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[Senate Hearing 106-863]
[From the U.S. Government Publishing Office]

                                                        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

                    U.S. GOVERNMENT PRINTING OFFICE
68-611 CC                   WASHINGTON : 2000

_______________________________________________________________________
            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          TOM HARKIN, Iowa
THAD COCHRAN, Mississippi            PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky            KENT CONRAD, North Dakota
PAUL COVERDELL, Georgia              THOMAS A. DASCHLE, South Dakota
PAT ROBERTS, Kansas                  MAX BAUCUS, Montana
PETER G. FITZGERALD, Illinois        J. ROBERT KERREY, Nebraska
CHARLES E. GRASSLEY, Iowa            TIM JOHNSON, South Dakota
LARRY E. CRAIG, Idaho                BLANCHE L. LINCOLN, Arkansas
RICK SANTORUM, Pennsylvania

                       Keith Luse, Staff Director

                    David L. Johnson, Chief Counsel

                      Robert E. Sturm, Chief Clerk

            Mark Halverson, Staff Director for the Minority

                                  (ii)

  
                            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
    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

 
                 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 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 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.
    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 tie-breaking 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 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-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 anti-backsliding 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 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 Illinois 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 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 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 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-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 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 without 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-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.
    [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 underground 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 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 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.
    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 requirement 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 non-oxygenated 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 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.
    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 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.]
    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 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 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 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 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 
mentioned, 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 five-tenths 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 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. 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 Institute 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.
    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.
    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 no-till 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.
    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, 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.
    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.
    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?
    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 Champaign-Urbana 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 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 by-products.
    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 Renewable 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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                            A P P E N D I X

                             April 18, 2000

      
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