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SUBCOMMITTEE HEARING ON SMALL

BUSINESS RENEWABLE ENERGY TAX

INCENTIVE POSSIBILITIES

SUBCOMMITTEE ON CONTRACTING & 

TECHNOLOGY 

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

SEPTEMBER 26, 2007

Serial Number 110-47

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

WILLIAM JEFFERSON, Louisiana 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

SUBCOMMITTEE ON CONTRACTING & TECHNOLOGY

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Braley, Hon. Bruce .................................................................................................. 1

Davis, Hon. David .................................................................................................... 2

WITNESSES

Kelly, Quentin T., WorldWater & Solar Technologies Corp. ................................ 4

Breitbach, Craig, Western Dubuque Biodiesel ...................................................... 6

Woolsey, Ed, Green Prairie Wind Development .................................................... 7

Zuhlke, Kim, Alliant Energy Corporation ............................................................. 9

Hutchinson, John, Powell Construction ................................................................. 12

APPENDIX 

Prepared Statements: 

Braley, Hon. Bruce .................................................................................................. 28

Davis, Hon. David .................................................................................................... 31

Kelly, Quentin T., WorldWater & Solar Technologies Corp. ................................ 33

Breitbach, Craig, Western Dubuque Biodiesel ...................................................... 36

Woolsey, Ed, Green Prairie Wind Development .................................................... 41

Zuhlke, Kim, Alliant Energy Corporation ............................................................. 44

Hutchinson, John, Powell Construction ................................................................. 51

(III) 

(1)

SUBCOMMITTEE HEARING ON SMALL 

BUSINESS RENEWABLE ENERGY TAX 

INCENTIVE POSSIBILITIES 

Wednesday, September 26, 2007

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON CONTRACTING & TECHNOLOGY

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 9:35 a.m., in Room 

2360, Rayburn House Office Building, Hon. Bruce Braley [Chairman of the Subcommittee] presiding. 

Present: Representatives Braley, Cuellar, Clarke, and Davis. 

Also Present: Representative Holt. 

OPENING STATEMENT OF CHAIRMAN BRALEY 

ChairmanBRALEY. I now call this hearing to order and would like 

to welcome everyone. I call this Subcommittee hearing to examine 

the issue of small businesses and the renewable energy tax incentive possibilities. 

The notion of modifying our tax policy to reflect the economic 

needs of our Nation and of small business is critical. Nowhere is 

that more clear than when we talk about energy policy. Since the 

1900s, the Tax Code has served as a primary tool that shape energy priorities in America. Today, this Subcommittee will have the 

opportunity to explore how tax incentives can play a role in promoting renewable sources of energy. Our distinguished panel shows 

us that small business can play an important role in this effort. 

Over the last 2 decades, small businesses have been at the forefront of renewable energy production and growth. Whether it is the 

growing number of small biodiesel or solar facilities or farmers who 

are providing inputs, small companies are leading the way in shifting America toward clean domestic supplies of energy. While there 

has been significant growth, renewable energy continues to make 

up only 7 percent of the energy produced and consumed in this 

country. As for renewable fuels, they make up only 1 percent of 

this energy. 

In order to improve upon this, it is critical that we have a proper 

Federal policy in place. The bottom line is that if we are going to 

stimulate investment and production in alternative sources of energy we must have valid tax incentives. These measures will not 

only encourage investment in new technologies but will make it financially possible for renewable energy producers to operate and to 

expand. I am very optimistic that alternative sources of energy will 

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continue to grow due to the fact that this Congress has already 

taken steps to encourage greater production and use of clean domestic supplies. 

Recently, the House passed its comprehensive energy bill that included a number of measures to promote renewable production. It 

included tax incentives that place a higher premium on new technologies and production that will further the next generation of renewable energy. I supported this bill because it invests in America’s future. It is renewable energy like wind, solar, hydropower, 

and other clean fuels. It puts small businesses front and center in 

this effort, and it develops a framework for renewable energy to 

grow. The tax policies in this legislation will help many small producers address the challenges that exist in renewable energy production. 

Earlier this year, our Subcommittee held a hearing on meeting 

the workforce demands of small bioenergy businesses, and I am extremely pleased that the Farm Bill that we recently passed included a renewable energy workforce education program that was 

first outlined in the New Era Act I introduced in February. We 

must secure our Nation’s energy future through efforts such as tapping into biofuels, wind and solar by training our farmers and 

workforce for bioenergy production. We also know that the viability 

of renewable energy producers is dependent upon having modern 

technology. 

All of these challenges threaten the financial viability of renewable energy production. With the proper tax incentives, we can help 

producers overcome some of these challenges. We must have economic policies that will help bring stable energy supplies and create jobs here in America. 

In Iowa alone, the exploding renewable energy sector has created 

thousands of jobs. As of early 2005, it is projected that ethanol 

could create over 5,000 direct and indirect jobs and pay $82.4 million in wages per year. With further improvements, these numbers 

underscore the potential for additional opportunities for small businesses with the proper tax incentives. 

The time to act is now. By switching our energy focus from the 

Middle East to the Middle West and to the entire country, we can 

transform our energy economy and improve our international security. 

There is a promising future for the next generation of bioenergy, 

including great potential for the growth in the evolving cellulosic 

industry. At a time when our country is facing record energy 

prices, it is critical that we continue to develop alternative energy 

supplies. Small businesses can help us achieve this goal, but only 

if they have the right tax priorities to make it happen. If we truly 

care about the security of our children’s future, we need to continue 

pushing the envelope on the bioenergy economy. Reexamining our 

energy tax priorities will be a huge help. 

I look forward to today’s discussion, and I yield now to my colleague and friend from Tennessee, Ranking Member Davis, for his 

opening statement. 

OPENING STATEMENT OF MR. DAVIS 

Mr.DAVIS. Thank you, Mr. Chairman. 

3

I would like to thank all of the witnesses for attending and for 

contributing today at this very important hearing concerning small 

business renewable energy tax incentive possibilities. 

I would like to especially thank Mr. John Hutchinson, who traveled from Johnson City, Tennessee, where he is located in my district, to be here with us today. 

Again, thank you to all of the witnesses. We are eager to hear 

your testimonies. 

No matter where you are or where you go nowadays, it is impossible to escape the realities of the extremely high energy costs facing the American population. The simple act of filling up a gas 

tank has become a painful experience for many Americans due to 

the high cost of fuel. A great many American families are dreading 

the winter season due to the high cost of heating their homes that 

will come with it. 

Additionally, small businesses are taking a huge blow due to the 

fact that increased energy costs are greatly affecting their bottom 

line. For some time now, everybody has known that the strife faced 

today is because of high energy costs due to the fact that America 

is far too dependent on foreign oil sources, and for some time now 

much effort has been put into developing alternative sources of energy to diminish the necessity of America’s reliance on oil that 

often comes from volatile areas such as the Middle East and Venezuela. 

Great strides have been made in developing alternative fuels. 

With a large amount of attention being given to renewable fuels, 

biodiesel and ethanol have been proven to be safe optional fuels 

which are derived from seemingly unending sources. Wind energy 

and solar power also offer great promise in the quest for energy resources, and I am certain that further research into alternative energy sources will yield new techniques for producing renewable 

fuels that most of us here today in this room cannot even fathom. 

Some believe that restructuring the Internal Revenue Code to 

provide incentives for this type of research may help expedite this 

process. I agree. I firmly believe that simplifying our Tax Code and 

offering targeted tax reductions for alternative fuel research, production and compensation can help wean our dependence on foreign sources of energy. 

However, in this drive to reinvent the way we produce and consume energy, I think it is extremely important not to forget an already existing energy source right under our noses. A balanced approach is needed to maintain the high energy demands our country 

needs for continued growth. Renewables offer a great deal of promise in the very near future, but we must also be able to maintain 

our current energy production while fostering growth in this exciting new field. 

For example, coal is indispensable for the production of electricity, and still, it is very important in the manufacturing of cement, paper and industrial heating. U.S. coal reserves currently 

stand at 275 billion tons, an amount that is greater than any other 

Nation’s in the world. These reserves are capable of meeting domestic demands for more than 285 years at current rates of consumption. 

4

Domestic sources of fossil fuels currently provide us with a renewable source of energy, and obtaining them from places such as 

the Arctic National Wildlife Refuge should not be discounted. 

Once again, I look forward to hearing the testimony from all of 

our witnesses today, and I believe it will give us a great insight 

into the issue at hand. 

Thank you again for being here today. 

ChairmanBRALEY. Thank you, Mr. Davis. 

We will now move on to testimony from the witnesses. The witnesses will be allowed 5 minutes to deliver their prepared statements. 

The way the light works is, when you have 1 minute remaining, 

the yellow light will come on, and then when your time is up, the 

red light that you see on the table between Mr. Breitbach and Mr. 

Woolsey will come on. 

At this time, I would like to introduce my friend and colleague 

Rush Holt to introduce our first witness. 

Mr.HOLT. Thank you, Chairman Braley, for calling this hearing 

on this important subject to discuss renewable energy tax credits 

and for bringing together such a distinguished panel. I would particularly like to recognize and introduce to you my friend and constituent Quentin Kelly, who will testify in just a moment. 

I think you have emphasized, Mr. Chairman, that small business 

is not only the source of jobs and new jobs in this country but is 

also the source of ideas and inventions. I have been privileged to 

know Mr. Kelly for many years, and as the founder, chairman and 

CEO of WorldWater Corporation in Pennington, New Jersey, Mr. 

Kelly has done a great deal to provide water and power solutions 

around the U.S. and especially to developing nations. WorldWater 

holds patents on powerful solar electric systems, motors, and Mr. 

Kelly is a member of the New Jersey Inventors’ Hall of Fame, and 

is particularly well-suited to talk about today’s topic. WorldWater 

has helped provide relief in the gulf coast region following Hurricane Katrina, and I am pleased that the committee is hearing from 

Mr. Kelly today, and I am sure that his experience will be very 

helpful as you carry this subject forward. 

I say welcome. 

STATEMENT OF QUENTIN T. KELLY, CHAIRMAN AND CEO, 

WORLDWATER & SOLAR TECHNOLOGIES CORP., PENNINGTON, NEW JERSEY 

Mr.KELLY. Thank you. Mr. Chairman, thank you for this opportunity. 

Members of the House Small Business Committee, Subcommittee 

on Contracting and Technology, Congressman Holt, other panelists, 

and guests, I am Quentin T. Kelly, Chairman and CEO of 

WorldWater & Solar Technologies Corporation of Pennington, New 

Jersey. We are solar engineers and water management engineers. 

We solve power problems and water problems, utilizing our proprietary solar technology. This is PV, photovoltaic. 

This technology which we have developed enables us not only to 

generate and to distribute solar electricity but to also drive motors 

and pumps up to 1,000 horsepower. Now, I will repeat that. We can 

drive motors and pumps up to 1,000 horsepower from sunshine 

5

alone or in seamless conjunction with the electric grid, or diesel 

generators. We are one small business that can point directly to 

the Federal energy bill that instituted the 30 percent Investment 

Tax Credit as an extremely significant part of our success. 

Today, WorldWater technology is operating the largest solar irrigation system in the world, a citrus ranch in Borrego Springs, California, the largest agricultural solar system in the world, a 1,000-

acre avocado ranch in Fallbrook, California. The only totally selfsustaining water district in the world—that is, grid power—may be 

interrupted, a blackout or the district can be disconnected from the 

grid, and that water district can continue normal operations strictly from our solar electronics. We have a half megawatt of solar-generated electricity at the Atlantic City, New Jersey Water Treatment Plant, and we have just begun construction on the largest PV 

plant for an airport in the world, for the Fresno-Yosemite International Airport in Fresno, California, where we will supply 40 percent of the electricity required and will save the airport an estimated $13 million over the 20-year contract period. 

We first implemented the tax credit, the 30 percent tax credit, 

in 2006 by creating Power Purchase Agreements for third-party investors. This investor group funds the installation of our solar technology and equipment for host customers who then pay for the electricity so generated for their buildings, airports, water districts, et 

cetera, at a discount to the going utility rate. The host customers 

pay directly to the investor group, who take advantage of the 30 

percent tax credit plus other incentives from the State and take the 

renewable energy credits which are also generated. 

The amount of business created by this, not just with 

WorldWater but throughout the solar business as it is now beginning to roll, is truly significant. What happens with our PPAs is 

a triple win situation. The host customer, corporate facility owner, 

municipality or water district pays nothing up front and receives 

a discounted rate for his electricity when it is installed and delivered. The investor group makes some 10 to 15 percent after-tax return annually, and WorldWater sells a whole lot more technology 

and equipment, earning much more revenue and employing substantially increased numbers of workers. 

To be specific, we had no PPA business in 2005. We initiated our 

first PPAs in late 2006, and nearly all of our business in 2007 will 

be from PPAs. In 2005, we had 27 employees and generated $2 million in revenue. In 2006, when we started the PPAs, we moved up 

to 40 employees and $17 million in revenue from $2 million. In 

2007, we now have 80 employees, and I have given guidance on 

revenues for this year of $25 million. We have a potential business 

pipeline now of $200 million, and much of that will be through 

PPAs. Next year, we anticipate having 150 employees. 

In addition to the direct influence on the sales of this one tax 

credit of 30 percent, the greatly increased growth of our company 

through the help of the PPAs now enables us to reach up and to 

bid for projects in the U.S. and around the world of a much larger 

dollar size and system capability. 

The importance of this hearing today on tax policy favoring credits and assistance to renewable energy efforts, in my opinion, could 

not be reflected any more clearly than in the facts and prospects 

6

that I have just described. What you have instituted and are considering in terms of lengthened tax incentives has palpable effects 

in the marketplace. WorldWater and Solar Technologies is a prime 

example. If we benefit, the renewable energy industry benefits, and 

America’s energy policy will experience success unforeseen even a 

few years ago. That is how fast we in the solar business now see 

the future of our power generation developing. We can use your 

help. 

Thank you very much. I would love to go into some more detail, 

if you are interested, in the Q and A. 

[The prepared statement of Mr. Kelly may be found in the Appendix on page 33.]

ChairmanBRALEY. We will have that opportunity. 

The next witness is a constituent from my district. Mr. Craig 

Breitbach is the Director at Western Dubuque Biodiesel in Farley, 

Iowa, and for those of you keeping score, Farley is located about 

10 miles from the Field of Dreams, and I think there is nothing 

more accurate as a symbol of what bioenergy provides in terms of 

the future other than a field of dreams. 

So, with that, Mr. Breitbach and his company employs 31 people. 

Western Dubuque Biodiesel, LLC was formed in November 2005 by 

a group of eastern Iowa farmers and businesspeople. Western Dubuque develops and operates a biodiesel facility that produces a 

cost-effective and environmentally friendly fuel while supporting 

agriculture and reducing America’s dependence on foreign oil. 

With that, Mr. Breitbach, thank you for joining us. 

STATEMENT OF CRAIG BREITBACH, DIRECTOR, WESTERN 

DUBUQUE BIODIESEL, FARLEY, IOWA 

Mr.BREITBACH. Thank you. 

Thank you, Mr. Chairman, Ranking Member Davis and members 

of the committee, and thank you for allowing me to testify on behalf of Western Dubuque Biodiesel and REG. 

Two weeks ago, we had our ribbon-cutting at our facility. Western Dubuque Biodiesel, a 30-million-gallon-a-year plant uses feedstock, soy oils and other oils for feedstock. I will give you a little 

background on Western Dubuque Biodiesel. 

In October of 2005, a group of investors, small and big, came up 

with $6 million of seed money to do a feasibility study. Western 

Dubuque then set a date for an equity drive on June 6 of 2006. In 

one day, investors came out in droves. 579 unit members came up 

with 19,529,000 in 4 hours. It was the fastest equity drive seen in 

Iowa—closed in 4 hours. We broke ground in July of 2006, started 

producing biodiesel in August of 2007. 

As Chairman Braley said, we have 31 employees—31 employees—no more than 25 miles away from the plant to travel. It is a 

great plant for Farley, Iowa. Farley is 18 miles west of the Mississippi. Farley, Iowa is a 1,200-person town with a $41 million 

plant. Not only did this plant create 31 jobs; it created jobs for 

trucking industries, local vendors, pipes and valves, and so forth. 

I would also like to take note that REG is working toward the construction of a new biodiesel facility in Rock Port, Missouri in Congressman Graves’ district. 

7

Biodiesel, it is a great renewable field. It takes 1 unit of input 

energy to create 3.2 units of output energy. REG and Western Dubuque Biodiesel are all about putting out quality BQ-9,000. BQ9,000 is an ASTM standard to produce the best quality biodiesel. 

We are very proud of our plant. As it takes normally 4 to 6 weeks 

to achieve this goal, our plant achieved it in 7 days, so we are very 

proud of that. With the help of REG and the commitment to put 

out a quality product and achieve, we achieved the ASTM standards in 7 days. 

Biodiesel, it reduces our dependency on oil, and domestic biodiesel is grown in America by American farmers, produced by 

Americans and is delivered to Americans by Americans. 

The biodiesel emissions, the EPA has sent out several emission 

standards. Biodiesel, total unburned hydrocarbons, a negative 67 

percent. Carbon monoxide, a negative 48 percent. Particulate matter, a negative 47 percent. Overall, a negative 50 percent—negative—from standard diesel. 

Western Dubuque Biodiesel and the biodiesel industry in Iowa 

employ over 3,000 Iowa investors. Excuse me. 3,000 Iowa investors 

have invested in the biodiesel industry in Iowa. 

I am here asking for your help on three things—extending the 

dollar per gallon biodiesel blender’s tax incentive to help make fuel 

prices competitive with conventional diesel fuel, maintaining a 

strong CCC bioenergy program to help with high feedstock prices, 

and enacting a biodiesel-specific requirement as part of a renewable fuel standard. We need a market for our product. 

I would like to conclude and thank you. Mr. Chairman, I appreciate the opportunity to come before you today and to present our 

case. Thank you very much. 

[The prepared statement of Mr. Breitbach may be found in the 

Appendix on page 36.]

ChairmanBRALEY. Thank you, Mr. Breitbach. 

Our next witness is Mr. Ed Woolsey, who is the President of 

Green Prairie Wind Development in Prole, Iowa, which is located 

in the Des Moines Metro area. He was raised on a farm that harvested corn, soybeans, alfalfa, grain, sorghum as well as raising 

cattle and hogs. Mr. Woolsey spent 5 years as a renewable energy 

program coordinator for the State of Iowa, a very, very important 

responsibility, and he currently works with farmers and small businesses in developing community-based wind turbine projects. 

Welcome, and please share your opening remarks with the committee. 

STATEMENT OF ED WOOLSEY, PRESIDENT, GREEN PRAIRIE 

WIND DEVELOPMENT, PROLE, IOWA 

Mr.WOOLSEY. Thank you, Chairman Braley, members of the Subcommittee and Ranking Member Davis. Thank you for the ability 

to come here and to speak to you today about this industry. 

I have had the opportunity to work in the renewable energy business for over 20 years now in Iowa. I have owned and operated 

small renewable energy businesses for 13 of those years. I want to 

start by saying I am more optimistic now about the future of the 

industry than I ever have been in my life. When I started working 

8

in the industry in Iowa, one person could follow all of the projects 

in the State and understand the technologies. Today, we have over 

$5.5 billion worth of concrete and steel in the ground or under construction in renewable energy. I believe we are only scratching the 

surface of this 21st Century industry. Many organizations have estimated the jobs and economic development surrounding the industry. I would refer you to the Union of Concerned Scientists and to 

the Energy Foundation for reports. 

While the reasons for supporting renewable energy have always 

included reducing heavy metals like mercury in the environment, 

reducing asthma-causing particulates in the air, preventing oil 

wars, slowing global warming, reducing trade imbalances, and protecting God’s creation, the motivating issue that seems to have 

gained the most traction is that of making money. Tax policy is one 

of the key mechanisms that enables developers in the industry to 

make money. In the energy development business, there is no economic level playing field. Fossil fuels have been subsidized for decades in ways too numerous to mention. If we were to internalize 

all of the costs associated with fossil fuels and pay that price and 

we turned on the light switch or were to pay at the pump and we 

were to incorporate the benefits of developing sustainable energy in 

the price consumers pay, there is no doubt sustainable energy 

would be cost-effective today, but unfortunately, that is not the 

world we live in. With that in mind, let me briefly lay out some 

details of how we are currently able to build projects, some of the 

hurdles and some of the ideas where incremental tax policy might 

help. 

I am currently involved in what we call ′′community-owned wind 

projects.′′ the projects I am referring to consist of 10 2.1-megawatt 

wind turbines and 10 mostly farmer owners. These wind turbines 

cost over $3 million each installed. The electricity is sold to a local 

generation and transmission cooperative at a very modest price 

under a long-term contract. The turbines are utility-scale, state-ofthe-art machines, each being able to supply enough electricity for 

750 homes. 

While all sustainable energy development is good, it needs to be 

done rapidly. It is not all equal. For example, energy projects with 

significant local ownership have been shown to return up to 10 

times the economic value to communities as those with typical corporate ownership. Projects having typical corporate ownership, the 

vast majority of those, usually provide land rental to the local landowner typically in the range of $2,500 to $4,000 per turbine while 

the same landowner who owns the turbine could retain $20,000 to 

$50,000 per turbine annually after debt service. In the renewable 

energy industry, ownership matters. 

Since none of our 10 farmer owners had $3 million in the bank, 

other money must be brought to the project. This is where tax policy played the largest role. Section 45 production tax credits is the 

largest cash-flow contributor after the sale of the electricity itself. 

In order to take advantage of the tax credit and to meet the passive income constraint, an outside investor must participate in the 

ownership of the business. The investor must then monetize his 

contribution to a present value, then hopefully monetize the available accelerated depreciation of that capital expense at the same 

9

time. Selling both of these tax credits by the developer reduces the 

value of the credits by the amount necessary to serve as an incentive for the new partner to participate. This discount is not taken 

by large companies able to use the entire tax credits and depreciation internally and those that have passive income appetites. The 

ability of the section 45 tax credit to offset active as well as passive 

income will be helpful to our locally owned project development. 

In addition to bringing in an equity partner, success of our 

projects was dependent on each of the 10 LLCs successfully obtaining grant money and loan guaranties under the new energy title, 

section 9006 of the 2002 Farm Bill. This energy title has been 

hugely successful starting new sustainable energy companies in 

Iowa, and we hope it will be reauthorized and funded in a much 

larger amount in the 2007 Farm Bill. Money from the USDA program does trigger a reduction in section 45 tax credits due to a 

double-dipping provision. The elimination of this provision would 

have a favorable impact on project development. 

After bringing in money from a new partner, the Farm Bill and 

any State incentives available, a considerable amount of debt is 

still to be obtained and serviced. Due to the maturing nature of the 

industry, local banks are now ready and willing with debt financing. The funding is available at market rates, and this funding 

stream may be a place where future tax policy may provide some 

incentives for small business development. A beginning farmer loan 

is an example of that. 

Tax changes that could rapidly build our industry would be to 

provide tax credits to the electricity offtaker for signing long-term 

contracts with sustainable energy projects that meet the criteria of 

′′locally owned.′′ these incentives would need to be at a level that 

would more than offset the current advantage that electricity buyers/utilities see in owning the turbines, themselves. 

I have a couple of more. I see I have exceeded my time. I will 

submit them for the record. 

[The prepared statement of Mr. Woolsey may be found in the Appendix on page 41.]

ChairmanBRALEY. Thank you. 

Our next witness is Mr. Kim Zuhlke, who is the Vice President 

of New Generation for Alliant Energy Corporation in Madison, Wisconsin. Alliant Energy has diversified electric generation capabilities, including renewable resources like wind, solar and anaerobic 

digesters. Alliant is an investor-owned, public utility holding company which provides electric and natural gas service to Iowa, Wisconsin and Minnesota. 

Thank you for joining us, and welcome, Mr. Zuhlke. 

STATEMENT OF KIM ZUHLKE, VICE PRESIDENT - NEW GENERATION, ALLIANT ENERGY CORPORATION, MADISON, WISCONSIN 

Mr.ZUHLKE. Mr. Chairman, Ranking Member Davis and members of the committee, thank you for the opportunity to appear 

today. I am Kim Zuhlke, Vice President of New Generation for 

Alliant Energy, an electric and gas utility, serving portions of Iowa, 

10

Minnesota and Wisconsin, including part of the chairman’s district 

in Iowa. 

Small business is the job creation and economic development engine across the country. Our service territory is no exception. Having grown up on a farm and starting my career in the agricultural 

seed business, in my experience, farmers are among the most courageous of small business people. While I applaud your effort to uncover the opportunities and to remove the obstacles of expanding 

renewable energy use and production by small business, my remarks will focus on farming. There are two specific areas that I 

will address as it relates to potential Federal actions that could remove barriers and expand on-farm use and the production of renewable energy—first, the deployment of anaerobic digesters and, 

second, energy crop production for electric generation. 

For those not familiar with digester technology, the system is designed to capture the methane that is produced as manure decomposes and to convert it to a fuel that can be used either for pipeline 

quality gas, transportation or for on-farm electric generation. By 

capturing and burning this methane, it prevents the release into 

the atmosphere of greenhouse gases 20 times more potent than carbon dioxide is. It is a domestic renewable fuel source. The process 

eliminates odor associated with traditional manure management 

systems and produces a by-product that can be put to profitable 

use as fertilizer for crops or in the lawn and garden industry. 

At Alliant, we have a partner thus far with four farm customers 

in our service territory to implement digester systems and have 

identified the following barriers to expanded use of manure digester systems. 

First, there is no standard manure digester design. We need to 

have these systems be more ′′plug and play.′′ additional funding for 

research development and demonstration projects could help. 

Grants to manufacturers to develop standardized systems would be 

useful. 

Second, there are issues of scale. For example, a herd of at least 

500 head is required today to make sure such a system is economic. 

It does not provide a solution for the smaller family farm. Appropriate investments in research and development can help make 

these systems more scalable. Alternatively, we could attempt to 

create cost-effective methods for farms to transport manure to a 

central digester. Here again, the specific grant to develop such a 

system would be appropriate. 

Third, for most farm customers of any size, making the capital 

investment represents the largest single barrier. Grants, low or nointerest loans would go a long way toward addressing the issue. We 

have found that tax credits are not as beneficial to most farmers 

unless they could potentially be sold to generate cash. 

Lastly, on a more technical front, in order to make the system 

as efficient as possible, one does need to achieve the right mix of 

enzymes and microbes in the digester. This is not always a simple 

task. Further research and development funding could help make 

this potentially complex part of the equation more of an off-theshelf solution. 

I now want to move to energy crops. Alliant Energy is currently 

in the process of seeking regulatory approval to build two new coalVerDate 0ct 09 2002 09:33 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38205.TXT LEANN
11

fired power plants. Both will be designed to co-fire biomass. In 

order to accomplish this goal, we need farmers within 50 miles or 

so of the proposed plant sites to agree to grow these crops. While 

this is potentially very attractive to farmers, we are discovering 

certain barriers. 

Corn prices have risen as the current and projected demand for 

corn-based ethanol has grown. Because there is a limit to what we 

can pay for an energy crop and still make co-firing economic at 

these new plants, we need to make growing energy crops attractive 

as well. 

Switchgrass can grow in fields that may not be fertile enough to 

grow corn or is highly erodible. In many cases, these fields are currently enrolled in the Conservation Reserve Program, or CRP. 

Changing the rules governing CRP land will allow farmers to grow 

or move switchgrass for biomass without suffering the financial 

penalties they currently face when harvesting hay from the CRP 

land, and it would go a long ways toward addressing this issue. By 

allowing 80 to 90 percent of switchgrass on the CRP land to be harvested once per year, it would continue to be a benefit to wildlife, 

would maintain reduced erosion, and would allow for the production of a beneficial crop without increasing the Federal price tag of 

CRP. Once established, switchgrass is a relatively easy crop to 

grow and maintain. It is, however, difficult to get started, and it 

typically takes 2 to 3 years to become established. Grants, low or 

no-interest loans could help farmers defray upfront expenses and 

the potential loss of income as the crop is being established. 

Switchgrass and other energy crops can be used as fuel in power 

plants or as the feedstock for the future production of cellulosic 

ethanol. Both are beneficial, and whatever incentives are established for one should be generally equal to the other. 

We look forward to working with our farm and other small business customers to make the expanded use and the production of renewable energy a reality, and we welcome your support in meeting 

this goal. 

Thank you very much. 

[The prepared statement of Mr. Zuhlke may be found in the Appendix on page 44.]

ChairmanBRALEY. Thank you, Mr. Zuhlke. 

For our last witness, I will yield to the ranking member for the 

introduction. 

Mr.DAVIS. Thank you, Mr. Chairman. 

I would like to introduce Mr. John Hutchinson. John is a graduate of West Virginia University. He already spent 50 years of his 

life in the heart of West Virginia’s coalfields. He has over 38 years 

of experience in the coal industry, working with the construction of 

underground slopes and ventilation shafts, aboveground with the 

construction of coal preparation plants and material handling and 

conveying systems. Currently, Mr. Hutchinson serves as the Vice 

President of Finance at Powell Companies right in the heart of my 

district in Johnson City, Tennessee. He also serves on the Board 

of Directors for the Johnson City, Jonesboro, Washington County 

Chamber of Commerce. 

John, thank you for being with us today. 

12

STATEMENT OF JOHN HUTCHINSON, VICE PRESIDENT - FINANCE, POWELL CONSTRUCTION, JOHNSON CITY, TENNESSEE 

Mr.HUTCHINSON. Thank you, Mr. Braley, Mr. Davis, the committee. It is an honor to be here this morning from east Tennessee 

to speak with you. 

Our companies engineer, construct and automate coal preparation facilities in the Eastern and Central U.S. bituminous coalfields. We also manufacture and rebuild solid liquid separation centrifuges widely used in coal preparation throughout the world. 

With huge fleets of trucks, large mobile cranes, hundreds of units 

dependent on petroleum fuels and an annual fuel budget of over $1 

million, we are certainly concerned about energy prices and its stable availability, but I am not here today to talk about our individual problems. I am here today to speak with you regarding one 

of America’s greatest and most abundant sources of energy for yesterday, today and the future, that being coal. 

U.S. energy sources today consist of oil, approximately 39 percent 

natural gas, approximately 24 percent coal, 23 percent—or 1 billion 

tons—per year, nuclear 8, hydropower 3, and other 3. These same 

percentages are also very similar on a worldwide basis. As Mr. 

Davis said, coal is indispensable for the production of electricity 

and steel. Other key uses include cement, paper, limestone industries, and industrial heating. 

The technology is now in place for coal gasification, a process 

whereby coal is converted into a syngas and is itself a fuel. In this 

process, coal is reacted with oxygen at high temperatures with the 

advantage that more of the energy in the fuel is extracted. It may 

then be burned in internal combustion engines used to produce 

methane gas or to convert it into a synthetic fuel. Today, I would 

encourage all possible tax incentives to promote increased research 

and development in this area. 

U.S. coal reserves stand at 275 billion tons, an amount that is 

greater than any nation’s in the world. This includes reserves at 

active mines and estimated recoverable coal reserves. Our Federal 

Government is, by far, the largest owner of the Nation’s coal beds, 

particularly in the West. To emphasize, these reserves are available right here at home in 38 U.S. States not dependent on importation. These reserves are capable of meeting domestic demand for 

more than 285 years at the current rates of consumption. 

In addition to this nearly 300-year supply, there are additional 

demonstrated reserves of approximately 250 billion tons available 

for future mining. Coal reserves at existing mines by selected 

States include, in the West, Wyoming, almost 8 billion tons; West 

Virginia, almost 2 billion tons; Montana, 1 billion tons; Kentucky, 

1 billion tons; also, Alabama, Illinois, Indiana, Ohio, Pennsylvania, 

Tennessee, Virginia, and obviously others. 

In the U.S., coal-fired power plants account for over 56 percent 

of the electricity generated. In recent years, 90 percent of U.S. coal 

is consumed for the generation of electricity. As I said, this is, 

roughly, 1 billion tons per year. 9 percent of U.S. coal is exported 

to 40 foreign countries. In the Southeastern U.S., the Tennessee 

Valley Authority operates 11 coal-fired power plants, producing 60 

percent of TVA’s power, providing a capacity of 33,000 megawatts 

13

of electricity to 158 locally owned distributors in seven States and 

serving 9 million customers. 

During World War II, our Appalachian coal mines, specifically 

mines in southern West Virginia, provided abundant metallurgical 

coal supplies for the production of steel that were used to make 

guns, planes, tanks, et cetera, that were required for the war effort 

and that were significant to the outcome of that conflict. 

Other coal reserves throughout the world: U.S., 275 billion; Russia, 173 billion; China; India; and Australia. 

Coal is also widely used throughout the world for the production 

of chemicals and fertilizers. The types of coal mining include underground mining that is predominant in the Eastern U.S. and surface 

mining that is predominant in some Appalachian areas but more 

so in the West. 

Coal use has grown in recent years because of secure, abundant 

domestic reserves and relatively low prices. Demand has been 

maintained through increasing mine productivity, larger mines, 

technology for more efficient systems, and fewer mine personnel. 

Also, great advances in clean coal technology have been accomplished since 1985 with contributions from the Federal Government 

and also from the coal industry, itself. 

Giant strides have also been accomplished in the area of miner 

safety. Currently, development is underway for underground safe 

houses and GPS location devices. Tax incentives for development of 

these systems would certainly aid this effort. 

Nationwide, currently, there are approximately 90,000 coal mining jobs. These mining jobs support another 250,000 additional 

jobs. The coal mining industry, as a whole, provides many jobs directly or indirectly to east Tennessee, southwest Virginia and eastern Kentucky. These jobs are in the form of not only coal mine jobs 

but also in construction, manufacturing, engineering, sales, marketing, and consulting. The Powell Companies alone with whom I 

am associated, headquartered in Johnson City, Tennessee, provides 

over 500 jobs regionally to the coal industry. 

History indicates that each significant action of government was 

accomplished with an immediate and negative effect on coal production. However, the reverse is also true. That is, positive governmental encouragement will likely result in the capital investment 

necessary to sustain future production at or above current levels. 

That is what we should all strive for. 

Thank you all for this opportunity to speak to you today regarding the coal industry. No matter what the future holds for America’s energy needs, coal must be there along with oil, water, wind, 

natural gas, nuclear, and biofuels. In my final statement, I will 

say, ′′Why not coal?′′

Thank you very much. 

[The prepared statement of Mr. Hutchinson may be found in the 

Appendix on page 51.]

ChairmanBRALEY. Thank you, Mr. Hutchinson. 

Before we get to the questioning of witnesses, we have been 

joined by our colleague from Brooklyn, New York, Yvette Clarke, 

and I will just ask if you have any opening remarks you would like 

to offer. 

14

Ms.CLARKE. Not at this time, Mr. Chairman. 

ChairmanBRALEY. Thank you. 

For the questioning of witnesses, each member will have 5 minutes for questioning. We may do more than one round of questions, 

and I will begin the questioning at this time. 

Mr. Breitbach, you spoke about the importance of tax incentives 

in spurring growth in biofuels. We know that the biodiesel tax incentive was first established in the Jobs Creation Act in October 

2004 and was extended in 2005 and will expire in 2008. 

Can you provide the committee with some idea of the state of 

your industry prior to the passage of this biodiesel tax incentive? 

Mr.BREITBACH. Chairman Braley, that tax incentive created the 

legs to get the biodiesel program going. We need to continue that 

as feedstock costs have risen from the industry start-up date, the 

feedstock industry 10-year average. Bean oil, 18 cents today, 41-1/

2 cents per pound. If we could get the feedstock under control and 

get our product marketed and sold, we may not need it, but as of 

right now we need it to keep our legs and to keep our stride going. 

ChairmanBRALEY. One of the follow-up questions I had for you 

is how this tax incentive has impacted biodiesel growth and demand in Iowa. 

Mr.BREITBACH. Oh, it is huge, sir, huge. 

Without that tax incentive, our group in Farley, Iowa would have 

not pursued this matter. We could not have done it without it. We 

need it to keep our industry going, to keep our legs under us, and 

again, with the rising cost of feedstock, it is either we have help 

or we are going to have a dying industry before we even start. 

ChairmanBRALEY. One of the things that people often do not appreciate is the interplay between a number of these incentives in 

various sectors of the renewable fuel economy in Iowa where crop 

rotation between corn and soybeans has been a fact of life for 

years. We have seen the phenomena where, as ethanol prices create demand for corn, it leads to the planting of more acres of corn, 

which impacts the price of corn. It also impacts the price of beans 

as fewer acres are planted in soybeans, and then that has an impact on your business. 

So can you talk a little bit about the interplay of the policies that 

are set here in Washington and how that affects long-term planning for your industry? 

Mr.BREITBACH. Absolutely, Congressman Braley. 

With that saying, farmers—again, staying in the crop rotation, 

farmers normally plant soybeans and then the following year plant 

corn. Soybeans are a natural nitrogen. With the price of corn going 

up, farmers are stepping away from the crop rotation of beans and 

are putting corn on corn acres and are putting more nitrogen in the 

ground, nitrogen fertilizer of course. With that saying, it is shrinking our soybean market, or soy oil market, which is driving up 

costs. So that is—again, I hope I am clear on this as to why we 

need the tax incentive, because the corn-on-corn market is just taking away our cropland for the soybeans and oil industries. 

ChairmanBRALEY. Thank you. 

Mr. Kelly, one of my first encounters with photovoltaic energy 

was when my family and I—our kids were much younger—did a lot 

of hiking and camping out West, and a lot of, for lack of a better 

15

term, the outhouses in national parks and in national forests have 

a decomposition that is sometimes fueled by solar panels. 

As you look at the future of solar energy, can you talk to us 

about some of the unique applications you see on the horizon? I 

know you have shared some of those innovations with us, but as 

we look toward providing incentives for the next generation of 

Americans, what do you see on the horizon as being impacted by 

the decisions we are making here? 

Mr.KELLY. There has been a sea change, if I may use such an 

expression, in the attitudes of solar expectations. We are acquiring 

a company called InTech in Keller, Texas. It is a high-tech supplier 

of solar technology for space probes and space shots. We are going 

to take their space technology and bring it down to earth. We are 

utilizing this new technology to build farms. 

Before 18 months or so ago, there was not the idea of solar farms 

because everything was just too big. You had to have too much 

space that was required. You could not create the big numbers of 

megawatts. The largest projects were 1 megawatt. We just have assigned an LOI for 130 megawatts, 130 megawatts in Spain. We are 

in discussions with others in Texas and in California and Nevada 

for huge megawatts. I am talking 50 megawatts solar. This was unheard of. 

The reason that it is happening is because there has—through 

such tax incentives that you are talking about here, through the interest that Congress does show in the renewable energy and in 

solar, there is now concentrated interest on developing new technology capabilities. We have just had another company invest in 

our company, a company called EMCORE. They are another solar, 

high-tech supplier to NASA for the space shuttles, and the American satellites that are being propelled in space are run by this 

company’s cells, okay? EMCORE has a little bit of a dot. I am telling you it is not more than an eighth of an inch in diameter. Well, 

you can concentrate this 500 to 1,000 times. They are moving in 

with us now in our R&D. We are taking much larger quarters next 

week as a matter of fact. 

The R&D from EMCORE and the R&D from InTech and the 

R&D from WorldWater are all going to be working together. We 

are going to have this three-legged stool. We are going to take the 

cell that is used in space, this tiny, little dot. We are going to use 

the optics that have been developed which are unsurpassed by the 

InTech group down in Texas. Those two will combine to create 

1,000 times the energy that would be in a standard cell. We, with 

our conversion devices, are able to then—and control devices—able 

to translate that energy, that concentrated energy, into working 

power. We will be able in a matter of 2 or 3 years to generate all 

the power required for a city of 10,000, 20,000 or even more, and 

it will not be this huge amount of space. We could do a city of 

20,000 with this new technology that exists, okay? We need to do 

just a little bit more shining on it, but it would take, maybe, 10 

acres, 10 acres to do a city of 20,000. This is a transformation. This 

is the future of power, I believe. 

ChairmanBRALEY. Thank you. 

Mr. Zuhlke, with all the data that has recently been released on 

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16

tion that has increased correspondingly, as Congress debates the 

details of carbon control programs, can you share with the Subcommittee what your company is doing proactively to generate electricity from alternative sources? 

Mr.ZUHLKE. On the renewable front, we have been involved with 

what I will call the growing up of the wind industry in the Upper 

Midwest for a period of time. We will invest in wind between now 

and year end 2010, nearly $1 billion in wind technology in our 

service territory. 

I talked a little bit about the on-farm digesters. Again, the wind 

does not always blow, so we are looking for resources that are a 

little more reliable on a 24-by-7 basis. So, as to the on-farm digesters, we think there is potential. As I discussed today, we have four 

in the portfolio today. We think that could exceed over 30 or 40 in 

the next couple of years given the right environment to overcome 

some of these barriers. 

ChairmanBRALEY. Can I just follow up on your on-farm digesters 

comment? 

Mr.ZUHLKE. Yes. 

ChairmanBRALEY. With a lot of new technologies that can benefit 

individuals or small businesses—in the case you are talking about, 

we are talking about a lot of small farm operations or mid-sized 

farm operations—sometimes there is a reluctance to move to adapting new technologies that may offer a lot of potential. 

So, when you are talking to farmers about digesters that are 

going to be a part of your energy portfolio, can you share with us 

what type of feedback you are getting, what kind of response you 

are getting, what type of challenges you face in convincing them to 

look at adapting to some of these new technologies? 

Mr.ZUHLKE. Envision yourself going in to your banker and saying, ′′I want to invest in an anaerobic digester,′′ and they want to 

know and understand what that technology is and how does it 

work, and what we really need is a John Deere 100 on-farm digester, meaning, a recognized brand with a recognized, proven 

technology that plugs in. I think that—

ChairmanBRALEY. Since I have about 60 percent of the John 

Deere production in my district, I will make sure I mention that 

to them. They are probably going to be very interested. 

Mr.ZUHLKE. Clearly, it is one of the technologies that they are 

indeed interested in, and the on-farm digesters solve a number of 

problems for farmers, nonpoint pollution issues, the control of nutrient odor, et cetera. 

So what happens is, when you have a technology that is solving 

multiple problems and has multiple benefits, it takes a while for 

people to get their minds around what it is going to take to get it 

done. 

The bottom line is, someday, somebody is going to put some 

money down and take a risk because, if it is still in the early 

adapter stages, we end up with fits and starts, and we need to 

make sure that people are encouraged to take that risk in making 

those investments. 

ChairmanBRALEY. Thank you. 

For the sake of time, I am going to move to Mr. Woolsey and follow up on some of those points. 

17

Mr. Woolsey, it has been very exciting to me. Iowa currently 

ranks third in the per capita generation of wind energy. Actually, 

it ranks in the top 10 in wind energy potential. Waverly, Iowa is 

in my district, and there has been a great partnership between 

Wartburg College and the City of Waverly, which has been one of 

the municipalities at the forefront in adapting to wind technology. 

They have just built a green wellness center that the city and the 

college are going to share, and the college made a gift of a new 

wind turbine to the city as part of that partnership. But I also 

know from talking to a lot of people that one of the major challenges in wind energy production right now is the accessibility of 

wind turbines, and we have seen a lot of companies moving into 

this market. 

So can you talk a little bit about how the supply and demand of 

the generation production equipment is impacting what is happening in the industry that you are talking about? 

Mr.WOOLSEY. Yes. The demand for wind generation equipment 

has been rising very rapidly, 25-30 percent per year. There is a 

shortage of equipment worldwide. That makes your selection more 

limited. You know, I think the industry is ramping up right now. 

We are seeing some new players come into the industry. The predominant reason is the Federal production tax credit that is driving the U.S. market, and because it has been extended, you know, 

1 year or 2 years at a time, large players have been reluctant to 

make the large capital investments needed to start new wind turbine manufacturing facilities, and I think that has been the holdup 

for bringing new players into that manufacturing business. 

One of the constraints right now is on sub component manufacturers. There are over 800 individual components in a wind turbine, and it takes a while for those industrial manufacturers to 

ramp up, but I think we are seeing it happen rapidly. I think there 

are some new technologies in the wind generation business that 

are going to be exciting, and a lot of them are seen in Iowa right 

now and the Midwest. 

The U.S. is a very good marketplace for wind. Basically, in the 

European market, they are starting to run into NIMBY problems. 

Offshore applications have a lot of potential, but they are expensive. So the U.S. is going to continue, I think, to see a large demand. I suspect that we will start seeing wind energy move into 

supplying electricity and to our transportation sector in the not-toodistant future. 

ChairmanBRALEY. Thank you. 

Mr. Hutchinson, I live in Waterloo, Iowa. There is a large L.S. 

coal-fired plant on the drawing boards there. It is generating a lot 

of concern on a lot of different fronts. 

What I would like you to do is to talk about some of the things 

that the coal industry is doing to respond to some of the concerns 

about global warming and how your technology is adapting some 

of the things you were talking about in terms of coal gasification 

and other innovations. Just from your industry’s perspective, if you 

would be good enough to share with us some of the innovations you 

see that are responding to those concerns and that are a proactive 

approach on behalf of the coal industry. 

18

Mr.HUTCHINSON. Okay. Well, first of all, I guess, in the mining 

process, in the preparation plant end of it, there is quite a bit of 

new technology involved in removing some of the harmful things 

there. That is in the preparation plant. When it gets to the coalfired power plant, obviously, there are scrubbers, and so forth, who 

remove the particulates and the sulfurs, and also, they are gearing 

more toward the low sulfur coal in certain areas where that is possible, but with the mixture of limestone and water into the flue gas 

that comes off of these power plants, they are able to reduce most 

of those emissions by somewhere in the 98 percent range. 

ChairmanBRALEY. Thank you. 

At this time, I will yield to the ranking member. Please feel free 

to take the time you need. Given the turnout today, we want to 

give everybody on the panel an opportunity to respond to some of 

the issues, the important issues that brought us all here today. 

So thank you, Mr. Davis. 

Mr.DAVIS. Thank you, Mr. Chairman. I would like to thank the 

panel again. You have offered some great insight, and I appreciate 

that. 

I would like to start with Mr. Zuhlke if I could. 

Has the USDA offered any indication lately that they will review 

their conservation reserve program so that more crops, such as 

switchgrass, can be grown for production? 

Mr.ZUHLKE. Well, we have certainly had those discussions, and 

the proposal that I have just described has surfaced. I do not know 

where that is going to go, and I do not know what the final answer 

is going to be, but our concern is that, since we have all of these 

thousands of acres in CRP today and we are going to see a lot of 

that torn up and go into row crop production, we just see an opportunity to maximize it. In the coal-fired coal plants that we are proposing, both of those could utilize between 50,000 and 100,000 

acres of switchgrass. So, when we describe the potential here, it 

has a material impact to the local economy and to the local water 

quality, et cetera. 

Mr.DAVIS. I have met with and have received a great deal of information from Dr. Kelly Tiller, from the University of Tennessee, 

on the subject of switchgrass. She has done a lot of research on 

that. 

In your part of the country, how close are you to actually using 

switchgrass as an energy source? 

Mr.ZUHLKE. We are doing it today, and we have been for about 

3 or 4 years in a coal-fired plant that was never intended for 

switchgrass. We did a retrofit on a baseload plant, and we basically 

have a proof of concept that it can work even in a retrofit sort of 

situation. 

We think what will happen is we will go into a coal-firing basis 

now in these new plants from day one, design day one, and then 

we suspect, as we create switchgrass markets, we will probably 

transition from the cellulose being burned in the power plant to, 

maybe, a liquid fuel later on with the conversion of cellulose to ethanol. 

Mr.DAVIS. Thank you. 

19

Mr. Hutchinson, I am a strong supporter of expanding our renewable energy fuel base. I think we have to look at all options and 

not take anything off the table. 

That being said, I feel like coal has to be in the mix, personally. 

How has the coal industry changed recently in terms of national 

economics and even worldwide economics, and where do you see 

coal going in the future? 

Mr.HUTCHINSON. Well, I think here in the past 3 to 5 years, the 

demand for energy, new energy sources, has increased very late, 

and coal has stepped up to the plate and has been able to satisfy 

the demand. Actually I believe right now that demand has dropped 

a little bit. If you look at the coal prices, they have dropped in the 

past year. But the coal was able through these larger mines to increase preparation facilities in order to meet the demand that arose 

here in the past 2 to 3 years. 

Mr.DAVIS. What do you think happens to our economy if Congress makes decisions that actually harms coal production in the 

future? 

Mr.HUTCHINSON. Well, you can go back to my report and look at 

some of the statistics. Right now we have no substitute for electricity that is being produced in this country. This coal is here. It 

is available. It is readily mined. It is being mined, and it is here 

to satisfy our needs, particularly on the electricity side and steel 

manufacturing side. Right now I know of no substitute in the immediate future. 

Mr.DAVIS. Do you believe that we can go from a coal-based economy basically if we are looking at domestic fuels to only renewable, 

and if so, how long do you think that would take? 

Mr.HUTCHINSON. Personally, I don’t think you could. I think, 

with the availability and the relatively low price of coal, that coal 

will always be a big player. And I am listening to all of these other 

alternatives today. I am very interested in all of those, but I think 

the bottom line is for the future, we need all types of energy in this 

country we can achieve. Obviously, if something drastic happens in 

the Middle East, and our foreign oil supplies are shut off, we are 

going to be—we are going to be in serious trouble in this country 

and looking to all sources, including coal, to supply our needs. 

Mr.DAVIS. That is a great segue. 

You talked about our dependence on foreign oil. I served on 

Homeland Security Committee as well, and that is something that 

is at the top of mind for me is our dependence on foreign oil. I appreciate everyone on the panel doing everything that we can to becoming energy independent and using domestic supplies. 

With that being said, you mentioned coal gasification and actually being able to take coal and take it into a gasoline-type product. 

I think they were doing that in Germany as early as World War 

II. Can you expand on that? 

Mr.HUTCHINSON. That is true. That has been in effect for a lot 

of years, but the increase of it is now, and I think there is actually 

some large coal gasification plans on the tables right now for the 

Appalachian regions. So it will be a bigger player in the future, 

hopefully. 

Mr.DAVIS. When you look at OPEC, I see them being able to adjust prices, so it affects everyone on the panel, I think. To manipuVerDate 0ct 09 2002 09:33 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38205.TXT LEANN
20

late our markets, is there some level that we need to make sure 

that energy prices stay at so each one of you are protected from foreign oil, Mr. Hutchinson? And then I will let everybody else take 

a stab at that, too. 

Mr.HUTCHINSON. I am not sure I follow your question. Some level 

of what? 

Mr.DAVIS. Basically is there some level of pricing—because I 

have seen OPEC since the 1970s, when I see the economy, when 

they say some other type of alternative fuels start to come on, coal, 

switchgrass, wind, water, whatever, OPEC has the ability to regulate prices, we go from $3 a gallon to 97 cents a gallon. 

Is there some floor that we need to help as a Congress that when 

you put those dollars in investments, that your investments are 

protected for the future? 

Mr.HUTCHINSON. I am not sure I am qualified to answer that 

question. Maybe someone else on the panel is. 

Mr.DAVIS. Okay. Thank you. 

Mr.ZUHLKE. I don’t know as though I have a number that I could 

respond to, but I would give you a real-life example of the way we 

would view the impact. 

We have a very large fleet that is dedicated to keep the energy 

flowing in Iowa. We use a lot of diesel fuel to keep that fleet rolling. We are in the middle of transitioning to—our fleet to the use 

of biodiesel. I look at West Dubuque Biodiesel in terms of our ability to utilize that fuel depends upon those incentives they are producing. 

Right now our barrier is not proof of concept, it is not whether 

or not it works in our trucks, it is just getting the supply, and then 

we will be using it. 

Mr.KELLY. I would make reference to kilowatt hour pricing, I 

think. And, yes, what you are saying is absolutely true. The manipulation can be easily demonstrated from—you know, by OPEC and 

so forth. 

Your kilowatt hours ultimately that the people pay, whether it 

is commerce or residential, is the key feature. We in the solar business are bringing that number down to what I was talking about 

a few minutes ago when I was speaking about this three-legged 

stool of the new technologies of three small businesses. 

But we will be able to come in with kilowatt hour prices that are 

every bit as good within a short period of time as the—as what prevails, and I am talking—you know, your prices may run all the way 

from 5 or 6 cents a kilowatt hour up to 15 or 20 or more. We recently—we are actually bidding on a job now at 6 cents. 

So, I mean, solar is coming in to be a big boy here and a bigtime player. If you can come in at numbers like that, you are able 

to compete, and that has significance, I think, with respect to oil 

prices. 

Mr.DAVIS. Thank you. That is all I have. 

Mr.BRALEY. At this time I would like to recognize the gentlewoman from New York. 

Ms.CLARKE. At this time I would like to thank the distinguished 

chairman for holding this hearing today as we examine the impact 

of the energy tax policy on small businesses. 

21

As has already been stated, I am from Brooklyn, New York. You 

may wonder why is a city gal sitting on this panel? As the granddaughter of a sugar cane farmer, I am intrigued by the renewable 

energy movement that is now taking root in our Nation. I am excited about this next wave of industrial manufacturing in pursuit 

of sustainable renewable energy, and I want to do all that I can 

in my capacity to serve as a catalyst to generate as much incentive 

as possible to get us into the renewable energy age in this generation, or at least in my lifetime. God willing that will be long. 

I just learned this morning from the Associated Press that in the 

great State of New York, a renewable energy task force has identified several barriers to developing renewable energy technology. 

This task force has confirmed that the complex local governments, 

their regulations, lack of resources and strong competition from 

neighboring States has contributed to some of the problems as to 

why New York may face some difficulty achieving its goal of generating 25 percent renewable energy by 2013. 

As of now, the 41.3 million funding in the renewable portfolio 

standard is not sufficient to change New York’s energy use. 

I want to ask you gentlemen if the RPS program was created to 

improve energy security, help diversify the State’s electricity options and increase economic opportunities in the renewable energies industry, how can I help my State to create a vision to develop 

policies that will make us more competitive with States such as 

California, Connecticut, Massachusetts and Pennsylvania for businesses attracted to alternative energy sources? 

Did you get that? It was kind of long. 

Basically, what would a State like New York, who is really struggling right now to really galvanize its industry, do at this stage to 

help create a vision and help develop policies that will make it 

competitive, that would attract business to the State that many of 

you already are involved in—with the exception of coal; I don’t 

think we have any coal in the State—to really attract businesses 

that would generate alternative energy sources? 

Mr.KELLY. If I may speak for a moment on that. We are talking 

to some of the larger developers in New York City now, and the 

idea being that with the new technologies, you can build in your 

construction in the buildings, the big buildings in New York. You 

have got so much opportunity. For example, again, I am obviously 

speaking about solar, but the impact that you can have on the economics is getting to be rather strong, and that would be a draw, 

I think. 

If there were—you are in New York, and you are able to get 

some benefits for—particular benefits for solar in the construction 

of new buildings, I am talking some of the bigger buildings, too, 

which we are discussing about in Jersey City right now and out on 

Long Island, I think that would have significant, you know, impact. 

Mr.WOOLSEY. You have got the—carrot-and-the-stick approach. 

You have got a very good RPS in place right now. If you put some 

teeth into that RPS for nonperformance, you will have compliance 

at some cost. 

The other idea is to use the carrot and providing term contracts 

at sufficient prices to get developers to come in and sign agreements, sign long-term power purchase agreements for clean elecVerDate 0ct 09 2002 09:33 Dec 20, 2007 Jkt 033615 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\38205.TXT LEANN
22

tricity or the purchase of cellulosic ethanol or sustainable biodiesel, 

with the State doing that or entity that has deep enough pockets 

that a developer can take that contract, and go to the bank and get 

money, put those plants up and start the production. That is the 

other option. 

So I think you guys are on the right track. 

Mr.ZUHLKE. My only thought would be whatever you use, try to 

extend it for—give it a certain time, certain length of period of 

time. If we have any lessons learned in this industry, it is the on 

again, off again on tax credits, or the on again, off again on terms 

of incentives. 

The people who build the equipment just can’t figure us—this industry out, and they just don’t have time to design, build and get 

it into the pipeline. So longer-term signals on purchase power 

agreements is extremely valuable to getting something done. 

Ms.CLARKE. Thank you, gentlemen. 

I wanted to ask when the House focused on energy independence 

day initiatives, it was this committee’s goal to provide financial assistance for programs such as the Small Business Development 

Center, to provide support to small businesses to evaluate energy 

efficiency and green buildings opportunities, securing financing to 

achieve energy efficiency and to help these businesses improve environmental performance. 

Can you tell us how the increased loan limits of small businesses 

will help these companies reduce their energy costs and become 

more energy efficient? 

Mr.KELLY. I am sorry. The reduced loan charges to whom? 

Ms.CLARKE. For small businesses. 

Mr.KELLY. In other words, if I am a small business, if I could—

if it was easier for me to get a loan? 

Ms.CLARKE. Exactly. 

Mr.KELLY. Sure. But in the banking, I can tell you that we have 

tried to get a line of credit, for example, never. No matter what, 

we could not get lines of credit. 

I now have millions of dollars in the bank, and only now are they 

ready to start giving us a line of credit. 

So, yes. 

Ms.CLARKE. Why would you say this is? What is the mentality 

out there in the lending community when it comes to renewable energy in particular with small business? 

Mr.KELLY. I think that the bankers ultimately will not write any 

checks for something that they consider is not really mainstream, 

and renewable energy is not mainstream. 

So we are working our way in there. We are really muscling our 

way in, and I have seen that difference in the last year now, but 

it is because we are growing and getting forceful in what we are 

doing on all renewable. 

And solar I will speak for, but the banks, I mean—

Ms.CLARKE. Do you see venture capital being attracted to this 

area? 

Mr.KELLY. Venture capital is clearly coming in, and that is 

where there has been a major attitudinal change. They are now 

coming in, and I am getting a lot of requests for people to buy our 

stocks. I get two, three investment groups a week saying, we will 

23

buy your stock. But the banks aren’t doing it. I want a line of credit. I don’t want to give away my stock. 

Ms.CLARKE. Thank you very much, Mr. Chairman. 

Mr.BRALEY. Let me follow up on that, Mr. Kelly. 

One of the questions that Ms. Clarke raised was the whole issue 

of the 25-by-13 incentive program in New York, and a lot of us are 

familiar with a lot of different variations of that. 

There is a group called 25-by-25 here in Washington advocating 

that 25 percent of our energy be derived from renewable energy resources by 2025. 

Has your industry been involved with any of these efforts, and 

can you tell us what you believe the contributions your industry 

can be to achieving that goal, assuming that the proper energy tax 

incentives are afforded and extended beyond the current law? 

Mr.KELLY. I think one quick way would be what I think you have 

in your bill, that utilities, electric utilities, be given this 30 percent 

Federal tax credit availability. 

In New Jersey we have a—an RPS of 90 megawatts before, I 

think, the end of 2008 or 2009, and it is a struggle to get there. 

The utilities would, I think, would jump on something like this, 

and I do think you have this as a part of your new bill. That is 

very important. I think that will open up a whole lot of new business. Just as I was talking about what the tax credit did for—to 

really jump-start everything through PPAs for us, the power purchase agreements, you would have the same thing with the utilities. So I think that is very important. 

In conjunction with that, if I may actually kind of put our oar 

in here. The tax credits need to have that extension of time. You 

have got to have a minimum of 8 years, or the investors will not—

they don’t like to come. They will come if they know that there is 

some stability there, at least 8 years on that tax credit. 

If you—the other subjects, very fast, that I would just put across 

to you, Mr. Chairman. The interconnection, okay, with the distribution lines, very important. 

The Federal procurement mandates. We are now talking to 

HUD. HUD has—we demonstrated. We spoke to HUD and had a 

very nice response from them. And I basically said, we can present 

the whole power spectrum to you from your heating, your hot 

water, your HVAC, your electricity, and we will run all of the motors and pumps in your projects, and we will save you 25 percent. 

And that is now—you know, it is going through a process. But that 

is very real. 

So the government is the biggest owner and the biggest builder 

and the biggest energy buyer. There should be something there. 

And that would really have very visible and palpable impact. 

Then also in your grants to the States for infrastructure. If you 

would say some of that needs to be renewable, that would also do. 

Mr.BRALEY. Thank you. 

Mr. Breitbach, one of the earlier hearings we had in this Committee on renewable energy and its impact on small businesses, 

Bob Deneen from the Renewable Fuel Association came in here and 

identified the renewable energy production in every member of the 

full committee’s congressional district, and that was a very impressive performance. And one of the things he did was point to Ms. 

24

Clarke and talk about the use of recycled cooking oil as a component of the renewable fuels industry. And we know that one of the 

things that does has potential, especially in biodiesel production. 

Can you share with us some of the innovative things that are 

being done in biodiesel beyond just the derived biodiesel production 

from soy beans? 

Mr.BREITBACH. Biodiesel can be made of other oils and also 

white grease, white cooking grease. Animal fats can create biodiesel. At this time the soy bean oil is the most economical, best 

product to use in making biodiesel. 

The inputs on the animal fat side is a little tougher, a little 

tougher to work with to get your ASTM standards biodiesel out of. 

That is why the choice is the oils. 

Referring back to Ms. Clarke’s question on going to the bank and 

getting the money, we are seeing a slowdown or a stoppage of biodiesel plants, as you well know, Mr. Braley, because of the prices 

of our feedstock, because of the return on investments. The investors aren’t coming out. The banks aren’t jumping on board because 

we don’t have a standard. You know, as these gentlemen on the 

panel say, 2 years, nobody wants to take a chance on a 2-year program. 

So as I must say, we sure need a renewable fuel standard so we 

can get these investors out so we can get the banking and the financial institutes behind us. 

On biodiesel, Congressman Braley, yes, there is all kinds of new 

technology coming out. They are talking about corn oil, the back 

side of a corn oil, TDG, making biodiesel out of that. There are all 

kinds of new technology coming out. 

Ms. Clarke, as you were saying, how can we push New York? A 

standard. A renewable fuel standard that mandates New York uses 

2 percent biodiesel to get that State in the renewable fuels program. 

Mr.BRALEY. One of the things that I hear when I talk to people 

who are on some of the cutting edges of wind energy technology is 

the problem of storage and retrieval of electricity generated from 

wind production so that you can get it back onto the grid during 

peak demand times. And I have heard a lot of the innovative ideas 

that are out there on how we can accomplish that; but, as you 

know, and listening to every member on the panel, the research 

and development that goes into that technologies that leads to actual cost-effective ways of delivering that type of a result is what 

is a big challenge facing the people in your industry, especially 

small business owners. 

Can you talk a little bit about some of the issues that relate to 

not just the production of wind energy, but the storage and retrieval to meet these peak demand periods? 

Mr.WOOLSEY. There is, of course—the wind doesn’t blow at one 

location all the time. However, when you look at the weather patterns coming across the plains or across the United States, if you 

diversify the location of your wind generation, you will have wind 

blowing and supplying electricity at almost any point at a time. 

You will be able to have electricity and—provided you can transport it to where you need it. 

25

The idea of putting a disbursed generation pattern out there on 

the land allows you to use the smaller lines, the distribution grid 

more readily. The existing capacity that is available on that versus 

the transmission lines, the larger lines that transport larger 

amounts of electricity, you locate that generation closer to where 

the loads are, closer to where you need the electricity, and consequently you save a lot of line losses in electricity and transporting that—a product. 

Right now some very exciting things are going on right now with 

making—turning electricity into ammonia, anhydrous ammonia, 

actually capturing nitrogen from the atmosphere and fixing it and 

using that as your storage system. NH3 is one of our most densest 

hydrogen carriers that we have. We now have irrigation engines 

that have been converted over from diesel fuel over to anhydrous 

ammonia running those pumps. This technology will also be able 

to be used in cars. 

We have a pump storage compressed air project that is under 

way right now where they take electricity when they don’t need it 

and pump it and turn big compressors, pump the air down into the 

subhorizons of the Earth’s strata. And then when they do need it, 

they can pull that air back up, turn the turbines again, and use 

that as a very significant storage medium. You can also use that 

electricity to make hydrogen and use that as a storage medium. 

As it becomes more clear to people and company corporations 

that this is going to be a very necessary technology for the future, 

we are seeing some very innovative and very exciting technologies 

move in that direction. And I think this small business aspect of 

this is critical for you folks to take a lead on this. I think it will 

be the determining factor on whether the industry is all owned by 

the old Big Oil folks or whether we tap the entrepreneurial creativity and ingenuity of America. 

Mr.BRALEY. Thank you. 

At this time, I will yield to the Ranking Member for any additional comments or questions he wishes to share. 

Mr.DAVIS. I want to thank you for being here today. It is very 

helpful for us to know that we have great minds working on our 

energy independence. Thank you for your willingness to travel to 

Washington. 

Mr.BRALEY. Ms. Clarke, any further questions? 

Ms.CLARKE. No. 

Mr.BRALEY. One of the things that we know is that the consumers and small business owners all over the country are very interested in what we are talking about here today. We want to 

thank you for taking time from your busy lives to join us today, 

and we do have votes pending, but I would like to give each one 

of you a minute to make any closing comments or any additional 

remarks that you would care to share with us. 

Mr.KELLY. First of all, I would like to say thank you one more 

time. We need to have an audience such as yourselves. We go back 

to our respective locales, and we can rage, if you will, but not get 

anything done, and where you get it done is here and with you. 

There are ways to really, I believe—I will use a pun here, but 

to electrify what we can accomplish through—it is through you to 

give the true encouragement through tax incentives. They work. 

26

And if you can do some of the things that I was saying, from our 

point of view, that would be hugely helpful not just to world order, 

but to all solar companies and certain other renewables, too. 

Mr.BRALEY. Mr. Breitbach. 

Mr.BREITBACH. I would like to thank the committee as well for 

taking the time to listen to us and listen to our concerns and voice 

our concerns. 

As Mr. Kelley said, it is up to you guys. We look to you to help 

us out. In any way we can help you out, we sure would. 

Ranking Member Mr. Davis, you asked a question, and I didn’t 

get a chance to get in on it, but you said what could we do, is there 

a number on it? Well, me and my constituents, we put together a 

countercyclical payment program that I am going to get copies out 

to everybody, and it puts a floor on it for biodiesel. It is a great 

countercyclical payment program, and I will get that out to you 

gentlemen. 

Thank you very much again. 

Mr.BRALEY. Thank you. 

Mr.WOOLSEY. I thank you all also. 

I think in using the tax policy to internalize the external costs 

and benefits of the industry that we are working in I think is vitally important. You know, the costs associated with health care, 

with the military, with carbon—fossil carbon additions, you know, 

to be able to use the tax policy, to actually start to quantify those 

is going to become a much more complicated and, I think, important task as we go forward. 

The biofuels, I think, is going to be especially interesting to see 

that accomplished. There are so many different criteria that go into 

producing something like biofuels or any of the other renewable energies. It is a complex process, and tax policy, I think, is probably 

the appropriate place to be able to nuance the benefit and the 

value that we count on these products. 

Mr.ZUHLKE. Mr. Chairman, you asked earlier about global warming, and I would just comment from the standpoint you probably 

heard the expression before there is no silver bullet; but we are 

going to need to use silver buckshot, and there is going to be many, 

many answers, and a diverse fuel supply and a diverse solution is 

in indeed in the offing. 

You have every reason to be optimistic. When we touch—from 

coal gasification to sequestration, to solar applications, to energy 

storage, to converting the way we do our transport, there are tremendous amounts of energy and human capital going on in this 

business, and you have every reason to be very, very optimistic. 

There is many, many technologies that makes your job in your 

committee hard because there are so many things going on. But 

there are lots of reasons to be optimistic about the future. 

Mr.BRALEY. Thank you. 

Mr. Hutchinson? 

Mr.HUTCHINSON. Thank you again. Thank you very much for inviting me here today. 

Just to wrap up the coal presentation, as I said, I think it is a 

major player for years to come. There are billions of tons of reserves right here in the country that we don’t have to worry about 

the foreign world situation or anything of such. And the prices are 

27

competitive; the mining is available. Working in conjunction with 

some of these new alternative fuels, I am sure you guys will come 

up with some methods that benefit all of these industries that we 

have talked about here today. And certainly don’t forget coal for 

what it has done and for what it will do for us in the future. 

Thank you. 

Mr.BRALEY. I ask unanimous consent that Members have 5 legislative days to enter statements into the record. 

Without objection, so ordered. 

Mr.BRALEY. I want to thank the witnesses again, and the hearing is now adjourned. 

[Whereupon, at 11:07 a.m., the subcommittee was adjourned.]

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