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94–135 PDF 2004

THE BENEFITS OF TAX INCENTIVES FOR PRODUCERS OF RENEWABLE FUELS AND ITS IMPACT ON SMALL BUSINESSES AND FARMERS

HEARING

BEFORE THE

SUBCOMMITTEE ON RURAL ENTERPRISES, 

AGRICULTURE, & TECHNOLOGY

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, MAY 6, 2004

Serial No. 108–63

Printed for the use of the Committee on Small Business

(

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

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

FRANK BALLANCE, North Carolina 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

BRAD MILLER, North Carolina 

[VACANCY]

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Policy Director 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON RURAL ENTERPRISES, AGRICULTURE AND 

TECHNOLOGY 

SAM GRAVES, Missouri, Chairman 

BILL SHUSTER, Pennsylvania 

SUE KELLY, New York 

SHELLEY MOORE CAPITO, West Virginia 

MARILYN MUSGRAVE, Colorado 

PATRICK TOOMEY, Pennsylvania 

FRANK BALLANCE, North Carolina 

DONNA CHRISTENSEN, Virgin Islands 

ED CASE, Hawaii 

MICHAEL MICHAUD, Maine 

BRAD MILLER, North Carolina

PIPER LARGENT, Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

Hulshof, Hon. Kenny, U.S. Representative (MO-9), U.S. House of Representatives ....................................................................................................................... 4

Hurst, Mr. Brooks, Missouri Soybean Association ................................................ 6

Dineen, Mr. Bob, President, Renewable Fuels Association .................................. 8

Adams, Mr. Duane, National Corn Growers Association ..................................... 10

Hurst, Mr. Charlie, Golden Triangle Energy, L.L.C. ............................................ 12

Lampert, Mr. Phillip, Executive Director, National Ethanol Vehicle Coalition . 13

Werner, Ms. Carol, Executive Director, Environmental and Energy Study 

Institute ................................................................................................................ 16

Jobe, Mr. Joe, Executive Director, The National Biodiesel Board ....................... 17

APPENDIX

Opening statements: 

Graves, Hon. Sam ............................................................................................. 29

Prepared statements: 

Hulshof, Hon. Kenny, U.S. Representative (MO-9), U.S. House of Representatives ................................................................................................... 31

Hurst, Mr. Brooks, Missouri Soybean Association ........................................ 33

Dineen, Mr. Bob, President, Renewable Fuels Association ........................... 36

Adams, Mr. Duane, National Corn Growers Association .............................. 45

Hurst, Mr. Charlie, Golden Triangle Energy, L.L.C. .................................... 48

Lampert, Mr. Phillip, Executive Director, National Ethanol Vehicle Coalition ................................................................................................................. 50

Werner, Ms. Carol, Executive Director, Environmental and Energy Study 

Institute ......................................................................................................... 54

Jobe, Mr. Joe, Executive Director, The National Biodiesel Board ............... 62

(III) 

(1)

THE BENEFITS OF TAX INCENTIVES FOR 

PRODUCERS OF RENEWABLE FUELS AND 

ITS IMPACT ON SMALL BUSINESSES AND 

FARMERS 

THURSDAY, MAY 6, 2004

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON RURAL ENTERPRISE, AGRICULTURE

AND TECHNOLOGY

COMMITTEE ON SMALL BUSINESS

Washington, D.C. 

The Committee met, pursuant to call, at 10:02 a.m. in Room 311, 

Cannon House Office Building, Hon. Sam Graves presiding. 

Present: Chairman Graves and Representative Miller. 

Mr. GRAVES. Good morning. This is the Small Business Subcommittee on Rural Enterprise, Agriculture and Technology. I appreciate everybody coming in today. This is a newly refurbished 

hearing room. We are real proud of it. It is very nice, it is a lot 

nicer than our old hearing room over at Rayburn. We are real 

pleased with it and this is the first time we have gotten to use it 

this year. 

Our purpose today is to explore the value of renewable fuels and 

the role they play in the comprehensive energy policy in our economy and in our national security. Far too often, misconceptions regarding renewable fuels become embedded in the heads of Washington policy makers. Questions such as our renewable fuels and 

effective fuel source, are they affordable? 

Most of us are aware of the successful track record of renewable 

fuels, but it is my hope that today’s panel can help to further educate us on the effectiveness of renewable fuels and clarify any misconceptions that are out there. 

The focus of today’s hearing is the many benefits of renewable 

fuel’s use, more specifically, I want to highlight the positive impact 

on our economy and America’s farmers. I want to show why our 

country needs to maximize our domestic renewable resources to 

provide an added market for our farmers to drive down and stabilize the price of fuel, reduce dependence on foreign sources of energy and increase our important reserves. 

I have asked today’s panel to discuss how renewable fuels benefit 

our economy and how federal policies can further develop renewable fuel use. Also, advancing renewable fuel’s use is essential to 

lessen our reliance on foreign fuel. That is why we need to include 

2

them in an overall national energy policy. According to the Department of Energy, domestic supply of petroleum peaked at 11.7 million barrels per day in 1970 and imports stood at 3.2 million barrels. As domestic supply declined, consumption grew. And in 1988, 

for the first time ever, bed imports surpassed domestic supply. In 

fact, in 2002, domestic supply was a little over nine million barrels 

per day and net imports were over 10 million barrels per day. 

Over reliance on imported fuel makes our economy and national 

security vulnerable to the winds of foreign governments, such as 

which are hostile to U.S. interests. Recent increases in the cost of 

gasoline as a result of tensions in the Middle East and elsewhere 

fully illustrate this point. I believe that the United States should 

promote the use of alternate, domestically produced fuel such as 

biodiesel and ethanol. Fortunately, farmers in Missouri and across 

the nation have expanded the industry at a record pace. Corn and 

soybeans are used to produce ethanol and biodiesel—fuels good for 

the environment and good for our economy. 

Each day, more than five million gallons of ethanol are blended 

into 65 million gallons of gasoline, adding critical volume to the 

tight gasoline market and reducing pressure on price. Since I have 

been in Congress, I have supported legislation that promotes ethanol and biodiesel and I will continue to fight for these fuels, which 

are included in a national energy policy. 

[Chairman Graves’ statement may be found in the appendix.] 

Again, I want to thank everybody for coming out today and I do 

want to recognize Mr. Miller who is stepping in today for Frank 

Ballance, the ranking member and I appreciate him being here. Do 

you have an opening statement? 

Mr. MILLER. Thank you, a fairly brief one. I am pleased to be 

here today to substitute for my friend, Frank Ballance, who has an 

adjoining district of mine and with whom I served for six years in 

the state senate before we both became members of Congress last 

year. 

Today an important issue for our country is access to a reliable, 

affordable energy supply. The United States is a large importer of 

energy and is sensitive to price increases and to shortages. In an 

effort to insure our nation’s energy security, we have made significant investment in domestic renewable energy sources. Small companies have to play a role in those efforts. 

These renewable sources include fuels like ethanol and biodiesel. 

Both ethanol and biodiesel offer our small farmers a way to 

produce value added crops. Such sources also assure our energy 

independence, help to create jobs and are environmentally friendly. 

Ethanol is an alcohol produced primarily from grain. The production facilities for ethanol provide a much needed stimulus to many 

rural communities. The economic demand or impact of demand for 

ethanol adds up to approximately 4.5 billion to foreign revenue annually and it boosts total employment by approximately 200,000 

jobs. I think many Democrats with national ambitions realize that 

many of those jobs are in the state of Iowa. 

Biodiesel is another renewable fuel, but its market life is behind 

that of ethanol. It does offer several health and environmental benefits related to relative compared to petroleum based diesel fuels. 

3

Increased substitution of biodiesel for petroleum based diesel fuel 

may offer broader public access to cleaner water and air. 

As a result of these positive consequences, there are a variety of 

government programs and tax incentives that deal with renewable 

fuel production. These include tax credits, requirements, subsidies 

and incentives. Some of these programs have a specific emphasis 

on small business producers. Others are targeted to those entering 

the marketplace. 

There has been much congressional interest in renewable fuels. 

Several of the issues on which Congress is focused are addressed 

in H.R. 6, the Comprehensive Energy Bill. The energy bill contains 

proposals such as establishing a renewable fuel standard but the 

outcome of this legislation is still unclear. 

An array of other congressional legislative issues are also pending that deal with renewable fuels. That is because it has been 

proven that renewable fuel production helps local agriculture based 

communities to grow their economies, create jobs and increase tax 

revenues for states. 

There are also federal programs, mainly within the U.S. Department of Agriculture, that focus on getting small businesses more 

involved in the production of renewable fuels, from loan programs 

and rural business opportunity grants to technical assistance. 

There is support for small business to play a larger role in the domestic production of renewable fuels. 

Unfortunately, the Bush Administration has proposed cuts to renewable energy programs in its budget this year. Under the Farm 

Bill, Congress provided $23 million a year in funds to provide 

grants and loans to small business for the development of renewable energy projects. But the administration proposal would cut 

that program by $12 million. 

There are more programs that focus on small business and the 

production of renewable energy sources that also saw cutbacks in 

the latest administrative proposed budget. If we want to increase 

small business participation in the production of renewable energy 

sources, then we must guarantee they have the right tools and programs at their fingertips. It is critical for our country to have a 

comprehensive energy policy that not only includes supporting renewable fuels, but also includes small business in the process. That 

way, we can insure greater energy stability, additional jobs and increased economic growth in our rural communities across the country. 

I want to thank all of the witnesses for appearing today and I 

look forward to their testimony. Thank you, Mr. Chairman. 

Mr. GRAVES. Thank you, Brad. All of the statements of the witnesses are going to be placed in the record in their entirety and I 

first want to welcome Representative Hulshof, who is going to be 

our first panel. Representative Hulshof has been a leader, an outstanding leader in ethanol and biodiesel legislation, particularly 

those areas as it deals with the tax consequences and Ways and 

Means Committee. And I appreciate you being here to testify today 

and I will open the floor up to you. 

4

STATEMENT OF THE HONORABLE KENNY C. HULSHOF (MO-9), 

U.S. HOUSE OF REPRESENTATIVES 

Mr. HULSHOF. Thank you, Mr. Chairman. Good morning, Mr. Miller. Appreciate the invitation and applaud you for having this 

forum to discuss the broad based benefits of renewable fuels. Perhaps if we transported this hearing across to the other side of the 

Capitol, we might be better served, but I appreciate the chance to 

be here. 

I am actually here as a colleague, but I guess in the interest of full disclosure, also as an active farmer. We have 375 acres of corn 

and probably about 350 acres of soybeans that we expect to plant 

this year. So Mr. Miller, I appreciate your comments as it affects 

value added agriculture. I am going to submit my written statement for the record and then just make a couple of points in the few moments that I have. 

Mr. Chairman, you mentioned the rising prices of gasoline right 

now. One need look no further than the gas pump to see the need, 

the necessity to strengthen our commitment to renewable fuels. I 

think back to the time when I got my drivers license when I turned 

16. We imported one out of three barrels of oil from foreign lands. Mr. Chairman, when your daughter turns 16, and I see that look of trepidation in your face just mentioning that fact, but knowing 

Megan as I do, when she turns 16, about two out of three barrels 

of oil will be imported. And when my youngest daughter who is one 

gets to that magic age of 16, if nothing changes, roughly three barrels out of four will come from, again, some foreign land. And so obviously, our nation cannot afford to be increasingly de- pendent upon these foreign sources of fuel. Mr. Chairman, you 

talked about, suggested the economic benefits. Let me give you just 

a couple of facts and figures from an ongoing ethanol plant. In fact, 

a northeast Missouri grain ethanol plant in Macon, Missouri. Mr. 

Miller, it is a small town in the middle of the state in my congressional district. It was the first ethanol plant developed in the state 

of Missouri. According to Dr. Donald Van Dyne, who is a retired 

research associate professor from the University of Missouri, here 

is how the northeast Missouri grain annually bolsters the local 

economy. First of all, it processes 16 million bushels of corn from 

right within that area, circle around Macon, Missouri, 16 million 

bushels of corn go through the plant, producing about 42 million 

gallons of ethanol at that single plant. As far as the number of 

jobs, obviously there are jobs that are directly impacted or created 

by the plant itself. But when you look at the indirect jobs, roughly 

1,779 jobs, almost 1,800 jobs created in this one plant that are indirectly related, which creates about $169 million in economic output. 

You know, all of us are supporters, for instance of the USDA 

rural development grants and the discussion about what level of 

funding is appropriate. This is a way to help bolster rural America. 

And I know, Mr. Chairman, in your district, in Craig, Missouri, 

that probably similar numbers from the Golden Triangle Ethanol 

Cooperative, similar benefits to the surrounding community. 

Each of you have said that the federal government has a role as 

far as maintaining our commitment to renewable fuels. I absolutely 

agree that the Energy Policy Act that was approved by the House 

keeps that commitment. We hope, of course, that our counterparts 

5

again on the other side of the Capitol would see fit to maybe put 

the politics aside and allow this comprehensive energy plan to be 

considered on the floor of the Senate for an up or down vote. 

Enactment of the Renewable Fuel Standard, for instance, not 

only does it strengthen the ethanol tax incentive, and it also creates an incentive for biodiesel. You know, we have been focusing 

on ethanol. Biodiesel is another promising renewable fuel, produced 

primarily from soybeans that can be blended with conventional diesel fuel, burned in diesel engines, and again, an economic benefit 

to the community, but also environmentally friendly. The use of 

biodiesel has grown in the market. A couple of years ago, 1999, 

about 500,000 gallons of biodiesel were sold. Last year, biodiesel 

sales topped 25 million gallons. 

And so this increased acceptance of biodiesel in the marketplace 

is a positive signal. That is why I think this Renewable Fuel 

Standard is so important. 

Mr. Chairman, at the outset, you talked about some of the misconceptions about renewable fuels and that is why I again applaud 

you for having this hearing, because I think it is incumbent upon 

us to help dispel some of the myths. You do not have to have some 

special engine. Obviously, if you are burning E85, that is, 85 percent ethanol, yes, you have to have modifications. But a 10 percent 

ethanol blend or an 80–20, B20, you do not have to have these 

modifications and yet you still are able to reap the positive environmental benefits. We lessen our dependence upon volatile regions of 

the world as far as the importation of our fuel and obviously, then, 

for those of us who have rural constituents, some really direct and 

indirect positive economic benefits. 

So, again, thank you for giving me the chance to say a few words 

before your Subcommittee and would be happy to answer any questions you might have. 

[Congressman Hulshof’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Mr. Hulshof. The misconceptions are extremely tough for me and it is very frustrating. We did, I think it 

was in 1990 or 1991 on our farm, we did a study through the Missouri Soy Bean Association with biodiesel and we were running 

about a 50 percent to one-third blend through our tractors with no 

changes whatsoever. And that was when biodiesel was in its infancy. It was just really getting started, there were a lot of criticisms about gelling aspects and that sort of thing. But it works and 

both products are great products. Do appreciate you being here. 

I know you are pressed for time. I would invite you, if you would 

like to come up and sit on the panel, I offer that to you, but I know 

you are pressed for time and do want to move on, but I appreciate 

you taking the time to testify. 

Mr. HULSHOF. Mr. Chairman, as tempting as it would be to 

share the dais with you and Mr. Miller this morning in this awesome hearing room, you are right, I have other pressing matters. 

But I do appreciate you giving me the opportunity to be on the 

record here today to talk about something, but I think we are at 

a critical juncture again. 

From a policy perspective, if we could make decisions in a policy 

vacuum, without question I think all of our colleagues would supVerDate 0ct 09 2002 21:55 Oct 01, 2004 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\HEARINGS\94135.TXT MIKEA
6

port the idea of renewable fuels. It is just sometimes when we add 

that political component is when we get frustrated, you and I get 

frustrated because we see good policy that is being hampered from 

being implemented because of the politics. So hopefully this hearing and others like it will help break loose that political log jam 

so that we can do good things for our country. Thank you. 

Mr. GRAVES. Thank you. We will go ahead and seat the second 

panel and we will get everybody situated. 

[Pause.] 

Mr. GRAVES. I want to thank everybody for being here today. I 

appreciate you all taking time out of your busy schedules to be 

with us. We will go ahead and get started. We try to limit testimony to five minutes, but we do not keep a very rigid policy on 

that. If anybody goes over their time limit, I do not think Mr. Miller or I will have you thrown out or anything. So do not worry so 

much about that. There will be a timer down there that kind of 

gives you what the limit is, but again, do not worry too much about 

it. 

We are going to start off with Brooks Hurst on the far left, who 

is here with the Missouri Soybean Association. I appreciate you 

being here, Brooks, very much and I will go ahead and turn the 

floor over to you. 

STATEMENT OF BROOKS HURST, MISSOURI SOYBEAN 

ASSOCIATION 

Mr. BROOKS HURST. Thank you, Mr. Chairman. Mr. Miller, good 

morning. I would like to first of all thank you, Mr. Chairman and 

the members of the Committee for allowing me the opportunity to 

testify today on behalf of the Missouri Soybean Association, which 

represents about 28,000 Missouri soybean farmers. I am a farmer 

from Congressman Graves district. We have been blessed in Missouri with a progressive congressional delegation. As the chairman 

mentioned a minute ago, he has burned biodiesel on his own farm 

and Congressman Hulshof who testified earlier is also a very 

staunch supporter of biodiesel. In fact, the original legislation that 

I am here to testify about today on the tax incentive, excise tax 

abatement for biodiesel was originally drafted by Congressman 

Hulshof. And it is one cent per percent excise tax abatement, up 

to a 20 percent blend. And it is in several pieces of legislation and 

it is probably the single most important legislation that could be 

passed for soybean farmers. The studies have suggested that if this 

legislation and the excise tax abatement passes, there would be a 

million gallon biodiesel market by the year 2012. 

This market, the Food and Agriculture Policy Research Institute 

has done a study that suggests an 80 cent per bushel increase in 

the price of soybeans, which would mean $148 million in additional 

income to Missouri soybean farmers. And I do not need to explain 

how important in the last couple of years that would be to Missouri 

soybean farmers. The farm economy has not been as robust as we 

would like. That would be a crucial addition to our rural economy 

and all the rural development implications that goes with it. 

My father is also on the panel to testify later for ethanol. We are 

both members of the Golden Triangle Ethanol plan and it has done 

an amazing amount to increase our rural development. 

7

I am also sitting on a board of directors for Mid America 

Biofuels, which is a biodiesel plant and we are in the start up 

phases. And we have had feasibility analysis done on different size 

plants. And right now, biodiesel is a boutique fuel. It has a lot of 

uses in complying with the EPACT legislation in large cities and 

the environmental aspects of it, which I will talk about a little 

later, are very beneficial. So right now it is kind of a boutique fuel 

and a five million gallon plant per year is the largest feasible plant 

that we can build. 

The minute that we get the excise tax passed, a five million gallon plant is no longer efficient. So we are sitting on the sidelines, 

because if an excise tax abatement is passed, that will, you know, 

as I mentioned earlier, immediately increase the demand for biodiesel. So it is very important and we have been waiting for about 

three years to decide which way to go on it, how to build the plant. 

I would really urge the passage of the excise tax abatement, because a 15 million gallon plant would do a lot more for the economic development of rural Missouri. 

I talked a little bit about the environmental advantages of biodiesel. I will talk some more about that. There are no sulfur emissions in biodiesel and the presidential directive that reduced the 

sulfur content in petroleum diesel from 200 parts per million to 15 

parts per million, sulfur adds a lot of lubricity to biodiesel. So this 

is another deal that is not environmentally friendly, but engine 

friendly. A one percent biodiesel plant increases lubricity of diesel 

65 percent. So I see an opportunity to reduce engine wear by a 

small blend of diesel in the national fleet and adding lubricity to 

diesel. 

Soy diesel also burns half the hydrocarbons which, when added 

to the air, contribute to smog and acid rain. It also has half the 

carbon monoxide of petroleum and half the particulate matter and 

it has 75 to 80 percent less potential cancer causing agents. And 

so you can see that not only is it a renewable fuel that we grow 

right here on our own farms, but it also is very good to the environment. 

Another thing that is brought up in renewable fuels discussions 

is the energy conversion required to produce renewable fuels. And 

I am very proud to say that in a 1998 U.S. Department of Energy 

and United States Department of Agriculture Joint Study revealed 

that for every unit of fossil energy required to produce biodiesel, 

3.2 units of energy were yielded, and that is in contrast with 1.2 

units of fossil resources needed to make just one unit of petroleum 

diesel. This is due to the fact that soybeans do not use nitrogen in 

the production of them. So we have really good energy conversion 

numbers and we are proud of that. 

And it has been mentioned before on the panel, Mr. Chairman, 

you referenced in your opening statement and Congressman 

Hulshof referenced it, too, the dependence on foreign oil. I will not 

go over the numbers again, but, you know, 20 million barrels a day 

of oil the United States is using and over half of it now is imported. 

And by 2005, the Department of Energy projects that 68 percent 

of all oil will be imported. 

Right now there is currently a 1.5 billion pound surplus of vegetable oil in the U.S. I think that is a perfect opportunity to use bioVerDate 0ct 09 2002 21:55 Oct 01, 2004 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\HEARINGS\94135.TXT MIKEA
8

diesel to not only use up excess vegetable oils, but also to replace 

some of the imported petroleum from foreign countries. If we have 

a four percent use of renewable fuels by the year 2016 in a U.S. 

consultant study, using Department of Energy numbers, stated 

that four percent renewable fuels would displace annually 302 million barrels of petroleum fuels that we are currently importing. So 

you can see not only in national security, but for rural economic development and the farm economy, I think that renewable fuels are 

a very good opportunity to help our nation. And with that, I would 

like to thank you again for allowing me this opportunity to testify 

and I appreciate your consideration of this matter. 

[Mr. Hurst’s statement may be found in the appendix.] 

Mr. GRAVES. Next we will hear from Bob Dinneen. We are going 

to move through all the panelists and then we will take questions 

once each of you have finished. But, Bob, I appreciate you being 

here today. Bob is the president of Renewable Fuels Association 

and we look forward to hearing your testimony. 

STATEMENT OF BOB DINNEEN, RENEWABLE FUELS 

ASSOCIATION 

Mr. DINNEEN. Mr. Chairman, thank you very much and Congressman Miller. I appreciate the opportunity to be here this morning and I commend you for the leadership that you are showing in 

holding this very timely hearing. Indeed, I can tell you that the tax 

incentives that Congress has provided to stimulate renewable fuels 

have been extremely successful and have promoted rural economic 

development and small businesses all across this country. 

Indeed, Mr. Chairman, the U.S. ethanol industry today is the 

fastest growing energy industry in the world. We produced 2.8 billion gallons of ethanol last year. That is 32 percent more than we 

had the previous year and about double our production from just 

four years ago. 

Importantly, the fastest growing segment of the ethanol industry 

are small businesses. Farmer owned cooperatives that want to 

seize control over their own product. As a whole, farmer owned ethanol facilities are now the single largest ethanol producer in the 

country, providing critically important value added economic stimulus to rural America. 

Last Saturday, I attended the grand opening of the 76th ethanol 

plant in operation today, just a little bit north of Missouri in South 

Dakota, maybe a little bit east of North Carolina, but we intend to 

have ethanol plants in North Carolina as well. 

Mr. GRAVES. That is west. 

Mr. DINNEEN. West, I am sorry. See, I got into politics because 

I was never very good at geography, Congressman. Anyway, that 

plant joins a fraternity of ethanol producers across the country that 

this year alone will process more than one billion bushels of corn 

into about 3.4 billion gallons of high quality, high performance fuel 

ethanol. Ethanol is now blended in 30 percent of the nation’s fuel. 

It is replacing MTBE in new markets all across the country, from 

New York to California. And the growth that we are seeing in ethanol markets has been phenomenal. 

This growth is absolutely as a direct result of the tax incentive 

program that Congress provided to stimulate the production and 

9

use of renewable fuels and it has tremendous benefits for the nation. Earlier, Congressman Hulshof cited the economic benefits to 

a small rural community. We in the industry have looked at what 

the economic benefits were across the entire nation, from 3.5 billion 

gallons of ethanol. We determined that the ethanol industry today 

is adding $15.3 billion to gross output. The ethanol industry today 

is adding $3.9 billion to consumers’ pocketbooks as a result of the 

jobs that are created and the economic stimulus that is provided. 

We are adding $1.25 billion in increased federal tax revenue and 

another $800 million in local taxes. And at a time when many industries across the country are outsourcing jobs, the U.S. ethanol 

industry is insourcing jobs, this year alone being responsible for 

143,000 jobs across the country. 

And all this is being accomplished at the same time that the federal government is realizing about $2 billion in net savings as a result of reduced farm program costs. But, Mr. Chairman and Congressman, we can do far more. The country is currently importing 

about 62 percent of its transportation energy. Imports of crude oil 

and refined products are at their highest levels ever. Tight gasoline 

supplies have driven average consumer prices to record levels. We 

are in the midst of an energy crisis and we need to act now. Congress should act to pass the Comprehensive Energy legislation that 

you both discussed in your opening statements and Congressman 

Hulshof cited and that energy legislation ought to include a renewable fuel standard, to send a signal to the world that our nation 

is not going to continue on this path towards increasing dependency on imports. That we will create a new pathway and a new dynamic, where we are producing our own energy. 

We also strongly support HR 3119, introduced by Congressman 

Hulshof, the Volumetric Ethanol Excise Tax Credit and we urge its 

expeditious approval in whatever piece of legislation we can get 

that on. If VEETC solves a dilemma that the ethanol tax incentive 

has created for states by no longer allowing states’ highway funding to be reduced because of their ethanol use, it resolves that issue 

so that states are not penalized for their ethanol use. It creates a 

great deal more flexibility for refiners that utilize ethanol, such 

that they do not have to use ethanol in specific volumes and importantly, as Phil Lampert, I am sure, will talk about later, it provides 

a much more economic access to the incentive than the current program by allowing oil companies to take advantage of the tax credit 

independent of whatever volume or specific blend level is used. 

We also believe that Congress should finally act to correct an 

oversight that occurred in 1990 when Congress created the Small 

Ethanol Producer Tax Credit, but failed to allow that credit to be 

claimed by farmer owned cooperatives. As I indicated, the fastest 

growing segment of our industry is the farmer owned cooperative, 

but the way that tax program was set up, those very small businesses are not able to claim the credit that was provided and intended to help them. That legislation is passed several times. It 

has never reached the President’s desk. If we can get that on a 

piece of legislation this year, I think it would be important. 

Look, at a time when there are 135,000 in the Persian Gulf, at 

least in part because of our dependence on energy from that part 

of the world, at a time when consumer gasoline prices are at their 

10

highest levels in history and the growing energy crisis is slowing 

our economic recovery, at a time when EPA says that more than 

half of the country is living in areas and breathing polluted air, 

and at a time when farmers across the country are looking for 

value added markets and are saying that they can be energy producers as well as energy consumers, Congress needs to act. 

We need an energy bill. We need policies such as those I have 

outlined to stimulate further expansion of domestic renewable fuels 

such as ethanol and biodiesel. With your continued leadership and 

the leadership of this Committee, I am confident that that will 

occur. Thank you, Mr. Chairman, Congressman Miller. I will answer any questions when that time arises. 

[Mr. Dinneen’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Mr. Dinneen. We are now going to hear 

from Duane Adams from Cosmos, Minnesota, I believe. And he is 

representing the National Corn Growers Association and I appreciate, Mr. Adams, you being here today and thank you for your testimony. 

STATEMENT OF DUANE ADAMS, NATIONAL CORN GROWERS 

ASSOCIATION 

Mr. ADAMS. Thank you, Mr. Graves and Mr. Miller. I certainly 

appreciate the opportunity to be among the first to testify in this 

beautifully renovated room. It is really pretty beautiful. 

Okay, my brother and I raise corn and soybeans near Cosmos, 

Minnesota, which is about 70 miles west of Minneapolis. We are investors in a local ethanol co-op. I am the chairman of the Ethanol 

Committee for the National Corn Growers Association. I am here 

today to represent the NCGA, its 33,000 members and thousands 

of corn growers across the country who participate in corn checkoff programs. 

N.C.G.A. appreciates the opportunity to offer testimony today on 

the benefits of ethanol production to rural America. The strides 

made by the industry in the past few years are nothing short of 

miraculous and it is a story that needs repeated telling. 

No other energy source has doubled its production in the last 

three years. There was virtually no ethanol used in California two 

years ago. The ethanol industry now supplies eight percent of the 

gasoline supply in the state—a total of 900 million gallons per 

year. And we can conclusively prove that ethanol has kept the price 

of gas in California from rising faster than it has. Even the MTBE 

industry has publicly agreed. The contribution of this domestically 

produced renewable fuel is being felt at the pump across the country. 

But the true success of ethanol is best measured in the benefits 

to rural America. Ethanol plants bring jobs, good jobs, to small 

rural communities that struggle to keep young people. A 40 million 

gallon plant will provide more than 40 full time permanent jobs. 

In small town USA, those jobs are vital. Ethanol plants help keep 

schools and hospitals open and businesses profitable. And ethanol 

plants provide hope—a commodity that has not been in surplus for 

many small rural communities. 

Ethanol production is increasingly in the hands of farmer owned 

coops. ADM is not the big player in the industry. I am—and my 

11

brother and our neighbors and tens of thousands of farmers across 

the Corn Belt. We have become marketers of energy and not just 

sellers of corn. We are getting more of our income from a value 

added source and less from farm programs. Ethanol can claim to 

be the primary reason that the federal farm program will save $2 

billion this fiscal year. We had a near record corn crop last year 

and we have high prices this year. That would not have happened 

if we were not using more than one billion, 300 million bushels of 

corn for the production of ethanol. It is the third largest use of corn 

behind livestock feed and exports and it is the one with true 

growth potential. 

We did not get to this point by accident. Federal policy supporting the ethanol industry has made this possible. The excise tax 

credit, the small producer tax credit and other incentives have 

helped us get the capital to build plants. Federal policy regarding 

clean air has created a strong demand for ethanol as states ban 

MTBE and turn to affordable supplies of ethanol in reformulated 

gasoline. Strong support for the oxygenate standard by the Bush 

Administration has given the industry the signal to invest and to 

produce. We have heard the challenge and we have met it. 

N.C.G.A. policy strongly supports current renewable programs. 

We have joined with others in the ethanol industry to seek ways 

to advance common sense solutions to problems we have had. We 

worked hard to reach a historic agreement with the petroleum industry that calls for flexibility for gasoline blenders and establishes 

a renewable fuels standard that provides stability for the renewable fuels industry. We joined with the highway construction industry and state governors to fix a problem created by the current excise tax credit. The Volumetric Ethanol Tax Credit legislation is a 

bipartisan solution that helps states that want to use ethanol and 

need to invest in highway infrastructure. It solved some sticky political problems for both industries and pointed a way for Congress 

to pass policy that is good for America and has broad base support. 

The programs that benefit ethanol and other renewable fuels 

were enacted by previous Congresses. We are glad they did and we 

recognize the leadership and statesmanship that was required to 

obtain enactment of those policies. This Congress and its predecessor have debated and talked and talked and debated over energy 

policy for more than three years. Nothing has happened. In that 

time our nation has become even more dangerously dependent on 

foreign energy. 

Our farmers have spent countless hours on Capitol Hill and in 

town meetings and congressional listening sessions asking members of Congress why we cannot pass an energy bill. If we ask a 

member of the House, he or she will blame the Senate. If we question a Senator, the House is blamed. The Republicans blame the 

Democrats and the Democrats blame the Republicans. Tom Daschle 

and Tom Delay seem to be two handy targets. Everyone else is to 

blame and no one takes responsibility. Let me bring you one very 

clear message from farmers—quit blaming the other guy and do 

your work. We cannot raise corn without anhydrous ammonia and 

we cannot make anhydrous with natural gas at current prices and 

supplies. We cannot run ethanol plants without energy. Our econVerDate 0ct 09 2002 21:55 Oct 01, 2004 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\HEARINGS\94135.TXT MIKEA
12

omy cannot get out of its slump with gasoline prices increasing 

every week. 

I have my crop in the ground. I made my investment in the ethanol plant. I write my Congressman and Senators. I vote. I encourage my neighbors, friends and fellow farmers to do the same. And 

I will continue, but let me end with this note. We farmers are looking at you folks to quit bickering and do the nation’s business. Our 

nation needs an energy policy and we expect you to deliver. Thank 

you for your time. 

[Mr. Adams’ statement may be found in the appendix.] 

Mr. GRAVES. Thanks, Mr. Adams, I do appreciate that. Point well 

taken. We are now going to hear from Charles Hurst, who is with 

the Golden Triangle Energy Cooperative, the ethanol plant in 

Craig, Missouri. I appreciate you being here, Mr. Hurst, and look 

forward to your testimony. 

STATEMENT OF CHARLIE HURST, GOLDEN TRIANGLE 

ENERGY, L.L.C. 

Mr. CHARLES HURST. Thank you, Mr. Chairman. My name is 

Charlie Hurst, a fifth generation farmer from northwest Missouri 

and secretary treasurer of Golden Triangle Energy Cooperative in 

Craig, Missouri. 

The small town in the Midwest is rapidly losing the best and the 

brightest young people. They are completing their schooling and 

then leaving for employment in the city. 

A small ethanol plant, such as Golden Triangle Energy in Craig, 

Missouri, who has a population of 309—this is really a small town, 

provides decent jobs for these people and allows them to stay and 

raise their families in a home environment. Golden Triangle Energy hires approximately 30 people. The starting wage for the inexperienced is $11 to $12 an hour, plus excellent health and retirement benefits. The salaried positions are from $30,000 up. 

When you include the jobs of the people moving the corn into the 

plant and moving the ethanol and feed products out of the plant, 

it has a major financial impact on a very small area. 

The lifeblood of all small towns is their schools. IF the school 

closes, the town has a very difficult time surviving. The tax base 

that Golden Triangle has given to the schools and the town of 

Craig infrastructure, such as roads, sewers and so forth in the 

town, is a major contributor to the stability of Craig, Missouri. 

All of these area improvements would not be possible without the 

ethanol plant in Craig. The ethanol plant has also had a very positive effect on my family. With improved prices and the reduction 

of transportation costs, we now have three sons and their families 

farming with my wife and I. Last year, the oldest grandson, the 

seventh generation to be farming in Atchison County, and his wife, 

also joined the operation. Another agriculture related business in 

the family, greenhouses, has brought two granddaughters and their 

families back to this same area. 

The federal exemption of 5.2 cents per gallon of ethanol is one 

of the best rural development programs funded by the federal government. It has provided the basis for an expanding ethanol industry in the central United States and has reduced the need to import more expensive oil from the Mideast. 

13

The ethanol industry now uses 10 percent or one billion bushels 

of our corn crop. This raises the price of corn nationally from 15 

to 25 cents per bushel. Until the last few months, the price of corn 

to the farmer was below the guaranteed price in the farm program. 

The farmer was paid the difference in LDPs. Without ethanol, 

these payments would have averaged 20 cents per bushel more on 

an entire corn crop of 10 billion bushels. 

This benefit alone would have offset the 5.2 cents per gallon the 

federal government paid supporting ethanol. Not only has the ethanol industry raised the price of corn nationally, but locally, around 

the town of Craig, the price has risen another 10 to 15 cents. This 

means that rather than shipping the corn another 50 to 75 miles 

to a terminal, we are delivering the corn locally, saving transportation costs. 

The increased price of corn goes directly to the farmer’s bottom 

line. The income and social security taxes the farmer pays is another huge offset to the 5.2 cent government subsidy. There have 

been studies in the past that have cast doubt on the energy efficiencies of producing ethanol. The latest studies by USDA show 

that we are getting 34 percent more energy from a bushel of corn 

than inputs in producing that bushel of corn. These efficiencies will 

only improve in the future. 

We are also converting corn to a more useable form of energy. 

With the introduction of the hydrogen fuel cell, ethanol will become 

even more desirable. 

As we import more and more of our energy needs, as we are 

more concerned with the quality of the air we breathe and as the 

cost of all forms of energy are increasing, I believe we must expand 

the use of ethanol as a clean burning, renewable energy source. 

The 5.2 cent federal subsidy is needed by the industry to be a viable, renewable energy source. It is not, however, a direct drain on 

federal resources. As offsetting savings in the federal farm programs, the jobs and taxes the industry provides, and the savings 

in the balance of trade more than offset this cost. Thank you very 

much, Mr. Chairman. 

[Mr. Hurst’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Mr. Hurst. We will now hear from Phillip Lampert, who is the executive director of the National Ethanol 

Vehicle Coalition. I appreciate you being here today and look forward to your testimony. 

STATEMENT OF PHILLIP J. LAMPERT, NATIONAL ETHANOL 

VEHICLE COALITION 

Mr. LAMPERT. Thank you so much, Chairman Graves and Mr. 

Miller. Appreciate the opportunity to be here today. I am Phil 

Lampert and serve as the executive director of the National Ethanol Vehicle Coalition. NEVC is the nation’s primary advocate of 

the use of 85 percent ethanol as a form of alternative transportation fuel. Our members include automakers, state and national 

corn growers associations, ethanol producers, equipment manufacturers and suppliers, ethanol marketers, the Governors’ Ethanol 

Coalition, farmer cooperatives, chemical seed companies, petroleum 

marketers and individuals. 

14

Our focus in regard to the use of ethanol is very narrow in that 

we concentrate our efforts and resources on advancing this next 

generation of ethanol use. 

As chairman and the members of the Committee know, motor vehicles produced and sold in the United States have been able to use 

a 10 percent blend of ethanol for many, many years. Initially established to extend the availability of petroleum, ethanol has transformed itself from the gasohol of the early 1970s to the oxygenate 

of choice in 2004. 

In July of 1979, as then President Carter addressed the nation, 

calling the battle to achieve energy independence the moral equivalent of war, gasohol availability was limited to Nebraska, Iowa and 

several other Midwest states. Today, as previously mentioned, almost 900 million gallons of ethanol are being used in California 

and hundreds of millions of gallons in the East Coast and elsewhere across the nation. This ethanol is added to our gasoline, 

typically in a blend of one part alcohol to nine parts gasoline and 

is used to improve air quality, add octane and reduce dependence 

on imported petroleum. 

My colleagues who have preceded me this morning, two of which 

are representing organizations that are members of the National 

Ethanol Vehicle Coalition, have provided outstanding summaries of 

the positive impact that biofuels have on our nation’s economy, balance of trade deficit and environment. While the use of ethanol has 

expanded from approximately 300 million gallons in 1980 to the 

more than 3.3 billion gallons expected to be produced this year, by 

and large, the vast majority continues to be dependent on being 

blended with high amounts of gasoline. 

The Ethanol Vehicle Coalition strongly supports the continued 

growth and development of the use of ethanol as an oxygenate and 

renewable fuel and we have worked with our colleagues here this 

morning and members of Congress to adopt and promote the renewable fuel standard. However, sir, the focus of the National Ethanol Vehicle Coalition and the balance of my comments are directed to other uses of ethanol as a form of alternative fuel. 

Beginning in 1992 with the modest production of 272 E85 flexible 

fuel Luminas built by General Motors, we expect that during the 

current model year, more than 1.5 million of such vehicles will be 

produced and sold in the United States. By the end of this model 

year, in August of 2004, we estimate that approximately 4.5 million 

flexible fuel vehicles will be on the nation’s highways. These flexible fuel vehicles, as the chairman knows, are capable of operating 

on any blend of ethanol, from zero percent, 10 percent, up to 85 

percent, or where ethanol fuels are unfortunately not marketed, on 

pure gasoline. 

The electronic control module in these vehicles reads the level of 

alcohol in the fuel and modifies the air fuel ratio. There are no 

switches to flip, additional fueling tanks or other controls needed. 

The technology is transparent to the driver and most importantly, 

this capability is provided at no extra cost to the consumer. 

The 4.5 million flexible fuel vehicles on our highways could, Mr. 

Chairman, if using E85, consume an additional 3.4 billion gallons 

of ethanol today. That is in addition to the 3.3 billion gallons that 

we assume to be used in 2004. Unfortunately, using statistics proVerDate 0ct 09 2002 21:55 Oct 01, 2004 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\HEARINGS\94135.TXT MIKEA
15

vided by the Energy Information Administration, we expect to actually consume about 30 million gallons in these vehicles, or slightly 

less than one percent of the total potential demand that could be 

generated by this technology. 

Three primary factors in regard to this problem. Lack of fueling 

infrastructure. Secondly, the difficulty that is inherent with taking 

advantage of the current tax situation. And finally, the lack of education and knowledge of many of the drivers that they even have 

a flexible fuel vehicle. 

Mr. Chairman, finally, with your indulgence, I would like to 

briefly outline potential solutions to some of these problems. First, 

as my colleagues preceding me have mentioned this morning, passage of the Volumetric Ethanol Excise Tax Credit is extremely important and would provide immediate relief to the Highway Trust 

Fund and advance the use of E85. Secondly, passage of a renewable fuel standard would also be very supportive. Finally, sir, placing additional attention on the federal fleet to provide leadership 

in the use of biodiesel and E85 may be appropriate. 

The government of the United States is the world’s largest single 

user of petroleum products and maintains the world’s largest fleet 

of vehicles. There have been previous attempts to modify the behavior of government to advance alternative fuel use, however, 

these have frequently come up short. As an example, the Energy 

Policy Act of 1992 requires federal agencies to purchase alternative 

fuel vehicles. Twelve years after the adoption of this mandatory 

measure, many federal agencies continue to fail to meet these purchase requirements. 

While some progress has been made in meeting this standard, 

EPACT completely fails to address the use of the alternative fuels 

in these alternative fuel vehicles. 

Executive Order 13149 issued by the Clinton Administration and 

embraced by the current administration, requires federal agencies 

to reduce petroleum consumption 20 percent from a 1999 baseline 

as of January 1, 2005. Unfortunately, there is little effort being 

made to advance this presidential directive and it is unlikely that 

any federal fleet will actually reduce petroleum consumption, much 

less meet the 20 percent reduction goal. 

Clearly, national energy independence cannot be achieved solely 

on the actions of the federal fleet. However, there is a place and 

role of leadership that the federal government may wish to more 

closely address in regard to the use of domestic renewable transportation fuels. We appreciate and applaud all of the efforts that 

you have made,Mr. Chairman. I have enjoyed working with you 

from your days in the Missouri legislature to today, and want to 

thank you for the opportunity to testify today. Thank you. 

[Mr. Lampert’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Mr. Lampert. Next we are going to hear 

from Carol Werner who is the executive director of the Environmental and Energy Study Institute and I appreciate you being here 

today and look forward to your testimony. 

16

STATEMENT OF CAROL WERNER, ENVIRONMENTAL AND 

ENERGY STUDY INSTITUTE 

Ms. WERNER. Thank you very much, Mr. Chairman and Mr. Mil- ler, for the opportunity to appear before you today. My organization, the Environmental and Energy Study Institute, was founded 

in 1984 by a bipartisan group of members of Congress who were 

concerned about energy and environmental issues. As part of our 

work, we hold about 20 to 25 congressional briefings a year, looking 

at environmental, energy, science, technology and policy issues that 

are coming before the Congress. We have three major areas of program work. Energy and climate change, our Clean Bus/Sustainable Transportation Program and 

our Agriculture and Renewable Energy Initiative. I agree with so 

much of what has been said by my colleagues here today, so I hesitate to repeat a lot of the things that have already been said. But 

perhaps the most important thing for me to talk about a little bit 

is our perspective in terms of why our organization, EESI, feels so 

strongly about this issue. Our organization believes strongly that a healthy economy and a healthy environment go hand in hand. We very strongly believe 

that farmers across the country can and must play an important 

role in our country’s energy future. We see agriculture addressing 

three critical drivers that are fundamental to our national concerns. Rural economic development, national energy security 

through reduction of oil use and oil imports and environmental protection, especially reduction of greenhouse gas emissions that contribute to global climate change. Furthermore, we now have all seen countless reports on the connection between power plant and vehicle emissions and public 

health and the enormous increase in asthma cases among children. 

Use of biofuels can address that, too. I think it is remarkable, but 

how many times do we find the opportunity to solve multiple problems with the kind of win-win solutions provided by the production 

of renewable energy in the form of electricity, biofuels in terms of 

ethanol and biodiesel and biobased products that can be produced 

by America’s own farms and small businesses across the country. 

We see enormous opportunities existing for developing rural 

America’s clean energy resources, including biofuels, bioenergy in 

terms of the production of electricity, useable heat or liquid fuels 

from biomass, wind, solar and improving energy efficiency overall. 

Yet we see that there exists a tremendous knowledge gap among 

policy makers. We have seen that throughout the last couple of 

years with regard to many of the debates on the Energy Bill with 

farmers and other key stakeholders, including the environmental 

community about all of these opportunities. 

So I think that what I would like to do now is to just talk a little 

bit about the suite of policies that we think is very important. 

Many of them have been referred to already, because in order to 

accomplish moving towards a more biobased economy and really 

seeing agriculture being revitalized through the development and 

use of our very abundant renewable resource base, in order to accomplish that, we believe that there needs to be a suite of policies, 

not just one particular policy will take care of this. That means 

with regard to the tax incentives that have been talked about here 

17

this morning, we support that and believe that those are extremely 

important in helping send the right signals to industry and, indeed, 

to begin to level the playing field. 

The kinds of renewable resources and biofuels that we are talking about have many positive attributes that are not reflected in 

the marketplace at this time. And therefore, tax incentives at this 

time are absolutely critical. And therefore, the VEETC proposal is 

also extremely important as we look at the Highway Trust Fund. 

The renewable fuel standard, another important incentive that 

we view as a terribly important component of looking at how policies need to create a supportive framework. There are several important programs in the energy title of the Farm Bill. It is very important that the 2002 Farm Bill for the first time recognized the 

role of America’s farms in helping produce renewable energy that 

can address so many of our problems. 

At the same time, those programs which have been so enthusiastically embraced by the ag community across the country, 

whether it is in terms of looking at biofuels, at wind, at anaerobic 

digesters, there is enormous enthusiasm as people see the opportunities to really look for local economic development and small businesses and being able to actually stay on the farm in a viable way. 

Those programs, however, Section 9006, the Renewable Energy 

Program, as well as the Value Add Program, both were cut very, 

very substantially by the administration’s budget proposal. We 

hope that Congress once again this year restore funding for those. 

At the same time, we think that it is also important for there to 

be a renewable resource assessment that can help communities 

across the country really know the size of the renewable resource 

that they are sitting on. In terms of really getting that developed, 

if you do not know the value of what you have really got, it is hard 

to really encourage the full fledged development of that. 

And we would also like to mention that it is very important for 

the federal government to lead by example, again, whether it is 

through federal fleets, through purchase renewable energy, that 

that also needs to occur. And that it is very important that we look 

at this as an opportunity to develop opportunities for biofuels and 

renewable energy production from farms across the ag sector, 

whether it is the Midwest, the Northeast, the Southeast, Northwest, across the country. We feel that that is critical in terms of 

really building the bridge, looking at all of the feed stocks that 

should be involved, including waste materials that can make a 

huge contribution and can also help bridge the very important 

rural/urban divide that we see, that is acting as a barrier to really 

moving all of these wonderful opportunities forward. Thank you. 

[Ms. Werner’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Ms. Werner. I appreciate your testimony. We are now going to hear from Joe Jobe, who is the executive director of the National Biodiesel Board. I appreciate you being 

here today and look forward to your testimony. 

STATEMENT OF JOE JOBE, THE NATIONAL BIODIESEL BOARD 

Mr. JOBE. Thank you, Chairman Graves, Congressman Miller. I 

would like to again commend you for your leadership and advocacy 

on this issue. I do serve as the executive director of the National 

18

Biodiesel Board in Jefferson City, Missouri. NBB is the national 

not for profit trade association which serves as the central coordinating body for biodiesel research and development in the United 

States. 

It was founded in 1992 by soybean farmer groups who were funding biodiesel research and since that time, NBB has developed into 

a comprehensive industry association which coordinates with a 

broad range of cooperators 

Mr. Chairman, my distinguished panelists have made many important points here today and I agree with those points. So I would 

like to focus my comments on how biodiesel specifically offers an 

immediate and long term solution as part of an integrated, diversified energy portfolio. 

Biodiesel is a diesel fuel substitute made from agricultural products such as vegetable oils and animal fats, including recycled cooking oils. Biodiesel is produced through a process which separates 

the glycerin from the oil and the resulting compound acts very 

chemically similar to diesel fuel in a diesel engine. 

It can be used in conventional diesel engines in pure form, but 

it is most commonly blended, as you pointed out earlier, in 20 percent blends or B20 or two percent blends, also known as B2, which 

is used as a renewable premium diesel additive. It is one of the 

best tested alternative fuels in the country, with more than 50 million successful road miles, countless marine and off road hours. It 

has been tested in virtually every diesel engine type and every diesel application, has similar torque, horsepower and fuel economy to 

conventional diesel, but burns significantly cleaner because of the 

oxygen content in the fuel. It has premium fuel attributes. 

U.S. soybean farmers have invested more than $40 million 

through their Soybean Check Off Program and biodiesel growth 

has either doubled or tripled each year for the last four years in 

a row. While biodiesel can and is being used in today’s diesel engines, the future of diesel is about to shift very dramatically. The 

EPA has ruled that beginning in 2006, diesel fuel will undergo a 

90 percent reduction of sulfur in diesel fuel. What that will do, the 

refining process to desulfurize the diesel fuel will also remove the 

lubricating characteristics in diesel fuel and a diesel fuel injection 

system relies on the fuel to keep the system properly lubricated. It 

is very important in a diesel system. 

Biodiesel is well positioned and well addressed to fit into that future diesel platform because it already meets the 2007 sulfur 

standard and it is complimentary to ultra-low sulfur diesel fuel because it has very excellent lubricity benefits. As Mr. Hurst pointed 

out, just two percent biodiesel can improve lubricity by as much as 

65 percent. 

During the EPA’s rulemaking process, Stanadyne Automotive, 

which is the largest fuel injection equipment manufacturer in the 

United States, indicated that two percent biodiesel in the entire 

diesel fuel pool, would be a superior solution to the lubricity problem created by that ruling. The state of Minnesota has already 

taken the leadership role in utilization of biodiesel and compliance 

with the rule by enacting legislation that will require that by next 

year, all of the diesel fuel sold in that state will be B2, two percent 

biodiesel. Because of this rule, just the removal of the sulfur in the 

19

diesel fuel does not necessarily clean up the fuel. But what it does 

is it enables pollution control emissions optimization technology to 

be employed on the engines. 

And so it will reduce, it will shift the environmental drivers in 

the heavy duty platform away from nitrogen oxide emissions and 

particulate matter emissions, which will be reduced under this rule 

by 90 percent. And the remaining emissions will be air toxics and 

greenhouse gases. Those are the remaining emissions that will 

need to be addressed in the future of heavy duty advanced diesel 

technology. 

Those also happen to be the emissions that biodiesel addresses 

better than any currently available heavy duty technology. According to the Department of Energy, biodiesel reduces air toxic contaminants by up to 90 percent and has a life cycle reduction of carbon dioxide of 78 percent. It could be said that using biodiesel has 

the effect of putting a diesel engine on a low carbon diet. 

In addition to the energy and environmental benefits, several 

independent economic studies have shown that biodiesel provides 

significant economic benefits to the economy. A study completed in 

2001 by the USDA Office of Energy Policy and New Uses in conjunction with the Economic Research Service, found that an average annual increase equivalent to 200 million gallons of soy based 

biodiesel demand boosted the total crop cash receipts by $5.2 billion 

cumulatively by 2010, resulting in an average net farm income increase of $300 million per year. 

A number of other economic studies have been completed which 

are consistent with these findings and can be made available to the 

Subcommittee upon request. 

Mentioned previously have been two very important pieces of legislation which are currently being considered by Congress. The Volumetric Ethanol Excise Tax Credit, which biodiesel is included in 

those provisions in the Senate version of those provisions. I want 

to point out that biodiesel and ethanol are complimentary fuels. 

The same farmers who grow corn also grow soybeans in rotation 

and we would like to recognize the ethanol industry for their leadership and their partnership in the development of coordinated energy policy efforts. 

So the very first and most important provision currently being 

considered in our view that can be passed and should be passed 

and must be passed this legislative session would include the 

VEETC provisions. Congressman Hulshof and Congressman Pomeroy have led a bipartisan effort in the House to get those provisions passed in the House and Chairman Graves and Congressman 

Miller have served as excellent advocates, as well, supporting those 

provisions. 

In addition to the VEETC provisions, also mentioned were the 

renewable fuel standard provisions. Biodiesel has been included as 

an eligible fuel under the renewable fuel standard. If the renewable 

fuel standard and the biodiesel provisions are included in the 

VTEEC, we see an extraordinary future for biodiesel fitting into 

the future of heavy duty diesel platform. 

If those provisions pass, biodiesel will be incorporated into future 

diesel fuel as a renewable fuel additive to solve the lubricity issues, 

20

to meet the renewable fuel requirements and to take advantage of 

the lubricity operational issues in ultra-low sulfur diesel fuels. 

Unlike some other alternative fuels, low blends of biodiesel can 

be transported by existing petroleum pipelines. We know this because it is already being done in Europe. The EU, in fact, has 

adopted B5 as the primary greenhouse gas reduction strategy. 

In closing, Mr. Chairman, the VTEEC and the RFS will have a 

positive impact on the biodiesel and ethanol industries and would 

result in a dramatic improvement in our nation’s energy security, 

environment and economy. The importance of biodiesel for the nation’s economy has never been greater. Oil prices are now at record 

highs and are once again threatening to harm the U.S. economy. 

Biodiesel and ethanol represent proven technologies that can be 

brought to bear immediately to supplement our existing energy 

supplies, using existing domestic agricultural resources we have 

today and con continue growing tomorrow. Thank you. 

[Mr. Jobe’s statement may be found in the appendix.] 

Mr. GRAVES. Thank you, Mr. Jobe. I might add, too, you mentioned some of the basic benefits in your testimony, it just plain 

smells better, also, when you get it on your hands, particularly. 

We are now going to open it up for questions and I know I have 

several that have come up. I want to start with Mr. Adams. You 

mentioned in your testimony that ethanol can save the Federal 

Farm Program $2 billion a year. And at a time when every time 

we pass a farm program, we come under fire from a lot of individuals who do not understand farm policy in my opinion and this 

would be one of the things I think would help sell farm policy and 

obviously a savings to the federal government. Could you elaborate 

on that just a little bit? 

Mr. ADAMS. Well, certainly the fact that the price of corn has increased because of ethanol, you know, a few years ago we went 

through the exercise of trying to capture the best LDPs and you 

are familiar with that, since you are a farmer. Well, when we had 

this increased price because of increased demand, we are not struggling to beat our neighbor and our LDP payments. You know, that 

was kind of the pride of the coffee shop, what did you get today? 

Well, we do not have to do that anymore. 

So if we can portray this to the consumer with some type of a 

media campaign or whatever and the corn growers certainly could 

be involved in something like that, but the consumers have to become aware that this renewable energy situation is going to save 

them taxpayer money. And, you know, I do not really know how 

to get that across to the consumer, but that is what we have to do. 

Mr. GRAVES. Well, you are helping to do that right now. 

Mr. ADAMS. Okay. 

Mr. GRAVES. Appreciate that. Mr. Hurst, I have a question to 

Charlie about you said that ethanol would be more desirable with 

the use of hydrogen fuel cells. You just touched on that for just a 

minute. Could you expand on that a little bit? I am not as nearly 

familiar with hydrogen fuel cells as obviously I am with the ethanol biodiesel industry, but how ethanol would compliment that or 

how the hydrogen fuel cells would compliment ethanol. And anybody else who might want to weigh in on that. 

21

Mr. CHARLES HURST. Several years ago I went to Iowa State and 

they were, at that time, the Iowa Corn Growers were funding a 

study in Iowa State on fuel cells. And the man that was running 

this experiment for the corn growers up there said that ethanol 

was really a little bit better fuel than gasoline because they could 

get that hydrogen out of it by fuel cells a little bit better than they 

could from gasoline. Of course, he was also funded by corn growers 

wanting to use ethanol, too. So you have to take all these considerations into it. 

But we see some talk about going to hydrogen fuel vehicles and 

then we see about them having fuel systems that are infrastructure 

that will supply this hydrogen. I do not think that is feasible, to 

be honest. It has to be under such high pressure. If we are going 

to pull into a filling station as it were and fill up with hydrogen, 

it has to be under such high pressure, it has to be under such high 

pressure in the vehicle, I think the fuel cell is where we are going 

to go with this technology. And then we can fill up with alcohol or 

with gasoline and it will convert to hydrogen to be used in the fuel 

cell in the vehicle. And I think this is the technology that is coming. 

When the President talked about hydrogen, we wanted to go to 

a hydrogen economy, I think we are going to have to go via the fuel 

cell rather than just using hydrogen as such, you know. Phil is 

probably more versed on that subject than I am. Do you agree that 

raw hydrogen put into our cars is probably not feasible? 

Mr. LAMPERT. Well, yes, and certainly, Mr. Chairman, thank you. 

I believe the general public believes that the fuel cell and the hydrogen business is like a perpetual motion machine, that once it 

starts, you are always going to have hydrogen being generated and 

that is completely false. Hydrogen, the production of hydrogen or 

stripping it from water, requires energy, today, very high amounts 

of energy compared to the output. 

I believe what Charlie is referring to, why continue to use a fossil 

fuel to produce hydrogen when we could use a renewable domestic 

fuel such as alcohol, produced from corn, use some type of commodity renewable to produce the energy input. 

Mr. GRAVES. Does biodiesel have a future in fuel cells, also? 

Mr. JOBE. Yes, there have been studies performed, including a 

study just funded by the Iowa Soybean Board, which indicates that 

biodiesel offers some excellent benefits as a fuel cell fuel. It meets 

all of the criteria as a fuel cell fuel. It is an excellent hydrogen 

donor. It is easily reformed and it fits within the existing liquid petroleum infrastructure that we currently have. 

I think as the other panelists were saying, the government has 

put a real emphasis on development of fuel cell technologies and 

I hope that that pays off. But I caution, because it seems like there 

maybe has been some overpromising of that technology. We still 

are several years away from that technology of being made widely 

available, especially in heavy duty technology. 

It is going to be an awfully long time before you see a fuel cell 

bulldozer or fuel cell semi-truck. In fact, Phil and I were just at a 

conference this weekend where Ford had, unveiled its fuel cell vehicle. And when it came time to go, they pushed it out the door and 

loaded it on a diesel truck and hauled it off. So it is a few years 

22

down the road,but it is an awfully long time before fuel cells are 

going to be made available in the heavy duty form. 

There has been some more promising developments for fuel cells 

in industrial applications, for example, in light duty applications. 

But until that time, ethanol and biodiesel meet those criteria for 

the development of an excellent fuel cell fuel. 

Mr. GRAVES. Mr. Dinneen? 

Mr. DINNEEN. Yes, Mr. Chairman, just to underscore just a couple of points here, because there is no question that everybody is 

enamored with hydrogen technology and the fuel of the future and 

it all makes sense. And it is going to happen. But if all we do is 

transfer our dependency on petroleum in the internal combustion 

engine to a dependency on petroleum derived hydrogen for fuel 

cells, we have not helped each other. And there is no question that 

ethanol can be a renewable source of hydrogen that makes a great 

deal of sense. There is an ethanol-based fuel cell in operation today 

in Peoria, Illinois. We are doing a lot of research. The government 

needs to do a little bit more research on it, as well. Renewably derived hydrogen makes the most sense. 

Mr. GRAVES. Thank you. I have a lot of questions, but I will go 

ahead and give Mr. Miller a chance to ask anything. 

Mr. MILLER. Thank you. I would like to continue on the same 

subject. During the President’s State of the Union address, he devoted a paragraph to developing fuel cells, hydrogen fuel cells, that 

it was going to be a process that went straight from hydrogen to 

water, and use hydrogen directly as a fuel. What I heard after that 

was a great deal of skepticism about that as the next technology 

that we needed to develop for a variety of reasons. One is that hydrogen does not exist in nature as a readily available fuel. What 

I heard mostly is that it is stripped out of natural gas. And natural 

gas is a fossil fuel, which is also finite, upon which we are also dependent on other countries, in fact, pretty much the same countries 

that we are dependent upon for petroleum, which does not improve 

our hand a whole lot in trying to improve energy efficiency. 

In addition, and that is not a particularly environmentally 

friendly process, stripping hydrogen out of natural gas, although 

the President presented it in the State of the Union as something 

that only produced water. Well, turning hydrogen into electricity 

may only produce water, but getting the hydrogen, that is something else again. 

And we have a massive, massive investment as a society in the 

infrastructure to deliver a liquid fuel. And on this planet, at least, 

hydrogen is not a liquid fuel. 

I was very puzzled at the administration’s focus on that one 

source of alternative energy. And three to five, I cannot recall the 

exact amount, seems like it was a proposal of $3 to $5 million for 

research into the hydrogen fuel cell economy. What is your impression? Why is it that you think this administration is so focused on 

the hydrogen economy instead of a bioeconomy? And I have also 

heard or read that there are promising dramatic advancements in 

turning organic matter into fuels, that biotechnology may increase 

dramatically the fairly slow fermentation process of turning soybeans or corn into fuel. Where does that technology stand, where 

does that research stand and do you agree with this administraVerDate 0ct 09 2002 21:55 Oct 01, 2004 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 G:\HEARINGS\94135.TXT MIKEA
23

tion’s focus, apparently to the exclusion of other alternative fuel 

sources? The President’s budget would cut the renewable energy 

system and energy efficiency improvements program by $12 million, the value added producer grants by $25 million, the Commodity Credit Corporation’s bioenergy program by $50 million. Do 

you agree with this administration’s focus on the hydrogen economy and hydrogen fuel as where we ought to be going. 

Ms. Werner, you can perhaps go first? 

Ms. WERNER. Thank you very much, Mr. Miller. I think a number of my colleagues on the panel have made some important 

points with regard to what is really involved in terms of hydrogen 

production. I think that investments in fuel cells and in additional 

research with regard to hydrogen are important. But I do think 

that it has been oversold in terms of its role within the next couple 

decades. 

As has been made clear here, hydrogen is an energy carrier as 

opposed to a source. Therefore, many of us who are concerned 

about environmental implications are very, very concerned about 

where the hydrogen would come from. And we feel very, very 

strongly that if we are going to move towards the greater use of 

fuel cells, it is absolutely critical that the hydrogen should be derived from renewable resources. 

And we see biofuels which can be reformed aboard vehicles as 

being a very important source of that, which is readily available 

and which works. 

We would also suggest, however, that we think that there are a 

variety of energy sources in terms of, again, fuels, electricity, 

biobased products that are important to address from a federal policy perspective. The Farm Bill programs which you just cited and 

for which very, very significant cuts have been proposed, we strongly disagree with those administration proposals and very much 

hope that the Congress will restore full funding for those. Last 

year, the Congress did restore full funding for the Section 9006 program for renewable energy programs and put some money back 

into the value add program, but not full funding. 

And one other point that I would just make in terms of thinking 

about kind of the role of, I think, all of our concerns are that we 

need to do something about our oil use, natural gas, which is also 

very clean and highly valued commodity. But we are all seeing 

huge cost increases in natural gas creating a lot more outsourcing 

within our chemical industry, creating huge impacts for agriculture 

because of the run ups in natural gas. So I would suggest using 

natural gas for hydrogen production isn’t a good investment for our 

country. And that, indeed, if we really want to reduce our use of 

oil, perhaps the best thing would be for us to really encourage our 

domestic vehicle industry to do a lot more in terms of moving hybrids into the market and using that with biofuels and then we are 

making a huge impact with regard to our oil use. Thank you. 

Mr. MILLER. Mr. Dinneen, first of all, you can get to South Dakota by traveling east from North Carolina, but it takes a lot 

longer. 

[Laughter.] 

Mr. DINNEEN. Ouch. I was hoping you had forgotten about that 

by now. 

24

Mr. MILLER. You are also someone logical to address that question. All of you are, but if you might address it as well? 

Mr. DINNEEN. We certainly agree with ESI and others on this 

panel that have worked to restore some of the funding cuts that 

have been proposed for renewable energy and we think that it is 

critically important. We think that the investment that this government can make in renewables is something that can pay dividends in the near term. And we certainly support those efforts to 

restore the funding. 

In terms of looking at the hydrogen issue, I think it is a question 

of what your focus is. Is it near term or long term and I do not 

think any of us really dispute that hydrogen represents a technology that is worth an investment in terms of trying to determine 

where it can go. We do think that the focus ought to be more on 

trying to get that hydrogen derived from renewable resources as 

opposed to, you know, more petroleum based sources. But the technology itself will certainly develop. 

You know, but I do not think that it is the administration that 

simply has this hydrogen focus exclusive of anybody else. I think 

it is something that has had bipartisan focus. Senator Dorgan has 

had legislation in place, the Apollo project, that many of us support 

because of what it will do in terms of research for hydrogen. Has 

it been oversold in the near term? I think Carol is probably right, 

it probably has been oversold in the near term. But I do think it 

is worth an investment for the promise it holds, so long as the 

source of the hydrogen is renewable. 

Mr. MILLER. Anyone else wish to address that point? You do not 

have to, but you can. 

Mr. ADAMS. Mr. Dinneen made the comment that I was gong to 

make and that is that in my training as an economist, you know, 

we talk on one hand and then on the other hand. He suggested in 

the short term and in the long term, and I really think that, you 

know, fuel cell concept is a long term concept. And we are facing 

a short term energy crisis right now and this is what we need to 

be concerned about. It is not to deny that hydrogen and fuel cells 

are going to be on the horizon and be very important ten, 20, 30 

years from now, but what are we going to do in the next five to 

ten? This is where renewable fuels, I think, can really place an important impact on our energy crisis. And one more comment. 

Mr. MILLER. Okay. 

Mr. ADAMS. I hate to admit that hydrogen can come from somewhere else than ethanol, but in southwest Minnesota and northeast 

Iowa, we have a huge amount of—or a large array of wind farms 

developing. And you can get hydrogen from electrolysis and using 

a surplus energy from these wind farms when you have the surges 

and low usage period, in a low usage period you could use the surplus electricity from these wind farms to produce hydrogen. Now 

that is a concept that is not talked about too much. And we are 

not using hydrogen fuels or fossil fuels to make the hydrogen, nor 

are we in a case of even ethanol using fossil fuels to make ethanol 

to make hydrogen. 

So it is a long way away, but we have to be concerned about the 

short run, I think. Thank you. 

25

Mr. MILLER. Thank you. You know, of course, that President 

Truman said he was looking for a one-handed economist. 

[Laughter.] 

Mr. ADAMS. Yes, yes. 

Mr. MILLER. One other criticism that I have heard is that the research, by its very nature, is unpredictable. The problems that 

seem absolutely insurmountable yield to a solution and problems 

that seem imminently solvable do not. By focusing so heavily on 

one alternative fuel source, we may find ourselves looking for, the 

phrase I have heard is off ramp for our research in some period of 

time, five, seven, ten years, when the problems that we thought 

were solvable were not. 

And we would then find ourselves five or seven or ten years behind in starting on some other technology. Do you agree that we 

should be moving on several fronts at one time and do you think 

we are doing it now in our research into alternative fuels? That can 

be anybody that wants to answer. Ms. Werner, do you want to give 

it a shot? 

Ms. WERNER. Sure. Then I will turn to my colleagues. I do think 

that we need to be investing in a variety of approaches at the same 

time and for the same reason that I also suggested that I think we 

need a suite of supporting policies, rather than relying on just one 

kind of approach if we are really going to be serious about addressing the overall energy situation confronting our country. 

And I think that we need to recognize, too, that energy and environment are kind of the flip side of the same coin and that obviously that is why we feel so strongly about the whole row of agriculture being able to produce a whole array of renewable energy 

products. And that all of those really need to be pursued much 

more aggressively as well as policies that will also help us really 

develop the market and get those various important technologies 

deployed. 

Mr. DINNEEN. Congressman, I would suggest that the Department of Energy and the Department of Agriculture have been 

working fairly well together to develop an array of research programs that will certainly move renewable fuels forward. You can 

produce ethanol from virtually any agricultural feed stock. There is 

a plant seeking financing in North Carolina today that is looking 

to produce ethanol from sweet potatoes. There is a plant in New 

York today that is looking for financing to produce ethanol from 

municipal solid waste. 

The Department of Energy, the Department of Agriculture have 

had a number of research projects over the years looking at producing renewable fuels like ethanol from a variety of feed stocks. 

And, in fact, I think there is the potential for the economic development opportunities that Congressman Hulshof talked about earlier 

today to have that be available to communities all across the country, whether they happen to be in the grain belts or not. Because 

the opportunities for ethanol production exist everywhere. 

Mr. JOBE. I would like to add that I think one of the reasons fuel 

cell technology has been embraced in such a way that it has sort 

of been sold as the silver bullet solution and I would propose that 

there is no such thing as a silver bullet solution, that we need more 

of a silver buckshot solution. 

26

We do not have a diversified energy portfolio right now and that 

is what we need to work toward. We need an array of options. All 

of those mentioned here, but in addition to that, looking at conservation and other things. For example, in Europe, Europe has not 

had such a strong pursuit of policies to keep petroleum prices low 

and therefore, they have an emphasis on conservation and fuel 

economy. So the consequence of that is that about half of all the 

passenger vehicles on the road are diesel, because diesel has up to 

50 percent more fuel economy than gasoline versions. 

So the U.S., as a comparison, in the United States, only about 

two percent of our cars on the road are diesel. So we have an enormous potential to increase and improve efficiency in our transportation sector. 

Mr. MILLER. Go right ahead. 

Mr. ADAMS. Chairman Graves, there is a saying that what comes 

around, goes around. I have a 1926 Model T at home. Henry Ford 

drove his first cars, as I understand it, on alcohol. And then as the 

automobile industry grew, the alcohol industry could not keep up 

and the fossil fuel industry was born. 

Now we are at this point in life and production of ethanol has 

become much more efficient. There are new enzymes developed 

every year and new technologies and energy conservation and ethanol plants. So all of a sudden, we are becoming very competitive 

with the fossil fuel industry, plus it is produced domestically. So 

maybe old Henry was not so dumb to start with. You know, maybe 

it is time to go back to old Henry’s philosophy. Thank you. 

Mr. GRAVES. Let us talk a little bit about the economic development that these products do bring to our rural communities. It was 

mentioned and I do not know which member of the panel mentioned the number of plants that are out there, how many plants 

are right now producing cooperatives, but somebody may? 

Mr. DINNEEN. Well, there are 76 ethanol plants across the country. More than 40 percent of those are farmer owned ethanol plants 

today. 

Mr. GRAVES. What are the other 60 percent? Are they private industry? 

Mr. DINNEEN. Privately held companies. 

Mr. GRAVES. I may ask everybody this, at the rate that we are 

going, what will the rate of growth be in ethanol production? There 

is obviously a demand. The California demand alone requires a lot, 

but how fast are we growing? How fast are we growing to grow? 

What is the potential in the next five to ten years as far as ethanol 

plants? Anybody can answer. 

Mr. DINNEEN. Mr. Chairman, there are 12 plants currently under 

construction that will add another 500 million gallons of production 

capacity when it is on stream, bringing the industry’s total capacity 

to almost four billion gallons. We can certainly grow as fast as we 

need to grow. A lot will depend upon what policies this Congress 

puts in place, in terms of how quickly we have to grow. But we 

have seen 32 percent growth last year. I believe it was 20 some odd 

percent growth the year before. This year we will likely see close 

to 30 percent growth again. 

Our rate of growth has been nothing short of phenomenal and it 

is a testament to, you know, farmers across this country that have 

27

invested their own money and invested their own time and energy 

to create these ethanol plants all across the country. 

Mr. GRAVES. I mean, that is a huge, and that could have a huge 

impact on our communities, just like Mr. Hurst mentioned. You 

know, in a town of 300, that is a big impact. These small communities, they are not going to be able to go out and get an industry, 

you know, Ford Motor Company or Chevrolet is not going to locate 

in Craig, Missouri or Macon, Missouri or whatever the case may 

be. 

And I have always been told that we need to stick to what we 

already know. And what we do know in these small communities 

is agriculture and that directly ties in to this energy production. I 

think it is an incredible opportunity we have and that is the sideline. Not to mention the national security issues that we have out 

there dealing with our energy dependence, not to mention the environmental impact that we can have as far as, you know, ethanol 

and biodiesel goes. 

I might direct that question to Carol, too, even on the environmental impact. I could not think of a more environmentally friendly product than either biodiesel or ethanol. And we talk about oil 

spills and that sort of thing. You know, ethanol is completely water 

soluble. You don’t have the environmental impact, even if you do 

have a spill. You might address that just a little bit. 

Ms. WERNER. Sure, Chairman Graves. Because that is one of the 

reasons why we are so supportive of biofuels is because they do 

provide a superior way to provide fuel in an environmentally sound 

way in terms of protecting our water shed, helping reduce harmful 

air pollutants as well as obviously really reducing greenhouse gas 

emissions. 

We have seen a lot of work done over the last decade with regard 

to the connection between our current fuels, in terms of fossil fuels, 

in public health, where we now know lots more about that in terms 

of the toxics that are in these fumes and the damage that that is 

doing to children across the country. 

So I think, you know, when you start to just add up all of these 

benefits, it is really, really critical that people across the country 

understand that. It is also very important that biofuels not be seen 

as oh, if we are going to have a tax incentive here or however it 

works, that it is not just a giveaway to midwest farm states. But 

that, indeed, it is really serving national concerns, national needs. 

And that is why it is so important to also get these industries developed across the country, helping communities. 

Biomass is also heavy. You know, it also means the more that 

we can do in terms of having new businesses sprout up across the 

country which can really help develop indigenous resources in 

every single state, which helps economic development everywhere 

and really helps build a much broader base of support for overall 

biofuels. Thank you. 

Mr. GRAVES. It is interesting that ethanol and biodiesel production and renewable fuels have moved from the farm policy arena 

and it has now moved into the energy arena, which I think is good, 

because it helps out, you know, it is addressing all consumers, 

rather than just one segment. 

Anybody have anything else to add today? Yes? 

28

Mr. BROOKS HURST. Yes, Mr. Chairman, just to expand a little 

bit on Carol’s comment. I was playing golf several years ago with 

the producer of MTBEs and he was being rather defensive because 

it was just at the start of them taking hits and environmental concerns with spills from MTBEs. And he said, well, you ethanol producers are going to have problems, too. And when you get in the 

groundwater and I told him that I had actually heard of some people purposefully mixing alcohol with water, to drink. 

[Laughter.] 

Mr. GRAVES. I have heard similar comments, too, in Craig, Missouri, that producing alcohol in the bottoms of whole counties is 

nothing new. They have been doing it for years. It is just that they 

have got railroad cars pulled up to the still rather than jugs. 

Well, I would like to thank everybody for being here today. We 

did not even get a chance to talk, Mr. Lampert, I took a look at 

this and the number of cars that are available as far as hybrids 

go and this is exciting, too. In fact, I am going to look into that 

even more. You mentioned in your testimony the increase we are 

going to see. But I am sorry we were not able to cover everything. 

But I appreciate everybody coming out today. This has been a fantastic hearing and, if nothing else, what we are trying to do is 

bring some more attention to the energy debate and more attention 

to renewable fuels like biodiesel and ethanol. We have some hefty 

increases in funding for renewable fuels in the Energy Bill, but we 

do have to get them passed. The House passed the conference report, what we thought was an agreement between the House and 

the Senate in November. The Senate has not taken it up yet, but 

we need to continue to push for that. We need to continue to get 

that done. It is vitally important that we have an energy policy. 

I would much rather be dependent on our farmers in the United 

States for our energy production than I would countries like Saudi 

Arabia. It just makes sense, not to mention the environmental impact it has, the impact it has on small communities and keeping 

our young people in our small communities, having a reason for 

them to come back to our small communities. It is a win-win everywhere, national security, farmers, consumers. It just makes sense. 

We are going to continue to bring light on this subject and show 

the national impact that it has, but I appreciate everybody coming 

out today and giving your testimony. This hearing is adjourned. 

[Whereupon, at 11:43 a.m., the Subcommittee was adjourned.]

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