U.S. GOVERNMENT PRINTING OFFICE

68–611 CC WASHINGTON : 2000

S. HRG. 106–863

MTBE CRISIS AND THE FUTURE OF BIOFUELS

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

SUBCOMMITTEE ON RESEARCH,

NUTRITION AND GENERAL LEGISLATION

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

ON

MTBE CRISIS AND THE FUTURE OF BIOFUELS

April 18, 2000

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

RICHARD G. LUGAR, Indiana, Chairman

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAUL COVERDELL, Georgia

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CHARLES E. GRASSLEY, Iowa

LARRY E. CRAIG, Idaho

RICK SANTORUM, Pennsylvania

TOM HARKIN, Iowa

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

J. ROBERT KERREY, Nebraska

TIM JOHNSON, South Dakota

BLANCHE L. LINCOLN, Arkansas

KEITH LUSE, Staff Director

DAVID L. JOHNSON, Chief Counsel

ROBERT E. STURM, Chief Clerk

MARK HALVERSON, Staff Director for the Minority

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C O N T E N T S

Page

HEARING:

Tuesday, April 18, 2000, MTBE Crisis and the Future of Biofuels ..................... 1

APPENDIX:

Tuesday, April 18, 2000 .......................................................................................... 43

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Tuesday, April 18, 2000 .......................................................................................... 97

Tuesday, April 18, 2000

STATEMENTS PRESENTED BY SENATORS

Fitzgerald, Hon. Peter G., a U.S. Senator from Illinois, Chairman, Subcommittee on Research, Nutrition and General Legislation, Committee on

Agriculture, Nutrition and Forestry ................................................................... 1

WITNESSES

PANEL I

LaHood, Hon. Ray, a U.S. Representative from Illinois ....................................... 3

Shimkus, Hon. John, a U.S. Representative from Illinois ................................... 5

PANEL II

Hampton, Joe, Director, Illinois Department of Agriculture, Springfield, IL ..... 14

Skinner, Thomas, Director, Illinois Environmental Protection Agency, Springfield, IL .................................................................................................................. 12

Zaw-Mon, Merrylin, Director, Transportation and Regional Programs Division, U.S. Environmental Protection Agency, Washington, DC ....................... 8

PANEL III

Corzine, Leon, President, Illinois Corn Growers Association, Assumption, IL .. 20

Quandt, Larry, President, Illinois Farmers Union, Mason, IL ............................ 27

Vaughn, Eric, President, Renewable Fuels Associaiton, Washington, DC ......... 25

Warfield, Ron, President, Illinois Farm Bureau, Gibson City, IL ....................... 23

PANEL IV

Brinkmann, Darryl, Illinois Representative, American Soybean Association,

Carlyle, IL ............................................................................................................. 38

Donnelly, Brian, Executive Director, SIUE Ethanol Pilot Plant, Edwardsville,

IL ........................................................................................................................... 36

Holt, Donald, Senior Associate Dean, College of Agriculture, Consumer, and

Environmental Sciences, University of Illinois, Urbana-Champaign, IL ........ 34

APPENDIX

PREPARED STATEMENTS:

Fitzgerald Hon. Peter G. .................................................................................. 44
Page

IV

PREPARED STATEMENTS—CONTINUED

LaHood, Hon. Ray ............................................................................................ 48

Shimkus, Hon. John ......................................................................................... 49

Brinkmann, Darryl ........................................................................................... 94

Corzine, Leon .................................................................................................... 70

Donnelly, Brian ................................................................................................. 92

Hampton, Joe .................................................................................................... 63

Holt, Donald ...................................................................................................... 87

Quandt, Larry ................................................................................................... 85

Ryan, George ..................................................................................................... 46

Skinner, Thomas ............................................................................................... 67

Vaughn, Eric ..................................................................................................... 76

Warfield, Ron .................................................................................................... 72

Zaw-Mon, Merrylin ........................................................................................... 56

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Position statement, submitted by Lynn Jensen, President, on behalf of

the National Corn Growers Association ...................................................... 98

Position statement, submitted by Hon. Richard J. Durbin ........................... 99

Position statement, submitted by Jim Ryan, Attorney General, Springfield, Illinois ................................................................................................... 101

Position statement, submitted by Rudy Rice, President, on behalf of the

National Association of Conservation Districts .......................................... 103

Position statement with attachments, submitted by Alvin M. Mavis,

Rochester, Illinois ......................................................................................... 104

‘Ethanol’ Brief Report on it use in gasoline: Expected Impacts and Comments of Expert Reviewers, submitted by Sarah R. Armstrong, M.S.,

M.S., Cambridge Environmental Inc. on behalf of the Renewable Fuels

Association ..................................................................................................... 121
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MTBE CRISIS AND THE FUTURE OF BIOFUELS

TUESDAY, APRIL 18, 2000

U.S. SENATE, SUBCOMMITTEE ON RESEARCH, NUTRITION, AND GENERAL

LEGISLATION, OF THE COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC.

The Subcommittee met, pursuant to notice, at 10:10 a.m., in

room 400, State Capitol Building, 2nd and Capital Street, Springfield, Illinois, Hon. Peter G. Fitzgerald, (Chairman of the Subcommittee,) presiding.

OPENING STATEMENT OF HON. PETER G. FITZGERALD, A U.S.

SENATOR FROM ILLINOIS, CHAIRMAN, SUBCOMMITTEE ON

RESEARCH, NUTRITION AND GENERAL LEGISLATION, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

The CHAIRMAN. I would like to call this meeting to order. Thank

you all for being here. This marks the opening of the field hearing

of the U.S. Senate Committee on Agriculture, Nutrition and Forestry and this is a subcommittee hearing of the Subcommittee on

Research, Nutrition and General Legislation, and I am Chairman

of that subcommittee. Thank you all for being here. I appreciate

having so many people here from Illinois as well as those from

Washington who have come here to testify.

In a few moments we will start with Congressman Ray LaHood

and John Shimkus from the heart of Illinois. I would just like to

open this meeting with a few comments.

We are now at a crossroads in the ethanol industry. Illinois is

the largest ethanol producing state in the Nation and the second

largest corn producing state in the Nation. I think, in terms of

yields per acre, we are still number one in the Nation as I like to

remind my good friends from Iowa, Chuck Grassley and Tom Harkin. But right now there are competing proposals on what to do

with our Nation’s air pollution situation. And how to deal with the

gasoline additive methyl tertiary butyl ether [MTBE] . Going back

to last summer, the Environmental Protection Agency in Washington had a blue ribbon panel that came out with a report suggesting

that our Nation should phase out and ultimately ban the use of

MTBE as an additive in our reformulated gasoline.

MTBE has been used for many years, probably going back to the

1970’s. It was first used a gasoline additive after the use of lead

was banned in gasoline. After lead was banned, oil producers needed something that would enhance the octane level of reformulated
2

gasoline; and thus the oxygenated, MTBE, came into popular production.

In 1990, Congress amended the Clean Air Act to require all fuel

sold in the Nation’s largest, and most polluted cities to contain an

oxygenate additive that would help reformulated gasoline burn

more cleanly. In order to comply with these regulations gasoline

had to contain at least 2-percent oxygen by weight.

Since 1990, reformulated gasoline has been required by the

Clean Air Act to be blended with an oxygenate, in all the large

smog-filled cities, or ozone non-attainment areas. Most (roughly

85%) of the reformulated gasoline used in this country is blended

with the oxygenate MTBE. Ethanol is used in about 8-percent of

our nation’s reformulated gasoline; primarily in the mid-west. But

for all intents and purposes, only Chicago and Milwaukee are using

ethanol as their oxygenate additive in their fuel. Most of the rest

of the country is using MTBE.

It turns out, however, that Illinois has been very lucky that we

have been using ethanol. It has recently come to light that many

of those cities 2nd municipal lines where gasoline has been blended

with are finding severe contamination in their drinking water.

According to the Environmental Protection Agency’s blue ribbon

panel, MTBE, in very small amounts, can yield water undrinkable.

One cup of MTBE can contaminate, and make undrinkable, a 5-

million gallon water tank. Additionally, MTBE has properties that

make it resist degrading. If gasoline blended with MTBE leaks out

of an underground storage tank, most of the gasoline will just leak

out and ultimately be eaten by the microbes in the soil. But the

MTBE will resist degradation and rapidly seep into the ground

water, where even the smallest concentrations can make the

ground water undrinkable.

Even though MTBE is not popularly used in Illinois, it has been

found in many wells around the state. I believe 26 is the number.

Twenty-six wells in Illinois that have detected some level of MTBE.

In other parts of the country, California, for example, MTBE has

been detected large amounts. There are numerous stories of cities

that have almost shut down because of MTBE in their drinking

water. Sixty-Minutes did a report about a small town in California

that literally dried up when they started detecting MTBE in their

water.

Many seem to agree that we should ban MTBE. The question

now is, though, how do we go about doing that? Do we simply ban

MTBE and keep the oxygenate requirement in our fuel? If that

were to happen, would that mean that ethanol would simply immediately capture the entire MTBE market? That is one possible solution to this problem.

The other potential solution is to go in and amend the Clean Air

Act and do as the administration has suggested, and repeal the oxygenate requirement in our fuel. The administration has suggested

that we should repeal the oxygenate requirement, but replace it

with a renewable fuels requirement. Specifically, their proposal is

that, of all the gasoline sold in the United States, approximately

1.2-percent of that gasoline should be a renewable source of fuel,

presumably ethanol. It looks to us that 1.2-percent of all the gasoline sold in the country would be roughly the market ethanol now
3

has, where it is being sold for our nation’s reformulated fuels program.

Those are the issues we want to discuss. The other thing that we

are going to discuss today is should the EPA, or will the EPA,

grant the waiver request that the state of California has made.

California has requested that it waive out of the Clean Air Act’s

requirement that their fuel be reformulated. My understanding is

Missouri has also requested such a waiver.

What would be the affect of such waivers be if we start seeing

those being granted by the EPA? With that, with those opening

comments, I am going to ask for unanimous consent to submit a

written statement to the record from myself. Since I am the only

Senator here, I will grant myself unanimous consent. And I want

to welcome my good friends and colleagues, Representatives Ray

LaHood and John Shimkus. I know they have both been very active

in Illinois agriculture for a number of years now and they have

been leaders in the House of Representatives, fighting for Midwestern farmers. I welcome you here. And thank you for having me

in your district because both of you represent different parts of the

city of Springfield.

But thank you all for being here. And Congressman LaHood,

would you like to start first? We appreciate all that you have done

for agriculture. And thank you for showing your interest in being

here today.

[The prepared statement of Senator Fitzgerald, can be found in

the appendix on page 44.]

STATEMENT OF HON. RAY LAHOOD, A U.S. REPRESENTATIVE

FROM ILLINOIS

Mr. LAHOOD. Mr. Chairman, thank you very much. Let me begin

by saying that it is a treat for those of us on Agriculture Committee of the House to have you in the Senate, on the Agriculture

Committee. For those people gathered here today who do not know

it, you and I have worked very closely on file bill that you have

passed in the Senate and we have now passed in the House and

I think it is a bill that can be signed by the President that will

really bring agriculture into the 21st Century by allowing farmers

to electronically file all the paperwork with their FS offices and

your leadership in the Senate is very much appreciated.

And then our work on the crop insurance bill, where we are trying to really make some sense out of a crop insurance program that

has not worked very well, and I know you have spent some time

on that, and we have now passed a bill that hopefully, in a conference committee, which is going on right now, we will get it back

to both the House and the Senate. So I think we have a number

of good things that we have accomplished for agriculture, and we

could not have done it without your leadership. And I am grateful

to you for your service on the agriculture committee, and the way

that we have been able to work so closely together on a couple of

real, real important bills that will have a tremendous impact on agriculture generally, but certainly on our state of Illinois and on the

farmers that we represent. So thank you so much for your leadership that you have provided over there. It is great to have you

there.
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John and I represent, together between the two of us, 33 counties

in Illinois, which is about a third of the state. And a good part of

what we represent is agriculture and farmers, and I think I have

more ethanol producing plants in my district than any district in

the country. I have two plants in Pekin, Pekin Energy and Midwest

Grain; the ADS facility in Peoria; and I also represent part of

Macon County which had a dominance of ADM there, too. So when

we talk about ethanol, it is something near and dear to my heart

because of the jobs that are provided by the ethanol industry in the

18th District and then all of the jobs that are provided for the raw

material that is provided through the corn that is used to make

ethanol.

I would like to read in part my statement because I know that

this hearing is so important. And the recent reports over MTBE,

contamination of ground water wells, have provided us an opportunity to insure that ethanol will emerge as the primary oxygenate

in the reformulated gasoline program. I am really encouraged by

the meeting that we had with Administrator Browner and Secretary Glickman where it was really a meeting to address the problem with MTBE and I believe that we need to take the proposal

a couple of steps further to insure that we protect our ground

water from MTBE, while at the same time maintaining the clean

air that we have achieved under the reformulated gasoline [RFG]

program.

I believe the best approach would be to amend the Clean Air Act

in order to allow oil manufacturers to address the volatility of ethanol during warm weather and maximize the blending formation of

their gasoline. However, this approach would be very difficult to

achieve in the near term, which is why I am supporting of efforts,

I am very supportive of efforts in Congress to ban MTBE. I know

Congressman Shimkus will talk about a bill that he and Congressman Ganske have introduced and I know there is similar legislation in the Senate. And I believe the administration.

And I have said this before, and I said it to Ms. Browner and

Secretary Glickman. This administration has had a good record on

ethanol, a very good record, for seven, 8-years. Vice President Gore

made the tie-breaking vote in the Senate to extend the ethanol

credit to 2007. Where it was a 50–50 tie, he did make the tiebreaking vote, and so I give them a great deal of credit.

But as I told Ms. Browner at the meeting that we had, Mr.

Chairman, I think it would be a terrible mistake for them to allow

California to opt out of this program. That will open the flood gates

to a lot of other northeastern states to make application to opt out.

California is a huge state. They have made a lot of progress, but

they can make a lot more progress if they eliminate MTBE and

begin to use alcohol, and to allow them to opt out, I think would

send a very, very bad message all over this country, and I think

it would destroy the good record that they have had and maintained over the last 8-years. So I am very much opposed to them

doing that, and I made that very clear.

Banning MTBE and encouraging greater use of ethanol in the

RFG program will benefit the environment. It will also help our beleaguered farm economy at a time when commodity prices are at

a historic low. Increased use of ethanol will provide a valuable
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market for corn. For every 100-million bushels of corn used in the

production of ethanol, the price of corn increases by approximately

five cents. This increase in price could mean the difference between

solvency or bankruptcy for many corn producers in Illinois and

throughout the country.

So again, I appreciate your bringing your hearing right here in

the heartland, right smack dab in the middle of Illinois, where we

produce so much corn. And say, again thanks for your leadership

and allowing us to sound off for a few minutes on some aspects of

ethanol. Thank you very much.

The CHAIRMAN. Well, thank you, Congressman LaHood, and

thank you also for convening that meeting with Secretary Glickman and Administrator Browner last week. It was very productive.

And you bring up an excellent point about the importance of the

EPA denying California’s waiver request. I share your concerns. If

they grant that request, there are going to be a lot of states that

may request waivers and that could be trouble for the ethanol program. Thank you much.

[The prepared statement of Representative LaHood, can be found

in the appendix on page 48]

John Shimkus, thank you for being here. It is good to have you

here.

STATEMENT OF HON. JOHN SHIMKUS, A U.S.

REPRESENTATIVE FROM ILLINOIS

Mr. SHIMKUS. Thank you, Mr. Chairman, and thank you for calling the hearing, and your efforts. Thank you for allowing me to testify along with my colleague Ray LaHood about the phasing out of

the MTBE and increasing our use of bio-fuels such as ethanol. And

I say bio-fuels because, of course, our personal favorite in Illinois

ethanol produced by corn. But there are other types of bio-fuels

programs that can help meet the demand, rice grown in California

is an example of issues that we deal with in the Congress committee as far as the bio-fuels program.

But in my tenure as a member of Congress I have never seen a

better climate to increase the use of ethanol than we have here and

now. We really need to strike while the iron is hot. With gas prices

having reached almost two dollars a gallon and corn prices just

over two dollars a bushel, we can produce a product that will help

our energy supply, which is also a major focus I think that we need

to keep in mind, while increasing the demand for our corn farmers.

With that in mind, I am here today to discuss recent proposals

to phase out the use of MTBE, a hazardous fuel additive and an

ethanol competitor. As you well know, the administration recently

offered its legislative principles in response to the MTBE crisis. We

talked about that at our meeting just last week.

The administration is asking for three legislative responses. They

want to amend the Clean Air Act to provide the authority to significantly reduce or eliminate MTBE use. As MTBE use is reduced

or eliminated, to insure that air quality gains are not diminished.

They call that the anti-backsliding clause. They want to replace the

existing oxygenate requirement contained in the Clean Air Act

with a renewable fuel standard, as you mentioned, for all gasoline

at a level that maintains the current level of renewable fuel, 1.2-
6

percent of the gasoline supply and allows for sustained growth over

the next decade.

While I support the first two principles, I need to express my reservations about eliminating the oxygenate requirement in reformulated gasoline. And I agree with my colleague, Representative Greg

Ganske from Iowa when he said in a hearing, we want to fix real

problems like MTBE and water contamination and not abandon

real solutions like oxygenated fuels. We need to understand that

mathematically under the administration’s proposal, not as much

ethanol would be used per gallon as the current law, and that has

a lot of us concerned.

And the debate in the Committee, as we have addressed this now

2-years in a row, was you can have clean air and you can have

clean water. The solution is ethanol. Just to throw the baby out

with the bath water, eliminating the oxygenate standard, it is an

incredible debate, that what you are getting is dirtier air. And so

we have got to focus on a couple of things. Clean air, clean water

and also our energy security which we deal with a lot in the Energy and Power Subcommittee of the Committee.

As a result my colleague, which shares a large portion of the district and borders, Congressman LaHood, is helping co-sponsor the

legislation that Greg Ganske of the chief original sponsor of the

Clean Air and Water Preservation Act of 2000. Our bill currently

has 37 other co-sponsors and is supported by the American Farm

Bureau, the National Corn Growers Association and the Renewable

Fuels Association.

This legislation bans MTBE within 3-years and urges refiners replace it with ethanol; requires labels be placed on all pumps dispensing MTBE-blended fuels, giving consumers knowledgeable

choice. I think that is always critical in this debate. Directs the

U.S. EPA to provide technical guidelines to help states remove

MTBE from ground water. We have to help fix the program that

MTBE has caused. Give refiners flexibility to blend oxygen with

the 2-percent requirement, thus addressing some of the debate

issues that we have with Chicago and the warmer air. If it is averaged out, we see that as a better solution.

Prohibits environmental backsliding by raising the standards on

emissions reductions and prohibiting an increase in the use of the

gasoline aromatics. In our debate about these new gasoline standards, if you take out the oxygen, they are talking about new mixes

of fuels. And one issue that was brought up in our hearings countless times was an increase in aromatics which is toxic. So this antibacksliding clause is a very critical part of this debate. And the

clean air standards have to be maintained because they have been

successful. Our air is cleaner. The reason why it is cleaner is because of the oxygen standard and the fact that it forced, it allows

gasoline to burn hotter and it burns up all that nasty stuff. And

it is a proven fact that the oxygen requirement cleans the air. We

have now polluted water, and that polluted water because of MTBE

and not ethanol.

Overall this bill will help clean up MTBE contaminated water

supplies. It will preserve clean air accomplishments of the past decade and will provide a renewable energy source which will decrease
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our dependence on foreign oil and improve our agricultural economy.

Last week, with the leadership of Ray LaHood we had that meeting that he mentioned with Secretary Glickman and the Administrator Browner and members of the Illinois, Missouri delegations,

also we had colleagues from Nebraska and I think Minnesota, too.

I hope that in the future we can continue to sit around the table

and work on a solution to phase out MTBE and increase demand

for ethanol. I applaud all my colleagues who attended the meeting.

I think there was a consistent message given to the administration.

Again the time is now to make changes, and I appreciate the

work that everyone has been doing. However, I must make special

mention of the work that you have done, Mr. Chairman, since coming to Washington. For many of us from downstate, we were watching anxiously as you moved to Washington, to see, to help us fight

for the interest of Illinois. We are all tickled pink that you chose

to lobby to get on the Ag Committee, as Congressman LaHood has

said, your work there has been courageous and we needed a voice

on the Ag side, on the Ag Committee on the Senate, so much that

I think Ray and I are going to try to propose that we make you

an honorary member of the House Renewable Fuels Caucus. That

is still up to debate, based upon our success of the pending legislation in front of us. But we do really appreciate your commitment

to downstate and the agricultural interest.

And as we continue to move forward, you have our commitment

to work with you to make sure that our agriculture sector, our family farms are not left behind and that we accomplish what was attempted to accomplish under the Clean Air Act. But we want clean

air. We want clean water. And we want, we no longer want to be

solely reliant on foreign oil by having renewable fuels program and

a national energy policy that can meet all three needs, with working together, and pressuring the administration. I think we can get

there. Thank you for the hearing. If you have any questions, I am

sure Ray and I would be happy to answer them.

[The prepared statement of Representative Shimkus, can be

found in the appendix on page 49.]

The CHAIRMAN. Well, Congressman Shimkus, thank you very

much. I appreciate your testimony. I just have one or two questions

for both of you. My understanding is that about 16-percent of the

corn that is sold in Illinois goes for ethanol production. The figure

nationwide is less. I think it more like, 6-percent or below of all the

corn nationwide goes for ethanol.

In your districts and specifically Congressman LaHood, do you

think even more of your corn than 16-percent goes to ethanol production with those ethanol plants you have?

Mr. LAHOOD. All I know is this. I know that ADM in Decatur

uses about 350, excuse me, ADM in Decatur uses about 500,000

bushels of corn a day. In Peoria it is about 250,000 bushels of corn

a day strictly for ethanol. And I have to believe that what the administrator said about Chicago for the summer, that will be very

helpful for ethanol production. I do not know the figure for Pekin

Energy which is now Williams Company or Midwest Grain, but I

am sure it is significant and I think the use of corn in Central Illi-
8

nois I think would go up dramatically, given the opportunity to

make the standard different.

The CHAIRMAN. Congressman Shimkus, do you have any ethanol

plants in your district?

Mr. SHIMKUS. We are working diligently to get an ethanol pilot

plant at SIU to help, you know, the industry have a location in research and development to help lower the cost. But of course, I border on all the other areas, and remember, distance does equal cost.

We benefit greatly just by being close to the proximities of Peoria

and Decatur.

And as far as the cost, I see your Agricultural Legislative Director here Terry Van Doren, and he probably could answer that question about my district better than I could. And it is good to see him

here. You are well served by him.

The CHAIRMAN. Well, Congressmen, thank you both very much

for being here and I look forward to working with you as we resolve

these issues in Washington. Thank you, all, very much.

And now it is time for the second panel, and you can please come

up there and take a seat. We will put your name tags up there.

On this second panel we have Joe Hampton who is the distinguished director of the Department of Agriculture. Joe, you have

been doing a great job. I visited with you many times in Washington and here, and thank you so much for being here.

We have Tom Skinner who is doing an excellent job as director

of the State’s Environment Protection Agency. Just as I visited

with Joe, I saw you in Washington just last week. You were at that

meeting with Administrator Browner and Secretary Glickman.

Thank you very much for being here.

And Merrylin Zaw-Mon from the Environmental Protection Agency in Washington. You are the director of the Transportation and

Regional Programs Division of the U.S. EPA, and you traveled from

Washington to be here. Thank you very much for making the trip.

We appreciate it.

Merrylin, if you would like to begin first, we would appreciate

hearing from you, then we will go to Tom Skinner and then Joe

Hampton.

STATEMENT OF MERRYLIN ZAW-MON, DIRECTOR, TRANSPORTATION & REGIONAL PROGRAMS DIVISION, OFFICE OF

TRANSPORTATION AND AIR QUALITY, U.S. ENVIRONMENTAL

PROTECTION AGENCY, WASHINGTON, DC.

Ms. ZAW-MON. Thank you, Mr. Chairman, for the invitation to

appear here today. I am pleased to have this opportunity to share

information with the Committee on the Administration’s recommendations and plans to reduce or eliminate MTBE and boost

the use of alternatives.

The CHAIRMAN. Would you speak into that microphone? Use the

other microphone and put that one right here. Thank you.

Ms. ZAW-MON. Is this better?

The CHAIRMAN. That is better.

Ms. ZAW-MON. OK. And also boost the use of alternatives like

ethanol that pose less of a threat to ground water. The Administration’s response includes taking regulatory action under the authorities that it currently has available, and working with Congress to
9

implement the legislative principles that we recently announced to

protect ground water, maintain clean air benefits and promote

greater production and use of renewable fuels.

Last month Administrator Browner and Secretary Glickman submitted to Congress legislative principles which have been discussed

earlier, and I would like to reiterate that these three principles,

taken together, will lead to an environmentally sound and cost effective approach.

The first principle is to ask Congress to amend the Clean Air Act

to provide the authority to significantly reduce or eliminate MTBE.

Second, as MTBE is eliminated we must preserve the clean air

benefits. This was the anti-backsliding provision that Congressman

Shimkus referred to earlier.

Third, the existing oxygenate requirement in the Clean Air Act

should be replaced with a renewable fuel standard for all gasoline,

not just the reformulated fuels. And we would expect that this renewable fuel standard would grow over the next decade. By preserving and promoting continued growth in renewable fuels, particularly ethanol, this action will increase farm income, create jobs

in rural America, improve our energy security and protect the environment.

Allow me to present a brief history of the Federal Reformulated

Fuels Program in order to put the issues surrounding the use of

oxygenates, MTBE and ethanol, in perspective. As you know, the

Clean Air Act amendments of 1990 put into place a number of programs to achieve cleaner air, and these included cleaner motor vehicles and cleaner fuels. These programs have been extremely successful in reducing air pollution.

Congress stuck the balance between vehicle and fuel emissions

control programs after extensive deliberations, and in order to

serve several Congressional goals, including air quality improvement, enhanced energy security by extending the gasoline supply

through the use of oxygenates and encouraging the use of renewable energy sources.

The Federal Reformulated Gasoline Program introduced cleaner

gasoline in 1995, primarily to reduce smog levels or ozone levels.

Unhealthy ozone levels are still of concern in many areas of the

country, with over 30 areas still in non-attainment of the current

1-hour ozone standard. Ozone has been linked to a number of

health effects concerns. Repeatedly exposures may increase susceptibility to respiratory infection, cause lung inflammation and aggravate preexisting respiratory diseases such as asthma. Other effects

attributed to ozone exposures include significant increases in lung

function and increased respiratory symptoms such as chest pain

and coughing. The young and the elderly are particularly susceptible to ozone.

The Reformulated Fuel Program is an effective way to reduce

smog precursors such as volatile organic compounds and oxides of

nitrogen. The Clean Air Act amendments of 1990 require that RFG

contain 2-percent minimum oxygenate content by weight. The first

phase of the Reformulated Fuels Program from 1995 to 1999 required average reduction of smog forming volatile organic compounds and toxics of 17-percent each, and a minimum oxide reduction of 1.5-percent. In practice, however, the clean air benefits of
10

this program have far exceeded the requirements, and these are

the benefits that we are seeking to preserve.

This year the second phase of the Reformulated Fuel Program

will achieve even greater air benefit, an average of 27-percent reduction in volatile organic compounds, 22-percent reduction in

toxics and a 7-percent reduction in oxides of nitrogen emissions.

These reductions for the Reformulated Fuel Program are equivalent to taking 60-million cars off the roads. States rely on the air

quality benefits of the Reformulated Program, to demonstrate in

their state implementation plans that they can achieve the ozone

standard. 17 states and the District of Columbia are relying on air

quality benefits associated with the Reformulated Fuels Program.

The Reformulated Fuels Program is required in ten metropolitan

areas that have the most serious ozone pollution levels; however,

many other areas of the country, including the northeast, Texas,

Kentucky and Missouri have elected to join or opt into Reformulated Fuel Program as a cost effective measure to combat the ozone

air pollution they are experiencing in their jurisdictions.

At this time approximately 30-percent of the Nation’s gasoline

consumption is cleaning burning RFG. It should be noted that neither the Clean Air Act nor the EPA requires the use of specific

oxygenates in the Reformulated Fuels Program. The statute and

subsequently EPA’s regulations only specify the oxygen content by

weight. They do not specify which oxygenate to use. Both ethanol

and MTBE are used in the current RFG program but as you pointed out, Mr. Chairman, many fuel providers are choosing to use

MTBE in about 85- to 87-percent of the RFG, mainly because of

cost and ease of transport reasons.

Despite the air quality benefits of oxygenates in RFG there is

significant concern about contamination of drinking water in many

areas of the country including California and Maine. And you are

absolutely correct in that some areas of California have had to go

to an alternative water supply because the water supply was contaminated by MTBE. EPA obviously is very concerned about the

widespread detection of MTBE in drinking water. And current levels of MTBE in ground and surface waters are at low levels.

The United States Geological Survey has found that the occurrence of MTBE in ground water is strongly related to its use as a

fuel additive in that area. Low levels of MTBE were detected in 21-

percent of ground water in areas where MTBE is used under the

Reformulated Fuels Program as compared to 2-percent detections

in areas using conventional gasoline.

In response to concerns associated with the use of oxygenates in

gasoline, the Administration established the blue ribbon panel that

you referred to earlier. It included leading experts from public

health and scientific communities, water utilities, environmental

groups, industry and state and local government, to assess issues

opposed by the use of oxygenates in gasoline.

The panel’s recommendations have been used by the Administrator and the Administration to formulate the legislative principles that have been brought before Congress. EPA has also initiated a number of actions to deal with the panel’s recommendations.

These include developing a secondary drinking water standard

under the Safe Drinking Water Act establishing a water quality
11

standard under the Clean Water Act, and enhancing underground

storage tank program compliance to 90-percent level this year. The

agency is funding a grant to evaluate the effectiveness of leak detection technologies and we are conducting a million dollar technology demonstration for the clean up of MTBE contaminated

aquifers. EPA is committed to working with those cities and states

that need help cleaning up ground water contaminated with

MTBE.

In addition to the legislative principles that we have discussed

here, EPA has initiated a regulatory action aimed at reducing or

eliminating the use of MTBE in gasoline. Under Section 6 of the

Toxic Substances Control Act [TSCA], we initiated an advance notice of proposed rule making which was signed last month. This is

now under a 45-day comment period. This action is the best regulatory mechanism available to the Agency.

TSCA gives EPA the authority to ban, phase out, limit or control

the manufacture of any chemical substance deemed to pose an unreasonable risk to the public health or the environment. However,

the procedural burdens associated with this statute can be complex

and time consuming. And we are not certain that we can prevail.

Therefore, legislative action is out first priority and we want to

work with Congress to address this issue.

Reducing or eliminating MTBE in no way diminishes the continued role for other oxygenates such as ethanol to control mobile

source emissions. We recognize that a significant role for renewable

fuels is important to our nation’s energy supply. Thus, the Administration recommends that Congress replace the 2-percent oxygenate requirement in the Clean Air Act with a renewable fuel average

content for all gasoline at a level that maintains the current use

level of renewable fuel, and this was the 1.2-percent that you referred to earlier. But also allows for sustained growth over the next

decade.

Mr. Chairman, in closing, we intend to move forward with the

rule making under TSCA. This action, however, cannot substitute

for Congressional action based on the legislative principles I have

discussed here. If we are to continue to achieve the public health

benefits of cleaner burning gasoline, while avoiding unacceptable

risk to our nation’s water supplies, it is essential that Congress

acts. We remain committed to working with you to provide a targeted legislative solution. Americans deserve both clean air and

clean water. One should never come at the expense of the other.

With regard to the California waiver, we are doing a thorough

independent evaluation of the application that was submitted by

the state of California. We intend to make a decision and propose

our decision in early summer. After the decision is proposed there

will be a 30-day public comment period. This concludes my prepared statement. I would be pleased to answer any questions once

the other panels members have testified.

[The prepared statement of Ms. Zaw-Mon can be found in the appendix on page 56.]

The CHAIRMAN. Thank you very much for that.

Director Skinner, thank you for being here. If you feel comfortable summarizing your remarks, you can submit your prepared

remarks for the record, and if you could try and keep it four or 5-
12

minutes so we can keep the hearing moving, we would appreciate

it. Thank you very much for being here.

STATEMENT OF THOMAS V. SKINNER, DIRECTOR, ILLINOIS

ENVIRONMENTAL PROTECTION AGENCY

Mr. SKINNER. Absolutely. I am glad to do that. Thank you for

your kind introduction a little bit earlier. I can tell you, from my

standpoint, your efforts on behalf of both the MTBE issue and ethanol in Illinois are greatly appreciated. No matter how capable

Terry Van Doren is, and he is very capable, I am quite confident

that he is not a ventriloquist, and your work and your understanding of these issues, issues that are not all intuitive, obviously have

taken a great deal of effort on your part, but I think goes a very

long way in dealing with the Administration.

The CHAIRMAN. I will at least take credit for hiring Terry.

Mr. SKINNER. It is a pleasure to see you again, Mr. Chairman.

The meeting last week seemed to be very productive, although I

think we have a ways to go. By the way, Governor Ryan fully intended to be here this morning. He sends his regrets. His schedule

changed at the last minute and he asked Director Hampton and me

to represent him and to convey his support for your proposed legislation phasing out MTBE as well.

To summarize my prepared remarks, the use of RFG in the Chicago area has been an unqualified success. We estimate that its

use in 1999 reduced emissions of VOCs or volatile organic chemical

compounds by about 65-tons per day. RFG also reduces air toxics

such as benzine as compared to conventional gasoline. These benefits have resulted in very measurable improvements to the air

quality in the Chicago area, as well as it does in other large urban

areas throughout the country.

As we have discussed this morning, and as others have discussed, one of the two oxygenates in the RFG program, MTBE

which is the primary alternative to ethanol, however, has proved

to be problematic, particularly in recent years. Contamination of

drinking water supplies from MTBE has been reported from New

York to California, literally coast to coast. It comes from underground storage tanks, from marine engines that contain fuel with

MTBE in it, and even at times auto accidents have been linked to

detections of MTBE in ground water. As you have pointed out, it’s

highly soluble. It gets into the water very quickly and is pervasive

and is very difficult to remove once it is there. Even here in Illinois

where we are, I believe, 95-percent ethanol RFG, we have had detections of MTBE in, as you pointed out, 26 different water supplies across the state. In fact, in three of those communities, Island

Lake, East Alton and Oakdale Acres, we have actually had to discontinue use of drinking water wells as a result of MTBE levels.

As Director Zaw-Mon pointed out, U.S. EPA appointed a blue ribbon panel a while back, a little over a year ago or so to examine

the use of oxygenates in the RFG program. They did recommend

that MTBE be phased out. Since that time the states of California

and New York have banned its use or proposed banning its use.

Here in Illinois, the city of Chicago adopted a resolution that state

and Federal officials take action to prevent the use of MTBE in the

Chicago area. And on the state level, a bill that will require that
13

MTBE containing gasoline be labeled is on its way to the Governor’s desk, and the Governor is expected to sign it into law shortly. The Illinois General Assembly continues to discuss the possibility of passing legislation that would immediately ban MTBE from

further use in Illinois.

Responding to these concerns and others, last month U.S. EPA

proposed, as Director Zaw-Mon pointed out, a legislative frame

work to encourage immediate Congressional action to reduce or

eliminate the use of MTBE. Among other things, U.S. EPA recommended that Congress amend the Clean Air Act and provide the

authority to phase out MTBE usage and also call for the removal

of the oxygenate requirement from RFG.

We in Illinois believe that the most appropriate means to address

the MTBE issue is on the national level rather than on a state by

state piecemeal basis. We fully support a phase out of MTBE of the

type that you have proposed in your legislation. We still disagree

with the Clinton Administration’s recommendation to remove the

oxygenate requirement, at least as that proposal currently stands

now.

The ground water contamination issue is an MTBE problem. It’s

not an oxygenate problem. Ethanol, because it has a higher oxygen

content than MTBE, provides additional carbon monoxide and toxic

air emissions reductions benefits over MTBE. By removing the oxygenate requirement we risk losing the current level of emissions reductions being achieved, and I think that is why U.S. EPA in fact

has proposed their so-called anti-backsliding provisions which we

believe would be critical if you were going to remove the oxygenate

requirement.

We believe that implementation of your proposal, Mr. Chairman,

will both remove a risk to our nation’s drinking water supply and

insure the continued air quality benefits of the Reformulated Gasoline Program as envisioned in the Clean Air Act. I would like to

touch on at least one other issue in closing. And that is that we

would urge Congress to continue to push U.S. EPA to adopt Illinois’

proposal for an appropriate carbon monoxide offset or credit with

regard to ethanol blended reformulated gasoline.

We estimate the use of ethanol in the Chicago area reduces carbon monoxide emissions from vehicles by 780 tons per day, compared to non-oxygenated gasoline. The scientific analysis that we

have submitted concludes that a minimum of 0.5 per square inch

Reid vapor pressure allowance is a reasonable gasoline volatility

offset. This would provide a long term solution that more accurately recognizes the clean air contribution of ethanol while avoiding the increased expense to gasoline producers of a lower volatility

based gasoline.

In summation, Mr. Chairman, we appreciate and applaud your

effort to address the MTBE problem in an expedited yet reasonable

time frame. We will continue to urge U.S. EPA and the Clinton Administration to support your bill as well. It strikes me that it would

be strikingly inconsistent for the U.S. EPA to attempt to phase out

MTBE through TSCA, the Toxic Substances Control Act, and complain about how lengthy, complex and uncertain the TSCA process

and yet not support your effort to accomplish the same thing with-
14

out the uncertainty and without the delay. I will be glad to take

questions.

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

The CHAIRMAN. Thank you very much, Tom. We appreciate that.

And Director Hampton, again thank you for being here. We appreciate all your efforts on behalf of agriculture. And after your testimony we will take questions from all the panelists.

STATEMENT OF JOSEPH L. HAMPTON, DIRECTOR OF

AGRICULTURE, STATE OF ILLINOIS

Mr. HAMPTON. Thank you, Mr. Chairman. I have done some editorializing here, as Director Skinner gave his presentation, realizing not to be redundant but I think there are a couple of things

we need to touch on.

First, we really appreciate you coming to Illinois. And on behalf

of the Governor, thank you for coming. And as Director Skinner

said, the Governor wanted to be here and I think you have his

written testimony. And it was unavoidable, that he could not be

here today. So with his apologies, we again thank you.

It is very important that we state to you on behalf of agriculture

and more important on behalf of the citizens of Illinois that you exercise the kind of leadership and courage that you have as a member of the Senate, particularly as a member of the Agriculture

Committee. And we think the vision that you have brought and

your willingness to look at things with a clear and open eye is very

important to us and very important to the future of the state and

the country. We thank you very much for that.

I also, as you listened to the testimony of Director Skinner, I

think that we in agriculture recognize the importance of having,

first, his competency and the Governor’s wisdom in using him and

asking him to represent our interest in ethanol and our interest,

and I think this is a precedent that other states have not had the

luxury of having, and we truly appreciate that.

One of the unexpected side effects of the renewable fuels program has been that the ground water contamination caused by

MTBE, because it is a colorless liquid and it has an odor, it contaminates our ground water and because it is non-biodegradable

and soluble in water, we agree that it should be banned through

a phase out program. It has entered ground water wells and drinking water supplies across the country and continues to cause future

environmental problems and cost. I am glad that the Clinton Administration has proposed rectifying the MTBE problem. I am very

concerned about their proposal in two areas.

The first one is rescinding the oxygenate requirement in gasoline

and the second, a new renewable fuel program as it is proposed.

While the Nation’s air pollution has improved with the Clean Air

Act oxygenate requirement, the increased negative Nation attention directed toward MTBE is allowing critics to question the oxygenate standard. Your bill, Mr. Chairman Fitzgerald, Senate 2233

not only recognizes the problems with MTBE in Illinois but also

the importance of maintaining our air quality with an oxygenate

requirement. I also want to commend Senator Durbin for his co-
15

sponsorship of this bill. We pledge our support to both of you for

its passage.

As you know, Governor Ryan and other Illinois officials and organizations, some of which are here today, and the 23-member Governor’s Ethanol Coalition have repeatedly asked the White House

and U.S. EPA to maintain a role for ethanol and renewable fuels

program. With Illinois farmers facing some of the lowest commodity prices in years, there needs to be an assurance for ethanol in

the future. And second, a need to increase their market share. Ethanol, whether produced from corn or other bio-fuels should not be

overlooked because it benefits the environment, the Ag economy

and is a bio-renewable fuel for the future.

The ethanol blended gasoline has been projected to reduce carbon

monoxide emissions by some 700-plus-tons in the Chicago air shed

each day. This is the equivalent of over 30 semi loads of carbon

monoxide. And as I heard Director Zaw-Mon talk about removing

15-million cars from the highway, and you think about the need to

do that and then having an alternative that is falling off a log simple, like ethanol. That does not make for a very hard decision. And

you know, we recognize people actually spend their own money to

buy carbon monoxide detectors so this becomes pretty clear how

significant this is to us.

I also might add there is almost three semi loads each day of organic compounds that are not introduced in the Chicago air shed

because we currently use ethanol. Illinois corn growers, if ethanol

or the oxygenate requirement is eliminated, would forfeit a market

of at least 160-million gallons of ethanol and 70-million bushels of

grain usage. As I said in here, as I heard Congressman LaHood

about the usage, and 150 bushels, that is 5,000-acres a day. 5,000-

acres a day, as I best remember, 365 in a year, we are talking

about a fair amount of corn. That is important to all of us including

the people who build grain bins.

That elimination could translate into investment losses by the

ethanol industry in excess of a billion dollars, a loss of 800 jobs in

ethanol plants, 4,000 jobs in industry related jobs and a decrease

in the national market price of corn by 25 cents a bushel. Our Illinois legislators should also be complimented.

Their recent efforts to pass a consumer right to know about what

is being purchased at the gasoline pump is a first step to addressing MTBE. The bill requires retail motor fuel gas pump dispersement that contains 2-percent MTBE to display a label identifying

it. This piece of legislation now awaits the Governor’s signature.

I think it is a mistake to allow states to opt out of any oxygenate.

This discredits the entire clean air effort and all history of the

clean air effort. We think that the oxygenate and the credit offset

that Director Skinner talked about are reasonable and should certainly be given attention. Thank you again, Mr. Chairman, for your

leadership here today.

In closing, I think it was Representative Greg Ganske who said,

the solution is simple; if you want clean water, ban MTBE. If you

want clean air; use oxygenated fuel. If you want both clean water

and clean air; use ethanol. Thank you for your time today. I will

try to answer any questions you may have. Thank you.
16

[The prepared statement of Mr. Hampton can be found in the appendix on page 63.]

The CHAIRMAN. Well, that’s a great close, a quote from Representative Ganske. Thank you very much, Director Hampton.

I have a question that I have wondered about it a lot. And anybody on the panel who knows this can answer. I only see that

MTBE has about 85-percent of the Nation’s reformulated fuel market. Ethanol has about 8-percent. Who has the remaining percent

of the oxygenate reformulate fuel? Is there another oxygenate additive out there?

Ms. ZAW-MON. Yes, Mr. Chairman, there are other oxygenates

out there that can be used and they are used in very small quantities. There are other ethers. There is one called TAME, and I

have to admit I cannot remember what it stands for, but there are

other oxygenates that are used on much lesser volume than MTBE.

The CHAIRMAN. They are not cost competitive I take it; is that

why they are not used as much? or are they not as effective? Do

you know the answer?

Ms. ZAW-MON. Both. They are not as effective in that their oxygenate value, their octane value is not as good as MTBE and ethanol. And then also in terms of production costs, they are not produced in the amounts that MTBE is produced.

The CHAIRMAN. Well, thank you. That answers my question.

That kind of leads to another one, though. Some people criticize the

idea of just banning MTBE and retaining the oxygenate requirement, suggesting that will give ethanol the better market. But it

turns out there are other competitive oxygenates out there that are

used now, and potentially could compete with ethanol for the oxygenate market. So if you banned MTBE, you would be banning not

one of two oxygenates but one of many oxygenates out there. And

you wouldn’t necessarily being giving the whole market to ethanol.

Does that make sense?

Ms. ZAW-MON. It does, Mr. Chairman. But one of the concerns

raised by the blue ribbon panel was to look at the environmental

impacts of those other oxygenates. In fact, TAME is an ether like

MTBE and probably possesses very similar qualities to MTBE. So

there is a concern that you were to ramp up the usage of this ether

we might see similar ground water contamination problems. So one

of the blue ribbon panel’s recommendation was to thoroughly address the health impacts and the environmental impacts of the

other oxygenates and the Agency is in the process of looking at

some of the other oxygenates.

The CHAIRMAN. Has there ever been a study that has found any

problems with ethanol contaminating ground water, are there similar health problems that we are finding with MTBE?

Ms. ZAW-MON. No, there are not, because as you pointed out, ethanol does degrade. It is liked by the little organisms in the soils

and they tend to consume ethanol over the other components of

gasoline. Nonetheless, we have been asked to also address the environmental and health effects of ethanol and it is something that we

do need to be looking into.

The CHAIRMAN. Director Skinner, you said in your testimony that

95-percent of your reformulated fuel used in Illinois is with ethanol, and yet you pointed out we have detected MTBE in the under-
17

ground water supplies in 26-communities, three of which have been

forced to discontinue use of wells and switch to another source of

water.

If 95-percent of the fuel we are using has ethanol, where is this

MTBE that we are finding in Illinois, where we did not think we

used it, where is this coming from? Is it coming from boats or

lawnmowers or something else that we are not really thinking

about; do you know?

Mr. SKINNER. It is both of those. MTBE was used as an octane

enhancer historically. So it may be fuels that leaked out prior to

the Reformulated Gasoline Program coming into effect and remaining in either the soils or migrating from the soils to the water supplies. As we discussed, MTBE degrades very slowly and has a relatively long life.

Representative Ganske I know has premised or suggested that

MTBE in fact can come from automobiles traveling through a jurisdiction, going from one jurisdiction with MTBE RFG through Illinois to another jurisdiction. Now, he uses Iowa as an example. But

Iowa has apparently no MTBE in their fuel supplies and yet they

have found some levels of MTBE as well. So it probably comes from

a number of sources. But it shows you how diligent we really need

to be with regard to this particular contaminant.

The CHAIRMAN. To Merrylin Zaw-Mon, I am wondering, the California fuel refiners have argued that they can refine fuel that can

burn as clean as an oxygenated fuel without an oxygenate additive.

Do you know if that really is possible? And if so, at what kind of

added cost? I presume it would add a substantial cost to the price

of a gallon of gasoline.

Ms. ZAW-MON. We are reviewing all that information right now.

It is my understanding that with cleaner cars, California has

adopted a cleaner car program, very similar to the tier two cleaner

car program that the Agency recently adopted. But with cleaner

cars the use of oxygenates is less effective because the emissions

from the vehicles are reduced considerably. But California refiners

believe they can still meet the VOC, the volatile organic compounds

reduction as well as the toxics reductions by reformulating fuel

without all of the oxygenates that were required under the Clean

Air Act. That is the 2-percent oxygenate.

But in any event, a study that California required showed that

even with the repeal of the 2-percent requirement we would expect

that 60-percent of the fuels used in California would contain

oxygenates to some extent.

The CHAIRMAN. Is it not true that the gasoline refiners need

something like an oxygenate in order to enhance the octane? Even

if we did not have the oxygenate requirement, they would be using

an MTBE or an ethanol to give it more octane. Is that correct?

Ms. ZAW-MON. You are absolutely correct. But you use it at much

lower volumes, and lower weight percentages. But you are absolutely right, it is used as an octane enhancer, especially in premium fuels.

The CHAIRMAN. Director Skinner, maybe you can comment on

the issue of the phase two of the Reformulated Fuels regulations

taking effect in Chicago. I know you have been talking to the oil

refiners who deliver in Chicago. We are currently awaiting to find
18

out whether the carbon monoxide credit that the EPA has proposed

to the administration will be granted for ethanol. If it is not granted, that would pose a potential problem for ethanol. Has a decision

been made by the petroleum producers who supply the Chicago

market? Are they going to use MTBE even in the face of lawsuits

that have been filed asking them to clean up the pollution that has

been caused by it? Or do you think they will just go ahead and use

ethanol in summer and do whatever they have to do to make sure

it complies with the phase two regulations?

Mr. SKINNER. We have had discussions with the refiners in Illinois, and actually the answer I am going to give you goes to the

last question you asked, as well as in a sense how does MTBE get

into a state which does not have much MTBE. Literally yesterday

I was driving down 294, the tollway outside of Chicago on the way

to a speech to a bunch of chemical manufacturers. And at one point

I looked over and I was passing a tanker truck, and on the tanker

truck was, it was like a billboard. Huge letters that said, this tanker contains high quality MTBE, blah, blah, blah. And two thoughts

occurred to me at the time.

One was, who designed the marketing scheme for this trucking

company? Why would you put that on your trucks, given the controversy lately? Second, where was the truck going? Was it just

passing through Illinois? Was it in fact heading toward an Illinois

refinery? We have been assured by the main producers in Illinois

that at least for this summer season they intend to continue to use

ethanol. I believe in part it is because of this potential for litigation

that is out there. There have been a couple of class action lawsuits

filed in Long Island. There was one, as I understand it, that was

filed in Madison County very recently. I think it is in part because

of the regulatory uncertainty. They are hopeful that there will be

some sort of CO offset that is coming out of Washington at some

point in the next 6-months or so and it is difficult to switch ethanol

to MTBE and back to ethanol.

So for reasons that may be related to wanting to do the right

thing environmentally, but may be related to economics, for this

summer we are hopeful that ethanol will continue to be used.

There is no assurance that after this summer, that in subsequent

years, that situation will continue unless we get some sort of CO

offset that equalizes the economic disparity between MTBE and

ethanol. It is cheaper to use MTBE now. If you are a for profit company, ultimately that is something that you are going to have to

take into account. I would think the Nation as a whole, and certainly Illinois, wants to avoid an economic incentive to switch to a

contaminant that greatly concerns everybody, that we find almost

impossible to get rid of.

The CHAIRMAN. Director Hampton, I think you touched upon this

in your opening remarks. You talked about the effects on farm income and rural employment if we were to ban MTBE and replace

some of that market with ethanol. I know that Secretary Glickman’s office has done studies at the USDA that suggested that the

annual increase in farm income nationwide could be as much as a

billion dollars if you banned MTBE and replaced it with ethanol.

Do you have any idea what the specific effects on farm income
19

might be in Illinois if we were to ban MTBE and phase it out over

3-years and replace it with ethanol?

Mr. HAMPTON. Mr. Chairman, my response would be that the estimate along with the million dollars is some 13, 000 jobs nationwide. The only thing I can think here in Illinois that 15-percent of

the market will kill the market. It is having the last 10-percent or

so of the crop or not having that last ten percent that makes the

value on the other 90-percent. So that truly it is significant.

One other thought I had, I would like to, this is not going to shed

a lot of light on this, but I think it is probably right to the point.

A gallon of the MTBE contaminated 25-million-gallons of water

contracted to maybe a gallon of Everclear making 25 people pretty

happy. To really tell this whole story, and that sometimes, you

know, I think as we look at the real answers for this, as Director

Skinner pointed out, looking at something that is a contaminant

and trying to find economic incentives to make this program work

I think is the real challenge for us. We would try to be more patient and more effective, and as far as meeting the demand, you

know, I since I was a small child, I have heard that we would

never raise enough food to feed the world, and we are selling corn

and beans even less than I was a small child. So I think we would

really like to accept the challenge to be able to do this as an industry and as a state.

The CHAIRMAN. Thank you very much, Director Hampton. One

final question for Merrylin. I am wondering, I am sure you saw

that 60-Minutes report on MTBE that aired a couple months back.

In that report, they claim that there was an EPA memo that went

as far back as 1987 that stated that, quote, ‘‘known cases of drinking water contamination have been reported in four states affecting

20,000 people. It is possible that this problem could rapidly mushroom due to leaking underground storage tanks. The problem of

ground water contamination will increase as the proportion of

MTBE in gasoline increases.’’

Now, that was an internal EPA memo circulated in 1987, according to that 60-Minutes report. Certainly that was before you or the

current administration were there. But I am wondering, how could

it be that the EPA could have overlooked that kind of memo and

have allowed the problem to mushroom, just as that memo predicted, and it is only now really that the EPA is suggesting that

we initial action under the Toxic Substances Control Act?

Ms. ZAW-MON. That memo was written as part of a health effects

and environmental effects, a study that is required for fuel additives. And in 1988 I think this memo laid out some of the concerns

and the need for additional studies.

Subsequent to that, the fuel additive MTBE was approved because there is a provision in the Clean Air Act that allows for substantially similar components of gasoline to be approved at certain

levels. And MTBE actually is a by-product of gasoline. And given

the fact that it is substantially similar to gasoline it was approved

as an additive. And in the meantime, you know, the studies were

ongoing and we really only had inhalation studies as opposed to ingestion studies. And that is one of the reasons, and we are doing

the ingestion studies now, close to completing them.
20

I know that is no excuse for the fact that there is this widespread

contamination of ground water. But these studies do take a long

period of time because you have to look at all the available data.

They have to be peer reviewed and we based our decision to move

forward on the inhalation studies.

The CHAIRMAN. Well, that is a pretty good answer and that

clears that issue up for me. I appreciate so much all of you being

here. And Director Zaw-Mon, for traveling all the way from Washington to be here.

Ms. ZAW-MON. Thank you, Mr. Chairman, it was my pleasure.

The CHAIRMAN. You are welcome any time on Capitol Hill.

Ms. ZAW-MON. Thank you.

The CHAIRMAN. And Director Skinner, Director Hampton, you

were wonderful, as always. And thank you very much for your hard

work on behalf of the state, and I give Governor Ryan credit for

hiring you two gentlemen, too. Thank you very much.

We will take a quick break. Then we will come back to the final

panel. My hope would be that we could try and wrap up by noon,

so that everybody has time to get lunch. But let us just take a

quick, no more than 5-minute break. Thank you.

[Recess.]

We are going to get going with the third panel. We do have one

panel after this third panel. So we are just going to keep moving

forward. I want to thank all of the panelists for being here. We

have Leon Corzine, the President of the Illinois Corn Growers Association. Leon, thank you very much for being here.

We have Ron Warfield, who is the President of the Illinois Farm

Bureau. Eric Vaughn, who is the President of the Renewable Fuels

Association. Eric, thank you for being here. And Larry Quandt,

who is the President of the Illinois Farmers Union. Larry, it is good

to see you, and thank you for being here.

Why don’t we start from my left to right. Leon, why don’t you

go ahead. Corn growers are the ones who make it, ethanol, and

make it possible. So why don’t we start with you, and thank you

again for being here.

STATEMENT OF LEON CORZINE, PRESIDENT, ILLINOIS CORN

GROWERS ASSOCIATION

Mr. CORZINE. Thank you, Mr. Chairman. I would like to start

with thanking you for providing us this forum to talk about this

very important product ethanol. My name is Leon Corzine and I

am a corn and soybean grower from Assumption, Illinois, which is

in Christian and Shelby County. I am testifying today on behalf of

the Illinois Corn Growers Association.

Let me start off by addressing ICGA’s concerns about the recent

recommendations made by the U.S. EPA with the blessing of the

Clinton Administration in regard to ethanol and MTBE. It is our

sentiment that this plan to fix the Nation’s clear air program is offered with good intent but it is really lacking in substance.

EPA’s plan will phase out MTBE. This is a positive step considering it does contaminate water and damages the environment. But

it also eliminates the oxygenate requirement which is key to the

continued use of ethanol and the market growth that we need.

ICGA opposes this strategy because eliminating the oxygenate re-
21

quirement due to the failure of MTBE also constitutes backsliding

in our efforts to address air quality. We can document the clean air

success of this program and ethanol’s ability to keep it viable.

As was stated earlier, Chicago offers a perfect example. We have

used ethanol almost exclusively in Chicago to meet the clean air

standards and the results really have been remarkable. ICGA concurs with you, Mr. Chairman, that Illinois citizens should not have

to choose between clean air and clean water. Ethanol is proven to

reduce emissions, especially carbon monoxide which is the number

one contributor to air pollution, and it can do so without water contamination associated with MTBE.

MTBE, as it was stated, has contaminated water resources from

Maine to California, including the 25 known sites in Illinois. So it

must be addressed as soon as possible. That is why we are supporting your bill wholeheartedly.

Ethanol provides the means to reach our environmental goals

quickly and painlessly, by also providing jobs to boost our economy.

Ethanol provides these clean air benefits in a cost competitive manner, compared to highly refined gasoline and other additives which

might be used in lieu of MTBE. Petroleum companies continue to

tell the EPA, the Administration and Congress that they can meet

the Federal clean air guidelines without using oxygenates; however, no one is asking at what cost to consumers and the environment.

The volume of gasoline increase without oxygenates has not been

talked about. They have to replace it with something by sheer volume and what that means if more foreign oil. The bottom line is

that consumers will pay more for gasoline without ethanol, probably a lot more. Even before the recent price spike of gasoline, I

am running an E–85 pick up truck and my E–85 gasoline at the

pump is ten cents a gallon cheaper, even before this price spike,

cheaper than conventional gasoline.

Environmental benefits of oxygenates is clear long term environmental and public health benefits, resulting from the use of these

oxygenates and reformulated gasoline when compared to nonoxygenated gasoline that meet the RFG include the fewer aromatics in the gasoline, the lower potency weighted toxic emissions and

thus lowering long term cancer risk, the reduced emissions of carbon monoxide that we have talked about, and this also reduces the

ozone pollution due to the carbon monoxide reductions and fewer

fine particles in the exhaust emissions. This is what oxygenates do

for us all.

The oxygenate standard must not be compromised in any way.

ICGA is asking the Senate and U.S. Congress as a whole to make

a real statement about our government’s commitment to clean air,

fighting high fuel prices and energy self-sufficiency. The administration proposal also encourages establishment of a renewable fuel

standard and this proposal sounds good at first. It is similar to a

bill offered by Senator Tom Daschle of South Dakota and it would

require gasoline sold in the U.S. to contain a small amount, estimated at one to 2-percent, of renewable fuels.

There is nothing wrong with the concept except the projected

market potential for ethanol would be little improved in its early
22

years and would be far less than leaving the oxygenated requirement in place.

I could not believe that Tom Daschle made the comments that

he did last week in the public. His comments questioning the ability to supply enough corn or ethanol are unexcusable and in my

opinion we cannot ignore that kind of verbiage. The USDA has

done a study. The Governor’s Ethanol Coalition had a study done.

California has done several studies. They have all said the same

thing, the supply of ethanol will be there.

What we need now is a Federal Government commitment to

phase in ethanol, replacing all the MTBE in our Nation. All these

studies have said we will supply, we can supply the ethanol within

a three to 4-year time frame. And what about the corn supply?

Senator Daschle mentioned that also and I would challenge, no,

maybe better, I would dare him to come to Illinois and talk about

corn supply to me as an Illinois corn farmer. I would like to bring

him to my farm and have a talk about that.

Today ethanol also means $20,000 to every 500-acre corn farmer

in the U.S. We can double ethanol usage in the next 4-years or

less. And that would also help our rural development.

Corn growers also question why the U.S. EPA’s proposal did not

address the concept of a carbon monoxide credit for ethanol. EPA

director Tom Skinner presented this concept to the U.S. EPA, as

he mentioned earlier, and a way to use science to resolve ethanol’s

role in the U.S. energy policy. And we agree with Mr. Skinner, that

ethanol should receive the carbon monoxide credit which will allow

its use year round in the Chicago market. The carbon monoxide

credit is not some kind favor or special concession to the growers

that we are asking for but it is a natural response to the National

Academy of Science’s study on RFG. They concluded about 20-percent of the ozone or smog produced in non-attainment areas is

caused by carbon monoxide. Ethanol cuts carbon monoxide pollution by up to 20-percent, 25-percent, excuse me.

We are at a watershed moment for ethanol. Years of research,

building of infrastructure and expanding corn supply, high gas

prices and growing public support leave us well positioned to finally make a national commitment to our only domestically produced renewable fuel supply. Expanded ethanol product would give

agriculture, which is in the economic doldrums, a much needed lift,

provide jobs in processing and transportation and help us reach our

environmental goals responsibly.

ICGA applauds you, Mr. Chairman, Congressman Shimkus, Congressman LaHood, Governor Ryan’s administration and others for

their efforts to provide clean air and clean water for all of us, and

at the same time providing a sound rural development policy that

will work for agriculture. Thank you very much.

[The prepared statement of Mr. Corzine can be found in the appendix on page 70.]

The CHAIRMAN. Leon, thank you very much. I have enjoyed working with you and the corn growers in Washington. And I look forward to working with you in the months and years to come on this

issue and others.

Mr. CORZINE. My pleasure.
23

The CHAIRMAN. Ron, thank you for being here. Feel free to go

ahead with your testimony and we will wait on all the questions

until all of you have had an opportunity to provide your testimony.

Thank you very much.

STATEMENT OF RONALD R. WARFIELD, PRESIDENT, ILLINOIS

FARM BUREAU

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

for coming here and having this hearing and the leadership that

you have shown on this and other agricultural issues that we have

had an opportunity to visit about. I am Ron Warfield, president of

the Illinois Farm Bureau, the state’s largest general farm organization.

I believe right now we in agriculture are facing two of the most

important pocketbook issues that we will face that are going to impact us in the next 5-years. Number one is what we do with PNTR

and increase our markets through expanding trade; and number

two, how we expand our market through the use of ethanol which

is a renewable fuel that provides environmental qualities that

many people have already attested to today.

I am going to have many of the same notes in my written testimony that have already been presented. So I am just going to summarize and give an overall view on some points that I think are

very important because many of the points I would make have already been made.

It was interesting to me that the U.S. EPA comes in and makes

a presentation talking about the fact that we have actually exceeded the requirements under the reformulated gas program through

the oxygenate requirements that we have put forward. We have exceeded the requirements. Now, that just says oxygenates work. The

fact is, first of all, don’t question whether whatever oxygenates

work, they worked, they cleaned up the air and the fact that has

been extremely significant, we have exceeded what we have set out

to do.

Second now, because of the health and the environmental aspects

of the water contamination, it has prompted the EPA and others

to talk about eliminating MTBE. Now, this action has or will

prompt several states to ask the Government to grant them a waiver from the oxygen requirements of the Clean Air Act. EPA has responded by seeking Congressional action to eliminate the oxygen

requirement and replace it with renewable fuels standard.

Now, I sit as a farmer here kind of scratching my head because

I’m saying, on the one hand we are saying oxygenates work. They

have cleaned up the air. We have on the other hand, a product that

has contaminated the water, so we are going to eliminate the oxygenate requirement, when actually all we are trying to do is clean

up the water. Quite frankly farmers sit here scratching their head

and say let us use a little common sense, the approach I want to

use.

As Leon has already indicated, the further scientific studies show

that clean air rules do not take into account our ability to cut the

carbon monoxide emissions which reduce pollution. And he quoted

the statistics that show the effect that, that has in cleaning up the

emissions and the situation here in Chicago. As you met with the
24

EPA Carol Browner last week, she told the Illinois Congressional

delegation that legislation granting an ethanol carbon monoxide

credit and thus allowing ethanol use in the Chicago market would

be finalized by Memorial Day. Well, again farmers say we believe

the administration could solve this not only now, but could have

done it in January, granting the carbon monoxide credit, clearing

up any uncertainty, any uncertainty about ethanol’s role in the

Chicago market.

All of these actions are particularly puzzling to farmers, especially again in the light of the proven track record that we have

with ethanol. While MTBE has very significant human health and

environmental impact, as you have questioned the panelists here

this morning, in the last 10-years none, I repeat, none have surfaced with the use of ethanol. Ethanol has a proven track record

of reducing air pollution without any negative environmental or

health effects.

The Farm Bureau along with the Farmers Union, the Renewable

Fuels and National Corn Growers and other organizations have

been meeting in a summit, to come together with common legislative strategy, that we have all put together a national solution to

the ethanol issue. It is Farm Bureau’s belief that any legislation

addressing MTBE, one, must be national in scope. We know about

states individually banning MTBE. It does not make an industry

that can operate effectively or efficiently. All action should be taken

on a national level.

In addition, we ought to have legislation or ruling that would not

allow any state or regional waivers from the reformulated gasoline

oxygenate standard. We believe that national standards, we should

not reduce the progress we made and certainly has been well documented in terms of what we have accomplished in clean air.

Three, we must retain the oxygen standard, not allow any reduction in air quality standards and not allow any backsliding to

occur. Four, we must protect the real world environmental and

public health benefits of Phase 2 of the RFG program nationwide.

As a group we support H.R. 4011 with an amendment to prohibit

state or regional waivers of the RFG oxygen requirement based on

current law, and protects the environment and public health. We

would also support a companion bill in the Senate that does the

same thing.

These legislative principles reflect a united strategy that expands

ethanol use while preserving and enhancing the environmental and

public health benefits. It is a win-win-win. It is win for the environment, for energy and for the economics. Cleaner healthier air while

no water quality problems would exist. For energy policy it would

increase domestically produced renewable fuel, relying less on imported fuel. And economics, it increases the market and market

prices for agriculture, increases jobs and improves the trade deficit.

We unapologetically believe that we will expand the use of ethanol by two times and the use of corn by two times in the production

of ethanol in the next 5-years. And that is good for the farm economy and creating jobs in the process and we urge your support in

making that happen. Thank you.

[The prepared statement of Mr. Warfield can be found in the appendix on page 72.]
25

The CHAIRMAN. Mr. Warfield, thank you very much for that testimony. Good to have you here.

Eric Vaughn, thank you for being here, and we look forward to

hearing what the Renewable Fuels Association has to say. Thank

you.

STATEMENT OF ERIC VAUGHN, PRESIDENT, CHIEF

EXECUTIVE OFFICER, RENEWABLE FUELS ASSOCIATION.

Mr. VAUGHN. Mr. Chairman, thank you very much. It is indeed

an honor to be here. Thank you for the invitation to appear before

you, Mr. Chairman, and your committee here in Illinois. The Senate Agriculture Committee over the last 14, 15-years has played a

prominent role in the development of renewable and alternative energy sources. Your current chairman, Senator Lugar, in neighboring Indiana has been a stalwart defender and promoter and expander of the notion of ethanol from corn and arange of other the

bio mass feed stocks.

I represent the Renewable Fuels Association, the national trade

association for the domestic ethanol industry. There are 58 ethanol

production facilities in operation today, and within about 2-days

there will be another one in neighboring Missouri, a farmer owned

co-operative.

In 1990, when the Clean Air Act amendments were being debated and discussed, a great Illinois legislator by the name of Ed

Madigan teamed up with another legislator from the great state of

California. I probably should say great legislator as well, Mr.

Henry Waxman, to promote, produce and develop a new standard,

a reformulated gasoline standard that would require for the first

time the oil companies would produce cleaner burning fuels. It was

historic. I was there for many, if not all, of those hearings. I

watched Mr. Madigan work tirelessly as he promoted the ethanol

and oxygenate content requirement of reformulated gasoline.

Now, it didn’t come out of the air. It came out of Colorado. It

came out of the Rocky Mountain West, where it was tried and succeeded by adding oxygen, the simple addition of oxygen greatly reducing toxic emissions, and reduced carbon monoxide emissions.

And it was included in that program as a compromise, a 2-percent

weight oxygen requirement, in order to encourage competition. If

Representative Madigan were alive today, I think he would be

spinning on the floor in front of us, the thought that 85-percent of

that program turned into an MTBE program. That is not what was

anticipated.

It was farm leaders, people at this very table, certainly those in

this room who worked tirelessly for the adoption of that initiative

in the Clean Air Act amendments of 1990. It worked then and it

works today. Chicago, and Northern Illinois is the envy of the Nation in terms of reformulated gasoline. The leadership of your Governor, the Mayor of the great city of Chicago Mr. Daley, Mr. Chairman you, Mr. Durbin and your entire Congressional delegation

have worked to provide a very solid political base. The oil industry

in the state has worked very aggressively to produce clean burning

reformulated fuel with ethanol. The ethanol industry and the corn

farmers have worked to promote and produce the cleanest burning

renewable alternative fuel supply in the country. The program
26

works. It exceeds all toxic emissions standards required under

Phase 1 and will do so under Phase 2. But most importantly, it is

done without any harm or degradation to the rest of the environment, namely the water.

You have already recounted and many of the witnesses have already told you all the terrors and woes of MTBE. I cannot tell you

it is going to cause cancer. I cannot tell you it is going to cause an

increase in the instances of leukemia. I can tell you MTBE stinks.

It just flat out stinks and people are tired of it, and they do not

want to trade off some air toxic reduction for water contamination.

The Chairman of the powerful Environment of Public Works

Committee, where by the way, a hearing has not been held on the

ethanol issue in 7-years, has stated recently that 3,865 wells in his

state of New Hampshire are contaminated with MTBE and he

wants it out of their gasoline. We join with him in that. We want

it out as well. It was never intended, it was never thought of as

the Nation’s primary oxygenate choice, but it was a mistake and

we need to reverse that mistake.

The two major questions before us today are confronted by your

legislative initiative, S. 2233. I like Ron Warfield’s point, a common

sense approach. It is about time we had some leadership in Washington like yours, Mr. Chairman, that is just flat out common

sense. We have an MTBE contamination problem, so deal with it,

address it and your bill does. I also note with a great deal of pride,

because I was there the day it was on the Senate floor. 15-days

later the Federal EPA issued a notice of intent to accomplish your

legislative objective under TSCA. The Federal EPA has it within

their authority to act and act aggressively and they should do so.

Your legislative initiative will help move them along just that

much more quickly. And I congratulate you, Sir, on your initiative.

In addition, the Federal EPA has the authority, in fact, they

have made the promise to the Illinois delegation for three and a

half years to provide a carbon monoxide credit for ethanol blends

in reformulated gasoline. There will be no carbon monoxide credit

on Memorial Day or any other day because what the EPA is currently working on is not a carbon monoxide credit. I know they say

it is, but when you see it, it will surprise you, hopefully shock you.

They are not considering what Illinois EPA Administrator Tom

Skinner proposed. If they would simply adopt the Skinner plan, in

fact, allow it to be used in experimental purposes, your air will be

cleaner, the product will be a much more powerful one and the economic implications would be tremendously powerful.

In addition, the California waiver has now become a major hot

topic of debate. The Federal EPA has it within their authority to

deny that waiver for one very specific reason. The California waiver request fails to prove its stated concern which is that the use

of ethanol will prevent or interfere with the attainment of another

national ambient air quality standard. That is not the case. A politically motivated waiver can be granted. A technical and environmentally focused one cannot be, and should not be.

Lastly, the Federal EPA has the authority today to adopt oxygen

averaging in the Federal reformulated gasoline program which provides tremendous flexibility assistance to the oil industry as it
27

phases out of MTBE and begins the marketing and production and

use of ethanol.

Mr. Chairman you asked earlier and I would like to submit for

the record a study that was done for the Federal EPA by one of

the most experienced and professional organizations in the country

on air toxic and toxic emissions in the environment, Cambridge Environmental. We submitted this study to the Federal EPA at the

hearing on ethanol last week in Washington and I would like to

submit it for the record, because it identifies extensively, in an exhaustive fashion the environmental, health and fate of ethanol entering the environment, the ground water and the soil.

What it says is ethanol is a benign, efficient, effective, very consumer friendly and health friendly additive with approximately a

6-hour half life. In other words, it will break down completely in

6-hours. And I would ask that the report be entered into the

record.

The CHAIRMAN. We will introduce that into the record. Thank

you.

Mr. VAUGHN. Thank you, Sir. And I would like to just close with

this. In traveling here today from Washington, and on my way to

California, the stark contrast is almost beyond belief. That while

there is concern here in the Midwest about MTBE contamination,

one of the greatest concerns is that should this administration deliver to California a waiver, I would believe and tell you today, a

politically motivated waiver, that would allow California to be out

of the oxygenate program and in their case, that is a MTBE program. There are 1.5-billion gallons of MTBE sold in the state of

California. Providing one state, with a resolution to their MTBE

problem presents an unacceptable risk to the rest of the country.

Where will those MTBE barrels go? And how will they be dealt

with when they end up in Kansas City or St. Louis or Chicago if

trucks are moving along your highways? We need a national solution to this problem, not a regional one. And we believe ethanol

ought to be part of, in fact, we are confident it will be part of a

national solution to the MTBE contamination crises.

Again Mr. Chairman, I want to congratulate you for S. 2233 and

pledge our strong support and commitment to you as you pursue

a success of that legislative action back in Washington. Thanks for

the opportunity to be here.

[The prepared statement of Mr. Vaughn, can be found in the appendix on page 76.]

The CHAIRMAN. Mr. Vaughn, thank you very much. I appreciate

your testimony. It was very enlightening. And we will have some

questions for you after Larry Quandt, the President of the Illinois

Farmers Union, testifies.

Larry, thank you very much for being here. It is good to see you

again.

STATEMENT OF LARRY QUANDT, PRESIDENT ILLINOIS

FARMERS UNION

Mr. QUANDT. Good morning, Mr. Chairman. Thank you for the

opportunity to testify here this morning. As you said, my name is

Larry Quandt and I am president of the Illinois Farmers Union.

And I would particularly like to thank you, Mr. Chairman, and
28

your co-sponsors, especially Senator Durbin for introducing Senate

Bill 2233. I think it shows vision and leadership that we need in

Illinois, and it continues the ongoing debate on ethanol and MTBE

and I think we now have learned enough about MTBE that we

have to get it out of our fuel market and out of the ground.

The Illinois Farmers Union would support any legislation to insure expansion of the ethanol industry because out here, all over

the United States, not just in rural Illinois, but there is a price crisis. It is an income price we will see, commodity prices that are at

a decade long low period. The increase in ethanol would have a

dramatic effect on it.

It is also an environmental issue. We know now that MTBE is

bad for the ground water and it contaminates it. We don’t know

what the other health effects might be and they are just now being

studied, and I think it is safe to assume that they are probably not

good. Agriculture plays a big role in protecting the environment,

not just in the clean air by helping produce clean burning ethanol,

but our conservation practices and the chemical reduction and

what the different practices will put in place on the farm to preserve all the water, not just ground water.

I think this debate centers around another thing, too, as well

that has just been brought to our attention in the last few months,

is energy security. We are spending too much of our money on foreign oil and it puts us in the dictates of governments and people

that really do not have our best interest at heart anymore. So if

we would increase the use of ethanol we reduce our dependence on

foreign oil. I know we cannot eliminate it, but we can reduce it and

if we reduce it 1-percent, that has an effect in the market.

Everyone I believe in this room anyway is supporting the expansion of the ethanol industry, whether it be the corn growers or the

people that grow the corn, the ADMs, the environmental people. I

think part of why we are here is what is the best way to do that.

We have heard some discussion about replacing the oxygenate

mandate with a national renewable fuel standard. I know that this

debate is just now breaking out. I know that virtually all the proposals say we start at the base level. What I have not been able

to discover yet is what kind of growth factor anybody wants to put

into it, whether we take 10-years to double which I think that is

the projection we get, in three or four if we maintain the oxygenate

standard.

I would assume that it would have some increase in growth over

a 10-year period, it would more than double it. Which is the best

way to go? I do not think we have enough information to answer

that question. There would be some advantages to both. We would

have larger growth I think versus any renewable standard. We

could have larger quicker growth maintaining an oxygen standard.

But with renewable standard it might be slower but it might wind

up larger at the end of 10-years and with the slower growth, might

offer the opportunity for farmer owned value added co-opts to pick

up part of this demand.

I think along with that we should study the possibility of including a renewable energy security reserve. I think everybody can

probably remember back in 1996 some of us farming, there was a

pretty good price, but it also shut down the ethanol plants. So a
29

renewable energy security reserve would do two things. Increased

ethanol production would raise prices. Creating this reserve would

also raise prices. Seeing a reserve of any kind is very cost effective,

reduced not only in the Treasury and would also guarantee a supply of seed stock for this extra ethanol demand. This also has to

be coupled with strict, and this has been covered by some of the

experts, a backsliding for the air quality standards we have had.

I know you want to get done, so I am going to close. I would like

to thank you for this opportunity again, Mr. Chairman. And the

question you asked earlier about any knowing intentions of ethanol

contaminated water, I think if you ask some people in this room

they might confirm that occasionally I have deliberately consumed

water contaminated with ethanol.

[The prepared statement of Mr. Quandt can be found in the appendix on page 85.]

The CHAIRMAN. Well, Larry, thank you very much for your testimony, and all of you. It is good to have you all here and on the

same panel. Seeing you all together, all saying pretty much the

same thing, brings to light one issue we have in Washington. I am

a little bit worried that the different associations might get divided

and go in different directions supporting different bills. Senator

Daschle and I have worked very well in the last year and a half.

We have always agreed on farm issues. I am concerned that there

seem to be two main competing ways of going about this, one banning MTBE and keeping the Clean Air Act unchanged with the oxygenate requirement. And the other replacing the Clean Air Act requirement of an oxygenate with the renewable fuels. I think it is

really important that we all unite on this, or we are going to lose

out all together. We may not get anything because the forces

against us will be united.

Last year when Senator Boxer proposed a resolution to ban

MTBE and replace it with ethanol, we passed it by just two votes

in the U.S. Senate. So the Senators from farm states cannot afford

to be divided on this issue, And we appreciate all of you working

together.

I think it was Leon, mentioned that MTBE really started being

used in Denver. Was that right? or was it you, Eric?

Mr. VAUGHN. Actually I said MTBE was first used in Denver.

The CHAIRMAN. It is oxygenate.

Mr. VAUGHN. But that is actually true. It was the National Corn

Growers Association and others that went to the front range of

Denver and established in 1988, the first in the Nation oxygenate

content requirement in the winter months for carbon monoxide.

And after about 8-months of debate, over the strong opposition of

the oil industry at the time, the content requirement was established. It was a huge victory, and ethanol got completely shut out

of that market. For the first 3-years it was all MTBE.

Since that time it has become virtually an entire ethanol market.

In fact, just last week I believe the Senate in Colorado approved

a bill to ban MTBE. So it has come around completely full circle

to where ethanol, I believe, is the only oxygenate today used in the

front range of Colorado.

The CHAIRMAN. OK. But they started experimenting with MTBE

in Denver as an oxygenate. And that is how that was. You men-
30

tioned, Eric, in your testimony that you do not believe that the

EPA is proposing a carbon monoxide credit. You think that it is

going to be something else. Have you seen what the EPA has proposed? My understanding is they have sent something to the Office

of Management and Budget that is winding its way through the

process. Administrator Browner described it to me, Ray LaHood

and Senator Durbin. She described what they had proposed as a

carbon monoxide credit. What do you think their proposal really is?

Mr. VAUGHN. Well, as you know in Washington, all you have to

do is say that something is sensitive or secret or confidential and

then everybody gets a copy of it. We have been reviewing this informally with administration officials now for months. I do not think,

I am absolutely certain it is not a carbon monoxide credit. Essentially they have come up with a, the only word I can use is convoluted, but it is a scheme that allows those in the state of Illinois,

in Chicago, Illinois, in the RFG covered areas, reasonable further

progress credits will essentially be allowed in a 1-percent VOC

credit to an oil company using ethanol. It may have carbon monoxide as its underpinnings, but the reality is Tom Skinner, one the

brightest State EPA Administrators in the country, and I am not

just saying that because I am here, but he has just really dug into

this issue.

If you simply read his plan, you will understand the technical

and scientific approach he brings to this debate. And the fivetenths VOC offset is fully documented by the air shed models that

you incorporated in that plan. I would tell you, I do not think the

Federal EPA even read his proposal, because they certainly did not

act on it and they did not incorporate his suggestions into their

proposed. And Sir, again it is not going to be a carbon monoxide

credit once it comes back out of the OMB. It just is not going to

happen that way.

The CHAIRMAN. It is going to be something else. A question for

all the panelists. It has occurred to me that with the lawsuits being

filed in Long Island, recently in Madison County, and I guess a

class action suit was filed against oil companies all over the country by plaintiffs from all over the country who are alleging that

their water supply was contaminated by MTBE.

Is it possible that if Washington did nothing the oil industry

would be thinking twice about continuing their use of MTBE based

on now the studies coming out showing that it is a problem in the

water, the lawsuits, and the mounting legal challenges that they

face? Do you think there is any possibility that they might just of

their own accord stop using MTBE and start gradually shifting

over to ethanol?

Would anybody care to comment on that?

Mr. WARFIELD. I guess speculating with you in terms of the direction they might go. Although we know that when it comes to

this issue and certainly the opposition we faced over the last decade that they seem to have nine lives when it comes to this issue.

But certainly is going to put a great deal of pressure upon them.

There is a very broad based understanding, common understanding

that the fact is there is a problem with that.

I guess the concern I have, even if that is true, even if that is

true, that will we have allowance by EPA for certain states to opt
31

out and say well, we can do it without the oxygenate requirement,

and we start moving down that path. So even if that scenario does

follow, it seems to me I still have the concern about the direction

and the policy we pursue because of that. And again I say that in

mind of the fact that every time, it seems like this one has nine

lives. I hesitate to say that, but it seems like it is common understanding by everyone that there is a water quality problem here

that needs to be dealt with and so it is broad based enough that

it seems to me that is a possibility.

The CHAIRMAN. Larry.

Mr. QUANDT. I am not sure these are right, but that way we can

get them in the record and somebody maybe can help verify them,

if I cannot. I think in this discussion, like what do they call the

fuels in California that they are trying to meet both designer fuels

that contain no oxygen, additive. The nearest I can tell from what

I have read, the cost of that product is like 12 to 14, 15-cents a gallon more. And that would be RFG, too.

If you upgrade the blend stock to use ethanol without any waiver

it is a couple cents. So there is an economic incentive. But I do not

know, based on history, whether you want to assume that would

drive it, because there seems to be a great hesitancy for the oil

companies to relinquish any share of the market for ethanol.

Mr. VAUGHN. Let us take this hypothetical. Let us say you lived

in a progressive state with a progressive governor and a greatly advanced and progressive state legislature that adopted an MTBE

label and let us say you put that label on the pump. Apparently

there is hardly any MTBE blending going on here so there won’t

be many labels up. We will find out. But let us say you identify

where the stuff is and you give the consuming public some information about the oxygenate that is out there. We have had to have

an ethanol label on the pump for years. It does not seem to have

any serious negative effects. My guess is an MTBE label will.

Second, if the Federal Government were to be as progressive as

the state of Illinois and provide the oil companies with a carbon

monoxide benefit in the terms of the oil that they are producing,

the gas that they are selling, you are getting the credit, you are

getting the benefits for air quality, so provide that to the oil industry to make the blending of ethanol that much more economic and

efficient. Then Mr. Chairman, with those two caveats, I would say

there is no question that the oil companies are responsible. They

do not want to be in MTBE blending, and when you think about

how the MTBE might get here, you are crossing the Great Lakes

with shipments of MTBE. Nobody wants to take on that responsibility. So I think you are right, almost doing nothing, those being

the two caveats, I think you have a very powerful incentive to move

out of MTBE and back into cleaning burning renewable ethanol.

Mr. CORZINE. Mr. Chairman, the only other thing that I could

add would be that one thing that is not talked about very much

is that if we were to eliminate the oxygenate or eliminate MTBE

without replacing it with ethanol, we are talking about a large volume of more gasoline that we would need. Also if the gasoline could

be further refined without oxygenates it would also mean less gasoline per barrel of oil. So all that boils down to, more barrels of oil.
32

And what that means to me is more foreign oil and increases our

dependency on foreign oil.

What we really need in conjunction with what you might say is

a real initiative for a renewable initiative by the Federal Government to help us reduce our dependency on foreign oil and keep all

those dollars on our shores.

The CHAIRMAN. Well, thank you. It just occurs to me, being a

lawyer, that the legal liability the oil industry may face now,

makes it very clear that MTBE is a problem, and it may enhance

their liability for any future contamination. They may have a defense to any cases of past contamination, they may say that they

did not know that it caused ground water contamination. They may

say the EPA required the use of it. But going forward, now they

are on notice and continuing to use MTBE with it continuing to

leak into the soil and into the ground water would potentially enhance their likelihood of being found guilty in the future. I just

throw that out there as something to think about.

Now, on this waiver issue, this is a very serious matter. Most of

you alluded to it in your testimony. If the California waiver is

granted I think we can expect to see more states applying for waivers. My understanding was the Governor of Missouri Mel

Carnahan said that he was going to apply for a waiver, but now

he is saying he was misinterpreted. Does anybody know if any

other states are thinking about applying for a waiver from the oxygenate requirement?

Mr. VAUGHN. Mr. Chairman, I will do it from memory, but the

states of Maine, New Hampshire, New York, Connecticut, New Jersey, Alaska did some time ago, getting out of MTBE, California.

The CHAIRMAN. They applied for a waiver?

Mr. VAUGHN. Actually at the time Governor Hickle simply

banned MTBE and the Federal Government decided not to take

him on, and the MTBE was in there for about a week.

The CHAIRMAN. This is what state?

Mr. VAUGHN. The state of Alaska.

The CHAIRMAN. The state of Alaska. The previous Governor?

Mr. VAUGHN. It is also the CEO program in Alaska. Yes, Sir,

back in about 1991, 1992 time frame. I can get the specifics.

The CHAIRMAN. They banned MTBE?

Mr. VAUGHN. They banned MTBE. Ethanol now has the entire

Alaskan market.

The CHAIRMAN. Wow.

Mr. VAUGHN. We satisfied that relatively easily. I think it is 14

states currently have applied for relief from either the Federal RFG

oxygen standard and also considering MTBE ban bills in their state

legislatures. Governor Carnahan has asked the Federal Government for relief on the Federal standard and would like to replace

the Federal program with the state RFG program that would require the use of ethanol. That was his change of position that was

announced about a day later or so.

Mr. CHAIRMAN. OK. Well, that is something we are going to

watch. If any of these waivers are granted, it could have a domino

effect and we will have to watch that issue very closely.

Thank you all, for your testimony. I do have another panel that

will be testifying. One final question. I guess the Petroleum Insti-
33

tute has argued that states do not have the authority to ban

MTBE. You just pointed out, Eric, that Alaska has banned it.

Other states have also banned it.

Do you have any comments on the authority of states?

Mr. VAUGHN. Mr. Chairman, that is a very good question. The

former, the previous 2 counsels of the EPA that are now in private

practice in Washington, DC. are working with several senators, one

in fact your colleague from Iowa, Senator Grassley and others, to

make it clear what authority the governors have. When a governor

was either placed in a program, as Chicago was placed in the gasoline program because of air quality concerns, or opts into that program because of the objective of achieving air toxic reductions, they

did not obviate or eliminate their responsibility to their citizens to

protect the environment. There is nothing that prevents a governor

acting against any chemical in any program if it is affecting water

quality.

I realize there is a tight legal definition, and since you have got

something that is covered under the Clean Air Act, some have contended that the governors do not have the authority to remove that

chemical of that product under the Clean Air Act. I would agree

with that. However, if other environmental contamination, in this

case water contamination results, the governors absolutely not only

have the right, they have the responsibility to move on that product and my guess, my comment would be that the Federal EPA

ought to provide that guidance to the state that they can move out

of that product to protect their water resources in their states.

The CHAIRMAN. Thank you. That answers that question. All of

you have been very helpful and I appreciate your testimony. I look

forward to working with you on this issue and others. Thank you

all very much.

While that panel is coming up I am going to ask unanimous consent that the following letters and written statements be included

in the record as if read. The National Corn Growers Association

letter of support for S. 2233; the National Association of Conservation District’s letter of support for S. 2233; letter of support from

Mayor Daley and Governor Ryan; statement of United States Senator Durbin; statement of Illinois Attorney General Jim Ryan;

statement by Al Nathis, long time ethanol supporter.

[The information referred to can be found in the appendix on

page 97.]

The CHAIRMAN. The Committee record shall remain open for five

business days after the conclusion of this hearing for additional

written testimony. And with that I want to welcome the fourth

panel. We have here Donald Holt, the Senior Associate Dean of the

College of Agriculture, Consumer Environmental Sciences at the

University of Illinois at Urbana-Champaign. Mr. Holt, thank you

for being here.

Brian Donnelly. Brian is the Executive Director of Southern Illinois University at Edwardsville ethanol pilot plant, which we have

been working very hard to get funding to construct that plant, from

Edwardsville, Illinois.

Darryl Brinkmann. Darryl is the Illinois representative in the

American Soybean Association. Darryl, you are from Carlisle, Illinois. Thank you all for being here.
34

Don Holt, if you would like to begin, we would appreciate your

testimony.

STATEMENT OF DONALD A. HOLT, SENIOR ASSOCIATE DEAN,

COLLEGE OF AGRICULTURAL, CONSUMER AND ENVIRONMENTAL SCIENCES, UNIVERSITY OF ILLINOIS

Mr. HOLT. Thank you, Mr. Chairman. I bring greetings to you

from our Dean and also to Terry.

The CHAIRMAN. Did you have Terry as a student there?

Mr. HOLT. Yes, we did.

The CHAIRMAN. You did, okay.

Mr. HOLT. He was a good student.

The CHAIRMAN. Thank you.

Mr. HOLT. As you indicated, I am Don Holt, Senior Associate

Dean of the College of Agricultural Consumer and Environmental

Sciences. I hope you will pardon my scratchy voice today. We do

greatly appreciate this opportunity to provide testimony on issues

facing ethanol and the bio-fuels industry.

You specifically requested to hear our views on the Clinton Administration’s recently released proposal to ban the use of methyl

tertiary butyl ether, MTBE, rescind the oxygenate requirement of

the Clean Air Act and replace the oxygenate standard with a renewable fuels requirement. Likewise, you requested our views on

your bill S. 2233, described as the MTBE Elimination Act, and

other relevant legislation.

Needless to say, measures that encourage use of ethanol as a

fuel, fuel additive and for other purposes stand to benefit Illinois,

which is a major producer of both ethanol and the most important

raw material for ethanol production, namely corn. Likewise, measures that would reduce and eventually eliminate the use of MTBE

as a fuel additive would have several benefits for Illinois and the

other speakers have outlined outline the reasons for that.

The logical substitute for MTBE in gasoline is ethanol. Ethanol

is the Nation’s head start in the bio-based economy of the future.

I want to repeat that statement. Ethanol is the Nation’s head start

into the bio-based economy of the future. Ethanol provides oxygen

to insure complete oxidation of gasoline components in internal

combustion engines, and the benefits of that have been outlined by

other speakers today.

Further, ethanol enhances octane levels thus improving engine

performance and fuel efficiency. We do not see a benefit for eliminating the oxygenate requirement, as some propose. Ethanol can

provide the environmental benefits of oxygenate without the drawbacks and dangers of MTBE. And according to USDA, by 2004 ethanol could successfully replace MTBE in meeting oxygenate demands with negligible effects on gasoline prices and supplies.

I am going to talk mostly about the science involved in ethanol

production. The major steps in ethanol production include corn production, corn harvest and drying, corn milling, ethanol production

and sidestream processing. Thanks to research, ethanol production

is now an energy efficient process, yielding net energy benefits and

a number of other benefits to the U.S. economy. This development

was the result of improvements at all stages in the overall ethanol

production process.
35

The University of Illinois has a long history of interest and contributions in all facets of producing and utilizing corn-based ethanol. The Illinois Corn Marketing Board, which administers the

check-off funds, has been a key partner in ethanol related research,

along with other Illinois universities, neighboring state universities, state and Federal Government and several private firms.

Decades of corn breeding and genetics research have increased

the yield of corn and consequently of starch, contributing greatly

to the efficiency of the overall process. In the mid-1980’s the energy

required to produce corn was sharply reduced by introduction of notill technology that was pioneered by Professor George McKibben

of the University’s Dixon Springs Agricultural Center. Recently,

University of Illinois scientists, including Professor Marvin Paulsen

and colleagues developed a rapid accurate test for extractable

starch, the key variable for ethanol production.

Research facilitated by the quick test is focused on genetic improvements, harvest protocols and artificial drying equipment and

procedures leading to higher levels of extractable starch. University

of Illinois scientist Steve Eckhoff and colleagues improved the milling step by pioneering the so called ‘‘quick germ’’ and ‘‘quick fiber’’ processes in which relatively inexpensive dry milling equipment is

used to separate the corn germ, starch and fiber for further processing.

With this equipment corn processors can gain many of the benefits of wet milling while using the simpler, less expensive dry milling process. An especially exciting recent development is the finding that there are important cholesterol-lowering agents, known as

stanol esters, in an oil fraction associated with corn fiber produced

by the quick fiber process. These ingredients alone are worth about

three dollars a bushel, even though they make up a small fraction

of each bushel of corn.

University of Illinois scientists pioneered important changes in

the ethanol fermentation process. Through the 1980’s and 1990’s

Professor Munir Cheryan and colleagues developed and perfected

continuous membrane bioreactors, that is CMBs, for ethanol production. This continuous fermentation approach offers many advantages over the traditional batch processes.

Successful large scale CMBs were first operated in Illinois at the

world’s second largest ethanol producer Pekin Energy, now William’s Energy. Continuous membrane bioreactors were also developed by University of Illinois scientists for production of improved

dextrose, that is, glucose, which is key to almost all fermentation

processes, as well as corn oil, zein, which is corn protein, and

zanthophylls. CMBs will be key components of corn processing in

the future and will be used to produce many diverse corn based

products safety and efficiently and profitably. Brian Donnelly will

address some of the interesting scale-up problems associated with

this kind of research.

University of Illinois research on aspirating ethanol into both

gasoline and diesel engines continues to yield engine design criteria

and specifications. In addition, literally hundreds of studies were

conducted on the use of various co-products as food, feed, fiber, fuel

and chemical feedstocks. This work will continue and increase in

the future.
36

Functional genomics, which is part of the bio-technology revolution, will continue to make corn a better raw material for manufacturing ethanol and many other products. Bio-technology will create

totally new products, including pharmaceuticals and

neutraceuticals, that can be produced in and manufactured from

corn and soybeans. Functional genomics will also improve the

microorganisms and enzymes used in production and processing of

the various fractions of the corn kernel, leading to even more diverse and useful products that can be obtained from corn in profitable commercial operations.

In my written testimony I reported on our research on all of the

major stages of ethanol production and use. Because the overall viability of the ethanol industry is improved by advances in each of

these dimensions, no one factor makes or breaks the strong case for

ethanol. Ethanol is one part of a very complex bio-based production

and utilization system. Analyses of its strengths and weaknesses

must reflect all of these dimensions.

Legislation that encourages public and private investment in research and development in support of a bio-based economy, including your MTBE Elimination Act and Senator Lugar’s National Sustainable Fuels and Chemicals Act, S. 935, will benefit the ethanol

and bio-fuels industries and their customers. We applaud your efforts in that direction. Thanks for this opportunity to provide information for the Committee.

[The prepared statement of Mr. Holt can be found in the appendix on page 87.]

The CHAIRMAN. Dean Holt, thank you very much.

Brian Donnelly from SIUE and the Executive Director of the ethanol pilot plant there. Thank you for being here and I look forward

to your testimony.

STATEMENT OF BRIAN E. DONNELLY, EXECUTIVE DIRECTOR,

UNIVERSITY PARK, SOUTHERN ILLINOIS UNIVERSITY,

EDWARDSVILLE

Mr. DONNELLY. Thank you, Mr. Chairman. Good afternoon. I am

Brian Donnelly, Executive Director of University Park, Southern Illinois University, Edwardsville. I am here to represent the site that

has been chosen for the National Ethanol Research Pilot Plant. I

would like to begin by complimenting you, Mr. Chairman, and the

Senate Committee on Agriculture for holding this hearing and for

the commitment to the development of the safe dependable cost effective fuel to meet the clean air needs of our Nation. Particularly

I would like to compliment the Committee and the entire Senate

for the passage of S. 935, to promote the conversion of bio-mass

into bio-based industrial products. This legislation, thanks to an

amendment offered by you, Mr. Chairman, includes a Federal authorization for the construction of the National Ethanol Research

Pilot Plant at SIUE.

The pilot plant holds the potential to provide a bright future for

ethanol and the environmental and energy security that it provides.

University Park is a 330 acre research and technology park located on the campus of Southern Illinois University-Edwardsville.

The state of Illinois has invested $3.1 million in University Park,
37

building concrete roads and installing utilities to support more

than one million square feet of building space. The park exists to

foster regional, state and national economic development by making tracts of land available to corporations, nonprofit organizations

and government agencies that could benefit from its strategic location. This site is at mid-continent, next to a comprehensive university, just 30-minutes away from Lambert-St. Louis International

Airport.

Scores of researchers are engaged in discovering new ways to

produce ethanol more efficiently. Some are examining processes for

grinding corn, hydrolyzing starch, fermenting glucose, distilling

and dehydrating alcohol or converting corn fiber to ethanol. Others

are interested in engineering the corn kernel, altering enzymes,

breeding or genetically engineering new strains of bacteria, yeast

and fungi or in producing or recovering valuable co-products of the

ethanol production process.

However, these research efforts share a common problem. Encouraging results have not been tested on a commercial scale because of the prohibitive costs and risks of injecting an exploratory

technology into an existing facility. These costs and risks have created a log jam of research projects waiting to go forward to commercialization. In 1995 SIUE received a $500,000 grant from

USDA to study the feasibility of constructing the pilot ethanol

plant. As part of this study, engineers from the Fluor Daniel Company succeeded in producing a preliminary design for a pilot plant

that would emulate full scale corn wet mill and corn dry mill production facilities and be a very flexible platform for testing of many

different types of technology.

The benefits of the facility were clearly demonstrated. Representatives of the fuel ethanol industry were asked to select several research projects from a list of 102 that hold the greatest potential

for reducing the cost of manufacturing ethanol from corn. Ten

projects were selected. Stanley Consultants, Inc. conducted an economic analysis of these projects and reached a dramatic conclusion.

If just five of these technologies are sped to commercialization

through the ethanol pilot plant, the cost of converting corn to ethanol could be reduced by approximately ten cents a gallon. In 1999,

1.56 billion gallons of ethanol were produced in the United States.

In 1996 Congress appropriated $1.5 million for final design of the

pilot plant. Using these funds, Raytheon Engineers and Constructors was employed to finish designing the plant and produce bid

packages. These bid packages are prepared and ready to mail. Construction can begin within a few months. The State of Illinois believes so strongly in this $20 million project that it has already appropriated $6 million. If the additional $14 million Federal share

becomes available within a year or so, this major national asset

will be on line.

In closing I would like to thank you, Mr. Chairman, for the opportunity to appear today, and would be pleased to answer any

questions you might have. Thank you.

[The prepared statement of Mr. Donnelly can be found in the appendix on page 92.]

The CHAIRMAN. Mr. Donnelly, thank you very much.
38

Next is Mr. Brinkmann from the American Soybean Association,

thank you for being here and we look forward to your testimony.

STATEMENT OF DARRYL BRINKMANN, ILLINOIS SOYBEAN

ASSOCIATION

Mr. BRINKMANN. Thank you, Mr. Chairman. It is indeed an

honor to be here today to share some comments of what the soybean industry can contribute toward our bio-fuels effort.

Good morning. My name is Darryl Brinkmann. I am a corn and

soybean farmer from Carlisle, Illinois. I am past president of the

Illinois Soybean Association. I currently serve on the Board of Directors of the American Soybean Association. I also serve on the

Board of Directors of the National Bio-Diesel Board. I am pleased

to be here today to commend you, Mr. Chairman, for holding this

hearing on bio-fuels. I am going to shift the focus a bit from the

earlier panels and use this opportunity to discuss bio-diesel and

some of the issues our industry our industry is working on.

Mr. Chairman, I know you understand bio-diesel, but for the

record bio-diesel is a cleaning burning fuel for diesel engines. It is

produced from renewable resources such as soybean oil. Bio-diesel

is an ideal alternative fuel because it operates in diesel engines

just like petroleum diesel and requires little or no modifications

while maintaining the payload capacity and range of petroleum.

Because its chemical characteristics are very similar to petroleum

diesel, bio-diesel blends well at any level. The most commonly used

blend is 20-percent bio-diesel and 80-percent diesel blend, B20. One

of the reasons this is the most commonly used blend is due in large

part to legislation sponsored and shepherded through Congress in

1998 by my Congressman John Shimkus.

Congressman Shimkus’ bill amended the Energy Policy Act,

EPACT of 1982 to allow Federal and state fleets to earn credit

under this program by using B20. The major change in this law

has resulted in record growth of bio-diesel use and I believe we are

just beginning to take advantage of the potential of that market.

So I thank you, Mr. Shimkus, and other members of Congress in

the room for your strong support of this effort and of our industry.

Bio-diesel is simple to use, renewable, domestically produced and

readily available. Other advantages of bio-diesel include superior

lubricity for smoother operation and reduced engine wear and a

high flash point, making it safer to store and handle.

The use of bio-diesel in a conventional diesel engine results in

substantial reductions of unburned hydrocarbons, carbon monoxide

and particulate matter compared to emissions from diesel fuel.

Pure bio-diesel does not contain any sulfur and therefore reduces

sulfur dioxide result from diesel engines virtually to zero.

Of course, there are other reasons to use bio-diesel fuel right

now. With agriculture prices at record lows and petroleum prices

approaching record highs, it is clear that more can be done to utilize domestic surpluses of renewable oils such as soybean oil while

enhancing our energy’s security. Because bio-diesel can be used

with existing petroleum infrastructure it provides immediate opportunity for addressing our dependence on imported petroleum

and helping our farm economy.
39

There are many reasons for our transportation sectors to use

more renewable fuels like bio-diesel, but there are still hurdles and

obstacles to making this a reality. Congressman Shimkus has introduced legislation in the House to amend the Congestion Mitigation Air Quality or CMAQ program to allow funds in this program

to be used to buy down the cost of bio-diesel. The Shimkus bill does

not create a new program for bio-diesel nor does it earmark funds

in the current program for bio-diesel. It just levels the playing field

for bio-diesel by making the funds eligible in the CMAQ program.

Senator Bond of Missouri and Senator Johnson of South Dakota

have sponsored similar legislation in the Senate, and I am sure we

can count on your support, Mr. Chairman of that bill.

For long term support of bio-diesel the industry is considering a

number of options including a national renewable standard. In

other words, all diesel transportation fuel would contain a very

small percentage of bio-diesel. Some petroleum distributors are already offering premium diesel that includes a low blend of bio-diesel as an additive. For example, Koch Industries is offering a product, U.S. Soy Field Diesel in bulk at over 20 terminal locations

across the midwest. A similar product, Soy Master is being marketed by Country Energy, a joint venture between Farmland and

Cenex/Harvest States co-operatives. We think this concept has

merit and will work with industry to further develop expansion and

use of low level blends bio-diesel. An upcoming rule making process

by EPA which will lower sulfur content in diesel fuel and consequently necessitate inclusion of a lubricity additive makes this

all the more attractive. Because bio-diesel contains no sulfur it can

serve as a domestically produced renewable oxygenated lubricity

additive in the ultra-low sulfur diesel fuel.

Mr. Chairman, we think the future looks bright for bio-diesel and

with the help of members of Congress like you and Representative

Shimkus we know that many of the current obstacles will soon be

opportunities. Again, I appreciate the chance to talk about several

key issues facing the bio-diesel industry and look forward to working with you on these matters and others of importance to Illinois

soybean farmers. Thank you.

[The prepared statement of Mr. Brinkmann can be found in the

appendix on page 94.]

The CHAIRMAN. Thank you very much, Mr. Brinkmann. If I could

just stay with you for a couple of questions and then I will go back

to Dean Holt and Brian Donnelly.

You mention in your testimony the use of bio-diesel is enhanced

by the Energy Policy Act of 1992, EPACT. Can you explain how

this program fosters the market for bio-diesel?

Mr. BRINKMANN. Well, it is like ethanol, making the exhaust of

the diesel, the diesel exhaust cleaner. It lowers hydrocarbons and

particulate matter emissions. And you know, gives us cleaner burning air. Actually soy diesel contains about 11-percent oxygen by

weight, and that is the big point that we are trying to do.

The CHAIRMAN. It helps the oxygen content. So it is very similar

to ethanol in that context.

I know many transit authority buses, state government trucks

and mowers, as well as other municipal vehicles are powered by

diesel. What kind of success has bio-diesel had in these markets?
40

Mr. BRINKMANN. Well, in these kind of markets you can come in

with bio-diesel and there is absolutely no modifications that need

to be made as far as fueling facilities or engine changes or anything. It can be burned in an engine just like diesel fuel. That is

one advantage we have over some of the infrastructure changes

that natural gas would have to make or something like that.

The CHAIRMAN. Now, the CTA in Chicago, the Chicago Transit

Authority, they were using some bio-diesel buses, weren’t they, for

a while?

Mr. BRINKMANN. Yes, they were. They tried those along with the

Chicago police department on their water boats on the riverfront.

And they were very happy with the results. Again, people could notice the difference in the exhaust. It was no black as straight diesel

and it smells a little bit like french fries.

The CHAIRMAN. What happened? They are not using those anymore?

Mr. BRINKMANN. There is some going on, but until the EPACT

was amended these transit authorities did not get credit for using

bio-diesel as if they were converting vehicles to natural gas or

something. So that was why we really had Congressman Shimkus’ bill.

The CHAIRMAN. Well, I look forward to working with you. And let

us know what we can do to assist you on that. I think it is a very

promising area and we have got to continue to promote it.

Back to Mr. Holt and Mr. Donnelly. The need for research on improving the efficiency of producing ethanol is only going to increase, even though we have made great strides already. And as

Dean Holt pointed out, we have made strides in every step of the

production of corn all the way to ethanol. But if we ban MTBE and

part of that MTBE market is replaced with ethanol and market for

ethanol doubles, we are going to need even more research to improve the efficiency and effectiveness of the ethanol production.

I am wondering what steps will your universities take to fill this

role? Obviously SIUE is committed to managing the corn to ethanol

pilot research plant and we are trying to get funds for that. But

beyond the research plant itself and specifically at the ChampaignUrbana campus of U of I, what steps will the U of I be taking to

help fill this important research role?

Mr. HOLT. Incidently I should point out that we have worked

closely with Brian and others at SIU and see ourselves as cooperators in that effort. We will need to make the best use of all of our

research facilities.

There are many initiatives underway that I think bear on this,

probably the biggest one, the one that has the most potential for

the future, is what has come to be known as I-bio or the bio technology initiative in Illinois. Of course, there are similar initiatives

at the Federal level.

In the future, biological research, and most of the research that

is going to be done relative to ethanol is biological research, will

essentially be done under this umbrella of genomics, comparative

genomics and functional genomics. It is a relatively recent development that grew out of the progress that was made in structural

genomics that is, the mapping and sequencing of enzymes. The success in that is building on itself. I think your imagination is just
41

above the limit on how that is relevant to ethanol. It is relevant

to increasing the yield of ethanol from a bushel of corn, which is

very important for us, and it is relevant to increasing the yield of

corn overall. It is relevant to being able to tailor corn and soybeans

and other crops to be ideal raw materials for manufacturing a

number of different products. In the past, of course, one of our

problems has been that corn and soybeans were essentially commodities and they were not differentiated for various uses.

Genomics will make it possible to differentiate corn and soybean

for all the uses, including ethanol, and to tailor that raw material

so that you start out with something that has great value and that

value can be there as ethanol and some of the co-products and byproducts.

I wish we could somehow emulate the bio-medical and pharmaceutical industries. I recently attended the Bio meetings in Boston

and I was impressed that the various participants were unanimously enthusiastic in their support for the National Institutes of

Health. They are supporting an effort to double the research budget in the National Institutes of Health. They see that effort pouring

new disclosures and patents into the private sector and into the

medical and pharmaceutical industries. It will do that. It is going

to be the biggest game in town in terms of biological research. We

need to get the same degree of energy and focus among stakeholders in agriculture.

The CHAIRMAN. We will continue to work on that. Now, ethanol

can be made, not just from corn, but from any plant that has

starch. Is the research just not that very advanced on making ethanol out of potatoes or out of rice stalks or out of meat? What is the

state of all that research and do you do any of that research in

your universities?

Mr. HOLT. Well, we focus primarily on corn. I think the reason

is that corn has such a tremendous advantage in terms of the yield

of starch per unit of input, I think the only plant that comes close

in that regard is casava. It grows tubers and does produce a tremendous weight of starch, but is hard to harvest. To make comparisons you have to look at all the dimensions of the process.

The CHAIRMAN. The bottom line is that nothing is likely to

threaten a dominance of corn in producing ethanol.

Mr. HOLT. I do not think so because it is very hard to find any

biological system that is as productive as growing corn in Central

Illinois.

The CHAIRMAN. That is right. Well, that is good. One final question and then we will conclude this hearing. I am just wondering

how the public research universities such as SIUE and University

of Illinois, are doing on interfacing with the ethanol industry and

with the corn growers to insure that your research is well targeted?

Mr. DONNELLY. One of the things we did as part of evaluating

the feasibility of the ethanol plant, the pilot ethanol plant, is we

did an inventory of the, inventoried all the current ethanol research projects underway in the United States. We managed to

identify 102 active research projects at that time, incidently more

than half of which were coming out of the big public research universities in the midwest, institutions like University of Illinois,

Purdue and Iowa State University. We then, through the Renew-
42

able Fuels Association, ordered a study in which the major ethanol

companies were asked which of those research projects held the

greatest promise for increasing the cost effectiveness of producing

ethanol from corn. And they identified through that process ten research projects which were particularly high yield projects.

The pilot plant was then designed to make sure that it accommodated those ten research projects as an example of the mechanism

we have used to try and stay in touch with industry and its needs.

The CHAIRMAN. Well, all of you, thank you very much for being

here. I appreciate your testimony. I appreciate your traveling to

Springfield. And to everybody who has been here in the audience,

thank you for your attendance and your interest in this issue. And

with that, I am going to conclude this meeting of the Senate’s Agriculture Committee, and thank you all for being here. This meeting

is adjourned.

[Whereupon, at 12:45 p.m., the Subcommittee adjourned.]
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