other s mall, biomass

- based 8

diesel produce rs around the country. It's pushing 9

Viesel Fuel out of business, and it will eliminate tens 10

of thousan ds of jobs created under the RFS2. 11

A number of these small biomass

- based diesel 12

producers planned for the tax credit to go away. They 13

made investments so that they could be more efficient, 14

and so, hence, they planned for the RVOs to be growing 15

or to

-- ba sically to grow. They weren't planning on 16

them going down. 17

Further, there is a massive surplus of biomass

18

based diesel RINs that were produced in 2013, and we 19

don't think that they were taken into consideration 20

correctly under the proposed rules, and ther efore, 21

those should be taken into consideration when the 22368

biomass

- based diesel RVOs and the advanced biofuel pool 1

is considered. 2

What I really want to point out is that EPA, in my 3

estimation, correctly modified the heating regulations 4

and that expand the bi omass - based diesel market. So 5
right now, bio diesel and biofuel s that meet the number 6

one and number two fuel oil that can be used in any 7
boilers, including industrial, commercial, electricity 8

generation. Other biofuel s can be used for heating 9

spaces for people if they have the quarterly 10

affidavits. 11

Expanding this market is important. The new 12

definition opens up a 15 billion gallon market each 13

year. Biomass

- based diesel fuel can displace 80 14

percent or more of that 15 billion gallons, especially 15

in the la rge scale. This is a massive environment al 16

and health benefit. It reduces em issions for heating 17

in cities. 18

Tremendous health benefits. If you've ever 19

watched a child gasping for air due to an asthma 20

attack, you'll recognize how important this was and 21

th at expanding this market is very important. 22369 Further, there is less pressure on the 1

transportation sector. There is no blend wall issues 2

in the biomass

- based diesel category. This market is 3

massive. There is more opportunities to reduce 4

greenhouse gas em issions. 5
Reducing the RVO targets runs contrary to the 6

fina lized heating oil regulations a nd runs contrary to 7
President Obama's agenda to reduce greenhouse gas 8

emissions. We will obviously file comments. We 9

appreciate this opportunity and thank you for y our 10

time. 11

MR. GRUNDLER : Thank you. Mr. Taliaferro? 12

MR. TALIAFERRO : My name is Bryan Taliaferro , and 13

I'm president of the Virginia Grain Producers 14

Association. 15

For 41 years, I've farmed with two brothers in the 16

middle peninsula of Virginia along the sout hern shores 17

of the Rappahannock River on land that's been in 18

continuous cultivation for 400 years. We raise corn, 19

soybeans, wheat, and barley, and we've been through 10 20

major droughts, 12 damaging hurricanes of varying 21

intensity, pestilences of Mexican be an beetles, corn 22370

earworms, aphids, cereal leaf beetles , stinkbugs, and 1

fought wars with free

- loading fast deer and fat 2

groundhogs. 3

We've made it through periods of adversity, but 4

none worse than having prices well below production 5

cost while interest rates were above 20 percent like 6

they were back in the early '80s. Some of us may 7
recall the pick year of 1983 when almost one half of 8

the corn acres in the country were idled at a great 9

expense to the Federal Government

. 10

We made it through with borrowed capit al, but 11

creating a debt hangover which lingered for 20 years. 12

It was that experience that spawned the idea of 13

ethanol . Derived from corn, blended with gasoline. 14

There were attractive benefits like having a 15

domestic fuel source during periods

-- a period of 16

escalating imports. Oxygenated fuel, reducing CO 17

emissions. And enhanced octane. All of these would 18

occur while preserving the pro tein from each bushel of 19

corn. 20

My corn

- producing colleagues and I from around the 21

country caught this vision, went for i t, and as we say, 22371

the rest is history. The timing couldn't have been 1

better because improvements in crop genetics were 2

generating yields double that of 40 years ago. With 3

respect to corn , fuel ethanol absorbs muc h of this 4

expanded production. 5

Today, the proposal under consideration would 6

reduce consumption of that expanded production. If 7

ethanol is reduced by 1.4 billion gallons from 8

previously anticipated levels and the fermentation 9

yield is 2.8 gallons per bushel, we're talking about 10

500 million bushel s of corn added to the annual 11

carryover or ending stocks. 12

This additional burden on ending stocks has been 13

estimated to depress the price by approximately 32 14
cents a bushel. For my farm, this would mean $32,000 15

in additional losses for the unpriced corn I presently 16

have in inventory. And that's just for this year's 17

crop. Next year, that number will be $96,000. 18

How will I decide to make up that loss? Lay off 19

employees? Defer replacement for aging equipment, 20

letting the equipment dealer lay off his? Go into debt 21

again at my age? This kind of impact reverberates and 22372

will reverbe rate through the farm economy. 1

As you might imagine from my hair color these 2

days, I'm looking to transition the farm to the next 3

generation. I have two nephews who have come bac k to 4

the farm. Both went off for their college degrees and 5

have returned full of hope and encouragement. 6

When you reduce this market, bringing the price of 7
corn to below the cost of production, what kind of hope 8

can they have, and what kind of future? As the 9

surpluses build up, do we go back to the 1983 pick year 10

and idle land again? Is this what you intend? 11

To put this to you in personal terms, suppose the 12

recent Government shutdown was without the prospect of 13

any back pay , a nd 25 percent of your a gency was 14

permanently laid off. A nd imagine how morale and 15

productivity would be affected. That's how it will 16

reverberate across the country if the RFS is violated. 17

We've already recovered from the 2012 drought 18

without disturbing the RFS. This is a good thin g. 19

It's working. Leave it alone. 20

Thank you. 21

MR. GRUNDLER : Thank you, sir. 22373 Mr. Ensign, welcome. 1

MR. ENSIGN : Happy holidays to you all. 2

My name is Clint Ensign. I'm senior vice 3

president with Sinclair Oil Corporation. We're a 4

family

- owned corporation b ased with two refineries in 5
Wyoming. My offices are located in Salt Lake City. 6

Both of those refineries are considered small 7

refineries. Under the Energy Policy Act, we're an 8

obligated party, and we do not own

-- we own three 9

service stations connected w ith hotel operations that 10

we have. But our major customers are the clients for 11

PMAA, the petroleum marketers that are the wholesale 12

jobbers that fly our flag. 13

We own a few terminals. We own a few pipelines. 14

But by and large, most of our distribution of product 15

throughout the Rocky Mountain region is on common 16

carrier pipelines owned by others and terminals owned 17

by others as well. 18

I'd like to focus on

-- my comments on the PADD IV 19

region, which is Utah, Wyom ing, Colorado, Montana, and 20

Idah o. This is a u nique region in that it's a region 21

that's self

- sufficient for fuel. Very few amounts, 22374

quantities of refined product come into the region. 1

Very little leave the region, just for geographic 2

reasons. 3

It is a region where the use of diesel fuel is 4

higher tha n the nation at large. It's a region where 5
there is very poor infrastructure for bio diesel , and in 6

most terminals, except for the ones that we own, that 7

we cannot

-- there is no t an ability for us to even 8

blend bio diesel if we wanted to. There is no abil ity 9

for us to export diesel offshore to other countries. 10

There's no pipeline capacity that leaves the Rocky 11

Mountain region to the areas, to the coastal areas. 12

So with a high amount of diesel use in the region, 13

diesel fuel, bio diesel is just RIN deficient . And so, 14

you're stuck. Last summer, we came to visit with 15

senior officials of EPA here in Washington, D.C., and 16

in doing so were very transparent about the amount of 17

gasoline and amount of diesel that we produce. And we 18

wanted to counsel with the agenc y not to complain, but 19

to counsel on how we meet the standard and how we meet 20

our obligation. 21

And based on the amount of gasoline and diesel we 22375 sell and because of the heavy demand for diesel in the 1

west, we're not close to meeting the obligation through 2

b lending. It means that year on year , we have to go 3

out and buy

-- buy RINs in the marketplace. And as of 4

last summer, as you know, the price exceede d $1 per 5
RIN. Very expensive proposition for us. 6

And it's a situation where we're in a constant 7

state of noncompliance unless we go out and spend 8

millions and millions of dollars, which is a difficult 9

regulation for us. It's a poor re gulation for us in 10

that sense. 11

So we applaud the effort that you've made to 12

recognize the blend wall issue and rebalance that in a 13

way. We'd like to see you go further and within the 14

rule provide some mechanism for a company that is doing 15

all that they can to comply in good faith with the law, 16

but can't reach it just because of the demand for 17

diesel in the region. 18

Thank you. 19

MR. GRUNDLER : Thank you. Mr. Schwarck? 20

MR. SCHWARCK: Thank you. 21

My name is Rick Schwarck. I'm president and the 22376

CEO of Absolute Energy on the Iowa

- Minnesota border. 1

Our plant straddles the border. We own property 2

in both States. Our address is 1372 Stat e Line Road, 3

and we're owned by 470 local residents, the vast 4

majority of whom are farmers. 5
Ninety

- five percent of our owners live within 50 6

miles of the plant. Oh, a little louder? All right. 7
Ninety

- f ive percent of our owners live within 50 miles 8

of th e plant. 9

It's a busy time for me ba ck home, and I'm lucky 10

my wife has let me be here because for more than two 11

d ecades, we've operated a choose

- and

- cut Christmas tree 12

farm. So I'm just glad to be here. 13

I'm also president of the Iowa Renewable Fuels 14

Associ ation. I'm also a board member of Growth Energy 15

and the Renewable Fuels Association. I'm here to speak 16

in support of the RFS, just as it was writte n and just 17

as it was intended. 18

My time is short, but it's important you 19

understand that we will likely have a record farm 20

income in the United States this year. But ag is not 21

just doing well in the United States . Ag is doing well 22377

across the planet. 1

Yeah, we've heard a lot about food versus fuel. 2

But a rising tide lifts all boats, and I want to give 3

you -- an d I'm not going to talk about a paid

- for 4

study. I'm going to talk about what has happened since 5

2004 when ethanol burst on the scene. 6
In Costa Rica, their GDP in 2004 was $18.6 7
billion. Last year, $45 billion. Colombia, $117 8
billion. Last year, $369 bi llion. Papua

- New Guinea, 9
$3.9 billion. Last year, $15.6 billion. Kenya, $16.1 10

bil lion. Last year, $37 billion. 11

And in Ethiopia, the poster child for starvation, 12
in 2004, that country's GDP was $10 billion. Last 13
year, it was $43 billion. Eighty percen t of the 14

population of Ethiopia is rural, agricultural based. 15

Over 50 perce nt of their GDP comes from ag. 16

So, and I talk about Ethiopia because in 1984, a 17

million people died of starvation. It's hard to talk 18

about because this has been so perverted. It was 19

caused due to low ag prices. So just please read the 20

U.N. report on that causality. 21

Now everybody's got smartphones. You can look 22378

this up. Just Google any ag country and take a look at 1

the growth curve in their economies. It's been 2

staggering. 3

Now RIN

-- now I want to talk about E85. We are 4

selling E85 directly as a manufacturer to the retailer. 5
RINs is a big component of that, and we wanted to make 6

sure that the RINs value was

-- the retailer was able 7
to get that RINs value and pay for his infras tructure 8

cost and then pass that cost savings on to the 9

consumer. 10

Since we began this program, most of the retailers 11

that we're selling to, their average increase in E85 12

sales has gone up 400 percent. So when the consumer 13

has a chance, he responds, and th e consumer votes with 14

their dollars. Typically, in our area for most of the 15

summer, the retailers we were selling to w ere anywhere 16
from $1.34 to $1 a gallon under the E10 alternative at 17

that same station. 18

MR. GRUNDLER : You're going to have to wrap up. 19

MR . SCHWARCK : Oh, thank you. In closing, E15 has 20

a lower RVP than E10, no reason not to give it a 21

waiver. 22379 Merry Christmas. 1

(Laughter.) 2

MR. GRUNDLER : Thank you. Any questions? 3

(No response.) 4

MR. GRUNDLER : Mr. Haer , you're up. 5

MR. HAER : Thank you. Good afternoon. 6

On behalf of the Nation al Bio diesel Board and REG, 7
I'm grateful for the opportunity to t estify regarding 8

the 2014 RVO. 9

I'm Gary Haer , vice president of sales and 10

marketing with Renewable Energy Group, and through 11

November, I served as chairman o f the Nation al 12

Bio diesel Board, and I continue to serve those members 13

and the Nation al Bio diesel Board as its immediate past 14

chair. 15

I'm here today because during the past 12 months, 16

I appointed and oversaw the work of the NBB's RVO 17

Working Group. The work ing group was established in 18

2011, was created to work with you on many aspects of 19

the biomass

- based diesel RVO. And as you know, EPA 20

must go through a specific process and analysis to 21

evaluate whether the RVO for biomass

- based diesel 22380 should be increased. 1

As chairman of the NBB, my job and the job of the 2

RVO Working Group was to provide you with all of the 3

information necessary to allow you to evaluate our 4

industry, and I think we did a pretty good job of that. 5
In fact, our industry has met with you on ma ny 6

occasions since February on issues specifically related 7

to the 2014 RVO. 8

In previous testimony, it's been reported that our 9

industry is on track to produce at least 1.7 billion 10

gallons of bio diesel this year, and our current run 11

rate is 2.1 billion gall ons on an annualized basis. I 12

think it's important to note that at 1.7 billion 13

gallons, we create at least 2.55 billion RINs to fill 14

not only the biomass

- based diesel RVO, but also the 15

majority of the 2.75 billion advanced pool. 16

And at 2.1 billion gallons , we would create at 17

least 3.15 billion advanced RINs. We're achieving this 18

while also reducing the cost of finished diesel fuel to 19

consumers in the marketplace today, as you've heard in 20

previous testimony today. 21

It's difficult to ascertain what your goal s were 22381

in proposing dramatic changes to this program, but it 1

has already had a devastating impact on interest in 2

bio diesel . This week, ethanol RINs, D6 RINs are 3

trading at about 30 cents, which is probably what they 4

will trade at well into the future. Bu t now, given the 5
proposed biomass diesel and advanced program, there is 6

little differential in values as premiums for bio diesel 7

RINs, the D4 RINs, or the advanced RINs, which are D5, 8

are gone. 9

Which seemed contrary to what you want the market 10

to do It wou ld seem that you would like more interest 11

in biomass

- based diesel RINs and advanced RINs and less 12

interest in conventional RINs, given the gasoline and 13

ethanol issues you're trying to address. But that is 14

not how the market is reacting. 15

In fact, we believ e that you have the flexibility 16

to address ethanol issues and the shrinking gasoline 17

pool while at the same time adding more advanced 18

biofuel s to the growing diesel pool. When it comes to 19

bio diesel , the NPRM is disappointingly wrong on so many 20

ac counts, a nd we have lots of folks here testifying 21

today to assist you in better understanding our 22382

industry. 1

I don't have time to cover a lot of those today, 2

but I'd like to make a few points here. All of the 3

data that was used to set the volume at 1.28 billion 4

gal lons in the 2014 NPRM was the same data that EPA 5

used to set it at 1.28 in 2012. The data was from 6

2011. 7

We have prepared numerous updated documents and 8

analyses, and we have given the documents to your teams 9

on at least four different occasions. I know this to 10

be true because I was actually at the meetings where we 11

pro vided your team with the data. 12

I've heard you ask others for their data to 13

support their ask today. So, as an industry, my 14

question is why? Why did you ignore all the data that 15

we provide d you, and why did you not analyze 1.7 16

billion gal lons instead of just the 1.28? 17

Furthermore, you set a range for every other part 18

of the program, all those parts that you are supposedly 19

having trouble with, even conventional biofuels, but 20

you did not set a range for bio diesel . So I've got to 21

ask you, why the bias against bio diesel ? 22383 Now I want to talk about the environment al 1

benefits of using more bio diesel instead of petroleum 2

diesel fuel in the marketplace. This year's production 3

of more than 1.7 billio n gallons will reduce greenhouse 4

gas emissions by 32 billion pounds when compared to 5

diesel fuel, and that's 8 billion pounds more than if 6

we just produced 1.28 billion gallons, which is the RVO 7
for this year. 8

MR. KOROTNEY : You're going to have to wrap up , 9

please. 10

MR. HAER : Thank you. With greenhouse gas 11

emissions as a factor for EPA to consider and a goal of 12

this administration, why would you choose to increase 13

the use of petroleum diesel fuel, which will also 14

increase the cost of diesel fuel to the con sumers , and 15

cut bio diesel production by nearly 1 billion gallons? 16

Again, the goals of this administration do not line up 17

with this proposed rule. 18

I think that we just avoided all discussion of the 19

reason that we have the RFS in this country today. But 20

I' ve got to tell you, in closing, the bio diesel 21

industry has been responsible in its approach to 22384 filling both the biomass

- based diesel pool and the 1

advanced biofuel pool, and we are exercising restraint 2

once again, even as we ask you to increase the biomass

3

based diesel program to 1.7 billion gallons and the 4

advanced program to 3.7 billion gallons. 5
We can and will produce well over that amount if 6

given the chance to do so by this administration, and 7
we urge EPA to give us the opportunity to do so. 8

I'd be happ y to take any questions you may have. 9

MR. KOROTNEY : So it would be helpful in your 10

written comments if you provide some information, more 11

information about wha t's actually happened in 2013. 12

So we know that the volumes are increasing in such 13

a way that you 're likely to hit somewhere in the order 14

of 1.7 billion gallons by the end of the year. What 15

we'd be more interested in is the factors that go into 16

driving that, given that the standard is 1.28. 17

So the standard is 1.28, you're reaching 1.7 this 18

year, the various factors have got to be some 19

combi nation of feedstock costs, feedstock supply, the 20

Federal tax credit, imports and exports , and so on. So 21

if you could provide more information on that for your 22385

written comments, that would be helpful. 1

MR. HAER : We' ll be happy to do so. 2

MR. GRUNDLER : Thank you very much, all of you. 3

It's very helpful. 4

Panel 14? 5

(Pause.) 6

MR. GRUNDLER : Mr. Hessler, proceed. 7

MR. HESSLER : Gentlemen, so there are 16 million 8

flex

- fuel vehicles on the road today. It appears the 9

questio n that EPA is wrestling with and has put to the 10

public is how do fuel prices in the market arrange 11

themselves such that an additional 3.5 billion gallons 12

of renewable fuel gets used in the coming year? 13

So rather than talk about what would happen if 14

your pr oposal went final, I'd like to talk about what 15

has already happened in the market with energy prices. 16

So there was, obviously, a large run

- up in RIN 17

prices in the first quarter this year. That run

- up did 18

not increase ethanol prices from suppliers to

-- to 19

blenders. Nor did it increase E10 at the retail pump. 20

The main effect of high RIN prices in the fuel 21

market was that it drove down the price of high 22386

renewable content fuel s like E85 and biomethane CNG. 1

So , in this first chart, we're basically

-- in both 2

charts, we're comparing on an energy basis gasoline 3

prices, which are the red line, with the energy 4

discounted price of E85. 5
In order for E85 to be selling at a properly 6

energy discounted price, it's got to be below this 7

line. So the green band is basica lly the expected 8

price, the market expected price of E85 based on 9

wholesale prices with normal margins, normal retail 10

margins. 11

In the first quarter of this year , as RIN prices 12

ran up, we saw a sharp rundow n in the expected

-- the 13

market expected price of E 85. This happened for other 14

high

- renewable content fuels as well. The nation wide 15

average price didn't quit e keep track of what the 16

market expected price was, and the reason for that is 17

interesting. 18

Basically, this is average data that includes

-- 19

include s independent retail stations at which E85 was 20

being sold at a 15 to 30 percent discount, right in 21

line with the market expected price. At E85 pumps 22387 found under major oil company canopies, the E85 price 1

essentially was pegged to gasoline. So it sold at t he 2

same price as E10. So if we just looked at the 3

ind ependents, it'd be right here. 4

More importantly, what the market was telling us 5
in July, the futures market was suggesting that in the 6

very near future, we should be expecting prices for E85 7

at a 40 to 50 percent discount against gasoline. That 8

would ce rtainly drive demand. 9

You know , the question on infrastructure that's 10

been asked repeatedly today, I think the way to think 11

about that is infrastructure follows demand , d emand 12

follows price. When you hav e a 50 percent discount on 13

your fuel, you're going to see demand follow that 14

price. 15

So what happened? Somewhere in the late summer, 16

EPA started suggesting and industry started getting a 17

sense that there might be a change in the RVO, that the 18

conventional biofuel RVO might be reduced, and there 19

was an immediate and fairly logical response in the 20

market. 21

RIN prices fell. The price of E85 expected by the 22388

market rose sharply, and the actual price of E85 rose 1

as well. And again, that generally reflects change s in 2

the independent retail price of E85. 3

Again, the bigger story here is what did the 4

market tell us about futures? And the future vision 5
now is saying, well, E85 might be priced at the energy 6

-- at par on an energy basis, which is substantially 7

better t han it has been historically , b ut nowhere near 8

the incentive of the 40 to 50 percent discount we were 9

looking at when RIN prices were high. 10

So, you know, several times today, you've asked 11

for market data about what went on with high RIN 12

prices. There's no correlation with E10 prices. 13

There's no correlation with ethanol prices. There is a 14

direct correlation with high renewable

- content retail 15

prices. 16

So the question EPA should be asking itself is 17

what vision of the future do you want? You control 18

this wit h the RVO. And if the future that you want is 19

an E10 future with the blend wall basically reinforced, 20

then your p roposal is the right proposal. 21

If the future you want is to break through the 22389

blend wall and bring more renewable fuel into the

-- 1

into the ma rket, then the track we were on with the 2

expectation that the RVOs would proceed according to 3

statute for the conventional renewable fuels was the 4

right track. 5

MR. GRUNDLER : Thank you. Questions? 6

(No response.) 7

MR. GRUNDLER : Mr. Durham? 8

MR. DURHAM : Tha nk you. Good afternoon. 9

Thank you. Good afternoon. I am David Durham. 10

I'm a farmer from Missouri. I grow corn there with 11

many other things. 12

As a farmer, I'm used to dealing with inclement 13

weather and all the attributes that it brings with it 14

and the v ariability of that. The past 2 years have 15

really pointed that out to us. 16

This year, we as farmers have responded to the 17

market signals to produce a record crop to beat these 18

projection demands. Despite the success, the proposed 19

2014 RVOs threaten to chan ge that dem and in the middle 20

of the game. 21

As farmers, we plan far ahead to produce a crop to 22390

meet expected demand. I already have purchased seed 1

for next year, which won't be planted for 5 months or 2

harvested for 11 months or even probably sold until 3

2015 . We cannot respond as farmers as fast as 4

literally someone who can increase or decrease supply 5
by turning off a spigot or turning it on. 6

The 2013 crop will be a record of around 14 7
billion bushels, according to USDA. There is ample 8

corn for all uses thi s year, plus a large carryover 9

going into next year. Corn prices have already 10

declined in relationship to this big crop and the 11

demand that is known. 12

The worst

- case scenario for us as farmers and 13

rural America would be to reduce a significant chunk of 14

tha t demand curve during a year when record corn 15

production happens and falling prices. It's not just 16

farmers who will also suffer from this loss of demand. 17

Our local communities will suffer. Our schools will 18

suffer, and our State will suffer. 19

In Missouri specifically, ethanol production is 20
adding approximately $350 million in increased taxes, 21

Federal and State, to our economy. In Missouri, all 22391

the ethanol production facilities are farmer owned and 1

farmer built. So we are the first on the line of a 2

negati ve impact in this industry. 3

Also I sit on the board of a local bank, and we 4

have seen what rural revitalization ethanol has brought 5

to us. Better

- paying jobs at the plants, more jobs as 6

suppliers to those plants, and more retail 7

establishment to address

- - to feed and take care of 8

those people. 9

In this tight economy, what I also see from a 10

banker's perspective is that there are more people 11

coming into our small local banks and borrowing money 12

to pay their monthly electricity and heating bills. 13

These are t he people that will really suffer when they 14

have to go to the local gas station and pay 40 to 50 15

cents more per gallon because their fuel is not a 16

blended fuel. 17

As farmers, we have fought for years to obtain 18

market access for ethanol . The renewable fuel s tandard 19

passed by Congress is the tool that was chosen to bring 20

-- slowly bring fairness to the marketplace and allow 21

consumers choice at the pump. If that tool is changed 22392

by a simple request of the oil companies, the 1

environment suffers, farmers suffer, consumers suffer, 2

and the U.S. economy suffers. Only big oil benefits. 3

As a farmer, I have seen the rural revitalization 4

due to ethanol production. Please do not reverse this 5
trend by gutting the renewable fuel standard s. 6

Thank you. 7

MR. GRUNDLER : Thank you. Any questions? 8

Mr. Kent? 9

MR. KENT : Thank you for holding the hearing, and 10

thank you for your endurance at this time of the day. 11

(Laughter.) 12

MR. KENT : My name is Mark Kent, and I'm the 13

general manager of Beltway Bio diesel , located here in 14

Washington , D.C. We do have local bio diesel . We're 15

not all from farm country. We do bio diesel here in 16

D.C. 17

We are a waste cooking oil to bio diesel company, 18

and a subsidiary of the Sustainable Bio diesel Company, 19

which oversees Tristate Bio diesel , Connecticut 20

Bio di esel , Independence Bio diesel , and Liberty 21

Bio diesel . We collect waste cooking oil from Virginia 22393

to Maine and recently acquired a bio diesel production 1

plant in Bridgeport, Connecticut, that will be expanded 2

to a capacity of 10 million gallons per year. 3

Add itionally, we recently acquired an algae to 4

bio diesel company and are in the process of scaling 5
that company up to commercial levels. We currently 6

employ over 50 workers. With our new acquisitions, we 7
will be doubling the number of employees to over 100 in 8

all of our operations spanning over 10 States. 9

Our continued growth is dependent on the RFS and 10

the RINs that accompany it. Bio diesel is a renewable 11

energy success story, and in particular, our segment of 12

the industry. We're taking a waste byproduct t hat has 13

already been used to serve a purpose and recovering the 14

embodied energy that is still available for repurposing 15

into fuel. 16

The EPA should be stimulating the production of 17

such an environment ally beneficial fuel, not 18

intentionally trying to stunt it s growth. When we look 19

at financing new projects, our model is dependent on 20

the RFS and tax credits to make our fuel competitive to 21

petroleum diesel

. 22394 I'd like to share a little story about the 1

beginnings of our industry, and that's the bio diesel 2

industry. In 1 900 at the World's Fair, Rudolf Diesel 3

introduced his engine that ran on peanut oil. He had 4

patented an engine that was designed to run on peanut 5
or vegetable oil that was produced by farmers for their 6

machinery. 7
Thirteen years later, on September 2 9, 1913, 100 8

years ago this fall, he disappeared from a steamship 9

traveling from Belgium to England. The mystery still 10

surrounds his death to this day. With his death, so 11

died the vision of vegetable oil to power his engine. 12

Petroleum companies quickly f illed the void with 13

petroleum diesel , and that began the journey of dirty 14

diesel , which would pollute our environment for the 15

next 100 years. Over the past 20 years, the bio diesel 16

industry of toda y has sought to complete Rudolf 17

Diesel's vision of his engi ne running on vegetable oil 18

grown by farmers. 19

We have been cleaning up the image of diesel fuel 20

by providing a cleaner burning, renewable fuel that 21

reduces toxic emissions by over 90 percent over 22395

petroleum diesel . Whi le we may never know how Rudolf 1

Diesel died, we'll certainly know that the EPA is the 2

cause of the death of the bio industry

-- bio diesel 3

industry today if the RFS is left at the current 4

levels. 5
I strongly urge the EPA to reconsider its proposal 6

and increase the bio diesel production standard s to 7
levels beyond our current capacity to stimulate the 8

growth of this industry and foster the innovators that 9

are providing green jobs to our economy. 10

Thank you. 11

MR. GRUNDLER : Thank you. Questions? 12

(No response.) 13

MR. GRUNDLER : Ms. Wood, you're up. 14

MS. W OOD : Thank you. My name is Nicole Palya 15

Wood , and I'm here on behalf of Boat U S. 16

We are the boat owners of the United States , b oat 17

owners association of the United States . We have over 18

half a million members. We also have the nation's 19

largest recreation al towing operation, with 600 vessels 20

in 300 ports. So to say that we know boats is an 21

understatement. 22396 I want to take a few minutes to talk about the 1

proposed RVOs tonight. First and foremost, we want to 2

commend you and the work that you guys have done. We 3

believe it's a giant step forward to addressing the 4

current day realities of the renewable fuel standard 5

w ith the drafting of these RVOs. 6

We applaud their pivotal recognition of the 7
shrinking demand for fuel, particularly gasoline, and 8

hope this sends a signal to Congress of the dangers 9

that the impending blend wall presents to the average 10

consumer. The EPA has in a small way recognized the 11

impact to the consumer in addressing these market 12

changes, and now is the time for Congress to do so as 13

well. 14

As the RFS policy pushes higher blends of ethanol 15

gasoline into the market, there is an increased 16

potential for misfueling and engine failure that needs 17

to be made clear. Not all Americans can afford to 18

drive tow vehicles made after 2001. I know in my 19

famil y, sometimes it's a tractor. Sometimes it's a 20

family farm truck. But I can guarantee you that most 21

families who have the average of a 16

- foot or 17

- foot 22397

boat that's a towable is not going to have a brand

- new 1

tow vehicle. 2

Not to mention that these higher blends, E15 in 3

particular, are poison to our marine engines. There is 4

a critical safety and soundness issue related to the 5
use of higher blends of ethanol in marine engines that 6

cannot be denied. 7
Over 63 percent of our members fuel their boats at 8

roadside gas stations. With over 180,00 gas stations 9

now with the ability to sell the approved E15, a fuel 10

that no marine engine is warrantied to run on nor 11

calibrated to run on, the opportunity for misfueling 12

must be acknowledged and is obviously growing. And 13

w hat may result in a roadside breakdown for a car 14

quickly leads

-- can quickly lead to a search and 15

rescue mission or a search an d recovery mission for a 16

boat. 17

I think it's also important to point out that 18

EPA's role in the renewable standard is to implemen t 19

the policy, not reform the law. Although there are 20

implicit waiver authorities written into the law, the 21

EPA shouldn't have to use that authority to modify 22398

policy to meet the realities of the current marketplace 1

every year. 2

It is the responsibility of t he EPA and Congress, 3

however, to ensure that the fuel they approve for our 4

consumers is a safe and a reliable fuel for our 5
engines, all engines. On behalf of our members, we 6

would like to thank the EPA administrators and staff on 7
drafting the 2014 RVO pro posal, which sets targets that 8

are more in line with the reality of current supply 9

volumes. 10

However, we don't believe this goes far enough in 11

reducing the pressure to mix more ethanol into our 12

gasoline than is safe. It is our hope that Congress 13

will now a ccept the baton and continue their work on a 14

permanent fix for the renewable fuel standard

. 15

In closing, I'd like to share a few words. 16

Yesterday, as I was wrapping up drafting of my 17

comments, I asked a colleague what he thought I could 18

say today that migh t make a difference and that would 19

stick in someone's mind, that would stand out. He's a 20

man of few words, and as he walked away from my office 21

and grumbled down the hall, he said, "T ell them I have 22399

three dead outboards wasting space in my garage. " 1

So I w ill leave you with that, and thank you very 2

much. I'd be glad to accept any questions. 3

MR. GRUNDLER : Thank you. 4

MR. MACHIELE : I would just, I guess, ask you in 5
written testimony if you could provide information 6

elaborating more on how much of the fuel t hat's 7
consumed in recreational boating is fueled through 8

marinas versus through service stations, like you said. 9

How much of it really goes through just normal gas 10

stations? 11

MS. WOOD : Sure. I can tell you that 63 percent 12

of our members fuel their boats at roadside gas 13

stations rather than marinas, which are more commonly 14

those that serve E0. And I know that basically E0 15

accounts for about 3 percent of the gasoline that's 16

sold in the United States

. 17

MR. MACHIELE : Okay. 18

MS. WOOD : But I'd be glad to inclu de as much 19

information as I can. 20

MR. MACHIELE : And I don't know how your members 21

correspond to boating at large, so would more of your 22400

industry fuel at service stations versus at marinas or 1

vice versa would be helpful. 2

MS. WOOD : We have members in every State. We 3

have inland members as well as coastal members. So I 4

think we have a very good representation of the boating 5

-- a boating snapshot of the country. 6

MR. MACHIELE : Thank you. 7

MR. GRUNDLER : Mr. Hartman, welcome. 8

MR. HARTMAN : Yes. Thank you. Th ank you for the 9

opportunity to comment today. 10

I'm Kenneth Hartman, and I farm with my family 11

near Waterloo, Illinois, which is 25 miles southeast of 12

St. Louis. My wife and I have three daughters, one 13

attending Kansas State University, and two still living 14

at home in grade school and high school. 15

With my young family to think of, I'm very 16

interested in preserving the family farm for the next 17

generation. Your proposal to limit the amount of corn

18

based ethanol our country will use in 2014 sends a very 19

negati ve signal for the future of my family farm. 20

I have two ethanol plants within 40 miles of my 21

farm. I sell corn to one of these plants. So to say 22401 I'm invested in your decision is an understatement. As 1

I read the proposal, I couldn't help but won der what i s 2

U.S. EPA thinking? 3

In 2012, during the worst drought I've ever 4

experienced, I raised 78 bushel corn. Yet the ethanol 5
plants around me continued to run and still produced 6

enough ethanol to help our country meet the 7
requirements of the 2013 3.8 billion ga llons. 8

This year, I produced an average of 160 bushel 9

corn. And my price based on December futures, which is 10
locally around $4.20, is below my cost of production 11

with the cost of fertilizer, seeds, and chemicals of 12

today. Why now, when I have record yiel ds and USDA 13

predicts bushels and bushels of corn to spare, would 14

you consider reducing the ethanol requirement, 15

resulting in a massive surplus of corn and one less 16

market for my crop? 17

What were you thinking? There is no shortage of 18

corn to fulfill the req uirements of the RFS for 14.4 19

billion gallons of conversional biofuel s for 2014. Our 20

corn crop this year, according to USDA numbers, is 13.9 21

million bushel

-- I'm sorry, billion bushel. 22402 With an expected carryout at the end of this year 1

of over 2 billion b ushel. If we have another year 2

similar to this year, our carryout for 2014 could 3

easily be over 3 billion bushel with an ag sector 4

seeing a huge decline. This is a great example of the 5

Federal rules and regulations have a serious 6

unintentional consequenc e. 7
I am a farmer first, but I am also vice president 8

of the Illinois Corn Growers Association. I have to 9

come to D.C. and represent the interests of the corn 10

farmers of Illinois. We are concerned over uncertainty 11

that U.S. EPA has created with this propo sed rules to 12

reduce ethanol volumes for 2014. 13

With these rules, we could lose up to 500,000 14

million bushels of corn demand. If these rules 15

continue, farmers can look forward to relying on USDA 16

for foreign policy decisions and now for U.S. EPA for 17

ethanol decisions before we determine what crops we can 18

plant. 19

The original law passed by Congress was working. 20

America was moving towards energy independence. 21

Consumers had a choice of cheaper liquid fuels. 22403

Farmers and rural America were enjoying more stable 1

e conomies. I could look forward to a future for my 2

daughters on our family farm. 3

After all that, what is this about? We are 4

talking about creating and preserving an inheritance 5

for the future generations of farming. W hether there's 6

more -- whether that's a more healthy environment or 7

more stable economy or a future on the family farm, 8

isn't our future our priority? 9

Thank you. 10

MR. GRUNDLER : Thank you very much. Mr. Wagner? 11

MR. WAGNER : Thank you. I appreciate the 12

opportunity to provide testimony here th is evening. 13

My name is Owen Wagner, and I'm a senior economist 14

with LMC Inter nation al, a leading economic and business 15

consulting fir m for the agribusiness sector. 16

LMC provides market intelligence, analysis, and 17

advice to most of the major companies and or ganization s 18

around the world involved with agricultural commodities 19

and their end markets, including foods, industrial 20

materials, and biofuel s. On the basis of our expertise 21

and in light of similar studies we have conducted on 22404

this subject, we were asked by the Nation al Bio diesel 1

Board to prepare an economic impact assessment of 2

bio diesel on the U.S. economy. 3

The impact of the bio diesel industry on the U.S. 4

economy was assessed on the basis of three different 5

metrics. The first being the economic impact, which is 6

analogous to the value added to the U.S. economy. The 7
second being the employment impact, which is the number 8

of jobs that the industry supports. And the third 9

being the wage impact, which is the support to wages 10

paid that the industry provides. 11

The bio diesel industry is complex, and to account 12

accurately for the economic impact of the industry as a 13

whole, we evaluated at 11 distinct steps along the 14

value chain, ranging from the procurement of plant

- and 15

animal

- based feedstocks to processing and distribution 16

as a transportation fuel. The economic, employment, 17

and wage impacts directly attributable to bio diesel 18

were calculated by LMC using in

- house models across 19

thes e 11 steps in the value chain. 20

Where possible, data came from public sources, 21

prin cipally the U.S. Department of Agriculture, the 22405

Department of Energy , and t he Bureau of Labor 1

Statistics. In instances where public datasets lacked 2

the data required, as in the case of bio diesel factory 3

staffing and wage rates, we were granted access to 4

p roprietary bio diesel industry data and interviews with 5
industry stakeholder s. 6

Although the direct effects of bio diesel are 7
significant unto themselves, they do not capture the 8

full impact of the sector. To assess the total impact 9

of any industry, one must include not only the direct 10

effects, like those calculated by LMC for the bio diesel 11

industry, but also the indirect effects, which capture 12

the ripple effect on supporting industries, and induced 13

effects, which capture the economic activity stemming 14

from e xpenditures of households drawing an income from 15

the sector. 16

Recognizing the interconnectedness of any 17

subsector on the broader economy, the U.S. Department 18

of Commerce's Bureau of Economic Analysis maintains a 19

database of economic employment and wage mult ipliers 20

across 406 detailed industries for both indirect and 21

induced effects. To evaluate total impacts of the 22406

bio diesel industry on the U.S. economy, LMC employed 1

the BEA multipliers corresponding to each step in the 2

bio diesel value chain. 3

LMC was asked to evaluate the economic impact of 4

bio diesel from 2006 onwards. Since that time, the 5
production of bio diesel and its contribution to the 6

American economy in terms of economic activity, jobs, 7
and wages supported has grown significantly. For 2013, 8

in which bio diesel production in the U.S. is expected 9

to reach more than 1.7 billion gallons, the U.S. 10

bio diesel industry will support $16.8 billion in 11

economic activity, in excess of 62,000 jobs, and nearly 12
$2.6 billion in wages paid to the broader U.S. economy. 13

In addition, LMC evaluated the projected impact of 14

bio diesel on the basis of three levels of production 15

for 2014. If production next year remains consistent 16

with 2013 levels at 1.7 billion gallon s, then the 17

impact of the sector in terms of economic activi ty, 18

jobs, and wages supported will remain intact. 19

If, however, production falls back to the current 20

RFS2 level of 1.28 billion gallon s and currently the 21

industry believes production may go lower than that, 22407

then the industry would not be able to maintain th is 1

level of economic activity. In fact, at this level of 2

production, we estimate that the industry's ability to 3
contribute to the broader economy would fall by $4.5 4

billion in the medium term, while its ability to 5
support jobs would ultimately fall by 7,7 00 full

- time 6

positions, with its wage contribution falling by more 7

than $330 million. 8

If, on the other hand, U.S. bio diesel production 9

were to hit the 2 billion gallon mark, which is 10

virtually impossible under the current proposal, we 11

forecast that the eco nomic impact of the sector would 12
increase by more than $3.2 billion. Meanwhile, to 13

maintain this level of production, we would expect the 14

employment impact of the sector to increase by 4,400 15
jobs, with an additional $191 million in wages paid. 16

Again, I ap preciate the opportunity to present, 17

and I'd be happy to take any questions now or after the 18

hearing. Please don't hesitate to contact me either 19

way. 20

MR. GRUNDLER : Thank you. 21

Okay. One more testifier. Mr. Vollan , proceed. 22408 MR. VOLLAN : My name is Bruce Vollan . I own and 1

operate Midway Se rvice in Baltic, South Dakota. Midway 2

Service is a small business that sells bulk fuels, 3

operates a retail fuel station at a convenience store, 4

and does all types of auto repairs. 5
The business has been in my family for 35 years, 6

and 6 years ago, we had to make a decision between 7
going out of business and spending a lot of money to 8

modernize. Fortunately, that decision was made easier 9

because of the renewable fuel standard. 10

When Congress decided to increase the amount of 11

ethanol that would be used in vehicles, we decided to 12

move forward with the rebuilding of our business to be 13

a leader in the sale of renewable fuels. The risk we 14

took has been rewarded through increased fuel volume 15

profits, and we were able to help our b ottom line while 16

we passed on savings from lower

- cost ethanol blends to 17

our cust omers. 18

My family has invested a lot of money in the 19

future of our small business with the expectation that 20

Congress and the EPA would keep its word and follow 21

through with the renewable fuel standards , and that is 22409

why I'm here today to speak in opposition of the 1

proposed reduction in the 2014 RVOs. 2

It is my understanding that the EPA has proposed 3

to reduce the amount of ethanol blended into gasoline 4

next year because it's concer ned about an E10 blend 5

wall. Well, part of me does not want to tell you what 6

I'm about to share with you because I could lose a huge 7
competitive advantage I gain by offering E15 and higher 8

blends. 9

But EPA and Congress have not been receiving 10

accurate or h ones t information on this subject, a nd 11

this threatens my ability to continue to operate my 12

family's business. The truth is getting over the blend 13

wall is to try to get over the blend wall. 14

You know, there's no such thing as a 10 percent 15

blend wall unless petroleum marketers refuse to give 16

their customers any choices above 10 percent. In my 17

station, over the past year my monthly sales have been 18

at least 18 percent ethanol overall, with the maximum 19

of 28 percent. And we hit these percentages month 20

after mo nth , e ven with my station offering ethanol

- free 21

gas and even with E15 sales restricted to flex

- fuel 22410

veh icles in summer, low RVP season. 1

W e're confident in the quality of E15 , given EPA's 2

thorough testing, and so are our customers. When we 3

began selling E1 5 legally, it immediately became our 4

seco nd

- highest selling blend fuel. 5
Again, part of me hopes that the oil companies 6

continue to refuse to even sell anything over E10 7
because the refusal also drives up the value of the 8

RINs that Midway Service and other stations like ours 9

receive for proving that the blend wall is imaginary. 10

Oil companies could force RIN prices back down to 11

nothing if they would just start selling E15 and E85. 12

But until they do, you know, I'll be happy to sell our 13

RINs to them, and those extra dollars help me offer 14

lower prices at the pumps. I hire more people to 15

handle the extra business. It's paying for my fueling 16

equipment, and it increases my bottom line. 17

I've also heard concerns over the cost of 18

converting E15. At one point, I had someone ask me if 19
it actually cost $300,000 to convert your station for 20

an E15 upgrade. I'm here to tell you in my case 21

changing my pumps to sell E15 cost me less than $ 300. 22411 Most pumps

-- most pump manufacturers over the 1

past 10 years are warranted for u p to 15 percent 2

ethanol . Even if stations want to sell E85 and other 3

blends, like we do at Midway Service, those dispensers 4
are each about $9,000 more than a standard pump that 5

most station owners can use to still sell E15. 6

Three hundred thousand dollars, it would buy all 7
the new fueling equipment for an entirely new station 8

that could sell any blend of ethanol , not just E15, and 9

in either case, it's interesting that those equipment 10

cost estimates in compatibility statements almost 11

always come from represe ntatives from the oil 12

companies. 13

I'd suggest you ask equipment manufacturers or 14

installers. I think they'll confirm that a station 15

like mine cost little or nothing to convert to E15. 16

The final issue that is usually thrown out as a reason 17

not to sell E15 is that the risk to vehicles and the 18

potential liability is too high. As I mentioned 19

earlier, we also do auto repair at Midway Service. 20

MR. KOROTNEY : You'll need to wrap up, please. 21

MR. VOLLAN : And contrary to what ethanol 22412

opponents would like consumers and Congress to believe 1

about E15, since selling E15, I have had zero 2

complaints and have had no

-- and have had not to pay 3

for a single repair. 4

The renewable fuel standard allows us to sell 5
clean fuel made by our neighbors. It's created six new 6

jobs in my business to handle additional business that 7
I've earned and helps me compete with the big box 8

retailers. It has done all of these things while 9

offering lower price fuel to customers. 10

We urge you to stay the course on the RFS. Midway 11

Service is proof t hat the blend wall only exists if you 12

refuse to step over it. 13

MR. GRUNDLER : Thank you. John? 14

MR. HANNON : Both yourself and Mr. Hessler have 15

talked about the role of RIN prices in the marketing 16

decisions on the higher ethanol blends. Could you

-- 17

could you explain what the role is of the delta between 18

the ethanol price and the gasoline price? That would 19

seem to be as important as the RIN price. 20

Is that fair or not fair? 21

MR. VOLLAN : Could you explain what you're looking 22413 for here? 1

MR. HANNON : In making decisi ons to market E85, 2

for example

-- 3

MR. VOLLAN : Right. 4

MR. HANNON : -- Mr. Hessler's point is that RIN 5
prices facilitate that by allowing the price of the E85 6

to be marketed down lower so consumers will buy it and 7
the retailer has the price, has the v alue of the RIN to 8

help justify that. 9

My question is what's your experience with how 10

that calculus also takes into account the delta in 11

price between ethanol and the CBOB or the RBOB to 12

gasoline? 13

MR. VOLLAN : Well, I think you need to understand 14

that if yo u're going to take advantage of these RINs 15

and be able to pass these through to the consumer, it's 16

something you don't wait for the pie in the sky, that 17
$1.40 RIN. You market these on a continuous basis, and 18

you know, I've sold RINs for 3 cents, you know? 19

So you're either going to have increased RIN 20

prices for those people not willing to blend, you know, 21

and the ability for ethanol to go up and down, it is 22414

just as volatile as gasoline and diesel fuel. 1

MR. HESSLER : John, can I just add? They're 2

clearly an important component of the economics in the 3

market. So one of the things that we saw in this in 4

2013 as RIN prices went really high, we were benefiting 5
also from fairly low ethanol prices. That accelerated 6

the downturn. 7

Recently , and not reflected on th ese charts, we've 8

seen a real run

- up in ethanol prices, driven by exports 9

from what I understand, just in the last 2 weeks. The 10

futures market aren't reflecting that that's going to 11

be there. But if you had a really high RIN price, but 12

an even higher eth anol price, then E85 isn't going to 13

be valuable at the retail level. 14

So it's not like RINs are a silver bullet, but 15

RINs are an integral component. You take them out, and 16

you're not going to

-- you're not going to make this 17

work. 18

MR. GRUNDLER : Thank you so much for your time 19

today. It's very helpful. 20

Next panel is number 15. I don't see them on the 21

on - deck row. You know who you are. 22415 (Pause.) 1

MR. GRUNDLER : Mr. Bushong, you're up first. 2

Proceed, please. Welcome. 3

MR. BUSHONG : Hello. My name is Bill B ushong, and 4

I thank you all for the opportunity to speak to you all 5
today. I am from Woodstock, Virginia, in the 6

Shenandoah Valley. I am a member of the Virginia Grain 7

Producers Association and also a director. 8

My family produces corn and soybean, small grain, 9

and livestock, which is mainly cattle. I have been 10

involved in the grain and livestock industry for 50 11

years and have seen the ups and downs of all the farm 12

commodities. I have seen the positive impact ethanol 13

has had on the agriculture industry. 14

I'm going to give you some of the positive of the 15

ethanol . Number one, it reduces our imports by 10 16

percent. It's another market for the corn producer. 17

It has created a lot of jobs , and also, number one, 18

it's made in America. And I have a hard time fin ding a 19

hat that's made in America anymore. 20

Out of a bushel of corn, 2.5 gallon s of ethanol is 21

produced, and 37 pounds of feed and protein going back 22416

into the livestock, the cattle, poultry, hogs, fish 1

industry. Ethanol environment ally provides up to 50 2

pe rcent less reduction in greenhouse gas emissions 3

compared to gasoline, and also ethanol is renewable and 4

gasoline is not. 5
The corn producers have stepped up production to 6

meet demand, producing almost 14 billion bushel crop 7
this year. I want to give you s ome of the myths that's 8

in ethanol , and one that concerns me the most , that 9

we're starving people. Out of our total corn 10

production produced in any given year, only 10 percent 11

goes to the food consumption, and a lot of this 12

includes the corn sweeteners. 13

A nd as to these gasoline engines, I don't know why 14

they're having so much trouble with them. I've got an 15

old '58 Inter nation al tractor that I use on the farm to 16

back wagons around, and it's never missed a beat. All 17

my chainsaws, lawn mowers, and everythin g is run by 18

ethanol , and I've had no problem at all. 19

And I am

-- Bob Goodlatte, I heard him speak, and 20

h e is my representative. A nd I'm going to be sure to 21

let Bob know that I sold the highest price feeders two 22417

weeks ago and the highest fat cattle this su mmer that 1
I've ever sold, and I figured the corn prices at $8 a 2

bushel. 3

And in conclusion, the mandate by RFS means the 4

price received back the corn producer could be well 5
under the cost of production and will take the positive 6

effects ethanol has had. I urge you to do everything 7
possible to let the RFS continue to work and do its 8

job. 9

Thank you for your time. 10

MR. GRUNDLER : Thank you, sir. Mr. Delahoussaye ? 11

MR. DELAHOUSSAYE : Thank you. It's good to see 12

you all again. Thank you for sticking with us. 13

My name is Da y ne Delahoussaye , and I'm he re to 14

testify on behalf of Nest e Oil U.S., Incorporated. 15

Neste Oil continues its successful strategy for 16

focusing on the production of cleaner traffic fuels by 17

producing a non

- ester renewable diesel marketed under 18

the name NExBTL

. NExBTL is a drop

- in diesel 19

replacement fuel produced by hydrodeoxygenation , the 20

isomerization of biogenic trig l yceride oils and free 21

fatty acids. 22418 It is a pure hydrocarbon oil virtually free of 1

contaminants , such as aromatics and sulfur , that meets 2

the current diesel ASTM D975 specification and is fully 3

fungible with the slate of ultra low sulfur diesel fuel 4

available today without logistics, equipment, or 5
infrastructure changes, a true drop

- in diesel 6

supplement in every sense of the word. 7

The NExBTL technology can allow for the production 8

to tailor to cold weather performance characteristics, 9

often as low as minus 37 degrees Celsius, and makes it 10

an ideal solution in cold climate blends for uses even 11

in the harshest winters. 12

This drop

- in fuel, produced from qualifying 13

feedstock, meet the requirements of biomass

- based 14

diesel in the D4 pool. More significantly, it has an 15

equivalence value of 1.7, a 13 percent increase in the 16

number of RINs over the same volume of traditional 17

first

- generation met hyl ester bio diesel

. 18

Focusing only on bio diesel production in the EPA's 19

recent RVO analysis only eliminates the inclusion of 20

this higher

- density

-- higher

- energy density fuel and 21

ignores and fails to include these additional RIN 22419

volumes available, based on the historical data and 1

reasonable RIN production estimates for 2014 and 2

beyond. 3

Secondly, Nest e Oil is very disappointed that the 4

current RVO proposal specifically declines to include 5
imported volumes in its calculations of the expected 6

renewable fuel vo lume. The methodology is flawed and 7
adverse to reasonably expected market expectations. 8

State

- specific mandates, such as the California's 9

low carbon fuel standard program, serves as a market 10

factor that acts as an independent driver to this 11

program for bi ofuel consumption. Specifically, the 12

mechanics of that program provide very specific draws 13

for renewable diesel and low carbon ethanol , 14

s ignificant volumes of both of w hich are achieved via 15

imports. 16

California is still part of the United States and 17

one of the world's largest diesel and gasoline markets. 18

Its expected consumption and significant public policy 19

drivers must be considered and included in this 20

agency's evaluation of the total Federal renewable fuel 21

supply sources, and it would be naïve to conti nue to 22420

ignore that. 1

To that end, Nest e Oil has invested over $2 2

billion in its worldwide production capacity. While 3

not physically located within the sea to shining sea 4

boundaries, the United States market plays an important 5

part of Nest e Oil's investment decisions and business 6

plans. The locations were selected in part with a view 7
to the logistic opportunities for deliveries to the 8

U.S. and to procure and convert U.S.

- sourced 9

feedstocks. 10

Global companies are producing low carbon and 11

clean renewable fuels . I would strongly caution the 12

EPA against omitting consideration of these imports as 13

it sends a chilling signal on the inter nation al trade 14

of transportation fuels and would force these real GHG 15

reduction fuels in the U.S. fuel supply to other 16

markets. 17

Fi nally, I think it's important to remind this 18

panel and participants that the D6 pool is not limited 19

to corn ethanol . EPA regulations allow for any fuel 20

with a GHG reduction of 20 to 50 percent to qualify as 21

a D6 renewable fuel. Included in this volume ar e non - 22421

ethanol grandfather fuel producers and pathways. 1

Nest e Oil would encourage the EPA to consider 2

historical volumes and reasonable RIN production 3

estimates and include non

- ethanol renewable fuel along 4

with the non

- ethanol advanced fuel when revising it s 5
proposal and setting a more accurate renewable volume 6

obligation under the RFS. 7

MR. GRUNDLER : Thank you very much. 8

MR. KOROTNEY : Can you tell us, either now , if you 9

know it off the top of your head , or in your written 10

comments, how much Nest e specifica lly has imported into 11

the U.S. for the California low carbon fuel standard 12

program? 13

MR. DELAHOUSSAYE : I don't have that figure, but 14

I'd be glad to share that with you. 15

MR. KOROTNEY : Okay. And then

-- 16

MR. DELAHOUSSAYE : It's a couple

-- it's a 17

significan t amount, though. 18

MR. KOROTNEY : Okay. And then, as an aside, we 19

didn't intentionally omit things. What we're looking 20

for is things that we know are actually going to count. 21

They're going to be RIN generating either for advanced 22422

biofuel or for conventio nal. So if there is more of 1

that coming into the U.S. than we accounted for in the 2

rule, we want to know that. 3

So make sure you tell us what kind of volumes 4

we're talking about of

-- of renewable diesel that can 5

actually count under the RFS program as adv anced or 6

conventional. 7

MR. DELAHOUSSAYE : And to that point, all of the 8

renewable diesel that we import would count. So I'd be 9

glad to share those with you so you can have those 10

California draw figures. 11

MR. KOROTNEY : Okay. 12

MR. GRUNDLER : Other questions? 13

(No response.) 14

MR. GRUNDLER : Thank you. Mr. Brandenberger? 15

MR. BRANDENBERGER : Thank you all very much. 16

My name is Joel Brandenberger. I'm the president 17

of the Nation al Turkey Federation. We represent 18

virtually all the family farmers who raise turkeys and 19

the processors who process them, as well as breeders, 20

hatchery owners, allied industry. We sort of view 21

ourselves as part of the original market for corn 22423

producers. 1

I think, in the interest of time, I've given you 2

all a copy of the written statement. I'm sure at the 3

end of this day you all will want to read it for light 4

reading tonight. But

-- 5

(Laughter.) 6

MR. BRANDENBERGER : But we'll keep it to a couple 7
points, starting with thank you all for having this 8

hearing. Thank you all for the proposal. I t 9

recognizes some inherent problems in the standard and I 10

think begins to move us in the right direction. 11

I recognize it's based

-- our members recognize 12

it's based primarily on the blend wall, but hopefully, 13

this dialogue will open some discussion to the issues 14

that affect our industries as well going forward. 15

So the two primary points I want to make is that 16

the impact on our members and everybody in the 17

livestock and poultry industries is indisputable. For 18

our industry, since 2006, production at times ha s 19

ranged as low as 11 percent below the pre

- RFS levels. 20

Today, we're still about 6 percent below pre

- RFS 21

production levels. We've had four companies either 22424

close their doors, seek Chapter 11 bankruptcy, or just 1

move to other products and qui t producing t urkey since 2

then. 3

And the problem is less the price. Now I'm not 4

going to sit here and pretend that the price of feed 5
isn't a part of it. That's 70 percent of the cost of 6

production. But it's the vol atility is the bigger 7

problem. 8

I had a member, a retir ed CEO of one of our 9

companies who said, look, up to a point if I know what 10

the price is going to be and the normal, mother nature 11

variable factors that can go into it, I can figure a 12

way to operate. It's wild swings in feed c ost that 13

make it very difficu lt to plan and produce. 14

And so, the impact is real, and everybody can 15

quote all of the studies they want. But when I talk to 16

the members who are suffering, they say it's not fuel 17

prices. It's not energy costs. It is not anything 18

other than the high cost of feed that has caused these 19

problems in our industry and, more importantly, the 20

unpredictable cost of feed. 21

The second thing is, and this has puzzled me a 22425

lot , I actually foolishly thought that the renewable 1

fuels industry might be comfortable enough wi th th e 2

proposal when it was released. B ecause a year ago, 3

when the Governors of a number of States petitioned 4

your agency for a complete waiver of the RFS for 2013, 5

the reaction from the renewable fuels industry is, 6

well, that wouldn't have any impact tha t the livestock 7
and poultry industry thinks. I mean, there are all 8

kinds of reasons why refineries will continue to blend 9

ethanol into gasoline. 10

In fact, one of the leading associations wrote in 11

their comments last October of 2012, they wrote, 12

"Studies es timating the impact of a potential RFS 13

waiver on corn prices show that waiving the 14

requirements"

-- and this is 100 percent waiver we're 15

talking about

-- "in 2013 might reduce corn prices by 16

as little as 4 cents a bushel , or 0.5 percent." 17

Today, we've hear d testimony that makes it sound 18

like a waiver that is a fraction of what the Governors 19

were seeking last year is going to lead to Armageddon 20

on the farm. I've seen repeated comments about how 21

this will gut the RFS. 22426 I don't understand how you can have it b oth ways. 1

A 100 percent waiver is not going to have a big 2

impact, but you know, a waiver of less than 10 percent 3

from current production levels is going to gut the RFS? 4

It does not make sense to us. 5

Thank you all. 6

MR. GRUNDLER : Thank you. Mr. Anderson? 7

MR. KEVIN ANDERSON : Good afternoon. I am Kevin 8

Anderson. I farm 3,500 acres of corn, soybeans, wheat, 9

and barley with my family in Princess Anne, Maryland. 10

I am a fourth

- generation farmer and was privileged to 11

be the 2002 American Farm Bureau Achievem ent Award 12

runner - up and the 2007 Nation al Outstanding Young 13

Farmer. 14

I currently serve as the president of the Maryland 15

Grain Producers Association, and in that capacity is 16

why I've come before you today to express the 17

association's strong opposition to the EPA's proposal 18

to reduce the RFS for conventional ethanol to below 19

production capacity. 20

If this proposal goes through as proposed, my 21

family's net income has the potential to decrease by 22427 $100,000, making it difficult to squeeze a profit out 1

of my current corn crop, which will be marketed in 2

2014, based on the highest cost per bushel of any corn 3

crop I have previously grown. 4

I live in the heart of Maryland's poultry 5
industry. The poultry industry is Maryland's biggest 6

customer of grain. As Jim Purdue stat ed, the industry 7

is a three

- legged stool

-- p oultry processors, poultry 8

growers, and grain farmers. When any of these legs are 9

weakened, the trouble impacts us all. 10

For many years, grain farmers were the weak leg 11

due to low commodity prices that left us d ependent on 12

Federal subsidies for sustainability. Through greater 13

discipline, substantial investment of grower check

- off 14

funds, and private industry, we have brought production 15

agriculture away from the need of Government price 16

support programs and streng thened the three

- legged 17

stool. 18

Recently, the poultry and livestock industries 19

experienced high

- energy end feed costs, loss of export 20

market, declining domestic use, and industry 21

overproduction. These items were all contributing to a 22428

loss of income. 1

We sha red their concerns. As grain farmers, we 2

stepped up to the plate and even wit h significant 3

weather challenges produced the largest corn crop in 4

history. To accomplish this, it took significant 5
investment in new technology and more efficient 6

machinery to accomplish this by the agriculture 7
community

. 8

We need the ethanol industry to continue to 9

provide the demand for our corn in order for us to cash 10

flow these investments we have already made in good 11

faith. It is important to note while feed costs are a 12

sig nificant input cost to the poultry industry, poultry 13

production is very efficient, requiring only 2 pounds 14

of feed per pound of weight gain. 15
At $8 a bushel for corn, that is 14.2 cents per 16

pound. That is 28.6 per pound of live chicken. With 17

corn prices r educed to $4.20, that is 7.5 cents per 18

pound , or 15 cents per pound of live chicken. That is 19

only a difference of 13.6 cents per pound of chicken, 20

and we all know that's a very small portion of what we 21

pay in the grocery store. 22429 I mentioned the figure of $ 8 for corn, which was 1

the level it peaked at for a short period of time last 2

year after farmers experienced the worst drought in 3

many years. The peak in the price was caused by 4

speculators in the market that felt crop production 5
would have devastating imp act. 6

Speculators were wrong. The country survived the 7

drought . L ess ethanol was produced. Margins were 8

tightened for all of us, but we survived. 9

We now start a year with farmers having to step up 10

to the plate to ensure that there is adequate corn for 11

fo od, feed, export, and fuel. Our farmers have 12

invested millions in growing our 2013 and '14 crops to 13

meet our standards, to ensure that our fuel providers 14

can meet the renewable fuel standard , only to find us 15

with bumper crops and the EPA pulling the rug o ut from 16

underneath of us. 17

The impact of this decision will have significant 18

negative effects on my family farm and the farm 19

families around us, farm workers. And when our bottom 20

line is impacted, the local businesses that we support 21

will also realize the negative impact to their bottom 22430

line. 1

MR. KOROTNEY : You'll need to wrap up, please. 2

MR. KEVIN ANDERSON : A couple things I'd like to 3

point out. I've farmed through three droughts. '98

-- 4

or '88, '96, and '12. In '88, the corn price went up 5

40 percent b ecause of drought. In '96, the corn price 6

went up 30 percent because of drought. 7

With the RFS standard in 2012, corn prices only 8

went up 26 percent. That's low volatility, and the RFS 9

did not cause significant volatility in the market when 10

you look back on the Chicago Board of Trade figures. 11

MR. GRUNDLER : Thank you, sir. 12

Mr. Lapp, welcome. 13

MR. LAPP : Good afternoon, and thank you for your 14

patience and opportunity and your endurance you should 15

be congratulated on. 16

My name is Bill Lapp, and I'm the preside nt of 17

Advanced Economic Solutions. AES is an independent 18

commodity and economic forecasting firm. In the past, 19

we've done analysis on biofuel policy options for a 20

wide range of companies from the Nation al Corn Growers 21

Association to the Grocery Manufactu rers Association. 22431 In my view, the EPA proposal to reduce the RFS 1

mandates is warranted and appropriate. Without these, 2

we have the prospect for higher fuel prices, higher 3

gasoline prices, and upward pressure on the price of 4

corn and soybean oil. 5

Since 200 7, biofuel mandates have been a primary 6

catalyst for rising food input costs, costs that are 7
ultimately passed on to the consumer. Specifically 8

with regard to your p roposal, I have three comments. 9

One is that AES agrees with your proposed 10

reduction in the RFS for 2014. Without this change, 11

the conventional ethanol would exceed the E10 blend 12

wall by more than a billion gallon s, and this, combined 13

with the impact of advanced , the advanced biofuel 14

mandate, would force a tenfold increase in the 15

consumption of E85 by my analysis. 16

The ultimate consequence of this is higher 17

gasoline prices, and depending on how you set the 18

parameters within

-- with regard to bio diesel and 19

pulldown of RINs, you would

-- my model suggests that 20

you'd have retail gasoline prices 8 ce nts to 30 cents 21

higher than you would without the reduction that you 22432

have proposed. 1

Secondly, with regard to bio diesel mandates, AES 2

agrees with your proposal to maintain a bio diesel 3

mandate of 1.28 billion gallon s for both 2014 and 2015. 4

The challenge in meeting these is not a blend wall 5
one, but one from feedstock availability and the 6

potential sharp increase in advanced biofuel mandates 7
in 2014 and beyond. 8

Soybean oil inventories are declining to their 9

lowest level in 8 years this year, and your proposa l 10

suggested an increase in soybean oil production during 11

calendar crop year 2013

- 14, and the latest USDA data 12

suggests a 2 percent decline, in fact. So there's an 13

update may be in order there. 14

If the mandates lead to higher bio diesel 15

production, then the soybean oil market is going to 16

face significant market disruption, and consumers could 17

face higher, significantly higher soybean oil prices. 18

My point on the advanced biofuel mandates is that 19

they grow so rapidly from in the coming years to over 7 20

billion g allon s, and this would equal as much as 4.8 21

billion gallon s of bio diesel production if it all were 22433

achieved through bio diesel . And with that, these 1

levels , based on your analysis for sure and my 2

understanding of the feedstock , are unattainable, and 3

the ne ed for EPA to lower the mandates in order to 4

prevent further market disruptions is in order. 5
The other point, and it was well articulated in 6

the proposal, is the risk of bio diesel output rising to 7
meet the blend wall requirements where conventional 8

ethanol cannot. And it's critically important that EPA 9

has recognized in its proposal that relying on 10

bio diesel to meet the shortfall caused by the blend 11

walls is not feasible, given bio diesel production 12

capacity as well as limitations on feedstock. 13

This becomes a bigger and bigger issue in 2015 and 14

2016 and would compel you to come back here next year 15

for the same fun and frivolity a year from now. 16

In conclusion, the proposals for the 2014 17

standards, EPA took a bold and appropriate step towards 18

putting the RFS o n a manageable and sustainable path 19

for 2014 and beyond. Without these changes from the 20

original schedule, increased mandates would result in 21

higher gasoline prices and diesel fuel prices. 22434 Additionally, left unchanged from the original 1

levels the mandates would create upward pressure on the 2

primary feedstock used to produce these fuels

-- corn 3

for ethanol and soybean for bio diesel . AES recommends 4

that the EPA adopt the renewable fuels mandates for 5

2014 as prescribed in the proposal. 6

I've included some inf ormation on a study I've 7
published and would be glad to share that and portions 8

of that as desired in my formal comments submitted. 9

MR. GRUNDLER : Thank you so much. Questions? 10

(No response.) 11

MR. GRUNDLER : Okay. Mr. Foglesong , welcome. 12

MR. FOGLESONG : G ood afternoon. Sir? 13

MR. GRUNDLER : Welcome. 14

MR. FOGLESONG : Welcome to you. I'm Steve 15

Foglesong . I'm a cattle feeder, rancher, corn grower, 16

and maybe the only pork producer that will at least 17

admit it so far today. 18

(Laughter.) 19

MR. FOGLESONG : Today, I'm here on behalf of the 20

Nation al Cattle men's Beef Association, and I would be 21

remiss if I didn't mention this is the first time that 22435 I was ever to appear before EPA where we actually 1

agreed on something. So I applaud you. 2

(Laughter.) 3

MR. FOGLESONG : My fam ily owns and operates the 4

Black Gold Ranch and feedlot in west central Illinois. 5
And as a corn farmer, we decide that we're going to 6

feed all of our cor n. That's called value added. 7
It's just exactly like ethanol producers. They 8

take corn and they feed it to their plant, and they 9

produce ethanol , DDGs, carbon dioxide. We feed it 10

steers. It's the exact same process , with the 11

exception that the RFS mandate that gives the ethanol 12

producers an advantage in purchasing that corn. 13

RFS has been a topic of inte rest in the beef 14

industry since Congress passed that legislation in 15

2005, and then they greatly expanded it in 2007. Be 16

clear. Our industry and me personally supports 17

renewable energy . I'm all about ethanol . All my 18

neighbors are corn farmers. It's ris ky for me to come 19

here and talk about this. 20

There is no denying that ethanol has brought 21

prosperity to rural America. I mean, everybody's got a 22436

new pickup. We all got a new tractor. We're getting 1

along, and it's made a huge difference. But Government 2

p olicies that are passed by Congress and enforced by 3

you all has created significant challenges in the 4

livestock sector. 5

The NCBA strongly supports the EPA's proposed rule 6

to reduce the 2014 renewable volume obligations for 7

conventional ethanol by 1.3 milli on gallon s. We 8

recognize your proposal is focused on the energy side 9

of this debate rather than the feed side, but your 10

actions will have a direct impact on our industry that 11

also utilizes corn. 12

During the 2002 to 2003 marketing year, USDA 13

estimated that corn use for ethanol production 14

accounted for 10 percent of the total U.S. corn usage. 15

Today, because of Government policies that are in 16

place, roughly 42 percent of that corn is utilized by 17

one user, the ethanol industry. From 2002 to 2013, the 18

use of c orn for feed has fallen from 58 percent to 19

about 37 percent. That's a pretty substantial number. 20

Even though the cattle industry is able to utilize 21

the byproducts created from the ethanol process, their 22437

efficiencies replacing the corn is not comparable, 1

c onsidering that only 17 pounds of distillers grain can 2

be produced from a bushel of corn. 3

I often hear the phrase that more feed is 4

available now than ever before because of the RFS, 5

available to who? The ethanol industry has done a 6

fantastic job of marke ting DDGs around the world. I 7
don't compete with other cattle producers. I compete 8

with some Chinaman for DDGs because he can get them to 9

him duty

- free. 10

This year alone, we've sent 5.92 million metric 11

tons of DDGs overseas, removing them from the domesti c 12

feed supply. In western Illinois today, the corn is 13

worth $4.20 a bushel. That's $ 150 a ton. DDGs priced 14
in Peoria are $220 a ton. That's not an even deal, and 15

it's not really a bargain. 16

I'll tell you what. This whole ethanol and the 17

feed thing has me kind of feeling like a first wif e. I 18

was there, you know, and I went to college and I helped 19

you start your business, and then you start looking for 20

a younger model. And the next thing I know, you know, 21

I'm left holding the bag, and I kind of feel lik e I'm 22438

holding the bag here. 1

The U.S. cattle industry has realized a 2

significant economic impact due to the RFS mandate and 3

the historic drought that impacted over 70 percent of 4

the country last year. From 2007 to 2010, the cattle 5
feeding sector and our in dustry lost a record $7 6

billion, billion, in equity due in large part to feed 7

costs. 8

Over the past 4 years, the average cost of grain 9

to finish a market steer in the feedyard has gone up by 10
over $200 a head as a direct result of increasing feed 11

costs. The se costs are not able to be passed on to the 12

consumer, and they're absorbed by me and my fellow 13

cattle producers. 14

This type of loss is not sustainable for a segment 15

of industry that relies on corn. And as a result of 16

the continued diversion of corn to sat isfy the 17

mandatory RFS, it is unlikely

-- it is likely that 18

these losses will continue. 19

There's been a lot of talk here today about what 20

might happen if you leave your deal in place. Well, 21

I'll tell you what has happened. In the beef industry, 22439

we've got feedlots that are closing. We've got pack 1

and

-- those are jobs that are gone. They're not going 2

to get them back. 3

Those things have happened, not any supposition 4

that they're going to happen. 5

MR. KOROTNEY : You're going to have to finish up, 6

please. 7

MR. FOGLESONG : Our industry appreciates EPA's 8

proposal as it acknowledges that the current policy 9

needs to be reevaluated, especially since the agency 10

denied the petitions to waive the RFS last year in the 11

most recent drought. The agency's policy is a great 12

step in the right direction, and we hope the EPA will 13

work to retain those lower projections. 14

At one time, there was a need for Government 15

policies and the American taxpayer to help the ethanol 16

industry find their feet. Today, we have a mature and 17

sophis ticated industry before us that after many years 18

of Federal support, it's time to get everybody on the 19

level playing field to compete for that bushel of corn. 20

In closing, we appreciate the opportunity to visit 21

you today and support your recent decision to reduce 22440

the 2014 standard s. In September, the Renewable Fuels 1

Association encouraged the cattle industry to look at 2

the flexibility of the RFS policy on the regulatory 3

side of this debate. Typically, this is an area where 4

we disagree with the RFA , b ut you r recent activity does 5
acknowledge that flexibilities do exist. 6

This is a step in the right direction, and as the 7
policies that are in place are outdated, we will 8

continue to work with Congress to level that pla ying 9

field. 10

Thank you very much. 11

MR. GRUNDLER : Thank you. Safe travels. Thank 12

you. 13

Panel 17. Correction. Panel 16. 14

(Pause.) 15

MR. GRUNDLER : Mr. McNinch, we're ready when you 16

are. 17

MR. MCNINCH : I am Dennis McNinch. I'm a fourth

18

generation corn farmer from Kansas, and I've been a 19

farm banker for o ver 30 years. I am here to tell you 20

how I believe ethanol has impacted rural America. 21

My banking career began in 1983 after college 22441

graduation. My dream, however, was to be working on 1

our family's farm that my great

- gr andfather homesteaded 2

in 1885. 3

In 19 83, that dream had little hope of becoming 4

reality as our country was in the middle of a farm 5
crisis. Commodity prices were low. Interest rates 6

were high. Land prices were falling, and farmers were 7
losing their farms to foreclosure. 8

My grandfather was i n his 60s and should have been 9

cutting back his workload instead of increasing it. 10

He, like many others, was saddled with debt and had to 11

go to town and get a job so that he could pay the 12

mortgage. My career as a banker in agriculture was far 13

from reward ing in the 1980s. I spent most of my time 14

collecting loans instead of making them. 15

In fact, I experienced one of the most awkward 16

times of my life as I had to collect a loan from my 17

father's best friend as his farm was no longer 18

profitable. The economic impact on the heartland was 19

devastating to agricu lture and Main Street America. 20

In my opinion, the one thing that contributed the 21

most to those hard times was the lack of demand for the 22442

grain. Simply put, we did not have eno ugh end users to 1

create value. 2

Going into the 1990s, things improved slightly for 3

the corn farmer. Foreclosures had subsided , and farms 4

were starting to be profitable. However, from a 5
banker's perspective, I believed that many of the 6

profits were artificial, as many farms were receivi ng 7

Government payments. I can attest that many of my farm 8

customers would not have shown a profit without those 9

payments. 10

Commodity prices for the decade remained low. We 11

still lacked end users for our product, and surpluses 12

were mounting. During this p eriod, I returned to the 13

farm not because it was profitable, but because a 14

banking job in the area became calling and because of 15

my grandfather's fading health. I then assumed his 16

role of providing labor on the far m, plus having a job 17

in town. 18

At the star t of the 21st century, the agriculture 19

economy had grown stagnant. Farmers were still 20

dependent upon Government payments. Corn prices were 21
below $2 per bushel, and we still struggled to create 22443

value for our grain. We had a recipe for disaster if 1

we did not find a way to create value. 2

At about that time, the landscape in agriculture 3

started to change. That was the period when our 4

industry realized that we did have a way to create 5
value for our grain, and that was by making ethanol

. 6

Capital requirements w ere many to get the ethanol 7
industry going. Many farmers invested heavily with 8

their own money, some of whom had no business risking, 9

but they had to take a chance or risk becoming 10

unprofitable again. 11

Our critics will tell you that our industry would 12

neve r have made it without the Government subsidies. I 13

could not agree more, and I do not apologize , as the 14

ethanol story is a success story. I believe that the 15

Government 's return on investment had to be huge as 16

farmers , for the first time in decades , were paying 17

large sums of Federal taxes on farm profits. 18

The economic tide created by ethanol has floated 19

many boats in and outside of agriculture. Industries 20

such as equipment and auto manufacturers, seed dealers, 21

chemical dealers, grain mercha ndisers, banks, and many 22444

others reaped the benefits from ethanol . A real

- life 1

example of the economic impact of ethanol would be the 2

succe ss the bank I work for has had. 3

In 1987, the credit quality of the bank was quite 4

poor as only 60 percent of the loans were consider ed 5
acceptable quality, and our loan volume was below $70 6

million. Today, our bank's credit quality is over 99.5 7
percent acceptable quality. Our loan volume is almost 8
$300 million, and we have had

-- have not had to 9

collect a loan for over 10 years. 10

Besid es the economic impact of ethanol , our 11

nation al security is sounder, as imported oil needs 12

from foreign countries, many of whom do not like us, is 13

less. And ethanol , as you well know, is a cleaner 14

burning fuel than gasoline refined by the petroleum 15

indust ry. 16

Today, the ethanol industry is under attack, and 17

if our opponents are allowed to succeed in pushing back 18

ethanol , our nation will be at great risk economically 19

as the corn farmers will again be faced with the lack 20

of end users. The RFS has achieved wh at it was 21

originally intended, and that is to provide our country 22445

with a renewable fuel source, clean up the environment , 1

and provide economic stability. 2

As you finalize the RFS ethanol requirements for 3

2014, I ask you, on behalf of my partners in ethanol , 4

to please leave the RFS as it originally was drafted 5

in to legislation. 6

Thank you. 7

MR. GRUNDLER : Thank you. Questions? 8

(No response.) 9

MR. GRUNDLER : Mr. Keaveney? 10

MR. KEAVENEY : My name is Timothy Keaveney. I 11

serve as the vice president of sales for HER O BX. HERO 12

BX is a privately held bio diesel refiner located in 13

Erie, Pennsylvania. 14

Our plant will manufacture 50 million gallon s of 15

biomass

- based bio diesel in 2013, record production for 16

our company. We use recycled cooking oil and rendered 17

animal fat s a s feed stock. Our fuel helps supply 18

America's enormous demand for diesel fuel and heating 19

oil. 20

Si nce our inception in 2006, HERO BX has invested 21

in the people and the technology that would enable our 22446

company to produce a gallon of bio diesel at a cost 1

equal to petroleum diesel . Today, by running multiple 2

feeds, price parity between domestic bio diesel feed and 3

global crude oil prices, economies of scale as a result 4

of running at full capacity, and a ratable market that 5
buys our products, we are producing a g allon of 6

bio diesel at a price that rivals petroleum diesel , 7
making bio diesel affordable to United States consumers. 8

Our company provides well

- paying jobs to 43 full

9

time employees who contribute to the economic and 10

manufacturing revitalization of Erie, Pen nsylvania. 11

The proposed EPA renewable fuel standard for biomass

12

based diesel and advanced biofuel in 2014 will have a 13

negative impact on our business. The proposed rule 14

effectively reduces U.S. biodiesel consumption by 50 15

percent from current production rates , directly and 16

indirectly threatening hundreds of jobs in Erie County, 17

PA, and freezes our planned corporate growth 18

initiative. 19

In 2013, HERO BX made a $6 million capital 20

investment to expand its refining capacity by 22 21

percent, as well as other plant efficiencies, 22447

anticipating an increase in the 2014 biomass

- based 1

volume that would at least match 2013 industry 2

production volume of 1.7 billion gallon s. 3

Since the proposal to reduce biomass

- based diesel 4

volume was released, now in question is whether our 5

plant upgrades will be commissioned. Furthermore, 6

we've delayed our plan to hire up to 10 new employees 7

that were slated to staff our expansion. 8
Our owner, Pat Black III, has invested $120 9

million into our bio diesel refinery with a vision of 10

supporting a green industry, to foster innovation, and 11

to create meaningful jobs in Erie, Pennsylvania, one of 12

America's oldest manufacturing towns. 13

The investment was made in part due to 14

Government 's stance on establishing and supporting 15

renewable fuels. To pull the rug out from under us now 16

would foil current investment and likely stagnate 17

future development in clean energy
. 18

Thank you. 19

MR. GRUNDLER : Thank you, sir. Mr. Thomas, 20

welcome. 21

MR. THOMAS : Gentlemen, thank you for this 22448

opportunity and your uncanny ability to stay awake. 1

My name is Mark Thomas. I'm a dairy farmer from 2

Lewisville, Ohio, up in the northeast corner. We milk 3

400 cows, farm 2,000 acres with my wife and three kids 4

and several employees. 5
I have a long history of working with ethanol , as 6

in my yo unger years, I was a professional drag racer 7
for 25 years and saw the incredible benefits of ethanol 8

as a fuel in my race car. We are the winningest team 9

in Inter nation a l Hot Rod Association history. 10

We had a car that made 3,000 horsepower, went 0 to 11

250 mile an hour in 5.7 seconds, and we won 7 world 12

championships due to ethanol

. I retired at the end of 13

2008. 14

The three things I dislike the most are being away 15

from my family, being away from my farm, and wearing a 16

suit. 17

(Laughter.) 18

MR. THOMAS : And one da y you can't screw up is my 19

birthday, and I'm 55 today. That's 18 y ears with 37 20

years experience. Now, but here I am today, wearing a 21

suit, away from my family and my farm, and that's how 22449

important the renewable fuel standard is to me. 1

We had an extreme d rought in 2012 that drove the 2

price of corn through the roof, and many livestock 3

farmers screaming mad and blaming high input cost on 4

the ethanol . However, the anger was misplaced. The 5
drought drove up corn prices, not ethanol

. 6

This year, we have seen a bumper crop of grain, 7
and the price of corn has dropped in half in one short 8
year to that that it was in 2012 to between $3.50 and 9
$4 a bushel in my area, much lower than the cost to 10

produce it. These prices are declining even with the 11

renewable fuel stan dard s and the ethanol industry in 12

place, highlighting once again that there are so many 13

other factors contributing to the corn price. 14

We in the agricultural industry need access to all 15

the markets for our products that we can get, and 16

rolling back RFS just opens the door for massive 17

oversupply of corn, artificially cheapening it, and 18

that will hurt all of us. Does anyone remember the 19

challenge of 2009 that the livestock and dairy industry 20

had? We had the privilege of working 24

- 7 to lose a 21

ton of money, e quity, and were exhausted and depleted. 22450 This was a result of too cheap of inputs leading 1

to an oversupply of milk and other commodities, 2

crashing the markets and creating the most challenging 3

year of my life, my depression. I feel strongly that 4

changing t he renewable fuel standard s will create an 5
atmosphere allowing for oversupply of milk, beef, pork, 6

and poultry, and once again make it hard to make a 7
decent living in agriculture. 8

As we all know, the farm bill expired in 9

September, and it is clear we canno t depend on farm 10

programs to keep our industry afloat in these tough 11

years of oversupply. We need al l the markets to keep 12

growing. 13

I have an ethanol plant within 70 miles of my farm 14

that allows me for a great market for my extra corn 15

that I don't feed my cows. I can sell it at a premium 16

of about 30 to 40 cents per bushel extra. I also use 17

25 tons of wet distillers grain a week, a co

- product of 18

the plant and ethanol production. It's a very 19

economical, high

- protein feed that my cows love. 20

Unfortunately, o ur agricultural world has seen a 21

great division within our community between the grain 22451 farmers and the livestock producers on the importance 1

of the renewable fuel standard and the ethanol 2

industry. As a grain farmer and livestock producer, I 3

could attest we cannot afford to fight each other. 4

For the agriculture industry to be strong, all of 5
ag must be strong, and I'm certain nothing is stronger 6

than American agriculture. The RFS is helping make 7
American agriculture stronger, and we are now just 8

starting t o see the benefits. We should not be scaling 9

back. 10

Thank you for your time and consideration, and I 11

appreciate the opportunity to share my thoughts and my 12

birthday with you guys. 13

MR. GRUNDLER : Thank you. Happy birthday. 14

MR. THOMAS : Thank you. 15

MR. GRUND LER : You didn't have to wear a suit for 16

us. 17

MR. THOMAS : Pardon me? 18

MR. GRUNDLER : Next time you don't need to wear a 19

suit to provide testimony. 20

MR. THOMAS : My wife said I'd look more 21

professional. 22452 MR. GRUNDLER : You have to wear something, but

-- 1

(Laugh ter.) 2

MR. GRUNDLER : Any questions? 3

MR. HANNON : Yeah, can you come tune my sports 4

car? 5

(Laughter.) 6

MR. HANNON : And I'll even convert it to higher 7

ethanol blends if you can get it to 3,000 horsepower. 8

MR. THOMAS : Not a problem at all. 9

MR. HANNON : Happy birthday. 10

MR. THOMAS : I'd be glad to do it. Thank you. 11

MR. HANNON : Just a quick comment for yourself and 12

Mr. McNinch. What I take from both of your comments 13

and actually several other panel members on various 14

panels is you need an increased demand for grain. You 15

have a large supply of corn and abundance of it. 16

Prices have gone down. You're concerned that there is 17

not enough demand for the product to make it a livable 18

wage for the producer. 19

Our proposal is premised on the view of how to 20

grow ethanol u se, how much

-- how quickly and how much 21

ethanol can actually physically be used? And neither 22453

yourself nor Mr. McNinch have really addressed that. 1

In your written comments, if you can, that would be 2

very helpful because that is the key issue in front of 3

us is how much ethanol can be used? 4

Mr. Hessler earlier commented on and various other 5

people on E85 or E15, other ways to expand ethanol use. 6

If you could make sure your comments address that, 7

that would be very helpful. 8

Thank you. 9

MR. THOMAS : Thank you

. 10

MR. GRUNDLER : Mr. Jeter? 11

MR. JETER : Yes. I'd like to say thank you for 12

the opportunity to comment today on the proposed rule 13

for the 2014 standards of the Renewable Fuel Standard 14

Program. 15

I'm Jeff Jeter, and I'm speaking today for NAFA 16

Fleet Managemen t Association . I'm the fleet director 17

for Chesterfield County, Virginia. My fleet includes 18

2,400 vehicles and 3 central fueling facilities. 19

NAFA is a not

- for

- profit association for 20

professionals who manage fleets of civilian public 21

safety vehicles, truck s and buses of all types and 22454 sizes, and a wide range of military and offroad 1

equipment. NAFA's members are responsible for more 2

than 3.5 million vehicles. 3

NAFA has long supported Federal environment al 4

energy policies, including the renewable fuel standard s 5

that reach the ent ire motoring public and return 6

benefits to fleets and the general public. My comments 7
today will address two topics. First, EPA's proposal 8

to reduce the advanced biofuel in the total renewable 9

fuel standard s for 2014 and the proposal to maintain 10

the same volume of biomass

- based diesel for 2014 and 11

'15 as was adopted for 2013. 12

As fleet managers, we are concerned that the 13

approaching blend wall will result in the mandated use 14

of E15, an ethanol blend that fleet managers fear will 15

void ve hicle warranties, damage engines, and cause 16

damage to underground storage tanks. As a major 17

consumer of vehicles and engines, we are concerned with 18

the potential impact of both light

- duty engines as well 19

as noncovered engines, including engine failure, 20

co rrosion, water in fuel, phase separation, high er 21

exhaust temperatures, increased pollution emissions, 22455

and reduced life of the vehicle or engine. 1

We take very seriously the statements of the 2

vehicles and engine manufacturers that E15 will damage 3

engines, vo id warranties, and reduce fuel efficiency. 4

For fleet managers, the warranty issue is very real , 5
and it has been raised by several auto manufacturers. 6

NAFA just recently queried the OEMs, and the 7
warranty issue continues to be a valid concern. As a 8

fleet manager, I simply cannot rely on EPA's findings 9

that E15 is suitable for use in vehicles manufactured 10

in model year 2001 and newer when the OEMs are telling 11

me the E15 might void the warranty. It's a catch

- 22 12

the fleet managers just cannot accept. 13

NAFA me mbers that are users of small engines have 14

been

-- have seen a significant increase in engine 15

failures due to issues with ethanol in the fuel. Many 16

times we find that the fuel will separate with a small 17

amount of moisture. We now have an additional expen se 18

to purchase fuel conditioners to counter this effect. 19

The overall result is that we spend more dollars 20

now on maintenance and repairs while the lifecycle 21

expectancy of the equipment is reduced. This 22456

negativity affects production and profitability and 1

w ill be made worse with E15. 2

Fleets that have their own fueling facilities 3

predominantly store and issue diesel and only one grade 4

of gasoline, generally 87 octane. Fleets have many 5
vehicles and equipment that are not compatible with the 6

E15 blend, as well as model year 2001 and later 7
gasoline vehicles and equipment that EPA claims are 8

compatible with E15. 9

If E15 were mandated, these fleets with these 10

vehicles and equipment mix have no additional fueling 11

infrastructure to store the issue d two grades of 12

gaso line, E15 and E10. This places fleets in a 13

position of not being able to meet their mission 14

requirements for gasoline refueling for all their 15

vehicles and equipment. 16

This is a real

- world logistical issue that cannot 17

be solved by simply mandating the use o f E15 for model 18

year 2001 and later gasoline vehicles and equipment. 19

The fueling infrastructure is simply not there yet. 20

There are also many unanswered questions regarding 21

the compatibility of E15 with underground storage tank 22457 systems and the potential fo r leaks for these systems. 1

Many fleets, including the fleet that I manage, have 2

central fueling facilities to provide onsite refueling 3

to our vehicles. 4

The EPA's decision to allow the use of E15 in 5
certain vehicles does not remove a fleet's obligation 6

to assure that all their equipment is lawfully 7
certified to store and sell this product. EPA rules 8

require that equipment be proven compatible with E15. 9

However, in 2011, the U.S. Government Accountability 10

Office advised that the compatibility of many exist ing 11

underground storage tank systems with ethanol blends is 12

uncleared for two main reasons. 13

MR. BURKHOLDER : Can you please conclude your 14

testimony? 15

MR. JETER : Many retailers have older equipment 16

and lack of records. On short for that, we just don't 17

thin k it'd be a good idea t o go with the E15 at this 18

time. 19

A nd then , on the biomass diesel , you know, without 20

repeating everything everybody else has said, what 21

we're recommending from NAFA is to carry on with the 22458 same blends that you did for 2014

-- for '13 a nd go 1

ahead and do the same thing for '14 and '15. 2

MR. GRUNDLER : Thank you. 3

MR. JETER : Thank you. 4

MR. GRUNDLER : Mr. Vinson , welcome. 5

MR. VINSON : Gentlemen, good evening. My name is 6

Scott Vinson , and I'm here on behalf of the Nation al 7

Council of Chain Restaurants, which is the trade 8

association that represents America's quick service and 9

table service restaurant chains. We appreciate this 10

opportunity to testify at today's hearing, and we will 11

also submit wri tten comments on the proposal. 12

Chain restaura nts are, by and large, owned and 13

operated by tens of thousands of small business 14

franchisees, most of whom have one or two or a small 15

handful of individual restaurant locations. 16

These small business franchisees are often family

17

run enterprises, and they ar e the very picture of small 18

business in America. They give back to their 19

communities through charitable do nation s to local good 20

causes. They serve as popular gathering places for 21

family events and special occasions, and they serve 22459

countless meals to ever yday Americans every single day. 1

In recent years, food commodity costs for chain 2

restaurants and their small business franchisees have 3

increased dramatically. This increase has happened to 4

coincide with the enactment and implementation of the 5

renewable fu el standard

. 6

These higher food commodity prices are not unique 7
to chain restaurants but have been experienced by 8

nearly every entity along the food chain, from poultry 9

and livestock farmers on one end of the chain to chain 10

restaurants and other food retail outlets on the other, 11

as we've heard here today. 12

Several entities, including the Congressional 13

Budget Office, USDA, Economic Research Service, 14

Congressional Research Service, World Bank, and 15

Nation al Research Council, have all implicated the RFS 16

in the re cent climb in food commodity prices. 17

Moreover, numerous academic studies have done the same. 18

My organization was not content to simply rely on 19

the studies of all of these experts. So last year, we 20

went the extra mile, and we engaged a third party to 21

dete rmine whether the RFS is responsible for at least a 22460

portion of the higher food commodity cost experienced 1

by chain restaurants and, if so, to what degree. 2

We commissioned the independent firm of 3

Price waterhouse Coopers to examine this issue. PWC 4

reviewed e xisting private sector, academic, and 5

Government studies on the impacts of the RFS mandate on 6

ethanol production and the price of corn and other 7
commodities. They then combined these estimates with 8

survey information on commodity purchases by chain 9

restau rants to estimate the overall impact of the RFS 10

on chain restaurant input cost. 11

PWC issued its findings in a report released last 12

November entitled " Federal Ethanol Policies and Chain 13

Restaurant Food Cost." I have copies of the executive 14

summary from the report, and I'm happy to provide them 15

to the members of the panel. The full report is 16

available at our Web site, nccr.net. 17

PWC concluded that the conventional portion of the 18

mandate, when it's fully implemented in 2015, will 19

raise chain restaurant food co st by up to $3.2 billion 20

a year every year. That's billion with a "b

. " And 21

that estimate is prospective from 2015 onward. It does 22461

not even include all the years that the RFS has been in 1

effect since its enactment. 2

For a typical chain restaurant franchis ee, that's 3
an increase of about 10 percent per year, or $18,0 00 in 4

higher food cost. For a typical casual dining 5
restaurant, it represents a 9 percent increase, or 6
about $17,000. But for many franchisees, the cost can 7
be far higher. 8

To provide an example and bring these numbers into 9

perspective, let me tell you about the experience of 10

one individual chain restaurant franchisee. Ed and 11

Judy Anderson own and operate with their son four 12

We ndy's restaurants in Virginia. Mr. Anderson 13

testified before the Hou se Energy and Commerce 14

Sub committee on Energy and Power in July that he 15
estimates the RFS to cost his restaurants up to $30,000 16

a year per location. 17
For his four Wendy's restaurants, that's $120,000 18

a year in higher food costs, which is money that the 19

Ande rsons are not able to use to expand their busin ess 20

and help grow the economy. Unfortunately, the 21

Andersons' experience with the RFS is all too common. 22462 In conclusion, we encourage the agency to go 1

further than the proposed 2014 RVO, recognizing the 2

very ne gative impact on food cost for American small 3

business, farmers, and consumers. Ultimately, Congress 4

will have to address the long

- term challenges created 5
by the RFS, but in the interim, we urge the agency to 6

take every available step to further lower the mandate 7
for 2014 and each year the RFS mandate remains in 8

effect. 9

Thank you. 10

MR. GRUNDLER : Thank you. Mr. Siu , you have the 11

final word on this panel. 12

MR. SIU : Well, good evening, and thank you very 13

much for the opportunity to comment on EPA's proposed 14

2014 renewable volume obligation. My name is Brian 15

Siu , and I'm a senior policy analyst with the Natural 16

Resource Defense Council. 17

Founded in 1970, NRDC is a nation al advocacy 18

organization with over 1.4 million members and online 19

activists working to prot ect the environment , climate, 20

and public health. That's why we believe that getting 21

our biofuel policies right is critically important. 22463 The renewable fuel standard is one of the most 1

critical biofuel policies, but requires enormous 2

balance in both substan ce and process. We need low 3

carbon fuels to reduce the substantial climate impacts 4

of our transportation system and protect the air 5
quality and public against harmful pollution. 6

But not all biofuel s are created equally. Some 7
will provide climate benefits , while others, like corn 8

ethanol using current practices, can make climate 9

change worse while also harming wildlife, water, food, 10

and feedstocks. Thus, a balance must be struck that 11

transitions us to meaningful volumes of low carbon, 12

nonfood

- based fuel w ithout otherwise impacting the 13

environment . We hope that these issues can be resolved 14

by EPA through future rulemakings. 15

In the current rulemaking, however, EPA must 16

strike a balance that responds to ethanol blending 17

limits while still fostering deploymen t of biofuel s and 18

biofuel infrastructure. It must move the policy 19

forward while carefully accounting for significant 20

unf oreseen changes in fuel demand. 21

NRDC is currently studying the NPRM but would like 22464

to offer two points that will guide our detailed 1

wri tten comments. First, we support EPA's authority to 2

address practical E10 blending limits. Specifically, 3

we support EPA's interpretation of the term "supply" 4

under Section 211(o) (7)( A ) of the Clean Air Act. When 5
Congress provided this authority to EPA, it sought to 6

avoid the unintended product of a mandate coupled with 7
significant supply constraints. 8

It stands to reason that severe volatility or 9

other compliance challenges will be the same whether 10

the supply constraint occurs upstream with the producer 11

o r downstream with the consumer. For instance, so long 12

as a blender cannot prod uce or sell supply, RIN 13

separation will suffer and volatility will result. 14

It's unlikely that Congress sought to prevent this 15

outcome for upstream supply constrains , but not an 16

identical outcome for downstream supply constraints. 17

Focusing on the outcome that Congress intended to 18

prevent supports a broader interpretation of the term 19

"supply." Furthermore, EPA's ability to manage 20

unanticipated challenges is key to maintaining pub lic 21

support for the program and, thus, the bedrock policy 22465 framework for biofuel s. 1

Secondly, however, NRDC does not think that every 2

downstream supply constraint justifies waiving the 3

mandate where the compliance needs to be cost free or 4

even low cost. Con gress also foresaw a greater share 5
of our fuels eventually coming from alternative 6

sources, and stable price signals can help facilitate 7

that goal. 8

While EPA must adopt measures to address severe 9

unanticipated blending challenges, it must also avoid 10

any lo ng - term approach that waives the requirement any 11

time reasonable compliance costs are present and must 12

navigate between managing volatility and sustaining 13

support for the right types of biofuel s. We believe 14

that EPA is working to strike that balance, and we'll 15

provide detailed analysis on whether its proposal hits 16

the mark, goes too far, or falls short. 17

How sustainable forms of advanced biofuel fare 18

under the proposal will be of paramount importance, and 19

NRDC will study this issue in particular. 20

I'd like t o close by stating that EPA continues to 21

do admirable work in administering this very complex 22466

program. EPA is the right forum to resolve these 1

issues, as it has the expertise and the flexibility to 2

address these and other challenges as they arise. This 3

i s not a black and white issue, and all parties should 4

recognize that the best outcome will result from an 5
open engagement in the public rulemaking process. 6

This concludes my remarks, and thank you once 7
again for hosting this public forum. 8

MR. GRUNDLER : Th ank you. Thank you very much, 9

everybody, especially those who traveled here. 10

Appreciate it. 11

All right. Panel 17, come on down. 12

I also want to announce that we're going to be 13

taking a short break prior to Panel 19. 14

(Pause.) 15

MR. GRUNDLER : Mr. Bowling, we lcome. We're ready 16

when you are. 17

MR. BOWLING : Thank you. My name is Chip Bowling. 18

I'm a grain farmer from Newburg, Maryland, which is 45 19

miles south of Washington, D.C. My farm is located on 20

the Wicomico River, which feeds into the Chesapeake 21

Bay. 22467 Non e of the corn that I grow is used to make 1

ethanol . My corn is used to feed the poultry industry. 2

I'm here today to testify on behalf of the Nation al 3

Corn Growers Association, as I serve as the 4

association's first vice president. 5

As the organization that represents the n ation 's 6

corn farmers, we are extremely disappointed after 7
hearing of the proposed 2014 RFS volume obligations. 8

The RFS has worked and continues to be successful by 9

supplying a domestically produced renewable resource, 10

and this rule propose s to do the exact opposite of what 11

the intent of the RFS was

-- t hat was to produce and 12

consume ethanol

. 13

In the March 26, 2010, Federal Register, the E PA 14

noted that the increasing volumes of renewable fuel 15

would need to be consumed by flex

- fuel vehicles an d 16

that the higher volumes of ethanol in the fuel system 17

were expected to exceed 10 percent. The automobile 18

industry, corn farmers, and consu mers responded to this 19

demand. 20

Now approximately 15 million flex

- fuel vehicles 21

are on the road in the United States and are capable of 22468

running blends of ethanol up to 85 percent. While 1

there are approximately 3,200 retail stations that 2

offer flex fuel, it is often inappropriately priced, 3

higher than regular gas even though the cost of ethanol 4
is 50 cents to $1 cheaper per gallon

. 5
Not surprisingly, consumers choose the cheaper 6

regular blended fuel, picking E10 over E85. Not until 7
recently was much E85 utilized. However, this past 8

summer, we saw an example of how the RIN system was 9

originally designed to support the ma rket through the 10

combi nation of lower

- priced ethanol , coupled with 11

higher

- priced RINs, fuel marketers were able to 12

capitalize on the RIN market and economically price E85 13

for consumption. 14

The EPA's latest proposed rule has undercut 15

exactly what the system was designed to do, which was 16

to move the market towards the production and 17

consumption of ethanol and away from oil's monopoly. 18

Within the November 29, 2013, Federal Register, the EPA 19

states that the objective is to put the RFS program on 20

a manageable tr ajectory to support continued growth in 21

the renewable fuels over time. 2246 9 How do you proposed to continue to grow the 1

renewable fuels market while cutting it at the same 2

time? This proposed cut will negatively influence 3

investors who will be less likely to f und future 4

innovations for second

- generation biofuel s. 5

Further, in the same Federal Register, the EPA 6

cites the Clean Air Act, Section 211, which provides 7
the EPA the authority to address extreme and unusual 8

fuel and fuel additive supply circumstances, whi ch 9

prevent the distribution of an adequate supply of fuel 10

and fuel additives to consumers. That must be the 11

result of a natural disaster, an act of God, a pipeline 12

or refinery failure, or an event that cannot be 13

reasonably foreseen. 14

The EPA justifies this to mean there is a supply 15

issue , w hen there is plenty enough ethanol production 16

capacity to provide the supply. Instead, the EPA 17

attempts to make the case that infrastructure is 18

controlling supply when it's simply not true. 19

Today, as we sit here, the inf rastructure is in 20

place to dispense 14.4 billion gallon s of ethanol for 21

2014 if only the pricing was in place to move the 22470

product. Again, your recent proposed action is exactly 1

the opposite of what the RFS was intended to do, again 2

to produce and consume ethanol

. 3

Clearly, past actions of the EPA supported the 4

desire to produce and consume ethanol . The latest RVO 5
proposal does not support the claim of the EPA to place 6

biofuel s on a growth trajectory as designed in the RFS 7

statute and clearly moves away fro m the climate action 8

plan put forth by the current administration. 9

NCJ strongly urges you to reconsider this ill

10

advised proposal. Thank you. 11

MR. GRUNDLER : Thank you. Questions? 12

(No response.) 13

MR. GRUNDLER : Ms. Case? 14

MR. MACHIELE : Oh, wait. Just you said the 15

infrastructure is there for 14.4 billion gallon s of 16

ethanol , if only the pricing were there to support it. 17

Is that

-- I mean, what

-- I guess follow up in your 18

comments or your written testimony of what do you mean 19

by that infrastructure , and what is the pricing that 20

would be necessary then to get to that level? 21

MR. BOWLING : And we will follow this up with some 22471

written testimony. But if all the vehicles that were 1

E85 on the road now could use E85 and should, if the 2

price were in place for them to choose that over E10, 3

they would definitely use that product. 4

MR. GRUNDLER : Proceed. 5

MS. CASE : Good evening. My name is Jennifer 6

Case, and I am the CEO of New Leaf Biofuel, a small 7

bio diesel refinery in San Diego, California. I'm here 8

today to discuss how the proposed RFS volumes will 9

devastate my business and my employees. 10

You may remember my name from testimony earlier 11

this year when I appeared in front of this agency to 12

discuss the RIN fraud issue. Myself and others worked 13

very diligently with the EPA to rectify that issue so 14

that today, plants across the country are enrolled in 15

quality assurance programs which have added security to 16

the marketplace. 17

It's baffling to me that the EPA would spend such 18

considerable energy strengthening the integrity of the 19

RIN program while paying particular attention to ensure 20

that small plants like mine survive the RIN fraud 21

crisis only to issue a proposed rule that could wipe us 22472

out completely in a matter of months. 1

We started New Leaf in 2006 with a mission to 2

conve rt used cooking oil, plentiful to the large 3

metropolitan city of San Diego, into bio diesel and sell 4

that fuel back to the community . Over the last 8 years 5
we have been in business, we have seen some very 6

challenging times and some very prosperous times. 7
Unfortunately, we have yet to see any consistency. 8

As would be expected in a new industry, it was 9

initially very difficult to raise money to build the 10

business, obtain raw materials at a competitive price, 11

and to convince the users of petroleum to switch t o a 12

new, relatively untested product. This was especially 13

challenging for small plants like New Leaf, who are 14

located on the west coast, far from the large bio diesel 15

marke ts established in the Midwest. 16

Prior to the RFS, the bio diesel consumed in the 17

Unite d States was largely manufactured using virgin 18

soybean oil, and plants like New Leaf struggled to find 19

a market to sell its fuel made from used cooking oil. 20

Then came the RFS. 21

New Leaf was finally able to attract investment, 22473

obtain loans, and hire more em ployees to build the 1

business that we have today. With a strong Federal 2

policy mandating the increased use of bio diesel , the 3

demand that was initially focused in the Midwest 4

finally started making its way to California. 5
By 2010, New Leaf was producing a h igh

- quality, 6

low carbon bio diesel fuel at commercial scale, and 7
customers such as the local military bases, 8

municipalities, utilities, and school districts were 9

consuming the fuel with success and at a price equal to 10

or lower than the price they were payin g for diesel

. 11

Due to our ever

- increasing demand, New Leaf has 12

spent millions of dollars over the last couple of years 13

upgrading our refinery and is currently working toward 14

tripling the annual production capacity. We have also 15

spent considerable time rese arching and developing 16

methods for reducing cost of production, improv ing 17

yields, and utilizing lower

- value feedstocks. 18

In 2013, due to reaching better economies of scale 19

and lower feedstock cost, the cost to produce New 20

Leaf's fuel went down compared to 2 011 and 2012. Our 21

plant is located in the economically depressed area of 22474

Barrio Logan. But over the last few years, we have 1

nearly tripled our workforce, offering well

- paying 2

management, sales, manufacturing, transportation , and 3

office jobs to area resid ents. 4
Our lowest paid employees earn more than 1 1/2 5
times the minimum wage. And in 2013, New Leaf was able 6

to hire a brand

- new management team to run the plant, 7
allowing the founders to pursue more business 8

development opportunities. 9

New Leaf's plant has also supported indirect jobs 10

in the transportation of raw materials and finished 11

products, equipment, parts, and we've offered 12

supplemental income to restaurants in exchan ge for 13

their used cooking oil. 14

The EPA's proposal has now severely jeopardized 15

our s urvival. The practical application would be to 16

remove 500 million gallon s of demand from the bio diesel 17

marketplace. 18

It's questionable whether larger, more established 19

plants will be able to survive that kind of blow. To a 20

plant like New Leaf, who has alw ays fought for the 21

scraps, survival to 2016 would be nothing short of a 22475

miracle. Our employees will lose jobs. Our lenders 1

and investors will lose capital. And the State and 2

Federal government will lose tax revenue. 3

Most important for all of us, if the biomass

- based 4

diesel category is not increased to 1.7 billion gallon s 5
next year, the 500 million gallon s of bio diesel demand 6

will be replaced by 500 million gallon s of petroleum 7

diesel at an unmeasurable cost of adding greenhouse 8

gases to the atmosphere. 9

W e really don't like fighting this battle with the 10

EPA year after year. We both have the same goals, 11

goals that we share with the President , to see small 12

business and low carbon fuels thrive. There must be 13

some way we can work together going forward that 14

ensures my business a positive pathway forward. 15

MR. BURKHOLDER : Please conclude. 16

MS. CASE : In closing, on behalf of small 17

bio diesel plants across the country, please reconsider 18

how your proposal will stifle small business. 19

Thank you. 20

MR. GRUNDLER : Thank you. Mr. Yaksich? 21

MR. YAKSICH : Good evening. My name is Nick 22476

Yaksich. I'm vice president of government and industry 1

relations at the Associat ion of Equipment 2

Manufacturers. In the interest of time , I will 3

summarize my summary. 4

AEM is the inter nation a l

- based trade group serving 5
the offroad equipment manufacturing industry. AEM 6

members number more than 900 companies that manufacture 7
equipment, products, and services used worldwide in the 8

agriculture, construction, forestry, mining, and 9

utility fields. 10

Our agriculture equipment manufacturing members 11

are an integral part of the American economy, directly 12

and indirectly employing 370,000 workers. We are 13

optimistic about the market potential represented by 14

the continued development of an advanced biofuel s 15

industry. 16

Because of the market

- driving force of the RFS, 17

several advanced biofuel s projects are set to begin or 18

ramp up production in 2014. Their operation should 19

drive investme nt in new equipment purchases. 20

Based on these developments, preliminary analy sis 21

indicates demand for ag equipment, specifically bailers 22477

used to collect biomass for cellulosic ethanol 1

production, will be created next year. This infant 2

market is valued at $25 million. And if the RFS is 3

left intact, by 2022, early projections are t hat this 4

market could grow to nearly $2 billion with a potential 5
growth market of $4 billion in equipment needed to 6

s upport agriculture production. 7

The recently proposed EPA rule to reduce the 8

amount of renewable fuel blended into our supply 9

threatens futu re demand for agriculture equipment by 10

adding uncertainty and discouraging investment. 11

Significant investment and research towards renewable 12

fuels would be lost, putting American jobs at risk. 13

In summary, the equipment industry is excited 14

about the opport unities presented by the advanced 15

biofuel s sector. However, lowering the RFS will cause 16

an exodus of investment capital, which could 17

permanently stunt growth in this market. 18

We will provide more detailed analysis and 19

comments within the 60

- day timeframe f or comments. 20

Thank you for the opportunity to present our views at 21

this time. 22478 MR. GRUNDLER : Thank you. Mr. Clemens, welcome. 1

MR. CLEMENS : For the record, my name is Mike 2

Clemens from Wimbledon, North Dakota. That's close to 3

the end of the world, if yo u've been watching the 4

weather lately. It's going to be 12 below 0 tomorrow 5
morning. 6

But you know, that's where the biggest oil play is 7
happening in the United States right now is in the 8

Bakken oil field of western North Dakota. Also 50 9

percent of the 3. 6 million acres of corn we grow in 10

North Dakota is being converted into ethanol also , and 11

cattle expansion is taking place at a record pace in 12

North Dakota due to the RFS, the certainty of having 13

corn grown and the co

- product of DDGs also being into 14

the ma rketplace. 15

The ethanol industry has survived rough years by 16

investing millions of dollars to keep the plants 17

running in poor economic conditions only to have the 18

rug pulled out from underneath it by removing the 19

certainty of the RFS. A reduction of the vo lume 20

obligation will have severe income consequences for 21

North Dakota's ethanol and corn industries, which are 22479

currently providing great economic contribution to the 1

State. 2

The proposed volume reduction would have 3

significant impact on corn producers like myself, as it 4

would result in a 500 million bushel drop in corn 5
demand. Deutsche Bank says that it would result in an 6
80 cents to $1 bushel drop in corn prices, which we've 7
probably seen some of that already being taking place 8

since the announcement. 9

This comes in a year with a projected record corn 10

crop of 14 billion bushels, which already has dropped 11

the prices. As someone who has invested their own 12

money into the ethanol plants in North Dakota, South 13

Dakota, and Minnesota, the economic impact would be 14

devastating. A proposal like this would stifle current 15

multibillion dollar investments in the next

- generation 16

biofuel s such as the one at Spiritwood, North Dakota, 17

that just receive d RFS2 certification from this very 18

agency. 19

In record deficits in Governme nt spending , it is 20

imperative that this industry is able to sustain 21

itself. On my farm , last time any countercyclical 22480

payments or marketing loan LDP payments were collected 1

was back in 2005. The marketplace has set a new 2

plateau in commodity prices highe r than the trigger for 3

such payments due to the demand base created within the 4

ethanol production, saving the Government payouts to 5

farmers. 6

Another way I manage risk at my farm is that 7

investment into ethanol plants. The RFS has given me 8

the confidence t o invest in the business. With change 9

and lower requirements for ethanol not only will I be 10

looking at lower corn prices, but my investment will 11

also struggle to break even. 12
I look at this as a lose/lose proposition. I like 13

win/win models for the ethanol industry and for the 14

consumer. The current infrastructure can't absorb the 15

14.4 billion gallon s of ethanol . This can be met with 16
an E85 carryover of RINs and/or bio diesel . E8 5 17

structure and flex

- fuel vehicles are in place. 18

However, the oil companies h ave refused to allow 19

retailers to offer it to consumers. 20

If the marketplace were available, an additional 8 21

billion gallon s of fuel could be accommodated. E15 has 22481

been available for 14 months, including the past 4 1

months in North Dakota, with not a single sighted 2

engine problem. However, oil companies are running 3

false ads and campaigns telling people not to use E15 4

because it's bad for their cars. 5
You know, it surprising everybody gets home every 6

night, and our wreckers aren't running up and down the 7

roa d just snagging them and bringing them in. But 8

they're getting home every night. 9

Then they tell you that the Government and the 10

consumer doesn't want E15. This proposal will reward 11

the distribution of false information. Right now, in 12

my State , North Dak ota, there is roughly an 85

- cent 13

spread between unleaded fuel and E85. There is even a 14

30

- cent spread and a 50

- cent spread betw een E10 and 15

E15, respectively. 16

This is a photo that I

-- you know, I didn't want 17

to fill with fuel when I got home , and it was 1 5 below. 18

So this is the snapshot I took at our local station in 19

Fargo, North Dakota, just to point out the difference 20

in fuel prices and the selection to the consumer out 21

there that is the ultimate winner at the end of the 22482

day. 1

MR. GRUNDLER : Please concl ude. 2

MR. CLEMENS : I hope that this hearing from this 3

group of people who work in agriculture as well as the 4

renewable fuel industries, and when you take into 5
consideration the comments that are made during the 60

- 6

day comment period, you will see that it w ill be a huge 7
mistake and a colossal failure on our fragile economy. 8

Thank you. 9

MR. GRUNDLER : Thank you. Mr. Eischeid , welcome. 10

MR. EISCHEID : Thank you. 11

Good evening, gentlemen. I'm Gary Eischeid , 12

general manager for POET Biorefining in Gowrie , Iowa, 13

a lso a member of the Iowa Ethanol Producers 14

Association, and I'm a retired brigadier general with 15

the Iowa Army Nation al Guard. 16

I flew here to speak with you today because the 17

administration has always been our partner, and I think 18

you deserve to know this proposed rule threatens that 19

partnership. These teammates employed by the Iowa 20

ethanol producers are part of an American dream. They 21

are employed in a growing clean energy industry that 22483

did not have to leave their hometown to make it happen. 1

We all know what a family represents and consists 2

of. These families have children in local schools, are 3

members of the church, spend their paycheck in the ir 4

local businesses, contribute to local and State tax 5
base. At the same time, our plant supports over 1,150 6

ve ndors , from sandwich makers to highly technical 7
specialists who also have families that depend on them. 8

On the basis of the RFS, POET and Iowa's ethanol 9

industry has worked hard to put together a customer 10

base that can supply us with corn today and cellulo sic 11

material in the future so we can manufacture the 12

ethanol that reduces the need for foreign oil. 13

The trickle

- down effect of this added income has 14

also helped to support the local economy. Auto and 15

truck dealerships, grain bin companies, trucki ng and 16

ra ilroad operations, con tractors and implement dealers. 17

The RFS was a clear roadmap to the expansion of the 18

renewable fuels industry, and so far the administration 19

honored the commitment mandated by Congress in 2007. 20

Currently, our sister POET facility loca ted in 21

Emm e tsburg, Iowa, has partnered with Dutch Science 22484

Mining, headquartered in the Netherlands, and is 1

undergoing an expansion into cellulosic ethanol that is 2

scheduled for commissioning this March of 2014. This 3

operation was built right next to the e xisting grain 4

ethanol plant. 5

Grain ethanol producers and their investors are 6

the most significant players in pioneering this 7
technology. The proposed rule will hurt the Iowa 8

economy and ignore one of the goals of the RFS, to give 9

the consumer a choice at the pump. 10

Every American will feel the pain at the pump. 11

Ethanol today displaces 10 percent of petroleum , and 12

independent analysis suggests this saves consumers 13
anywhere from 50 cents to $1.50 at the pump. Reducing 14

volumes by 1.4 billion gallon s will inc rease pump price 15

by as much as 8 cents per gallon

. 16

We need more ethanol fuel, not less. The ethanol 17

industry generates annual sales of ethanol , corn oil, 18

and DDGs of 2.9 billion annually, which , in turn , 19
generations $500 million in additional economic 20

act ivity. Reduced volume of ethanol could result in 21

more than 500 million bushels drop in corn demand. 22485

This decrease in demand could result in 80 cents to $1 1

drop in corn prices per bushel. 2

We need to move away from our addiction to foreign 3

o il. My great h ope is that some day I can put out a 4

sign that says now hiring for cellulosic plant that we 5
will build if you stay committed to the vision of the 6

RFS. My greatest fear that I hope to leave you with 7
today is that instead of a h iring sign, we may instead 8

som e day see a for sale sign outside our doors. 9

Thank you for this opportunity. 10

MR. GRUNDLER : Thank you very much. Mr. Corle? 11

Corle. 12

MR. CORLE : Corle. 13

MR. GRUNDLER : Corle. My a pologies. 14

MR. CORLE : Thank you for sticking in here and 15

allowing us to contin ue. 16

The grandest strategy in the world can't be 17

sustained if the tactics are counterproductive. 18

Lowering the RVO targets is counterproductive. It 19

erects a roadblock, putting the RINs market in jeopardy 20

of not functioning in a way that provides sufficient 21

incentive for blending more renewable s. That's very 22486

important for historical policy support here from 1

Washington that financial institutions will base their 2

investment risk on this historical event. 3

It alters the strategy from one of encouraging the 4

RFS to one of retarding its implementation. And I 5

speak for Inbicon . It's a Danish cellulosic 6

technology, and my company has been marketing and 7
developing business across North America and including 8

in Spiritwood, North Dakota, and inter nation ally since 9

2008

. 10

DONG Energy , the largest power company in Denmark, 11

has invested over $200 million in developing and 12

optimizing the Inbicon process and mitigating the 13

process risk. They built their demonstration refinery 14

in Denmark in 2009 and now surpassed 15,000 hours of 15

operation turning wheat straw into cellulosic ethanol

. 16

They're marketing that ethanol to 100 fueling 17

stations over the p ast 3 years through Statoil. The y 18

advance the enzymes

-- Novozymes, which is right next 19

door, Du P ont, and DSM

-- at this refinery o ver the past 20

3 years , b eing able to run their enzymes on near 21

commercial production. 22487 DONG is now committed to investing development 1

capital and equity to future projects globally. But 2

here's what a former CEO of Inbicon , Niels Henriksen , 3

stated recently. 4

A nd I quote, "In 2008, the USA looked to be the 5
most promising market for cellulosic ethanol in the 6

world, but it has now been replaced or outpaced by 7
other markets that are moving faster, especially China 8

and Brazil. The branding value of Inbicon, create d 9

primarily in the U.S. , has led to very good projects 10

and partners in these other areas. 11

" The big marketing push in the U.S., but the 12

climate of commercialization is better in China and 13

Brazil right now. We could be driving biomass 14

refineries in China be fore get our first commercial 15

project commissioned here in the U.S. because the 16

policy risk in the U.S. is greater than even China." 17

Unless investors see a clear policy path to 36 18

billion gallons of total renewable fuels by 2022, they 19

will remain on the si delines, and that's what's 20

happening. Every other risk, from biomass to technical 21

to financial, can be understood, evaluated, and 22488

mitigated. 1

Investor uncertainty over shifting EPA regulations 2

have guided new directions in a $400 million g reenfield 3

Inbicon biomass refinery in Indiana at Fair Oaks Farms. 4

It's a 40,000 head dairy showcase, w ho made a 5

commitment at the COP 15 to reduce carbons and the only 6

industr y to make a pledge in the U.S. 7

Hal f the sugars from the corn stover on this 8

project is going to p roduce power instead of ethanol 9

because debt financers are more certain on a long

- term 10

contract to the power market than the ethanol because

- 11

- mainly because of policy risk and the blend wall. 12

Another project in Oregon is being mitigated

-- is 13

mitigating risk from our technology to take those 14

sugars to glycols for the

-- 15

MR. BURKHOLDER : Could you please complete your 16

testimony? 17

MR. CORLE : EPA actions recently have also stalled 18

our project development with several large U.S. grain 19

ethanol producers. RVO reductions will weaken their 20

business and opportunity to invest in new projects. 21

Although they've acknowledged the necessity of 22489

investing in a lower carbon future of collocating 1

biomass refineries on their sites, two of these 2

producers have backed off sinc e you made this 3

announcement. All these delays and diversions of 4

sugars serves no one but the petroleum industry. 5

Thank you. 6

MR. GRUNDLER : Thank you. Any questions? 7

(No response.) 8

MR. GRUNDLER : Thank you very much for providing 9

your testimony today. W e're very grateful. 10

Panel 18 ? 11

(Pause.) 12

MR. GRUNDLER : Mr. Schad , please proceed. 13

MR. SCHAD : Thank you. 14

My name is Dwayne Schad , and I am a farmer from 15

central Missouri in the heart of the United States

. 16

And I want to thank you for the opportunity to comm ent 17

today. 18

I not only raise corn, but I raise beef cattle as 19

well. I could be working on the farm today, but I 20

thought it was more important to come to Washington, 21

D.C., because I support ethanol and have seen how 22490

important the RFS is to all of agricultur e and to 1

America. 2

My wife and I use ethanol because it's the right 3

thing to do to reduce dependence on foreign oil. We 4

have a 2007 Fo rd F

- 150 and use the clean

- burning E85 in 5
it virtually all the time. When I change the oil, it 6

doesn't look like it needs to be changed. And after 7
running over 160,000 miles with no mechanical issues, 8

we feel it's a premium fuel. 9

With these proposed cuts, we will not see the 10

reduced greenhouse gas em issions assumed under the RFS. 11

As a farmer, I deal with the ups and downs of the 12

marketplace every year. Year in and year out, I work 13

through whatever curveballs that weather throws us. 14

It's just the nature of our business. 15

This year, with the help of God, we, as farmers, 16

responded by bouncing back to grow a record corn crop 17

t o meet projected demands. Because of our success, I 18

am deeply troubled by the proposal to reduce the RFS. 19

Reducing the demand for corn in a record crop year will 20

have a devastat ing impact on our communities. 21

With corn prices already on the decline below the 22491

cost of production, this could be a blow that is very 1

unexpected in a year with so much promise. We are used 2

to fighting markets and weather, but we're not used to 3

a Government agency deciding to pull the rug out from 4

underneath us in the middle of th e game. 5

As I mentioned before, I am also a cattle 6

producer. Yet I support ethanol and the RFS. I see 7
all of the positives ethanol provides to Missouri. As 8

I served on our local school board for 18 years, I know 9

how important the increased tax bases are for our 10

schools , h igh

- quality feed for livestock farmers like 11

myself. 12

And Missouri has some of the lowest gas prices in 13

the nation due to the inclusion of ethanol in our fuel. 14

That benefits all Missourians, not just those involved 15

in agriculture. 16

Oil has always resisted homegrown, renewable 17

fuels. Their resistance to accepting this viable 18

domestic fuel source is no reason for America to go 19

backwards in our goal of being energy independent. 20

Don't just stand with farmers. Stand with 21

Americans and reverse t his proposed rule. Oil is the 22492

only one who benefits if you don't. 1

Thank you. 2

MR. GRUNDLER : Thank you, sir. Mr. Ward? 3

MR. WARD : I want to thank you all for your 4

Herculean efforts to pay attention throughout what's 5
been a very long day, and there's still time to come, 6

I'm sure. 7

MR. GRUNDLER : It's the chocolate. 8

MR. WARD : What's that? 9

MR. GRUNDLER : It's the chocolate. 10

MR. WARD : Do you have any left? 11

MR. GRUNDLER : I'm not sharing. 12

(Laughter.) 13

MR. WARD: Okay. Thanks. 14

I'm Steven Ward, a principal with the D.C.

- based 15

consulting firm V H Strategies. I speak today on behalf 16

of three of the nation's largest bio diesel producers

-- 17

I mperium Renewable s, Renewable Biofuels, and Green 18

Earth Fuels

-- companies with more than 350 million 19

gallon s of annual producti on capacity combined. We 20

plan to provide extensive written comments on a range 21

of technical issues not covered in this far more 22493

general testimony. 1

Congress created the RFS2 as an energy security 2

program to grow domestic biofuel s industry with the 3

goal of diversifying our fuel supply, reducing our 4

dependence on foreign sources of oil, and reducing 5
greenhouse gas submissions in the transportation 6

sector. 7
In the statute, Congress crafted the economic pool 8

of the renewable volume obligations with annual 9

increa ses out to 2022 as a tool to drive domestic 10

demand and provide confidence to investors to fund 11

domestic infrastructure, crop development, and R&D. 12

Congress understood that a long

- term Federal commitment 13

was necessary -- excuse me, was a necessary factor t o 14

attract this requisite private investment. 15

In response, our companies and hundreds like them 16

have invested billions of dollars to help the n ation 17

fulfill these stated goals, building a domestic 18

industry that's met and exceeded these annual volume 19

require ments every year. In 2013, the bio diesel 20

industry is projected to exceed the volume mandate for 21

biomass

- based diesel , producing over 1.7 billion 22494

gallon s and generating over 2.55 billion RINs, which 1

also will meet most of the broader advanced biofuel s 2

requ irement for this year. 3

In 2013 alone, the industry supported more than 4
62,000 jobs, contributed nearly $17 billion in total 5
economic value to the economy. Bio diesel producers 6

have been able to bring this additional capacity online 7

and attract the investme nts for their future based on 8

the expectation of annual increases in demand. 9

To sustain this success, it's imperative that the 10

Federal Government continue to meet the intent of the 11

statute and provide a clear signal of support to the 12

industry and its inves tors through increases in RVOs. 13

Unfortunately, the proposed 2014 rule

-- with the 14

proposed 2014 rule, producers are suddenly facing the 15

possibility of a static bio diesel mandate for 2 years, 16

a drop in the advanced biofuel s requirement far below 17

even 2013 l evels, and significant carryover RINs from 18

2013. If these factors happen in concert, the industry 19

and the policies of this administration and its 20

predecessor will suffer a devastating blow. 21

With the proposed RVOs, demand will drop 22495

precipitously, and if ob ligated parties utilize the 1

eligible carryover RINs, demand could drop further to 2

as low as 1 billion gallon s. The reduced demand will 3

force our producers to shed at least 30 percent of 4

their workforce. Many smaller producers will go out of 5

business, and investors will flee with serious 6

implications for the future of the program and to next

7
generation fuels. 8

In setting the 2013 requirement, EPA made a 9

forceful argument to raise biomass diesel requirement 10

by 28 percent and retain the statutory RVO for adva nced 11

biofuel s based on their confidence that the industry 12

could meet these volumes, and the industry outperformed 13

expectations. These same conditions remain for 2014. 14

EPA's own analysis states that the industry has the 15

capacity to produce increased volum es, has ample 16

affordable feedstocks, and is not bound by 17

infrastructure or fuel blending limitations. 18

The RVO is a proven tool to stimulate demand. 19

Obligated parties have shown they will buy the volume 20

and RINs necessary to meet their obligations. We 21

enc ourage the EPA to continue to use this effective 22496

tool by proposing to increase the 2014 volumes for 1

bio diesel to at least 1.7 billion gallon s, reflecting 2

this year's production. 3

We also urge the EPA to raise, rather than lower, 4

the 2014 advanced biofuel s r equirement to a level that 5
reflects at least this production, enough additional 6

volume to accommodate the projected domestic production 7

of all other advanced biofuel s and room for production 8

to grow. 9

I'll wrap up quickly. Moreover, we strongly 10

discourage the EPA from setting the 2015 biomass diesel 11

volume at this year's level. 12

Finally, in conclusion, by setting this year's 13

volume at 1.7 billion gallon s and raising the RVO for 14

advanced biofuel s, the EPA will send a strong and 15

critical signal to producers an d investors, 16

demonstrating a sustained commitment to the program and 17

its goals. 18

Thank you. 19

MR. GRUNDLER : Thank you. Mr. Tom, you're up. 20

MR. TOM : Thank you, and good evening. 21

Thank you, and good evening. We appreciate your 22497

resilience today during this h earing. I also sincerely 1

thank you for allowing me to speak in regards to the 2

RFS this afternoon. 3

My name is Kip Tom. I've just concluded 4

harvesting my 40th crop and am representing a family 5
farm based in northern Indiana operated by sixth, 6

seventh, and eighth generation on the same land we 7
settled on in 1837, today producing corn, soybeans, and 8

beef cattle, employing over 30 full

- time staff and over 9

500 seasonal staff. 10

When I knew I'd have this opportunity to be 11

involved in the discussion here today, I t ook the time 12

to do an inventory of what improvements and investments 13

we have made to support conventional and cellulosic 14

ethanol since the passage of the RFS2. Since the 15

passage of the RFS, our family farming operation has 16
spent over $12 million on grain handling 17

infrastructure, several hundred thousand dollars to 18

improve environment al ecosystems, from restoring 19

wetlands, installing waterways, to filler strips 20

without relying on Government support. 21

We, like many producers, have not brought any 22498

environment a lly sensitive acreage into crop production. 1

In fact, we have retired some acreage to noncrop 2

ecosystems. In the meanwhile, we have made significant 3

strides in reducing our carbon footprint from reducing 4

soil erosion, fuel consumption and , in the meanwhil e, 5
using less water and fertilizer resources to produce 6

each and every bushel of corn due to the RFS2 with our 7

confidence in Government standing behind their policy 8

commitment. 9

We, along with many farmers, invested in 10

information management systems to impr ove our 11

productivity supporting sustainable gains for our 12

output to meet the challenge of doubling th e world's 13

food supply by 2050. 14

Today, we are at the convergence of three 15

innovations in crop production agriculture

-- 16

b iotechnology, the ability to remote monitor, sense, 17

and control equipment with GPS and GIS systems, and 18

informatics, allowing us the ability to make cognitive 19

computing decisions

-- t aking an analog agriculture 20

production system t o a digital agriculture model. This 21

is the next lever that w ill be pulled to increase ag 22499

productivity and will allow us to meet the demands of 1

both food and fuel. 2

In 1973, when I graduated from high school, corn 3

yields nation wide were just 75 bushel per acre. This 4

year, the U.S. average will be over 160, and our o wn 5
farm's acreage will be over 220 bushel per acre. We 6

are well on our way to producing a 300 bushel corn crop 7

per acre by the year 2030. 8

While in the meantime, the consumption of corn for 9

livestock rose in the U.S. due to consumer preferences , 10

t his year, American corn farmers have produced a record 11

crop, producing a carryout of over 2 billion bushels 12

and have no reason not to believe that this will 13

increase that carryout into 2014 while using nearly 5 14

billion bushels for ethanol production. 15

We have now sl ashed corn values in half in less 16

than 1 year, benefitting the livestock and biofuel s 17

industry , and remind you that every year since the 18

initiation of the RFS, livestock producers have had the 19

opportunity sometime during the marketing season, the 20

opportuni ty to lock in a profit for their livestock 21

production. As an additional benefit, do not forget 22500

that 22 pounds of every 56 pounds of a bushel of corn 1

go back into a high

- value feed protein source for 2

livestock. 3

Although livestock interests oftentimes lead us to 4

believe that they have had

-- they

-- although 5

livestock interests oftentimes lead us to believe that 6

we have at times been threatened to run out of corn the 7

last several years due to the drought, they still 8

maintain their herds and flock while, in t he meanwhile, 9

U.S. consumers paid only 9 percent of their disposable 10

income for food, the lowest in the developed world and, 11

in the meanwhile , saving money at the fuel pump and 12

supporting a cleaner environment and the use of 13

ethanol

. 14

In 1991, in my Hoosier State, 142 percent of corn 15

and soybean producers' net income came from Government 16

subsidies, while indirectly subsidizing low cost for 17

our vital livestock producers. In sharp contrast 18

today, our family business receives little in the form 19

of USDA subsidi es with plans to move completely away 20

from the engagem ent of any USDA farm programs. 21

We do not want to be a burden to the U.S. taxpayer 22501

due to receiving subsidies. The RFS has helped us 1

accomplish this goal. 2

MR. BURKHOLDER : Can you please complete your 3

t estimony? 4

MR. TOM : In conclusion, we would like to 5

encourage your agency to stay the course of the current 6

RFS, both cellulosic and corn

- based , in a single policy 7
that has been the largest contributor to growth in 8

rural economies across the United States

. Any movem ent 9

away from the planned sunse t of the mandate will have 10

significant consequences to our rural economies across 11

the country and the largest employer in this country, 12

that being agriculture. 13

We again ask you to remain committed to this 14

policy, w hich is an environment ally friendly, cost

15

effective source of transportation fuel for all America 16

and those of us who made long

- term financial 17

commitments based on your policy. 18

Thank you. 19

MR. GRUNDLER : Thank you, sir. Mr. Potas ? 20

MR. POTAS : Thank you for the opportunity to speak 21

today. It's much appreciated. 22502 My name is Kevin Potas . I'm the business 1

development manager at POET

- DSM Advanced Biofuel s. 2
My company is currently building a $250 million 3

commercial cellulosic bio ethanol plant in Emm e tsburg, 4

Iow a, that will process at full scale approximately 5
300,000 tons of crop residue to produce 25 million 6

gallon s per year of cellulosic bio ethanol

. Start

- up is 7

scheduled for early or the f irst part, first half of 8

2014. 9

My responsibility within POET

- DSM is to s ell our 10

process and technology package to other companies. We 11

are primarily targeting corn

- based

-- or corn ethanol 12

producers who can collocate cellulosic facilities on 13

their site, taking advantage of synergies in 14

infrastructure, marketing, the feedstock supply, staff, 15

and other considerations. 16

Expanding that cellulosic capacity became much 17

more difficult when the EPA released its proposed 2014 18

volumes under the renewable fuel standard . The 19

prospects I am talking to are facing a major investment 20

decision. They see this proposal as an indicator of an 21

uncertain future and, therefore, an uncertain return on 22503

their investment. The message you are sending could 1

have a negative impact on the development of the 2

cellulosic industry, just as its initial capacity c omes 3

online. 4

Without growth and market access, cellulosic 5

ethanol cannot make headway into the U.S. fuel supply. 6

The RFS was designed to force the oil industry to 7
allow our product into the monopolistic distribution 8

chain. Without growth and access, ther e is no road 9

forward for developing and expanding this process and 10

technology. 11

POET

- DSM expects to produce anywhere from 7 12

million gallon s to 12 million gallon s of cellulosic 13

ethanol next year , depending on how quickly start

- up 14

proceeds. The 17 million ga llon s proposed for the 15

industry in 2014 is below what the industry is capable 16

of producing. However, more disturbing is the cut to 17

grain ethanol . We rely on a healthy grain ethanol 18

industry in order to build this new cellulosic 19

capacity. 20

The low

- hanging fruit of cellulosic biofuel 21

production is the existing network of corn ethanol 22504

producers and their access to plentiful crop residue. 1

When you weaken that industry, you weaken the 2

opportunity for cellulosic ethanol expansion. Cutting 3

the corn ethanol leve ls does two things. 4

First, it tells the market that the Government 5
policy cannot be trusted long term, which undermines 6

the confidence of banks and investors , as well as our 7
current customer base of grain ethanol producers. 8

Secondly, it hurts the profitab ility of corn ethanol 9

producers, thereby limiting their ability to invest in 10

this new technology. 11

When the renewable fuel standard was created, the 12

Government made a contract with the private sector, and 13

Congress said, listen, if you can produce domestic 14

r enewable fuel, we will ensure there is a market for 15

this important product. Based on that commitment, 16

companies like POET invested millions of dollars 17

towards bringing this technology to scale. 18

Companies like DSM brought millions of dollars 19

into the U.S. to be part of this leading energy 20

revolution. The fact that a European company chose to 21

invest in the U.S. should be seen as a clear indication 22505

that the RFS is working and has achieved recognition 1

across the world as s visionary policy. 2

MR. GRUNDLER : If you could please wrap up your 3

testimony? 4

MR. POTAS : P rivate investment of over well over 5

$1 billion has occurred in the cellulosic biofuel 6

development because of this policy. To discard this 7
progress at this point is not only bad for our 8

country's abilit y to produce its own energy 9

sustainability, it's a dangerous precedent for future 10

efforts. 11

If the Government cannot be counted on to fulfill 12

its side of the bargain, how can anyone expect the 13

private sector to invest in these sorts of endeavors? 14

The corn e thanol industry has set the base upon 15

which the cellulosic ethanol industry will grow. That 16

can only happen if the Government remains firm to its 17

commitment to wean our nation off of foreign and 18

increasingly dirty sources of oil. To move forward

-- 19

MR. G RUNDLER : Thank you. 20

MR. POTAS : -- appropriately, the EPA should stay 21

true to the vision of the RFS by increasing biofuel use 22506

and shifting the country towards more fuel options, 1

such as E15. 2

MR. GRUNDLER : Thank you, Mr. Potas. Thank you 3

very much for yo ur testimony. 4

MR. POTAS : Thank you. 5

MR. GRUNDLER : Mr. Caupert ? 6

MR. CAUPERT : I sometimes wish I were French, but 7
it's Caupert, which is about as German as you can get. 8

I ask you to bear with this kind of frog in my 9

throat that I have. Allergies are kind of driving me 10

nuts. When I talked to my wife earlier today, she 11

goes, "W ell, you've always said that Washington makes 12

you sick. " So I think today it's been proven. 13

MR. GRUNDLER : Welcome. 14

MR. CAUPERT : I'm going to be brief. You guys 15

have been gluttons for punishment. I've got send a 16

shout

- out to the ladies out there that have allowed me 17

to move up six panels. I wasn't looking forward to 18

testifying 3 hours after my bedtime. So it's nice to 19

be here 1 hour before my bedtime. 20

But before I start into my testimony, which will 21

be brief, there is three or four factoids that I must 22507

point out. One is in the Midwest where I'm from, 1

within 1 hour of the proposed rule coming out, gasoline 2

prices jumped up 9 cents. I don't think that was by 3

coincidence. That 9

- cent jump, that's a $10.6 billion 4

hit to the consumer. 5
In that same time period of corn trading, corn 6
prices dropped 14 cents a bushel. That's a $1.9 7
billion devaluation of the 2013 corn crop. That's 8

$12.5 billion of loss in 1 hour that the consumer and 9

the industry won't get back. 10

That being said, my name is John Caupert. I'm the 11

executive director of the Nation al Corn

- to

- Ethanol 12

Research Center, today known as NCERC biofuel s research 13

center. 14

We're a nation ally recognized center. We're 15

dedicated to res earch, development, commercialization 16

of biofuel s and technologies utilized to produce 17

biofuel s. We were actually created out of a 18

congressional directive. We opened our doors in 2003. 19

The first 6 to 7 years of our existence over 90 20

percent of our fundin g came through public sources. 21

Today, that's different. Today, between 85 and 90 22508

percent of our funding actually comes from the private 1

sector in the form of contractual services that we 2

perform for them. We're a success story of public

3

private partners hip working together. 4
The decade that we've been in operation over $33 5
million of contractual projects have passed through our 6

doors. This has resulted in more than 50 technologies 7
that are now in the commercial marketplace. These 8

technologies have been adopted by dozens of ethanol 9

plants, allowing them to stay competitive despite 10

reduced profit margins. 11

As a result of these technologies, more than 4,000 12

direct jobs, 50,000 indirect jobs have been created in 13

the State of Illinois alone. On a nation al sca le, you 14

can multiply th is by a factor greater than 8. 15

Now due to our dependence on private sector 16

contractual work, we felt and will continue to feel the 17

immediate impact of this proposal. Why? Policy 18

uncertainty, as been said numerous times today, leads 19

to market uncertainty. Market uncertainty leads to 20

investment uncertainty , as Kevin just said. 21

And when the investment community feels uncertain, 22509

what do they do? They stop investing in research, 1

development, and commercialization. This impacts jobs, 2

a nd there is a direct overlap between research, 3

development , commercialization, and jobs. 4

At our center alone in the last half decade, we've 5
trained more than 600 unemployed and underemployed 6

personnel. Ninety

- three percent of these folks are 7
working in th e biofuel s sector today. If this proposal 8

becomes final, these 600 persons, along with tens of 9

thousands more, will find themselves back on the 10

unemployment lines. 11

So, in closing, the Nation al Corn

- to

- Ethanol 12

Research Center is staunchly opposed to the pr oposed 13

level of RVOs for 2014. This proposal has already 14

created uncertainty in the marketplace, resulting in 15

millions of dollars of biofuel 's contractual research 16

be postponed. 17

If these proposed levels are finalized, the result 18

will be financially devast ating to many sectors of the 19

U.S. economy. Why? Because with this level of RVOs, 20

investment in research, development, and 21

commercial ization, it won't be postponed. I t won't be 22510 slowed down. It will stop. 1

Thank you for the opportunity. 2

MR. GRUNDLER : Tha nk you. Mr. Davis, welcome. 3

MR. DAVIS : Yes, thank you for the opportunity. 4

And I, as well, was planned to do later, but to get my 5
flight , the ladies allowed me to move up, and I 6

appreciate it. 7
My name is John Davis. I'm a corn farmer, 8

soybeans, wheat, from Delaware, Ohio, central Ohio. 9

I farm there proudly with my wife, Jill, two sons 10

aged 17 and 12, and my nephew, who will be the fourth 11

generation on that farm, as well as my sons. I hope 12

they eventually have the opportunity to take over my 13

role, and I can do something different. 14

I'm here today to offer my displeasure, obviously, 15

with the proposal to the reduced renewable volume 16

obligations in the renewable fuel standard for 2014. I 17

guess now would be the time, I'm no expert, but the 18

question was posed , how much ethanol can we use? 19

I guess let's not forget the day the Energy 20

Independence and Security Act of 2007 was passed, we 21

all knew that we would need renewable fuel blends much 22511

higher than 10 percent to reach the goal of 36 billion 1

gallon s of renewab le fuel by 2022. The American corn 2

farmer has met our obligations of producing enough corn 3

for food, feed, and fuel. 4

Oil and gas industries would meet theirs for 5
infrastructure placement and delivery methods of 6

ethanol , maybe we both can find out how much ethanol we 7
can use. The decision to lower the RVO number is just 8

it's a red herring , and they drag their feet on 9

building the infrastructure to expand the availability 10

of the cleaner and more domestic renewable fuels. 11

As a farmer, hunter, and outdoorsman , I treasure 12

rural America. I cannot begin to tell you how much the 13

RFS has benefited my community , and I am hard pressed 14

to think of another policy in my lifetime that has had 15

a more positive effect on rural America. 16

As a member of our local school distr ict's 17

athletic boost ers, serving as vice president

-- my wife 18

is also serving on the school finance committee

-- 19

there is an unforeseen firsthand positive effect that 20

the RFS has had on rural America. The RFS has 21

certainly helped bring about a new market for my corn 22512

and, as a result, has increased the value of America's 1

farm land. While I, by no means, am here to advocate 2

for higher taxes, we have seen significant increases in 3

taxes from farmers like myself, which directly benefit 4

our local community and my school. 5
By rolling back the RFS, a potentially very real 6

and unintended consequence will be the devaluation of 7
this farm land throughout America, shrinking an already 8

overstressed rural tax base and taking resources away 9

from my school, local government , and community . And 10

with increased higher taxes if they stay in my local 11

community , I think we all can agree we can deal with 12

that. 13

The RFS has been a tremendous success and 14

continues to reach many of the goals it set out to 15

achieve. The more renewable fuels we use, the more 16

reduced greenhouse gas emissions, decrease our reliance 17

on foreign energy sources, lower gasoline prices for 18

consumers, thus keeping billions of dollars here in our 19

economy, stabilize the tax base in rural America, and 20

continue to ke ep the door open for new innovations and 21

other renewable fuels. 22513 At the end of the day, this decision will penalize 1

the American consumer. Let's not take a knee

- jerk 2

reaction to issues that we cannot overcome, suc h as a 3

drought from last year. 4

We farmers c ontinue to step up and answer all 5
calls for the demands for our products. We will 6

produce a corn crop this year that even after all the 7

needs have been met for food, livestock, feed, ethanol , 8

and exports will have enough corn left over to fill the 9

Empire State Building 66 times. It's food and fuel, 10

not food versus fuel. 11

I am proud of my small role in helping Americans 12

and providing for our energy needs. Let's not scale 13

back on a resoundingly successful program in the RFS. 14

Thank you for your time and cons ideration and for 15

giving me the opportunity to share some thoughts on 16

this important topic. 17

MR. GRUNDLER : We thank you. Thanks again to all 18

of you for taking your time and giving us your 19

thoughts. We're very grateful. 20

We're going to take a short break n ow so we can 21

stretch our legs. We'll be back in about 15 minutes. 22514 (Break.) 1

MR. GRUNDLER : We'd like to get going again. And 2

we have room on this panel. These people look a little 3

lonely. 4

So I'd like to invite Gary Hudson and David

-- oh, 5
Gary Hudson is already there. How about David Deramus ? 6

Okay. All right. Sorry. How about Grant Troop and 7

Randy Hughes, come on down. 8

(Pause.) 9

MR. GRUNDLER : Okay. Mr. Hudson, you may proceed. 10

MR. HUDSON : Thank you. Thank you for this 11

opportunity to share my exper ience on the farm and to 12

comment on your renewable volume obligation numbers for 13

2014. 14

My name is Gary Hudson, and I farm about 1,000 15

acres of corn and soybeans in Douglas County, Illinois. 16

We have some cattle, and we also have some alfalfa, 17

which is p art of the kids' FFA projects. 18

I'm currently the president of the Illinois Corn 19

Growers Association, but I'm not here to pile on and 20

tell you that corn is not happy with what you're 21

planning here. I am here as a school board member to 22515

indicate that the kids need us to support them. 1

We have a school district in Oakland, Illinois, of 2

about 300 children. We have around 40 staff members, 3

including the teachers, the administrators, and the 4

other staff. Current economic outlook for Illinois, if 5
you might have loo ked in the news every now and then, 6

you might see that it's not real rosy in Illinois, and 7
we're having a hard time financing from the State the 8

schools. So we have to fall upon the local financing, 9

which is basically the land values, which we tax. 10

Sixty percent of the kids in our district are on 11

free and reduced. So we're not a wealthy district, but 12

yet we still use the farm land assessment to collect 13

enough taxes to educate these children. 14

Western Illinois University recently did an 15

economic impact stud y and found that 50,000 jobs were 16

created by ethanol in Illinois, and $7 billion worth of 17

economic impact came from ethanol

. 18

In summary, according to the Illinois Farm Bureau, 19

farmers have paid 10 percent more each year in crop 20

plan assessment value in tax es on all soils across the 21

entire State. And we're using these increased revenues 22516

and the higher property taxes in order to keep our 1

school districts solvent. 2

Just this week since your announcement, I have 3

seen prices drop 25 percent. A piece of land a y ear 4
ago sold for $10,000 per acre. Last week, a piece 5
right across the road from it had a hard time getting a 6
$7,000 bid, and I know for a fact that it sold for 7
$7,600 this week. 8

Rolling back the ethanol volume number to pre

- 2010 9

levels will stop growth i n its tracks. It's critically 10

important to keep the ag sector strong and growing so 11

it doesn't stagnate and depress like similar portio ns 12

and sectors of the economy. 13

If we lose 500 million bushels of potential corn 14

demand based on U.S. EPA's current propo sal ruling, the 15

farm economy, we're going to plummet. And along with 16

it are going to go the rural economy as well as our 17

children's education. 18

Did the U.S. EPA consider the full ramifications 19

of this proposal and the impact on the schools, the 20

impact on l ocal governments, and the small business es 21

in rural America? I pray that you will consider that 22517

now. 1

Thank you. 2

MR. GRUNDLER : Thank you, Mr. Hudson. 3

Mr. Hughes, please proceed. 4

MR. HUGHES : My name is Randy Hughes. I'm a 5

farmer from Janesville, Wisconsi n. We grow wheat, rye, 6

blue corn, white corn, yellow corn, lima beans, snap 7

beans, peas, beets, oats, and several other crops that 8

I just can't quite remember right now. 9

One of the things we do is we take our blue corn 10

and make it into a blue corn tortill a chip and 11

distribute that throughout the Midwest. A lot of my 12

farmer buddies ask me what it's like to have a product 13

that we take all the way from the field to the table, 14

and I tell them all the same thing that if you want to 15

make money in the food busin ess, don't be the farmer. 16

The money is made on the other end, and I know that 17

from what I've been into now. 18
When we have a bag of chips that we sell for $4, 19
that retails for $4, there is only 10 cents worth of 20
corn in it. That's with a price of $5.60 a b ushel. If 21
you were to double that to $11.20, farmers would be 22518

doing handsprings everywhere, and it would only add 1
another dime to that $4 bag of chips. 2

We also do sweet corn, and we sell that by the 3

ton. That's $100 a ton. That comes to about 4 cents 4

fo r a little bag that you might buy in the store 5

th at's, what, $1.50 or maybe $2. 6

I think that a lot of people would have you 7
believe that the increases in prices for food is 8

strictly due to the increase in prices of corn or some 9

of the products that are gro wn on the farm, and that's 10

just not the case. There's a n awful lot that goes into 11

it. 12

A lot of it is transportation . Of course, 13

transportation is primarily fuel based, and ethanol 14

helps cover the cost of that, too. So one of the 15

things that I want to ma ke sure that you understand is 16
that that $7 or $8 corn that we had was not caused by 17

ethanol . That was caused by a 100

- year drought. 18

I had some corn that was early this year, and I 19

had called my grain dealer and said to him we're going 20

to harvest a little early. I heard that corn was 21

fairly tight. Are you interested in getting some of 22519

that? 1

And he came back to me. These are his words. He 2

said, "Tight?" He said it was "tighter than a bull's 3

ass during fly season." You got your own visual on 4

that, you can imagine. 5

(Laughter.) 6

MR. HUGHES : And I had to

-- and I asked him why 7
that was, and his response was that it was due to the 8

drought and due to the wet spring. It had nothing to 9

do

-- I shouldn't nothing to do, but he didn't say that 10

it was from ethano l , nor was it from cattle, nor was it 11

from corn sweetener or any of the other uses. It was 12

strictly about a production thing. 13

So it's very important that you understand that if 14

you really

-- if you want to change corn prices, all 15

you've got to do is chang e the weather. And if you 16

want to change the weather, just keep burning fossil 17

fuels because that's already happening already, isn't 18

it? A lot of people would tell you that. 19

The CRP was capped at 32 million acres beginning 20

in 2010. That's down from 39.2 as a result of the 2008 21

farm bill. It is against the provisions of the Energy 22520 Independence and Security Act to use any land that was 1

not in production in 2007. 2

I take big offense to the two congressmen that 3

were sitting here that indicated there was wide spread 4

abuse of land due to ethanol , due to the ethanol boom. 5
That's just not true. There are a lot of farmers who 6

do a great job. We are stewards of the land. 7
I want to pass my farm on to my son in better 8

shape than I got it, and I expect him to do the same 9

thing. We aren't doing that. There might be a few 10

that do, but it's against the law. If that's the case, 11

arrest them. 12

And politicians, of all people that would be 13

saying something like that, jeez, if you look at their 14

industry, if you were to judg e them based on what one 15

or two of them did, they wouldn't look good either. 16

Well, by gosh, the farmers aren't that way. We 17

are stewards of the land, and we do take care of it. 18

The one other thing I wanted to mention was just 19

about the compatibility of E8 5. General Motors is 20

coming out with a three

- quarter ton pickup. I have got 21

two of them ordered. They will be here in February. 22521

Until now, I could not get those pickups because they 1

didn't seem to think that it was worthwhile to do the 2

technology that is needed or do the research needed to 3

put that into their heavier pickups. 4

I also bought a brand

- new John Deere lawn mower, 5
and it's E85 compatible. That's a small engine. It's 6

got aluminum, and it's got valves, and it's got hoses, 7
and it's got tanks, a ll those things. They figured it 8

out, and it works absolutely wonderful. 9

My point is, is that these two companies and 10

several others are now geared up for the 18.5 million 11

gallon s. They don't want to have a reduction that they 12

have just now started to do these things. The dealers 13

didn't even know about this when I came to them. It's 14

now happening, and I just hope that you don't stop it. 15

That's why I'm here today. Thank you for your 16

time. 17

MR. GRUNDLER : Thank you, Mr. Hughes, and thank 18

you for waiting s o long to present those comments. 19

Grateful. Seeing you here sitting all day, taking 20

notes. 21

Okay. Ms. Kavaler? 22522 MS. KAVALER : Very good, yes. Exactly. 1

MR. GRUNDLER : Welcome. 2

MS. KAVALER : Thank you. 3

I'm Andrea Kavaler, executive vice president for 4

LMC I nter nation al Limited . LMC is an independent 5
consulting firm founded in 1980 to analyze the 6

economics and markets of agricultural commodities. Our 7
largest business practice covers oil seeds, vegetable 8

oils and fats, and their downstream products, includin g 9

bio diesel

. 10

We have staff all over the world, researching 11

markets and policies. As a result, the Nation al 12

Bio diesel Board commissioned LMC when they needed a 13

third

- party evaluation of global availability of 14

feedstocks for the production of bio diesel

. 15

We were asked to do four things. First, to 16

examine recent global production of vegetable oils and 17

fats that qualify under the RFS. That's soybean oil, 18

canola, rapeseed oil, animal fats, inedible corn oil 19

from dry distillers grains, waste greases and cam e lin a 20

oil, and to forecast their production to 2018. 21

Second, to do the same for RFS nonqualifying 22523

vegetable oils and fats, sunflower seed and cottonseed 1

oils, edible corn oil, palm, palm kernel, and coconut 2

oils, and jatropha and castor oils. 3

Third, to evaluat e the contribution of the U.S. 4

and Canada to the overall global supply of RFS 5
qualifying oils and fats. 6

Finally, to consider a host of factors that may 7
influence the supply and demand for vegetable oils and 8

fats, concluding with a breakout of global demand 9

between nonbio diesel and bio diesel end uses. 10

We analyzed GNC technology, yields, growth in 11

vegetable oil and meal demand, soybean oil demand in 12

the U.S., the Conservation Reserve Program, and trends 13

in the U.S. oleochemicals industry and its demand for 14

ta llow, to name just some of the issues we've covered. 15

As the study is lengthy, I am here just to 16

summarize it. The single most important takeaway from 17

our global analysis is that there are large volumes of 18

vegetable oils and fats in the marketplace, which are 19

getting ever larger, dwarfing bio diesel 's demand for 20

these feedstocks. 21

In specific, we project total global production of 22524

RFS qualifying feedstocks to rise from 87.5 million 1

metric tons last year, that's 2012, to more than 108 2

million in 5 years, that' s 2018. And most of that 3

growth is expected to come from an increase in the 4

production of soybean oil. 5
Looking just at next year, the supply of RFS 6

qualifying oils and fats is projected to rise strongly 7
with total availability growing from more than 92 8

mi llion metric tons this year to almost 98 million next 9

year. The rise in soybean oil output will be 10

particularly strong, with a 7 percent increase 11

anticipated. 12

For next year, we forecast that the demand of 13

qualifying feedstocks for uses other than bio diese l 14

will be more than 77 million metric tons, and that 15

still leaves almost 21 million metric tons of 16

qualifying feedstocks for bio diesel production. This 17

is equivalent to 6.2 billion gallon s of bio diesel

. 18

By 2018, these numbers will have risen 19

significantly , with almost 25 million metric tons of 20

qualifying feedstocks available for bio diesel 21

production after accounting for other uses. That's the 22525

equivalent of 7.4 billion gallon s of bio diesel . That 1

means that for both next year and the longer term, 2

there wil l be more than enough qualifying feedstocks to 3

produce bio diesel for the U.S. and that only a small 4

percentage of these feedstocks will go into bio diesel

. 5

Around one

- third of qualifying vegetable oils and 6

fats are located in the U.S. and Canada, and we do not 7
expect this proportion to change much in future. The 8

other two

- thirds of qualifying feedstocks are located 9

in Argentina and Brazil, supplying soybean oil, and the 10

EU supplying rapeseed or canola oil. 11

We look forward to submitting our in

- depth, 12

detaile d study and to working with the EPA on feedstock 13

supply assessment. 14

Thank you for your consideration. 15

MR. GRUNDLER : Thank you. Yes, please share that 16

report with us through your written comments. We're 17

interested in seeing that. 18

Mr. Morehouse, welcome. 19

MR. MOREHOUSE : Welcome, thank you, fellows, for 20

spending your whole day here. 21

Hello. I'm Mike Morehouse, partner of Morehouse 22526

Grain Farms. I'm a fifth

- generation family farmer, 1

established in 1866. We live in Indiana, n orthern 2

Indiana by South Bend. 3

We farm 2,000 acres of corn, soybeans, and seed 4

corn. We've been a strong supporter of ethanol and 5

bio diesel

. 6

Why do we make laws in 2007 and change them in 7

2014 uses for ethanol ? I thought the law was good 8

until 2022 for volumes for bio diesel and ethanol

. 9

Do we really want to go back to foreign oil? No. 10

When I was 20, I won the Star State FFA Farmer Award 11

in Indiana because of the hard work and dedication that 12

I have given to the agriculture sector. It's time for 13

American citizens to stand up for making our fuel on 14

our soils, not foreign. 15

Why do we want to cut gallon s? POET is going to 16

start cellulose ethanol in April of 2014. Why don't we 17

let the farmers he lp grow food, fuel, and fiber? 18

I'm tired of regulations of big oil. They seem to 19

always get the ir way. Can we make and use all the 20

ethanol we produce if you let us? I want you to think 21

positive about this. 22527 MR. GRUNDLER : Thank you. Mr. Deramus? 1

MR. DERAMUS : Yes, thank you. My name is David 2

Deramus. I'm an economist with the economic consulting 3

firm of Bates White. 4

The focus of my remarks is a NERA consulting 5
report asserting that RFS2 will cause significant 6

economic harm by 2015, and I am concerned that NERA's 7
flawed study has been given undue weight in current 8

policy discussions. According to NERA , RFS2 will cause 9

the U.S. economy to enter a death spiral, driven by RIN 10

shortages, dramatic fuel price increases, and refinery 11

capacity closures. 12

NERA predicted that RFS2 will result in RIN prices 13

of $10 to $14 a gallon in 2013 and over $100 by 2015 , 14

that the price of diesel fuel will be $12 per gallon by 15
2015, and that U.S. GDP will decline by fully $770 16

billion in 2015 alone. NERA's fear

- mongering is based 17

on fundamentally flawed assumptions, and its death 18

spiral forecasts are flatly contradicted by current 19

data. 20

U.S. fuel prices in late 2013 are roughly the same 21

as in early 2011. RIN prices are approximately 20 22528

cents per gallon , with some near historical lows, and 1

petroleum refining margins are high , while capacity is 2

expanding. 3

Retail fuel price s are driven almost entirely by 4

crude oil prices and petroleum refinery capacity. And 5

none of the data suggests that RFS2 has caused any 6

meaningful change to this relationship. If anything, 7

the data suggests that biofuel s have led to lower 8

retail fuel pr ices by providing a competitive 9

constraint on petroleum prices. 10

With respect to bio diesel , the available supply 11

and demand are far in excess of EPA's 2014 and 2015 12

volume targets of 1.28 billion gallon s. Current 13

bio diesel production capacity is double EPA 's volume 14

target, and current bio diesel blending rates of less 15

than 5 percent are a small fraction of what is 16

currently feasible. 17

The most salient flaw of the NERA study is its 18

incorrect assumption that the EPA has no meaningful 19

flexibility in setting biof uel volumes. One hardly 20

needs a sophisticated forecasting model to know that 21

imposing a binding constraint on fuel production or 22529

consumption will result in massive U.S. economic harm. 1

The EPA, however, has significant statutory 2

flexibility in administerin g the RFS2 program, 3

including establishing the specifics of the RIN trading 4

program, annual volume targets, and compliance periods. 5
The EPA has repeatedly exercised its flexibility since 6

the inception of RFS2, and I have no doubt it will 7

continue to exerc ise such flexibility, particularly in 8

the unlikely event that the mandated biofuel volumes or 9

RIN prices would even begin to show any signs of actu a l 10

economic harm. 11

The NERA study also suffers from the flawed 12

assumption that the 10 percent blend wall would be an 13

insurmountable constraint on biofuel consumption, even 14

in the face of significant RIN or fuel price increases. 15

NERA further assumes no significant change in 16

technology, investment, or demand. 17

If a supply of gasoline were truly limited by the 18

availa bility of RIN credits, as NERA assumes, one would 19

expect a precipitous decline in the price of E85, for 20

example , i ncreased demand for E85 , and increased demand 21

for advanced biofuel s that generate more RIN credits 22530

per gallon

. 1

NERA's modeling approach to hol ding everything 2

else constant in the event of large, assumed price 3

increases and supply constraints is simply unrealistic 4

in the context of this rapidly changing industry. 5
Ironically, NERA's death spiral is largely a result of 6

its predictions of reduced d iesel supply and increased 7

diesel prices. 8

Bio diesel , however, is far from being constrained 9

by either supply or demand limitations. Bio diesel 10

penetration is c urrently well below 5 percent. There 11

is broad consensus that the use of bio diesel is not 12

limited to B5, whether with respect to distribution or 13

engine performance. B20 is increasingly available, 14

does not require engine modification, and provides 15

similar performance as petroleum diesel

. 16

Bio diesel can be produced from a variety of 17

feedstocks, and bio d iesel is available throughout the 18

U.S. Thus, given the large excess bio diesel capacity, 19

well above the 2014 and 2015 RFS2 mandates, there are 20

significant unexploited opportunities to further 21

increase bio diesel production and consumption, which 22531

can further help push back the assume d blend wall, 1

particularly since each additional bio diesel RIN credit 2

is equivalent to 1.5 conventional RIN credits. 3

Further reducing the RFS2 volumes would undermine 4

the important policy goals of the EPA and Congress, as 5

well as undermine the U.S. biofuel s industry, which has 6

been an important contributor to U.S. employment and 7
GDP growth. Such actions would significantly dampen 8

the pace of investment and technological innovation in 9

this important sector of the economy, precisely when 10

many of these innovations are reaching commercial 11

feasibility. 12

Thank you. 13

MR. GRUNDLER : Thank you. Questions? 14

MR. MACHIELE : Just maybe briefly now or in your 15

follow

- up written testimony, you're countering the NERA 16

study and talking about they're a ssuming some 17

infeasible constraints in their analysis, which is 18

driving it. I guess the question that we're asking 19

today, which is specific to our proposal, we're hearing 20

testimony saying EPA has gone too far low. We're 21

hearing EPA has gone far enough. 22532 I s our -- but you're saying EPA has authority to 1

avoid infeasible constraints, and the question, I 2

guess, is, is based on your work or your analysis, 3

where are we in that continuum of

-- 4

MR. DERAMUS : Well, the main purpose of the 5
testimony is to say put th e near a doomsday conclusion 6

off to the side. I think you could ignore them, for 7
all meaningful purposes of your actual work here in 8

terms of establishing the RFS2 volumes. I don't think 9

any of those

-- there's no way in which given the 10

statute that thos e outcomes are

-- could ever 11

conceivably occur. 12

I do think that there is significant headroom, and 13

that

-- in the current volumes you've established , and 14

I think that you are doing a disservice to the biofuel s 15

industry by lowering the

-- or by keeping the RFS, the 16

bio diesel volumes constant and lowering the advanced 17

fuel requirements. 18

MR. GRUNDLER : Will your written comments provide 19

your own analysis in terms of what the volume should 20

be? 21

MR. DERAMUS : I have not come up with an 22533

independent estimate, but I certainly think the volumes 1

that are closer to the actual capacity of the bio diesel 2

industry, something that's closer to the 2 million

-- 3

sorry, the 2 billion gallon mark is certainly feasible. 4

And my understanding is that it was the intent of 5
Congress i n establishing these different nested 6

categories was that EPA should target the actual 7
productive capacity and the absorptive capacity of the 8

economy for each of those sectors. 9

And everything that I've seen would indicate tha t 10

the economy, that consumption can absorb that quantity 11

of bio diesel and that that amount can be produced. 12

MR. GRUNDLER : Okay. Thank you so much for your 13

time today. We're r eally grateful, particularly those 14

who have traveled a long distance. 15

All right. I'd like to invite the next six people 16

up to present testimony. Mr. Grant Troop, Mr. Joseph 17

Sincavage , Mark Bore r , Jamie Jamieson , Tom Brooks, and 18

Steve Pittman. Welcome. 19

And we'll start with Mr. Troop. 20

(Pause.) 21

MR. GRUNDLER : When you're ready. 22534 MR. TROOP : Thank you, gentlemen, fo r the time and 1

long hours you put in today. 2

My name is Grant Troop. I'm a Pennsylvania 3

farmer, produce field corn, which is not sweet corn, 4

which is what people eat, for the most part. Grow 5
soybeans and grow both of those crops as grain crops. 6

I do it b y the continuous no

- till method of crop 7
production. 8

We grow cover crops and follow the implementation 9

schedules of our soil and water management and nutrient 10

management plans. So we're good stewards of the land 11

by all measures that are out there. Wildlif e abounds 12

on our farm land, and sportsmen enjoy days afield 13

harvesting wild game. 14

Now the RFS, in our opinion, to this point has 15

done what it was developed to accomplish. The United 16

States of America is becoming more self

- sufficient by 17

producing its own h omegrown energy supply. As a 18

result, our nation al security has increased, and our 19

rural agricultural communities have grown. 20

With blended gasoline now containing at least 10 21

percent ethanol , greenhouse gas production has 22535

decreased, improving air quality. And the RFS to this 1

point has systematically taken us in a direction we 2

need to go to become energy independent as a nation

. 3

Pennsylvania agriculture is very diverse, 4

especially concerning corn utilization. Corn

- based 5

ethanol production has provided anot her market choice 6

for Pennsylvania corn growers. 7

Ethanol

- blended gasoline has saved our farm 8

operation and the farmers and consumers of the 9

Commonwealth of Pennsylvania a lot of money since the 10

price of ethanol is usually well below the price of 11

gasoline. Blending gasoline with ethanol lowers the 12

price per gallon

. 13

Corn prices have gone done following the proposed 14

reduction in conventional ethanol . Before the RVO 15

proposal was leaked, March 2014 corn futures closed at 16
$4.56 pe r bushel. Today, according to the Chicago 17

Mercantile Exchange, at 1:45 p.m., the March 2014 18
futures market was at $4.33, a drop of 23 cents a 19

bushel. 20

And I also note that the shares of the oil giants 21
gained $23 billion after EPA unveiled the 2014 biofuel 22536

plan. Of paramount importance is the fact that the 1

current market price for corn is very close to the cost 2

of production. In many parts of the country because of 3

the local basis pressure, corn prices are already below 4

the cost of production. 5

Ag Web has reported that corn prices could p lummet 6
to $2.75 cents if the proposed ethanol production 7
limits are implemented. This would prove very 8

devastating to the corn growers of Pennsylvania and 9

across the country. Profitable corn prices are needed 10

to assure that ample corn is produced to supp ly all 11

corn users, including animal agriculture, ethanol 12

distillers, industrial users, and the export market. 13

The proposed reduction in conventional ethanol 14

usage is supported by a few groups as a knee

- jerk 15

reaction to the corn supply reduction brought on by the 16

2012 countrywide drought, resulting in higher corn 17

prices in 2012. However, in 2013, Pennsylvania corn 18

growers produced a new record

- high corn crop, and the 19

same can be said of the U.S. corn crop, a new record

20

high yield. 21

Corn grain supply has been replenished by the 22537

tremendous production capacity of our farmers across 1

the country. Corn prices have dropped significantly 2

since 2012. Reducing the production mandate for 3

conventional ethanol will reduce demand for a record

4

high corn crop and force the price of corn well below 5
the cost of production. 6

No one wins in this scenario, especially rural 7

America. Mid course is not the time to change 8

direction. Maintaining the RFS is required to avoid 9

the economic devastation that will be encountered 10

should th e proposed reductions be pursued. 11

Corn growers across the U.S. now produce about 30 12

percent more corn than in 20

-- 13

MR. BURKHOLDER : Please conclude your testimony 14

here. 15

MR. TROOP : 2007. Okay. 16

MR. GRUNDLER : Thank you very much. 17

Mr. Borer , proceed. 18

MR. B ORER : First of all, I'm amazed by and I 19

applaud your level of attention at this late hour. 20

Thank you. 21

I also appreciate the opportunity to comment on 22538

behalf of the Ohio Ethanol Producers regarding the 1

recent EPA proposal to reduce renewable volume 2

obliga tions despite established rules in an industry 3

that has invested and prepared itself to meet those 4

obligations. 5
The progress and considerable success that has 6

been made to date are a direct result of a 7
collaboration and partnership between Government and a n 8

emerging renewable fuels industry. No administration 9

has been a bigger supporter than this one, which makes 10

this proposal all that much more perplexing. 11

This change of direction will have a direct and 12

immediate impact on the economy. It'll put at risk the 13
approximately $1 billion in capital investment that's 14

been made in Ohio since 2007 to meet established and 15

legislated RFS obligations. The reduction of blending 16

requirements will have a dramatic effect on the supply 17

and demand equation and severely ch allenge renewable 18

fuel producers' margin environment

. 19

It will also damage rural economies. The economic 20

impact will be to extend to more than just one 21

industry. The approximately 100 truck drivers that 22539

come through my plant every day to pick up and drop off 1

product will be impacted. The direct employees, local 2

businesses, and their families will also feel the pain. 3

But a broader and much more far

- reaching impact 4

will be to the local farmers and the industries that 5
rely on them. They will be entering a n ew crop year 6

with record corn supplies, slashed market demand, 7

break

- even or worse input cost, and all of this with an 8

undefined farm bill that is predicted by all to have 9

much less protection in it. 10

Ultimately, the EPA's renewable fuels commitment 11

reversa l puts at risk all of Ohio's 300

- plus direct 12

jobs and 1,500 indirect jobs. But less immediate, but 13

equally certain is the negative impact this proposed 14

action will have on the future investments, 15

particularly with regards to cellulosic biofuel s. 16

Opponents of renewable fuels have cited the delay 17

in cellulosic fuel production as a failure, despite the 18

significant technological and investment progress that 19

has been made , a long with the impending growth spurt 20

that 20 14 plant openings will provide. T his propos ed 21

action and the lack of Government commitment it 22540

displays will have a dramatic impact on the investing 1

environment and incentive to develop advanced biofuel s. 2

Banks and entrepreneurs do not respond well to risk ̧ 3

unstable targets, or wavering markets. 4

If the EPA decides to go ahead with a reduced RVO 5
requirement for 2014, it will be responsible for 6

creating this uncertainty, and I may well need to quit 7
watching the fields next to me and wondering if I will 8

ever see stacks of cellulosic biomass sitting on them 9

waiting to be converted into fuel. 10

Regardless if the Government initiative to launch 11

a biofuel s industry was with the goal of gaining energy 12

independence, transitioning economic benefit from 13

abroad to the U.S., or if it was, as presumedly it is 14

the EP A's desire to begin using a cleaner, more 15

environment ally friendly , renewable transportation 16

fuel, the fact is we've succeeded in all of these 17

areas. That this administration, beyond all others, is 18

the one to reverse this success and course is , again, 19

ext remely perplexing. 20

I must say that this has created a high level of 21

excitement and discontent amongst Ohio's largest 22541

industry, which is agriculture. The farmers can often 1

be slow to respond until that that they are most 2

passionate about, which is tilling the land, harvesting 3

the crop, and transitioning this way of life to their 4

children, is threatened. I think we've seen it today, 5
but I think their concern is growing, and I sense that 6

you will continue to see their voices and advocacy 7

grow. 8

I would hope t hat the EPA would reconsider 9

reducing the RVO requirements for 2014 and continue our 10

path towards growing our use of American

- made biofuel s 11

and achieving clean energy independence. 12

Thank you. 13

MR. GRUNDLER : Thank you, sir. Mr. Jamieson, 14

please. 15

MR. JAMIES ON : Are we on? Okay. My name is 16

Charles Jamie Jami e son. I am here speaking as a 17

Maryland grain farmer to voice strong oppo sition to the 18

EPA proposed rule to reduce the corn ethanol allocation 19

in the renewable fuel standard. 20

I farm with my three sons in Poolesville, 21

Montgomery County, Maryland, just 40 miles north of 22542

here. If EPA continues with this proposal, this has 1

the potential to reduce the value of my cro p below my 2

cost of production. 3

Based on the EPA's continued support of the 4

renewable fuel stan dard last year, how could anyone 5
imagine the EPA would pull the plug on ethanol 6

allocation levels in a year when farmers adjusted their 7

crop acreage to ensure adequate corn to meet a ll the 8

needs of our customers? 9

On November the 8th, USDA said U.S. corn fa rmers 10

produced almost 14 billion bushel of corn, with an 824 11

million bushel carryover, for a total supply of 14.8 12

billion bushels of corn. USDA projects there will be 13

1.8 billion bushels of corn carryover after all uses on 14

September 1, 2014. 15

There is lots of cheap corn. This reduction in 16

the proposed allocation makes no sense and is totally 17

irrational and unacceptable. 18

The oil industry has made little effort to expand 19

the use of E85. In fact, the oil industry has been a 20

roadblock to our efforts in Maryla nd to expand the 21

number of E85 stations. Although now illegal, fuel 22543 suppliers still discourage the installation of E85 1

pumps, even though there is abundant ethanol available 2

at the Baltimore terminal. There's been no interest 3

from oil companies in Baltim ore to blend E85 for our 4

stations in Maryland. 5
We frequently hear comments that it should be left 6

to the marketplace to decide which fuels are used. 7
Yesterday, February 2014 RBOB gas futures were trading 8

at $ 2

. 72 a gallon. Ethanol February 2014 futures w ere 9
trading at $1.66 per gallon . This was about 5 o'clock 10

in the morning. That is $1.06 cheaper. 11

When the American consumer fills up with 20 12

gallon s, this is a $20 difference. This $20 belongs in 13

the consumer's pocket, not the trillion

- dollar big oil 14

sa fe. 15

Perhaps the best solution for the future is the 16

expanded use of blender pumps to provide more choices 17

to the consumers for fuels with E10, 20, 30, as well as 18

85. We should work with vehicle manufacturers to 19

improve fuel consumption so car manufacturer s can 20

attain EPA fuel economy standards. But this will not 21

happen if EPA responds to the whims of the petroleum 22544

industry that the blend wall is a barrier and 1

eliminates the requirement that they search beyond the 2

blend wall by expanding market opportuniti es for 3

renewable fuels. 4

Please reconsider your proposed reduction in the 5

baseline 2014 renewable volume obligations. Many 6

family farms and gas consumers depend on you making the 7
right decision, and thank you for all your work today. 8

You guys earned your money, and so did staff. 9

(Laughter.) 10

MR. GRUNDLER : Thank you. I want to thank you for 11

sticking around to share your thoughts. It's 12

important. 13

Mr. Brooks? 14

MR. BROOKS : Good evening, gentlemen. Thank yo u 15

for your continued attention. 16

I'm here to share my frustration and concerns of 17

the proposed RVO change. I am the general manager of a 18

30 million gallon bio diesel plant in Farley, Iowa. I 19
have a payroll that supports $1.65 million in direct 20
jobs to employees and another $2.2 million for my 21

leased drivers

. 22545 The market will only support half the bio diesel 1

currently produced if the proposal is allowed to stand. 2

This potentially means that half the industry will be 3

laid off, terminated for the next 2 years. For my 4
company, that means $2 million to $3.8 milli on loss in 5
revenues that will certainly hurt our local economy and 6

our State in Iowa. 7
Western Dubuque Bio diesel anticipated that the tax 8

credit would not be in place in January of 2014 and 9

would hope that the EPA would not factor that into the 10

volume requi rement. It is not something that you, the 11

EPA, has control over, nor us, the plant. 12

In fact, the EPA is using the loss of the tax 13

credit as a reason to hold bio diesel volumes at 1.28 14

billion gallon mark because it believes our product is 15

dramatically more expensive than diesel fuel. 16

Bio diesel production costs are decreasing, and in 2014, 17

with or without the tax credit, we anticipate we will 18

continue to be competitive with diesel prices. 19

When my facility runs at capacity, I save 26 cents 20

per gallon on ever y 20 percent of the plant's running 21

capacity. So if you run me at 80 percent, I've just 22546

increased my cost by 26 cents. At 50 percent, as this 1

RVO suggests, I've just increased cost by 52 cents per 2

gallon

. 3

Feedstock prices in 2013 have dropped 70 cents pe r 4

gallon to me, the producer. To the end user at the 5
pump, he should see that cost, but he's not seeing that 6

cost because big oil is keeping that cost for 7

themselves. 8

I'm disappointed, as my company is and my 557 9

investors, that the EPA decided to punt on bio diesel 10

for 2014 and 2015 and set the RVO number at 1.28 11

billion on analysis that was completed in 2011 and 12

2012. Because some in the industry or the agency felt 13

it was an easier lift to ignore the data that suggests 14

an increase in volume. 15

I am a Gulf War veteran, an officer who served his 16

country in the Air Force. I have concerns on domestic 17

energy security. The bio diesel industry is increasing 18

domestic energy production, diversifying our fuel 19

supplies, and expanding domestic refining capacity so 20

tha t we're not vulnerable to global oil markets and 21

associated refining bottlenecks. 22547 This improves U.S. energy security because no 1

matter how much oil we discover domestically, consumers 2

will continue to be at the mercy of a heavily 3

manipulated global petrole um price until we have 4

diversity in our market. Using methodology developed 5

by the EPA and Department of Energy 's Oak Ridge 6

Nation al Lab, increasing bio diesel production from 1.28 7

to 1.7 billion gallon s would generate energy security 8

benefits valued at $6 1.4 million due to reduced imports 9

and associated price disruptions. 10

The final thing that concerns me by reducing the 11

RVO is that you increase global emissions, specifically 12

greenhouse gases. 1.28 billion gallon s reduces 13

emissions by 24.1 billion gallon s. So with this 14

proposal , versus the current market where we're 15

producing at , you would be increasing emissions by 16

almost 14.6 billion pounds of added emissions with your 17

reduction. 18

I thank you for your time and your consideration 19

of my thoughts. 20

MR. GRUNDL ER : Thank you, sir, and thank you for 21

your service. 22548 MR. BROOKS : Thank you. 1

MR. GRUNDLER : Questions? John? 2

MR. HANNON : One question, sir. You stated that 3

there'd be

-- our proposal would lead to a 50 percent 4

drop in market demand for bio diesel based o n the 1.28 5
minimum standard. So are you assuming there is no 6

impact from the advanced biofuel standard ? 7

T he current bio diesel standard is 1.28, and the 8

bio diesel standard itself is then drawing significantly 9

more. What's your analysis about the market in the 10

context of 1.28 minimum and an advanced biofuel 11

standard significantly higher than that? 12

MR. BROOKS : The advanced biofuel pool for the 13

most part is being filled by the bio diesel pool. So 14

when you decrease that nested pool of

-- right now , 15

we're prod ucing at 2 billi on gallon s. So you've pulled 16

away 700 million gallon s of bio diesel

. 17

And of the bio diesel , that 1.28, roughly 300 18

million of that was the renewable diesel . So when I 19

say my numbers, you're taking me from 1.28 down to a 20

billion, and we're c urrently producing at 2 billion. 21

So you've cut our industry in half. So the market 22549

can't pull the product away. 1

We were already seeing this in the price. When 2

the RVO numbers were leaked, RINs have dropped. The 3

price of bio diesel has dropped. I was se lling 4

bio diesel at heating oil plus 75 and 80 cents April 5
price now. Let's go with January price. That's even 6

better. 7
Heating oil plus 40 cents out in the Midwest, 8

Iowa, that's a 35

- cent a gallon loss to my facility to 9

even produce the fuel because t he n ested volumes were 10

changed. A nd when you change those nested volumes, you 11

impacted RVO numbers that affect RINs. The RINs price 12

is tied to those nested volumes. And as those volumes 13

move up and down, yo u're playing with the markets. 14

The day that number was released, my numbers here 15

support that big oil made billions of dollars , in 16
addition to the $17.9 billion that they currently have 17

in tax subsidies that are grandfathered to them each 18

year, while our industry is taking billion

- dollar 19

losses because we' ve taken the nested volume decrease. 20

Did I answer your question? 21

MR. HANNON : You answered it, but I think there is 22550 still a lot of uncertainty about that issue. Our 1

proposa l, for example, projected, I think , 1.4 billion 2

bio diesel for 2014. 3

MR. BROOKS : In the proposal that I saw was 1.28. 4

MR. HANNON : 1.28 is our minimum standard for the 5

bio diesel standard. We projected, I think , 1.4 within 6

a range of 1.2 up to 1.6 or

. 7 in calculating the 7

advanced biofuel standard of 2.2 billion. 8

MR. BROOKS : Be glad to submit my comments in 9

writing. I have

-- 10

MR. HANNON : Yeah, it'd be very helpful. Thank 11

you. 12

MR. BROOKS : All right. Thank you. 13

MR. GRUNDLER : Thank you again. Mr. Pittman, 14

proceed. 15

MR. PITTMAN : Thank you very much for thi s 16

opportunity in the late hou r. 17

I'm here to represent the Indiana Ethanol 18

Producers Association, which is 13 plants, and we 19

produce over 1.1 billion gallon s a year of ethanol , of 20

which I am the general manager of 1 of those 13 plants. 21

Just to say up front, I practice what I preach. 22551

M y wife and I both drive flex

- fuel cars, and we fill 1
them up with E85 every week, and I'm enjoying about $1 2

a gallon cheaper than I saw on your gas station out 3

here locally. So we're very happy with that, and we're 4

supporting the industry. 5
As my opening re marks, I'd like to state that the 6

current administration, up to and including the 7

President of the United States , has been the most 8

supportive of the advancement of renewable energy of 9

any administration in the history of our country, and I 10

think that is n oteworthy. 11

Therefore, you cannot imagine our complete 12

surprise and feeling of abandonment by this 13

administration for our industry as we are on the cusp 14

of the introduction of new cellulosic technology that 15

will change the world and, poof, our support is cu t off 16

at the stroke of a pen that limits our market 17

immediately by this proposal. 18

The main points I want to cover are the current 19

state of our industry, the forward impact I see from my 20

level at the State level in Indiana, and the effect 21

it's going to have on cellulosic production. 22552 You know, we were blessed last year to elect Joe 1

Donnelly as our Senator in the State of Indiana to 2

replace Richard Lugar. What I say

-- what I mean by 3

that is he is very supportive of the ag industry. He 4

gets it with ethanol , and he came to all the ethanol 5
plants during his campaign and impressed us all. 6

So just as soon as this proposal was made, he 7
arranged to have Gina McCarthy come to a farm in 8

Indiana and to speak to the farmers there. There were 9

60 of us in that cold barn that morning, and I was 10

there, and I was able to talk to Gina. So we 11

appreciate that opportunity. 12

She understood where we come from, just like you 13

guys are listening to us. And the thing that bothers 14

me is here we have elected, we've cross party lines t o 15

go from a Republican to a Democrat just to keep on the 16

same track with our industry, and Joe is going to be a 17

great guy for that. 18

But I wonder if this proposal sticks and we go the 19

other way and we reduce this bill down to what it's 20

going to be, is Joe g oing to get reelected? Are we 21

going to get somebody else in there we're going to 22553

change course? We want to stay the course. We want to 1

stay consistent. So who can predict those results? We 2

don't know. 3

You've heard many people say farmers are making 4

mo ney, and we don't apologize for that because they 5
spend it. They buy new shiny pickup trucks. They buy 6

new tractors. They're spending it in the economy, and 7
they're part of this resurgence out of this depression 8

or recession that we've had, and that nee ds to be 9

noted. 10

Gas prices are down, and reduced dependence on 11

foreign oil has never been better. And good

- paying 12

r ural jobs are being developed. 13

In fact, the plant manager at my plant is a third

14

generation farmer who is able to graduate from Purdue 15

Unive rsity, come to work in my plant as a plant 16

engineer, and now he's the plant manager. A nd he's 17

able to stay on his family farm, help his dad farm, and 18

he's actually rebuilding his grandfather's original 19

farmhouse on that property for him and his wife and h is 20

children to move into. That's what America is about. 21

The forward impac t of this proposal on our 22554

community and State economy, I see a really bleak 1

picture. Gas prices have already increased, as many 2

have said, as well as corn support prices are startin g 3

to erode quickly. 4

The reduction would wipe out the entire Indiana 5
production level. It would take all these jobs away 6

from a State like Indiana, fifth

- largest producer, and 7
it undermines existing operations and their 8

profitability. 9

We have the oldest pl ant in the State of Indiana

- 10

- i n fact, the oldest plant in the country, I believe

- 11

- that produces ethanol , New Energy , go bankrupt this 12

last year. A handful of investors have bought the 13

plant. They reinvested in it, and the y waited on this 14

new corn cro p. 15

A nd now it's back in jeopardy because they don't 16

know based on this change to the renewable fuel 17

standard whether or not they're going to be able to 18

market the product. There's 100 jobs in South Bend, 19

Indiana, that are hanging in the balance on that. 20

I n closing, what I'd like to say is this. I've 21

saved the most important concern I have about this 22555

proposal for the last, and it's a very personal one for 1

me. My son served two tours of duty in Iraq. He put 2

his life on the line for all of us and to protec t 3

United States interests there. 4

My personal concern is for the next generation of 5
children we're raising, which includes my three little 6

grandsons, okay? Will they have to leave this great 7
country, starting within the next 14 years, to go and 8

protect our oil interests in the Middle East, putting 9

their lives on the line when we had the answer to 10

energy independence right under our noses but just 11

didn't have the courage to do the right thing? 12

Don't listen to special interest groups in this 13

decision. You gu ys know the facts. The next time you 14

pick up one of your grandkids, listen to them. They 15

deserve better from us, and I plan to continue fighting 16

to see that they get the chance to be heard. 17

Thank you very much. 18

MR. GRUNDLER : Thank you, Mr. Pittman. 19

Mr. Sincavage ? 20

MR. SINCAVAGE : Sincavage

. 21

MR. GRUNDLER : Sinc avage. Welcome. 22556 MR. SINCAVAGE : All right. First of all, I'd like 1

to thank you for your time. You know , this is a really 2

great country where a citizen can come and speak their 3

mind to the Governme nt and I just want to thank you for 4

that opportunity today. 5

MR. GRUNDLER : Thank you. 6

MR. SINCAVAGE : All right. The renewable fuel 7

standard is not good for the environment , the consumer, 8

or the economy. It sounds great on paper, but when you 9

examine the details, it falls short of its goals in 10

many areas. 11

First, consider the negative impact. While it is 12

true that 1 gallon of ethanol burns cleaner than 1 13

gallon of gasoline, ethanol is not the green 14

alternative that was sold to the American public. 15

Ethano l contains less energy than pure gasoline. One 16

must burn more ethanol to produce the same amount of 17

energy that results in E10 having a reduction of fuel 18

economy versus ethanol

- free gasoline. 19

Every year, more and more of our farm land is 20

being used for co rn crops, which are designated for the 21

production of ethanol . This reduction of farm land 22557

used for food production results in higher food prices, 1

poor land management practices, and farmers must dump 2

petrochemical fertilizers on the land to boost 3

producti on. Valuable and sometimes scarce fresh water 4

resources also go into the raising of corn for ethanol 5
production. 6

Once the ethanol is produced, it cannot be 7
combined with the fuel and sent to the regional fuel 8

depots through our network of pipelines as it causes 9

damage to the pipelines. It must be shipped by truck 10
and/or rail to the depot, which a ccelerates wear on our 11

highways, and of course, more fuel is burned to get it 12

there, increasing the carbon impact of ethanol fuels. 13

Corn itself is an inefficient means of producing 14

ethanol . There is a reason moonshine rs dumped sugar in 15

their mash. 16

Next, think of the negative i mpact on the American 17

consumer. As mentioned earlier, the use of farm land 18

for fuel production increases food costs. Instead of 19

crops for fuel being planted, crops should be planted 20

for food. 21

Fuel is taxed by the gallon , not by its energy 22558

content. As the average vehicles experience a decrease 1

in fuel economy from the use of E10, the average driver 2

is paying higher taxes because of it. I of ten say that 3

the ethanol mandate is a hidden tax on the American 4

consumer. 5

The Government taxes the fuel by the gallon and 6

then mandates an additive that lowers the fuel economy. 7
Because of the reduced efficiency of fuels containing 8

ethanol , the consumer must purchase more fuel more 9

often. 10

Ethanol is hydrophilic. Ethanol in the fuel 11

absorbs water from the atmosphere and runs it straight 12

through the engine. This even further reduces the fuel 13

economy. It literally waters down the gasoline. 14

Ethanol damages engines. It's for this reason 15

that gasoline for boats and airplanes are exempt from 16

ethanol mandates. All vehicle owners should have this 17

option. 18

Now I'll scrutinize the negative impact on the 19

nation al economy. Heavy trucks hauling ethanol to the 20

fuel depots cause undue damage to our highways and 21

roads. This results in increased highway maintenance 22559

costs. Drivers in the United States are purchasing and 1

using more gasoline than needed because of the reduced 2

economy that results from ethanol fuels. 3

Usin g our farm land and fresh water resources for 4

motor fuel increases our f ood cost at the grocery 5

store. 6

I own several vehicles

-- a motorcycle, a full

7
sized pickup truck, and a hybrid vehicle. I keep 8

detailed records of all of my mileage. I find that 9

when I use ethanol

- free fuels, I get 2 miles per gal lon 10

better in my pickup truck. 11

My hybrid and motorcycle both get 3 to 6 miles per 12

gallon better on ethanol

- free fuel. From my 13

experience, using ethanol

- free gasoline increases my 14

fuel economy by at least 8 t o 10 percent. 15

In the end, the only ones that benefit from the 16

ethanol mandates are the Government from the increased 17

tax revenues, corn farmers and ethanol producers from 18

Government subsidies and selling a product that is 19

mandated to be added to the fuel. If the EPA is truly 20

interested in reducing overall emissions, reducing the 21

amount of fuel used in this country, and increasing the 22560 fuel economy of every gasoline

- powered vehicle on the 1

road right now, then eliminate the ethanol mandate. 2

Let the market dec ide. If consumers want ethanol 3

in their fuel, they can purchase it. But those that do 4

not should not have the option

-- or excuse me. Those 5
that do should have the option to obtain ethanol

- free 6

fuel. 7

MR. GRUNDLER : Thank you very much. 8

MR. MACHIELE : Di d you have an affiliation or

-- 9

MR. SINCAVAGE : Just a regular citizen. 10

MR. MACHIELE : All right. Thank you. Great. 11

MR. GRUNDLER : Awesome. Thank you. 12

MR. SINCAVAGE : All right. Thank you. 13

MR. GRUNDLER : Thank you very much to everyone for 14

staying so l ate to provide us your thoughts. We value 15

them very much. 16

(Pause.) 17

MR. GRUNDLER : I'd like to invite up to the panel 18

now is Mr. Bruce Lutes, Rob Mackie , Jay Schutte , Robert 19

Morton, Brian McClarren , and Rich Hanson. I hope I 20

didn't put too many names. We lcome. 21

(Pause.) 22561 MR. GRUNDLER : Okay. Welcome, everybody. We'll 1

go from my left to my right. We're ready when you are, 2

Mr. Lutes

. 3

MR. LUTES : Thank you very much, and I do 4

appreciate the fact that you gentlemen have been able 5
to hold your attention all d ay. It's incredible, and 6

you've done a nice job. 7
My sheet says good afternoon, but I'm going to say 8

good evening because it is that time of night. My name 9

is Bruce Lutes. I'm a general manager of two bio diesel 10

refineries for Renewable Energy Group. One is a 45 11

million gallon nameplate capacity biorefinery in 12

Danville, Illinois. The other is in Newton, Iowa, and 13

is a 30 million gallon plant. 14

A little over 5 years ago, I made a decision to 15

leave a Tier 1 automotive supplier, where I'd been 16

employed for 2 9 years. It was my decision. 17

I left that job because I wanted to be in the 18

bio diesel industry. It was good for America's energy 19

security. It was good for the environment . It was 20

good for the economy, and it still is today. 21

The economies in the two comm unities where I work 22562

were not good, and they're still struggling today. In 1

Newton, Iowa, the Maytag plant had just closed its 2

doors and wiped out 2,500 direct jobs in a town of only 3

14,000. 4

Most of the employees at the REG Newton plant are 5

former Maytag e mployees. Newton is starting to recover 6

from this huge loss of jobs, but the ripple effects are 7

still ver y present, as you can imagine. 8

In Danville, Illinois, where I live, we've lost 9

thousands of jobs since the mid 1990s, when companies 10

like GM, 2,000 jo bs gone. GE, 500 jobs gone. H y ster, 11

800 jobs, all left Danville. Our population dropped 12

from 45,000 down to 33,000 , as it is today. 13

Most of the people that have been hired at REG 14

Danville were not leaving jobs as I did. There were no 15

jobs to leave. Th ey didn't have a job. The current 16

Danville area unemployment is close to 13 percent. And 17

we need the se jobs more than ever before. 18

The total number of jobs that a bio diesel plant 19

supports is really hard to count, but that number is 20

much higher than you m ay think. First, you have the 21

actual employees, the operators, the loaders, the 22563

maintenance staff, the office staff. Then you have the 1

transportation companies, the truck drivers. We had 2

14,000 truck drivers in and out of the Danville plant 3

last year al one. 4

We have railcar loaders offsite that bring in our 5

raw material on railcars some. The raw material 6

suppliers, many of whom are adding value to what was 7
once a waste product. Chemical suppliers, pipe fitters 8

and welders, hose makers, parts suppliers, outside 9

repair crews. The list just goes on and on. 10

These are real people, paying taxes, buying goods, 11

sending their children to schools, and buying houses. 12

With the sequestration and the Government shutdown, 13

maybe you or some of your Government colleagu es have 14

gotten a small taste of what it means when your job 15

isn't there. You were told you couldn't come to work. 16

Some of you had to tell your colleagues they would 17

have to take days or maybe even weeks off without pay. 18

I've had to do that in my past and present careers. 19

And I've had to look people in the eye who had done 20

the ir jobs very well and told them, "Y ou're not going 21

to have a job to come back to." 22564 Bio diesel has proven itself with increased 1

production, increased efficiencies, increased 2

environmen t al benefits. Bio diesel is not a part of the 3

problem. It's part of the solution. So why would we 4

want to slash these tremendous benefits and ignore the 5

data and ignore the facts ? 6

To those who say the RFS forces the Government to 7
pick winners and losers, I say this policy is a winner 8

for jobs, for the economy, for energy security, and 9

most definitely for the environment . The only way you 10

pick a loser here is by picking the numbers in the 11

current proposal. Let's not take that step backward. 12

On behalf of the employees I have the honor of 13

working with in Danville, Illinois, and in Newton, 14

Iowa, and the tens of thousands of other Americans 15

whose jobs are directly or indirectly supported by 16

bio diesel industry, I ask you to please stick with a 17

winner and incre ase the biomass

- based diesel and 18

overall advanced RVOs. 19

I thank you very much for your time. 20

MR. GRUNDLER : Thank you, Mr. Lutes. Mr. Mackie ? 21

MR. MACKIE : Thank you very much, and I appreciate 22565

your persistence. My comments were good morning, and 1

we're we ll beyond the morning hour, although it may be 2

rapidly approaching. 3

(Laughter.) 4

MR. MACKIE : Former Arizona congressman Mo Udall 5
said, "Everything has already been said, but everybody 6

hasn't had a chance to say it yet." So I'll move along 7
very quickly. 8

My name is Rob Mackie , and I'm president of the 9

American Bakers Association. ABA advocates on behalf 10

of more than 700 wholesale baking facilities around the 11

country and their suppliers. ABA members produce 12

wholesome, nutritious baked products for America's 13

families. 14
The baking industry generates more than $102 15

billion in economic activity annually. It employs over 16

630,000 skilled employee s around the country. We 17

great ly appreciate this opportunity to provide our 18

perspective on the renewable fuel standard proposal. 19

We recognize and support the modest proposal to 20

lower the corn

- based ethanol mandate in the 2014 21

standard s for the Renewable Fuel Standard Program

. 22566

However, we strongly encourage EPA to move further to 1

alleviate the volatility that corn

- based et hanol 2

creates in the grain markets. Corn

- based ethanol is a 3

factor that has led to decreased wheat acreage in the 4

United States

. 5

While we find no fault in the farmer for planting 6

what will bring the most profit, wheat acreage has 7
declined by almost 25 mil lion acres over the past 30 8

years in large part, we believe , to the renewable fuel 9

standard . In fact, Kansas, which used to be the wheat 10

baske t of the world, more corn is now grown than wheat. 11

The wheat market typically follows the corn 12

market. So when t he renewable fuel standard drives 13

corn prices higher, wheat prices also rise. Some 14

studies show that the RFS drove corn prices up by 35 15

percent during the 2011 and '12 crop year. During this 16

same time, wheat prices rose by 22 percent. These 17

spikes impac t market volatility and create market 18

uncertainty for the baking industry. 19

The above factors continued leading to higher 20

budgets and hinder job creation at a time when many 21

bakers are challenged by the ongoing economic 22567

environment . But ultimately, it is t he Americ an family 1

that pays the price. 2

ABA will submit more detailed written comments, 3

including some documentation on some of our figures, in 4

the written comment period, and we just want to say 5
thank you again for the opportunity. 6

MR. GRUNDLER : Thank yo u. Mr. Morton, welcome. 7

MR. MORTON : My name is Robert Morton. I'm here 8

to represent Newport Bio diesel , the only bio diesel 9

production facility in Rhode Island and one of several 10

small producers spread throughout the New England area. 11

I'm going to give yo u another version of the story 12

you've heard before from the other small producers that 13

have presented. So you know that our situation is 14

widespread throughout the country. 15

We started our company in 2007 with 4 partners and 16

have since grown to 19 employees producing bio diesel at 17

a rate of 2 million gallon s a year. We use waste 18

vegetable oil exclusively as our feedstock, which we 19

collect from over 2,000 restaurant partners. 20

The growth of our company was accomplished through 21

a great deal of hard work and per sistence, but also 22568

through the support of State and Federal programs, such 1

as the renewable fuel standard . The RFS has not only 2

been extremely successful on a nation al level, but it's 3

been a huge win for southern New England, as every 4

gallon of bio diesel we produce and distribute within 5
the region lowers greenhouse gas emissions by as much 6

as 89 percent. 7

However, if bio diesel is to continue to develop as 8

an alternative to fossil fuels, Newport Bio diesel and 9

the entire industry need the commitment of EPA an d the 10

administration to attain that goal. We continue to 11

face enormous resistance from entrenched fossil fuel 12

interests that simply ignore or, as we actually heard 13

today, deny the established reality of climate change. 14

And it is extremely frustrating to l earn that the 15

Environment al Protection Agency is giving credence to 16

arguments that renewable energy , such as bio diesel , is 17

simply too expensive to compete with fossil fuels that 18

have had decades of Government subsidies to establish a 19

monopoly on energy sup ply. 20

At Newport Bio diesel , 2013 has been a banner year 21

for production and expansion. Earlier in the year, we 22569

received a retroactive payment of the blending tax 1

credit, and through most of the year, we are able to 2

produce and distribute bio diesel in a cost

- effective 3

manner, as reasonable RIN prices worked to establish a 4

viable market for our fuel. 5

Based on this favorable economic situation, we 6

invested in our facility to double our production 7
capacity from 1 to 2 million gallons per year. This 8

expansion wa s very beneficial to our business model as 9

we've been able to significantly increase the 10

efficiency of both our collection and our processing 11

operations. 12

We also initiated efforts to more than double 13

again to a level of 5 million gallon s per year by 2015. 14

Toward that end, we extended the lease on our facility 15

for a 10

- year period. We initiated conceptual designs 16

for the expansion and worked with the Rhode Island 17

Economic Development Corporation and our banks to 18

finance the effort. 19

This expansion would cer tainly mean the addition 20

of several more employees to support the additional 21

collection of waste vegetable oil and production of 22570

bio diesel . However, as a result of EPA's RVO proposal, 1

the financial viability of Newport Bio diesel is in 2

extreme jeopardy, an d the potential for future 3

expa nsion simply no longer exists. 4

We've already put a hold on further efforts toward 5
expansion, and we are looking at methods to reduce 6

expenses, which will almost certainly mean reduction in 7

the amount of bio diesel we now produ ce in spite of the 8

gains in efficiency that we've been able to achieve 9

this year. 10

EPA's recent announcement regarding the RVO level 11

of biomass

- based biofuel s for 2014 has already had an 12

extremely negative effect on our business. By 13

extending those levels to 2015, the EPA has taken away 14

all of the opportunity for further expansion. The fact 15

that these decisions were based on 2011 data, not the 16

current information supplied by the Nation al Bio diesel 17

Board, is extremely frustrating. 18

On a personal note, after retiring from 35 years 19

as an oceanographer addressing environment al issues 20

with coastal waters, I was excited to have the 21

opportunity to create Newport Bio diesel and continue to 22571

work towards a cleaner and more sustainable environment 1

through the use of ren ewable energy
. 2

I enthusiastically recruited other investors and 3

put a great deal of time, energy , and money into this 4

effort because I thought I would have the support of 5

EPA and the administration in this endeavor. It's 6

extremely disappointing to f ind th at that is not the 7

case. 8

I appreciate the opportunity to speak at this 9

hearing, and I hope that EPA acts quickly to correct 10

this situation. 11

Thank you. 12

MR. GRUNDLER : Thank you very much. Mr. Schutte ? 13

MR. SCHUTTE : Thank you for allowing me to speak. 14

My na me is Jay Schutte . I farm just east of 15

Mexico, Missouri, with my two brothers. We have about 16

3,000 acres, and we also feed cattle. We raise corn, 17

soybeans, and wheat. 18

You know, and also just recently, we added my 19

niece's husband as an additional partner , bringing on 20

another generation in our operation. My family came to 21

the Midwest many years ago as payment for their service 22572

in the Revolutionary War. This was in lieu of getting 1

paid cash. 2

This was a creative way of satisfying an 3

obligation from the Gov ernment without using taxpayer 4

dollars. I think the RFS was done in the same spirit. 5
We're not requiring tax dollars, but just requiring a 6

product to be used. 7

In all full disc losure, I am not just a farmer. I 8

am a board member of an ethanol plant, also a bio diesel 9

plant, and I'm also a member of the

-- board member of 10

the Miss ouri Corn Growers Association. 11

In 2007, 564 farmers gathered together for the 12

ground

- breaking of a bio diesel plant in Laddonia , 13

Missouri, a town of 260 people. It employs 40 people

. 14

We now write a check to the local school district, 15
$150,000 a year. I know by Washington standards, these 16

are very small numbers. But with a small town like 17

that, these are very significant. 18

Anyhow, the plant , within 1 week , was operating at 19

its face p late capacity, providing a market for 15,000 20

bushels of corn in our area. We have improved and 21

innovated as time has gone by, as many industries do. 22573

We are now extracting the oil from the distillers 1

grains and using that to produce bio diesel to local 2

bio diesel plants in our area, and we are producing at 3

70 thousand

-- million gallon face plate capacity and 4

providing a market for 25,000 bushels of grain. 5

Last year, we not only used corn as a feedstock, 6

but also grain sorghum and wheat, just to meet the 7

dema nds after the very bad drought. We've already paid 8

one dividend this year, and that's put, you know, tax 9

revenue back into the community as well. 10

The big thing that I would like to stress is we 11

are -- you know, this is a multigenerational operation 12

at my farm, and we are getting ready

-- we brought in 13

the next generation and would like to have the option 14

to bring on the next one. You know, the Founding 15

Father Benjamin Franklin once said that democracy is 16

two wolves and a sheep deciding what they're going to 17

have for dinner. Liberty is when the sheep is well 18

armed. 19

The arming that we want is just protection with 20

the RFS to keep things on an even keel. I would say 21

that the two wolves in the room, though, are big oil, 22574

big food, and that's all I would like t o say. 1

Thank you. 2

MR. GRUNDLER : Thank you very much. Mr. Hanson? 3

MR. HANSON : As everyone else on this panel has 4

said tonight, thank you for all of you having the 5
patience to sit and listen to all of us and to hear 6

what we all have to say. 7

I'm the genera l manager at Show Me Ethanol , LLC. 8

The plant is located in Carrollton, Missouri, north 9

central Missouri. 10

Our plant has been in operation since mid 2008, 11

producing about 56 million gallon s of ethanol annually 12

from corn grown by local farmers. We also prod uce 13

approximately 170,000 tons of dried distillers grains 14

as a feedstock for cattle, swine, and poultry. All of 15

our products are transported from the plant via truck, 16

with the majority of our ethanol being delivered for 17

consumption in the State of Missour i. 18

While Show Me Ethanol provides employment to only 19

38 individuals, the number of families dependent upon 20

our production is much greater. The local truck 21

drivers moving products to and from our facility, the 22575

employees of the local elevator supplying our corn, as 1

well as the farm families in the area that grow corn to 2

support our production, all depend on us to help 3

provide a livelihood in rural America, rural Missouri 4

more specifically. 5

Studies show that over 400,000 American workers 6

benefit directly from a job in the robust ethanol 7
industry. Ethanol production has helped to invigorate 8

the local economy by providing good jobs to a broad 9

variety of people, allowing families to stay in the 10

rural areas and support local businesses. Every 11

ethanol plant plays an important role in keeping our 12

local rural communities alive. 13

The renewable fuel standard allows companies such 14

as ours to continue to provide those quality

-- to 15

provide quality employment in rural areas, keeping 16

families here and supporting the school s and local 17

commerce. The drastic volume cuts in the proposed 18

ruling could have a devastating effect on the rural 19

communities of America. 20

Not only does ethanol lower the cost of fuel 21

consumed by each of us in our daily transportation , it 22576

also provides pri ce support for the agricultural 1

economy that is the heart and soul of the United 2

States . The EPA did a wonderful thing by putting in 3

place the RFS , r educing our dependence on foreign oil 4

and providing an opportunity for a clean domestic 5

renewable fuel sou rce. 6

By taking a step backward, you are sending a 7
signal that the Government no longer supports the 8

production of biofuels. Making changes to the mandated 9

volumes takes away incentive for businesses such as 10

ours to expand and will create challenges for so me to 11

even continue operating. 12

Changing the mandate will impact demand for our 13

product, depressing the value. Additionally, it will 14

negatively impact the value of corn for the local 15

farmers, many of whom are investors in Show Me Ethanol

. 16

Those farmer inv estors should be allowed to continue 17

to sell their crops for a profit in the free market and 18

not go back to the days of depending on Government 19

subsidies for survival. 20

As a producer, I know the requirement of 14.4 21

billion gallon s of ethanol for 2014 can ea sily be met. 22577 13.3 billion gallon s can be consumed as E10, leaving 1

just 1.1 billion gallon s, which can be met with 2

increased use and sales of E85 and E15. 3

When the RFS was established, it always envisioned 4

ethanol blends above 10 percent, even with decreas ing 5
gasoline volumes. We should not be going backward, but 6

should be charging ahead, encouraging on a nation al 7
level the use of higher ethanol blends in vehicles 8

designed to operate on those higher blends and 9

supporting the economic stability of rural Ame rica. 10

The RFS has had a positive impact on the people in 11

our community as well as the rest of the nation . I'm 12

truly concerned that making the proposed volume change 13

to the 2014 RVO will create an even greater negative 14

impact for all of us. 15

I do hope you w ill consider the fallout of a rule 16

such as the one proposed would have on ethanol plants 17

and the workers who count on their jobs at these 18

facilities around the country. 19

Thank you. 20

MR. GRUNDLER : Thank you, sir. Mr. McClarren , 21

welcome. 22578 MR. MCCLARREN : Firs t of all, thank you for having 1

us all here today. I appreciate being able to speak in 2

front of the Government

. 3

My name is Brian McClarren , and I appreciate the 4

opportunity to speak on behalf of the renewable fuel 5

standard s and its impact on agriculture. 6

I 'm a farmer in northwest Ohio that farms 1,500 7
acres and raises 2,500 head of cattle. My operation 8

has evolved into one that relies heavily on the five 9

ethanol plants in my area. My family has farmed our 10

land since 1832, and my children are the sixth 11

gen eration to do so. 12

The EPA's proposed change to the renewable fuel 13

standard and undermining the progress we've made in 14

developing domestic renewable fuels will have far

15

reaching impact. It will, number one, disrupt the 16

transition that many farmers, like my self, have made by 17

relying on local ethanol plants to raise the revenues 18

from the fields and reduce the cost of my cattle 19

operation. 20

Despite what many opponents say, I'm here to tell 21

you that the renewable fuels industry does more than 22579

just produce biofuel s. The use of corn for ethanol has 1

provided a market demand for corn and eliminated a 2

decade

- long oversupply imbalance that has resulted in 3

depressed grain prices. Now that there is local demand 4

for corn, farmers have the ability t o sell corn at its 5

true value. 6

The local ethanol plants also supply a high

- value 7

feed product

-- distillers grains with soluble

-- that 8

is used for dairy feed, feed for cattle, feed for hogs, 9

chicken, and poultry. This permits me to sell corn 10

that I previously grew primarily as a feed product for 11

my livestock to the ethanol plants and replace it with 12

these distillers grains. 13

The impact is that I'm now getting increased value 14

for my corn while reducing the cost of feeding my 15

cattle. It allows me access to distillers grains that 16

are worth 130 percent the val ue of the corn that I 17

produce. The decision to reverse the EPA's direction 18

on growing the use of biofuel s will place this new 19

lower cost, improved efficiency operation of mine in 20

jeopardy. 21

The impact of EPA's proposed decision will also 22580

extend to those that provide supplies and services to 1

both the biofuel s industry and agriculture in general. 2

The increased demand for corn has permitted the farmer 3

for the first time in many years to be profitable 4

without relying on Government programs. 5
Ohio farmers are purchasing semis and hiring 6
drivers. I have personally invested $200,000 in 7
equipment and facilities, and the increased 8

efficiencies on my operation have allowed my small farm 9

to hire two new employees. And more importantly, it 10

has allowed my son, my daughter, and my son

- in

- law to 11

join our family farm. 12

This has also had a dramatic effect on farm 13

purchases and acreage values. Most important to many 14

of the farmers that I talk to is the increas ed 15

sustainability of the farm. 16

The ab ility to raise a family without having 17

numerous side jobs to supplement income. The ability 18

to actually make a profit without relying on Government 19

programs. The ability to have children be a part of 20

the farm instead of having to send them off to the 21

cit ies to find jobs to support their families. And the 22581

ability to fend off the mega farms and keep the smaller 1

farms that are under 1,000 acres in the family by 2

passing it down to their children. 3

I'm also concerned about the impact this direction 4

will have o n our next generation of biofuel s. I follow 5
with interest the advances being made in cellulosic 6

ethanol , and I have a hope, too, that I wil l be selling 7

corn stover to make biofuel s. The wavering and 8

uncertainty that has been shown by the EPA and this 9

adm inistration will be responsible for slowing down or 10

eliminating future investment in advances in biofuel s. 11

I'm surprised that this administration would want 12

to be responsible for limiting the future of advanced 13

fuels. In the end, I would hope that the EPA would 14

reconsider its proposal to reduce the use of biofuel 15

and ethanol

. 16

As a farmer that talks with many other farmers, I 17

assure you that this proposal is increasingly unpopular 18

in rural America. We believe we've done our part by 19

working together with th e industry in order to be able 20

to provide for our families and produce domestic, 21

clean

- burning renewable fuels. We ask that you 22582

maintain your commitment to this worthy endeavor and 1

restore the RFS RVO to the p reviously established 2

volumes. 3

My goal is the same as many other farmers and 4

folks that I talk to. I want the McClarren farm to 5

remain McClarren farms for the next generation, the 6

seventh generation, and the RFS and the volumes it 7

establishes are crucial. 8

Thank you. 9

MR. GRUNDLER : Thank you very much

. 10

MR. MACHIELE : No questions. But thanks to all of 11

you for sticking out this late as well and to the 12

audience that's still here, and we still have another 13

panel at least to go. So

-- 14

(Applause.) 15

MR. GRUNDLER : Thank you very much. Appreciate 16

it. 17

Okay. Next up, would you please come on down? 18

Joel Grams , Sparky Crossman. We need a spark. Tim 19

French, Wayne Presby, Ben Wootton , and Miles Stephens

. 20

(Pause.) 21

MR. GRUNDLER : Mr. Grams , proceed, please. 22583 MR. GRAMS : Okay, thank you. Thank you guys for 1

stayin g so late, too. 2

I'm Joel Grams, a corn farmer from Minde n, 3

Nebraska, and president of the Nebraska Corn Growers 4

Association. Thank you for the opportunity to testify 5
today in opposition to the proposed changes in the 6

renewable fuel standard

. 7

If I had to b oil down the importance of 8

maintaining the current renewable fuel standard to one 9

word, it would be "choice." As a corn farmer, the 10

ethanol industry gives me more choice s in marketing the 11

corn I grow. H aving a couple ethanol plants near my 12

farm gives me a competitive market that helps me stay 13

ahead of continually rising costs for land and inputs. 14

Rather than simply selling raw corn, we're adding 15

value to those bushels, transforming them into fuel, 16

feed, and food. The added value creates jobs and 17

economic growth all along the value chain, not just on 18

the farm. From the grain elevator to the ethanol 19

plant, from the trucking companies to the livestock 20

operations, from ag equipment dealers to seed and 21

fertilizer companies. 22584 Nebraska is the nation's second

- lar gest ethanol 1

producer, and our economy has benefited from this 2

position. A recent study by the Nebraska Department of 3

Labor found that the average wage in Nebraska's ethanol 4
industry is more than $56,000 , c ompared to $37,000 from 5

all Nebraska industries c ombined. 6

These are good

- paying jobs in r ural communities 7

that need them, p roviding more career choices for young 8

people and more disposable income to spend with local 9

r etailers and other businesses. 10

Thanks to ethanol , American consumers have more 11

choice at the pump also. Drivers can choose a wide 12

range of fuels from E10 to E15, from E30 to E85, and 13

yes, they can even choose fuels with no ethanol at all. 14

That's what choice is all about. 15

But without ethanol in our nation's fuel supply, 16

it would be

-- we wou ld all be subject to 100 percent 17

oil mandate, and that's having no choice at all. The 18

price of ethanol is consistently below the cost of 19
gasoline, sometimes by a $1 more. So choosing to add 20

more ethanol to our fuel supply helps lower price at 21

the pumps. 22585 That means consumers spend less to fill up and 1

have more money available to spend as they choose, to 2

save for the future, to buy a home, make purchases, pay 3

for their children's college education, and generally 4

enjoy a better quality of life. 5
By increasing the amount of ethanol in our 6

nation's fuel supply, we choose cleaner air instead of 7
continuing to choke on toxic exhaust and its invisible 8

deadly particulates that cause damage to our lungs, 9

hearts, and brains. With ethanol , we choose a cleaner 10

burning f uel that protects children with asthma and 11

seniors with respiratory disease. 12

Since EPA is responsible for our country's 13

environment al health, I would think that choosing to 14

reduce the amount of fuel that makes our air healthier 15

to breathe woul d be counter to their mission. 16

When the renewable fuel standard was established, 17

Congress made the choice to free America from the 18

shackles of costly imported oil and create a domestic 19

renewable energy industry that would spur economic 20

investment, strengthen American a griculture, and 21

improve our nation's energy security. That's exactly 22586

what has happened. The RFS is Federal policy that is 1

working and wor king well. 2

The proposed revision of the volume of corn 3

ethanol is completely arbitrary and violates the intent 4

of the law. We should be expanding our renewable fuels 5
infrastructure, not stifling it. We should be 6

increasing the volume of ethanol in our fuel supply, 7
not reducing it. Should be strengthening our 8

commitment to energy independence, c leaner air , and 9

consumer choice , not making it weaker. 10

I'm a corn farmer. So you would expect me to 11

support the growth of the ethanol industry, and I do. 12

But first and foremost, I am an American, and I 13

appreciate having the choices that a robust renewable 14

fuels industry provide s for my business, my family, my 15

community , and my nation

. 16

I strongly urge you to reject the proposed changes 17

to the renewable fuel standard and choose instead to 18

renew America's commitment to energy independence, 19

environment al health, and economic strengt h. To me, 20

it's a pretty easy choice. 21

Thank you. 22587 MR. GRUNDLER : Thank you very much. Mr. Crossman? 1

MR. CROSSMAN : Good evening. 2

MR. GRUNDLER : Good evening. 3

MR. CROSSMAN : My name is Sparky Crossman. I want 4

to thank you for the opportunity to speak tonig ht. I 5

speak to you from

-- as a fifth

- generation farmer from 6

Laurel Springs Farm in Mount Holly, Virginia. 7
Laurel Springs Farm is a family operation. We're 8

located in northern neck of Virginia. Today, the farm 9

grows soybean, corn, small grain, and barle y. We're 10

all no

- till and have been for about 30 years. 11

Promoting and supporting ethanol industry to me is 12

important. I personally know the importance of a 13

successful corn crop to my family and community to feed 14

the world. I take pride in work and time a nd energy to 15

serve as vice chair of the Virginia Grain Producers 16

Association, chair of the Virginia Corn Board, and I 17

serve as a delegate to the U.S. Grains Council. 18

On our farm, our corn goes into chicken feed. 19

None of our corn goes into corn

- based ethan ol , but I am 20

for corn

- based ethanol . This year, we had an excellent 21

crop of corn. Our average corn was about 170 bushel to 22588

the acre. 1

Well, when EPA came out and said that the corn

2

based ethanol was going to be reduced, our corn prices 3

fell. My break

- eve n price per bushel this year was 4
about $4.50 a bushel. So when corn dropped below $4, I 5

lost money, and ethanol is what's kept our prices up. 6

Two years ago, my daughter Katie joined the family 7
farm. She graduated from Virginia Commonwealth 8

University wit h a degree in environment al science. 9

Couldn't find a job, and she's been on the farm here. 10

She also sees the low corn prices, the high 11

fertilizer prices, seed price, equipment prices, and 12

sees what profitability does to a family farm. Every 13

farmer in thi s room probably has a daughter, son who 14

would like to come back to the farm. But if it's not 15

profitable, farmers can't bring the next generation in. 16

In this country, we've already lost our textile 17

industry. It's been difficult to find a shirt made in 18

thi s country. We've lost our steel industry. I don't 19

want to see agriculture lose. B ecause by 2050, the 20

population is supposed to have doubled, and we're going 21

to have to be doubling what crops we grow today. 22589 Agriculture is the only industry that has a 1

sci ence - based product like ethanol . It's 2

biodegradable. It's renewable , and it's safe for the 3

environment . It helps curb our appetite for foreign 4

oil and helps the American farmer stay in business and 5
compete in our world economy. 6

In closing, I read a litt le article in the farm 7
magazine the other day, and it said an attack on 8

agriculture

-- an attack on ethanol is an attack on 9

agriculture. And I urge you to rethink the arbitrary 10

decision and let the RFS continue its work and do its 11

job. 12

Thank you. 13

MR. GRUN DLER : Thank you, sir. Mr. Stephens ? 14

MR. STEPHENS : Again, thank you for the 15

opportunity to testify before you tonight. 16

My name is Miles Stephens . I am the co mpliance 17

officer at Washakie Renewable Energy , also known as 18

WRE. I'd like to note first that I have never 19

testified to the EPA before today. 20

WRE has been what I consider to be a poster child 21

success story as a direct result of the RFS mandate. 22590

Our company literally started

-- in 2007 , it literally 1

started as a mom

- and

- pop g reenfield project in the 2

Quonset shop

. Today, WRE is a 10 million gallon per 3

year bio diesel producer. 4

It's the only commercial facility in Utah, and we 5
have also just now completed a second production line 6

for 10 million gallon s per year, totaling 20 million 7

gallon s per year. T hat will go online

-- it was 8

scheduled to go online in January, this January. But 9

now it's being reconsidered whether or not we'll be 10

able to bring that online , pending the outcome of this 11

proposal. 12

In addition to that production increase, we've 13

also brok e ground on a 36,000 barrel bio diesel blending 14

facility and a 48,000 barrel capacity petroleum service 15

storage tank, as well as a glycerin refining unit and a 16

high

- capacity seed crushing facility. So we've had the 17

opportunity to start a lot of new project s. 18

We also hold a unit train capacity at our plant 19

that we installed. We currently employ approximately 20

200 people. These expansions that we have are 21

privately financed. However, our private financing is 22591

in jeopardy of noncommitment because of the propo sed 1

rule. 2

We oppose the proposed renewable fuel volumes 3

represented because they are meritless, regressive, and 4

they represent stag nation for a multiyear period. This 5
will seriously affect our expansion plans and our job 6

creation at a time when jobs are a n endangered species. 7
Utilizing the job modeling established by the 8

Department of Labor, we have estimated a minimum of 9

permanent jobs after project completions to be 60 10

direct jobs and an additional 300 indirect jobs. We're 11

concerned that the rule will a lter our expansion and 12

jeopardize all of the plans, and this means an 13

estimated loss of $5 million tax revenue. 14

It's clear that the proposal has an adverse effect 15

on the market for both fuel and RINs, regardless of 16

prior statements by the agency that it is not 17

responsible for market conditions. The publicly traded 18

producer companies have already experienced a share 19

loss on the markets, and others are reassessing their 20

expansion plans. The proposed numbers send a strong 21

signal to our investors that they de em will be a loss 22592

of investment and jobs. 1

We also assess that $58 million will be lost in 2

the Utah

-- in our local Utah economy. Despite the 3

assumption that the tax credit will have an effect on 4

the industry, we sustained operations and we 've 5

subsequently grown because of the costs to operate our 6

facility , and the support operations were controlled 7
with good business practices. 8

MR. KOROTNEY : You'll need to wrap up, please. 9

MR. STEPHENS : We believe our company will 10

continue to grow, and we can

-- I mean, we can fight 11

through this. I believe that a mid

- sized plant, we can 12

fight through this, but it certainly is not our plan 13

and a business model that we'd like to follow. 14

When legislation and rules that are designed to 15

grow businesses and industries , such th e EISA and the 16

RFS , become an impediment to growth, then the 17

legislation or rule is obsolete and counterproductive 18

to true business , regardless of its intended purposes. 19

Again, I thank you. 20

MR. GRUNDLER : Thank you. Mr. Wootton ? 21

MR. WOOTTON : My name is B en Wootton , and I'm 22593

president and CEO of Keystone Biofuel s. More 1

importantly, I'm 100 percent shareholder of the 2

company. 3

Keystone is a bio diesel production facility that 4

started in 2006. Right now, we are a multi

- feedstock 5
facility that uses recycled gr ease, soybean oil, and 6

animal fats to produce our fuel, and we have a 7
production capacity of over 30 million gallon s a year. 8

I say right now because if this proposed rule of 9

1.28 billion RVO for biomass

- based diesel becomes an 10

actual rule, my company will be out of business. To 11

say this is an important issue to me is an 12

understatement. You see, being 100 percent owner means 13

I'm all in. It's not just my job. It's not my career. 14

It's my family's savings, retirement, and future. 15

One hundred percent owner means my house being 16

mortgaged and personal guarantees on millions of 17

dollars of debt that I've invested in this industry. 18

But it's not just my family that relies on this 19

business and this industry. It's also my employees and 20

their families and their mor tgages and their savings 21

and their retirements. 22594 At my peak, I had approximately 24 employees 1

working for me. Over 40 percent of them were active or 2

former military personnel. We also had an annual 3
revenue run rate of $40 million a year, which is 4

signific ant for a small town in Camp Hill, 5
Pennsylvania. 6

Since the RFS2 program was implemented, my annual 7
volume production went from hundreds of thousands of 8

gallon s a year to millions of gallon s of bio diesel 9

production a year. More importantly, as my productio n 10

volumes increased, my production cost decreased. 11

So why is this so important to me? The reason is 12

that I'm a small business owner, and in today's world, 13

it's almost impossible for a small business owner to 14

obtain financing to start or run a business. L ike most 15

small businesses, my company has been challenged by the 16

recent downturn of the U.S. economy, and like most 17

small businesses, we have been turned down by bank 18

after bank on obtaining additional capital needed in a 19

competitive market. 20

Fortunately, w e have recently signed agreements 21

with an investors to move forward with our company, but 22595

the EPA's proposed rule has put serious doubts in the 1

investor's strategy in investing in this industry. 2

From an investor's perspective, you invest because you 3

think the market or the investment is going to grow. 4

If you know that market or investment is not going to 5
grow or decrease in value, you're no t going to get the 6

investment. 7

That is what the EPA and the administration would 8

be doing if the industry

-- if the c urrent proposed 9

ruling of 1.28 billion gallon s for biomass

- based diesel 10

stands. The rule will prevent new investments in the 11

industry. Keystone and , I assume , many other small 12

producers will not survive without continued and new 13

investment. 14

So I'm asking this panel and this organization and 15

this administration to truly listen to this industry 16

and implement a biomass basal RVO of at least 1.7 17

billion gallon s for 2014. It's been a long day, and as 18

one of today's final speakers, I want to thank the EPA 19

staf f for taking the time to hear everyone's views on 20

this issue. 21

I will close with this observation. The bio diesel 22596

industry and the EPA have historically worked together 1

in a constructive manner to advance the worthwhile 2

energy security and environment al ben efits associated 3

with the RFS program. The result of this positive 4

joint effort has been a robust and growing domestic 5

bio diesel industry that has consistently exceeded the 6

RFS program targets for biomass

- based diesel

. 7

Keystone shares the current concerns of many 8

bio diesel stakeholders as it pertains to the proposed 9

RVO rule. That said, going forward, it is my sincere 10

desire to work together with you to craft a final rule 11

that allows America's bio diesel indust ry to reach its 12

full potential, r ealizing the significant impact, 13

economic, environment al, energy security benefits 14

associated with expanded domestic production and use of 15

bio diesel is our shared interest. 16

Thank you for letting me testify today. 17

MR. GRUNDLER : Thank you, Mr. Wootton . Mr. 18

French, you' re up. 19

MR. FRENCH : Well, good evening, and like everyone 20

else, I a ppreciate your all's patience. 21

And I'm not very good at public speaking, and I 2259 7

pr acticed this speech on my cows. B ut I think they 1

were rejected from Chi c k

- Fil

- A , so they didn't give 2

much f eedback. 3

(Laughter.) 4

MR. FRENCH : But my name is Tim French, and I come 5
to you from a family farm, French Brothers Dairy in 6

Woodstock, Virginia, which is in the Shenandoah Valley. 7
And just so you all know why I'm here, I was asked 8

from Virginia Gra ins Cou ncil to share my story. 9

And Shenandoah Valley, Virginia, is a corn deficit 10

area 50 weeks out of the year. Our farm is a 100

- year 11

old family operation, and we have soybeans, corn, small 12

grains. We milk 150 cows and have 300 cow

- calf beef 13

operation, and we have 130,000 bro ilers that we raise 14

with George 's Family Farm s , which is an integrated 15

poultry producer, and also row crop 500 acres of corn. 16

And I'm sharing my story with you because for the 17

younger years of my life, I'm the youngest of nine, and 18

we didn 't know nothing to do but get up in the morning 19

and work. And I can remember our tractors being out of 20

fuel , and our farm not being profitable enough to get 21

fuel. And my dad, because we owned our land, free and 22598

clear, and the oil companies knew our famil y well , 1

would extend us credit that they didn't normally extend 2

to other people. 3

And so, we couldn't get the oil at the station. 4

We had to go around back, and the owner would come, get 5

it to us. A nd it kept us going until we'd sell a load 6

of cattle or so mething and pay off our bill, and we'd 7
go again. But because of the farm economy over the 8

last 4 or 5 years and the efficiencies and investments 9

that seed companies and other things have made, we are 10

-- became a very viable family farm. 11

We employ about 10 p eople in the Shenandoah 12

Valley. A nd it's quite rewarding to wake up in the 13

morning and know that you're making a difference and 14

you're paying your bills and you're a substantial 15

member of your community

. 16

So , with this, and I'm in a deficit area, and I'v e 17

heard some people today speak about how we've hurt 18

livestock fe ed prices and things like that. A nd I'd 19

just like you to know that I've never been more 20

profitable, and my family has never been more 21

profitable in the livestock industry. And we are 22599

divers ified, as we have been the last 5 years. I'm 1

just fortunate enough to sell our 2013 calf crop about 2

a month ago and received figures, and I took my 90

- 3

year - old uncle along to the sale with me to watch them 4

sell, and he'd never believed we could get money like 5

that for our cattle. 6

And this is in a time when a lot of our citizens 7

of our nation feel that because of ethanol they're 8

paying more for their food. But I think it's more 9

because over the years, farming has not been 10

profitable, and herds have went ou t of business because 11

people were not making money. And we do not have the 12

herd size it takes to sustain our desires as citizens 13

of the United States and the people of our country who 14

want our wonderful feed. 15

Just one other thing. On our dairy farm, we f eed, 16
right now I'm feeding 3 1/2 pounds of distillers grain 17

today to my 150 dairy cows. I say me. It's me and two 18

other brothers that are actively managing our farm, and 19

we have one uncle who is an owner. My father has 20

passed away. 21

So we have plenty of corn. We're fortunate enough 22600

that we have the acreage to raise all the feed we need, 1

but we choose to feed the distillers grains because it 2

helps us balance the ration for our dairy cows. A nd I 3

got a lot of stuff written here, and you're all making 4

me a little bit nervous, but I don't know why because 5
you seem like awful nice people. 6

I'll just look. One more thing. I want to say 7
one more thing, and I'm going to get off here. I was 8

elected the FFA president of my high school in 1986, 9

and I was full of s omething and vinegar. 10

A nd I went to the Ruritan C lubs and Rotary and 11

gave my talk about how this was and how we're going to 12

change this world and this, that, and the other. And I 13

was constantly reminded by my older peers, people who I 14

respected very much, how agriculture was dying in 15

Virginia. " If you really want to make a difference, 16

boy, pack your bags and move west. " 17

And today, those same people are there, renting me 18

their land and can't believe what we're doing on land 19

in Virginia. And I do believe t hat ethanol has helped 20

this, has fueled interest in young kids today to go to 21

college and come back and contribute to agriculture in 22601

many ways, be it through service companies or any way 1

that they can if they don't have the land. 2

So in your decision, and I know it's tough, just 3

remember agriculture is thriving all across this 4

country, and I know you all have driven through the 5
Shenandoah Valley. If you've ever driven 81, you've 6

driven past my corn fields, my c attle, my sheep, my 7
dairy. 8

A nd if you ever want to stop in, stop at 9

Woodstock, Virginia, and ask for a French, and th ey'll 10

point you to the Walton & Smoot drug store. A nd you'll 11

find one of us there, and we'll give you a good tour. 12

Thank you. 13

MR. GRUNDLER : Thank you, Mr. French, for sharing 14

that stor y. You did fine. 15

Mr. Presby, welcome. 16

MR. PRESBY : Thank you very much, and I appreciate 17

you giving me the opportunity to address my concerns 18

regarding your proposed RVO and for sta ying here so 19

late this evening. 20

My name is Wayne Presby. I'm the primary owner 21

and operator of White Mountain Bio diesel in North 22602

Haverhill , New Hampshire. I believe we're currently 1

the largest bio diesel production facility in New 2

England. 3

You know, we really got into this business years 4

ago because I believe in what the RFS is all about. 5
You know, I believed that we could create jobs here 6

domestically. I believed that we could achieve energy 7
independence. I was interested in helping to clean up 8

the environment , and I've made substantial investments 9

in this plant because of t hat. 10

And I think that any change to the RFS is very 11

shortsighted , and it's just plain bad policy. I think 12

people have spent so much time on the details of the 13

RFS that you've really lost sight of what the intent 14

was of the law in the first place. You can 't really 15

see the forest through the trees anymore. 16

I make about 3 million gallon s of bio diesel a year 17

from a feedstock called waste vegetable oil. Big oil 18

makes diesel from a feedstock called crude oil. Do you 19

think for one minute that the price of a ga llon of 20

diesel at the pump reflects what it really costs big 21

oil to produce that gallon ? If you do so, you're being 22603

extremely naïve. 1

The price at the pump leaves out a huge cost that 2

you and I bear every day, and we pay it through our 3

income taxes. The p rice at the pump does not include 4

the cost of our sons and daughters, dying in battle or 5
the cost of caring for their maimed bodies for years to 6

come. It does not include the hundreds of billions of 7
dollars that we spend every year protecting the 8

feedstoc ks used by big oil to produce their fuel. 9

This is a hidden cost that nobody considered 10

because it isn't in the price at the pu mp. It's in our 11

income taxes. 12

U.S. Secretary of Defense Chuck Hagel said of the 13

Iraq War in 2007, "P eople say we're not fighting for 14

oil. Of course, we are. They talk about America's 15

nation al interests. What the hell do you think they're 16

talking about? We're not there for figs. " 17

Fed Chairman Alan Greenspan said in 2007, "I'm 18

saddened that it is politically inconvenient to 19

acknow ledge what everyone knows. The Iraq War is 20

largely about oil." 21

The most recent major report on the costs of the 22604

war come from Brown University in the form of a cost of 1

war project. Their current estimate is that the cost 2
of the Iraq War was over $6 trill ion, $6 trillion. 3

We're not talking about billions anymore. We're 4

talking about trillions. 5
One trillion of that is going to be spent on care 6

for our veterans that have come back maimed from that 7
experience. This means that the cost of all of our 8

fuel ov er the last 10 years, if you look at the IEA's 9

numbers concerning how much liquid fuel we consume, 10
actually cost us $3 a gallon more at the pump than what 11

we paid for it. 12

For the last 10 years, if you extrapolate it over 13
the next 20, it's $1.50 a gallon

. And you say that 14

biofuels can't compete with these fellows? W e're 15

already half their price. 16

Instead of listening to big oil complain about the 17

cost of RINs, we should be complaining about the direct 18

cost of protecting their feedstocks. The last I knew, 19

n o one sent the U.S. military up to North Haverhill to 20

protect my tanks of used vegetable oil. 21

What we should be doing is charging the oil 22605

companies for protecting their feedstocks. If we did 1

this, their product couldn't co mpete with mine. 2

I was interested today to see people running 3

around wearing T

- shirt s that said, "Save my engine, 4

r epeal the RFS." How trite. Evidently they're more 5
interested in the wear and tear on their car engines 6

than saving American lives and trillions of dollars. 7
They don't reali ze that if we actually stuck to 8

this energy policy, they might be able to get a student 9

loan or cheap health insurance. They don't realize 10

that sticking to the energy policy could eventually pay 11

off the nation al debt. 12

They don't realize that if we don't s tick to this 13

policy, things are going to get much worse. This won't 14

be the end of the wars. It's just the beginning, and 15

they're not going to get cheaper. They're going to get 16

more expensive. 17

I think we've lost sight of what this program is 18

all about. Nation al security and energy independence 19

is about saving lives and trillions of dollars in 20

military costs. It's about not sending trillions of 21

dollars to foreign governments who like killing 22606

Americans and ramming airplanes into our buildings. 1

It's about creating jobs at hom e and making America 2

stronger. 3

We shouldn't be cutting back the RFS. We should 4

be enhancing it and every other alternative source of 5

energy available to us so we can stop the loss of human 6

life, the drain on our country's finances, an d start 7
creating jobs at home and making this country strong 8

again. 9

Thank you. 10

(Applause.) 11

MR. GRUNDLER : Thank you, Mr. Presby. This panel 12

certainly was worth waiting for. 13

(Laughter.) 14

MR. GRUNDLER : Thank you very much. 15

MR. PRESBY: You're welcome. 16

MR. G RUNDLER : Now we've got a few more names 17

here. I don't know if these people are still here. 18

Like you, Mr. Crossman . If you are, you're welcome to 19

come up -- Tim V erVaecke , Lisa Evans, Robert Batt, and 20

Prabhsharan Singh. 21

And if those people are napping a nd there is 22607

anyone else that wishes to provide testimony who hasn't 1

signed in, we'd love to hear from you as well. Any 2

takers? 3

MR. V ERVAECKE : How do you like that, best for 4

last? 5

MR. GRUNDLER : Okay. All right. 6

MR. V ERVAECKE : And I've been here since 8 :00, and 7

not p.m. 8

(Laughter.) 9

MR. GRUNDLER : Well done. Well done. Okay, we're 10

all ears. All ears. 11

MR. V ERVAECKE : Well, distinguished members of the 12

hearing board and colleagues, thank you for this 13

opportunity to bri efly testify before you today. 14

My na me is Timothy V er V aecke . I am the chief 15

operations officer at Global Alternative Fuels, also 16

known as Global, and I , nor my company , have ever 17

testified before the EPA before today. 18

Let me tell you a little bit about our company. 19

Global is currently a 10 million gallon a year 20

bio diesel producer located in El Paso, Texas, that 21

supplies key petroleum refineries and distributors in 22608

our region. Our parent company, Mesilla Valley 1

Transportation , is the 55th largest trucking company, 2

trucking fleet in the Unit ed States with over 1,400 3

trucks within the fleet covering over 180 million miles 4

a year , b oasting the best average miles per gallon 5
rating in the U.S. utilizing B20 as its primary fuel. 6

We do not blend this material onsite. We sell it 7

to the local refine r, and he sells it back to us, and 8

we are partners because we both benefit. And this is 9

something I haven't heard today. We are partners. 10

On the Monday before Thanksgiving, the refinery 11

personnel management people who purchase 90 percent of 12

our material came and talked to us about how are we 13

going to manage the brick wall that is going to hit us 14

in January, and we are working collectively together to 15

find a way. We both realized one thing. T hey need us, 16

and we need them. 17

Our bio diesel division has been in business for 18

over 7 years. We've just completed an additional 8 19

million gallon a year expansion and are in process of 20

initiating the engineering on a Phase 3 expansion 21

project to increase our production by an additional 10 22609

million gallon s a year by mid 2015. In all, our 1

facility, when completed, will represent 28 million 2

gallon s per year of production. 3

Additionally, we are in negotiat ions with a 4
California producer/ distributor to restart the 5
suspended production at their facility under a joint 6

venture and increase its production from 5 million 7

gallon s a year to 10 million gallon s a year by mid 8

2015. All of this current production and expansio n has 9

been privately financed. However, any additional 10

outside financing is in jeopardy of noncommitment 11

becaus e of t his proposed ruling. 12

We currently employ 90 people, and when our 13

expansion plans are completed, we estimate at a minimum 14

an additional 50 direct and 250 indirect jobs would be 15

created utilizing the job modeling established by the 16

Department of Labor. 17

We oppose the proposed renewable fuel volume 18

represented in the NPRM today because they represent a 19

stag nation for a 2

- year period. This will seriously 20

affect our expansion plans and job creation when we 21

were just starting to obtain an ROI on our initial 22610

inve stment of $35 million. 1

It is clear the proposal has an adverse effect on 2

the market for both fuel and RINs, regardless of the 3

prior statements that the agency is not responsible for 4

market conditions. The proposed numbers send a strong 5
signal to our investors that they deem will be a loss 6

of investment and jobs. The publicly traded producer 7
companies have already experienced a share loss on the 8

markets, and others are reas sessing their expansion 9

plans. 10

Despite the assumption that the tax credit will 11

have an effect on the industry, we sustained operations 12

and subsequently grew because the cost to operate our 13

facility and subsequent operations were controlled with 14

very good business practices. We will continue to work 15

to grow and support the industry. However, this ruling 16

will make it extremely difficult for u s to sustain 17

these objectives. 18

When legislation or rules that are designed to 19

grow business and industries, such as the EISA and the 20

RFS , become an impediment to growth, then the 21

legislation or ru le is counterproductive to true 22611

business, regardless of its intended purpose. 1

We will provide specific responses to requests for 2

comments in a formal written submission in accordance 3

with the timelines of the NPRM. From a company 4

standpoint, I'd like to t hank you for your 5
considerations of my brief testimony at this hearing. 6

One thing I want to close with here. As I've sat 7
here all day long, pretty much watching all of you and 8

watching what has transpired here today and this being 9

my first experience with this, I do not envy your 10

position. I've sat here and watched both sides present 11

their opinions, and it looks like I'm watching C

- SPAN. 12

We have those on the right and on the left, and 13

with all due respect, with the wide disparity in 14

comments, it looks lik e this is a gigantic ping pong 15

match, making volleys back and forth. 16

You've been given a task to establish something 17

that needs to be fair and equitable and that will move 18

us in the direction you were charged. A nd I, for one, 19

feel sorry for your position b ecause I don't know how 20

you're going to do that and satisfy everyone. It's not 21

going to happen. 22612 Unfortunately, I'm charged with going back to my 1

investors after tonight and report back to them should 2

we move forward with expansion plans in a business 3

the y've been committed to for nearly 7 years? 4

Committed to, but are now questioning where it's 5

headed. 6

They've seen in their own business practices and 7

use of bio diesel there is a benefit to this investment, 8

but the decisions you will make will define whethe r 9

this will be sustainable. We see the benefits of this. 10

We experience the benefit of this. 11

We didn't look at beating each other in the head 12

with big oil with a 2 x 4. We sat down and said how can 13

we work together? I haven't heard that here today. 14

And li ke I said, I feel sorry for you guys. I 15

really do. All I can tell you is I hope you have a 16

good holiday. 17

Thank you. 18

(Laughter.) 19

MR. GRUNDLER : Thank you, and you don't need to 20

feel sorry for us. We consider this a privilege. We 21

really do. That has bee n a great day for all of us. 22613 Let me ask if there is anybody else who would like 1

to provide testimony before I close this hearing? 2

(No response.) 3

MR. GRUNDLER : This gentleman looked expectantly. 4

Okay. 5
Okay. This concludes the hearing on the EPA's 6

2014 No tice of Proposed Rulemaking for the Renewable 7

Fuel Standard

. 8

Thank you all who stuck it out all day here. 9

We're very grateful for the time. This is what 10

democracy is all about. Thank you again for your time. 11

Good night. 12

( Whereupon, at 9 : 44 p .m., the hea ring was 13

adjourned .) 14

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