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76–472 2012

SMALL BUSINESS INNOVATORS: ON THE CUTTING 

EDGE OF ENERGY SOLUTIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON AGRICULTURE, ENERGY AND 

TRADE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD 

APRIL 26, 2012 

Small Business Committee Document Number 112–066 

Available via the GPO Website: www.fdsys.gov 


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(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

SAM GRAVES, Missouri, Chairman 

ROSCOE BARTLETT, Maryland 

STEVE CHABOT, Ohio 

STEVE KING, Iowa 

MIKE COFFMAN, Colorado 

MICK MULVANEY, South Carolina 

SCOTT TIPTON, Colorado 

CHUCK FLEISCHMANN, Tennessee 

JEFF LANDRY, Louisiana 

JAIME HERRERA BEUTLER, Washington 

ALLEN WEST, Florida 

RENEE ELLMERS, North Carolina 

JOE WALSH, Illinois 

LOU BARLETTA, Pennsylvania 

RICHARD HANNA, New York 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

KURT SCHRADER, Oregon 

MARK CRITZ, Pennsylvania 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

JUDY CHU, California 

DAVID CICILLINE, Rhode Island 

CEDRIC RICHMOND, Louisiana 

GARY PETERS, Michigan 

BILL OWENS, New York 

BILL KEATING, Massachusetts 

LORI SALLEY, Staff Director 

PAUL SASS, Deputy Staff Director 

BARRY PINELES, General Counsel 

MICHAEL DAY, Minority Staff Director 


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C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Scott Tipton ..................................................................................................... 1 

Hon. Mark Critz ....................................................................................................... 2 

WITNESSES 

Ralph Tommaso, CEO, Head of Business Development. Greenworks Holdings, 

Bethlehem, PA ...................................................................................................... 4 

Jerry Taylor, President & CEO, MFA Oil Company, Columbia, MO .................. 6 

Michael McAdams, President, Advanced Biofuels Association, Washington, 

DC .......................................................................................................................... 8 

Matthew Hughes, Director of Business Development—ETC) Environmental 

Tank & Container), JWF Industries, Johnstown, PA ....................................... 10 

APPENDIX 

Prepared Statements: 

Ralph Tommaso, CEO, Head of Business Development. Greenworks Holdings, Bethlehem, PA ..................................................................................... 25 

Jerry Taylor, President & CEO, MFA Oil Company, Columbia, MO .......... 30 

Michael McAdams, President, Advanced Biofuels Association, Washington, DC ..................................................................................................... 36 

Matthew Hughes, Director of Business Development—ETC) Environmental Tank & Container), JWF Industries, Johnstown, PA ................... 38 

Questions for the Record: 

None 

Answers for the Record: 

None 

Additional Materials for the Record: 

BioDiesel Written Testimony of Anne Steckel ............................................... 41 


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SMALL BUSINESS INNOVATORS: ON THE 

CUTTING EDGE OF ENERGY SOLUTIONS 

THURSDAY, APRIL 26, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10 a.m., in room 2360, 

Rayburn House Office Building. Hon. Scott Tipton (chairman of the 

subcommittee) presiding. 

Present: Representatives Tipton, Bartlett, King, Critz. 

Chairman TIPTON. The hearing will now come to order. And I 

would like to thank each of our witnesses for being with us here 

today to take time from their busy schedules. And we do look forward to your testimony. 

Today we are going to examine innovative ways that small businesses contribute to energy production. Specifically, we are going 

to look at advanced biofuels such as cellulosic ethanol and new innovative technology companies that have developed to produce energy from previously used materials. We are also going to look at 

the role of research and development in spurring innovative technology. 

Today’s topic is one of significant importance for our nation. As 

we all know, energy is critical to our economy. Economic prosperity 

in the United States is closely tied to the availability of reliable, 

affordable energy supplies. This is not a new issue. The way we 

discuss it, however, has changed. In recent years we have seen energy prices skyrocket. You only need to look at the sign at your 

local service station when you fill your gas tank or read the bottom-line on your home heating and fuel bills to see how much more 

we are paying for energy now compared to just 10 years ago. This 

puts tremendous strain on American families and small businesses. 

In order for us to take steps forward, we must reduce our dependence on foreign sources of energy and develop new homegrown energy solutions right here in our home communities. 

That is why this hearing on innovative energy solutions is so important. I do not believe that the search for new energy sources 

should be a zero sum game when we foster one industry to the detriment of another. Our economy is driven by energy and we must 

take a balanced approach to exploring ways to meet our energy 

needs. That means looking for ways to increase production of everything we need, including oil, natural gas, and coal, in addition 

to renewable energy like advanced biofuels, wind, and solar energy. 


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As has been shown in almost all industries in the United States, 

small businesses can be the catalyst that drives innovation to new 

and better technology. New technologies harness energy that we 

did not have the capabilities to be able to utilize before. There are 

many exciting developments in the biofuel wind, solar, and hydroelectric industries. 

Colorado is a national wind energy leader and has lots of small 

businesses who are finding innovative ways to be able to be successful. One of these Colorado small businesses employs 24 people 

and is leading the way in direct, dried generator technology for 

wind turbines, which I understand will be more reliable, more efficient, lower rate, and lower cost than competing technologies and 

will reduce the cost of energy. Having said that, businesses in the 

wind industry are not immune from the same challenges faced by 

other businesses, and one of the biggest complaints that I continue 

to hear from wind energy developers is the need for certainty from 

the federal government. Vestas, which is a major employer in my 

district, has warned that it could lay off as many as 1,600 Colorado 

workers and wind project developers have essentially put their 

plans on hold until the federal government acts. 

Wind is critical to the ‘‘all of the above’’ energy approach. And 

I believe Congress must provide certainty necessary so that this industry can continue to have economic growth and protect American 

jobs. I will continue to support these jobs and push for this timely 

solution. The advancement of new technologies moves us towards 

an ‘‘all of the above’’ energy policy and greater energy independence that grows our economy and is able to create American jobs. 

Just last week I introduced H.R. 4381, Planning for American 

Energy Act of 2012. This legislation represents a true ‘‘all of the 

above’’ energy plan that embraces all of America’s vast energy resources. The bill strengthens our energy security by requiring the 

Secretary of the Interior to be able to develop a strategic plan every 

four years on how to responsibly develop our federal onshore energy resources, including oil, natural gas, coal, wind, solar, hydropower, geothermal, oil, shale, biomass, and other minerals so that 

we can meet the needs of the United States’ energy needs. We live 

in a country with tremendous natural resources, and firmly believe 

that we can responsibly develop alternative sources of fuel along 

with our more traditional sources, and I believe that this legislation will help foster that development. 

Again, I would like to thank each of you for taking the time to 

be able to be with us here today. I look forward to hearing your 

testimony and I now yield to Ranking Member Critz for his opening statement. 

Mr. CRITZ. Thank you, Mr. Chairman. And thank you, gentlemen, for being here. 

In the last year, energy prices have been predictably unpredictable. Since October, oil prices skyrocketed from $80 per barrel to 

$110 resulting in higher costs at the pump. With a gallon of gas 

near $4, alternative energy sources have again become critical and 

in many regards it is small businesses that are leading the way. 

Whether it is developing renewable biofuels or creating innovative 

technologies, entrepreneurs are essential to our nation’s energy future. 


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Across the country, small businesses are working to develop new 

energy sources and rethink existing fossil fuels. As a result, these 

firms have become agents of change in the energy sector, generating new ideas and the jobs that come with them. Perhaps another area our small firms are as critical as they are is in the biodiesel sector. An overwhelming number of its production facilities 

are true small businesses, as approximately 90 percent meet the 

definition of a small producer. 

Since 2005, the 3.4 billion gallons of biodiesel produced in the 

U.S. have displaced an equivalent amount of imported diesel fuel. 

Not only does this reduce our dependence on foreign energy sources 

and decrease greenhouse gas emissions, but it also supports nearly 

40,000 jobs. 

Another area where small firms are playing a key role is in the 

development of innovative technologies related to traditional energy sources. This is clearly evident with regard to natural gas exploration. Shale gas, in particular, has created new jobs for local 

drilling service companies and regional heavy equipment companies. As they grow, so do the local economies they are located in, 

creating demand for restaurants, hotels, and other service companies. 

Today, I am looking forward to hearing how we can support 

these businesses. To ensure that progress continues on all of these 

fronts, we have to make certain that policies are in place to support 

small firms and their research, whether they are family farms harvesting the raw materials for biodiesel or their manufacturing partners. It also means continued investment in research that will ensure traditional fossil fuels can be used in an environmentally efficient and friendly manner. Determining the proper mix of these 

policies is often challenging, and that is why today’s hearing is so 

timely. 

I am also looking forward to understanding what barriers these 

innovative companies are facing, as well as determining if government should play a role or simply get out of the way. In some energy sectors government action has been useful, while in others it 

may have been less so. 

In this regard, small business challenges are our challenges, and 

ensuring that they continue to play a pivotal role in the energy industry is vital. The reality is that the more domestic options we 

have for energy, the better for everyone. With all of these alternatives on the table, the U.S. is better positioned to reduce its dependence on foreign oil over the long term. 

Today it could be biodiesel and ethanol, natural gas, and soon 

clean coal. No one has a crystal ball and our energy needs will 

surely grow, so it is essential that we diversify our energy supply 

as much as possible. 

Entrepreneurs remain at the forefront of these changes, not only 

as consumers but as researchers, developers, and innovators. This 

role is natural for them, and I look forward to hearing about the 

inroads they are making in this critical area during today’s hearing. 

Again, I thank you for being here. Thank you, Mr. Chairman. I 

yield back. 


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Chairman TIPTON. Well, thank you. And I would like to take a 

moment to be able to explain our timing lights for you. You will 

each receive five minutes to be able to deliver your testimony and 

the light will start out as green. When you have one minute remaining the light will turn yellow, and finally it will turn red at 

the end of your five minutes and you will be escorted out if you exceed that. I am kidding. We will certainly let you wrap up your testimony. 

STATEMENTS OF RALPH TOMMASO, CEO, GREENWORKS 

HOLDINGS, LLC; JERRY TAYLOR, PRESIDENT AND CEO, MFA 

OIL COMPANY; MICHAEL MCADAMS, PRESIDENT, ADVANCED 

BIOFUELS ASSOCIATION; MATT HUGHES, BUSINESS DIRECTOR DEVELOPMENT, ENVIRONMENTAL TANK AND CONTAINER, JWF INDUSTRIES 

Chairman TIPTON. So I would like to start out introducing Mr. 

Ralph Tommaso. He is our first witness. He is CEO of Greenworks 

Holdings, LLC, in Windgap, Pennsylvania. After graduating from 

the New York University, Ralph began his career in the Chicago 

Mercantile Exchange and later as a restaurateur. When he saw 

what was to become of the waste that was generated at the restaurant, he researched and developed a better way to be able to 

utilize that waste and created Environmental Energy Recycling 

Corporation. EERC, a member company of Greenworks Holdings, 

LLC, gathers biological waste, fat, oils, and greases from the food 

industry and transforms it into clean burning biofuels to promote 

a healthier environment and to be able to promote America’s energy independence. Last year, EERC combined with a similar company in Lehigh Valley, Smarter Fuels, and created Greenworks, 

LLC. Thank you for being here, Mr. Tommaso, and if you would 

like to give your testimony. 

STATEMENT OF RALPH TOMMASO 

Mr. TOMMASO. Thank you. Good morning, Chairman Tipton, 

Ranking Member Critz, and other distinguished members of the 

Committee. Thank you for the privilege to address you guys today. 

My name is Ralph Tommaso and I am the CEO and co-founder 

of Greenworks Holdings. My partner, Dave Dunham and I are very 

proud of what we have built. A little over a year ago we had 30 

employees primarily in Pennsylvania, and today we have 153 employees in the Northeast and the Southeast. When Dave and I each 

began our companies in 2005, we set out to change the way fat, 

oils, and grease wastes were used in this country. We envisioned 

waste being diverted from the animal feed industry and into clean 

burning energy to fuel America’s economy. 

In 2004, I read a study produced by the University of Georgia 

which proved that cooking oils and animal fats were superior fuels 

to Number 4 and Number 6 oils when used in industrial heating 

applications. Moreover, the emissions were low with waste greases 

when compared to Number 2 fuel oil, especially with regards to sulfur and CO2 emissions. The study results motivated us to continue 

to refine our process, and by 2006 we were selling our recycled vegetable oil and biofuel based to two New York City skyscrapers. Our 


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biofuel products are approved by the U.S. Environmental Protection Agency under their renewable fuel standard. 

Our growth is dependent on feed stocks that we procure. The 

thought that the United States consumes over 18.5 million barrels 

of oil per day is daunting to an industry as new as ours. In 2010, 

we found an uncommon source. Millions of gallons of degraded fats 

and oils in solid form, or what we like to call the biofuel equivalent 

of the Canadian tar sands. Catfish Processing Facilities design and 

build football field-size retention ponds to collect and process their 

wastewater. This water generated when the plant is washed and 

sanitized daily catches all the small pieces of fats and solids that 

are left over in the filleting process. Over a period of years, this fat 

accumulates on the surface of the ponds. 

Upon a long, competitive battle with other biofuel and rendering 

companies we were awarded 100 percent of the bids for this accumulated fat or a total of 10 ponds with up to 60 million gallons of 

regenerating feed stock, kind of a gift that keeps on giving. And 

that was the easy part. And now we came to the intensive process 

of extracting the fats and oils and turning them into one of our usable finished fuels. 

What we did next reminds me of one of those final tables at the 

World Poker Tour where the guy goes all-in with a pair of sixes. 

Not only did we need to put together the logistics and the colossal 

excavating equipment necessary to harvest the ponds, but we built 

two plants, one in Alabama and one in Mississippi to process all 

that material locally. Each plant was designed to process 20 million 

gallons per year from material that was the consistency of dirt. 

Using heat, pressure, and mechanical separation—these were technologies that we adapted from our other plants, as well as some 

tricks that we learned from the petroleum—we were able to 

produce a biofuel that has superior performance characteristics to 

current industrial heating oils. Leveraging our plants and employees, we also recently began collecting used cooking oil from the 

area restaurants as well, signing up 250 new accounts in our first 

month and paying them for a waste product that they used to pay 

somebody to take away. 

By teaming up with the catfish industry, our efforts have revitalized two southern towns with double-digit unemployment. 

Greenworks has provided over $4 million to the construction trade 

during the last six months and hundreds of jobs have been saved 

in the catfish industry through our harvesting of the oil. We have 

brought hope to a depressed area that was starving for work and 

thirsty to get behind an industry that sustains itself over the long 

term. 

We deal with ever-changing regulations around our product and 

its applications which cause us concern not only for the success of 

our company but for the people that believe in us. In an effort to 

participate in the regulatory and legislative process, we have members of the Advanced Biofuel Association led by Mike McAdams to 

my right, and are represented directly by Connie Lawson. The 

RFS2 program was written with just transportation and home 

heating oil in mind. We recommend that it be expanded so that 

such biofuels like ours may be used in manufacturing and largescale heating as well. Manufacturing industries use petroleum 


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products and many facilities need to reduce their emissions given 

new EPA regulations. Biofuels represent a potentially cost effective 

way for the manufacturing industry to reduce harmful emissions, 

thus saving manufacturing jobs while simultaneously creating and 

preserving jobs in the biofuel industry. 

I thank you for this opportunity to share our ideas and innovative efforts at Greenworks Holdings. 

Chairman TIPTON. Thank you, Mr. Tommaso. 

Next up is Jerry Taylor, president and CEO of MFA Oil Company and co-founder of MFA Oil Biomass, which is headquartered 

in Columbia, Missouri. The goal of MFA Oil Biomass is to create 

a vertically integrated renewable energy supply chain by combining 

MFA Oil’s knowledge of the energy industry in markets with farming knowledge with its cooperative members. A native of Omaha, 

Nebraska, Jerry received a bachelor of science in marketing from 

the University of Missouri in 1969. After serving with the U.S. 

Army, he spent six years in the banking and brokerage business. 

He then returned to Missouri as the owner/manager of a chain of 

convenience stores. Jerry joined MFA Oil in 1982 and served in 

several capacities before being named president in 2003. 

Welcome to the Subcommittee, Mr. Taylor. And I look forward to 

your testimony. 

STATEMENT OF JERRY TAYLOR 

Mr. TAYLOR. Thank you, Chairman Tipton and Ranking Member 

Critz and the members of the Subcommittee. Thank you for the invitation to testify today. 

I am Jerry Taylor, president and CEO of MFA Oil Company, a 

farmer-owned energy cooperative in Missouri with 40,000 members. MFA Oil supplies fuels, lubricants, and propane to customers 

in seven Midwestern states. 

Our cooperative has a long history in leading renewable fuels innovation. Starting in the 1960s, MFA Oil produced gasohol. Most 

recently in the early 2000s, we ventured into the biodiesel production, and in 2008, we began writing the next chapter of our renewable energy story, Biomass. 

In 2011, we took a major step forward and partnered with 

Aloterra Energy to form MFA Oil Biomass, a separate small business with the mission of leading the cooperative into this new, renewable energy field. Critical to this, as with anything we do, was 

to gain farmer trust and support. To ease their concerns and gain 

commitment, we realized that we needed to become experts in each 

area of our own supply chain. We are utilizing our existing knowledge in farming, energy, and commodities to form a vertically integrated renewable energy supply chain. The vertically integrated 

system provides farmers an energy crop source, unique harvesting 

and planting equipment for the crop’s rhizomes, special harvesting 

services for the mature crop, processing technology and marketing 

services to get the best return for the farmers and the cooperative. 

A key to success in any business is flexibility to respond to 

changing markets, so for us a versatile feed stock was critical. 

Miscanthus giganteus meets that need, not just as a viable feed 

stock but one with incredible potential. Miscanthus is a perennial 

grass that is noninvasive, drought and pest resistant, and needs 


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less fertilizer than food crops. This translates into less runoff into 

the water system. The target farm is margin or underproductive 

land that is not used for row crop production. 

At 10 to 15 tons per acre, Miscanthus more than doubles its 

nearest competitor in tonnage. Each ton contains about a million 

and a half BTUs, which means at full maturity each project area 

can produce enough energy to power 65,000 homes or 1.6 million 

barrels of renewable liquid fuels each year. One hundred seventy 

five farm families have dedicated acres to this new energy crop, 

and we anticipate this number will grow to over 1,600 as our 

projects scale up to maturity at 50,000 acres per region. In liquid 

fuel language, this would create a 20-year reserve of 93 million barrels of liquid fuel. 

To avoid betting the farm on an unproven technology, we are focused on existing markets and technology, such as solid fuel pellets. We have developed a biomass furnace company and heating 

systems with 100 in operation today. Our future plans entail building biorefineries inside our biomass reserve areas that make multiple higher value products that each replace part of the barrel of 

oil. This allows a conservative approach instead of betting our future on the success of a specific conversion technology. Beyond the 

quickly developing liquid fuel and bio-based chemical markets, we 

are implementing a model using Miscanthus to assist small towns 

across the U.S. in complying with EPA, wastewater discharge 

measurements, as well as helping to reclaim mining lands. 

It is hard to articulate just how difficult it was and still is to educate farmers on a strange new plant called Miscanthus giganteus. 

This was not an attempt to plant a known crop in a new industry 

but an unknown crop in a nonexistent industry. Add to that a crop 

that at the time was too expensive to plant and it was being planted by hand. And we are asking farmers to spend capital without 

a return on investment as the crop matures. 

However, I believe our success thus far had a lot to do with the 

fact that we are a farmer-owned cooperative. As a cooperative, we 

are able to work hand-in-hand with producers, as valued trusted 

business partners, allowing farmers to boost their earnings from 

the marketplace and diversity their income streams. Our farmer 

owners see incredible opportunities as this endeavor takes off. They 

recognize the potential to offer rural communities permanent manufacturing jobs. A new cash crop for farmers, a local source for 

green heating, renewable liquid fuel sources, bio-based chemicals, 

green building materials, water treatment systems, soil reclamation systems, and consumer packaging. 

Again, thank you for this opportunity to testify today and I will 

be glad to receive any questions. 

Chairman TIPTON. Thank you so much, Mr. Taylor. I appreciate 

that. 

Our next witness is Michael McAdams, president of Advanced 

Biofuels Association. Under his leadership, the ABFA is going to 

become an active partner with leaders in Washington as they work 

to transform our nation’s energy policy by creating long-term renewable solutions that will create jobs and strengthen our energy 

security. Mr. McAdams has testified before Congress and the executive agencies and participates In a number of advanced biofuel 


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forms across the country. He holds a bachelor’s degree from Virginia Polytechnic Institute and State University, and a J.D. from 

American University’s Washington College of Law. Thank you for 

being with us today, Mr. McAdams. I look forward to your testimony. 

STATEMENT OF MICHAEL MCADAMS 

Mr. MCADAMS. Thank you, Mr. Chairman. Chairman Tipton, 

Ranking Member Critz. Congratulations. 

Congressman Bartlett. I am honored to be with you this morning 

and proud to report to this Committee and to the Congress that 

America’s domestic advanced biofuels industry has moved from the 

beaker to the barrel, all in record time. And like most part of our 

nation’s economy small business and American ingenuity are proving to the engine driving our success. The Advanced Biofuels Association represents over 40 of our nation’s and world’s leading advanced biofuels and advanced feed stock producers. Our members 

range in size from large household names to small and mediumsized companies. 

Since our inception, the association has advocated for a level 

playing field. 

When it comes to public policies specifically calling for technology 

neutrality, feed stock neutrality, as well as parenting in the form 

of any government support. Washington should not be in the business of picking winners and losers. Many of our members specifically fit within the definitions of a small business found under the 

current law. In fact, I am delighted to be appearing with one of our 

members on the panel day. Mr. Ralph Tommaso of Greenworks 

Holdings, a company who is delivering renewable advanced gallons 

today. 

The association represents a wide range of technology platforms 

from Synthetic biology and hydroprocessing to gasification to name 

just a few. 

Our members are working on developing a wide range of feed 

stocks. Some are planning Giant Miscanthus, sugar beets, and creating cellulosic sugars from woods, grasses, and municipal solid 

waste while others are planning new forms of trees and growing 

algae to produce agricultural grade oils for refining. The challenge 

for all companies large and small is to build and deploy first of 

kind, no innovative technologies, which produce these new advanced biofuels. In order to be successful, these small business 

owners must manage the technology scale-up risk, the volatility of 

commodity prices, and the certainty of regulatory policy. 

Before we discuss policy, let me start today by sharing some of 

the biggest successes we have occurred over the last year. The Air 

Force has flown the F–16 Thunderbirds on a mixture of advanced 

biofuels. And the Navy has tested the advanced biofuels and ships 

and vehicles. The commercial sector has flown the first cross-country flight on a blend of renewable jet fuel. 

We have one member, Dynamic Fuels, producing a million gallons of renewable net and renewable diesel a week and have five 

members who have gone public. In addition, Colorado member companies, are preparing to deploy their innovative technologies this 

year. Gevo will produce an isobutanol, a drop-in fungible fuel. They 


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will commission its 18 million gallon plant in June in Luverne, 

Minnesota, while Sundrop Fuels is on target to break ground to 

build a 50 million gallon cellulosic gasoline plant in Louisiana. As 

you can see from our membership base, there are significant opportunities to create jobs in rural American, both from the growing of 

the feed stocks to the deployment of the plants. 

To your point on innovation, we are seeing new fuels that can be 

blended in new ways with existing products; the opportunity to 

make new bioproducts and the possibility to grow new feed stocks 

which are more sustainable and more productive than the existing 

options. These hold the ability to create an entire new set of opportunities for farmers and land owners. 

Mr. Chairman, turning to policy, as you recognized in calling this 

hearing, there are significant numbers of small business people involved in this sector. Several of our members welcome the opportunity to participate in various small business administrative programs which we call for matching funds and leveraging. One member company has been able to leverage the pre-engineering cost 

with a matching contribution in assisting in the building of a plant 

in Florida. That is a $150 million plant that is going up. 

Unfortunately, other companies have been unable to utilize the 

Small Business Administration’s funding options as they have utilized large partners who are supported by venture capital organizations of scale. I have been told this prevents them from being able 

to access most of the funds available. 

Earlier I spoke about regulatory certainty. Nothing more important to small business owners and innovators than a consistent 

long-term policy frame from which to build a business. For our sector, the single most important component is the renewable fuel 

standard passed overwhelmingly in 2007 by a bipartisan Congress 

and signed into law by President Bush. Although it is not perfect, 

it is fundamentally important that the Congress continue to send 

a strong bipartisan signal of support if we wish to continue the remarkable progress and growth of an advanced biofuels industry. 

As for tax policy, it has been a mixed bag at best. Many of the 

existing provisions have already expired and some are crafted in 

such a manner that they are not helpful to small business or create 

an uneven playing field across the entire sector. As you know, all 

of these are complicated by the current record of renewable and 

have been on a piecemeal basis for a number of years. This simply 

does not provide certainty on which to build a business. 

I want to thank you for allowing me to be here, Mr. Chairman, 

and I look forward to answering any of your questions. 

Chairman TIPTON. I would now like to yield to Mr. Critz to be 

able to introduce our final witness. 

Mr. CRITZ. Thank you, Mr. Chairman. 

Matthew Hughes is the director of business development for Environmental Tank and Container, a subsidiary of JWF Industries 

in Johnstown. It manufactures frac tanks, mud tanks, flowback 

tanks, and impoundments for oil and gas companies. It now employs 450. Is that right? 

Mr. HUGHES. No. Eighty. 

Mr. CRITZ. Eighty. Okay. Eighty individuals and occupies a total 

of 800,000 square feet of manufacturing space. It is part of JWF 


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Industries, which has humble roots as a two-man operation run out 

of a garage and now has successfully grown into a company with 

six locations, five of which are located in Johnstown. Oh, I see. It 

is 450 employees across all companies; I gotcha. 

Mr. HUGHES. Correct. 

Mr. CRITZ. Recently, this success was noted by PA Business Central, which recognized it as a top 100 organization. Matt, welcome, 

and I look forward to your testimony. 

STATEMENT OF MATT HUGHES 

Mr. HUGHES. Chairman Tipton, Ranking Member Critz, and 

members of the Subcommittee, thank you for the opportunity to 

testify today. My name is Matthew Hughes. I am the director of 

business development with Environmental Tank and Container. 

Going forward I will refer to our company as ETC. 

I would like to start off by saying that our CEO, William 

Polacek, would like to apologize for not being able to attend today’s 

hearing. 

Located in Johnstown, Pennsylvania, ETC occupies a 160,000 

square foot building currently shared with our subcontractor, 

United Industrial. This property was originally a World War II era 

munitions factory, later transformed into a railcar factory, and now 

houses our operations. Officially opening just over 11 months ago, 

ETC, like many small business start-ups in the oil and gas industry, owes its existence to shale energy. Each time you come across 

a success story like ETC’s which was born in the shale boom, you 

will find many other companies like United Industrial that are getting a second chance at life. United, once tied exclusively to the 

commercial fabrication market, fell victim to the economic downturn of 2008 and was forced into bankruptcy. Shale energy blew 

life back into the almost shuttered plant which had three workers 

in May of 2011, and was up to 80 by year’s end. Employing everything from engineers and welders, project managers, and sales people. 

Shale energy is a rapidly changing industrial with plenty of room 

for growth. Back in 2006, our president and CEO, William Polacek, 

investigated business opportunities within the Marcella shale. It 

felt like there may be opportunities down the road but did not see 

a good fit at the time. Like many good entrepreneurs, he believed 

his hunch and kept his eye on the young industry waiting for his 

opportunity. It came in 2010 when some of the larger exploration 

and production companies announced that they were converting 

their Marcellus operations into a closed-loop system. The new protocol changed the method used for containing drilling waste and 

also outlined best practices for onsite water storage. Both initiatives created the demand for portable steel storage containers, and 

because the ETC was a nimble, small business, it was able to 

quickly respond to those needs. ETC answered the needs when the 

market asked for reliable, durable, frac tanks that were leak-free 

and capable of withstanding the rough terrain in cold winters in 

Pennsylvania. ETC answered the need when drilling contractors 

had to store all on-site drilling fluids in tanks instead of earth and 

land pits. ETC answered the need when drillers, already slowed 

down by a multitude of time-consuming permitting procedures, 


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asked for a portable above-ground water impoundments that did 

not require soil disturbance permits. And we are proud to say that 

we are answering the call again, this time in the design and development of onsite treatment equipment that reduces the amount of 

frac fluid that is hauled offsite for disposal. 

While ETC can be credited for some innovation in our industry, 

we must also give credit to our customers, many of which are independent owner-operators of oil field service companies, equipment 

rental firms, and engineering groups. They were first to see the 

need and come to us with their ideas. By virtue of opening our 

doors, we have created a means for many others to spur innovation 

and growth. Mr. Polacek always reminds us that we will be building things a year from now that people have not invented yet. 

Recently, most businesses that served the natural gas portion of 

the shale industry are facing a common obstacle. The price of natural gas is now too low relative to what it cost to extract it. When 

you visit a natural gas well pad, attend an industry trade show, 

or speak with customers about future orders, the same concern 

arises. How will this industry continue to grow and prosper if the 

price of natural gas stays as low as it is? And what is frustrating 

to us as small businesses is that we cannot fix that issue with our 

hard work, innovation, and resolve. The fix lies in creating and 

mandating demand. 

In closing, I ask the members of the Subcommittee to be mindful 

of a the young start-up companies, the once bankrupt businesses 

that are rising from the ashes, and the multitude of small businesses that rely on shale energy for their livelihoods, and to consider looking into what you can do as policymakers to help increase 

the demand for natural gas as a cleaner fuel option for our energy 

sector and a cleaner fuel option for our transportation sector. 

Chairman Tipton, Ranking Member Critz, and members of the 

Subcommittee, thank you for working together in a bipartisan 

manner to help small businesses succeed, help fuel job growth, and 

to help our nation become more energy independent. Thank you. 

Chairman TIPTON. Thank you, Mr. Hughes. I appreciate you all 

staying within the time. We would not really have dragged you out. 

So, but we do appreciate that. 

Mr. Tommaso, we will move on to questions now and I would like 

to start with you. A common theme across all industries that we 

hear about in this Committee is regulatory certainty and general 

confusion put forth in the form of government regulation. Can you 

talk a little bit about the regulatory process in your industry as 

well as the process on how some of these new fuels are categorized 

by the EPA? 

Mr. TOMMASO. Sure. The first thing, when we started in 2005, 

that was first when the biodiesel subsidy came out where it was 

a 50 percent per gallon production credit for biodiesel made from 

second use oils and a dollar for the virgin oils. And in any new industry, as it builds traction you are building the customer on a oneoff basis and the way Mr. Taylor talked about building the trust 

with the farmers, we build the trust with our customers that this 

fuel is going to be here when we make the conversions to switch 

over from petroleum to biofuels. The uncertainty and the changes 

in the policy affect us because as we produce this fuel based on cerVerDate Mar 15 2010 04:42 Nov 16, 2012 Jkt 076472 PO 00000 Frm 00015 Fmt 6633 Sfmt 6602 E:\HR\OC\A472.XXX A472

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tain circumstances and certain economics, when they go away we 

have to go away or either subsidize—basically fund those subsidies 

until or if they do come back. And that ends up causing a lot of 

disruption to us. Supply chains, supply flows, and we have a large 

logistics arm. Five million gallons worth of storage, 60 tank cars 

that drive around the country on a daily basis. So when all of a 

sudden those subsidies go away and those customers are looking 

for product to be priced competitive and the economics change overnight the way they have done since 2006 on and off, it does affect 

us very drastically. 

Chairman TIPTON. How does the EPA categorize the fuels you 

produce? 

Mr. TOMMASO. Currently, we are classified as an advanced 

biofuel, a D5 RIN over the—since the program’s inception in July 

of 2010. The rules changed twice and again reclassifying us twice 

and changing the value of our RIN. And again, this has also caused 

a big disruption to our market. 

Chairman TIPTON. So changing oils, when the EPA does that—— 

Mr. TOMMASO. No good. 

Chairman TIPTON [continuing]. That is hurting your ability to be 

able to grow the business? 

Mr. TOMMASO. Absolutely. 

Chairman TIPTON. You need some certainty in there. 

I am curious as to the role that the federal government’s research and development efforts have on your business. What is 

that community like in terms of the R&D and does it work in partnership with small businesses? 

Mr. TOMMASO. We have had very little experience with state-run 

R&D or government-run R&D programs. We do a lot of all the 

R&D ourselves. We did employ Penn State to do a private study 

for us, as well as we have chemical engineers that we employ that 

used to work in the petroleum industry that came on with a lot of 

industry secrets that helped us to make a better fuel. 

Chairman TIPTON. How about you, Mr. Taylor? Are you using 

state and federal government R&D? 

Mr. TAYLOR. Yes, we are. 

Chairman TIPTON. Okay. Mr. McAdams. 

Mr. MCADAMS. A lot of my members are. 

Chairman TIPTON. Okay, great. 

Mr. Tommaso, I am intrigued a little bit by the work that you 

are doing with these catfish hatcheries, to be able to skim off the 

fat that is there. Where does an idea like that come from? 

Mr. TOMMASO. Oh, that was interesting. We had some sales guy 

that came out from Louisiana that had access to one pond and he 

was very undercapitalized, did not know the technology, and did 

not have a market for the product but had an inside track and saw 

it and went to the plant owner and told them about its possibility 

but did not have the means to extract it. And then when interest 

started to develop over this one pond, we were the only ones that 

had the ability to harvest it, process it, and actually find a market 

for it. So that is when we sent a team down there to develop that 

market and bid on all those other 12 ponds. And we did some experimenting. At first we pulled loads off the pond in a very crude 

manner, trucked them back to Pennsylvania, processed them down 


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in Pennsylvania, and then sold them back to Texas into the Houston field market. And then from there we developed the whole business development of going down there and going after all the 12 

plants. 

Chairman TIPTON. Great example of American 

entrepreneurialism. You did not have a bureaucrat out of Washington, D.C. come down and say we have a great idea. This actually came out from the working area. 

Mr. TOMMASO. Yes. There was a mechanical contracting company 

that went out of business a couple of days before we got down there 

and there were 60 guys ready to start manning excavating equipment, trucks, welding. It was an excellent opportunity. 

Chairman TIPTON. Terrific. 

Mr. Taylor, can you explain a little bit about the differences of 

creating biofuels for transportation and biofuels for electrical generation? 

Mr. TAYLOR. As far as biomass is concerned? 

Chairman TIPTON. Right. 

Mr. TAYLOR. The difference, at least the approach that we have 

taken, is to produce the biomass is sort of the first thing we had 

to do. And we’re actually creating a number of paths with relationships both towards cellulosic, which would take the crop in some 

form or fashion into their process or densifying it into pellets, but 

more of almost a biomass, kind of a bio refinery. Some of it could 

be building products and other things but those channels we see 

as—we have a multiple of channels that we are putting in play to 

be able to maximize the value of the crop, which is the number one 

thing as a farmer-owned cooperative we are trying to do. Does that 

answer your question? 

Chairman TIPTON. Yes, I think that gets to it. And just kind of 

going back to the catfish, because we have heard of being able to 

take French fry oil and be able to operate a vehicle, are you doing 

some experimenting with that? You mentioned using it for heating. 

Mr. TOMMASO. I originally came out of the restaurant business 

in New York City where there is a large heating oil—indusrial 

heating oil number 4 and number 6 market. My partner, Dave 

Dunham, started in the trucking industry. He actually started collecting used cooking oil and converting his father’s tractor trailers 

to run on vegetable oil to lower the gas. In the long term, running 

raw vegetable oils in transportation is not a viable option. We developed the market to run large industrial applications, power 

plants, universities, as well as district heating plants to run on our 

fuels. 

Mr. MCADAMS. Mr. Chairman, if I could come back and kind of 

tie that question with your first question. I am going to get in the 

weeds just a second because I think it makes the point that both 

of these gentlemen are trying to make. So, for instance, if he tries 

to use a hardwood to make pellets or to make biopower, he has no 

problem. But if we go into the transportation fuels industry and we 

want to build a half a billion dollar cellulosic plant and make a 

drop-in renewable jet fuel from wood, the definitions under the 

RFS are incredibly prescriptive. If Ralph wants to take his catfish 

oil, he has to have a determination from the EPA that specifically 

says it is a waste. 


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Now, this is a problem. This is a term of art, waste. What is a 

waste? Well, waste is something that has no value. So as I try to 

certify fuels on behalf of my 43 different members, every single 

feed stock has to go under the RFS and be determined whether it 

is certified under the law, which means many of his feed stocks 

have had to be singly submitted for their greenhouse gas reductions, the only law in America that regulates greenhouses gases for 

each of the four categories. And if the EPA does not determine that 

his molecule is a pure hydrocarbon molecule, then he is not a D$ 

RIN; he is a D5 RIN. And the difference is a buck. Now, that is 

a big difference. 

So the devil is in the details here. And in defense of the EPA, 

the statute was prescriptive in some way when we originally wrote 

it in 2007, and that is because candidly the incumbent industry 

had been around longer and people understood it. I am not criticizing the incumbent industry, but as we move forward, one of the 

challenges for our association and for all the guys sitting at this 

table is to have a level playing field so all of these different molecules can come in and lower the cost for the American driving consumer, whether it is diesel, jet, or gasoline. And we still have impediments in the regulatory structure that we are working on 

today. And I am hoping that we can get some of these rules 

through R&D, such as the heating oil rule that would expand the 

market for Ralph, or the commingling rule that would allow the 

Colorado butanol company to deploy his fuel which he cannot now. 

Those are the kinds of things I think that you are trying to drive 

it. 

Chairman TIPTON. I appreciate those comments. 

Mr. Taylor, in regards to some of the federal research and development efforts, are they being focused in the right areas? 

Mr. TAYLOR. The areas that we have participated in are very specific. The state of Missouri through a small business rural, small 

business grants was a study, for example, done on which energy 

crop would be the best for Missouri. We were the lead on that 

study. Miscanthus was the chosen crop and we have had two studies since that point. So we have utilized three different studies 

sponsored by the State of Missouri Small Business Administration. 

Chairman TIPTON. Good. Mr. McAdams, there seems to be pretty 

rapid breakthrough in technology in a variety of different fields 

that are out there. You were just speaking to it a bit but could you 

estimate where most of these innovations have come from? I think 

you spoke to it just a second ago. 

Mr. MCADAMS. The private sector. 

Chairman TIPTON. It is all the private sector? 

Mr. MCADAMS. It is private sector. Now, I will say I was the keynote speaker at NREL this year. Very talented group where the 

government has a good facility and a consortium they built at the 

Department of Energy to try to help lower the cost of testing different enzymatic reactions. And that has been helpful. I think 

there are 38 members of the consortium. But a lot of this is privately financed. And a lot of these guys have been at it for five 

years. What I am really proud to say is when the private sector focuses on innovation and they are trying to make a dollar at it, they 

do it real quickly and they do it economically efficient. And so that 


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is why it is so important that a framework like the RFS or a tax 

code if you choose to have one is neutral and lets a level playing 

field so we can raise the capital to actually fund the targeted R&D 

that each of these technologies need. 

Chairman TIPTON. Going back to your previous comments, would 

you be recommending that Congress play a more vigorous role in 

terms of oversight of the EPA in terms of having common sense 

regulations that are coming into play? 

Mr. MCADAMS. I think it is always a good conversation that the 

executive agencies have with the U.S. Congress. Over my tenure in 

Washington I found that the dialogue actually helps focus the mind 

and that it brings an opportunity to really ask questions. Sometimes in the legislative process we do not have the time to get into 

some of the weeds and what we have done constitutionally is we 

have delegated a lot of these specific decisions to the agencies. And 

I think it is really important that Congress have a very vigorous 

and active role in making sure that the statutes, their content and 

their intent is met. And I like that dialogue personally. So I would 

encourage you to do that and I think there are a lot of opportunities to expedite the deployment of these technologies through that 

dialogue. 

Chairman TIPTON. The renewable fuel standard has been set at 

36 billion gallons of biofuels to be inserted into the transportation 

fuel pool by 2022. Is that a realistic goal? 

Mr. MCADAMS. I think that it was a very optimistic stretch target. And so what we see is the flexibility that was built into the 

statute. I commend the Congress for the flexibility they built in 

with the off ramps. What you have in terms of specific application 

now of the statute is you saw, for instance, the cellulosic pool number was lowered over 90 percent in 2011. The pool was also lowered 

over 90 percent in 2012, and they are getting ready to make a recommendation in 2013. This has been an incredibly difficult economic market and the economic market did not match up with the 

stretch targets that were put in the statute. So I now have many 

members that are planning to bring to market. We are really beginning to see some of the cellulosic sector come in and try to meet 

these mandates. What EPA has allowed to do is to gift some of 

those gallons into the advanced pool. A big question on whether 

they can gift it into the biomass-based diesel pool. I agree with the 

National Biodiesel Board that moving forward there is a great opportunity to raise the billion gallon ceiling on the biomass-based 

diesel pool. We could probably do upwards of two billion gallons between now and 2022. And if that is backing out foreign oil, I think 

everybody from the executive branch and the legislative branch 

ought to look at that and what opportunities you have to kind of 

move some of these buckets around. 

Chairman TIPTON. Mr. Tommaso, Mr. Taylor, do you have any 

comments on that? 

Mr. TAYLOR. I do, if I may, Mr. Chairman. I think there is another piece to it as far as some of the environment we have been 

in over the last few years. We have been refining, oil refining since 

1939. We know the commodity pretty well. This economic vacuum 

over the last three or four years was also accompanied by crude oil 

reaching a high in July 2008 at $147 and hitting somewhere in the 


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low 30s by the summer of 2009, gutted most, if not any desire to 

be in renewable and risk your own money. This belief now, one of 

the reasons—we are an 83–year-old organization—our belief and 

the reason we have entered it is because we believe that generally 

global BTU prices had gone to another level in general and consequently, lowered the bar, so to speak, for renewables; hence, we 

have entered it. It is, I think, paramount to let programs work. 

Now the environment is correct. If we come out of the sort of economic vacuum we have been in, global prices are up and likely to 

stay. It gives now the right environment if time is lent. And that 

includes the BCAP programs for biomass, which we implemented 

very successfully. It is a very good program. We believe our model 

is almost the poster child for success in that. It helped a farmer 

get over the hump while we made the investment in environmental 

assessments, equipment, processes, plants, all of those types of 

things. All of those things are now in play because of those two 

things—a recovering economy and a higher fuel of global BTU 

products. Let the programs work. 

Chairman TIPTON. Mr. Hughes, I do not want to leave you out. 

Can you describe the new technology that is in frac tanks and 

elaborate on how these banks can mitigate some of the fears and 

risks associated with fracking? 

Mr. HUGHES. Yes, sir. I know for a fact that our facility, when 

we manufacture our tanks we do not differentiate on quality. Some 

of the same gentlemen that are welding on military vehicles are 

also welding on these tanks. So we practice the utmost integrity 

when we are working on them. 

I think one of the bigger parts that needs to be understood is the 

oil and gas operators have implemented pretty much their own best 

practices, self implementing them, and have gotten away from a lot 

of the in-ground impoundments and have moved over to hard side 

portable tanks, which makes it a lot easier to manage the fluid 

through all courses of the operation. 

Chairman TIPTON. You may well be aware in the West we have 

plenty of natural gas. We definitely need the jobs. As you know, we 

need to do it in a responsible way to be able to achieve that. With 

pricing that we have, we have got a real challenge. Do you see a 

pathway to be able to make the production of natural gas literally 

more viable in this country? 

Mr. HUGHES. Well, as you know, in our section as Mr. Critz 

knows, the majority of the Marcellus sits over a dry gas and we are 

moving more west towards where there are fluids that come up 

with the actual dry gas. Most of these operators need probably 

about 500 barrels of fluids that come up with their gas production 

per day in order to offset the very low prices that are in place right 

now for the dry gas. But as far as a path, I believe that we need 

to really focus on base loading our energy sector to be able to use 

that gas to generate electricity. And I know that is what a lot of 

the larger oil and gas companies, Exxon for one, is forecasting out 

to 2030, that the majority of increase for natural gas will come 

from electric generation. 

Chairman TIPTON. You know, you may not have seen it, it just 

came out in headlines this morning where an EPA official apologizes for they call it crucify oil companies. Is that going to give 


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some pause? Because it does need to be all of the above. We need 

all of these energy sources. Are we seeing an overreach again by 

the EPA? 

Mr. HUGHES. I would say yes, sir. 

Chairman TIPTON. Great. I concur. I would now like to yield to 

Mr. Critz for his questions. 

Mr. CRITZ. Thank you, Mr. Chairman. Since the Chairman ended 

with you, Matt, we will start with you, and it is a pretty straightforward question I have. The innovation taking place in the gas industry has had a profound impact on Pennsylvania. Can you talk 

about how Bill Polacek and ETC are able to seize on these opportunities? What is it that you saw and how is it that you got into this 

business so quickly? I am thrilled to hear the Chairman talk about 

the gas that is in Colorado, because they need your tanks, too, but 

that is another conversation. 

Mr. HUGHES. We will be visiting them soon. 

Mr. CRITZ. But if you would, just walk through the process of 

how you ended up here. 

Mr. HUGHES. Sure. We are a contract metal fabricator. Mr. 

Polacek has been in business since 1987. He started in a two-car 

garage and now employs close to 450 people. And our main facility, 

JWF Industries occupies just a little under a million square feet. 

Mr. Polacek is very entrepreneurial and did, as I mentioned earlier, 

keep his eye on this business. And when it first started there was 

not very much opportunity for metal fabrication. They dug a lot of 

pits. They lined them. They stored their water in the pits. They 

stored their drill cuttings in the pits. They stored their drill mud 

in the pits. Those have been highly—well, I do not want to say 

highly regulated but they have self-policed themselves, realized 

what they had to do in order to make things good and in order to 

proceed forward with the drilling operations and minimize the 

amount of environmental impact. When they imposed those, that is 

when we got involved and that is when Bill actually was able to 

seize the opportunity. 

We are what we consider a mid-range producer. Most of the companies that we compete against are down in the Texas-Louisiana 

area and they produce in very high volumes. What we saw in the 

market was an opportunity to produce a very good quality product 

at a medium volume and then answer the needs to the innovations 

that are required in order to keep growing this business. So we had 

several companies come to us and ask us if we could customize a 

particular tank, tweak it, or actually help them design it to be 

more functional for what they do. 

And as I mentioned, we are actually getting involved with one 

particular company. It was a great story. A very young engineer 

walked into our office and had a good idea regarding water clarification system in order to clean the residual frac fluid onsite which 

eliminates the amount of transportation, eliminates the amount of 

trucking, and also it eliminates the amount of water that is needed 

to begin the subsequential fracking processes. And it is that kind 

of innovation that we were open to. So that is basically what we 

are very well known for in the industry is our ability to adapt the 

innovation and be able to be flexible enough to work with some of 

the smaller companies. 


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Mr. CRITZ. You made me think of a company you need to talk 

to, but that is for another conversation. I remember talking with 

Bill, too, about the quality. You mentioned that your welders are 

doing military applications but they are also doing these tanks and 

that has also been part of your success; these tanks are top notch 

and there is no failure in any of these weld joints. Is that correct? 

Mr. HUGHES. That is correct, sir. 

Mr. CRITZ. Okay. Aquatech. Remember Aquatech? 

Mr. Tommaso, I am absolutely astounded, baffled, interested in 

this catfish pond. I guess it’s reclamation; I do not even know what 

you would call it. You say it is a football field size pond that has— 

I was looking through my paper because I was not sure if I heard 

it correctly—is the material that you want 3 to 10 feet deep or are 

the ponds 3 to 10 feet deep? 

Mr. TOMMASO. No, the ponds are 100 feet wide by 300 feet long 

by 30 feet deep. 

Mr. CRITZ. Thirty feet deep. Okay. 

Mr. TOMMASO. And as they are sanitizing and washing down the 

plants every day they are using about three million gallons of 

water of which about two percent is fats and solids. Every day. So 

all that goes into this pond. The solids flow to the bottom, the 

water stays in the middle, and the fats rise to the surface. And 

over the course of approximately three years you have a cap on 

these ponds of 3 to 10 feet deep. 

Mr. CRITZ. That is amazing. I am just trying to envision a football field with 10 feet worth of fat. 

Mr. TOMMASO. When that salesman came to me with a jar of this 

fat and the odor was horrendous and it was a sight to see, and he 

was showing us pictures, it did not do it justice until you flew down 

there and were standing in front of this pond. 

Mr. CRITZ. That is amazing. Now, have—you never been on that 

show ‘‘Dirtiest Jobs’’? 

Mr. TOMMASO. No. 

Mr. CRITZ. I was listening to your testimony, and it really threw 

me because of the massive size of this thing. But the one question 

I do have for you is whether converting used fryer oil to biofuels 

is an old-fashioned process? Someone has to collect the oil from restaurants. How challenging is it to manage the collection process 

and keep your costs at a level that you are actually making money 

on this? 

Mr. TOMMASO. We had the benefit of starting in other industries, 

so we came without any bad habits and we started with technology. 

And we currently have over 40 trucks that go out every day to restaurants. We collect from about 17,000 restaurants in 12 states. 

And we use UPS logistics. We use satellite technology. We use tablets in the trucks. We have live data knowing how much is in each 

truck, what the volume is. And we use this same technology that 

companies like UPS and Federal Express do to get this piece of 

paper across the country overnight for $12. 

Mr. CRITZ. Okay. All right. 

Mr. TOMMASO. But is a massive undertaking. 

Mr. CRITZ. Well, restaurants are dotted all over the place, so it 

must be massive just managing it. 

Mr. TOMMASO. That is why these ponds are easy. 


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Mr. CRITZ. Yes, I guess once you have your delivery route or your 

pickup route it is just a route. It is just a truck route. Okay. 

Mr. Taylor, you work with nearly 200 family farms and you anticipate scaling up to 1,500. Now, agriculture is still the number 

one industry in Pennsylvania, and there are a lot of small family 

farms. What are some of the benefits and challenges you face in 

working with so many of these family-owned farms? 

Mr. TAYLOR. The MFA Biomass, which we own 60 percent and 

Aloterra owns 40 percent. Aloterra really brought the Miscanthus 

expertise, feed stock, and a number of other expertise. What we 

bring to the table is logistics. We are the seventh largest propane 

retailer in the country and we’ve started several companies. 

Mr. CRITZ. And you do a sort of exchange; is that correct? You 

deliver propane and pick up the stuff that you need? Or is that not 

part of it? 

Mr. TAYLOR. No. What we have done, just to give you an example, a real life example, southwest Missouri, it is big chicken poultry country. They have a group of growers. The average grower 

might have six houses, might use 20,000 gallons of propane in a 

year to heat those houses at $1.60 per gallon approximately. Now 

that grower grows 15 acres on his farm of Miscanthus with a number of growers. We built a processing plant in the center to pick 

that up and pelletize it with our delivery trucks. We take it back 

and put it into the feed bin. We have a system for feeding it into 

the furnaces which we build now in southern Missouri. We build 

those furnaces. We have over 100 locations now. And his cost, we 

essentially can guarantee him a cost, the equivalent cost of about 

80 to 90 cents a gallon of propane. About half of what he is paying 

now. And obviously a very small delta with energy input because 

all you are doing is harvesting it once a year. So it is truly the economic effect. And that farm, that means approximately close to 

$20,000. And that is significant. The bottom-line effect turns out to 

be about $400 an acre net profit improvement if they use 

Miscanthus. 

Mr. CRITZ. Well, you said you are on the logistics side? So my 

next question was about the Department of Agriculture’s biomass 

crop assistance program, and I think it has been important to the 

growth of your industry. Can you discuss where it would be if this 

funding source had not been available? 

Mr. TAYLOR. Yes, I can. I call it prospectus. I think in the sovereign world we call it the ruling or whatever it is when BCAP 

came out. In the opening paragraph, when I read this the opening 

paragraph said we have the chicken and the egg problem. Farmers 

will not grow it because they do not even know the equipment to 

handle it; plants will not locate in the places because nobody is 

growing it. It was a chicken and an egg problem. What we witnessed first-hand with BCAP was an absolute resolution of that 

chicken and an egg problem. When we received BCAP funding for 

approximately 13,000 acres, our first 13,000 acres, and we are now 

just finishing up that planting process, there were a number of 

things we had to do. Most people that are in the rhizome business 

or the Miscanthus business want rhizomes as high as possible. We 

want costs as low as possible. So what we had to do is spend a year 

multiplying the rhizomes or a couple or three years. Multiplying 


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the rhizomes to get the costs down per acre from $1,400. In our 

BCAP program we are at $750. This year on the 2012 budget we 

hope to be at $550. We hope in another year we will have driven 

that down to $300 an acre to establish that. That would have been 

impossible without BCAP funding the bridge, getting the bridge for 

the farmer. Because the money did not come to us. The money goes 

to the farmer to plant the crop. It takes three years for it to mature, massive tonnage. So you have rhizome costs coming down. 

On the other hand you have got to have time to develop the logistics. Two years ago all the rhizomes were planted with people on 

the backs of the wagons dropping rhizomes down chutes. MFAO 

Biomass has partnered with an English company. We are now 

making the planters in Kansas. Twenty-four of them are now off 

the line which we have purchased and are in fields planting plants. 

Four-wheel planter, five miles an hour, that is 40 acres a day per 

planter. That is doable and we think we can now grow when they 

grow so we are up to—we are going to be pushing 80. Keep in mind 

the industry just two years ago was at five acres a day with four 

people on a planter. So this is so new trying to work out those systems to get the efficiency—not just efficiencies—to ward out any 

system that will work is happening because BCAP was available. 

The important thing with BCAP is it does not take just one year. 

The funding is critical to bridge the people that have already started on that path to get them to year two or three as it was originally designed, in three years to be able to let these things play 

out. Our game plan is absolutely to be on our own the fourth year. 

We needed three years of help from BCAP. We went from $280 million or whatever it was down to $17 million this year. And who 

knows. It is critical, we think, to bridge that gap for the farmer because it is an unknown entity at this point. We now have broken 

that chicken and egg problem because of BCAP. 

Mr. CRITZ. Mr. McAdams, did you want to weigh in? 

Mr. MCADAMS. I just want to say it is one of the top priorities 

of the association. We represent Freedom, which is a giant 

Miscanthus grower out of Georgia. We are hoping to see them 

plant—— 

Mr. CRITZ. We represent Freedom, too. 

Mr. MCADAMS. That you do. They are looking at trying to do 

30,000 acres. They are currently right now working with some 

folks. They actually have helped Aloterra in terms of their planting. Congressman Kingston was pivotal last year in putting some 

level of funding, 17 million, into the process for the BCAP program. 

I am not real optimistic in the House Farm Bill process but we are 

hoping this morning over in the Senate Farm Bill that they will restore a higher level of funding. It is key for us to have certified feed 

stocks, which these would be available to make the gallons. And it 

is a chicken and egg problem. I think he laid it out beautifully. 

Mr. CRITZ. You have in your testimony, and I want to circle back 

around to something called Miscanthus giganteus, which is I think 

what we are talking about. Back in my part of the world there are 

people talking about something called switchgrass as a feed stock. 

What are you describing, and is switchgrass something that is in 

a temperate zone? I saw where you can grow this Miscanthus 


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giganteus in a wide range of areas. So can you explain to me exactly what that is? 

Mr. MCADAMS. Sure. Well, let me say that the administration 

put together a biomass council to look at where you have various 

feed stocks available to support an advanced biofuels industry. And 

the conclusion of that was you could grow different feed stocks in 

different areas and it was not a one size fits all model. And so one 

of the great things about giant Miscanthus is you can grow this in 

subgrow crop land. So kind of loamy soils that you would not grow 

corn or cotton or anything else on. So you can take unproductive 

land and you can turn that into a real high-yield crop on a per acre 

basis. If you look in Oklahoma, switchgrass was a natural field 

grass in Oklahoma. If you look in Colorado, you have got a lot of 

beetle kill. So if we could get the definitions right in terms of what 

woods we could use, my, what a tremendous opportunity you would 

have to deploy cellulosic plants in Colorado. 

So I think this is one of the areas as we look moving forward, 

this is one of the areas we could probably do a little better fine tuning, particularly regulatorily as we move forward. 

Mr. TAYLOR. We use a specific clone called the Illinois clone, 

which is a sterile plant. It has no seeds. It is noninvasive. Because 

we are farmers, we understand our rows or any number of other 

plants that have been invasive, we felt that was a critical thing, 

to be noninvasive. So it is a sterile, nonseeded plant. We had to 

prove that in our EA under NEPA when we did that. One of the 

reasons that crop is number one is its tonnage. One of the reasons 

it was not done is because you are planting with rhizomes. And 

now that we have solved a pretty good share of the problems with 

the handling of the rhizomes, propagating, digging them up and 

doing it, that cost is what has come down significantly. 

Mr. CRITZ. Good. Mr. McAdams, you testified or in your testimony you discussed the benefits but also the challenges with using 

SBA investment programs. How important is equity investment 

and venture capital to the future of renewable fuels? 

Mr. MCADAMS. Well, obviously, it is very important. Let me just 

start there. But let me say it depends on where the company is in 

its cycle. So if I am a new company coming into the market for the 

first time, probably the VC world is pretty important. And again, 

if you look at some of the more successful, more known companies 

in this space, they came out of the VC industry. Some of the smaller ones that are not at that stage, I think the Small Business Administration could really help them specifically in the SBIR programs, some of the research and develop monies. I was really delighted to get the example for this hearing today about the pre-engineering cost. This is a guy with less than 10 employees that has 

a very novel technology that they are trying to deploy in Florida, 

and that helped him leverage what is about to be a $150 million 

facility. The loan was $3.5 million. It came out of the state program 

from the 2010 funding out of SBA. 

So I think it is a combination of things. And it really depends 

on what is the size of the company. Obviously, companies like DuPont have a different way to finance things than Ralph Tommaso. 

So I see them all in all sizes and again, it is not one size fits all. 


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Mr. CRITZ. Well, you mentioned something earlier about D4 and 

D5, and you are talking a different language to me. So at some 

point I want you to come in and talk to my staff about what that 

is so that I have a better understanding of it. 

Mr. MCADAMS. I would be delighted to do that. 

Mr. CRITZ. And just one closing comment. It is great to hear all 

of this because our subcommittee is Ag and Energy, so it is really 

interesting to hear everything that is going on. I was at a Steel 

Caucus hearing in Pittsburgh last week and we were talking about 

the price of natural gas. It is $2.20, $2.30 right now, but the natural gas industry says that once the LNG plants are up along the 

border and we start exporting, then it is probably going to hit 

about $5 to $6 a cubic foot. And that is the sweet spot for them. 

It is the dry gas, and you are right, we are sitting on a lot of dry 

gas, but are getting to this wet gas area now. So that is the figure 

that I am keeping in my head, because certainly we want manufacturing and everything going on. 

So with that, I want to mention that the Chairman came to 

Pittsburgh with me last week, and he is taking credit for my big 

victory on Tuesday. As long as he continues to be nice, I will give 

him all the credit he wants. 

Chairman TIPTON. Thank you, Mr. Critz. I would now like to recognize Mr. King. 

Mr. KING. Thank you, Mr. Chairman. And I thank the witnesses 

for your testimony. There have been a lot of things illuminated 

here in this discussion and testimony and the Q&A afterwards. 

I think there is a place to go that we ought to examine from a 

public policy standpoint and it caught my interest when I see Mr. 

McAdams’s testimony on the F–16s. I will tell it as I know it and 

then ask you to respond accordingly. I happen to be in a position 

where some of this information comes into my ears and it does not 

get published and I will tell it this way. The Pentagon decided that 

they wanted to have by my narrative, an F18 that they would fly 

at mach 1 and do so on biofuels. And so in order to create the 

biofuels necessary for the bio jet fuel, a 50/50 blend, biodiesel and 

regular jet fuel, they did not want to apparently take a few thousand gallons from a regular biodiesel producer but instead went to 

Pennsylvania to raise some algae in the dark that came from the 

bottom of the ocean where the sun does not penetrate in tanks with 

an individual there that had the skills and ability to do that. And 

then they needed to feed it something, so they found some condemned sugar from sugarcane in Louisiana, took it to Pennsylvania, fed it to the algae, looked around to see how we extrude the 

biodiesel out of this algae. Well, let us send it to Iowa. And we extrude the biodiesel. And they did that, shipped it out to Edwards 

Air Force Base, put it in an F–16 and flew it at mach 1. 

Now, it seems to me there would be a lot of gyrations to go 

through and it appears that they wanted to avoid the criticism of 

food versus fuel. As I listened to the testimony here and the Q&A, 

I have not heard that come up. I am concerned that that could be 

a significant barrier within the mind of the administration. If the 

Pentagon itself could go to such great lengths to accomplish something that would have been done much easier in a far less period 

of time. 


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Mr. McAdams, do you have any experience with that? Do you 

have a comment on that? 

Mr. MCADAMS. I am very aware of the certification process in the 

military. I have been working very closely as an association head 

on behalf of my members with the military, the Air Force, and the 

Navy. We are incredibly supportive of the MOU that was released 

last year that calls for funding, the $510 million program between 

the Department of Energy, the U.S. Department of Agriculture, 

and the Department of Defense. 

Mr. KING. Are they wasting money trying to avoid the food 

versus fuel argument? 

Mr. MCADAMS. I would say our association supports a technology 

and feed stock neutral approach. I would be delighted to share with 

you the letter that we gave to Senator McCain on this subject 

about three weeks ago in reference to his questions to our association on how that matter went down. 

Mr. KING. Is it your understanding that it went down any differently than I described it? 

Mr. MCADAMS. I am not sure I know that example. They recently 

did a 450,000 gallon purchase. That also involved an algae company. 

Mr. KING. You used the express feed stock neutral. 

Mr. MCADAMS. Well, when I used the expression feed stock neutral, what I am talking about is if you scope a specific solicitation 

and you require something specifically, that is not feed stock neutral. And so what you have a propensity to do is you try to pick 

a feed stock winner. Right? And so our association has been feed 

stock neutral since the beginning. What you are talking about was 

a specific REMAT to use a percentage of algae in a specifically 

made jet fuel. 

And let me just correct you on one thing with all due respect, sir. 

You cannot use biodiesel to make jet. Biodiesel has oxygen in it. 

It is 11 percent oxygen. So when you make jet fuel you are to use 

a hydrocarbon only. Jet fuel is the most narrowly prescriptive fuel 

to come out of the oil industry or coming out of the renewable industry. So it is a very tightly confined spec. 

Mr. KING. Is it possible to process the biodiesel so that you can 

use it? 

Mr. MCADAMS. You can take—— 

Mr. KING. And is it more cost effective than the method I described? 

Mr. MCADAMS. You can take the feed stock, right, and you could 

take Ralphs catfish oil or you could take white greases or brown 

greases. And depending on the technology you use, which is generally hydro processing an isomerisation. You can make a jet fuel 

out of renewable. You can also take oils out of algae and process 

it into a jet fuel. The cost of the range of feed stocks varies. They 

are not all the same cost. I think that is the point. 

Mr. KING. I think it would be substantially higher than the 

method that I described. 

Mr. MCADAMS. I think that is probably correct. 

Mr. KING. Thank you. There is more to be drilled into here. 

But I wanted to turn to Mr. Tommaso before I ran out of time 

because you intrigued me with 10 feet of catfish fat on a 100 by 


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300 foot area. I do not know, 1,000, 1,100 cubic yards of fat. That 

is a lot of fat. And I did not think of catfish as being fat. And this 

is intriguing to me that we have 30 percent of our young people 

who are obese, even to the point where the former secretary of defense said it was a national security issue. And if we can process 

and we are all innovators here so if we can process—this is a bit 

of a facetious question, you can see it coming—but if we can process catfish fat into energy, biodiesel, for example, has anybody 

given any thought of how you convert all that extra human weight 

that the First Lady is trying to reduce into something that could 

be useful energy? 

Mr. TOMMASO. I see a movie on that. No, there is a lot of fat. 

The catfish industry is shrinking, number one, due to the changing 

tastes of the consumers trying to reduce their fat as well as cheaper exports coming out of Southeast Asia. So every catfish plant is 

trying to grab a bigger piece of the shrinking pie. So that industry 

is in dire straits. 

Mr. KING. It is true that we had a surgeon in California that was 

collecting human fat and converting it into biodiesel and burning 

it in his car and someone thought there was an ethical problem 

with that. I did not. I thought it was a pretty good utilization of 

human energy. 

So my clock has run out. I thank all the witnesses and I yield 

back the rest of my time, Mr. Chairman. 

Chairman TIPTON. Thank you, Mr. King. 

Again, I would like to thank all of our witnesses for their testimony and input today. Very interesting when we are hearing comments of starting in a garage. We just held a jobs fair down in Alamos, Colorado. A young man was describing some work that he is 

doing on a fuel cell and interesting just watching and observing. 

Around the room there was some skepticism, and others that were 

very intrigued, could not help but bring to mind a guy named Steve 

Jobs who did pretty well with Apple starting out in his garage. And 

I think these are American energy solutions that we need to be 

pursuing. 

So energy production is vital for the nation’s economic and national security, and in most industries in the U.S., small businesses 

are the catalyst that drives innovation in new and better technology, new technology that harnesses energy that we did not have 

the capabilities to be able to use before. There are many exciting 

developments in biofuel—wind, solar, and hydroelectric industries, 

and new technology development not only moves us toward that 

‘‘all of the above’’ energy policy and greater energy independence 

but also grows our economy and jobs. 

This has been a very interesting hearing. I think the catfish fat 

probably took the cake. And we do look forward to following these 

advancements in the coming months and working with my colleagues to be able to expand energy production in the United 

States. It is that important for us. 

I ask unanimous consent that members have five legislative days 

to be able to submit statements and supporting materials for the 

record. Without any objection, so ordered. And the hearing is now 

adjourned. Thank you again. 

[Whereupon, at 11:19 a.m., the Subcommittee was adjourned.] 


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