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S. HRG. 108–649

BIOMASS USE IN ENERGY PRODUCTION: NEW

OPPORTUNITIES IN AGRICULTURE

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 6, 2004

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

THAD COCHRAN, Mississippi, Chairman 

RICHARD G. LUGAR, Indiana 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

PETER G. FITZGERALD, Illinois 

SAXBY CHAMBLISS, Georgia 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JAMES M. TALENT, Missouri 

ELIZABETH DOLE, North Carolina 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

THOMAS A. DASCHLE, South Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

ZELL MILLER, Georgia 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota

HUNT SHIPMAN, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

LANCE KOTSCHWAR, Majority General Counsel 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Biomass Use in Energy Production: New Opportunities in Agriculture ............. 01

Thursday, May 6, 2004

STATEMENTS PRESENTED BY SENATORS 

Cochran, Hon. Thad, a U.S. Senator from Mississippi, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 02

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 14

Coleman, Hon. Norm, a U.S. Senator from Minnesota ........................................ 09

Lincoln, Hon. Blanche, a U.S. Senator from Arkansas ........................................ 08

Lugar, Hon. Richard G., a U.S. Senator from Indiana ......................................... 04

WITNESSES 

Panel I 

Ewing, Hon. Thomas, Chairman, Biomass Research and Development

Technical Advisory Committee, Pontiac, Illinois ............................................... 06

Garman, Hon. David, Acting Under Secretary for Energy, Science and

Environment, United States Department of Agriculture, Washington, DC .... 05

Rey, Hon. Mark, Undersecretary for Natural Resources and Environment, 

United States Department of Agriculture, Washington, DC ............................ 02

Panel II 

Gray, Hon. C. Boyden, Energy Future Coalition, Washington, DC .................... 24

Woolsey, Hon. R. James, Former Director of Central Intelligence, Mclean, 

Virginia ................................................................................................................. 21

Panel III 

Lynd, Lee R., Professor of Engineering and Adjunct Professor of Biological 

Sciences, Thayer School of Engineering, Dartmouth College, Hanover, New 

Hampshire ............................................................................................................ 35

McLaughlin, Samuel B., Researcher, Oak Ridge National Laboratory, Oak 

Ridge, Tennessee .................................................................................................. 37

Richard, Tom, Associate Professor, Department of Agricultural and

Biosystems Engineering, Iowa State University, Ames, Iowa ......................... 33

Zappi, Mark, Director, Department of Energy Mississippi Research

Consortium for the Utilization of Biomass, Mississippi State University, 

Mississippi State, Mississippi ............................................................................. 31

APPENDIX 

PREPARED STATEMENTS: 

Coleman, Hon. Norm ........................................................................................ 44

Ewing, Hon. Thomas ........................................................................................ 60

Page

IV

PREPARED STATEMENTS—Continued

Garman, Hon. David ........................................................................................ 56

Gray, Hon. C. Boyden ...................................................................................... 74

Lynd, Lee R. ...................................................................................................... 92

McLaughlin, Samuel ........................................................................................ 98

Rey, Hon. Mark ................................................................................................. 46

Richard, Thomas ............................................................................................... 83

Woolsey, R. James ............................................................................................ 67

Zappi, Mark ....................................................................................................... 78

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

C. Boyden Gray (Attachments) ........................................................................ 126

‘‘Defeating the Oil Weapon’’ by R. James Woolsey ........................................ 118

‘‘The New Petroleum’’ by Senator Richard G. Lugar and R. James

Woolsey .......................................................................................................... 108

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD: 

Hon. Tom Harkin to Hon. Tom Ewing ............................................................ 148

Hon. Tom Harkin to Hon. David Garman ...................................................... 154

Hon. Tom Harkin to Hon. Mark Rey .............................................................. 157

(1)

BIOMASS USE IN ENERGY PRODUCTION: NEW 

OPPORTUNITIES IN AGRICULTURE 

THURSDAY, MAY 6, 2004

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, Washington, DC. 

The committee met, pursuant to notice, at 10:06 a.m. in room 

SD–106, Dirksen Senate Office Building, Hon. Thad Cochran, 

[Chairman of the Committee], presiding. 

Present or Submitting a Statement: Senators Cochran, Lugar, 

Coleman, Harkin, and Lincoln. 

STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM 

MISSISSIPPI, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. The hearing will please come to order. 

Several months ago, I was pleased to notice on my calendar a 

meeting that was scheduled to take place in my office in the Capitol with former Director of Central Intelligence James Woolsey, 

former counsel to President George H.W. Bush, Boyden Gray, and 

my former colleague in the House of Representatives from Colorado, Tim Wirth. 

My first thought was what do these guys have in common? Then, 

why do they want to come together to see me? Well, I found out 

that their interest was to discuss biomass fuels as an alternative 

to petroleum, particularly in the operation of automobiles and the 

progress that has been made in the scientific community. I have 

discovered this option as something that should be, as a matter of 

public policy, explored more fully and more carefully than we are 

currently doing as a government or as a society. 

Here we are today to look more carefully into their suggestions 

to me about steps that could be taken and should be taken by the 

Congress to help advance this cause. During this hearing, we will 

explore the role that agricultural and forestry products can play in 

sustaining a reliable energy supply for our country for the future. 

Congress has previously recognized the promise in this area of interest; for example, in the year 2000, we passed the Biomass Research and Development Act; the Farm Security and Rural Investment Act of 2002 devotes an entire title to renewable energy; and 

the Healthy Forest Restoration Act of 2003 contains incentives for 

commercial utilization of biomass. 

The idea of using these agricultural and forestry products for energy production is, therefore, not a new concept, but the process of 

developing technologies for conversion of these feedstocks is ever 

2

changing. Today, the Committee will hear how current programs 

are contributing to research, demonstration and application of 

these emerging technologies as well as ideas for future utilization. 

The Department of Energy tells us that worldwide energy consumption is projected to grow by 54 percent by the year 2025. I 

hope that today’s hearing will help us uncover information and 

suggestions and new policies that will help U.S. agricultural producers play an important part in helping make sure that we meet 

this ever growing need. 

We appreciate very much the panel that is with us this morning 

to open our hearing: the Honorable Mark Rey, Undersecretary for 

Natural Resources and Environment at the Department of Agriculture; David Garman, Acting Under Secretary of Energy, Science 

and Environment at the Department of Energy; and Thomas 

Ewing, Chairman of the Biomass Research and Development Technical Advisory Committee. 

We welcome you, and we ask that you proceed in the order in 

which I have introduced you to make opening statements and provide any other information you think would be helpful to our understanding of these issues. 

Mr. Rey, you may begin. 

STATEMENT OF HON. MARK REY, UNDER SECRETARY FOR 

NATURAL RESOURCES AND ENVIRONMENT, UNITED STATES 

DEPARTMENT OF AGRICULTURE, WASHINGTON, DC 

Mr. REY. Thank you, Mr. Chairman, and I am pleased to appear 

before you today to discuss the Department of Agriculture’s efforts 

to advance biomass energy and thereby contribute to the energy security of our nation. 

I want to stress the strong support of this administration, as documented in the President’s National Energy Plan, for developing 

domestic biomass as an important way to satisfy America’s growing 

energy demand. As a result, one of USDA’s key strategic goals is 

to increase the use and development of biomass energy. 

USDA has many exciting ongoing activities in this area. We support research and development and precommercial work as well as 

monitoring the role of biomass energy in energy markets and U.S. 

agricultural markets. USDA biomass energy activities address an 

array of forms and innovative technology such as starch and cellulosic ethanol, biodiesel from agricultural oils and anaerobic digestion for power. 

One of our areas of focus for us is the development of methane 

digesters for the production of electricity. This technology has positive environmental effects and excellent economic potential for producers as well. More than a year ago, the Natural Resources Conservation Service developed practice standards for methane digesters. These anaerobic systems break down animal waste, producing 

methane as a fuel source for the generation of electricity. 

The digesters can now be funded through the NRCS Environmental Quality Incentive Program. The agency has had excellent 

successes in assisting producers to incorporate digesters as part of 

an overall nutrient management approach to their farms. In turn, 

if market issues can be resolved, we believe the future holds a 

3

bright potential for widespread utilization of digesters and conversion to power. 

In terms of ethanol, USDA is looking beyond the current successes in ethanol development to future technologies beyond traditional starch-based methods of production. For example, the Forest 

Service’s Forest Products Laboratory is researching ways to derive 

ethanol from biomass other than corn starch. Currently, researchers are studying the conversion of sugars to ethanol. The key in 

converting wood to energy is converting five and six carbon sugars 

to ethanol. 

Although this process proposes many challenges, the laboratory 

is making progress in expanding capacity in this area, making it 

possible for a much wider variety of materials to be converted to 

ethanol. Researchers estimate that ethanol from wood can make a 

significant contribution to the liquid fuels market. 

Now, I would like to focus on what we are doing to implement 

new authorities provided in the energy title of the 2002 Farm bill. 

Section 9002 requires Federal agencies to increase their procurement of qualifying bio-based products. When fully implemented, 

the program should stimulate the development of a broad range of 

high-performing and environmentally friendly bio-based products. 

A proposed rule was published in the Federal Register in December, and once we have considered the more than 270 public comments, a final rule will be published later this year. 

Section 9006 authorizes loans and other assistance to businesses 

to purchase renewable energy systems and make efficiency improvements. Last year, we selected 114 applications to receive 

funding to develop renewable energy systems. I would note that 

yesterday, Secretary Veneman announced $23 million in funding 

for this year. We anticipate a lot of interest in this and will be accepting proposals under this initiative for the next 74 days. 

Section 9010 expands bioenergy production and supports new production capacity. For the 2004 program year up to $150 million 

has been authorized by Congress. Energy crops are included as eligible feedstocks. I also want to mention that USDA has an ongoing 

program of research to improve the economics of biomass energy. 

Our goals in this program are twofold: one, to overcome the technical barriers to developing biomass energy and two, to strengthen 

coordination with other Federal agencies and with universities, private sector companies and environmental organizations. 

Section 9008 provided USDA with $75 million through 2007 for 

research and development grants, and as you have noted, the 

Healthy Forest Restoration Act expanded the scope of this initiative, integrating silvacultural activities and authorizing an additional $20 million through fiscal year 2007. Through this Biomass 

Research and Development Initiative, grants are available to eligible entities to carry out research, development and demonstrations 

on bio-based products, bioenergy, biofuels, biopower and related 

processes. 

In the 2003 program, USDA received approximately 400 proposals, where were competitively evaluated in a process that included a joint USDA-Department of Energy technical merit review. 

Although the solicitation stated that $21 million would be awarded, 

an addition of $2 million from the Department of Energy resulted 

4

in $23 million in grant awards. In the fiscal year 2004 program, 

USDA and the Department of Energy intend to award up to $24 

million. 

We are very pleased with the outcome of this initiative, as it has 

resulted in cooperative funding for a diverse and innovative array 

of products, including anaerobic digestion, biorefineries, biomass-focused forest management training and innovative use of feedstocks. 

We are optimistic about the future of this program and look forward to continuing collaboration and mutual progress between the 

Department of Energy and the Department of Agriculture. 

Taken together, our efforts will help advance agriculture’s key 

role in realizing its potential in meeting the demand for clean, affordable and renewable energy. It is our conviction that this process will contribute both to the vitality of rural communities and the 

energy stability of our nation. 

That concludes my summary statement, and I would be happy to 

respond to questions from the members of the Committee. 

[The prepared statement of Mr. Rey can be found in the appendix on page 46.] 

The CHAIRMAN. Thank you very much, Mr. Rey, for your statement and your participation in this hearing. Before proceeding to 

hear from David Garman from the Department of Energy, I am 

pleased to yield to my friend and colleague from Indiana, Senator 

Lugar, for any opening statement or comments he would like to 

make at this time. 

STATEMENT OF HON. RICHARD LUGAR, A U.S. SENATOR FROM 

INDIANA 

Senator LUGAR. I thank you very much, Mr. Chairman, for this 

opportunity. I appreciate the distinguished witnesses that you have 

brought together for this important hearing. I will ask that my 

opening statement be made a part of the record but simply applaud 

the forum that this presents once again to give some benchmarks 

of progress. 

This has been an important objective, I know, for the Chairman 

and for me for many years, and we see our former colleague Mr. 

Ewing here on this panel today. He has worked with us throughout 

that period of time, a distinguished member of the House committee. Thank you very much for coming. I look forward to hearing 

how things are progressing and supporting your efforts. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Lugar. 

I might indicate that we will make a part of this record an article 

that you and Jim Woolsey wrote several years ago, 1999, I believe, 

that will illustrate the fact that this is a subject that you and Mr. 

Woolsey have been interested in for some time and have taken the 

lead in pointing the way for Government policies to help ensure 

that we do take advantage of and alternative energy sources. Mr. 

Garman, you may proceed. 

5

STATEMENT OF HON. DAVID GARMAN, ACTING UNDER

SECRETARY FOR ENERGY, SCIENCE AND ENVIRONMENT, 

UNITED STATES DEPARTMENT OF ENERGY, WASHINGTON, 

DC 

Mr. GARMAN. Thank you, Mr. Chairman and members of the 

Committee. 

I appreciate this opportunity to discuss the Department of Energy’s biomass R&D program. I am especially pleased to testify with 

the Undersecretary of Agriculture. Our two agencies have been 

working together in an unprecedented manner, and we have done 

so as a direct consequence of the provisions in the Biomass R&D 

Act of 2000, authored by Senator Lugar and other members of this 

Committee. 

Candidly, the law that you wrote established the framework 

through which we coordinated our activities, and I am certain we 

would not have worked together as well as we have without that 

law. I also want to thank and recognize the work of Tom Ewing 

and the entire Biomass R&D Technical Advisory Committee. They 

are performing a tremendously important task, giving us their time 

and lending us their expertise. 

Biomass is a tremendous national asset that is not widely recognized or appreciated beyond the members of this Committee and a 

few others. We think of biomass mainly as a source of liquid fuel 

products such as ethanol and biodiesel, but biomass can also be 

converted to a multitude of products that we use every day. In fact, 

there are very few products that we use today that are made from 

a petroleum base, including paints, inks, adhesives, plastics and 

other value-added products that cannot be made from biomass. 

Biomass is also a proven option for generating electricity through 

the direct combustion of wood, municipal solid waste and other organic materials, co-firing with coal and high-efficiency boilers or 

combustion of biomass that has been chemically converted into fuel 

oil. Biopower in 2002 contributed almost 71 percent of our nonhydroelectric renewable energy generation and about 1 percent of 

total U.S. energy supply. 

The Department estimates that the total available domestic biomass resource beyond that we use for food, feed and forest products 

is currently between 500 and 600 million dry tons per year. Within 

the Continental U.S., we think we could literally grow and put to 

use hundreds of millions of tons of additional plant matter each 

year on a sustainable basis. 

These biomass resources represent about 3 to 5 quadrillion BTUs 

of energy, or quads, or as much as 5 or 6 percent of total U.S. energy consumption. In terms of fuel and power, that translates into 

60 billion gallons of fuel ethanol or 160 gigawatts of electricity. 

That is enough electricity or enough energy to meet 30 percent of 

U.S. demand for gasoline or service 16 million households with 

electricity. 

The question is why do not we do it, and the major issue that 

we confront is cost. Current technologies cannot convert biomass 

resources to fuel and products for the mass market at a widely 

competitive cost, and we believe that the best way to produce fuel, 

power and product from biomass in a cost-competitive manner is 

6

through what we call an integrated biorefinery, which produces a 

suite of products, much in the manner of an oil refinery. 

By producing multiple products, a biorefinery could take advantage of the differences in plants and other biomass feedstocks and 

maximize the productivity and value from each of those feedstocks. 

A biorefinery that produces high-value chemicals, for instance, 

could enhance the economics of producing higher volumes of lower 

value liquid transportation fuel, all while generating electricity and 

process heat for its own operation. 

To achieve high volumes of products and fuel, such a refinery 

would need to take advantage of the vast supplies of corn stover 

and other lignocellulosic biomass, which is really the ‘‘everything 

else’’ in biomass beyond the simple sugar, starch and proteins that 

are valuable inputs to our food supply. 

Working with the Biomass R&D Technical Advisory Committee 

and the Department of Agriculture and others, we have developed 

our strategic multi-year and annual program plans targeted to 

overcoming the technical barriers that stand between us and the 

achievement of the integrated biorefinery utilizing this cellulosic 

material. The Department’s 2005 budget request for biomass activities is $81.3 million. Last year, about half of the biomass budget 

was earmarked for Congressionally-directed projects, and we are 

performing these projects as we have been directed to do, but the 

requirement to do so has resulted in our reducing research and 

work at some of the national laboratories. 

As a consequence, some of the work and some of our work plans 

have been delayed, and our timeframes for achieving our goals 

have slipped a little bit, but we remain very, very excited about the 

prospects for biomass and enhancing not only the economic prosperity of rural America but the energy security of the nation. 

I did not really dwell on it in the testimony, but I also want to 

highlight the potential that biomass has in the coming hydrogen 

economy, the hydrogen energy economy, both in the near term and 

the long term. One of the tremendous assets of hydrogen as an energy carrier is that it can be produced from multiple feedstocks, 

primary energy inputs, and biomass is certainly a very, very important energy input that we are considering as we look forward to the 

President’s Hydrogen Fuel Initiative. 

I will stop there and would be happy to answer any questions the 

Committee has either today or in the future. Thank you, Mr. 

Chairman. 

[The prepared statement of Mr. Garman can be found in the appendix on page 56.] 

The CHAIRMAN. Thank you very much. 

We are pleased to welcome to the hearing our former colleague 

in the House of Representatives, Tom Ewing from Illinois, who 

served in the House from 1991 until his retirement in 2001. 

We appreciate your participation in the hearing, Tom. You may 

proceed. 

STATEMENT OF HON. THOMAS EWING, CHAIRMAN, BIOMASS 

RESEARCH AND DEVELOPMENT TECHNICAL ADVISORY 

COMMITTEE, PONTIAC, ILLINOIS 

Mr. EWING. Thank you, Mr. Chairman. 

7

It is a pleasure to be here today as Chairman of the Biomass Research and Development Technical Advisory Committee. I was the 

House sponsor of this legislation upon the request of Senator 

Lugar, and I would not want to proceed further without giving the 

Senator the credit, for this was his idea and his brainchild, and 

without your initiative, Senator, probably we would not have the 

act that we have today. 

The Biomass R&D Act recognized the outstanding potential for 

benefit offered by biomass technologies. The act also acknowledged 

the need to integrate and coordinate the diverse R&D efforts currently taking place across the Federal Government, in industry, 

and at the State level. The primary objective of the Biomass Initiative is to coordinate the development of environmentally sound, 

cost-effective bioenergy and bioproducts. 

The Advisory Committee is comprised of individuals from industry, academia, nonprofits, from agriculture and forestry sectors to 

provide to the Secretaries of Agriculture and Energy and their 

points of contact, the gentlemen here at the table with me today, 

advice on the technical focus and direction of requests for proposals 

issued under the Bioinitiative and advice on the procedures for reviewing and evaluating proposals. 

The Advisory Committee recently ended its third year of activity. 

To date, the Committee’s activities have resulted in five major 

products: one, in December of 2001, the Advisory Committee submitted a preliminary set of recommendations to the Secretaries of 

Energy and Agriculture on the potential for biomass research and 

development. 

Two, in June of 2002, the Secretaries of Agriculture and Energy 

requested that the Advisory Committee develop a vision and road 

map documents to guide future biomass research and development 

activities. The vision and road map were developed over the next 

several months. The documents now serve as a resource for the 

agencies in planning their biomass research and development portfolios. The vision for bioenergy and biobased products in the United 

States was released in October of 2002 and set far-reaching goals 

to increase the role of biomass in the U.S. economy. 

Three, in January of 2003, the Advisory Committee released the 

corresponding road map for biomass technologies. The purpose of 

this document was to outline a research and development road map 

and identify public policy measures for promoting and developing 

environmentally desirable biomass fuels, power and products in 

order to help achieve the goals established by the Advisory Committee in their vision document. The road map is organized by 

major categories of research and development that will be needed 

to achieve the vision goals. 

Four, in December 2002, the Committee submitted a set of R&D 

recommendations to the Secretaries of Energy and Agriculture 

based on research strategies outlined in the road map. 

Five, in 2003, the Advisory Committee reviewed the USDA/DOE 

joint solicitation request for process and awards in order to develop 

its recommendations. During that year, the Committee also evaluated the USDA and DOE biomass research portfolios and investments, and the Committee developed the assessment of the portVerDate 0ct 09 2002 10:29 Oct 22, 2004 Jkt 093560 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 C:\DOCS\93560.TXT TOSHD PsN: TOSH
8

folios and developed recommendations to both the Secretaries of 

Energy and Agriculture. 

Finally, the committee also made specific recommendations for 

more aggressively pursuing the Federal procurement of biomass 

products. The Advisory Committee has been pleased to find that 

USDA and DOE have increased their level of coordination and collaboration as a result of the Biomass Initiative. The Committee 

also did not find significant duplication of biomass R&D by the 

USDA and DOE in the area of feedstock productions. 

Of major concern to the Advisory Committee is its belief that the 

Department’s current biomass program in the current policy contexts are not adequate to achieve the goals set forth in the vision 

without an order of magnitude increase in financial and policy support for biomass. Specific steps in this direction are outlined in the 

full text of my comments submitted to the Committee. 

We are looking at 2004, and the Committee plans to complete the 

following: we want to respond to the USDA and DOE regarding aggressive Federal purchasing of biomass products, develop detailed 

recommendations regarding the agencies’ joint solicitation; track 

progress in achieving the Committee’s vision goals; discuss cellulose ethanol gasification and co-firing and the history of the Federal Government’s effort in these areas and discuss hydrogen 

power. 

Mr. Chairman, my complete prepared statement has been submitted, and I would be happy to answer questions. Thank you. 

[The prepared statement of Mr. Ewing can be found in the appendix on page 60.] 

The CHAIRMAN. Thank you very much, Congressman, for your 

participation in the hearing. 

Before we proceed to questions of the panel, I am pleased to recognize the distinguished Senator from Arkansas, Ms. Lincoln, who 

has joined the hearing. 

Any opening statement or comments you would like to make at 

this time? 

STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR 

FROM ARKANSAS 

Senator LINCOLN. Thank you, Mr. Chairman. I would like to 

make just a few brief statements, and then, we will go on to some 

questioning. 

I just want to applaud the Chairman for holding this hearing. It 

is tremendously exciting to me that we are engaging in this issue 

and really talking about it, so I want to compliment the Chairman 

for being willing to hold this hearing and hopefully joining me in 

the excitement that I find in this issue and the potential that we 

have for our States and for our country. 

It is such a very important topic of converting our vast agricultural biomass resources to transportation fuels and to a host of 

other products that we can use often what we think of only as 

trash or left-over but to bring that into an enormously useful world 

of products that we can provide. 

I have worked to promote the use of agricultural products as a 

source of fuel throughout my public service, and it is not only an 

agricultural issue but also a security issue. Now more than ever, 

9

we must reduce our dependence on foreign oil and look toward renewable sources of energy. This hearing today is the beginning, but 

certainly, there are multitudes of opportunities for us to begin that 

search. 

I believe that the President and the Congress should consider developing a large-scale biomass and biorefinery initiative. We should 

look at the Clean Coal Program. A lot of what we have done there, 

we can see in evidence of what we can do and do in a better way. 

I know even in my travels, running into scientists in the airports 

and talking about some of the research that we have been able to 

get out of biomass and some of the potential that the biomass has, 

particularly our agricultural biomass is enormous, and the excitement out there in the investigative world, in the research world, 

is phenomenal, and we on Capitol Hill must seize that excitement. 

We must move forward in supporting these initiatives. 

With the proper financing and the policy focus, I believe we can 

help our farmers and others turn these farm fields of ours and 

many of our industries in our States into the energy fields of tomorrow while they still continue to produce the safest, most abundant and affordable food supply on the globe. In order to create favorable market conditions for biofuels, we need market support and 

tax incentives to foster these conditions, and with today’s depressed 

market for farm commodities oftentimes, and it does become often 

cyclical, biomass will serve as a ready new market for surplus farm 

products. 

I know that in my example in Arkansas, as the rice hulls in my 

State that are piling up; we cannot burn them anymore because of 

clean air requirements. Now, with new industrial enzymes coming 

available, we have the hope that we can convert these crop residues to useful ethanol transportation fuel. 

The investment now in the biomass industry will level the playing field and create new opportunities in rural communities in Arkansas and nationwide. I am excited, and I very much appreciate 

the Chairman, because I do think that this is an issue that has tremendous potential for our country, for our States and certainly 

something that is near and dear to my heart, and that is our agricultural producers. 

We appreciate the panel being here; look forward to further discussions, questions today, and certainly the other panels that will 

be here. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Lincoln for your participation and leadership in this hearing. 

Senator Coleman from Minnesota has joined our hearing, and I 

would be pleased to yield to you for any opening statement or comments you would like to make at this time. 

STATEMENT OF HON. NORM COLEMAN, A U.S. SENATOR FROM 

MINNESOTA 

Senator COLEMAN. Thank you, Mr. Chairman. Very briefly, Mr. 

Chairman, I have a more complete statement here that I would 

like to have entered into the record. I want to join my colleague 

from Arkansas, Mr. Chairman, in thanking you for your leadership 

on this issue. In Minnesota, we have United States Steel up in 

10

Northeast Minnesota. It is the largest energy user in the State. 

They are looking at opportunities to use biomass to cut down the 

cost of energy, which is a big issue for them. 

We have a lot of forestry up there, and we have wood chips and 

a whole range of other things that create opportunity. I had a 

chance to visit and check out an anaerobic digester and a 1,400-

cow dairy farm that is providing energy not just to the farm but 

to the local co-op. Although we often talk about biomass in terms 

of rural issues, in St. Paul, Minnesota, the city which I had the 

great pleasure to be the mayor of for 8 years, we have a biomass 

facility now operating as part of District Energy, which provides 

heating for the entire downtown area of St. Paul. 

This is something that is really universal that helps citizens in 

every corner of the State. We need to do more. There are a few 

things I know that are before us right now that will continue to 

move biomass on the forward track it has been on. The renewable 

energy provisions of the Farm bill are an important part of that. 

There is also the need to expand the Section 45 tax credit through 

2006 and ensure that it applies to biomass projects. 

The Senate is poised to get this passed. I hope we do so. I hope 

this hearing spurs us to do even greater things for something that 

really holds great hope for meeting America’s energy needs in the 

future. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator. 

[The prepared statement of Senator Coleman can be found in the 

appendix on page 44.] 

Mr. Rey, I appreciate very much the discussion that you gave us 

with respect to the provisions of current law that authorize certain 

projects. In the Farm bill, we provided authority for $22 million 

each year to fund renewable energy systems. I wonder whether you 

think this is a program that has enough authority. Should we consider expanding that at this time? Are there a number of biomass 

projects available to be funded around the country that offer hope 

for achieving the goals that we have discussed here this morning? 

Mr. REY. Well, we had no trouble awarding the $22 million in 

the fiscal year 2003 program, and we have recently published a Notice of Funding Availability for $23 million in fiscal year 2004 

grants. If you would like, Mr. Chairman, as we get the response 

to that, we can keep you apprised of what sorts of responses we are 

getting, what kinds of systems are being suggested, and we can 

also give you an idea of how the number of responses and requests 

would compare with the $23 million in 2004 funding that is available. 

The CHAIRMAN. I notice that in your testimony, Mr. Garman, you 

suggested that there is a goal of establishing the first large-scale 

biorefinery based on agricultural residues by the year 2010. What 

is the progress that is being made to indicate to you that we may 

be able to achieve that goal? What are the steps that are being 

taken now? 

Mr. REY. We have been working closely, and let me say with the 

Department of Agriculture and the mechanisms you have established using both, farm bill money and our money to do joint soliciVerDate 0ct 09 2002 10:29 Oct 22, 2004 Jkt 093560 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\DOCS\93560.TXT TOSHD PsN: TOSH
11

tations to work on the underlying science and technology that has 

to be developed to make that kind of refinery possible. 

We have only done two or 3 years worth of projects. Those 

projects are underway now. We are starting to get some early results, but it is going to take some more time in the lab, some more 

time—I have not seen anything that tells me that was not the right 

goal to set. We can be on track; again, there can be slippage depending on the outcomes of budgets, but that remains our goal at 

this point, and we have seen nothing from the scientific results of 

the first three rounds of solicitations that we have done that would 

dissuade me from that view. 

The CHAIRMAN. Thank you. 

Senator Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. 

Let me just ask a general question based upon the fact that as 

the Chairman generously cited an article that Jim Woolsey and I 

wrote for Foreign Affairs in 1999. We were describing then a perilous situation with regard to our national security and our energy 

inputs from all over the Earth and specifically the declining 

amount of oil prospects we had in this country and the difficulty 

of getting natural gas. 

These debates continue in the energy debate this year more urgently and in terms of popular look-see at this, the price of gasoline 

at the pump goes up, and it is a very large political issue. The fact 

is the debate has, it seems to me, moved only incrementally in the 

5-year period of time with most people who are savants at foreign 

policy pointing out again how perilous our situation is becoming. 

Toby Maxwell, a well-respected oil analyst, points out that as a 

matter of fact, even the foreign reserves, which we have always anticipated were relatively limitless are not; that we may have 

reached a tipping point in which the world is actually going 

through a quantity of oil and natural gas resources that comes to 

an end at some point. 

I expect those who are around this table when that time comes 

will be very urgent about that situation. This is no fault of any of 

the Departments here today. You are doing your best. As you point 

out, Mr. Garman, even given the $81 million you have, Congress 

has pigeonholed off $40 million, so you really could not quite get 

on with all of those projects. 

There still is obviously not the sense of national urgency quite 

apart from Congressional urgency. Even if there was, the problems 

that we saw then and now are that even taking corn for ethanol, 

the cost of using corn and that process always has been more expensive than simply the petroleum-based situation. Maybe the cost 

gap is narrowing, but a subsidy of one form or another has been 

in play. 

This has regularly been attacked as pork barrel politics for corn 

farmers. Leaving aside the validity of that attack one way or another, the fact is that we would have cost differentials elsewhere. 

Just theoretically, is it ever going to be possible to narrow the gap 

so that, for example, a corn-based ethanol costs the same or less 

than petroleum-based, or if not corn-based ethanol, a biomass solution of some other type that, in fact, through American ingenuity, 

comes in at less? 

12

Now, that does not mean even if it did, in my judgment, people 

would leap to it. The infrastructure that now supports the petroleum and natural gas business is out there, and the infrastructure 

that supports the collection of biomass, whatever it is, and the 

transportation of it and the refining and so forth is not there. 

Can you give us some national optimism that it scientifically is 

possible to come to a point in which, in fact, you make the economic case, it just simply costs less, quite apart from how you have 

been doing it all these years? 

Mr. GARMAN. Well, with the current set of policy measures and 

subsidies in place, I can say with some assurance that ethanol, dry 

mill ethanol producers today are making money and getting a good 

return on investment. 

Now, their profit margin has been inhibited in recent years by 

the high price of natural gas that they need to produce that ethanol. They have to—it is a pretty large energy input, which is why 

our vision of the integrated biorefinery, your vision of an integrated 

biorefinery is on target, because it can produce much of or all of 

the energy it needs for its process, heat and energy inputs. 

I believe there is reason for optimism here. Let me qualify that 

a little bit, provided we are able to break that barrier of using the 

cellulosic material as the feedstock. That is very important, because we in this nation use about 135 billion gallons of gasoline 

each year, and we are excited about the prospect through the renewable fuels legislation that the Senate is considering getting up 

to 5 billion gallons of ethanol production each year. 

We do not know exactly where the point is, but when you get 

much above 5 billion or 6 or 7 billion gallons, you start to impede 

on other values we have: how much arable land do you want to 

produce? How much do you want to take starch and sugars out of 

food production to go into energy production? You start to have 

some problems. 

If we break through the technical barriers that prevent us from 

using the cellulosic material and waste, then, as I indicated in the 

testimony, we can get up to around theoretically as much as 60 billion gallons a year, and that is a large percentage of our needs. 

Now, when you take the next step and look at how biomass can 

be converted to hydrogen, as can natural gas, as can coal, as can 

water if renewable energy or nuclear energy is applied, then, you 

have a multitude of domestic feedstocks pointed toward the one 

fuel. That could be a tremendous advantage for us. 

I have probably said too much, but the bottom line answer is biomass, we think, plays an important role today and will play an increasingly important role in meeting our energy needs for the——

Senator LUGAR. On the cellulosic idea, though, if you were—on 

a scale of 1 to 10, through the dead start and 10 being there that 

you really have, where is that? 

Mr. GARMAN. Our current estimates are that ethanol from cellulosic material probably can be produced at a cost of around $2.50 

per gallon. Our 2012 target is $1.07 per gallon. 

Senator LUGAR. $1.07? 

Mr. GARMAN. Yes, sir. 

Senator LUGAR. All the way from $2.50 to $1.07. 

Mr. GARMAN. Yes. 

13

Senator LUGAR. Through a new process. 

Mr. GARMAN. There is, you will hear, in later testimony on the 

next panel, there is an entity in Canada that is producing small 

commercial amounts of cellulosic biomass. I do not know with any 

precision their costs or how much they are actually shipping, but 

they have begun. That is an indicator to me that the time is coming. We produce cellulosic—ethanol from cellulose at a pilot scale 

plant at the National Renewable Energy Lab in Golden, Colorado 

today. We are talking about 2012 or so before we think it can realistically compete with gasoline. 

Senator LUGAR. That, optimistically, would—out of the 135 billion gallons we need as a country for everything, 60 might come 

from this thing if you had the breakthrough on cellulose, and that 

might become in the cars by 2010, 2012, from what you are saying. 

Mr. GARMAN. Yes, and let me add, of course, this morning, oil 

was priced in the Asian markets this morning at around $40 a barrel. 

Senator LUGAR. Yes. 

Mr. GARMAN. Of course, when the competing fuel is priced higher, that can hasten the time when biomass-derived fuels can compete. 

Senator LUGAR. Now, then, the step to hydrogen, where does that 

lie, if 2010–12 is somewhere in the neighborhood of where the first 

jump comes? 

Mr. GARMAN. Well, there are two methods that we can use to 

produce hydrogen from biomass, readily, just off the top of my 

head. One is through gasification, what we call the synthetic gas 

or the thermochemical platform, where you can produce a gas from 

biomass, you can gasify it, which makes a very hydrogen-rich gas. 

You can strip off that hydrogen and use that as fuel. We are beginning to explore that today. 

In the nearer-term, because hydrogen is very difficult to store 

and move around, ethanol could serve as a hydrogen carrier, where 

people could produce ethanol the way they are today; it could be 

distributed the way it is today to local filling stations and then, at 

the filling station, the ethanol could be converted to gaseous hydrogen, and we have demonstrated some technologies to do that. That 

is a method where ethanol could continue to play in the transition 

years of hydrogen, even if we have not dealt with all of the issues 

related to gasification. 

We are trying to look at all of these things in a balanced way 

and pursue the avenues we think are most promising technically. 

Senator LUGAR. Mr. Chairman, I wanted to ask one further question——

The CHAIRMAN. Sure. 

Senator LUGAR [continuing]. If I may, of Congressman Ewing, because he cited the act that we worked on in 2000 and which created the panel or the Advisory Committee that he speaks for today. 

How has that worked? Do the Energy Department and Agriculture 

work together? Has the coordination situation that we envisioned 

coming to pass? 

Mr. EWING. We found a very good attitude of cooperation between the two, and I have been very pleased with it. We have just 

scratched the surface with the act that was passed in 2000, and I 

14

doubted I would ever appear before a Committee of the Congress 

and say we need more money, but we really are not putting the resources yet into the development of new biomass energy sources, 

and what my observation is that there is an incredible amount of 

interest out there across the country in innovative ideas that they 

would like to have some help. We get a lot more applicants for the 

money than we have money to go around. 

Senator LUGAR. Thank you, Mr. Chairman. 

Mr. GARMAN. Could I add just one thing? I apologize, but I just 

want to stress that point the Department of Energy and the Department of Agriculture are two completely different agencies with 

two completely different cultures and outlooks and orientation. I 

never thought, because I was working for Senator Murkowski on 

the Energy Committee at the time your bill was passed, that these 

two agencies could work well together. 

We still have a ways to go, but thanks to this legislation and 

thanks to the work that the Advisory Committee puts us through, 

we are making great progress. 

Senator LUGAR. Well, we have created homeland defense in advance here, coordinated these agencies. 

Thank you. 

The CHAIRMAN. Thank you very much, Senator. 

I am going to ask now our distinguished ranking minority member from Iowa, Senator Harkin, if he would like to make any opening statement and then proceed with any questions he has of this 

panel. 

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

IOWA, RANKING MEMBER, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

Senator HARKIN. Mr. Chairman, thank you very much. 

I would just ask that my opening statement be made a part of 

the record. I apologize for being late, and I will just make a couple 

of observations and then go into my questions. 

First, I want to thank you, Mr. Chairman and the previous Mr. 

Chairman for the great leadership both of you have shown on this 

energy matter regarding agriculture and biomass. It was, I remember, several years ago when I sat not in this room but in the Ag 

Committee room listening to then-Chairman Lugar talk about cellulosic biomass energy, energy from cellulosic material, and I 

turned to my staff and said what is he talking about. Let us find 

out about this. 

It then evolved into the R & D bill that was passed in 2000, and 

then, all of us working together put the first energy title ever into 

the Farm bill, the 2002 Farm bill. We are making progress and 

moving ahead and getting a better handle on this, and I am just 

delighted that we have this advisory panel set up, and I look forward to the next panel also coming in to talk to us about what they 

see as our energy future. 

While we are making progress, it seems to me that there are 

some possible stumbling blocks, and we are not moving fast 

enough. I am concerned about a report, Mr. Garman, that DOE 

just came out that gave a significant negative reassessment of the 

cost of making ethanol from cellulose. The previous assessment was 

15

$1.40 a gallon. You just mentioned now cost that it is up to $2.50 

a gallon. Why was this changed? This is a pretty drastic change. 

Mr. GARMAN. Yes, and that is an excellent question, and I was 

somewhat alarmed to see that jump as well, because I had it on 

a little card I carry around with me all the time, the current estimate, $2.40. It has been revised to $2.75, and I use $2.50 or above. 

After talking to some folks in the chemical business, I am reassured that this is normal; in fact, It is fairly said that when we 

said we thought we could do it at $2.40, the professionals in the 

chemical business did not believe us. They said yes, when you are 

first discovering a scientific frontier, you make an estimate. Then, 

as you start to delve into it and start to really and truly understand the technical obstacles that confront you, that estimate usually starts to go up. This was actually a gentleman from DuPont 

who was telling me this. Then now, they believe us. Now, they say, OK, $2.50, $2.75, now, 

you are talking. That is really what it is, because then, that shows 

us you have done the scientific work, and you have really baselined 

this thing properly. You have the correct slope toward pathways. 

What I tell our program managers is that when we discover that 

our R&D targets are off, let us fess up to it, and let us put that 

in the budget and make sure that the Congress and everybody else 

knows that. Because in the process of scientific discovery, those are 

things that you find out once you start to really get into things. 

Senator HARKIN. I have here a press release dated 21 April 2004: 

cellulose ethanol is ready to go. Iogen Corporation in Canada announced today it is producing the world’s first cellulose ethanol fuel 

for commercial use. This is in cooperation with Shell, Petro Canada, whoever that is, but Shell Global—Shell Oil, the Government 

of Canada and Petro Canada. I assume Petro Canada is a gas company or something; I do not know. 

Anyway, Iogen made—is now making cellulosic ethanol, and they 

are actually selling it. Do you have any idea that they are now 

doing it. 

Mr. GARMAN. Yes, and that was the Canadian company I mentioned a little bit in the earlier question. 

Senator HARKIN. How can they do it at $2.50? What is happening 

here? 

Mr. GARMAN. Well, we do not think they are selling very much 

of it, and we think it is a start, and they are learning a great deal, 

and many startup companies or demonstration companies do operate at a loss to get ahead and develop the expertise they think they 

will need to be the industry leader of the future. Sometimes, they 

get that kind of financing to do that. 

Senator HARKIN. Could it be that they have some more active enzymes or some better enzymes that break down the cellulose? 

Mr. GARMAN. We are not aware that they have any kind of process or technology or enzymes that we also do not have access to, 

and the cost of enzymes is a major factor in the production cost. 

Senator HARKIN. Is there any way you can find out what Petro 

Canada is paying for this? 

Mr. GARMAN. It is proprietary, and it is very difficult. There is 

nothing we can do to compel them to tell us, our folks are talking 

to their folks, and we are trying to learn everything that we can. 

16

Senator HARKIN. Well, I am told that it is a private company, 

and I cannot imagine that they would be wasting money. That they 

would be doing something that would not be at least somewhat 

beneficial one way or the other. I guess my confusion comes from 

this reassessment that you have made and the fact that just recently, this Canadian company, which is a privately held company, 

along with Shell have announced that they are actually making it 

and marketing it. Someone is buying it, and I cannot imagine they 

would buy it at some exorbitant price when they could buy an alternative fuel a lot cheaper. 

I do not know; I just have a——

Mr. GARMAN. The Department has not seen Iogen’s estimated 

cost for the ethanol produced in their demonstration plant. However, Iogen has communicated to us that from a cost accounting 

perspective, the company is not including the cost of construction 

of its production facility in its ethanol product costs. Therefore, the 

selling price of the company’s ethanol under these circumstances 

only needs to cover operating and delivery costs, plus profit, excluding all capital costs on their income sheet. This situation is unique 

and makes comparison to the broader ethanol market challenging. 

It is also difficult to view the Iogen plant as a commercial entity 

because of its size. Iogen’s current rated production is approximately 250,000 gallons per year, which represents only 0.009 percent of 2003 domestic production. An average farmer-owned cornto-ethanol plant is 120 times larger, with a capacity of 30,000,000 

gallons per year. It is difficult to ascertain how the small size of 

the Iogen plant could lead to a profitable and cost-competitive situation under normal accounting methods. 

Senator HARKIN. Well, sometimes, we always have the attitude, 

if it is not invented here, it must not be any good they say they 

have been researching this for 25 years, I do not know; I do not 

know this company; do not know anybody associated with it, but 

if they have some new enzymes or new enzymatic process that 

works better, we ought to be looking at it. 

Mr. GARMAN. I have personally met with this company in the 

past. 

Senator HARKIN. You have? 

Mr. GARMAN. Oh, yes, sir, and they told us of their plans, and 

we have been monitoring them. Again, I do not know how much 

they are producing, and I do not think that release tells us how 

much they are producing either. This is pretty closely held information. They are certainly not telling us the cost at which they are 

producing this amount of material. 

Senator HARKIN. Well, they just estimated that for cellulose ethanol, there will be a market of $10 billion by 2012. 

Mr. GARMAN. I hope they are right. 

Senator HARKIN. Well, I hope they are right, too, but I hope we 

are moving ahead aggressively, too. 

The last thing I just want to say, is that in February, final rules 

released by the Department of Energy will not require local governments and private fleet operators to use alternative fuel vehicles 

under the Energy Policy Act. The reasons given for not requiring 

alternative fuel vehicles was that even if the 2 million or so vehicles in these fleets were converted to alternative fuels, it would 

17

have little impact on petroleum consumption. In particular, availability of alternative fuels was given as a problem limiting their 

use. 

Well, if this is the case, what is the DOE doing to promote the 

creation of a nationwide network of E–85 pumps? The decision to 

not require alternative fuel vehicles in fleet operations seems to be 

sending a very mixed signal about DOE’s commitment to biofuels 

development. Does the Department, do you, support E–85? 

Mr. GARMAN. Oh, absolutely, and we run what we call a Clean 

Cities Program to help to develop and deploy that refueling infrastructure that can help make E–85, compressed natural gas and 

some of the other alternative fuels, including biodiesel, a reality. 

Again, there are certain fleets under the Energy Policy Act that 

currently are required to use alternative fuel. What we found is 

that some of the State and private fleets, or State and local fleets 

are very small, fleet sizes of five vehicles. It was very difficult to 

justify the refueling infrastructure needed to do five vehicles, and 

so, many would, under provisions in the law, opt out of actually 

using alternative fuel in the vehicle. 

This is the kind of problem we have had. We can, under the law, 

compel people to purchase alternative fuel vehicles, but under the 

law, we cannot compel them to actually use alternative fuel in the 

vehicles. We have had that problem in the Federal fleet. 

Senator HARKIN. I understand that, but again, further promoting 

E–85 and establishing a system of E–85 ethanol pumps around the 

country would be very helpful. 

Mr. GARMAN. Yes, and in fact, our Clean Cities Coalitions are 

meeting right now, I believe this week, in Florida. We have coalitions with some 85 cities around the country to promote E–85, and 

compressed natural gas. We will see, 160 additional compressed 

natural gas buses plying the streets of Washington, DC in the next 

few months because of some of these successes. 

Senator HARKIN. Thank you, Mr. Chairman. I will just submit 

questions for Mr. Rey, in writing. 

Mr. REY. We will be happy to respond. 

The CHAIRMAN. Thank you, Senator. 

Senator Lincoln, any questions for the panel? 

Senator LINCOLN. Thank you, Mr. Chairman. Lots of questions, 

but I may not have time for all of them. 

Just on this last one that we talked about, lots of times when I 

hear back from industry side in terms of alternative fuel vehicles, 

they pretty much get the alternative fuel vehicle and then put it 

on the lower 40 and never use it. They get their credits for that. 

Why is it so difficult for us to encourage the use of the alternative 

fuel? Is it accessibility? 

Mr. GARMAN. Accessibility. Most of vehicles that we operate in 

the Department of Energy, are alternative fuel vehicles, compressed natural gas mainly. There is one fueling station, precisely 

one in this near area, over near the Pentagon, where you can actually refuel it. 

Senator LINCOLN. Right. 

Mr. GARMAN. I notice that we opened—or the private sector 

opened a new E–85 station in Lanham, Maryland just a few weeks 

ago, and that is a positive development, but you do not see a lot 

18

of E–85 stations outside the Midwest. Part of that is changing, and 

again, the renewable fuels legislation that the Senate is considering to expand renewable fuels production and using renewable 

fuels as an oxygenate is going to help create that infrastructure as 

we move more ethanol out of our heartland. 

Senator LINCOLN. This company in Canada, is the research that 

has allowed them to do that, is that Government research, or is it 

private industry research? Or is it a combination? 

Mr. GARMAN. I am not positive. I imagine they have used a combination of both. 

Senator LINCOLN. Do we? 

Mr. GARMAN. Yes, absolutely. 

Senator LINCOLN. How much partnering does go on with private 

industry? 

Mr. GARMAN. We try to predicate all of our work on public-private partnerships, because we think that the most productive kind 

of R&D we do is when we bring the private sector into the labs, 

and we work together on precompetitive aspects of the research. 

Then, they take what they learn in the labs and then go off and 

do their own proprietary research and try to gain that competitive 

advantage. That collaboration——

Senator LINCOLN. Well, I do not know as much about the cellulose, just simply because we do not grow as much corn as a lot 

of these gentlemen do. We grow a lot of rice and certainly soybeans. Biodiesel is really one alternative fuel that I am more focused on. I have also been very focused on what we can do with 

chicken litter, because it is creating a huge problem for us in the 

poultry industry and not to mention the municipal solid waste opportunities that exist out there. 

I guess my question is in earlier questioning, you continued to 

focus on the need for more money for research as opposed to really 

looking at the delivery of how we get this—we know that we have 

enormous potential in biomass and in alternative fuels, and it 

seems to me that we have done a remarkable amount of research. 

Really, the research needs to be more focused if it is research at 

all that we need in the delivery model of what we are getting out 

there. 

I have farmers in a whole county in Arkansas that have committed to using 5 percent biodiesel in all of their equipment. We 

have a crusher that we are looking desperately for dollars to get 

started and then, hopefully, see a refinery for biodiesel there, because we do not need retrofitting, really, there. We can just pump 

it into a combustible diesel engine. 

Mr. GARMAN. Right, and a number of things are going to happen. 

First, the EPA is going to or has promulgated low-sulfur diesel fuel 

standards for 2006. There will be a very low content of sulfur in 

that diesel fuel, less than 15 parts per million. As a consequence, 

that fuel will lose some lubricity that is very important. Biodiesel, 

soy biodiesel specifically, is a very good lubricity agent that folks 

are going to be clamoring for to meet the demand for the 2006 fuel 

standards. 

That is going to assist in deploying the biodiesel technology. 

There are also some things we need to do. There are not very many 

engine manufacturers that will honor a warranty on higher blends 

19

of biodiesel. Two percent is fine, but if you get up to 10 percent or 

more, you are in danger of voiding your warranty. Many consumers 

do not want to do that. 

One of the things that we are committed to doing is working with 

the engine manufacturers and fuel providers to certify the performance of higher blends of biodiesel in engine——

Senator LINCOLN. I heard that problem 10 years ago. Have we 

been doing that? 

Mr. GARMAN. We have been doing some but honestly not enough. 

There is a question as to whether, outside of certain small, regional 

markets, you can support blending of much more than 2 percent of 

diesel or it is going to be a regional and fractured market. We will 

have to talk to you more about this, because it is an exciting area. 

Senator LINCOLN. I guess it is regional and fractured if we allow 

it to be that way. It seems to me that we have such tremendous 

potential that we could really energize all of the different sectors 

of the economy that are going to not only participate but benefit 

and move it along quicker than we have been seeing. 

On the cellulose side of things, where are we on the technological 

development curve in terms of developing enzymes that can convert 

that biomass to sugar or ethanol? If there is a classroom curve, 

where are we on that? 

Mr. GARMAN. We can do it today; just the enzymes are too expensive to do it at a price competitive to gasoline or corn-based or 

starch-based ethanol. 

Senator LINCOLN. The curve is pretty steep is what you are telling me in terms of cost. 

Mr. GARMAN. Right. As we were saying, it gets into this earlier discussion we were having. We believe the current costs are $2.50 

to $2.75 a gallon. Our target for cellulosic biomass is $1.07 a gallon 

by 2012. That gives you a sense of——

Senator LINCOLN. That indicates to me that we are pretty low on 

the learning curve here. 

Mr. GARMAN. Pretty low on the curve, yes, because we have to 

reduce, for instance, the cost of the enzymes probably by a factor 

of 10. 

Senator LINCOLN. Can the biorefineries that you are talking 

about that use the cellulose-based biomass, are they able to operate 

in all 50 states? 

Mr. GARMAN. Well, we have not developed one yet, but yes, the 

answer would be yes, because I personally think the expense and 

difficulty of hauling large amounts of feedstocks very far will ruin 

your economics if you have to haul things from the field a long distance. 

Senator LINCOLN. What about hauling the end product? You cannot pipe it, right? 

Mr. GARMAN. Yes, you can. 

Senator LINCOLN. You can? 

Mr. GARMAN. You can. It has an affinity for water, and you have 

to deal with some of those issues, but we can deal with those issues 

over time. We will have, instead of the model we have today of oilbased refineries geographically concentrated in certain regions of 

the country a more even distribution and an even smaller-based refinery system run on a community scale instead of a very large inVerDate 0ct 09 2002 10:29 Oct 22, 2004 Jkt 093560 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\93560.TXT TOSHD PsN: TOSH
20

dustrial base. That is what I would like to see because that helps 

farmers share in that value chain closer to home. 

Senator LINCOLN. Mr. Chairman, I have used my time, but 

again, thank you for this, and I have many more questions I may 

submit for the record to be answered, and again, I appreciate it, 

because this is a very exciting topic with multitudes of possibilities. 

The CHAIRMAN. Thank you, Senator, thank you for participating 

in the hearing. 

Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. Just a comment 

and then a question. 

I mentioned in my opening statement about the urban applications. For me, it is important. This cannot be seen as we are just 

focusing on rural communities; critically important, but everybody 

should realize that they have a stake, and everybody has opportunity. In Minneapolis, there is a neighborhood called the Phillips 

neighborhood. It is one of the lowest-income neighborhoods in the 

heart of the city, and they are in the process of developing a project 

that will heat 20,000 homes and about 3 million square feet of 

business space and multifamily housing. They are looking at using 

tree stumps and some organic waste from a nearby General Mills 

plant. 

When they come to the Department of Energy and come to the 

Ag Department, please reflect upon the importance of our urban 

citizens understanding they have got a dog in this fight; they have 

got a stake in this, and the more we can get everyone to understand this is good for America, the better-served we are going to 

be. 

A question to Mr. Rey. I applaud the administration’s comprehensive energy policy and the energy bill-biomass; ethanol; biodiesel; wind, which we have a lot of, by the way, in Southwest Minnesota; they call it the Saudi Arabia of wind. One area of concern, 

however, has to do with budget submission for the development of 

renewable energy systems. You noted in your comments that we 

did not have any problem with the $20 million or the $23 million 

in 2003 and 2004. 

I understand that budget submission for 2005 is $10.8 million, 

and I am wondering how do you respond to the critics who say the 

need is out there; we have shown a commitment to a comprehensive energy policy, and this funding level does not accomplish that? 

Mr. REY. Well, what we have done in responding to funding requests for these kinds of systems is not only used the Section 9006 

grants, but we have also been using the Value Added Market Development Grant and the Rural Business Enterprise Grant and 

Rural Business Opportunity Grant programs to supplement the 

money available for these kinds of systems. We have given a priority in those three other grant programs to renewable energy systems as well, and when you look across what we do in 2004 in all 

four of those programs and what we hope to do in 2005 with those 

four programs, assuming a favorable response to the budget request, you will see a significant emphasis on renewable energy systems. 

Senator COLEMAN. It is important just to get that word out there. 

I do not want anyone to have at all the sense that somehow, we 

21

are stepping back on this when, in fact, there is this whole world 

of opportunity that we have to seize. I appreciate that. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. I appreciate your participation in this hearing. 

We appreciate also this panel leading off our hearing today on 

this subject. We thank you for your submission of your remarks in 

advance to the Committee. They will be made a part of the record 

in full. Thank you very much. 

The CHAIRMAN. We are pleased to have on our next panel a gentleman whom I mentioned in my opening remarks who came to 

visit with me and suggested that we take a more active role in trying to promote alternative fuels production, refining and research 

that is being done in this area of interest. We are pleased to welcome to the Committee James Woolsey, who is a former Director 

of Central Intelligence. He also served here in the Senate as counsel to the Senate Armed Services Committee about the time I was 

elected to Congress in 1972. He has chaired advisory boards of the 

Clean Fuels Foundation and the New Uses Council. He serves on 

the National Commission on Energy Policy as well; and Boyden 

Gray, who has been a friend for a long time. He served as legal 

counsel to Vice-President George Bush in 1981 and then continued 

in his role as counsel for President Bush when he served as our 

president from 1989 to 1993. 

Mr. Gray is representing the Energy Future Coalition. We appreciate very much your being here. We ask you to make any opening 

statement to the Committee you think would be helpful to our understanding of these issues. 

Mr. Woolsey. 

STATEMENT OF HON. R. JAMES WOOLSEY, FORMER DIRECTOR 

OF CENTRAL INTELLIGENCE, MCLEAN, VIRGINIA. 

Mr. WOOLSEY. Thank you very much, Mr. Chairman. 

It is an honor to be asked to testify before this distinguished 

Committee. I first got interested in these issues due to my old 

friend Bill Holmberg, who is here today, and then, Senator Lugar 

asked me 7 years ago to testify before this Committee, and then, 

following that testimony, he and I wrote the article you described. 

It is an absolutely vital issue for our national security. 

Let me say just a word about what I do not think we should be 

spending a great deal of time on. One is where we buy oil. The 

world’s oil market is more or less one market. We do not accomplish much by buying more from one part and having, say, Europe 

buy more from the Middle East. The economies are related; the oil 

prices are closely related. I do not think this is a question of the 

geographic region from which American imports come. The world’s 

dependence on the Middle East is an extremely delicate and difficult matter because of the instability there and particularly because of the uncertain future of Saudi Arabia. 

I say in the written testimony that although Crown Prince 

Abdullah speaks somewhat hesitantly and not very strongly sometimes but nevertheless does speak to some degree for a reform 

movement in Saudi Arabia, other important parts of the royal family such as Prince Nayyaf at the Interior Ministry and others are 

22

quite opposed to reform, and whether or not that Kingdom moves 

in a positive direction in cooperation with the world’s democracies 

and the rest of the world in setting oil prices or whether—and in 

a lot of other ways or whether it is mired in its vulnerability to terrorism and other threats has a good deal to do with the future direction of the world’s stability in economic terms as it relates to oil. 

It is not only governmental uncertainty in Saudi Arabia. It is the 

vulnerability to terrorism. Bob Bayer’s recent book Sleeping with 

the Devil opens with the scenario of a fully loaded 747 being 

crashed into a particularly important part of the fuel processing facilities in Saudi Arabia and thereby setting the world back many 

millions of barrels a day for many months. It is, unfortunately, a 

reasonably realistic scenario. 

Then, finally, of course, is the problem that could come about not 

only from terrorist attacks in Saudi Arabia, as we have seen earlier, within the last 5 days, but also in other parts of the Middle 

East and even the possibility of an Islamist government, people of 

the stripe of Osama bin Laden coming to power in Saudi Arabia. 

It is sometimes said that it does not really matter who is governing Saudi Arabia, because they are going to have to sell their 

oil anyway. That is not true if those who rule the country want to 

live in the Seventh Century, as do the Islamists. The uncertainty 

in the oil picture worldwide, driven by the uncertainty in the Middle East, is a very important aspect of the whole problem. It is also 

important that as we focus on alternative energy, we not spend a 

great deal of effort, if one is concerned about the strategic situation, on generation of electricity. 

There are interesting, renewable ways to generate electricity. 

There are a lot of ways to generate electricity. Oil only fuels about 

2 percent of our electricity generation now, and that is headed 

down. Insofar as one is worried about instability from foreign supply, we are really almost exclusively talking about a transportation 

fuel issue here. 

That it is important to focus on the fact that came out in a number of questions to the preceding panel. The problem here is moving along smartly to being able to produce alternative fuel that can 

be consumed within the existing infrastructure and doing so relatively quickly. There are a couple of fuels that fit that definition, 

to my mind. One is ethanol from biomass, because ethanol that has 

been reduced from biomass mixes readily with gasoline, and you 

can use up to E–85, 85 percent ethanol, in flexible fuel vehicles. 

Now, when I talk about these issues, rather than alternative fuel 

vehicles that sometimes would mean burning entirely, let us say, 

natural gas or something like that, which some bus fleets do, one 

wants to focus on the family car. There are millions of flexible fuel 

vehicles on the road. It costs a little bit extra to produce them, but 

you get a Ford Taurus that is a flexible fuel vehicle and can burn 

up to E–85 for no added cost if you walk into a dealer’s showroom. 

It is a slightly different type of plastic in the fuel line and a slightly different kind of computer chip. 

One thing that is important is to buildup the fleet of vehicles 

that the average American family can buy so that when ethanol is 

available from biomass, we do not have to go through yet another 

conversion of infrastructure; the infrastructure is already there. I 

23

know of nothing that would keep a flexible fuel vehicle from also 

being a hybrid. If a hybrid gets about 60 miles a gallon, as the Toyota Prius does today, then, if you were using E–85 in it, even with 

ethanol somewhat lower energy content than gasoline, you are up 

in the range of getting 300 miles per gallon of gasoline. That is not 

bad. 

It seems to me with those kinds of prospects before us, it is not 

a wise idea to spend a great deal of time and resources on focusing 

on the hydrogen economy. We have more of an urgent problem 

than this. Yes, there are certain attractive features to hydrogen 

being used to carry energy from one form to another, and it burns 

cleanly, and that is fine. 

Someday, we may have a hydrogen economy and fuel cell vehicles. If we concentrate on what can be done now and financial incentives to get things like biomass ethanol produced now, we will 

do a lot more for the country and for the agricultural sector of our 

economy. 

One final point: the other technology that I would like to call to 

your attention is the use not only of agricultural wastes but also 

waste that is from biomass, from cellulosic biomass but also waste 

from animal carcasses and manure, particularly animal carcasses, 

given the dangers from BSE and the like. 

In Europe, for example, there are tipping fees, that is, negative 

costs recognized of over $100 a ton for dead animals. That means 

with one of the processes that is now commercially operating in 

Carthage, Missouri, in a joint venture between ConAgra and 

Changing World Technologies, one could give away the diesel fuel 

that is produced and still make money. The reason is because the 

negative costs, the tipping fees from the producer getting rid reliably of those animal carcasses is so recognized by the tax system 

and so forth. 

If we look at waste products, first and center, both those that 

grow in fields and those that are the result of animals, for instance, 

rice straw in the process of producing ethanol, we can focus on giving credits for getting rid of substances that we have to get rid of. 

Often, those costs are not recognized in the systems that we operate today. If one recognized that rice straw has to be gotten out of 

the field—it is not like stover; it has silicon in it; you cannot plant 

again and cannot leave it in the field, and if you burn it, it smells 

awful. 

If we recognize those negative costs both in animal and in cellulosic agricultural wastes, we can help move the production of 

fuel, whether it is diesel that could be refined into gasoline or cellulosic ethanol, along far more quickly than by focusing on the 

R&D long-term perspective, which is often presented. 

With that, I will pause, Mr. Chairman, and turn the floor over 

at your permission to my friend, Boyden Gray. 

[The prepared statement of Mr. Woolsey can be found in the appendix on page 67.] 

The CHAIRMAN. Thank you very much, Mr. Woolsey. 

Mr. Gray, you may proceed. 

24

STATEMENT OF HON. C. BOYDEN GRAY, ENERGY FUTURE 

COALITION, WASHINGTON, DC 

Mr. GRAY. Mr. Chairman, thank you very much for this opportunity. 

I thought what I would concentrate on is a response to what has 

already transpired rather than summarize the testimony that you 

already have. Transportation fuels are the key to import insecurity. 

The DOD commissioned a study from the Arlington Institute that 

basically came to the conclusion that our Energy Future Coalition 

came to, which is the road to independence is through ethanol, and 

through ethanol, you will get ultimately to hydrogen, but the key 

part is the ethanol. 

Our own American automobile industry would love to see this 

route taken. As much as they are intrigued with hydrogen, the vehicle for moving hydrogen is going to be ethanol, and of course, ethanol from biomass and biodiesel can be used to run the fleet, E–

85 or whatever cars you are talking about in the interim. 

I believe—we believe ethanol biomass is the key. The questions 

that have come up have to do, obviously, with costs and capacity. 

Is there an efficient enough method of attacking the cellulose problem? Assuming you can do that in a cost-effective way that makes 

the product competitive worldwide with gasoline, is there capacity 

to make a real dent, to make it worthwhile? Is it worth really trying to do? 

The answer to both questions is yes, there is a way to attack the 

cellulosic problem, and the results would be quite interesting: 60 

billion gallons—we rely on a Battelle Memorial Institute study for 

our purposes which we have submitted which suggests 50 billion 

gallons. You heard Mr. Garman talk about 60. I will take either 

number. If you include what the Caribbean basin could do, what 

Central America could do and South America, the number would 

be very, very much higher, so this is very, very significant cut of 

120 billion, 130 billion gallons of gasoline. It is very, very significant. 

Now, what about the costs? I do not think only we really understands; this is something the Committee may and should perhaps 

try to get to the bottom of. I do not think the cost of the enzymes 

is the problem. My understanding is the Department of Energy has 

run studies to get the cost down tenfold that they were talking 

about. The problem is the commercialization of these technologies. 

Can they be worked at the plant scale? The huge kind of scale that 

you need to really realize the benefits of efficiencies? 

There, frankly, this is where the Government comes in, that’s 

necessarily to help jump-start the technology. In the same way 

NIH did for biotech for the drug side of the equation, the Government really has a role to play in sharing some of the risk of this 

with the private sector. 

The payback would come very, very quickly, because studies 

show, Oak Ridge studies show, that for every 10 or so billion gallons of ethanol consumed, you would save $1 billion or so in crop 

subsidy supports. You are talking about huge savings that would 

pay back very, very quickly any investment the Government made 

in commercialization. 

25

Now, there are certain other side benefits that come from this. 

If you understand what is going on here, the increase in crop prices 

resulting from the demand for them in the transportation sector 

means less subsidies. It also means better prices for farmers worldwide, and William Klein, who is an economist with the Center for 

Global Development, has estimated that every 50 billion gallon increment produced raises 40 million farmers out of poverty worldwide in the developing world. 

The consequences for world agriculture and for the world economy are quite significant. The last point I want to make responsive 

to what has occurred, what are we comparing the costs of here, at 

least initially as this thing tries to get underway and ramped up, 

and people get used to doing this? The highest value of these alternative fuels is as a substitute for—as a source of clean octane for 

the transportation fleet. 

We lose sight of this. I got into this whole issue primarily because of the elimination of lead from gasoline 20 years ago, which 

was one of the most successful environmental initiatives ever undertaken by the U.S. Government. We are still struggling trying to 

get the lead out of the gasoline in Africa, for example, but we have 

done it here. We were 20 years ahead of the rest of the world in 

this country. 

Well, where do you get the octane when you take out the lead? 

Well, the octane now comes from products called aromatics, which 

are bad actors. They are the principal remaining source of pollution 

in this country. They are expensive. They are on a par with ethanol 

to even produce today. If one were to eliminate the aromatics from 

the gasoline, one would have a ready market for ethanol at today’s 

prices, let alone what could be happening with a little jump start 

on the commercialization of these new technologies for cellulose. 

One of the benefits would be, and I will close on this, a total 

elimination of any remaining air quality problems in the United 

States. That would be a nice thing to do as a side effect of gaining 

a little energy independence. 

Thank you. 

[The prepared statement of Mr. Gray can be found in the appendix on page 74.] 

The CHAIRMAN. Thank you very much. 

Mr. Woolsey, you mentioned in your statement the hybrid engine 

development and use. What should we do as a Government to help 

move this along or promote it? 

Mr. WOOLSEY. Well, I just bought a Prius a couple of months ago, 

and the tax advantage was $500 less than it was the previous year. 

Next year, the tax advantage will be $500 less still. We are headed 

in the direction of nonencouragement of hybrids, which seems to 

me a little odd, given the events, for example, as I said, in Saudi 

Arabia a few days ago. 

The taxes are, I would think, the Government’s tool, both to encourage early production of biomass ethanol, of diesel fuels that 

can be used in the existing infrastructure and of hybrid vehicles. 

I realize, having worked up here, myself, Mr. Chairman, that it is 

sometimes a real struggle to get the tax system encouraging things 

that way. 

26

The CHAIRMAN. You also commented in your testimony about the 

potential of harvesting switchgrass——

Mr. WOOLSEY. Yes. 

The CHAIRMAN [continuing]. On Conservation Reserve Program 

lands. I had a visit in my office some time ago from former Senator 

Henry Bellman of Oklahoma. He came to town with a research scientist from his State who had been actively working on this technology. What is the prospect of effective and efficient utilization of 

things like switchgrass? Does it offer real promise of helping us 

achieve these alternative fuel resources? 

Mr. WOOLSEY. I definitely think so. Professor Lee Lynd will be 

testifying in the next panel, who knows a great deal about this subject. I would just say briefly that although you will get an economic 

kick to these processes sooner by recognizing waste disposal, things 

like rice straw and begas in a growing area and things like dead 

animals or animal carcasses in the other rest of the biological area, 

switchgrass would probably provide the bulk of what one could use 

to produce large volumes of cellulosic biomass ethanol. 

I know Senator Harkin had a bill a few years ago to permit the 

harvesting of the CRP lands for purposes of energy, and that is 

very important, because according to Lee Lynd’s calculations that 

Senator Lugar and I used a few years ago in our article, even at 

current levels of mileage, gasoline mileage in vehicles, if you harvested a small share of agricultural wastes and harvested just the 

switchgrass on the CRP lands, no new land into cultivation, no 

land taken out of cultivation from other crops, that would, as I recall, be able to produce about a quarter to a third of the replacement for the gasoline in the country. 

If you move up to hybrid mileages, 60 miles a gallon and better, 

it could replace all of the gasoline in the country. The trick, both 

with expanding the biodiesel definition so it covers all types of diesel, because this animal carcass to diesel is now not encouraged by 

the current biodiesel definition, if you move initially toward using 

recognition of wastes and getting rid of wastes as an economic incentive for commercialization of these various processes and then 

for the large-scale move into extremely substantial replacement of 

imported petroleum, I really believe that switchgrass would have 

a major role. 

The CHAIRMAN. Mr. Gray, you mentioned in your statement this 

Canadian company that we talked about when the first panel was 

before the Committee—Iogen, is the name of it—which has begun 

commercial production of ethanol from cellulose. Do you know of 

any U.S. investors or companies that are putting together similar 

joint ventures here in the U.S., or is that likely to happen in the 

near future without specific Government program development of 

incentives? 

Mr. GRAY. I do not know of any that are as far along as Iogen 

that are public, publicly known. I do know that there are communities in Kansas, for example, and we discussed this with Senator 

Roberts, communities that are getting bond issues together to try 

to start to build plants to do this. I cannot say that one has actually been designed. 

I do think that the Government support—maybe it is a guarantee kind of arrangement—for the commercialization of these 

27

technologies which the Department of Energy has done on a pilot 

plant basis may be necessary to get them really launched. It is a 

small price to pay. 

Mr. WOOLSEY. Mr. Chairman, could I add one small point? There 

was a company, BCCI, a couple of years ago that was reasonably 

far along. It used a technology of Professor Lonnie Ingram at the 

University of South Carolina, who is one of the real experts in the 

world on the modification of these biocatalysts, and it was going to 

be producing biomass ethanol from begas in Louisiana. 

It was reasonably far along, and then, the Department of Energy, 

in early 2002, withdrew the incentive that they had had in place 

for about a year for it, and it has slowed down, to the best of my 

knowledge, to not making any progress now. 

The CHAIRMAN. Senator Harkin. 

Senator HARKIN. Mr. Chairman, this is not only a fascinating 

subject, but it is one on which I hope that our Committee continues 

to focus more time. I thank you for this hearing. 

I also want to thank our witnesses here and also the group that 

you are representing, the Energy Future Coalition. I have read a 

number of the items that have come out from that coalition, and 

you are on the right track, and what your message is that we really 

ought to be doing more things in the tax benefit area, tax incentives, Government procurement. 

I am intrigued, Mr. Gray, by what the Battelle Memorial Institute—it is in your testimony but you did not cite it—about the 

Battelle Institute’s estimate that 50 billion gallons of cellulosic ethanol could be made annually without significantly impacting agriculture in a negative way. 

You mentioned, Mr. Woolsey, about all of the CRP ground out 

there with switchgrass. Switchgrass takes very little fertilizer. It 

grows annually. You can harvest it. I might just point out that I 

was involved several years ago with starting a switchgrass project, 

the Chariton Valley RC&D in Southeast Iowa, along with Alliant 

Energy and a couple of other groups, and we were able to get some 

funds into it. 

We have an ongoing project where they are just simply harvesting switchgrass and burning it in a coal-fired plant nearby. 

They are mixing it with the coal. That may not be the most efficient way, but at least it is working. 

Mr. WOOLSEY. Yes. 

Senator HARKIN. It is not impacting the environment in a negative way, and it is on CRP ground. 

Mr. WOOLSEY. Yes. 

Senator HARKIN. The next step is to get a digester and start 

using some of that cellulosic material in a digester to produce electricity. I hope that you will take a look at a paper that was developed for me by a scientist once in which he developed the idea of 

electro-farming, where farmers actually become producers of electricity by putting things through digesters, getting the hydrogen 

and using the hydrogen through a fuel cell to make electricity. 

The parameters he had were pretty interesting, using certain 

prices of fuel and that type of thing, it looked, actually, in a 10 to 

20 year timeframe, promising. It would take some Federal GovernVerDate 0ct 09 2002 10:29 Oct 22, 2004 Jkt 093560 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\DOCS\93560.TXT TOSHD PsN: TOSH
28

ment involvement, and it would take some pushing and some subsidies and that type of thing to get this going. 

I want to get back, Mr. Gray, though, and ask you: tell me about 

this fly off. I am intrigued by this idea that you had in your testimony that we recommend the Federal Government authorize and 

conduct a one-time procurement fly off aimed at building 5 to 10 

commercial-scale plants. 

Just tell me about what that means. 

Mr. GRAY. Well, I do not know who would do it; maybe the Department of Defense would do it. They have a keen interest, as I 

said, and in my testimony says about getting away from oil, not 

just because of the world security situation but because of their 

own needs when they go into combat zones. 

The idea would be to take five or six or so of the most promising 

potentially commercialized technologies and order up, pay for or 

guarantee the construction of five or six or seven or eight different 

plants and then see which one won. That is what we mean by a 

competitive sourcing to see which—who had the best mousetrap 

that would work and come up with the cheapest price. 

I am trying to think of an analogy. At the beginning of the petroleum business 100 years ago, the yields from the barrel of crude 

were pretty low. Just like people now complain that the yield from 

the kernel of corn is pretty low, the yield from the barrel of crude 

was very, very low. The Federal Government did not get in this directly, but the companies did compete. 

When Standard Oil of Indiana, the original Standard Oil trust 

was broken up, all heck broke loose as it were, and these independent refineries, now, began to rapidly increase the technological 

capacity. Well, that is what needs to happen. What the oil industry 

had as a benefit was a huge subsidy from the Federal Government 

in the form of the depletion allowance and also the intangible drilling cost writeoff, which made the product they were buying artificially cheap, which allowed them to do it. 

Now, meanwhile, ethanol was being taxed. This was all before 

the Second World War. Things went in divergent directions from 

the original version that the founders of the automobile industry 

had. Henry Ford expected our transportation fleet to run on ethanol. 

If you just a little jump start, just giving the agricultural sector 

just a little bit of juice to do this fly off would yield enormous benefits very, very quickly and represent only a fraction of the subsidy 

the oil industry has over the last century. 

Senator HARKIN. Would your Energy Future Coalition have any 

suggestions as to what that prize might be, or how much we would 

have to put—to say if you are going to do a fly off, what would we 

have to have in the end? 

Mr. GRAY. Well, it is a big number but I do not think in the larger context of what we are dealing with here it is insurmountable. 

It is $1 billion. We think it would probably take $1 billion to do 

this; not in 1 year; it would be over a 5-year period. That is not—

I do not, luckily, have any responsibility for meeting budget caps, 

but that is your problem. 

Senator HARKIN. I do not think we do either. 

[Laughter.] 

29

Mr. GRAY. One billion would do it. That is what our best—and 

we can supply more material for the record, but that is my understanding of the best number, what it would take, and it would yield 

huge benefits. 

Senator HARKIN. I forget which one of you mentioned something 

about what we think in terms of the capacity in the United States, 

and Mr. Garman was mentioning that before, but one of you mentioned that we have got to think beyond that, think about the Caribbean basin, Mexico, sugar. 

Mr. GRAY. Yes. 

Senator HARKIN. We have more sugar than we know what to do 

with, and we are always having our sugar wars with Mexico and 

the Caribbean and everybody else, but it seems to me sugar is very 

efficient for conversion to ethanol. 

Mr. WOOLSEY. Well, Brazil has to subsidize it, but, of course, 

they have been the major country in the world that has moved in 

this direction, and if one can start with sugar and then get the genetically modified biocatalysts working right so you could use not 

only sugar but the begas that is left over, then, the cost would really go down. 

I must say I disagree with Mr. Garman about the degree of R&D 

that still needs to be done here. I would encourage the Committee 

to get in touch with Professor Lonnie Ingram of the University of 

South Carolina, who is the head of the program down there. As I 

remember several years ago, the genetically modified biocatalyst 

which he had designed was able to first of all ferment the C–5 

sugar in hemicellulose. Hemicellulose may be, I do not know, 20 

percent of what grows, so already, you are going from using well 

under 1 percent of what grows to using 20 percent or so of what 

grows by being able to ferment that sugar. 

Then, cellulose is a polymer of C–6 sugars, regular sugar, but it 

is hard to break. It is hard to hydrolyze it, to break it down. Lonnie’s genetically modified biocatalyst, I believe, already produced at 

that point two of the three enzymes that were necessary in order 

to break down cellulose. At that point, you are being able to use 

maybe 80, 85 percent of what grows in order to produce ethanol. 

I believe one of the enzymes would have had to have been purchased from a plant that makes enzymes, and it would be better 

if we could do what Lee Lynd calls consolidated bioprocessing, that 

is, have everything happen together at once. It would make it a lot 

cheaper. 

I do not think we are years of R&D away on this. I agree very 

much with Boyden: what we need is some commercial incentives to 

people to move out and take some of these technologies into production. 

Senator HARKIN. It seems to me that in a lot of this, we have 

the chicken and egg. Now, why don’t more people use biomass energy? Well, because it is too expensive. Why is it so expensive? Because not very many people use it. Somehow, and that is what I 

am getting at here, is sometimes. You need a demand pull. 

Mr. WOOLSEY. Senator, if I might add, too, people need to be able 

to use it in what they have. They need to be able to use it in an 

existing vehicle. That is why the flexible fuel vehicles are important, because I do not have to decide now whether I am going to 

30

pump E–5 or E–10 or E–85. It will all work in my Ford Taurus. 

The same needs to be true of biodiesel. The biodiesel that is produced today is a very limited thing, and it does have the problems 

of mixing with other fuels and the problems that were described in 

the questioning with Senator Lincoln. 

The biodiesel that is produced by this ConAgra joint venture is 

regular diesel. It can mix with any other diesel. It can be used in 

existing vehicles. It is coming out of a turkey processing plant in 

Carthage, Missouri, right now. 

One needs to broaden the definition of biodiesel to include things 

like that, and one needs to focus on getting these transportation 

fuels, whether ethanol or a broadly defined biodiesel in a form that 

they can be used in the vehicles we all have and are driving, because if you have a separate alternative fuel vehicle, it probably 

will sit in the garage or the pasture or someplace if you have to 

have a special delivery of special fuel for it. 

You can mix ethanol with gasoline just fine, and you can mix 

some types of diesel that come out of biological processes with regular diesel just fine, and that, to me, is absolutely the heart of the 

matter. 

Senator HARKIN. Well, again, I know the Chairman wants to 

move on. It just seems to me that the Federal Government is a 

900-pound gorilla here in a lot of ways, both with the tax things 

that we could do but also with procurement. I ask you and your 

Energy Future Coalition to look at Section 9002 of the last Farm 

bill. In that, we put in a provision that mandates—shall—the word 

is shall—every department and agency of the Federal Government 

shall give a preference to bio-based products in their purchasing as 

long as they are equivalent in price, performance and availability. 

Now, that is in the Farm bill. Two years later, we do not even 

have the rules issued. The GAO did a report on this about a month 

ago, Boyden, about a month or so ago, they came out with this and 

just blistered the Department of Agriculture for not managing it, 

not promoting it, giving it a low priority. 

I happened to be in a car with President Bush a couple of weeks 

ago in Iowa, and I mentioned this to him about this bio-based requirement. It is not so much pertinent to ethanol. It is not ethanol. 

It is bio-based products. It is like the corn starch-based products 

but it would give an impetus to start getting these things built out 

there. We have some plants out there making these products already. We are making soy grease, and we are making corn starchbased products and McDonald’s is buying some of that material 

now. It just seemed to me that if the Federal Government could, 

again, breaking down that chicken and egg, get more people buying 

it, the price per unit comes down. 

Mr. WOOLSEY. Polylactid acid for all sorts of plastic being made 

out of corn in Nebraska right now. 

Senator HARKIN. Right in Nebraska. They are doing that in Nebraska right now. Take a look at that and see if you—well, just 

take a look at it. I appreciate it. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator. 

31

Thank you, Mr. Woolsey, Mr. Gray, for your contribution to this 

hearing and for bringing this initial idea of moving forward again 

on this issue to me initially. Thank you. 

Mr. WOOLSEY. Thank you, Mr. Chairman. Thank you, Senator 

Harkin. 

The CHAIRMAN. Our final panel of witnesses today includes Dr. 

Mark Zappi, who is the director of the Department of Energy for 

the Mississippi Research Consortium for the Utilization of Biomass. He is a professor of chemical engineering at Mississippi 

State University, and Dr. Tom Richard, who is an associate professor in the Department of Agricultural and Biosystems Engineering at Iowa State University—guess which two Senators recommended these two witnesses? 

[Laughter.] 

The CHAIRMAN. We are also pleased to have joining this panel 

Dr. Lee Lynd, who is a professor of engineering and an adjunct professor of biological sciences at Dartmouth College. He is a co-leader 

of a project entitled the Role of Biomass in America’s Energy Future; and Dr. Samuel McLaughlin, who is a research professor with 

the University of Tennessee and a former senior research scientist 

with the Ecosystem Studies section of the Environmental Sciences 

Division at Oak Ridge National Laboratory. He has worked with 

the Bioenergy Feed Stock Development Program, which has examined switchgrass as a model species, as a source of renewable energy. 

Welcome to each of you. We thank you for being here today to 

help us understand better the issues that are involved in the subject of this hearing: biomass use in energy production, new opportunities for agriculture. Dr. Zappi, you may proceed. 

STATEMENT OF MARK ZAPPI, DIRECTOR, DEPARTMENT OF 

ENERGY MISSISSIPPI RESEARCH CONSORTIUM FOR THE 

UTILIZATION OF BIOMASS, MISSISSIPPI STATE UNIVERSITY, 

MISSISSIPPI STATE, MISSISSIPPI. 

Mr. ZAPPI. Thank you, sir. 

Good morning. I would like to extend my thanks to this esteemed 

Committee for allowing me to testify today. My testimony today 

will hit on the four following key points: first, I would like to provide a brief comparison of the future of biomass and compare it to 

what we are getting from petroleum today. I would also like to take 

a look to show you the vision for what biomass feedstock industrial 

platforms of the future may look like; also discuss some obstacles 

to the future development and commercialization of biomass-based 

process. Then, I would like to end with some suggested R&D efforts. 

I would like to now briefly compare the potential of biomass to 

petroleum. The term biorefineries is a very accurate term, given 

the vast yet differing amount of chemicals found in both biomass 

and petroleum. The modern refinery for petroleum of today produces about 25 products. They really squeeze everything they can 

out of that crude petroleum. It is not to mention the many other 

chemicals they make once those chemicals leave the refinery. 

On the other hand, most biomass-based industrial processes of 

today or biorefineries will produce two to three products. Yet, the 

32

chemical complexity of biomass is on par with what we have with 

petroleum. Clearly, we need to fully develop the biomass potential 

in terms of what chemicals can we get out of biomass. 

It is very important that we do not separate energy production 

from biomass from what other chemicals we can make from biomass, because it is those other chemicals that I truly believe will 

provide the profitability to support this energy production we are 

after. Biodiesel is a good example. It is hard for me to envision an 

economically viable biodiesel business if we do not come up with 

another high-dollar co-product other than glycerol, and/or we have 

got to reduce those production costs, because that is really what is 

killing that particular fuel. 

I would also now like to move on to what I envision to be the 

products of the future: where are we going with this? As we know, 

industry today is pretty much based on a petroleum platform. I envision numerous other biomass-based industrial platforms in the 

future. The first that I would like to discuss is what I call the bulk 

biomass platform. Here, we are going to see cogeneration of electricity using cultured grasses, wood waste and poultry litter. 

We are also going to see an increased production of biogas from 

swine manure, other agricultural manures and municipal manures, 

municipal sludges. I would also like to see the further development 

of bio-oils for the production of novel adhesives, wood preservatives, 

diesel cuts and polymers. 

The next platform would be our lipid platform. The lipid platform 

is where we get oils from plants and fats from animals. Here, of 

course, is where biodiesel is coming from. I envision polymers and 

paints and even nutraceuticals coming out of this lipid platform. 

Examples of the nutraceuticals I am talking about would be the 

omega–3 fatty acids and lecithin. These are very high-dollar products that would impart a high profitability to our vision for biorefineries. 

The next platform would be the carbohydrate platform. This is 

where we get our ethanol from. This is where hydrogen is going to 

come to run our fuel cells and many other chemicals such as acetic 

acid, which is in the top 20 most used chemicals in the world today. 

The next platform is a little more researchy. That is going to be 

the lignant platform. 

Lignant is still very much a waste product in many manufacturing systems and the future envisioned biorefineries. The reason 

why it is such a refractory and stable chemical. I believe it is that 

stable and refractory nature that might make it a wonderful feedstock for wood preservative and glues. 

The final platform would be the protein platform. Here, I envision us manufacturing environmentally friendly polymers and also 

new animal feeds derived from pretty novel feedstock such as algae 

cake as well as manures. 

Now, I would like to provide to the Committee what I believe are 

the obstacles to truly establishing viable biomass-based industrial 

platforms. The first one is the heterogeneity of biomass resources 

between the various geographic areas of the United States. Developing a one-size-all technology for making ethanol is not conducive 

to allowing all areas of the United States to become biorefineries 

or homes of green processing. 

33

Another one is we have some proposed financial incentives that 

are being directed toward feedstocks and not the final product. Also 

we cannot accept bulk chemicals as a final developmental target. 

We have to look beyond the bulk chemical, the energetic chemical, 

into what the high-dollar by-products can be. I also think there is 

a lack of solid economic assessments of process viability prior to the 

construction of some projects here within the United States. 

I also think there is insufficient interest by some power companies to truly adopt green power, particularly biomass-based systems. Finally, there is limited engagement of the university research community, particularly in the chemical processing and 

chemical production area. 

I would like to end by suggesting some R&D efforts. I would like 

to see us organize regional centers of expertise to address the 

unique biomass resources found in each region of the United 

States. I personally think the Sun Grant program is a wonderful 

program, but it is too small and limited in scope. I also propose 

four R&D focal areas that will move us a little further ahead. The 

first focal area would be the feedstock development and management. Here, we would target an increased amount of oil or fermentable products or components we get out of existing agricultural 

products. At the same time, we need to be working toward development of new energy and chemical crops. What are the crops of the 

future to support what we are after? 

The next focal point would be biomass conversion into bulk, secondary and specialty chemicals using novel processing techniques. 

The third would be tertiary processing of the secondary processing 

of these secondary products into high-dollar chemicals, specialty 

chemicals. This is what is going to pay for the biorefinery. 

Finally, we need rigorous economic assessments of maturing 

processes, done so we can ensure that we are on the right track to 

an economic reality for our biorefinery vision. 

In closing, I would like to thank this Committee for its leadership in the development of biomass-based products over the years. 

I truly believe that biomass does indeed offer us a lot of great opportunity to develop new industrial platforms, and those platforms 

will be based on renewable resources grown here in the United 

States. 

I thank you. 

[The prepared statement of Mr. Zappi can be found in the appendix on page 78.] 

The CHAIRMAN. Thank you, Dr. Zappi, for your testimony. 

Dr. Richard, you may proceed. 

STATEMENT OF TOM RICHARD, ASSOCIATE PROFESSOR,

DEPARTMENT OF AGRICULTURAL AND BIOSYSTEMS

ENGINEERING, IOWA STATE UNIVERSITY, AMES, IOWA 

Mr. RICHARD. Thank you, Chairman Cochran and members of 

the Committee. Thank you for convening this panel and for the opportunity to share some of the exciting possibilities for expanding 

biomass energy production in the coming years. The opportunities 

to convert agricultural crops and residues into bio-based products 

and bioenergy present entirely new, value-added pathways for agriculture and industry. 

34

Coordinating business, government and university partnerships 

can greatly accelerate the emergence of these new pathways and 

facilitate their success. In Iowa, the BIOWA Development Association, composed of representatives from production agriculture, industry, environmental interests and academia has been formed to 

support and promote the growth and development of Iowa’s bioeconomy. BIOWA is working closely with the Iowa Department of 

Economic Development to structure Iowa’s economic development 

portfolio so that it focuses on the opportunities and challenges produced by possibilities for bio-based businesses. 

While near-term bio-based agricultural and economic development opportunities are being nurtured by business and government, research investments will drive the next generation of innovation needed for the bioeconomy to flourish. 

These research efforts will need to span both basic and applied 

sciences and also be widespread and diverse. Even with effective 

partnerships and significant investments, the development of a biobased economy will not happen overnight. Extensive analysis of a 

range of feedstocks has identified several opportunities for nearterm progress. Two of the feedstocks of particular interest are livestock manure and crop residues. Other organic residues and byproducts, including wood and paper wastes, agroprocessing wastes 

and biotechnology by-products also represent immediate opportunities to pursue. 

In an earlier panel, Mark Rey summarized some of the opportunities for manure and anaerobic digestion, and my written testimony confirms those while outlining some of the challenges that 

also need to be met. Crop residues are an agricultural by-product 

with even greater energy potential than manure. Among the many 

straws and crop residues produced at present, corn stover is widely 

recognized as the most promising high-volume, low-cost 

lignocellulosic feedstock on which to base a range of bio-based energy, chemical and material industries for the next several decades. 

However, several significant challenges must be addressed before 

this vision can be achieved. First, stover biomass must be supplied 

at a price that is competitive with petroleum, profitable for producers and favorable for the growth of the rural agroindustrial 

economy. Current stover harvest systems rely on multiple passes 

across each field, followed by dry storage of stover bales. Unfortunately, this technology is not really achieving the target the Department of Energy has set for price of this feedstock. 

An alternative system, coupling single-pass simultaneous harvest 

of grain and stover with ensiled stover storage has recently been 

shown to reduce centralized delivery costs by 26 percent. With targeted research and demonstration of these and similar new strategies as well as effective implementation, corn stover biomass appears poised to become the high-volume price competitive biorefinery feedstock that many had hoped. 

While manure, corn stover and other agricultural residues represent immediate opportunities for biomass energy, long-term 

growth of the bioeconomy will require additional feedstocks as well. 

Increased use of perennials and cover crops in agricultural systems 

has a number of environmental advantages, including reduced soil 

35

erosion, soil organic matter improvements, and carbon sequestration. 

The Conservation Security Program, established by the 2002 

Farm bill, provides a mechanism for encouraging greater use of 

cover crops and perennial species to conserve our working lands. 

The potential synergies with biomass feedstock production provide 

additional motivation for making sure that this conservation program gets stronger support. 

One of the distinct characteristics of biomass as an industrial 

feedstock is its low energy density relative to fossil fuels, and this 

is especially true of non-woody plants. As a result, transportation 

costs associated with large, centralized conversion facilities generate significant diseconomies of scale. Optimum sizing of bio-based 

facilities thus requires a decentralized infrastructure with many 

loci of bio-industrial development. 

While a decentralized mode of development has obvious advantages for rural development, it faces particular challenges as well. 

Perhaps one of the most critical issues that needs to be addressed 

as we ramp up the development of bio-based businesses is the business models of the supply chains. In particular, we need to find 

ways to recognize and reward the farmers through the foundation 

of bioeconomy value chains. One proposed solution is for producers 

to use their equity to vertically integrate up the value chain, as has 

been done for many of the ethanol plants in the Midwest. However, 

given the size of the capital investments that will be required for 

establishing integrated biorefineries and because of intellectual 

property protections, it is likely that the ethanol model will be rare. 

New types of business relationships need to be evaluated so that 

the new systems result in economically sustainable rural development. 

This concludes my summary of my written testimony, and I welcome any comments the Committee might have and questions. 

[The prepared statement of Mr. Richard can be found in the appendix on page 83.] 

The CHAIRMAN. Thank you, Dr. Richard, for your contribution to 

the hearing. 

Dr. Lynd, we will hear from you now. 

STATEMENT OF LEE R. LYND, PROFESSOR OF ENGINEERING 

AND ADJUNCT PROFESSOR OF BIOLOGICAL SCIENCES, 

THAYER SCHOOL OF ENGINEERING, DARTMOUTH COLLEGE, 

HANOVER, NEW HAMPSHIRE 

Mr. LYND. Thank you, Mr. Chairman, for the opportunity to appear before your Committee. 

I suggest the following points be among those you leave this 

hearing with: one, solutions exist to the energy and security challenges we face, and biomass, particularly cellulosic biomass, could 

play a major role. Two, widespread energy production from cellulosic biomass offers transformative benefits for American agriculture. Three, the Government should do much more than it is 

doing now to enable and accelerate biomass energy production. 

I am an expert in science and technology directly related to biomass energy production. My perspective is shaped by over 20 years’ 

experience in the field and most recently by an in-progress project 

36

entitled the Role of Biomass in America’s Energy Future. Working 

hypotheses of the RBAEF project include, first, large improvements 

of cellulosic energy crops; for example, doubling per-acre productivity, can reasonably be expected from an aggressive and sustained research and development effort. Second, such an effort is 

also expected to dramatically increase the cost competitiveness and 

efficiency of technology for biomass processing. I note in this context that cellulosic biomass at $50 a ton is equivalent on an energy 

basis to oil at $14 a barrel. Third, an amount of fuel sufficient to 

provide for current levels of vehicular mobility in the United States 

could be produced from biomass. Moreover, this could be accomplished within the existing agricultural land base while greatly increasing income to American farmers. Fourth, the project has identified some very large environmental benefits accompanying expanded biomass energy production, including essentially zero net 

greenhouse gas emissions and improved soil fertility and has identified no environmental show-stoppers. 

I turn now to my third point: the Government should be doing 

much more. Sustainability and security are poorly reflected in market prices. The market provides only limited incentive to overcome 

obstacles associated with first of a kind technology and reinvestments of profits from a nascent energy processing cellulosic biomass will result in but a small flow of funding for innovation-focused R&D during the critical early growth phase. 

For these reasons and regardless of one’s political philosophy, it 

is appropriate that the Government play an active role in enabling 

and advancing biomass energy production. In particular, I am confident that the growth of biomass energy production will be much 

more rapid with substantial and well-directed governmental support than without it. 

How well are we doing? Let us assume for a moment that sustainability and security challenges are deemed important to respond to and that biomass could play an important part of such a 

response, as I have argued. When viewed from these premises, the 

effort the U.S. is expending to enable and accelerate biomass energy production is far short of what it should be, as elaborated in 

my written testimony. 

I find it mindboggling that U.S. Federal expenditures on applied 

energy technology R&D are about what they were in real terms 

just before the oil price shock of 1973, although our economy is now 

more than twice as large, and energy-related challenges are much 

more evident. In short, we are not acting as if we have a lot at 

stake and an important solution at hand. 

What might we do differently? I recommend one, increase by several fold the amount of funding for biomass energy R&D, with 

clearly demarcated support for both precommercial research devoted to innovation and applied fundamentals as well as cost-sharing for first of a kind industrial plants. Two: commit to pursuing 

increased biomass energy production in ways that expand opportunities for farmers and that achieve sustainability, security and environmental benefits. It is important that these features embody 

transition phases as well as targeted endpoints. Three, allocate 

funds in a way that is responsive to potential for enhanced sustainVerDate 0ct 09 2002 10:29 Oct 22, 2004 Jkt 093560 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 C:\DOCS\93560.TXT TOSHD PsN: TOSH
37

ability and security, reliant to a significant extent on open solicitations and based on technical merit. 

If we are serious about cost-effectively realizing the benefits of 

biomass energy to the national interest, extensive earmarking 

needs to be curtailed. The cost of these measures are small on any 

relevant scale and significant relative to the potential benefits. 

Consider: quadrupling funding for bioenergy R&D would represent 

an additional expenditure of about $500 million. The cumulative 

cost of a focused R&D effort to develop technology for producing 

ethanol from cellulosic crops at a cost competitive on an unsubsidized basis with current gasoline prices has been estimated at 

less than 1 year’s expenditure for the current ethanol tax incentive. 

I believe that completion of such development within 5 years is 

a realistic goal if we are prepared to change how we do business. 

Much can be done within existing legislative mechanisms that are 

already in place; for example, by adding new funding authorized by 

the Biomass Research and Development Act to funding levels of 

preexisting programs and by fully funding the Biorefinery Development Grants portion of the Farm bill. 

Mr. Chairman, as current events make clearer the urgent need 

for sustainable and secure energy sources, and analyses such as 

the RBAEF project make clearer the potential of biomass to serve 

these needs in a meaningful way, the case for business as usual in 

the biomass energy arena is becoming progressively more weak. I 

urge your Committee and the U.S. Congress to take decisive action. 

[The prepared statement of Mr. Lynd can be found in the appendix on page 92.] 

The CHAIRMAN. Thank you very much, Dr. Lynd, for your interesting comments and statement. 

Dr. McLaughlin, you are our best for last. 

STATEMENT OF SAMUEL B. MCLAUGHLIN, RESEARCHER, OAK 

RIDGE NATIONAL LABORATORY, OAK RIDGE, TENNESSEE 

Mr. MCLAUGHLIN. Thank you, Mr. Chairman, for the opportunity 

to speak before you and the Committee about a topic that has generated great enthusiasm among the research community and 

amongst the farm community, which stands to benefit as we proceed with the use of cellulosic energy crops. 

I am going to talk to you about an energy crop this morning, 

switchgrass, which has been mentioned several times this morning. 

Switchgrass can be produced on American farms to provide benefits 

to the rural economy, to improve soil quality, to reduce erosion and 

improve stream quality, and to add significantly to our ability to 

displace foreign oil. Switchgrass is one of a group of cellulosic crops 

which are similar in the sense that the cell wall material that was 

laid down when they were formed can be used to produce chemicals, to produce energy. They include municipal waste, agricultural 

waste such as corn stover, rice hulls, cotton hulls, and forestry 

wastes. 

There are similarities in terms of cellulosic content amongst 

these potential feedstocks, but there are also big differences. As we 

keep our eye on the ball of reducing dependency on foreign oil, 

there are important things to think to consider as we look at feedstocks: Where will they be produced? What is the quantity we can 

38

produce per unit of land area? How much energy does it take to 

produce the feedstocks, so that when we balance the energy cost 

and supply components, we have actually gained significantly in 

using a particular type of feedstock. 

What are the benefits? What are the values that these feedstocks 

can provide to society in addition to just the cost that industry pays 

at the industry gate? These kinds of considerations lead us certainly to know that we will have to depend on multiple feedstocks 

and multiple chemical processes in the future, but there are best 

choices for achieving rapid gains as we move toward greater energy 

self-sufficiency. 

Switchgrass is a species that we picked in the Bioenergy Feed 

Stock Development Program at Oak Ridge National Laboratory 

after screening over 30 species of herbaceous agricultural crops. We 

picked switchgrass for a number of reasons that we think make it 

compatible with American agriculture and enable it to provide the 

kinds of benefits that we hope would be a part of an overall energy 

picture. It is a native prairie grass. It was here when the settlers 

came and contributed to the rich soils that were here when these 

mid-plains were settled. 

It occurs over most of the eastern United States, so it can be 

grown by a large segment of farmers. Participation in energy production can be regionwide, not just in a certain segment of the 

country. It is produced and harvested with equipment that is now 

used to produce 60 million acres of hay in this country. It puts 

about as much energy below ground as is harvested above ground. 

We have looked extensively at switchgrass roots, and there is just 

about as much biomass, roughly 5 to 10 tons of roots in the belowground system that is turning over and adding carbon to the soil. 

An absolutely important component of soil fertility is how much organic carbon is sequestered in the soil, and that relates to nutrient 

supply, water supply, erosion and retention of nutrients within the 

system. 

In 12 years of research with switchgrass, we learned a lot before 

the program was stopped as one of the casualties of the Congressional earmarks a couple of years ago, but we made tremendous 

progress in terms of how to grow switchgrass, how to harvest it, 

and how to measure its benefits to agriculture. We found we could 

reduce the nitrogen needed to grow switchgrass by perhaps a half 

to a third, which reduces the energy input. We learned a lot about 

the basic genetics of switchgrass and incorporated that into breeding programs and made gains of 3 to 5 percent per year in the initial phases of this program. Those gains are comparable to what 

was achieved with corn, which started 60 years ago and increased 

five to sixfold in the 60 years hence. We think there is great potential to improve yields beyond current levels. 

We learned a lot about the production levels of switchgrass and 

they vary across the eastern region, two-thirds of the United States 

where our research plots were located. This has allowed us to interface with an important tool that has been developed by a collaboration between DOE and USDA scientists. It is an econometric model 

called POLYSYS. The economic effects of introducing energy crops 

into POLYSYS allows us to look at U.S. agriculture. This has provided a tool that has allowed us to see how various energy crop 

39

prices, production costs, and production levels influence gains to 

American agriculture. 

POLYSYS considers what crops are currently grown in over 300 

U. S. agricultural districts what it costs to grow these crops, and 

what the prices are. As we introduce an additional crop into this 

system, we can estimate what its impact will be on farm income, 

and also, because POLYSYS is tied to the Government subsidy program, how revised from income levels might influence Government 

subsidies. 

An input to this program derived from our production research is that it costs about $20 a ton to produce switchgrass. The model 

has also been used to look at how much acreage would come into 

play as the price we are willing to offer for an energy crop such 

as switchgrass changes from current crops. We estimate that at 

roughly $28 a ton, 7.6 million acres would be converted to 

switchgrass if farmers want to go with a more profitable crop. At 

$48 a ton, roughly 50 million acres of crop land would be converted 

to switchgrass production for energy from the land that is being 

used right now for agriculture. 

There are important benefits of energy crop production on farm 

income. At the lowest price level (28/t) annual, farm income would 

increase about $1.3 billion, and there would be about a $1.3 billion 

reduction in Government subsidies required to support crop prices. 

At the highest price level, farmer income increase about $6 billion 

per year, with $5.7 billion of subsidy savings. 

These price and benefit levels provide options to Government. At 

that lowest price, the subsidy decreases would more than cover the 

costs of purchasing the feedstock by industry. Thus, initial stages 

of feedstock production could be subsidized by that amount of savings to the governments derived from subsidy savings. By looking 

at these things in a balanced way, it allows one to consider what 

the policy options might be, so that a subsidy is not considered as 

a one-way street. It is a reward for value to society. 

The fact that this crop can add farm income, can improve soil 

quality, as well as providing a continuous supply of clean removable energy, gives us the flexibility to consider in policy decisions 

how we might work toward the greatest good to agricultural and 

to society. 

I would like to conclude my comments with summary statements 

derived from my written report. First of all, cellulosic biomass produced on American farms can contribute significantly to the nation’s energy self-sufficiency and to both its economic and its ecological health. The American farmer and the American consumer 

should both benefit economically from increased reliance on biomass-derived fuels. 

It is my hope, Mr. Chairman, that the farmer would not just be 

the producer but the partner in this process. There are great opportunities for farm co-ops to be involved in this production process. 

The farmer should not get the lowest price possible but be able to 

be involved fully in the whole energy production industry just as 

the corn farmers have become involved in some of the ethanol producing plants in the Midwest. 

The costs of biomass-derived fuels to society both now and in the 

future are likely to be much lower than the costs of fossil fuels, and 

40

that seems controversial, but it is based on considering the values 

to society. We have values in terms of rural income, reduced Government subsidies, clean air. Ultimately, we will probably place a 

value on carbon emissions reduction, and there is about a ton of 

carbon per acre that is stored below ground each year when you 

produce switchgrass. There are human health effects of fossil fuels 

that would lead to avoidance benefits, and there are the tremendous oil shock effects to our economy resulting from our having to 

rely on highly variable oil price and supply levels as we are doing 

now. 

An important and appropriate focus of future energy policy 

should be the biomass utilization that minimizes net uses of imported energy maximizes net reduction in greenhouse gas emissions, and gives credit for reduction in societal costs of energy. Production, considering energy production values as well as costs, 

would accelerate near-term incorporation of cellulosic biomass into 

a U.S. energy strategy. 

There is flexibility within our system to enhance and accelerate 

benefits to be gained from increased reliance on cellulosic energy, 

however, it will require planning to consider how we most efficiently proceed to reduce energy costs and to enhance the associated values. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. McLaughlin can be found in the 

appendix on page 98.] 

The CHAIRMAN. Thank you very much for your statement. 

This panel has really added an extra dimension of understanding 

and important facts for us to consider as we try to figure out exactly what our role ought to be now to build on the incentives that 

are in current law and the opportunities that we have to make a 

difference in our future energy security, as well as the efficiency 

and profitability of American farms. 

These are interesting topics to consider, and I am very glad that 

the Committee was able to conduct this hearing today, and we appreciate especially the participation of this last panel. Senator Harkin and I both agreed with Dr. Zappi’s suggestion that regional 

centers of expertise ought to be taken seriously as a matter of policy by this Committee, and we will look for ways to try to help ensure that that becomes a reality. 

Dr. Richard’s comments about integrating the entire feedstock 

supply system was an interesting observation, I thought. I wonder 

if you could prophecize, what would be a reasonable timeframe for 

achieving this kind of integration that you mentioned? 

Mr. RICHARD. Well, there are two parts to that question. First, 

to really understand how to do that well, and the science has potential to put together integrated systems in the next three to 5 

years. My colleagues, some at this table, are doing research on 

that, as I am as well. The second part, implementation, is going to 

face some of those challenges I mentioned earlier. Trying to develop 

decentralized economic development strategies, and getting the 

capital involved for many different farmers and many different 

communities to build these systems, will be a bigger step. 

The CHAIRMAN. Dr. Lynd, you pointed out the beneficial consequences for American agriculture in taking advantage of these 

41

opportunities for more production of biomass materials on farms. 

What if we put a lot of money in these incentives and encourage 

that production, and then, we still fall short? Are we going to be 

accused of wasting money? Do you think this is going to be a 

wasteful expenditure of Government money, or are you pretty confident that this is going to turn out to be a wise investment? 

Mr. LYND. It could be a wasteful expenditure of Government 

money, and I also think it could be a historically successful expenditure of Government money, and it depends on how we do it. We 

need to recognize that we need a combination of funding for first 

of a kind commercialization but also, and I would disagree with 

several of the speakers who have appeared before this morning, a 

really much, much accelerated and more aggressive R&D program. 

In the absence of that R&D program to move that technology forward, we are just kidding ourselves if we think we are getting over 

the hump just by putting in the first of a kind plants or that revenue from those plants is going to drive the R&D process at any 

significant rate. If we do both of those and do them effectively, as 

I have suggested, then, I am confident this will be a very, very successful investment. We sure cannot take that for granted. 

The CHAIRMAN. Thank you. 

Dr. McLaughlin, you talked about the commercialization of 

switchgrass in particular as an energy source. I was impressed by 

the depth of research that has already been done at the university 

and within the program that you are involved in. Has the support 

from the national government, the Federal Government, been important to the conduct of this program? Is it one of those things 

that without which there would not be a program like yours? 

Mr. MCLAUGHLIN. Support was absolutely essential for the Feed 

Stock Development Program. It began back in 1978, which we can 

testify to somebody’s vision that we needed to be doing this work 

way back when. A lot of the early work was screening, looking for 

the best choices. What we developed with Government support, and 

in some cases, in many cases, it was matched by other programs 

going on at universities, was a very interactive program that 

evolved—there were seven groups working directly with us, including regional universities and one USDA laboratory. 

We functioned somewhat as subregional centers, but the overall 

program was very interactive, and the Government support was absolutely essential. I would add that when that support largely dried 

up in 2002, some of these folks have been able to get additional 

support. We would like to think because they made really good 

starts on things that were very promising. One, for instance, was 

on genetic transformation of switchgrass to increase the content, 

precursors for plastic formation, and an individual company supported that. Other work has been picked up by USDA and others. 

Government support is essential is focusing national research efforts on integrated and interactive targets. 

The CHAIRMAN. Dr. Zappi, as we talked about the regional centers, or you talked about then, I was impressed with the fact that 

we do need to have a diversified analysis and not just concentrate 

research in one particular area or on one specific subject. Could you 

elaborate a little bit on why you think it is important to have the 

regional centers? Would they be more cost-effective or more likely 

42

to bring us answers to the questions we need in order to help assure that alternative sources of energy really can become a reality 

for our country? 

Mr. ZAPPI. Well, It will be more cost-effective, because it will 

bring more players into the game. If you take our home state of 

Mississippi, we produce a tremendous amount of biomass, but it is 

very diverse compared to mainly corn in Iowa. If we want to bring 

more players to the table, we have to realize that each region has 

its own unique biomass feedstock it contributes. A lot of the research is oriented toward probably one or two key technologies, and 

there are other potential technologies that are just not receiving 

enough attention. That is because some of the ones that are not receiving enough attention are not predominantly corn-based at this 

time. 

We are very oriented toward corn and corn stover, and I am not 

against it. It is an excellent feedstock, both of them, but we do not 

recognize the differences from region to region. To be more cost-effective, that as I said, as we increase the volume of biodiesel we 

can make, the market becomes more competitive; we find more byproducts. In Mississippi, getting back to our home state, some of 

the by-products that may come out of biodiesel production could 

bring some new revenue. 

The CHAIRMAN. Well, thank you very much for your responses to 

our questions and our invitation to attend this hearing. We appreciate you helping us with our understanding and helping us develop a level of expertise to assist us in the shaping of our public 

policy formulation that is so important to this area of interest and 

concern. 

I do not know of any time in our history when this has been a 

more important subject for our consideration. The situation in the 

Middle East, the Persian Gulf, is strong evidence of how important 

sources of energy are, and the costs of energy can affect our own 

economy. We can look at the prices at the gasoline pumps right 

now, and the incentive is there as never before to look for alternative sources and try to help ensure that we are not so dependent 

on one form of energy for our economic survival and progress. 

Thank you for helping us at this hearing. It has been a very important and constructive step toward assuring a greater degree of 

independence for our country in the years ahead. We are going to 

make a part of the record, too, an article that impressed me that 

I read in preparation for this hearing written by Senator Richard 

Lugar and James Woolsey, who was one of our witnesses today. It 

was published in Foreign Affairs magazine in the January-February 1999 edition, and it is a very important statement, and we 

want to make that a part of our hearing record, and we will. 

With that, we thank all Senators for participating and all of our 

witnesses. The hearing is adjourned. 

[Whereupon, at 12:25 p.m., the committee was adjourned.] 

(43)

A P P E N D I X

MAY 6, 2004

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(107)

DOCUMENTS SUBMITTED FOR THE RECORD

MAY 6, 2004

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(147)

QUESTIONS AND ANSWERS

MAY 6, 2004

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Æ


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