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80–033 PDF 2013

S. HRG. 110–1213 

PENDING CORPORATE AVERAGE FUEL ECONOMY 

(CAFE) LEGISLATION 

HEARING 

BEFORE THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

MAY 3, 2007 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

DANIEL K. INOUYE, Hawaii, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

THOMAS R. CARPER, Delaware 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TED STEVENS, Alaska, Vice Chairman 

JOHN MCCAIN, Arizona 

TRENT LOTT, Mississippi 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

GORDON H. SMITH, Oregon 

JOHN ENSIGN, Nevada 

JOHN E. SUNUNU, New Hampshire 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

JOHN THUNE, South Dakota 

MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel 

LILA HARPER HELMS, Democratic Deputy Staff Director and Policy Director 

CHRISTINE D. KURTH, Republican Staff Director and General Counsel 

KENNETH R. NAHIGIAN, Republican Deputy Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on May 3, 2007 ................................................................................. 1 

Statement of Senator Boxer .................................................................................... 9 

Prepared statement .......................................................................................... 9 

Statement of Senator Cantwell .............................................................................. 7 

Prepared statement .......................................................................................... 7 

Statement of Senator Carper .................................................................................. 5 

Statement of Senator Dorgan ................................................................................. 8 

Statement of Senator Inouye .................................................................................. 1 

Statement of Senator Kerry .................................................................................... 2 

Statement of Senator Klobuchar ............................................................................ 3 

Statement of Senator Lautenberg .......................................................................... 4 

Statement of Senator Lott ...................................................................................... 9 

Statement of Senator McCaskill ............................................................................. 4 

Prepared statement .......................................................................................... 4 

Statement of Senator Nelson .................................................................................. 9 

Statement of Senator Stevens ................................................................................ 1 

WITNESSES

Blair, Admiral Dennis C., USN (Ret.), former Commander-in-Chief, U.S. Pacific Command, USN; Member, Energy Security Leadership Council; Omar 

Bradley Chair of Strategic Leadership, Army War College and Dickinson 

College ................................................................................................................... 34 

Prepared statement .......................................................................................... 36 

Feinstein, Hon. Dianne, U.S. Senator from California ......................................... 16 

Friedman, David J., Research Director and Senior Engineer, Clean Vehicles 

Program, Union of Concerned Scientists ........................................................... 29 

Prepared statement .......................................................................................... 31 

Levin, Hon. Carl, U.S. Senator from Michigan ..................................................... 10 

Prepared statement .......................................................................................... 13 

McCurdy, Dave, President and CEO, Alliance of Automobile Manufacturers ... 54 

Prepared statement .......................................................................................... 56 

McGinn, Vice Admiral Dennis, USN, (Ret.), Senior Vice President and General Manager, Energy, Transportation and Environment Division, Battelle 

Memorial Institute ............................................................................................... 43 

Prepared statement .......................................................................................... 45 

Reuther, Alan, Legislative Director, International Union, United Automobile, 

Aerospace & Agricultural Implement Workers of America (UAW) .................. 21 

Prepared statement .......................................................................................... 23 

Stabenow, Hon. Debbie, U.S. Senator from Michigan .......................................... 18 

Stanton, Michael J., President and CEO, Association of International Automobile Manufacturers, Inc. ................................................................................. 39 

Prepared statement .......................................................................................... 41 

APPENDIX

Pryor, Hon. Mark, U.S. Senator from Arkansas, prepared statement ................ 83 

(1) 

PENDING CORPORATE AVERAGE FUEL 

ECONOMY (CAFE) LEGISLATION 

THURSDAY, MAY 3, 2007 

U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Committee met, pursuant to notice, at 3:02 p.m. in room 

SR–253, Russell Senate Office Building, Hon. Daniel K. Inouye, 

Chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. DANIEL K. INOUYE, 

U.S. SENATOR FROM HAWAII 

The CHAIRMAN. Today’s witnesses have been invited to comment 

on S. 357, the Ten-in-Ten Fuel Economy Act, a bill to improve the 

Corporate Average Fuel Economy Program that was introduced 

earlier this session by Senators Feinstein, Snowe, and Inouye, as 

well as five other members of the Committee. A number of other 

Senators on the Committee have introduced or cosponsored legislation to improve CAFE standards, including the Vice Chairman, 

Senator Stevens. I’ve asked the witnesses to be prepared to discuss 

all the bills pending before the Committee. 

Increasing CAFE standards is both a national security and ecological imperative. The issue is not simply that the United States 

is dependent on foreign oil imports, but that it imports a substantial portion of these imports from areas that are politically unstable 

and could become hostile to America overnight. It is in our national 

security interest that Congress takes practical steps now to reduce 

our dependence on foreign oil. 

In addition, car exhaust is a major contributor to global warming. By increasing fuel efficiency, we can decrease the amount of 

carbon dioxide released in the atmosphere, and slow the harm to 

the planet. 

I believe that everyone here shares the dual desire of improving 

our environment and strengthening our national security through 

decreasing our dependence on oil, and I look forward to hearing 

from our expert panel about the best way to achieve these goals. 

May I call upon my Vice Chairman? 

STATEMENT OF HON. TED STEVENS, 

U.S. SENATOR FROM ALASKA 

Senator STEVENS. Thank you, Mr. Chairman, for calling this 

hearing today. I think it’s important, and look forward to hearing 

our colleagues, so I’ll be very short. 

2 

The issue of fuel economy of our cars and light trucks is significant as our country faces an increasing energy crisis. And I think 

since September 11, the need for us to reduce our dependence on 

foreign oil increases. I’m not going to talk about ANWR today, so 

you can forget about that—— 

[Laughter.] 

Senator STEVENS.—for a while, that is. 

[Laughter.] 

Senator STEVENS. As the Chairman said, I introduced legislation 

in January to address conservation, and, with it, a reduction in 

greenhouse gas emissions. As the impacts of climate change are 

more evident in Alaska than anywhere in the country, this bill 

would provide authority to the Department of Transportation to reform the passenger car fleet fuel economy program and set an aggressive target for the passenger car fleet by 2017. 

Since then, I have worked with the Chairman and his staff to try 

to develop an approach that would not only advance our national 

security interest in reducing dependence on foreign oil sources, but 

also an approach that will avoid unintended consequences that 

would adversely impact the domestic auto industry and consumer 

choice. It’s my hope that I will be able to join the Chairman in introducing his bill. 

I still am worried about how to deal with light trucks. These are 

extremely important to the West, and particularly important to my 

state. So, I want to continue to work with my good friend on that 

portion of the bill, but I do hope that today’s hearing will be helpful 

in advancing the Committee’s progress. 

Mr. Chairman, thank you very much. 

The CHAIRMAN. Well, thank you, sir. 

Senator Kerry? 

STATEMENT OF HON. JOHN F. KERRY, 

U.S. SENATOR FROM MASSACHUSETTS 

Senator KERRY. Mr. Chairman, thank you. Thanks for having 

this hearing. Thank our colleagues for coming and testifying. 

We’ve been at this for a long time on this Committee and in the 

Congress. I think, since 1985, at the 27 mile per gallon limit. We 

really haven’t made any progress. In fact, we’ve gone backward in 

some areas. 

I see we are going to hear from Alan Reuther, and I welcome him 

here. And I’ve talked to a lot of folks in the auto industry over 

these last years, and all of us want a strong domestic auto industry. All of us want cars made in America, and we want Americans 

to buy American cars. And we want our workers to be producing 

them, as much as possible. So, we’re sensitive to that need as we 

think about this. 

But there’s a convergence of two major issues here, and we need 

to figure out what the best approach is going to be. One is obviously oil dependency and energy dependency itself—independence. 

And the other is global climate change and emissions. And one of 

the questions we need to examine here today is which is the right 

standard or is there a mix of a standard, because part of the—I 

mean, there are many experts who are convinced that what we do 

at the—in the tailpipe, and—that the mileage is not, in fact, going 

3 

to liberate America with respect to fuel, but, on the other hand, it’s 

the CO2 emissions that are perhaps the larger concern, and whether that might not be more of the focus in the context of our overall 

approach. 

So, I think there are a lot of issues on the table. I’m glad we’re 

going to have this hearing. I think it’s a very important one. 

I do note, as I will in the question period, that, you know, Detroit, at one point, was producing a terrific electric car. And it 

stopped. I’ve driven in that car. It’s a superb car. And I think the 

question has always been open, why it stopped. 

The other day, I visited a car here in Washington, just outside 

the Russell Building, which is—it happens to a Prius, unfortunately—but it had a battery conversion, which is available in the 

market today, a retro-conversion, and it gets 150 miles to the gallon. The average commute of Americans is 40 miles. And batteries 

have the capacity today to take people those 40 miles. So, there’s 

a serious question here about why these kinds of technologies and 

opportunities aren’t being grabbed more rapidly, and why we aren’t 

producing those. And I look forward to exploring those today. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Klobuchar? 

STATEMENT OF HON. AMY KLOBUCHAR, 

U.S. SENATOR FROM MINNESOTA 

Senator KLOBUCHAR. Thank you, Mr. Chairman, for holding this 

hearing. And thank you, to my colleagues, for being here. 

I come from Minnesota, where, I have to tell you, in the last 

year, there has just been more and more focus on trying to make 

our country more energy independent. And I think some of it comes 

from people who live in rural areas, who are trying to fill up their 

tanks with gas, and find out it’s so expensive, they can only fill up 

half a tank, or it’s kids worrying about penguins drowning, or it’s 

people putting their fish-houses out and realizing that, you know, 

they’re having to put it out a month later than they ever used to 

do. 

And so, it’s really—the climate change issue has gone from just 

a—something that scientists are talking about and writing about in 

reports, to real people wanting real changes. And it’s about climate 

change, but it’s also about the cost of oil. We’re spending over 

$200,000 a minute on foreign oil in this country. And it’s also about 

our national security. 

And, I think, for the first time, the people in this country are seeing it themselves, and I think they’re way ahead of where we are 

in Washington, in terms of getting laws passed. And, like Senator 

Kerry, I’m very concerned that we’ve been going backward. The efficiency of the American car and truck is at its lowest level in 20 

years. And that’s why I’m very glad that we’re holding this hearing. I see this as potential jobs for our rural areas, if we can move 

more to biodiesel and ethanol, as well as better for our climate and 

better for our national security. 

The CHAIRMAN. Senator McCaskill? 

4 

STATEMENT OF HON. CLAIRE MCCASKILL, 

U.S. SENATOR FROM MISSOURI 

Senator MCCASKILL. Mr. Chairman, I would—with consent, I 

would like to submit a statement for the record. 

Senator MCCASKILL. I would say that I think the challenge we 

have is trying to respond to two issues. One is global warming, and 

the other is our dependence on foreign oil. And I think sometimes 

when we try to mix the two, and—we are not as disciplined as we 

should be about making sure that everyone understands what 

we’re doing, what we’re trying to get at, whether we’re trying to get 

at global warming or whether we’re trying to get at dependence on 

foreign oil. And, in both issues, I think we have to be doing things 

legislatively that most effectively do both. And so, I think it’s important we stay focused on that as we look at the legislation that’s 

pending. 

I also think it’s very important that we make sure that we move 

forward on getting more fuel efficiency at the same time we don’t 

penalize American manufacturers. And so, the devil is in the details and how we get to those places, and I look forward to hopefully finding the right way that accomplishes all of the goals I’ve 

talked about. 

Thank you, Mr. Chairman. 

[The prepared statement of Senator McCaskill follows:] 

PREPARED STATEMENT OF HON. CLAIRE MCCASKILL, U.S. SENATOR FROM MISSOURI

Thank you Mr. Chairman, 

This is a very difficult decision I have to make. On the one hand I believe that 

this Committee and this Congress have an obligation to do everything necessary to 

help curb our dependence on foreign oil not only for the purpose of our national security, but also to address global climate change. On the other hand, we also have 

an obligation to the hundreds of thousands of workers who manufacture automobiles 

and automobile parts in the U.S., thousands of those workers are located in my 

home state of Missouri. We must do everything necessary to protect not only these 

workers, but perhaps even more importantly, the 550,000 retirees and their families. Candidly, they are potential victims that could be devastated by the lack of 

foresight by American car manufacturers. And these manufacturers must be forced 

to face the future responsibly. 

Additionally, we must not lose sight on the fact that this is only one small portion 

of a larger portfolio of problems related to global climate change and energy independence. We must make sure that we do not continue to put the onus on one industry. This is a challenge that should be borne by many. 

In the end, I think this bill is a good start. But there is still a lot of work to be 

done, much of which lies outside the confines of this Committee’s jurisdiction. 

Therefore, I cannot support this bill in its present form. I do, however, look forward 

to working with the Committee and other Senators to craft comprehensive legislation that will move us closer to our goals of energy independence, start to slow global climate change, and protect the thousands of Americans jobs that are at stake. 

The CHAIRMAN. Senator Lautenberg? 

STATEMENT OF HON. FRANK R. LAUTENBERG, 

U.S. SENATOR FROM NEW JERSEY 

Senator LAUTENBERG. Thanks, Mr. Chairman. 

Holding this hearing is really important and a timely thing, and 

I thank you for doing it. But I want to look at the unvarnished 

truth about where we are. 

America’s current fuel economy standards are insufficient and 

are hurting our natural world. Our standards contribute to global 

5 

warming by letting too much greenhouse gas into the air. And 

these gases are already harming our planet. 

The average global temperature in 2006 was 2.2 degrees warmer 

than the average temperature during the 20th century. And it’s not 

an anomaly, this is a recurring fact. The last seven 5-year periods 

were the warmest 5-year periods on record. And we can trace some 

of these directly to the tailpipes of our cars and trucks, because 

that’s where one-third of America’s greenhouse gases come from. 

Well, if we want to reduce global warming, then we’ve got to 

begin to act now to cut the emissions coming from our vehicles. 

And I’m pleased that there seems to be consensus in this Committee that we should act to increase our country’s fuel economy. 

We lag behind the rest of the world in the fuel economy of our 

cars. And I want to just have a chart shown here for a moment. 

The one that says that we’ve been at the same standard since— 

somebody help him, please—since 2002. We were at the lowest 

level then, and we continue to be at a lower level far more than 

we were before. And as that chart shows, Japan is leading the 

world at fuel economy, at more than 40 miles a gallon. Now look 

at the United States. We are way behind. Our passenger cars have 

been regulated at 27 and a half miles per gallon since 1990, and 

our light trucks are just at 21.6 miles a gallon. We can, and we 

must, do better. 

Time to improve our fuel economy and tackle global climate 

change. And I believe that we have the ability, with our manufacturers, to rise to the challenge. And I sure hope that, working with 

this Committee and the Senate on this issue, we can do better. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Carper? 

STATEMENT OF HON. THOMAS R. CARPER, 

U.S. SENATOR FROM DELAWARE 

Senator CARPER. Thanks, Mr. Chairman. 

I want to thank our colleagues for coming by to—listening to our 

opening statements. 

[Laughter.] 

Senator CARPER. And we look forward to listening to yours in 

just a few minutes. 

Sitting right behind Senator Feinstein, in the—two rows back, is 

Dave McCurdy, with whom I once served in the House of Representatives—in fact, someone with whom a number of us once 

served—and he now is—heads up the Auto Alliance. He’s going to 

be one of our witnesses. 

I remember, I joined the House in the beginning of 1983. I think 

it was, maybe, 8 years after CAFE was first enacted, if my memory 

is correct. And at the—for most of the time that I was in the 

House, the time I was Governor, and the time I’ve been in the U.S. 

Senate, we’ve heard from our friends, and they really are friends, 

within the auto industry, the domestic auto industry—we’ve heard, 

‘‘Don’t do anything further on CAFE, because if you do, it will cost 

us market share. Don’t do anything more on CAFE, because if you 

do, we will lose money. Don’t do anything more on CAFE, because 

if you do, we’ll be forced to close plants. Don’t do anything more 

on CAFE, because if you do, we’re going to have to lay off employVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80033.TXT JACKIE
6 

ees.’’ And, really, for pretty much the last 25 or so years, we’ve not 

touched CAFE. And over the last 25 years, actually—especially the 

last 10 years, the last several years—we have seen the Big Three 

lose market share, we have seen the Big Three lose money, close 

plants, and lay off a lot of employees. And all the time, we’ve been 

trying to protect them from the evils of—or the problems, or the 

challenges posed by changing our approach to CAFE. There’s an 

irony there. And it’s one that’s not lost on us. And I would say to 

our friends from the auto industries, ‘‘If you come to us looking for 

us to do not much on CAFE, we listen to those arguments with a 

bit of skepticism. While we still love you, and we do; while we want 

you to be successful, and we still do; we need to do something.’’ 

I sat here next to Senator McCaskill, and I said, ‘‘Have I—did 

I miss your opening statement?’’ And she says, ‘‘I’m not going to 

give one.’’ And then she turned around and gave my opening statement. 

[Laughter.] 

Senator CARPER. And the points that—among the points that she 

made, there are three things that we—I think we need to accomplish. One is to reduce the amount of oil that we consume, especially that which is derived from foreign sources, and we have— 

we’re too heavily dependent on them. We all know that. Second, we 

need to improve our air quality, and we need to reduce the threat 

of global warming, climate change. And, third, we need to do the 

first two without further undermining the competitiveness of our 

auto industry. 

And I think we also need to remember that reducing fuel use in 

pollution involves addressing more than just auto efficiency, but 

also the availability of cleaner fuels and reducing fuel use by providing some alternatives to driving, get us out of our cars. 

Over the last 6 years or so, we’ve had similar contentious debate 

over regulating CO2 emissions from utilities. And I, along with 

some of my colleagues, including Senator Feinstein and others here 

at the dais, took the approach that we should set a goal, and then 

lay out steps for reaching that goal. And what we’ve done in some 

of our legislation is to say we want to reduce CO2 emissions from 

utilities by some 20–25 percent by a date certain, while increasing 

the cost of electricity by just a little. And I would suggest to my 

colleagues we may want to take a similar approach with respect to 

CAFE. 

And the last thing I would say is, I think we ought to set achievable steps that might require CAFE improvements slowly at first, 

ramp up over time, and there should be credits for early action, 

and maybe provide some off-ramps in case we, in Congress, set 

some goals that are not technologically feasible. And we should 

support attribute-based standards that are sensitive to varying 

fleet mixes between different manufacturers. 

Thank you. 

The CHAIRMAN. Thank you. 

Senator Cantwell? 

7 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON 

Senator CANTWELL. Thank you, Mr. Chairman. I’ll put a statement in for the record, that’s a longer statement. 

Thank you for having the hearing. 

I hope today we hear as much about flex-fuel cars as we hear 

about CAFE. I plan to offer some language on that if we go to a 

markup on legislation regarding fuel efficiency. 

Thank you. 

[The prepared statement of Senator Cantwell follows:] 

PREPARED STATEMENT OF MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

Introduction 

Thank you, Mr. Chairman. 

I very much appreciate you holding this hearing today on what I believe is an 

absolutely vital effort to tackle one of the preeminent problems facing our nation— 

our over reliance on oil. I look forward to hearing from today’s witnesses and markup of our bipartisan bill next Tuesday. 

Facing a Very Challenging Energy Situation 

I think every member on this Committee, and hopefully the entire Congress, realizes that we are facing a very challenging energy situation. We are just a major hurricane, or turmoil in a major oil producing nation, or, god forbid, some terrorist attack or accident that takes part of our energy infrastructure out of commission, from 

energy prices spikes that could stop our economy cold. And that’s in the short-term. 

Looking even a few years out—I am concerned if we stay on the path we are on, 

if we don’t challenge Americans to work together and harness our innovative spirit 

and ingenuity, we are headed for years of crippling high energy costs and a severe 

global warming crisis. 

That would mean continued distortions to our foreign policy objectives, oil companies continuing to reap exorbitant profits, and hundreds of billions of dollars more 

would be drained from the pocketbook of American families to the Middle East and 

other nations that don’t necessarily have our interests at heart. 

We Must Make Our Tranportation System More Productive 

I know that’s a future we all want to avoid. But the only way to really tackle the 

problem, the only way to start really improving our energy, environmental, and 

homeland security is to make our transportation system more efficient and enable 

it to run on alternatives to petroleum. 

I believe the key to this strategy is making our cars and light trucks go farther 

for each gallon of fuel we buy, and create new markets for alternatives to gasoline 

and diesel. 

An Announcement of Intention to Offer Flex Fuel Amendment 

As several witnesses noted in their prepared testimony, biofuels are a particularly 

promising clean-burning alternative fuel. But despite considerable government and 

public support to date, their growth has been hampered by the classic ‘‘chicken-andegg’’ dilemma. 

Farmers don’t want to start growing biofuel feedstocks if they aren’t sure there 

will be a market. Entrepreneurs don’t want to invest in biofuel processing facilities 

if there aren’t any feedstocks. Car manufacturers don’t want to build many flex fuel 

vehicles if there isn’t any biofuel being produced or places where people can get it. 

And gas stations don’t want to put in biofuel pumps if there aren’t any cars that 

can use them. 

Well as many of my fellow members of the Energy Committee can attest, yesterday we took an important step forward on one aspect of this dilemma by passing 

out a bill that significantly increases the Renewable Fuels Standard to 36 billion 

gallons by 2022. 

But that just deals with the supply part. On the demand side we need to put in 

requirements to ensure a minimum amount of biofuel infrastructure and then allow 

the market to grow from there. 

Today, almost all the cars on our roads can only use up to 10 percent ethanol, 

meaning all together they can only utilize around 15 billion gallons of ethanol. 

That’s why we need make sure there are enough flex fuel capable vehicles—that is 

8 

cars able to use either petroleum or biofuels or any mix in between to absorb billions 

of more gallons of biofuels required under any RFS increase and we need boost the 

number and distribution of pumps to deliver the fuels. 

That’s why I plan to introduce an amendment on Tuesday—based on legislation 

I introduced last Congress with 24 other cosponsors—that would require a certain 

percentage of vehicles sold in the U.S. be flex fuel capable, as well ensure the availability of a minimum number biofuel pumps. 

Need for Government Leadership 

History proves how effective Congressional action in this area can be. Following 

the first oil embargo in the 1970’s—by the same Middle Eastern countries who we 

are even more dependent on today—Congress legislated the CAFE program as one 

of the least controversial provisions of the Energy Policy and Conservation Act of 

1975. 

Thirty years ago, this body heard many of the same warnings we are hearing 

today. We heard that fuel economy standards will render this Nation’s auto manufacturers extinct, that it will cost thousands of jobs, that it will reduce vehicle safety. But the 94th Congress rejected those erroneous claims and passed a visionary 

law that was in the best interests of our Nation. 

The record affirms their foresight. In the decade following enactment, our Nation 

doubled the fuel economy of our Nation’s passenger vehicles. Those savings mean 

that today our Nation is importing nearly three million barrels per day less than 

we would have without the 1975 legislation. Put another way, American consumers 

are avoiding paying for an amount of oil equivalent to what we today import annually from the entire Persian Gulf. 

Conclusion 

Now once again Congress is in a position to take action and moves things forward. 

I am proud to be a cosponsor of Senator Feinstein’s Ten-in-Ten Fuel Economy Act 

along with the Chairman and several members of this Committee because I believe 

that it takes the right approach. 

Mr. Chairman, now is the time to provide the leadership on this issue that has 

been missing for the last 20 years. 

Simply put, improving the fuel economy of our Nation’s vehicles is the easiest and 

most cost-effective way to reduce our Nation’s vulnerability to oil supply shocks and 

dependence on unfriendly regimes. 

I look forward to hearing the witnesses and working with my Committee colleagues to endorse and act on the numerous security, environmental, and consumer 

benefits that increasing the efficiency of our Nation’s transportation system. 

Thank you. 

The CHAIRMAN. Thank you. 

Senator Dorgan? 

STATEMENT OF HON. BYRON L. DORGAN, 

U.S. SENATOR FROM NORTH DAKOTA 

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

I won’t prolong this at great length, but I—I mean, cars have 

changed—our vehicles have changed dramatically. We have heated 

seats and iPod docks and never-lost navigation and keyless entries, 

and what a wonderful thing, but one thing that hasn’t changed 

very much is efficiency. It just hasn’t. And 70 percent of the oil 

that we use—nearly 70 percent—goes for our transportation fleet. 

I was one of those who said, ‘‘Let’s have NHTSA figure this out.’’ 

The fact is, they haven’t, and they won’t. 

I have introduced, as you know, a piece of legislation called the 

SAFE Act, which would establish efficiency standards. I don’t think 

it’s an end-all or be-all to talk about efficiency of vehicles. There’s 

so much else—so many other things we need to do. But we can’t 

move forward any longer without dealing with this. We suck about 

85 million barrels of oil out of this planet every day, and we use 

a little over 20 million barrels of it here in this country. Seventy 

percent of that is for transportation. We can’t continue to look the 

9 

other way when it comes to the question of making these vehicles 

more efficient. 

One final point. We looked, recently, at a vehicle that we purchased 10 years ago, at the new version of that vehicle. Ten years 

later, the mileage on the window sticker was identical to what it 

was 10 years ago. And they say, ‘‘Well, the car’s more efficient, because it’s heavier.’’ Oh, yes? Well, it is still using the same amount 

of petroleum, isn’t it? I mean, there’s no efficiency in the mileage 

standards. 

We need to do something. And I appreciate very much your hearing, and I hope that the markup next week can be productive, as 

well. 

The CHAIRMAN. Senator Lott? 

STATEMENT OF HON. TRETT LOTT, 

U.S. SENATOR FROM MISSISSIPPI 

Senator LOTT. Mr. Chairman, I’m just looking forward to hearing 

our panel of experts. 

The CHAIRMAN. Thank you. 

Senator Nelson? 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Mr. Chairman, I can sum it up. Increased mileage equals increased national security through increased energy 

independence, and that means that we have a better chance of saving our planet. That’s my summary. 

I’m a cosponsor of Senator Feinstein. She goes to 35 miles per 

gallon. I think it ought to go to 40. 

The CHAIRMAN. Thank you. 

Senator Boxer? 

STATEMENT OF HON. BARBARA BOXER, 

U.S. SENATOR FROM CALIFORNIA 

Senator BOXER. Mr. Chairman, I’ll just put my statement in the 

record. I’m extremely supportive of Senator Feinstein’s bill. 

The CHAIRMAN. Without objection, so ordered. 

Senator BOXER. Thank you. 

[The prepared statement of Senator Boxer follows:] 

PREPARED STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM CALIFORNIA

Mr. Chairman, thank you for holding this important hearing today. 

The United States’ dependence on oil has grave environmental, geopolitical, and 

environmental consequences. 

Raising Corporate Average Fuel Economy (CAFE) standards is a meaningful way 

to help reduce our country’s unhealthy dependence on oil and thereby minimize its 

negative consequences. I have long been an advocate for boosting the CAFE standards that auto manufacturers must meet. 

There is available and proven technology to produce vehicles that are fuel-efficient 

while also being safe and featuring excellent performance. Increasing CAFE standards will ensure that more such vehicles are available on the market. 

One key benefit of increased use of fuel-efficient vehicles is environmental. With 

all the gasoline we consume in this country—over nine million barrels per day—we 

are polluting the air we breathe, and contributing to global warming. Transportation accounts for one-third of our annual emissions of carbon dioxide pollution. 

Another advantage of placing an increased number of fuel-efficient vehicles on the 

market, as would occur with higher CAFE standards, is a decreased dependence on 

10 

foreign countries for our country’s energy needs. Sixty percent of our oil consumption is from imports. This dependence on foreign oil is a national security liability. 

Finally, maximizing the use of fuel-efficient vehicles on America’s roads will 

translate to a reduced demand for gasoline, which should cause prices to ease. Gasoline prices this week are unusually high for this time of year: $2.97 per gallon nationwide, and $3.36 in California. Since Americans consume so much gasoline, high 

prices take a bite out of the budgets of both individuals and business owners, and 

are a drag on the economy that we cannot afford. 

When you add together the all the environmental, geopolitical, and economic costs 

of America’s oil dependence, it is obvious that we need auto manufacturers to start 

giving us more fuel-efficient vehicle options. 

It is also important that our Federal Government leads by example when it comes 

to fuel-efficient vehicles. That is why I reintroduced a bill this year that would ensure that cars purchased and leased by the Federal Government for the Federal 

fleet are the most fuel-efficient possible. 

Each year, the Federal Government purchases more than 60,000 passenger vehicles. Unfortunately, the average fuel economy of the new gasoline-powered vehicles 

acquired for the fleet in 2005 was an abysmal 21.4 miles per gallon. 

That is pathetic when there are hybrid cars on the market that can achieve over 

50 miles per gallon. 

I drive a Toyota Prius and can attest that there is no loss of performance associated with vehicles that get great fuel economy. 

Mr. Chairman, I look forward to the Committee voting on this important issue 

next week and hope that we can see action on the floor soon. 

The CHAIRMAN. And now I’ll call upon the panel of experts, politicians. 

[Laughter.] 

Senator LOTT. Expert politicians? 

Senator LEVIN. Do you want to bypass us altogether? 

[Laughter.] 

The CHAIRMAN. May I first recognize Senator Levin? 

STATEMENT OF HON. CARL LEVIN, 

U.S. SENATOR FROM MICHIGAN 

Senator LEVIN. Mr. Chairman, let me thank you and the members of the Committee for holding this hearing. 

It’s a very important hearing, for all the reasons that you’ve 

given. I don’t think there’s anybody in this room that does not 

share the thoughts that have been expressed by every member of 

this Committee, in terms of the need to address the problems of 

global warming, particularly, and the threat of imported oil. And 

the real question is, how do you go about that in a way, hopefully, 

which can also support American manufacturing, which has been 

hit hard by a lot of causes, some of which are their own making, 

but many of which are because they’re operating in a global economy, where other countries support their manufacturing. Our companies are not competing with foreign companies, they’re competing with foreign countries. When it comes to currency manipulation, when it comes to restrictions on our exports, when it comes 

to joint R&D projects with other countries, we are in a competition 

against other countries, not just against other companies. 

I believe the way that we can reduce the use of oil and gasoline 

is by leap-ahead technologies. And the CAFE system is a poor alternative to investing in those leap-ahead technologies. The CAFE 

system, if you get to a 4 percent increase over the number of years 

you’re talking about, will produce a minute improvement in the 

amount of CO2. We have a chart here, which will show you that improvement. 

11 

If you can get to the back charts first. 

I want to first show you the amount of CO2 currently going into 

the air. 

The other one. 

This is the current—the blue box is the current amount of CO2

production in the world, the U.S. contribution. And I think copies 

of this may be in front of each of you. The U.S. contribution is 

about a fifth, 21.8 percent. The transportation percentage of that 

is 6.8 percent. The passenger vehicle and light truck part of transportation, it’s only—it’s two-thirds of that, so you’re at 4.2 percent. 

That’s the passenger-vehicle and light-truck contribution to world 

CO2 production, that lower yellow box. 

Now, if you adopt the proposed CAFE change, and achieve a 4 

percent reduction by the year 2030—OK, this is with a 4 percent 

increase in CAFE—this is what the reduction will be in carbon dioxide. It’s that little red box at the bottom. That’s what will be 

achieved. 

It’s a—that doesn’t mean we shouldn’t achieve it, by the way. I 

think we can do a lot better if we would invest in the leap-ahead 

technologies—the fuel cells, the plug-in hybrids, the advanced diesels—instead of going the CAFE route. We can do better than 

CAFE if we use the resources that we have to invest in leap-ahead 

technologies instead of these incremental changes that are very 

minute, but which are aimed at trying to meet these 2 or 3 or 4 

percent increases. That’s my first point. Put our resources where 

they will make a heck of a lot bigger difference than that minute 

difference that will be made by a 4 percent increase in CAFE. 

Now I want to address Senator Lautenberg’s point. You put up 

a chart, Senator Lautenberg, which shows that the Japanese fuel— 

that the fleet of Japanese vehicles are more efficient than our fleet. 

The impression that is created—and, I think, erroneously—is that 

Japanese vehicles are more fuel efficient than ours. And they are 

not. It’s an impression which is in the minds of a lot of people, but 

it is a wrong impression. And if we’re going to do the right thing 

and not do harm needlessly and unfairly to an American industry, 

we then have got to look at the facts relative to the efficiency of 

vehicles. 

First, let me put up four vehicles, the same weight. This is a 

minivan, and I’m going to just go through these very quickly. This 

is the fuel economy, same weight, a Buick Terraza, Dodge Caravan, 

Honda Odyssey, Nissan Quest. They’re all the same weight, they 

all get the same miles per gallon. That is true across the fleet. The 

same weight, approximately—and sometimes exactly—the same 

number of miles per gallon. 

Let me just give you one more example of this. The Ford Freestyle, 4,250 pounds, does better than the Toyota Highlander, 4,250 

pounds—2 miles per gallon better. 

I’m not trying to prove that American vehicles are more fuel efficient than the Japanese. What I do want you to accept as a fact 

is that Japanese and other vehicles, pound for pound, are no more 

fuel efficient than American vehicles. Until you get to the hybrid, 

obviously. We’re talking about comparing 98 percent of the fleet. 

Hybrids are different, and that’s why we should focus on getting 

to the leap-ahead technologies. 

12 

Instead of a CAFE system which discriminates against American 

vehicles, because, historically, that system is based on the entire 

fleet, and, when the fleet has concentrated on the larger cars instead of smaller, historically, which have been in demand in America, those companies which have produced a larger percentage of 

smaller vehicles have room to sell all the larger vehicles they want. 

It’s perverse. It works against American jobs, with not a darn bit 

of benefit to the air. It doesn’t do the environment one bit of good 

for Toyota to be able to sell more and more Highlanders, but Ford 

not to be able to sell Freestyles, because they bump up against the 

CAFE limit. It doesn’t do the air any good. It doesn’t do the environment any good. And it hurts American jobs. 

So, our plea, my plea, is that whatever system you put in place, 

eliminate the discriminatory features of the CAFE system. And the 

way to do that is to have the same miles per gallon based on the 

same size or class. Do this by class, not by fleet. 

And I want to commend Senator Feinstein. In her bill, the first 

part of her bill does that. She has the same miles per gallon, 

class—not the same—she goes miles per gallon size—depending on 

the size. In other words, class by class by class, she has the same 

miles per gallon across the class, and does not impose the same 

standard on each company, even though their fleets are designed 

so differently. 

And I want to—I want to just point that out. That part of the 

Feinstein bill is an—a very significant improvement to avoid going 

by the entire fleet, and to do this class by class, so that the Highlander and Freestyle class will be treated the same way. And the 

discrimination in that regard will end. 

Now, we can argue whether CAFE makes sense or if you want 

to go leap-ahead versus incremental. That’s an argument which, it 

seems to me, is an important argument. You can do a lot better if 

you get companies to commit to use their research and development dollars on leap-ahead technologies. Sign agreements with 

companies to invest in the leap-ahead technologies, the way we’ve 

done, as I understand, in a number of other areas. 

However, if you’re going to go CAFE, follow the approach that 

Senator Feinstein has used in the—going by class, rather than by 

company fleet. 

However—and I want to end with this—there is language—there 

is language in the Feinstein—I want to—I just want to read one 

thing, from the National Academy of Sciences, before I change my 

point. The National Academy of Sciences, in 2002, made the exact 

point that I just made, and I want to read it to you, ‘‘A policy decision to simply increase the standard for light-duty trucks to the 

same level as passenger cars would operate in this inequitable 

manner. Some manufacturers have concentrated their production 

in light-duty trucks, while others have concentrated production in 

passenger cars. But since trucks tend to be heavier than cars, and 

are more likely to have attributes, such as 4-wheel drive, that reduce fuel economy, those manufacturers whose production was concentrated in light-duty trucks would be financially penalized relative to those manufacturers whose production was concentrated in 

cars. Such a policy decision would impose unequal costs on otherwise similarly situated manufacturers.’’ 

13 

The National Academy of Sciences has it right. And, by the way, 

I believe that Senator Carper made the same point, that we ought 

to go attribute-based, as he put it which means by class, which essentially means by size, rather than by going company fleet by 

company fleet. 

Now, there’s other language in here—I will close—there’s other 

language in the Feinstein bill which some have interpreted—and I 

believe, now, erroneously interpreted—that goes in the opposite direction and would require NHTSA to set for each company a combined car and truck standard of 35 miles per gallon by 2019. Such 

a requirement would exacerbate the discriminatory impact of the 

current CAFE system and hurt our American manufacturers disproportionately, because they have a higher percentage of trucks in 

their overall fleet. 

And now, I want to just state this very carefully, so this part I’m 

going to read. 

‘‘I discussed this matter yesterday with Senator Feinstein and 

her staff, and conferred further with the Commerce Committee 

staff as to the intent of the language in setting a combined standard of 35 miles per gallon by 2019. I was reassured to learn that 

the intent of S. 357 is not to set a combined standard for each company, but, rather, to set a number globally across the entire fleet 

of new vehicles sold in the U.S., and to give NHTSA the discretion 

to achieve that number by setting fuel economy standards using 

different attributes for different classes of vehicles.’’ Senator Carper’s point. ‘‘The intent of that language, in S. 357, in my judgment, needs to be clearer in order to avoid worsening the discriminatory impacts of the CAFE system; that is, the intention of this 

bill is to give NHTSA the flexibility to meet the industry-wide fuel 

economy number, taking into consideration both technological feasibility, the size and weight of different types and classes of vehicles, and the differences in each manufacturer’s overall fleet mix.’’ 

‘‘The goal of CAFE reform through a class-based standard is an 

important advance and must not be set back or reversed by a combined standard.’’ 

Thank you very much, Mr. Chairman. 

[The prepared statement of Senator Levin follows:] 

PREPARED STATEMENT OF HON. CARL LEVIN, U.S. SENATOR FROM MICHIGAN

Mr. Chairman, thank you for the opportunity to appear today to testify on the 

Corporate Average Fuel Economy bills pending before your Committee. 

As temporary stewards of the planet, we all need to be conscious of our impact 

on the global environment and take actions to address our dependence on oil and 

our contribution to global greenhouse gas emissions. 

As Chairman of the Committee on Armed Services, I am also very conscious of 

the effects of our continued reliance on oil that comes from unstable regions of the 

globe. I am also concerned that global climate change may present new security 

challenges in some of the most volatile regions of the world. I believe that we can 

address both of these challenges, but I also believe that there are ways of doing it 

that boost American manufacturing. 

America has lost 3 million manufacturing jobs since 2001, over 200,000 jobs in 

the automotive sector. Our companies face enormous competition in the global marketplace without sufficient support from the U.S. Government. Our companies are 

not just competing against other global companies—they are competing against 

other governments that strongly support their manufacturing sectors with currency 

manipulation and trade barriers against our products. American companies must 

compete against those who are protected from import competition by their governVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80033.TXT JACKIE
14 

ment, have cheap labor costs, do not pay health insurance and legacy costs, or do 

not have to meet our strict environmental standards. Our manufacturers can compete with anyone on a level playing field but right now that field is tilted against 

them. 

We can reduce our dependence on oil, reduce our greenhouse gas emissions, and 

improve the overall fuel economy of our vehicles on the road while supporting our 

American manufacturers in the global market place. To do that, we need a major 

public-private partnership and major investments in leap-ahead energy technologies, including advanced technology vehicles. We need a massive infusion of resources and a commitment from both the private sector and the Federal Government to support efforts to reach these important goals. In other words, we need a 

comprehensive American Manufacturing Initiative. But at a minimum, we cannot 

have our government act in ways that will unfairly disadvantage our American 

manufacturers against their global competitors. 

In the area of autos specifically, it would be better for our resources to be invested 

in leap-ahead advanced vehicle technologies rather than in the incremental approach to vehicle fuel economy improvement that the CAFE regulatory scheme requires. To the extent that the constrained R&D resources of our manufacturers are 

used on incremental improvements in current technology, it limits their ability to 

commit those R&D resources to advanced leap-ahead technologies. Better those resources be invested in big leaps ahead, such as advanced hybrids and advanced batteries, hydrogen and fuel cells, advanced clean diesel, and alternative fuel technologies such as biofuels. One way to accomplish that would be to have companies 

commit a certain amount of money for R&D on these technologies as an alternative 

to the incremental approach of CAFE. 

The current CAFE system is also an example of where our own regulatory scheme 

has discriminated against American manufacturers. There is a common misconception that Japanese vehicles are more fuel-efficient than American cars. That simply 

is not the case. Pound for pound, the vehicles are the same. The Japanese vehicles 

are no more fuel-efficient than ours. 

CAFE has historically been built around the average fuel economy of manufacturer’s total fleet of cars or light trucks. Because American manufacturers have historically offered more full-sized vehicles, they have typically had a lower fleet-wide average fuel economy than their foreign competitors. Even when individual American 

models have fuel economy performance equal or superior to comparably-sized foreign models, the ‘‘product mix’’ of the American manufacturers has produced a lower 

‘‘fleet average.’’ 

Under the perverse logic of the CAFE system, therefore, an American manufacturer of a full-size pickup truck, such as the GM Silverado, which gets 18 miles to 

the gallon, is constrained in how many of these pickup trucks it can sell and still 

meet the overall CAFE fleet average requirement, which is now 22.2 miles per gallon. At the same time, CAFE allows a foreign manufacturer to sell several hundred 

thousand more comparable pickup trucks that get 16 miles to the gallon. This is 

because the foreign manufacturers have produced more small vehicles historically. 

In essence, a foreign manufacturer has more ‘‘headroom’’ to increase its market 

share of full-size pickup trucks, without any requirement to increase the fuel economy of these vehicles. 

There are numerous examples of similar size and weight vehicles, made by domestic manufacturers and foreign manufacturers, all of which have the same fuel economy for the same size and weight. For instance, the Ford Freestyle small SUV gets 

23 mpg, while the Toyota Highlander small SUV gets 21 mpg. Both are the same 

size and weight—4,250 pounds. The Chevy Suburban and the Toyota Sequoia are 

both large SUVs, and both weigh 5,500 pounds—the Suburban gets 17 mpg while 

the Sequoia gets 16 mpg. One last example—four different minivans, made by four 

different manufacturers, each of which weighs 4,750 pounds, and each gets 21 mpg. 

In 2002, the National Academy of Sciences recognized these inherently discriminatory features of CAFE, stating the following in its report, the Effectiveness and 

Impact of Corporate Average Fuel Economy Standards. 

One concept of equity among manufacturers requires equal treatment of equivalent vehicles made by different manufacturers. The current CAFE standards fail 

this test. 

If one manufacturer was positioned in the market selling many large passenger 

cars and thereby was just meeting the CAFE standard, adding a 22-mpg car 

(below the 27.5-mpg standard) would result in a financial penalty or would require significant improvements in fuel economy for the remainder of the passenger cars. But, if another manufacturer was selling many small cars and was 

15 

significantly exceeding the CAFE standard, adding a 22-mpg vehicle would have 

no negative consequences. 

A policy decision to simply increase the standard for light-duty trucks to the 

same level as for passenger cars would operate in this inequitable manner. 

Some manufacturers have concentrated their production in light-duty trucks 

while others have concentrated production in passenger cars. But since trucks 

tend to be heavier than cars and are more likely to have attributes, such as 

four-wheel drive, that reduce fuel economy, those manufacturers whose production was concentrated in light-duty trucks would be financially penalized relative to those manufactures whose production was concentrated in cars. Such 

a policy decision would impose unequal costs on otherwise similarly situated 

manufacturers.’’ 

Over many years, CAFE has allowed an unfair competitive advantage to foreign 

vehicle manufacturers, without improving our fuel economy or reducing CO2. Proposed increases in CAFE would barely make a dent in CO2 emissions, while, if done 

in a discriminatory way, could do huge damage to American jobs. It could also be 

a step back on environmental improvement if American manufacturing is sent to 

countries with less stringent environmental standards. 

If we must have a CAFE system, then it needs to be significantly revamped so 

that it is not discriminatory against our companies, and the numbers should be set 

in a non-discriminatory way by experts who understand what can and cannot be 

done from a technology standpoint. We need to give this authority to the National 

Highway Transportation Safety Administration, or NHTSA, and give them the tools 

to set standards in a way that treats manufacturers fairly and ensures sufficient 

lead time to get new technologies into the market. NHTSA should be given the authority to set standards by class for passenger cars as they have done for light 

trucks. It would also promote leap-ahead technologies instead of incremental 

changes if NHTSA is clearly authorized to set a five-year CAFE number instead of 

an incremental annual approach, using a CAFE system based upon attributes, such 

as size or weight. 

In her bill, S. 357, Senator Feinstein provides authority for NHTSA to set separate standards for different classes of passenger automobiles. NHTSA already has 

that authority for light trucks. That is an important and positive step forward in 

terms of fairness to our American manufacturers. 

There is other language included in S. 357, however, that some have interpreted— 

erroneously, I now believe—to go in the opposite direction and require NHTSA to 

set for each company a combined car and truck standard of 35 mpg by 2019. Such 

a requirement would exacerbate the discriminatory impacts of the current CAFE 

system and hurt our American manufacturers disproportionately because they have 

a higher percentage of trucks in their overall fleet. 

I discussed this matter yesterday with Senator Feinstein and her staff, and conferred further with the Commerce Committee staff as to the intent of the language 

in setting a combined standard of 35 mpg by 2019. I was reassured to learn that 

the intent of S. 357 is not to set a combined standard for each company, but rather 

to set a number globally across the entire fleet of new vehicles sold in the U.S. and 

to give NHTSA the discretion to achieve that number by setting fuel economy standards using different attributes for different classes of vehicles. The intent of that 

language in S. 357 needs to be clearer in order to avoid worsening the discriminatory impacts of the CAFE system, i.e., that the intention is to give NHTSA the flexibility to meet an industry-wide fuel economy number, taking into consideration both 

technological feasibility, the size and weight of different types and classes of vehicles, and the differences in each manufacturer’s overall fleet mix. The goal of CAFE 

reform through a class-based standard is an important one and must not be set back 

or reversed by a combined standard. 

I want to emphasize again that I support improvements in fuel economy, and I 

fully support efforts in this Congress to reduce our dependence on oil and reduce 

our greenhouse gas emissions. I believe it is our duty to future generations. 

But it is important to recognize where U.S. auto emissions fit into the overall picture. World CO2 production is 28 billion metric tons. The U.S. contribution is 6 billion metric tons, or 21.8 percent of world production. U.S. transportation contributes 

6.8 percent of the world production, and U.S. passenger vehicles and light trucks 

contribute 4.2 percent of world CO2 production. The U.S. passenger vehicle contribution to world emissions is less than one-fifth of the U.S. contribution. Therefore, 

CAFE can make but a small contribution to the overall reduction in CO2 production. 

That should not stop us from making improvements in our vehicle technologies, but 

it should drive us to solutions that can give us the greatest bang for the buck. 

16 

We all want to reduce carbon dioxide emissions from vehicles, but we need to do 

it in a way that is fair to all manufacturers and in a way that unleashes great technological advances in vehicles. We can make leaps ahead in hydrogen use; in hybrid 

use, including plug-in hybrids; and biofuels. We need to focus on these leap-ahead 

technologies and give the incentives to manufacturers to develop and move to those 

technologies. If we focus instead only on CAFE as the main mechanism for CO2 re- ductions, we will miss an opportunity to do real good and might do real harm. Our 

manufacturing sector in America has been damaged already. We must, therefore, be 

doubly cautious about further disadvantaging our American manufacturers by pursuing the wrong approach. 

I am committed to work with this Committee and others in the Congress to develop the right approach to improving fuel economy, reducing our dependence on oil, 

and reducing our contribution to global climate emissions. 

The CHAIRMAN. Thank you very much. 

Senator Feinstein? 

STATEMENT OF HON. DIANNE FEINSTEIN, 

U.S. SENATOR FROM CALIFORNIA 

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

I was very heartened to hear the comments of the Senator from 

Michigan, and very much appreciative of them. We did work together yesterday. His staff—my staff did meet with your staff, who 

helped draft this section. And so, I think the intent is clear. 

I want to thank you, Mr. Chairman, for being an original cosponsor of this bill, along with Senators Snowe, Durbin, Kerry, Senator 

Boxer, Senator Nelson, who’s here, Cantwell, Lautenberg, 

Lieberman, Menendez, Collins, Reed, Leahy, Sanders, Dodd, and 

Akaka. 

The thrust of this bill would raise CAFE standards to 35 miles 

per gallon by model year 2019. This is essentially a 40 percent increase over 10 years. Similar increases are contained in virtually 

every CAFE bill proposed this year, including bills offered by Senator Dorgan and Craig, and by Senators Obama and Lugar. 

In the President’s State of the Union speech, he set a goal for 

America to conserve up to 8 and a half billion gallons of gasoline 

through better fuel economy by 2017. Now, what would it take to 

achieve this goal? An increase in fuel economy for cars and trucks 

of about 4 percent per year, which is, again, in line with our bill. 

Now, we all know what’s causing the remarkable agreement on 

how much we can accomplish through CAFE legislation. And the 

simple truth is this: national security imperatives, global warming 

concerns, and public opinion are all aligned in favor of a cleaner 

fleet. The devil’s in the details of how we get there. 

By 2025, this simple step would reduce emissions of greenhouse 

gases from United States cars and light trucks by 18 percent below 

projected levels, the equivalent of taking 50 million of today’s cars 

and light trucks off the road in 1 year. As I think Senator Boxer 

knows, and others know on this Committee, the transportation sector is responsible in this country for about 33 percent, or a third, 

of global warming gases. Of that 33 percent, the passenger and 

light truck part of the transportation industry is about 25 percent. 

So, that’s what we have. 

The bill would save 2.1 million barrels of oil per day, or nearly 

the amount of oil we import today from the Persian Gulf. 

The Ten-in-Ten bill is also fair, as I think Senator Levin stated, 

to the domestic auto industry. Detroit has suggested that the bill 

17 

would require each manufacturer to produce vehicles averaging 35 

miles per gallon. In other words, General Motors, Toyota, and 

Honda would all have to make enough high-mileage cars for model 

year 2020 to offset their low-mileage light trucks and average 35 

miles per gallon. 

However, as Senator Levin just pointed out, this is not the way 

this bill works. Instead, it is the entire nationwide fleet of cars and 

light trucks sold in this country that must average the 35 miles. 

NHTSA will set size-based mileage standards dependent on the 

mix of vehicles in the entire U.S. fleet. Companies that manufacture mostly larger vehicles will only have to meet lower mileage 

standards for these vehicles. To be sure, every type of vehicle, from 

the smallest to the largest, will have to improve its mileage to the 

extent possible. 

Critically, as Senator Levin stated, the National Highway Traffic 

Safety Administration, NHTSA, will retain the discretion to decide 

the most appropriate combination of mileage improvements for 

each vehicle class that will get the nationwide average to 35 miles 

per gallon. So, it can be class-by-class. Neither American nor foreign manufacturers will be especially advantaged or disadvantaged. 

Each manufacturer will have to improve the vehicle it makes to 

meet the standards that the agency sets. 

This bill, I deeply believe, is fair to all American manufacturers, 

and it is also fair to the car-buying public. Some have expressed 

concerns that drivers would have to choose between fuel efficiency 

and acceleration, safety, or space. But experts at the National 

Academy of Sciences have shown that we can increase the fuel 

economy of mid-sized SUVs to 35 miles per gallon; large cars, to 

39 miles per gallon; minivans, to nearly 37 miles per gallon, and 

large pickups, close to 30. This is the NAS report of 2002, pages 

41, 45, at tables 3 and 4. 

If you average the improvements that the National Academy considers achievable over the next decade for these different-sized 

classes of passenger cars and light trucks, you can actually get to 

37 miles per gallon for the U.S. fleet, even better than the 35 miles 

per gallon required in this Ten-on-Ten bill. The source of this is a 

Union of Concerned Sciences analysis of the NAS study based on 

the 2005 sales mix. 

So, all of this can be done, we believe, without sacrificing performance or safety. 

In conclusion, the average fuel economy of new vehicles sold 

today is lower than it was two decades ago. That goes to some of 

the comments made by members of this Committee. 

The Ten-in-Ten bill, I think, offers a straightforward and sensible 

solution. One, it can be done with existing technology. Two, it 

would satisfy the public’s desire for a more fuel-efficient fleet. And, 

third, it would reduce carbon emissions and limit America’s reliance on foreign oil. 

In 1963, President Kennedy set a national goal of putting a man 

on the Moon within the decade. Technology, paired with American 

ingenuity and hard work, achieved this historic objective. 

Today, we’re advocating, certainly, a less lofty goal, raising fuel 

economy standards by 40 percent over the next decade. And I think 

it, too, can become a reality. 

18 

Mr. Chairman and those members that are cosponsors of this 

bill, I thank you for that. 

To both Senator Levin and Senator Stabenow, I’m certainly prepared to work with you. We began yesterday. I think we achieved 

something yesterday. 

I thank you very much, Mr. Chairman, for your work on this, as 

well as the expertise of this Committee’s staff. 

Thank you very much. 

The CHAIRMAN. Thank you. 

Senator Stabenow? 

STATEMENT OF HON. DEBBIE STABENOW, 

U.S. SENATOR FROM MICHIGAN 

Senator STABENOW. Well, thank you, Mr. Chairman. 

And I want to also thank Senator Feinstein. She’s allowing us to 

surround her today. So—— 

Senator FEINSTEIN. Yes. 

[Laughter.] 

Senator STABENOW.—we appreciate that, and very much appreciate, Mr. Chairman, your holding this hearing, and to all of our 

colleagues. 

I don’t disagree at all about the importance of creating more fuel 

efficiency. We’ve got to decrease our reliance on foreign oil. It is a 

national security issue. We need to address, from an environmental 

standpoint, what’s happening. There’s no question in my mind that 

global warming is real, and every sector of the economy has to do 

its part. 

So, for me, this is not about the goals, but it is very seriously 

about how we achieve it, because it very much impacts the American manufacturing economy and jobs if we don’t get it right. And 

so, that’s what I’m asking today. 

First, though, I want to just speak a moment about the auto industry, because I think it’s very important for us to recognize that 

our American auto industry really helped create the middle class 

of this country and is key to continuing it. This isn’t your father’s 

factory anymore. This is high-tech manufacturing. And if you have 

not had an opportunity to visit a plant recently, we would welcome 

you to do so. It is extremely impressive. 

But, unfortunately, this industry has faced a lot of difficult challenges right now that, frankly, have nothing to do with quality of 

the vehicle or the competitiveness of the vehicles. Unfair trade 

practices, like currency manipulation and counterfeiting; rising 

healthcare costs, where they compete with other companies whose 

countries pay for the costs of those dollars of healthcare. GM, Ford 

and DaimlerChrysler, in 2005, spent $12.2 billion on healthcare, 

and they covered 2 million Americans. Experts predict that future 

health liabilities for Detroit automakers range from anywhere from 

$70 billion to $140 billion. 

Now, why would I say that in a hearing on CAFE and on the 

issue of increasing fuel efficiency? Because, frankly, every time one 

of our automobiles adds $1,435, which it does, on average, to pay 

for healthcare, that’s not $1,435 that’s going into new technologies, 

all of which we want to have happen. 

19 

So, this is connected. What is happening to manufacturing, 

where the dollars are going, is all connected. And, frankly, I want 

to free up those dollars so that we can put more of that into those 

technologies and where we want to go. 

Meanwhile, other countries are able to put their money into new 

technologies. Just to give you an example, the Governments of 

Japan and South Korea are spending five times more on new battery technologies. There’s something wrong when we see Ford, with 

the Escape, the hybrid using battery technologies, by—having to 

look to another country to get the battery. And part of what we’ve 

got to do is make sure whatever incentives we do are creating the 

jobs here, not just the new science and the new technology. 

But Japan invested $50 million last year, and South Korea invested $70 million, committed over the next 6 years. In comparison, 

our budget has $11 million, for one of the most critical technologies 

to doing what all of us want to do. 

And I believe the American auto industry’s really hit twice, because we’re not investing in those technologies, we’re not addressing competitiveness costs, and we regulate our automakers in different ways than their foreign competitors. 

I’m here today, though, not to say we should do nothing. Far 

from it. In fact, we’ve got to move ahead, and we’ve got to be smart 

about it, and we’ve got to raise the bar, in terms of increased fuel 

efficiency and technology innovations. 

Now, let me speak to the concerns about increasing CAFE, Mr. 

Chairman. And certainly in light of Senator Feinstein’s comments, 

I certainly appreciate that we’ve had some good discussion, and we 

can look at how we move so that these issues are addressed. 

But there’s no question that a fleetwide average does not increase fuel efficiency, as Senator Levin said. If you have—if it’s 

company-by-company, and one company is making larger vehicles, 

and the other, smaller, then the one making smaller cars can have 

a lot of room to go up on a cap, and those vehicles don’t have to 

be efficient. Those pickup trucks and SUVs don’t have to be efficient, and you still don’t meet the cap. That’s not fair. 

In the United States, the majority of our jobs are coming from 

those pickup trucks, are coming from trucks, light trucks, SUVs, 

and larger vehicles. And so, that is a critical issue for us as it relates to CAFE. 

And, second, I would argue that CAFE creates a situation of incremental change that I believe is slower than how we need to do 

this. If we are looking at something year to year, where—we’re 

looking at situation that forces the companies to look at short-term 

strategies, not investing for the next 5 years, but looking at the 

weight of the car, the size of the engine, what’s involved in the vehicle. It may mean as—cutting vehicles from the fleet. For those of 

us that produce automobiles, that means cutting plants, potentially. It means limiting production of certain kinds of automobiles. 

And those are the kinds of things, in the short run—you can address the weight or the size of the engine—but we need something 

bolder than focusing on these short-term, incremental approaches 

to increasing fuel efficiency. And that’s what I’m most concerned 

about. 

20 

Senator Levin talked about bold, leap-forward strategies. And I 

believe that’s exactly what we need to do, not talking about 4 percent here or 6 percent there. We need to be looking at cutting-edge 

technologies that reach exactly what Senator Feinstein said. 

I have no doubt that if we do this right, and we can set a requirement on where we need to be. And if we boldly invest in the 

technology, we can meet those numbers and surpass it. 

It’s a question of how we set it up and whether they’re forced to 

look at short-term strategies or longer-term strategies. 

And I also, Mr. Chairman, would have to say that we need to remember that our automakers, both foreign and domestic, have already invested millions of dollars in developing cleaner, better technologies. We are seeing the focus on the electric technology, the 

Volt, by General Motors. And right now we’re—the key question is 

the advanced battery technology and how fast we can get this to 

a point where they can bring it to market. But we also have biodiesel, and DaimlerChrysler focusing on important efforts that relate to diesel, clean diesel—I know Senator Carper has been focused on that—and biodiesel. For example, with new technology, 

today’s clean diesel engines achieve 20 to 40 percent better fuel 

economy than the equivalent gasoline engine. And over a lifetime 

of the vehicle, this is very, very significant. 

Just as an example, this year the 2007 Jeep Cherokee will use 

418 fewer gallons of gasoline each year than a traditional Jeep 

Cherokee. And we want all of them to do that. Also, as compared, 

for instance, to—a hybrid Honda Civic to a conventional Civic, that 

has a savings of about 154 gallons. 

If we have all new Jeep Cherokees with new diesel engines, we 

would save 23 million gallons of gasoline a year. And they’re moving in that direction. It’s not that this isn’t happening. That’s 

where they’re going. 

Another example is flex fuel vehicles. We all know about ethanol 

and what is happening there, and what we can achieve, and what 

we can achieve with cellulosic ethanol. There are extraordinary 

things that are happening. Fueling half of the fleet by 2012, which 

is less than 5 years away, would save us 3.9 billion gallons of gasoline, or approximately 42 percent of our 2012 fleet’s projected annual consumption of gas. Moreover, 77 million tons of carbon would 

be saved. And, frankly, that is more than what we’re talking about 

through these CAFE standards. There are bolder, better, bigger 

ways to get to where we want to go. 

And so, Mr. Chairman, I would say, in summary, that just two 

new technologies, flex-fuel vehicles and new diesels, together, are 

on track to reduce American gasoline consumption by over 4 billion 

gallons of gasoline annually in less than 5 years. 

What I believe our challenge is, is to make sure, particularly as 

it relates to biofuels, that the infrastructure is there, and that’s 

where many of us are working to make sure that it is. 

As a comparison, a CAFE increase would save just 2.8 billion, instead of 4 billion, by focusing on a CAFE increase as has been traditionally structured. 

We need to move ahead more boldly. We have many committees 

that are working on this together, not only this distinguished Committee, but the Finance Committee, where we are focusing on tax 

21 

credits and incentives; we have the Energy Committee, that reported, yesterday, some very, very positive things, a new requirement to reduce America’s gasoline consumption by more than 32 

million gallons per year, the same amount of ethanol that we can 

help produce in the Agriculture Committee with the farm bill, 

where we are also working; EPW, with Senator Boxer. We have the 

opportunity to work together to do what I believe is something 

very, very bold and also something very good for our economy, creating jobs. And I would urge us to look more broadly than just this 

one strategy. And I believe we can get there faster than the incremental change that has been the type of change in the structure, 

which started in the 1970’s—we’ve got a 1970’s structure of CAFE, 

and we’re in 2007, with a whole different set of challenges that are 

bigger and more serious. And I think there’s a bigger, bolder way 

for us to address those, and I look forward to working with the 

Committee. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Levin, Senator Feinstein, Senator 

Stabenow, on behalf of the Committee, I thank all of you. 

Senator FEINSTEIN. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. And I think this just demonstrates to all of us 

that the forthcoming debate will be a very serious, mature, and 

productive one. 

Thank you very much. 

Senator LEVIN. Mr. Chairman, I would ask consent that my entire—I would ask consent that my entire statement and an attachment be made part of the record. 

The CHAIRMAN. It is so ordered. 

Senator LEVIN. Thank you. 

The CHAIRMAN. And now, we will call upon the panel of experts: 

Mr. Alan Reuther, Legislative Director of the United Auto Workers 

International Union; Mr. David Friedman, Research Director of the 

Clean Vehicles Program of the Union of Concerned Scientists; Admiral Dennis Blair, United States Navy (Retired), former Commander-in-Chief of the United States Pacific Command, and presently Omar Bradley Chair of Strategic Leadership, Army War College and Dickinson College; Mr. Michael J. Stanton, President and 

Chief Executive Officer of the Association of International Automobile Manufacturers; Vice Admiral Dennis McGinn (Retired); and 

Mr. David McCurdy, President of the Alliance of Automobile Manufacturers. 

May I first call upon Mr. Reuther. 

STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, 

INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE 

& AGRICULTURAL IMPLEMENT WORKERS OF AMERICA 

(UAW) 

Mr. REUTHER. Thank you, Mr. Chairman. 

My name is Alan Reuther. I am the Legislative Director for the 

UAW. We appreciate very much the opportunity to testify today before this Committee on the subject of the pending CAFE legislation. 

For several reasons, the UAW strongly opposes these bills. The 

auto manufacturers will have to incur enormous retooling costs to 

achieve the fuel economy improvements mandated by these bills. 

22 

The Bush administration has estimated that GM, Ford, and 

DaimlerChrysler would have to spend $85 billion, or about 75 percent, of these costs. The UAW is deeply concerned that the magnitude of these costs and their disproportionate impact on GM, 

Ford, and DaimlerChrysler would inevitably lead to calamitous results in the auto industry. 

Unlike their competitors, GM, Ford, and DaimlerChrysler are 

facing extremely serious financial situations. In the past 2 years, 

they have posted shattering losses, closed numerous facilities, and 

downsized their workforces by almost 90,000 jobs. At the same 

time, GM, Ford, and DaimlerChrysler face much heavier retiree 

health legacy cost burdens than their competitors. GM has almost 

3 and a half retirees for every active worker. Ford and 

DaimlerChrysler have over one retiree for each active worker. Together, these three companies spend over $5 billion each year to 

provide healthcare for 550,000 retirees and their families. 

Thus, it is abundantly clear that we do not have a level playing 

field in the U.S. auto industry. The CAFE increases proposed in 

the pending legislation would severely aggravate this situation by 

imposing huge, disproportionate retooling costs on GM, Ford, and 

DaimlerChrysler. If these three companies are forced to shoulder 

these costs, they will be placed at a further competitive disadvantage. Something will have to give. The most likely result is that 

they will be forced to shutter more facilities, destroying jobs for 

tens of thousands of additional workers, and weakening the economic base in many communities across this country. They will 

also be pressured to reduce, or completely eliminate, retiree health 

insurance for their 550,000 retired workers and their families. 

UAW believes that this economic and human toll is unacceptable. 

Accordingly, we strongly urge this Committee to reject legislation 

requiring drastic increases in fuel economy unless it is accompanied by measures to provide assistance to the struggling auto 

manufacturers and to help level the playing field in the auto industry. 

UAW is prepared to work with this Committee to develop mechanisms, such as Federal loan guarantees, that can provide meaningful assistance to the companies. 

The UAW is also concerned about structural problems in the 

pending CAFE bills. We were very pleased to hear the discussion 

in the panel before us, between Senator Feinstein and Senator 

Levin, that the intent of S. 357 is not to impose a flat 35 mpg fuel 

economy requirement on the combined passenger car/light truck 

fleets of each manufacturer, but, instead, to have a global, industrywide target. We think that’s a much better approach, and we 

look forward to working with the Committee to clarify the language 

in that regard. 

We are also concerned that all of the pending CAFE bills would 

allow NHTSA to promulgate an attribute-based CAFE system, but 

do not contain an adequate anti-backsliding rule, or else allow for 

credit trading between the manufacturers. As a result, these bills 

would jeopardize the continuation of small car production and jobs 

in the United States. I would note that S. 357 does attempt to do 

an anti-backsliding rule. We think, again, the language needs to be 

23 

clarified so it has the intended result, and that we don’t lose our 

small car production in this country. 

The UAW shares the growing national concerns about climate 

change and energy security. We believe the best approach to address these problems would be an economywide mandatory 

tradable permits program to reduce greenhouse gas emissions. In 

addition, we believe Congress should establish carbon performance 

standards to require reductions in the carbon emissions of lightduty vehicles, as well as reductions in the carbon intensity of fuels 

that go into those vehicles. 

We also support other initiatives to promote the use of alternative fuels in motor vehicles. This includes mandating that certain percentages of all vehicles sold in the U.S. by each automaker 

must be flex-fuel capable by specified dates, as well as additional 

incentives or mandates relating to the conversion of filling stations 

so they have the capability to distribute alternative fuels. 

Finally, the UAW urges Congress to provide incentives to encourage domestic production of advanced-technology vehicles and their 

key components. This would help to maintain and create tens of 

thousands of automotive jobs in this country. At the same time, it 

would help to accelerate the introduction of these vehicles, and, 

thereby, reduce global warming emissions and our dependence on 

foreign oil. 

In conclusion, the UAW appreciates the opportunity to testify before this Committee. We look forward to working with you and the 

entire Senate to fashion new policies that will enable the United 

States to make significant progress in reducing greenhouse gas 

emissions and oil consumption while protecting jobs and benefits 

for American workers and retirees. 

Thank you. 

[The prepared statement of Mr. Reuther follows:] 

PREPARED STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL

UNION, UNITED AUTOMOBILE, AEROSPACE & AGRICULTURAL IMPLEMENT WORKERS

OF AMERICA (UAW) 

Mr. Chairman, my name is Alan Reuther. I am the Legislative Director for the 

International Union, United Automobile, Aerospace & Agricultural Implement 

Workers of America (UAW). The UAW represents over one million active and retired 

workers across the country. Many of these UAW members work or receive retirement benefits from auto manufacturers and parts companies. The UAW appreciates 

the opportunity to testify before this Committee on the subject of pending Corporate 

Average Fuel Economy (CAFE) legislation. This includes the ‘‘Ten-in-Ten Fuel Economy Act’’ (S. 357), sponsored by Senator Feinstein; the ‘‘Improved Passenger Automobile Fuel Economy Act of 2007’’ (S. 183), sponsored by Senator Stevens; the ‘‘Fuel 

Efficiency Energy Act’’ (S. 1118), sponsored by Senator Dorgan; and the ‘‘Fuel Economy Reform Act’’ (S. 767), sponsored by Senator Obama. 

The UAW strongly opposes these CAFE bills for several reasons. First, we are 

deeply concerned that the stringent fuel economy improvements mandated by these 

bills would impose enormous retooling costs on the auto manufacturers. GM, Ford 

and DCX cannot afford these costs because of their serious financial conditions and 

large retiree health care legacy costs. The net result is that the bills could lead to 

further plant closings and job loss, as well as cut backs in or the elimination of 

health insurance coverage for 550,000 retirees and their families. 

Second, the CAFE increases in some of these bills contain severe structural problems. Imposing a much higher flat mpg requirement on the combined car and light 

truck fleets would discriminate against auto companies whose product mix is more 

oriented toward light trucks. Furthermore, authorizing NHTSA to adopt an attribute-based CAFE system for passenger cars, without establishing an adequate 

24 

anti-backsliding rule, would jeopardize small car production and jobs in the United 

States. 

The UAW shares the growing national concerns about climate change and energy 

security. We believe these serious challenges can best be addressed through an economy wide cap-and-trade program that limits greenhouse gas emissions, along with 

additional performance standards that require reductions in the carbon content of 

fuels and improvements in vehicle efficiency. This type of approach can also help 

to provide various industries, including struggling auto manufacturers, with the resources needed to make investments in the advanced technologies that will provide 

significant reductions in greenhouse gas emissions and oil consumption. 

Economic Feasibility 

There is no dispute that the improvements in fuel economy mandated by the 

pending CAFE bills would necessarily entail enormous retooling costs for the auto 

manufacturers. The Bush administration has estimated that to comply with a 4 percent rate of increase in the CAFE standards that would save 8.5 billion gallons of 

oil by 2017, all of the automakers would have to incur retooling costs of $114 billion. 

However, these costs would not be distributed uniformly among the companies. GM, 

Ford and DCX would have to incur $85 billion, or about 75 percent of these costs. 

The UAW is deeply concerned that the magnitude of these costs, and their disproportionate impact on GM, Ford and DCX, would inevitably lead to calamitous results in the auto industry. GM, Ford and DCX are already facing extremely serious 

financial situations. In the past 2 years they have posted shattering losses. In response, they have announced unprecedented plans to downsize their operations, involving the closing of numerous automotive facilities and buy-out programs that 

could result in the loss of almost 90,000 jobs. Speculation continues about further 

industry restructuring that could lead to even more plant closings and job loss. In 

contrast, Japanese, German and Korean competitors have been making large profits 

and expanding their operations. 

At the same time, GM, Ford and DCX face much heavier retiree health care legacy cost burdens than their competitors. GM has about 31⁄2 retirees for every active 

worker; Ford and DCX have over 1 retiree for each active worker. Together these 

three companies spend over $5 billion each year to provide health care to about 

550,000 retirees and their families Many of these retirees are younger than 65, and 

thus are not covered under Medicare. In contrast, the Japanese, German and Korean operations in this country are relatively new, and thus have very few retirees. 

And the health care costs from facilities in their home countries are heavily subsidized through national health care systems. 

Thus, it is abundantly clear that we do not have a level playing field in the U.S. 

auto industry. The CAFE increases proposed in the pending legislation would severely aggravate this situation, by imposing huge, disproportionate retooling costs 

on GM, Ford and DCX. 

The stark reality is that GM, Ford and DCX do not have the ability to shoulder 

these additional, discriminatory costs. If they are forced to do so, they will be placed 

at a further competitive disadvantage. Something will have to give. The most likely 

result is that these companies will be forced to shutter more facilities, destroying 

jobs for tens of thousands of additional workers and weakening the economic base 

of many communities across this country. They will also be pressured to reduce or 

completely eliminate health insurance coverage for their 550,000 retired workers 

and their families. 

The UAW believes that this economic and human toll is unacceptable. Accordingly, we strongly urge this Committee and Congress to insist that any legislation 

requiring improvements in fuel economy must be accompanied by measures to provide assistance to struggling auto manufacturers and to level the playing field in 

the industry. Because none of the pending CAFE bills include adequate measures 

to achieve these objectives, the UAW urges you to reject these bills. 

Structural Problems in Pending CAFE Bills 

The UAW remains skeptical about the magnitude of the CAFE increases proposed 

in the pending bills. We do not believe the study by the National Academy of 

Sciences in 2001 supports increases of this magnitude. However, we also are deeply 

concerned about several structural problems in the pending CAFE bills. 

First, the ‘‘Ten-in-Ten Fuel Economy Act’’ (S. 357) would combine the passenger 

car and light truck fleets under the CAFE program, and impose a flat 35 mpg fuel 

economy requirement on the combined passenger car-light truck fleet. This is often 

referred to as closing the ‘‘SUV loophole.’’ 

This approach would greatly increase the magnitude of the proposed fuel economy 

increase, since light trucks are starting from a lower base line. Even worse, this apVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80033.TXT JACKIE
25 

proach would have a severe discriminatory impact on GM, Ford and DCX, because 

their product mix is much more oriented toward light trucks than other companies. 

In effect, GM, Ford and DCX would be required to make their passenger car fleets 

meet extremely high mpg standards in order to balance out their much larger fleets 

of light trucks. Or, they would be forced to curtail production and/or close many of 

their light truck operations. 

This problem is not ameliorated by the fact that S. 357 gives NHTSA the authority to do an attribute-based CAFE program for passenger cars, as well as light 

trucks. This bill still mandates that every company must meet the flat 35 mpg 

standard for its combined passenger car-light truck fleet, and thereby imposes a 

much larger burden on GM, Ford and DCX. 

The UAW submits that this discriminatory approach is fundamentally unfair. In 

our judgment, all companies should be required to improve the fuel economy of their 

entire fleets in a comparable manner. Fuel economy requirements should take account of the significant product mix differences between the companies, so that any 

requirements are even handed and do not impose disparate costs and technological 

burdens on certain companies. 

Second, all of the pending CAFE bills would allow or require NHTSA to promulgate an attribute-based CAFE system for passenger cars, as well as light trucks. 

But these bills do not appear to contain an adequate anti-backsliding rule, or else 

would allow credit trading between manufacturers. As a result, these bills would 

jeopardize the continuation of small car production and jobs in the United States. 

Under the existing passenger car CAFE program, the combination of the fleetwide averaging and the two-fleet (domestic and foreign) requirements ensures that 

full line auto manufacturers must maintain small car production in North America. 

This is because the production of smaller, more fuel efficient vehicles is needed to 

offset the production of larger, less fuel efficient vehicles. However, if NHTSA is authorized or required to promulgate an attribute-based CAFE system for passenger 

cars, this would undermine the fleet-wide averaging requirement, and would therefore enable the auto manufacturers to offshore all of their small car production and 

jobs. 

Over 17,000 American workers are currently employed in five U.S. assembly 

plants that produce small passenger cars. This includes GM, Ford, DCX, and 

NUMMI plants in Lordstown (OH), Spring Hill (TN), Wayne (MI), Belvidere (IL), 

and Fremont (CA). Almost 50,000 American workers produce parts for these vehicles. The jobs of these workers would be directly threatened by the pending CAFE 

bills because they would allow or require NHTSA to promulgate an attribute-based 

system for passenger cars, and therefore would undermine the fleet wide averaging 

requirement. The loss of these jobs would inevitably have a negative ripple effect 

on the rest of the economy. 

As the UAW has previously testified, there is an easy way to obtain the benefits 

of moving to an attribute-based CAFE system for passenger cars, while avoiding the 

down side of losing our small car production and jobs. Specifically, the UAW urges 

Congress to impose an ‘‘anti-backsliding’’ requirement on any new attribute-based 

CAFE rules that NHTSA would be authorized or required to promulgate for passenger cars. This requirement should specify that both the domestic and foreign passenger car fleets for each auto manufacturer would still have to meet or exceed the 

CAFE standard under the current system (i.e., the 27.5 flat mpg fleet wide standard). To be effective, this ‘‘anti-backsliding’’ benchmark must be increased in line 

with the overall fuel economy improvements required under any attribute-based 

passenger car CAFE system. 

The establishment of this type of ‘‘anti-backsliding’’ requirement would prevent 

companies from offshoring all of their small car production and jobs. It also would 

ensure that the auto manufacturers cannot subvert the objective of any new attribute-based CAFE system by ‘‘up-sizing’’ many of their vehicles, resulting in worse 

overall fuel economy. 

Unfortunately, S. 1118 does not contain any anti-backsliding provision. Although 

S. 357 and S. 183 do contain versions of an anti-backsliding rule, these provisions 

are poorly drafted and would not be effective in protecting small car production and 

jobs. Because S. 357 combines the passenger car and light truck fleets, the benchmark set forth in its anti-backsliding rule is set too low to be effective. Similarly, 

because S. 183 merely adopts the existing 27.5 mpg standard as the benchmark for 

its anti-backsliding rule, and does not increase this in line with overall improvements in fuel economy, this also would not be effective. 

In addition, S. 357 and S. 767 would establish a ‘‘credit trading’’ system that 

would allow auto manufacturers to buy and sell CAFE credits for passenger cars 

and/or light trucks. This would also have the effect of undermining the two fleet rule 

26 

and/or fleet wide averaging. As a result, it would inevitably jeopardize the continuation of small car production and jobs in this country. 

The UAW is concerned about a number of other problems in the pending CAFE 

legislation. A number of the bills would expand the CAFE program to cover heavier 

vehicles (above 8,500 lbs.), thereby substantially increasing the stringency of the 

overall program and making it even more difficult and costly for the auto manufacturers to comply with the proposed standards. Similarly, S. 1118 would eliminate 

the flex fuel CAFE credit. This also represents a back door means of increasing the 

stringency of the overall program, as well as the compliance costs for the companies. 

Both of these proposed changes in the CAFE program would have an especially negative impact on GM, Ford and DCX, because their fleets contain more heavier and 

flex fuel vehicles. 

Two of the pending CAFE bills, S. 1118 and S. 767, would require the auto manufacturers to improve the fuel economy of their passenger car and light truck fleets 

by 4 percent per year. Although the bills purport to give NHTSA the discretion to 

allow a more reasonable rate of increase, the findings that it would have to make 

in order to do this are so stacked that it would be impossible for the agency to ever 

make such a determination. In effect, the so-called ‘‘off-ramps’’ are illusory. 

Because of the foregoing structural problems in the pending CAFE bills, the UAW 

urges the Committee to reject these measures, and instead to explore better approaches for addressing the pressing problems of climate change and energy security. 

Need for Better Approach to Reduce Greenhouse Gas Emissions and Our 

Dependence on Foreign Oil 

The UAW shares the growing national concern about climate change. Scientific 

studies have confirmed that human use of fossil fuels is contributing to global 

warming. These studies underscore the major environmental challenges posed by 

global warming, including rising sea levels, changes in climate patterns and threats 

to coastal areas. To avoid these dangers, the growth in greenhouse gas emissions 

must be reduced, and ultimately reversed. 

The UAW is also concerned about the national security implications of our Nation’s dependence on foreign oil. Currently, 28 percent of the world’s oil is produced 

in the Persian Gulf. Although less than 11 percent of the oil used by the U.S. comes 

from this volatile region, disruptions in this oil supply can still create serious problems for our economy. As a result, in recent years our Nation has become entangled 

in deadly, costly conflicts in the Middle East. In our judgment, the long range economic and national security interests of the U.S. would better be served by implementing policies to reduce our dependence on foreign oil. 

The UAW believes that climate change and energy security are serious problems 

that need to be addressed by Congress and the Bush administration. We urge Congress to pursue initiatives that will deal with these issues in an integrated and balanced manner that protects jobs and benefits for American workers and retirees. 

It is important to recognize, however, that these problems cannot be solved 

through measures such as the pending CAFE bills. Light duty vehicles (both passenger cars and light trucks) account for approximately 16 percent of greenhouse 

gas emissions and 42 percent of oil consumption in the United States. The CAFE 

program only affects new vehicles sold each year, which represent about 7 percent 

of the total vehicle stock on the road. It takes about 14 years for the U.S. vehicle 

fleet to completely turn over. Furthermore, because of the long lead time needed to 

retool vehicles, any changes in the CAFE program will necessarily have a delayed 

impact. 

Thus, it is apparent that the proposals in the pending legislation to increase the 

stringency of the CAFE program would only have a very modest impact in the short 

term in reducing greenhouse gas emissions and oil consumption. 

In addition to these shortcomings, there are a number of other reasons why focusing on the CAFE program does not represent the best approach for addressing the 

problems of climate change and energy security. The CAFE program does nothing 

about the fuels that go into vehicles. It is not integrated with any broader economywide cap-and-trade program to limit greenhouse gas emissions. Historically, the 

CAFE program has been subject to gaming by the auto companies. And it does not 

generate any revenue that could be used to assist struggling auto manufacturers in 

doing the retooling needed to meet stiffer vehicle efficiency requirements. 

To address the problem of global warming in a meaningful way, the UAW believes 

we need a broad, comprehensive policy. In our judgment, this policy should require 

all sectors of the economy to come to the table and help to reduce our Nation’s 

greenhouse gas emissions. This includes all mobile sources, not just light duty vehicles. It also includes stationary sources, such as power plants and factories. And, 

27 

of course, it includes our fossil fuels such as coal, oil and natural gas. Each sector 

should be required to contribute to the reduction of greenhouse gases in a proportionate manner. No sector should enjoy a free ride. No sector should be required to 

bear a disproportionate burden, or to shoulder costs that would have a devastating 

impact on its operations or employment. 

Specifically, the UAW strongly supports the establishment of an economy-wide 

mandatory tradable-permits program that will slow the growth of, and then reduce 

greenhouse gas emissions in the United States. We believe this type of ‘‘capandtrade’’ program should be done on an ‘‘upstream’’ basis in order to minimize regulation and to ensure that all sectors of the economy participate in a proportionate 

manner. We also believe this program should include a ‘‘safety valve’’ cost cap to 

ensure that no sector is hit with unacceptable burdens that would have a negative 

impact on economic growth and jobs. In addition, this program should include measures to ensure that our businesses and workers are not placed at an unfair competitive disadvantage with U.S. trading partners and developing countries. 

The UAW believes that this type of ‘‘cap-and-trade’’ program can make a major 

contribution to reducing greenhouse gas emissions. It would ensure that such reductions are accomplished in an economically efficient manner. Because of the ripple 

effect of higher oil prices throughout the economy, it would also help to reduce oil 

consumption. 

To adequately address the problems of global warming and energy security, the 

UAW recognizes the need for additional measures to deal with the automotive sector. To be effective, we believe it is critically important that these measures address 

the fuels that go into vehicles, as well as the efficiency of the vehicles themselves. 

Furthermore, any auto sector policies should recognize that it is much more expensive to achieve reductions in greenhouse gas emissions from light duty vehicles than 

from other sectors. In our judgment, the best way to address this disparity would 

be to integrate any auto sector policies with economy-wide efforts to reduce greenhouse gas emissions. At a minimum, the Federal Government should provide assistance to the auto industry to offset this much higher compliance cost. 

(A) Auto Carbon Limits 

Instead of becoming mired in the old dead-end debate over the CAFE program, 

the UAW urges Congress to explore the feasibility of establishing an additional carbon control policy that would require reductions in the carbon emissions of light 

duty vehicles sold in the United States, as well as reductions in the carbon intensity 

of the fuels that go into these vehicles. This two-pronged approach could make a 

direct, major contribution to reducing greenhouse gas emissions. At the same time, 

it also could contribute enormously to a reduction in oil consumption. 

Under this approach, auto manufacturers would have a strong incentive to improve the efficiency of their vehicles. But there also would be a strong incentive to 

increase the availability and use of alternative fuels. This approach could be integrated with an economy-wide cap-and-trade program, thereby increasing the overall 

efficiency of efforts to reduce greenhouse gases and oil consumption. It could also 

avoid the gaming and other complications that have arisen in connection with the 

CAFE program. Significantly, through the allocation of allowances, this approach 

could help to generate the revenues needed to provide assistance to struggling auto 

manufacturers and to level the playing field in the auto industry. 

Obviously, there are many details that would have to be worked out in order to 

establish this type of carbon system for the auto sector. The UAW is prepared to 

work with this Committee and the entire Senate to fashion this type of system. 

(B) Alternative Fuels 

There are a range of other initiatives that Congress could pursue to promote the 

use of alternative fuels in motor vehicles. These initiatives could make an enormous 

contribution to reducing greenhouse gas emissions and our reliance on foreign oil. 

Obviously, there is a need to promote the production of vehicles that are capable 

of running on alternative fuels. The technology required to make vehicles flex fuel 

capable is relatively inexpensive—about $150 per vehicle. GM, Ford and DCX have 

already voluntarily committed to making 50 percent of their fleets flex fuel capable 

by 2012. The UAW would support legislation mandating that certain percentages of 

all vehicles sold in the U.S. by each automaker must be flex-fuel capable by specified dates. Meanwhile, to avoid any counterproductive disincentive, the CAFE credit 

for flex fuel vehicles should be extended and expanded to cover bio-diesel. 

To increase the use of alternative fuels, there also is a need to overcome technical 

hurdles facing cellulosic ethanol and bottlenecks in distribution networks. Thus, the 

UAW supports the continuation of existing incentives for the production of bio-fuels. 

28 

We also support additional incentives or mandates relating to the conversion of existing filling stations so they have the capability to distribute alternative fuels. 

The UAW welcomes the Bush administration’s proposal to increase the renewable 

fuels mandate. We also believe the fuels carbon cap recently proposed by Governor 

Schwarzenegger represents a thoughtful approach that is worth examining on a 

Federal level. 

(C) Assistance to Encourage Domestic Production of Advanced Technology Vehicles 

The Federal Government currently provides tax credits to consumers who purchase certain advanced technology (hybrid, diesel, fuel cell) vehicles. These incentives are designed to encourage consumers to purchase more fuel-efficient vehicles. 

However, the tax credits are available regardless of where the vehicles and their 

key components are built. They are not tied to domestic production. Unfortunately, 

many advanced technology vehicles currently are assembled in other nations. Even 

worse, virtually all of the key components (hybrid electric motors; diesel engines) 

for these vehicles are built overseas, including the key components for vehicles assembled in this country, as well as those assembled in other countries. As these advanced technology vehicles gain a larger share of the market, this means we are 

replacing vehicles that have higher levels of domestic content with vehicles that 

have much lower domestic content. As a result, the consumer tax credits are effectively subsidizing the movement of automotive jobs overseas. For this reason, we believe it would be a major mistake for the Federal Government to rely solely on these 

consumer tax credits to encourage the expansion of advanced technology vehicles. 

Certainly, these tax credits should not be expanded by increasing the amounts or 

lifting the cap on the number of qualifying vehicles. 

Instead of this flawed approach, the UAW urges Congress to provide incentives 

to encourage domestic production of advanced technology vehicles and their key 

components. As was demonstrated by a November 2004 study conducted by the Office for the Study of Automotive Transportation (OSAT) of the University of Michigan Transportation Research Institute, and commissioned by the bipartisan National Commission on Energy Policy, this type of approach would help to maintain 

and create tens of thousands of automotive jobs in this country. At the same time, 

it would help to accelerate the introduction of these advanced technology vehicles, 

and thereby reduce global warming emissions and our dependence on foreign oil. 

Moreover, in light of the highly competitive nature of the U.S. auto market, any savings realized by the auto manufacturers and parts companies would inevitably be 

translated into cost reductions for consumers, and thereby encourage sales of these 

more efficient vehicles. Significantly, the OSAT study indicated that the increased 

tax revenues for Federal, state and local governments generated from the jobs created for American workers would more than pay for the costs of such manufacturer 

incentives. 

The UAW is pleased that proposals for a manufacturer’s tax credit to encourage 

domestic production of advanced technology vehicles and their key components were 

included in a number of bipartisan bills in the last Congress, and that a similar proposal is included in one of the pending CAFE bills, S. 767. However, because of the 

current financial situations of GM, Ford and DCX, such tax credits would be of limited value to them. Thus, the UAW urges this Committee look at other mechanisms 

for providing assistance to auto manufacturers to encourage domestic production of 

advanced technology vehicles and their key components. This could include proposals for Federal loan guarantees and/or tax exempt status for any bonds issued 

to cover such investments. It also could include allowing auto manufacturers to 

monetize banked R&D and/or AMT credits that they have accumulated, provided 

the funds are used for such investments. 

(D) Leveling the Playing Field in the Auto Industry 

As previously indicated, to make it economically feasible for GM, Ford and DCX 

to shoulder the retooling costs associated with any improvements in vehicle efficiency, Congress needs to help level the playing field in the auto industry relating 

to retiree health care legacy costs. There are a number of ways Congress could do 

this. This includes allowing auto manufacturers to use federally guaranteed and/or 

tax exempt bonds to help fund retiree health care benefits, or to buy their early retirees into the Medicare program or a catastrophic reinsurance program. It also includes expanding the existing 65 percent refundable, advanceable health care tax 

credit so it applies to early retirees of older manufacturing companies that have 

large numbers of retirees. The UAW is prepared to work with this Committee and 

the entire Senate to craft these or other proposals so they will help the struggling 

auto manufacturers and level the playing field in the auto industry. We believe it 

29 

is essential that such proposals accompany any legislation that would impose stiffer 

vehicle efficiency requirements on the auto manufacturers. 

Conclusion 

In conclusion, the UAW appreciates the opportunity to testify before this Committee concerning the pending CAFE legislation. We look forward to working with 

this Committee and the entire Senate to fashion new policies that will enable the 

U.S. to make significant progress in reducing greenhouse gas emissions and oil consumption, while protecting jobs and benefits for American workers and retirees. 

The CHAIRMAN. Thank you, Mr. Reuther. 

And may I now recognize Mr. Friedman. 

STATEMENT OF DAVID J. FRIEDMAN, RESEARCH DIRECTOR 

AND SENIOR ENGINEER, CLEAN VEHICLES PROGRAM, 

UNION OF CONCERNED SCIENTISTS 

Mr. FRIEDMAN. Mr. Chairman, members of the Committee, I 

really appreciate the opportunity to testify before you today; in 

part, because our country is faced today with a critical question, 

and it’s the same question and the same decision that this Committee faces, are we going to act to decrease our oil addiction? Are 

we going to reduce the greenhouse gas emissions from our cars and 

trucks, which are currently responsible for more global warming 

pollution than the entire economy of India? It may have looked 

small on that chart that Senator Levin showed, but that’s only because our country produces so much. We also have to ask, are we 

going to give consumers a solution to $3 a gallon gasoline prices? 

Unless you pass a strong 35 mile per gallon or 4 percent per year 

fuel economy bill out of this Committee, you will be answering no 

to these questions. But Americans need you to answer yes. 

You can say yes with confidence, because the facts have moved 

beyond the old debates. First, there is absolutely nothing arbitrary 

about relying on research from our Nation’s top scientists and engineers in setting fuel economy standards. By relying on the congressionally requested research from the National Academy of Sciences, 

Congress can set fuel economy standards of at least 35 miles per 

gallon over the next 10 years, or about a 4 percent per year increase. 

Nobody is claiming that fuel economy standards are a silver bullet. We will also have to tap into low-carbon renewable fuels and, 

in the long run, fuel cells and plug-in hybrid electric vehicles. We 

will also have to ask consumers to take responsibility for the number of miles they drive. But a good dose of common sense, loopholefree fuel economy policy and good engineering can deliver the cars 

and trucks this country needs to tackle our oil addiction. 

Second—and we heard some of this, I think, in the earlier 

panel—a size-based system completely changes the way you should 

look at fuel economy standards. Hopefully, you have before you a 

chart, where I tried to show an example of how size-based standards fulfilling the 35 mile per gallon requirement would treat different vehicle classes. 

If you look at the chart, you will see that large pickups would 

only have to reach about 28 miles per gallon, significantly less than 

the 35 mile per gallon fleet average. Instead of large pickup trucks 

having to meet that average, all vehicles will have to improve fuel 

economy under a size-based system. 

30 

Automakers have already developed the technology for large 

pickups to reach 28 miles per gallon. The National Academy of 

Sciences says so. Our analysis says so. These pickups would have 

the same performance, size, and safety they have today. The added 

fuel economy technology would pay for itself in less than 2 years 

at today’s gas prices, and pickup truck owners would save an additional $4,500 on gasoline over the life of the vehicle. Higher fuel 

economy standards will help farmers and small businesses. 

Now, for the same reason pickups are protected, size-based 

standards effectively eliminate any arguments about competitiveness between automakers based on the standards. Individual manufacturers who have to sell more small vehicles to offset—sorry. Individual manufacturers will not have to sell more small vehicles to 

offset sales of large vehicles. A company that focuses more on cars, 

like Volkswagen, would only have to—would have to reach about 

39 miles per gallon, while General Motors, which sells vehicles in 

all size classes, would only have to reach 34, 5 miles per gallon 

lower, even though the Nation’s fleet would average 35. 

Now, this also means that the light-truck loophole can be eliminated, because the new size-based system provides automakers 

with added flexibility. 

The third important fact that has changed is that increasing fuel 

economy will boost profits and create more jobs in the United 

States. We’ve heard 30 years of concern, and understandable concern, about how fuel economy standards will impact our manufacturers. But a recent 2006 study from the University of Michigan 

shows that Detroit’s Big Three could increase profits by $1.3 billion 

in 2010 if they invest in fuel economy, even if gasoline only costs 

$2 per gallon. Our own work shows that auto-sector jobs could 

grow due to higher fuel economy standards, compared to the 

shrinking world autoworkers are facing today. 

Finally, fuel economy standards are the only policy under consideration today that will cut consumer spending at the pump. A 35 

mile per gallon fuel economy standard is equivalent to cutting today’s $3 per gallon gasoline price by 65 cents, even after paying for 

the technology to reach that goal. 

Mr. Chairman, Americans have moved beyond the old debate, 

and it’s time for Congress to do the same. A recent New York Times 

poll showed that over 90 percent of Americans support increasing 

fuel efficiency. A Detroit Free Press poll showed that a majority of 

Michiganders favored higher fuel economy standards. And a yet-tobe-released poll by the Mellman Group shows that 84 percent of 

American pickup truck owners support a mandatory increase in the 

fuel efficiency of cars, SUVs, and trucks, even when it is made 

clear to them that they would have to pay more up front in order 

to save money on gasoline in the long run. Americans are ready to 

do their part. They want to buy more patriotic cars and trucks that 

cut oil dependence, reduce global warming pollution, and save them 

money. What America needs is leadership from you. Saying yes to 

guaranteed 35 miles per gallon over 10 years, or a guaranteed 4 

percent per year increase in fuel economy standards, will deliver 

what Americans are asking for. 

Thank you very much. 

[The prepared statement of Mr. Friedman follows:] 

31 

PREPARED STATEMENT OF DAVID J. FRIEDMAN, RESEARCH DIRECTOR AND SENIOR

ENGINEER, UNION OF CONCERNED SCIENTISTS

Mr. Chairman and Members of the Committee, I appreciate the opportunity to 

testify before you today. 

I appreciate the opportunity because our country is faced with a critical decision, 

the same decision faced by this committee. Are we going to continue to increase our 

addiction to oil? 

There are many important ways to ask the same question: 

• Are we going to continue to weigh down our economy by paying to import 60 

percent of our oil at more than $60 per barrel? 

• Are we going to continue to produce more global warming pollution from our 

cars and trucks than the entire economy of India? 

• And are we going to continue to leave consumers with no solutions to $3.00 per 

gallon gasoline prices? 

We have been asking these questions for 30 years, and, for a long time, it seemed 

like we were having the same debate over and over again, but the facts have now 

moved beyond the old debate. 

Fact: There is nothing arbitrary about relying on research from our Nation’s top 

scientists and engineers in setting fuel economy standards. By relying on Congressionally requested research from the National Academies of Science and research 

from MIT, Porsche Engineering, the American Council for and Energy Efficient 

Economy, and the Union of Concerned Scientists, Congress can set science-based 

fuel economy standards of at least 35 mpg for the fleet of new cars and trucks over 

the next 10 years, or about a 4 percent per year increase in fuel economy. Analysis 

of the NAS data shows that a 37 mpg fleet is possible using existing technology. 

Our own analysis shows that we could top 40 mpg. 

There is no reason to leave the standard setting task to the National Highway 

and Traffic Safety Administration (NHTSA) which has a very poor record when it 

comes to increasing standards. 

The Ten-in-Ten bill would: 

• Cut our oil dependence by 2.1 million barrels per day in 2025—almost as much 

as we currently import from the Middle East. 

• Save consumers over $40 billion in 2025, even if gasoline is only $2.00 per gallon. 

• Reduce global warming pollution by more than 350 million metric tons of carbon dioxide equivalent—an 18 percent reduction that is equivalent to taking 

about 50 million of today’s typical cars and trucks off the road. 

Fact: Pickups are protected under the reformed fuel economy standards and farmers and small businesses will get the performance they need while saving thousands 

of dollars. The administration is asking for the ability to use vehicle size when setting fuel economy targets—a size-based system completely changes the way you 

should look at CAFE. Automakers would not have to sell more small vehicles to offset sales of large vehicles. All vehicles will have to use better technology to improve 

fuel economy, not just big vehicles. 

The chart below is an example of how a sized-based standard fulfilling the 35 mpg 

fleetwide requirement would treat different vehicle classes. 

32 

Combining a fleetwide fuel economy standard of 35 mpg with the President’s request to use size-based standards means that large pickups would only have to 

reach about 28 mpg—they will not have to hit the fleetwide 35 mpg average. Instead, all vehicles will have to improve fuel economy, including compact cars which 

would have to reach about 40 mpg. 

With existing technology, the NAS showed that full-size pickups could reach 29.5 

mpg. Our analysis shows that a pickup achieving 28 mpg would save its owners 

over $6,000 on gasoline during the life of the vehicle. The pickup would have the 

same power, performance, size and safety it has today, and would cost an additional 

$1,500. However, the added fuel economy technology would pay for itself in less 

than 2 years with gasoline at $2.50 per gallon. Higher fuel economy standards will 

help farmers and small businesses who rely on trucks as much or even more than 

the average consumer. 

Fact: Automakers that concentrate on the pickup market won’t have to compete 

on fuel economy with automakers that focus more on cars—the old competitiveness 

arguments are effectively eliminated. The 35 mpg goal applies only to the aggregate 

fleet of new cars and trucks sold by all automakers. NHTSA will be able to set separate fuel economy targets for different classes, so a company that focuses more on 

cars, like Volkswagen, would have to reach 39 mpg, while GM, which is spread out 

more across different size classes, would only have to reach 34 mpg. The new system 

requires all automakers to invest in fuel economy, addressing automaker complaints 

that they are currently being treated unfairly if they sell more large vehicles. 

This also means that the light truck loophole, and its problematic impacts, can 

be eliminated because the new size-based system provides automakers with added 

flexibility around larger vehicles. 

Fact: Increasing fuel economy will boost Big 3 profits and create more jobs in the 

U.S. A 2006 study from the University of Michigan shows that Detroit’s Big Three 

could increase profits by $1.3 billion in 2010 if they invest in fuel economy, even 

if gasoline costs only $2 per gallon. However, if they follow a business-as-usual approach their lost profits could be as large as $3.6 billion if gasoline costs $3.10 a 

gallon. 

There is a real opportunity here. If existing technologies are used to reach a 40 

mpg fleet in 10 years, we found that these investments would lead to 161,000 more 

jobs throughout the country. In the automotive sector, projected jobs would grow by 

40,800. These new jobs would be created because of investments in new technologies 

by the automakers and because consumers would shift spending away from gasoline 

to more productive parts of the economy. 

Fact: Adding a fleetwide goal to size-based standards addresses the key Achilles 

heel of that system. Size-based standards alone can create an incentive to make vehicles bigger to avoid meeting tougher standards, even if consumers are not pushing 


503ucs.eps
33 

for bigger vehicles. This would allow automakers to push down America’s fuel economy and increase our oil dependence. A fleetwide goal eliminates that incentive by 

requiring all automakers to add technology if they push up the size of the fleet. On 

the other hand, if consumers do demand bigger vehicles on their own, they can get 

them under this system. All vehicles, whether large or small, will just have to add 

more of the existing technology. 

Fact: Fuel economy standards are the only policy currently under consideration 

that will cut consumer spending at the pump. A 35 mpg fuel economy standard is 

equivalent to cutting today’s $3 per gallon gasoline price by 65 cents, even after paying for the improved technology. That represents a 22 percent cut in summer gas 

prices. 

Gasoline savings would pay for the added cost of fuel economy technology ($1,100) 

in about 2 years. After that, the average consumer would save $3,400 more on gasoline over the remaining life of the vehicle. Looking at it another way, assuming you 

are the typical person and you take out a loan on the car, your monthly gasoline 

costs will go down more than your monthly loan payments will increase to pay for 

the added fuel economy technology, so you will begin saving money on the first day 

you own the car. 

Fact: Fuel economy standards work. If we still had the same fuel economy we did 

in the early 1970’s, we would be using an additional 80 billion gallons of gasoline 

on top of the 140 billion gallons we will use this year. That would represent an increase in oil demand by 5.2 million barrels of oil per day, or a 25 percent increase 

in our oil addiction. At last year’s average price for regular gasoline, about $2.50 

per gallon, that represents $200 billion dollars saved. That number could have been 

much better, however, if fuel economy standards had not remained essentially unchanged for the past two decades. 

Fact: These standards can be met by putting existing efficiency technology to 

work; we don’t even need hybrids, though they certainly can contribute. 

Fact: These standards can be met while maintaining or improving highway safety. 

Major reports from researchers at Oakridge National Labs, Lawrence Berkeley National Labs, the University of Michigan, and DRI demonstrate that fuel economy is 

not linked with increased fatalities, large vehicles do not have lower fatality rates 

when compared to smaller vehicles, and increased weight is actually associated with 

increased fatalities. 

Fact: A 35 mpg fleet can keep the performance we have now. Today, you can buy 

a family car that goes from 0 to 60 mph as fast as a late 1960s Mustang or Porsche 

911. Using technology to increase fuel economy will allow us to keep that performance but focus new technology applications on the crisis at hand: oil addiction, climate change and high gas prices. 

Fact: Consumers are trying to buy cleaner and more efficient vehicles, but they 

don’t have many choices. The higher fuel economy version of America’s top selling 

car, the Toyota Camry outsells the lower fuel economy version by nearly four to one. 

But even that vehicle does not break the 30 mpg barrier for EPA combined fuel 

economy. The auto industry’s version of a 30 mpg vehicle is a compact car, leaving 

millions of Americans who need minivans, family cars and SUVs with no option. 

Fact: Americans have moved beyond the old debate. 

• A recent New York Times poll showed that over 90 percent of Americans support requiring automakers to make more efficient cars. 

• The same holds true for people living at the center of the auto industry—a majority of Michiganders favor higher fuel economy standards for cars and trucks, 

with some supporting increases to 40 miles per gallon or more, and many would 

pay hundreds of dollars extra for more-efficient vehicles, according to the latest 

Detroit Free Press—Local 4 Michigan Poll. 

• Pickup drivers also want higher fuel economy. A yet to be released poll by the 

Mellman Group shows that 84 percent of American pickup truck owners support 

a mandatory increase in the fuel efficiency of cars, SUVs, and trucks—even 

when it was made clear that they would have to pay more up front to save 

money on gasoline. These findings held across party lines and were even stronger among owners who live in rural areas than those who live in cities. 

It is time for Congress to move beyond the old debate too. 

Americans are ready to do their part, they want to buy more patriotic cars and 

trucks that cut oil dependence, reduce global warming and save them money. What 

Americans need is leadership from you. Requiring higher fuel economy standards 

will ensure consumers can have the choice to buy the higher fuel economy cars and 

trucks that the National Academies say are possible—a 29.5 mpg pickup, a 34 mpg 

34 

SUV, a 37 mpg minivan, and a 41 mpg family car. These standards should be sizebased, but should put in place steps to eliminate or counteract any loopholes. 

Nobody is claiming that fuel economy standards are a silver bullet. We will also 

have to tap into low carbon renewable fuels and ask consumers to take responsibility for the number of miles they drive. Nobody should be allowed to shirk their 

patriotic responsibility to cut our oil addiction and address the high costs climate 

change will have on our economy. But a good dose of common sense fuel economy 

policy and good engineering can deliver the cars and trucks this country needs to 

help tackle these critical problems. 

For further information, I have attached my recent testimony before this committee for additional details on these important issues. I have also attached a fact 

sheet on the Ten-in-Ten bill, the National Academies report, and the fuel economy 

potential both for the country and for trucks. I hope you find these helpful. 

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

Admiral Blair? 

STATEMENT OF ADMIRAL DENNIS C. BLAIR, USN (RET.), 

FORMER COMMANDER-IN-CHIEF, U.S. PACIFIC COMMAND, 

USN; MEMBER, ENERGY SECURITY LEADERSHIP COUNCIL; 

OMAR BRADLEY CHAIR OF STRATEGIC LEADERSHIP, ARMY 

WAR COLLEGE AND DICKINSON COLLEGE 

Admiral BLAIR. Thank you, Mr. Chairman. 

This afternoon, I’m speaking on behalf—turn it on. All right. 

This afternoon, I’m speaking on behalf of the Energy Security 

Leadership Council. We’re a group of 20 business executives and 

retired senior military officers. We’re led by Fred Smith, of FedEx, 

and General P.X. Kelley, retired United States Marine Corps. And 

our driving belief is that the oil dependency that we have severely 

threatens the economic and the national security interests of the 

United States. And this is one of the most important security 

issues facing this country. 

In December, we unveiled a set of recommendations to the Nation on reducing U.S. oil dependence, and we recommended a comprehensive program, specific measurable steps to cut in half the 

number of barrels of oil that we consume to produce a dollar of 

GDP by 2030; that is, to halve the oil intensity of this country. 

And, based on these recommendations, Senator Dorgan and Senator Craig have designed the Security and Fuel Efficiency Energy 

Act of 2007, that Senator Dorgan referred to, and they recently introduced the fuel economy sections of this bill as the Fuel Efficiency Energy Act of 2007. 

And we’ve already heard the contributions that many distinguished Senators in this Committee have made in recognizing that 

transportation fuel efficiency is a vital national security imperative. 

The iron logic is, we import 60 percent of the 20 million barrels of 

oil we use every day. Seventy percent of that is used in the transportation sector. The transportation sector depends on oil. A strategy for reducing oil dependency has got to tackle the transportation 

sector. That’s not all it has to tackle, but it has to tackle that. 

So, under our Council’s proposal, we propose that the fleet of new 

passenger cars and light trucks sold in the United States each 

year, the entire fleet, will have to get 4 percent better mileage 

every year than the fleet sold the year before. We also would apply 

the same standards to commercial trucks, which have never previously been subject to limitations. 

35 

This 4 percent is not a number plucked out of thin air. It’s in line 

with the historical annual gains that we made when we took this 

thing seriously and we last committed ourselves to fuel economy, 

and this has been cited several times. This is consistent with technical study results. We can do it. 

We also believe that these new standards have to have flexibility. 

We believe that NHTSA ought to have the discretion to establish 

attribute-based classes of vehicles so that there could be a different 

standard for freight-hauling vehicles from that for passenger vehicles. 

We also believe that there ought to be off-ramps. If NHTSA, 

based on expert opinion and data, judges that 4 percent in a given 

year is either technologically infeasible or it endangers safety or it’s 

not cost-effective, then they should have the ability to change it. 

And so, we believe that this idea of a 4 percent standard, vehicle 

classes based on attributes, and off-ramps gives credit to American 

ingenuity, technological prowess, and it will protect business from 

value-destroying mandates. 

And finally, the legislation that we favor contains a variety of 

consumer and manufacturer tax credits that will help car makers 

and car buyers to adjust to buying cars which have greater fuel 

economy. And this will result in, we think, two outcomes. It’ll improve our energy security and will also provide for a domestic automobile industry that is competitive. 

Now, I personally honor and respect the historical contribution to 

national defense that companies like GM and Ford have made. 

More than half a million ‘‘deuce and a half’’ trucks carried U.S. 

troops and their gear around in World War II. The Ford’s Willow 

Run plant, by itself, produced nearly 9,000 B–24s. And we think 

the American auto industry can contribute to the national defense 

in the future, as it has in the past. 

One question we’re often asked is, what is a bunch of retired senior officers doing getting so worked up about fuel-efficient cars? 

And I guess the answer is that we’ve seen firsthand how increasing 

U.S. dependence on oil from underdeveloped volatile areas overseas 

creates security risks for the country. It puts strains on our military forces and assigns them expensive missions for which they’re 

the wrong instrument of national power. 

When I first joined the Navy, in 1968, the entire U.S. military 

presence in the Persian Gulf was one flagship and two destroyers. 

Now our security policy in the Gulf is dominated by the use of 

major military force units. It’s expensive. The Persian Gulf is on 

the other side of the world. It takes over three ships to maintain 

one over there. It takes three soldiers, airmen, or marines. You just 

got back, you’re there, or you’re going. And it’s difficult to do it 

right. When we put major force units into underdeveloped volatile 

countries, it has major unintended consequences, rarely turns out 

to be quick, controlled, and short-lived, and our forces there of this 

size with this duration cause local resentments and dangers that 

really work against what we’re trying to achieve with our overall 

security policy. 

You look at new sources of oil, like Central Asia, West Africa, 

they’re drawing U.S. military forces into similarly underdeveloped 

volatile regions. We can see the same playbook being rewritten. We 

36 

need to find a better approach to oil security, and we have to reduce our dependence on overseas oil. 

So, let me tie things back to the policy objectives of this Committee. Improved security will require greater conservation, as well 

as increased production of petroleum and alternatives here at 

home. So, improved fuel economy will increase not just our energy 

security, but our military security, our overall national security. 

We’ll be less susceptible to being whipsawed by events in the Persian Gulf, Central Asia, and West Africa. We’ll not have to be on 

a hair-trigger for major military involvements in these regions with 

their expense and all the difficulties of doing the mission successfully and extracting cleanly. 

So, let me finish by encouraging you to support amendments that 

ensure an aggressive, but flexible, approach to increasing fuel economy of the entire—the entire—U.S. transportation fleet. The essential elements of this approach are a 4 percent annual increase applied to all on-road vehicles, including medium and heavy trucks, 

and containing these off-ramps that will protect consumers and 

manufacturers. 

And we, on the Council, are committed to working with you to 

continue making this an important—getting the work done. And we 

just all feel that it’s really time to move and reverse this increasing 

energy dependency, which is endangering our national security. We 

can do it in a bipartisan way that the entire country can support. 

Thank you, Mr. Chairman. 

[The prepared statement of Admiral Blair follows:] 

PREPARED STATEMENT OF ADMIRAL DENNIS C. BLAIR, USN (RET.), FORMER

COMMANDER-IN-CHIEF, U.S. PACIFIC COMMAND, USN; MEMBER, ENERGY SECURITY

LEADERSHIP COUNCIL; OMAR BRADLEY CHAIR OF STRATEGIC LEADERSHIP, ARMY

WAR COLLEGE AND DICKINSON COLLEGE

I would like to thank the Committee for the opportunity to discuss fuel-economy 

legislation from the perspective of national security. I speak to you on behalf of the 

Energy Security Leadership Council (Council), a non-partisan group that brings together twenty business executives and retired senior military officers who are concerned about the perilous state of U.S. and global energy security. We are led by 

Frederick W. Smith, Chairman, President and CEO of FedEx, and General P.X. 

Kelley (Ret.), the 28th Commandant of the United States Marine Corps. And we are 

united in the belief that oil dependence severely threatens the economic and national security of the United States. 

On December 13, 2006, the Council unveiled a set of Recommendations to the Nation on Reducing U.S. Oil Dependence. This report outlines a comprehensive energy 

security strategy. It replaces the false hope of domestic energy independence with 

strategies for better managing the reality of global energy interdependence. The 

suggested initiatives are aggressive while being balanced and credible. Where the 

market cannot be expected to provide solutions, government has been asked to apply 

workable standards capable of spurring the needed private-sector responses. The 

members of the Council have pledged to continue working until these policy recommendations are enacted into law. 

During the last few months, the Council has collaborated with Senator Byron Dorgan and Senator Larry Craig to design legislation that incorporates the central elements of the Recommendations. This collaboration has given rise to the ‘‘Security 

and Fuel Efficiency Energy Act of 2007 (SAFE Energy Act),’’ which was formally introduced on March 14. Senators Dorgan and Craig recently introduced just the fuel 

economy sections of this bill as the ‘‘Fuel Efficiency Energy Act of 2007.’’ I want to 

commend Senators Dorgan and Craig for their leadership and commitment. 

I also want to thank Chairman Inouye and Vice Chairman Stevens along with 

Senators Feinstein, Snowe, and all others who have recognized that increased transportation fuel efficiency is a vital national security imperative. Our nation consumes 

more than 20 million barrels of oil per day (mbd), more than 60 percent of it imVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80033.TXT JACKIE
37 

ported. Nearly 70 percent of our oil consumption goes to fuel the transportation sector. Transportation relies on oil for 97 percent of delivered energy with almost no 

substitutes available. By any measure that I know of, such extraordinary dependence is inconsistent with national security. 

The Council’s approach tackles oil dependence through many policies, but none of 

these is more crucial than reformed and strengthened vehicle fuel economy standards. Standards are necessary because there is no free market for oil. Oil prices may 

be a function of supply and demand, but the oil market is well removed from the 

free-market ideal. As much as 90 percent of all oil and gas reserves are held by national oil companies (NOCs) that are either partially or fully controlled by governments, not public companies operating in the free market. Moreover, the market is 

highly cartelized, with one group—OPEC—setting prices and supply based on a variety of pressures including political concerns. The marketplace alone will also not 

act preemptively to mitigate the enormous damage that would be inflicted by a serious and sudden price increase. Thus, government must apply workable standards 

capable of spurring private-sector responses. 

Under the Council’s proposal, the fleet of new passenger cars and light trucks sold 

in the United States each year will have to get 4 percent more miles per gallon than 

the fleet of cars and light trucks sold the year before. The same will be true of commercial trucks, which have never previously been subject to fuel efficiency standards. The proposal gives the National Highway Traffic Safety Administration 

(NHTSA) the discretion to require different percentage increases for different classes of vehicles in pursuit of 4 percent annual fuel economy improvement for the entire new vehicle fleet. 

These measures will help us reduce the oil intensity of this country. Oil intensity—the amount of oil needed to generate a dollar of GDP—has been cut in half 

since the oil shock of the 1970s. The result is a U.S. economy that still sees steady 

growth despite high oil prices such as those experienced over the last few years. Unfortunately, progress in further lowering oil intensity has slowed noticeably in the 

last decade. We must do better. 

Four percent is not an arbitrarily chosen number. It is right in line with the historical annual gains that were achieved when the Nation last committed itself to 

fuel economy. It is also perfectly consistent with scientifically-validated forecasts of 

cost-effective future fuel economy improvements. Between 1975 and 1985, the miles 

per gallon (mpg) performance of passenger cars in the U.S. increased 5.5 percent 

per year. The figures for light trucks rose 4.2 percent per year over the same period. 

In its 2002 study of CAFE, the National Academy of Sciences (NAS) concluded 

that the fuel economy of large U.S. passenger cars could be cost-effectively raised 

by as much 27 percent within a decade using available and emerging technologies. 

For the largest light trucks, the potential improvement was 42 percent. The implied 

potential fuel economy for the entire fleet given the existing mix of vehicles was 30.3 

mpg, more than 25 percent above the current figures. Significantly, these improvements were premised on the use of existing and emerging technologies without altering the average weight, size-mix, or performance of the fleet. The 2002 study was 

conducted on the basis of gasoline prices of $1.50 per gallon. One of the principal 

authors of the 2002 study, Dr. David L. Greene of Oak Ridge National Laboratory, 

has incorporated today’s higher fuel prices into the NAS model while holding technology assumptions constant. A retail gasoline price of $2.50 per gallon raises the 

expected cost-effective fuel economy of the entire fleet to 33.9 mpg. Even these projections may be too pessimistic in light of accelerating technological progress. Indeed, since diesels and hybrids did not figure in the cost curves utilized for the 2002 

study, but are now viewed as promising candidates for large-scale introduction in 

the U.S. marketplace, Dr. Greene is optimistic that current fuel economy levels can 

be raised by as much as 50 percent—even after applying the same weight and performance constraints used in the 2002 study. 

The new standards are designed to be very flexible. For instance, pickup trucks 

may not be able to obtain the same fuel-economy levels as SUVs or minivans, but 

the ESLC proposal does not require them to do so. To reiterate, NHTSA will have 

the discretion to require different percentage increases for different classes of vehicles in pursuit of 4 percent annual fuel-economy improvement for the entire new vehicle fleet. Vehicle classes will be determined by key attributes, and under this approach it would be perfectly justifiable to hold primarily freight-hauling vehicles to 

a lesser fuel-economy standard than would be applied to vehicles designed first and 

foremost for transporting passengers. By assessing multiple attributes, NHTSA can 

constructively classify vehicles to maximize fuel economy while tailoring the standards so that pickups will not be forced to compete with sedans that are roughly as 

long and as wide. 

38 

Flexibility is further ensured by ‘‘off-ramps’’ that may be employed if NHSTA 

finds 4 percent improvement in a given year to be technically infeasible, unsafe, or 

not cost-effective. These are not loopholes, since expert opinion and data will be required to invoke them. But, together, the 4 percent annual improvement standard 

and the off-ramps give credit to American ingenuity and technological prowess while 

protecting business from unachievable or value-destroying mandates. 

Finally, the proposed legislation contains a variety of consumer and manufacturing tax credits that will help car makers and car buyers adjust to greater fuel 

economy. 

Overall, this approach aims for two highly desirable outcomes: improved energy 

security and a competitive domestic automotive industry. To improve energy security, America needs to get millions of fuel efficient cars on the road. But we will 

not have a secure source of these vehicles without public policies that expedite the 

needed transition of U.S.-based manufacturing capacity. In order to level the playing field and enable domestic manufacturers to effectively compete in the growing 

market for advanced-technology vehicles, we support tax incentives for the retooling 

of domestic automobile parts and manufacturing facilities. 

Let me say that I recognize and respect the historical contribution that car companies like GM and Ford have made to our defense. More than half a million GMC 

‘‘Deuce and a half’’ trucks gave U.S forces in World War II unmatched logistical support. Ford’s Willow Run plant by itself produced nearly 9,000 B–24 bombers that 

provided the U.S. Army Air Corps with much of its strategic punch. I am asking 

these companies to continue this legacy of service to the Nation by embracing the 

mission of improved fuel economy. 

Having outlined the fuel-economy legislation we support, I’d like to devote the rest 

of my time to describing why improvement is so necessary. I will do this from a military vantage point, since this is where my expertise and knowledge are concentrated. Put simply: the increasing U.S. dependence on oil imported from underdeveloped volatile regions of the world is putting a strain on our military forces and 

it is assigning them expensive missions for which they’re really the wrong instrument of national power. 

This problem is best understood by looking at the Persian Gulf which is home to 

the five countries with the greatest proven conventional petroleum reserves. When 

I first joined the Navy in 1968, the entire U.S. military presence in that part of the 

world was a one star Navy admiral and two destroyers that would deploy to hold 

simple exercises with Gulf countries. As I recall gas at that time ran 30 to 40 cents 

a gallon for my Austin Healey 3000, and the Persian Gulf was a rare duty station 

for members of the armed forces. 

In the late 1970’s two serious threats to Persian Gulf oil were identified by the 

Carter Administration, which became seized by the issue. The first was a potential 

Soviet invasion from the north into the oil regions around the Gulf, a concern 

heightened by the Soviet occupation of Afghanistan. The second was an aggressive 

and fundamentalist Iran, which was led by a regime that had permitted and then 

exploited the takeover of the American Embassy in Tehran. In response, the Department of Defense created the Rapid Deployment Joint Task Force, the RDJTF, a 

planning headquarters and contingency force that could quickly deploy to the Gulf 

to defeat a major land invasion. In 1983 as part of its general military buildup 

against the Soviet Union, the Reagan administration upgraded this task force to a 

regional command like the European Command and the Pacific Command, where 

I served and where I ultimately commanded. So this Central Command had full 

time responsibility for U.S. interests in the region. 

Every commander of the Central Command, which was what the new organization 

was called, has had the mission of ensuring the security of oil from the Persian Gulf 

since that time. In response to the 1987 attacks on tankers by Iran and Iraq as part 

of their war, the United States gave Kuwaiti tankers U.S. registry and provided 

naval escorts for them as well as for tankers of allied nations. So, by 1990 America 

had a functioning military command structure, had deployed major forces to the 

Gulf both for exercises and for combat operations, and had established a military 

commitment to oil security. The military component of American security policy in 

the Gulf region had greatly increased, and—as we saw—it crowded out diplomacy, 

reliance on the market, and more indirect instruments of national power. 

U.S. security policy in the Gulf since then has been in the headlines, familiar to 

everyone, and dominated by the use of major military force: operations Desert 

Shield and Desert Storm in 1991; during the course of the 1990’s the maintenance 

of Air Force and Navy air wings in the Gulf on a full time basis to enforce no-fly 

zones in the north and the south of Iraq; an Army brigade full time in Kuwait; periodic bombings of Iraq during that period. And then following 9/11, the intervention 

in Afghanistan and invasion and occupation of Iraq. For those of us in the armed 

39 

forces the operations in this region of the world are expensive and tactically problematic. 

As a general rule, the use of large scale military force in volatile regions of underdeveloped countries is difficult to do right, has major unintended consequences and 

rarely turns out to be quick, effective, controlled and short lived. The Persian Gulf 

is just about on the other side of the world from the United States. It takes more 

than 3 ships in the U.S. Navy to keep one ship on station: one there, one going, 

one coming. Pretty much the same ratio holds for airplanes and, as we’re learning 

in Iraq, for soldiers and Marines. You just got back, you’re there or you’re getting 

ready to go again. A major military presence in the Gulf region raises local 

resentments and dangers that work against what we’re trying to achieve. This is 

not just a post-9/11 phenomenon. It was true well before 9/11 in terms of the effect 

of major U.S. military forces staged or spending large amounts of time in the Gulf 

region. So after all this major military effort, what’s the bottom line? Gas is pushing 

$3 a gallon, we’re extending the tours of soldiers in the Gulf region to 15 months, 

and we’re more subject to events in the Persian Gulf than we ever were in the past. 

Now, why has American security policy developed in this way? The fast pace of 

operations in the region has given little pause for reflecting on overall trends and 

effectiveness. American forces have been engaged in the Middle East since the tanker wars of 1987, and events have seemed to demand increasing our military force, 

not reducing it. But driving this engagement is America’s ever growing dependence 

on overseas petroleum. This dependence has influenced successive administrations 

to strengthen military engagement rather than to search for other means—perhaps 

politically more difficult but in the long run more cost-effective means—for boosting 

energy security. 

This expensive and somewhat clumsy model is shaping our energy security approach in other regions of the world outside the Gulf. Consider Central Asia, home 

to an increasing share of the world’s oil and natural gas reserves in the future. Already we see recourse to some of the early chapters to the same play book we followed in the Persian Gulf, 20 and 30 years ago. 

In conclusion, let me tie things back to the policy objectives of the Committee: improved security will require greater conservation as well as increased production of 

petroleum and alternatives here at home. Put another way, improved vehicle fuel 

economy will increase our military flexibility and our overall national security, not 

just our energy security. We’ll be less susceptible to being whip-sawed by events in 

the Persian Gulf, Central Asia and West Africa. We will not have to be on a hairtrigger for major military involvements in these regions with their great expense 

and all the difficulties of successful mission execution and withdrawal of forces. And 

we will be in position to break the cycle of increasing oil dependence followed by 

increased deployments of major U.S. forces into volatile and underdeveloped regions 

where they are often poorly matched to the mission of oil security. 

So let me conclude by encouraging you to support amendments that ensure an aggressive but flexible approach for increasing the fuel economy of the entire U.S. 

transportation fleet. In keeping with the Council’s fuel-economy proposal as it is embodied in the SAFE Energy Act and the Fuel Efficiency Energy Act of 2007, future 

fuel-economy provisions should: 

1. require 4 percent annual increases in vehicle fuel economy, 

2. be applied to all on-road vehicles, including medium and heavy trucks, and 

3. contain ‘‘off-ramps’’ that will protect consumers and manufacturers by relaxing the 4 percent annual increases if they prove to be too costly, unsafe, or technically infeasible. These are not loopholes, since expert opinion and data will 

be required to invoke them. 

The Council is committed to working with you in true bipartisan fashion to 

achieve these goals. Our nation deserves no less. 

The CHAIRMAN. I thank you very much, Admiral Blair. 

Mr. Stanton? 

STATEMENT OF MICHAEL J. STANTON, PRESIDENT AND CEO, ASSOCIATION OF INTERNATIONAL AUTOMOBILE 

MANUFACTURERS, INC. 

Mr. STANTON. Thank you, Mr. Chairman. 

AIAM and its members have historically taken progressive positions on fuel economy, energy security, and global climate change. 

40 

We have consistently supported the need to addresses these issues 

and the auto industry to play a role in this process. 

In a 2001 statement before the National Academy of Sciences, 

AIAM recognized the seriousness of these issues and urged that 

consideration be given to the adoption of an attribute-based CAFE 

program. AIAM supports NHTSA’s restructuring of the light truck 

CAFE program based on vehicle footprint. Although this program 

is new, we are optimistic that NHTSA has promulgated a good 

final rule. Consequently, we favor legislation to authorize similar 

restructuring of the passenger-car standards, leading to the adoption of some form of an attribute-based system. 

Such a system is desirable, since it enables NHTSA to set standards at levels that are feasible for manufacturers, offering different 

mixes of vehicles and more flexibility in responding to changing 

market conditions. In addition, this approach helps ensure that future gains in fleet fuel economy will be the result of technology, 

and not shifts in fleet mix. 

Lead time for any new standards is also critical. Current law requires NHTSA to set standards with a minimum of 18 months lead 

time. However, 18 months is sufficient only for standards that impose little increase in stringency. For more aggressive standards, 

substantial lead time is necessary to allow for the development and 

implementation of new technology. AIAM recommends that 

NHTSA set standards in 3-year increments and provide a minimum of 3-year lead time. 

AIAM unequivocally opposes the adoption of a uniform percentage improvement requirement or any other similarly discriminatory program such as a specific manufacturer total carbon tailpipe 

cap-and-trade system. 

AIAM supports the elimination of the domestic import fleet requirements for passenger cars. This requirement was originally intended to inhibit domestic manufacturers from importing large 

numbers of small captive-import vehicles as a compliance strategy. 

In practice, this provision has created a disincentive for foreignbased companies to increase the U.S. content of their vehicles to 

levels above 75 percent. This disincentive is real, and has cost U.S. 

jobs. 

We also support enhanced trading of CAFE credits between a 

manufacturer’s fleets. The law should allow credits to be traded between import and domestic passenger car fleets, if the distinction 

is not eliminated, and between passenger cars and light trucks. 

This approach would maintain the fleet average concept central to 

the determination of compliance under the existing law. 

And we also believe the carry-forward and carry-back provisions 

in current law should be extended from 3 years to 5 years. This 

will have no adverse effect on fuel savings, but will provide additional compliance flexibility. Enhanced credit trading has, in fact, 

been recommended by the National Academy of Sciences as a 

means of increasing manufacturers’ compliance flexibility while reducing costs. 

AIAM is concerned that State-level fuel economy standards, or 

standards that are functionally equivalent to fuel economy standards, would impose severe manufacturing and marketing burdens. 

As a result of the Supreme Court’s decision in Massachusetts 

41 

versus EPA, NHTSA has authority to set fuel economy standards, 

and EPA has authority to set emission standards. However, we believe that the methods of complying with CAFE standards, on the 

one hand, and with carbon dioxide standards, on the other hand, 

are virtually indistinguishable. AIAM favors a national program 

that avoids separate requirements. 

Finally, the effectiveness of CAFE would be significantly enhanced if coupled with appropriate market-based incentives for 

consumers. Tax credits for advanced technology vehicles are an example of an incentive that is potentially very effective. Such credits 

are helpful in overcoming the high initial cost of new technology. 

And thank you for the opportunity to testify today. AIAM and its 

members look forward to working with the Committee as it moves 

forward on this important subject. 

[The prepared statement of Mr. Stanton follows:] 

PREPARED STATEMENT OF MICHAEL J. STANTON, PRESIDENT AND CEO, 

ASSOCIATION OF INTERNATIONAL AUTOMOBILE MANUFACTURERS, INC. 

Good afternoon, Mr. Chairman and members of the Committee. I am Michael J. 

Stanton, President and CEO of the Association of International Automobile Manufacturers, Inc. (‘‘AIAM’’). I appreciate the opportunity to discuss with you today the 

very important matter of legislation regarding the Corporate Average Fuel Economy 

(CAFE) standards program. 

AIAM is a trade association representing 14 international motor vehicle manufacturers who account for 40 percent of all passenger cars and light trucks sold annually in the United States. AIAM members have invested over $35.5 billion in 47 U.S. 

vehicle plants, component manufacturing facilities and R&D centers which employ 

92,500 Americans with a payroll of nearly $7 billion. AIAM member company U.S. 

facilities produced 3.37 million units in 2005—more than 31 percent of total U.S. 

production. More than half (54 percent) of all vehicles sold by AIAM members in 

the United States are made in the United States. 

AIAM members plan to invest another $3 billion in the United States to create 

7,000 new American jobs by 2009 by constructing three new vehicle assembly plants 

and an engine plant and expanding existing facilities. AIAM companies purchased 

nearly $52 billion in parts and materials from U.S. suppliers in 2005 and that number is growing. 

AIAM member companies have for many years been leaders in offering fuel-efficient vehicles for the U.S. market. Historically, vehicles produced by our member 

companies have topped the Environmental Protection Agency’s (EPA) annual list of 

most fuel-efficient vehicles. Nine of the top ten models on the EPA’s Fuel Economy 

Leaders list for 2007 are manufactured by AIAM members. Member companies have 

achieved this fuel economy leadership to a significant degree by pioneering the introduction of advanced automotive technology into their vehicles. In recent years, 

this leadership has been demonstrated with the introduction and popular acceptance 

of hybrid vehicles and continuously variable transmissions and successful development work on other advanced technology vehicles including fuel cells. Starting in 

1999, AIAM members were the first to offer American consumers hybrid electric vehicles and have now sold more than a half-million hybrids in the United States. For 

the 2007 model year, AIAM members offer eight hybrid models—six cars and two 

SUVs. Our member companies continue to introduce a variety of advanced technology models. 

AIAM and its members have historically taken progressive positions with regard 

to the related issues of fuel economy, energy security and global climate change. We 

have consistently supported the national need to address these matters and for the 

auto industry to play a constructive role in that process. In a 2001 statement before 

the National Academy of Sciences (NAS), AIAM recognized that the seriousness of 

energy security and global climate change justify a regulatory role for the Federal 

Government in enhancing vehicle fuel efficiency. At that time we urged that consideration be given to the adoption of an attributebased CAFE standards system, such 

as one based on vehicle market class, size, or weight. AIAM supports increasing 

CAFE standards through rulemaking by the U.S. Department of Transportation 

(DOT) as a reasonable approach to enhancing national security and energy conservation and reducing greenhouse gas emissions from motor vehicles. Our support 

42 

for such standards is conditioned upon the standards being technologically achievable, providing manufacturers adequate leadtime for compliance, and being established in a form that does not discriminate against any segment of the auto industry. We prefer the approach of allowing DOT to set the standards, since it assures 

that the standards are analytically based, reflects well-understood technology developments and statutory considerations, and provides an open process for the consideration of public comments on proposed standards. It is impossible to predict future 

fuel prices or the rate of technology development. This makes it impossible to accurately predict the optimum level for CAFE standards. Thus, it is essential that an 

expert agency, such as DOT, evaluate the pace of technology development and fuel 

prices and adjust the standards, up or down, as needed. 

The issue of adequate leadtime for new standards is critical. The current law allows DOT to set standards with a minimum of 18 months leadtime. However, the 

18 month period is sufficient only for standards that impose little or no increase in 

stringency. For more aggressive standards, substantial leadtime is necessary to 

allow for development and implementation of new technology, with the most efficient technologies generally requiring the longest leadtime. Moreover, given the 

need for substantial in-use vehicle fleet turnover before new technology achieves 

widespread market penetration, the benefits of implementation of new technology 

take significantly longer to substantially affect total in-use fuel consumption. In any 

event, major improvements in new vehicle fuel economy cannot be achieved with the 

current statutory leadtime. AIAM recommends that the National Highway Traffic 

Safety Administration (NHTSA) set standards in 3 year increments and provide a 

minimum of 3 years leadtime. 

We generally support NHTSA’s recent restructuring of the light truck CAFE 

standards based on size class principles. Although this program is new and we have 

no practical experience with it yet, we think NHTSA promulgated a good final rule 

based on an extensive analysis of complex data. Consequently, we favor legislation 

to authorize a similar restructuring of the passenger auto standards leading to the 

adoption of some form of attribute-based system. Such a system is desirable since 

it enables DOT to set standards at levels that are feasible for manufacturers that 

offer different mixes of vehicles, and it is more flexible in responding to changed 

market conditions. In addition, future gains in fleet fuel economy will be the result 

of technology and not shifting fleet mix. 

AIAM unequivocally opposes the adoption of a uniform percentage improvement 

(UPI) standards format, or any other similarly discriminatory program. Simply stated, such standards represent bad public policy. The UPI format has been roundly 

criticized and thoroughly discredited by several respected organizations, including 

two National Academy of Sciences Committees that considered the CAFE program, 

the Office of Technology Assessment, and the U.S. Department of Justice. The UPI 

format would create unique fuel economy standards for each manufacturer, based 

on the manufacturer’s performance in a base year. The same percentage increase 

would be required for each company, but the actual standards differ due to differences in the fuel economy baselines. Under UPI standards, if two manufacturers 

were to produce the same mix of vehicle sizes and technology in the same year, one 

manufacturer could be assessed civil penalties while the other could be awarded 

credits, due to differences in the two companies’ baselines. We believe that a system 

that assigns differing compliance consequences to the same conduct by two entities 

is fundamentally discriminatory. 

Moreover, a UPI regulatory system would penalize those manufacturers that have 

exceeded CAFE standards, thereby discouraging any fuel economy accomplishments 

above the baseline in the future. The approach is also unfair because the currently 

available technology for improving fuel economy might already have been incorporated in the base year by the manufacturer that faces the most stringent futureyear fuel economy requirements, leaving fewer technological options to increase fuel 

economy in the future. In addition, the selection of the base year could create arbitrary advantages or disadvantages for the manufacturers due to the product mix or 

technology that was applied by the manufacturers in that year. Under a UPI system, manufacturers with high average fuel economies would be impeded in entering 

U.S. markets for larger vehicles because such entry—even if they produce more efficient larger vehicles than are currently available—could prevent them from meeting 

the new standards. Thus, competition would suffer and the fuel efficiency of a whole 

category of vehicles could be kept artificially low. 

AIAM supports the elimination of the domestic/import separate fleet requirement 

for passenger autos. The current law requires dividing a manufacturer’s passenger 

automobile fleet into domestic and import classes that must comply separately with 

fuel economy standards. There is no similar requirement for light trucks. This requirement was originally intended to inhibit domestic manufacturers from simply 

43 

importing large numbers of small, ‘‘captive import’’ vehicles as a compliance strategy. This provision has created a disincentive for foreign-based companies to increase the U.S. content of their vehicles to levels above 75 percent, since doing so 

would place the vehicles in a separate compliance fleet. This disincentive is real, not 

theoretical, and has cost U.S. jobs. This domestic/import separate fleet requirement 

has also had the perverse effect of content manipulation to move a model from a 

manufacturer’s domestic fleet to its import fleet. Attribute-based standards remove 

any incentive for U.S.-based manufacturers to achieve compliance by simply importing large numbers of very small vehicles. 

We also support enhanced trading of CAFE credits between a manufacturer’s 

fleets. The law should allow credits to be traded between import and domestic passenger car fleets and between passenger autos and light trucks. We envision this 

expanded credit trading authority as being conceptually consistent with the current 

authority for year-to-year transfer of credits. In the current system, credits are calculated as the product of a number of tenths of a mpg by which the standard for 

a class of vehicles is exceeded multiplied by the number of vehicles in the credit 

earning class, with the total credit amount thus calculated being available to offset 

a CAFE shortfall. This approach would maintain the fleet average concept that is 

central to the determination of compliance under the existing law. The carry-forward and carry-back provisions in current law should also in our view be extended 

from 3 years to 5 years. This will have no adverse effect on fuel savings but will 

provide additional compliance flexibility. Enhanced credit trading has been recommended by the NAS as a means of increasing manufacturers’ compliance flexibility while reducing costs. 

AIAM is concerned that state fuel economy standards or standards that are functionally equivalent to fuel economy standards would impose severe manufacturing 

and marketing burdens on manufacturers due to multiple inconsistent design or distribution targets. As a result of the Supreme Court’s decision in Massachusetts v. EPA, NHTSA has authority to set fuel economy standards and EPA has authority 

to set emission standards. We believe that the methods for complying with CAFE 

standards and with carbon dioxide emissions standards are so similar as to be virtually indistinguishable. AIAM favors a national program that avoids separate state 

requirements. Congress should address this issue as it moves forward. 

The effectiveness of CAFE would be significantly enhanced if coupled with appropriate, market-based incentives for consumers. Tax credits for advanced technology 

vehicles are an example of an incentive that is potentially very effective. Such credits are helpful in overcoming the effect of high initial costs of new technology, assisting in stimulating sufficient demand for the new technology to allow production volumes to increase to levels where costs begin to decrease. 

The energy security and climate change issues are real. AIAM and its members 

look forward to working with the Committee as it moves forward on this important 

subject. 

The CHAIRMAN. I thank you very much, Mr. Stanton. 

And now, may I recognize Admiral McGinn. 

STATEMENT OF VICE ADMIRAL DENNIS MCGINN, USN, (RET.), 

SENIOR VICE PRESIDENT AND GENERAL MANAGER, 

ENERGY, TRANSPORTATION AND ENVIRONMENT DIVISION, 

BATTELLE MEMORIAL INSTITUTE 

Admiral MCGINN. Thank you, Mr. Chairman, Mr. Vice Chairman, members of the Committee. It is an honor to appear before 

you today to discuss the critically important need for tough fuel 

economy standards based on the imperatives of national security, 

energy dependence, and climate change. Today, I’d like to talk 

about the national security impacts of our oil dependency right 

now, not in 10 years. 

In my view, our continued dependence on oil constitutes a clear 

and present danger to our national security, economically, militarily, and diplomatically. The United States consumes 25 percent 

of the world’s annual petroleum production, and we depend on oil 

to supply 97 percent of our transportation needs. Yet we only hold 

3 percent of the world’s oil reserves, and two-thirds of the reserves 

44 

are situated in that core of global instability, the Persian Gulf. 

Even if we tapped every last drop of oil on our soils and off our 

shores, we could still not produce enough to meet U.S. oil demand 

in the present business-as-usual mode. 

Our burgeoning demand for oil weakens U.S. diplomatic leverage 

around the globe, burdens our Armed Forces, and leaves the U.S. 

economy vulnerable to unpredictable price spikes and an evergrowing trade imbalance. Taken together, these dynamics create a 

daunting national security challenge that must be met immediately. 

Terrorist networks have openly called for, planned, and carried 

out attacks on the global oil infrastructure, because they know that 

oil is the economic lifeblood of the U.S. and the world’s economy. 

Just last week, a major oil infrastructure attack plan was disrupted by Saudi Arabia at the 11th hour. Had it been successful, 

the adverse consequences would likely have been severe, immediate, and felt around the globe. 

Our fine men and women in the Armed Forces serve our Nation 

with honor protecting American interests abroad. The major focus 

of their activities for nearly 30 years has centered in the Middle 

East, a region from which so much of the instability, strife, root 

causes of terrorism, and Persian Gulf oil flow. 

The economic impact of our oil dependency threatens our na- tional security, as well. We lose $25 billion from our economy every 

month, at a rate of $500,000 a minute. And oil imports now account for nearly a third of our Nation’s trade deficit. Our economy 

is exposed on a daily basis to oil shocks and supply disruptions. Regardless of how they are caused—by global market dynamics, natural disasters, terrorist attacks, or politically motivated oil embargoes—our economy grows more vulnerable each day. The trends of 

our growing oil demand in a business-as-usual mode will make 

those price shocks much more frequent, more deeply felt, and 

longer-lasting. 

There’s a great urgency to reverse this dependence on oil, and 

this urgency is twofold. Our dependency on unfriendly regimes is 

increasing, not decreasing, and the impacts of global warming 

emissions, if not swiftly and significantly reduced, will have profoundly negative national security impacts. According to top retired 

military leaders in a recent report from the Center for Naval Analysis, global warming poses a, ‘‘serious threat to America’s national 

security,’’ acting as a, ‘‘threat multiplier for instability,’’ in some of 

the world’s most volatile regions, adding tensions to stable regimes, 

worsening terrorism, and likely dragging the U.S. into fights over 

water and other resources shortages. 

We need to solve our oil dependency problem within the context 

of global warming, and the solution must include tough fuel economy standards for vehicles. In this regard, Corporate Average Fuel 

Economy standards have proven to work. After Congress set fuel 

economy standards for vehicles in 1975, our dependence on oil imports decreased very quickly, from 46 percent in 1977 to 27 percent 

in 1985, even though the price of oil fell in 1981. 

Ten years of CAFE progress saved the U.S. billions in oil and 

money. Without those standards that motivated automakers to increase fuel economy from the 1975 level to today’s average of 25 

45 

miles per gallon, we would be using an additional 80 billion gallons 

of gasoline each year. At today’s average price for regular gasoline, 

about $2.75 a gallon, that represents $220 billion saved. If CAFE 

had not stalled after 1985, the U.S. would have saved additional 

billions more in oil and dollars, especially in light of tremendous 

advances in technology available to improve vehicle fuel economy 

for both cars and light trucks. 

Americans, as has been pointed out earlier, do not have to sacrifice safety, comfort, or utility in their vehicles in order to achieve 

much greater fuel economy. The technology advances that have 

been primarily used to increase power and weight can now be directed to fuel economy. Data in the 2002 report on CAFE standards 

by the National Academy of Sciences, that Senator Levin mentioned in the previous panel, on CAFE indicate that technology exists to reach 37 miles per gallon in a fleet of the same make-up as 

the one that the National Academy analyzed, even ignoring hybrids 

and cleaner diesels. And I would make the comment that in my 

view, tough CAFE standards do not preclude leap-ahead technologies; in fact, they motivate the auto industry to produce them. 

One of the most important steps that Congress can take now to 

avert the worst consequences of oil dependency and global warming 

is to substantially raise fuel economy standards. As we have in our 

Nation’s past struggles, dedicated and concerned Americans from 

every part of the country want to play a role in decisively meeting 

the energy and environmental challenges which we already face 

and which grow greater every year we delay taking action. 

The key questions, in my mind, for this hearing, and as various 

legislative proposals move forward, are: How will the actions on 

CAFE by this Congress be viewed in 10 or 20 years? Will we be 

able to look back and say that a bold, comprehensive, and enlightened mandate produced substantial oil savings, increased our national security, helped our economy, and significantly reduced carbon emissions? 

We have less than 10 years to change our course in significant 

ways. Our Nation’s security depends on the swift, serious, and 

thoughtful response to these challenges by you, our elected officials. 

Thank you, Mr. Chairman, Mr. Vice Chairman, and members of 

the Committee. I look forward to your questions. 

[The prepared statement of Admiral McGinn follows:] 

PREPARED STATEMENT OF VICE ADMIRAL DENNIS MCGINN, USN, (RET.), SENIOR VICE

PRESIDENT AND GENERAL MANAGER, ENERGY, TRANSPORTATION AND ENVIRONMENT

DIVISION, BATTELLE MEMORIAL INSTITUTE

Mr. Chairman, Members of the Committee, Ladies and Gentlemen, it is an honor 

to appear before you today to discuss the critically important need for tough fuel 

economy standards based on the imperatives of national security, energy independence and climate change. Thank you for the opportunity to share my views which 

are based on over thirty-five years of service to the Nation in the United States 

Navy and as a senior executive presently involved on a daily basis with the science 

and technology of energy, transportation and the environment. 

The rationale and urgency for holding this important hearing was clearly underscored by the world’s leading scientists earlier this month in their warning to the 

world that we have a short window of time to begin reducing our global warming 

emissions if we are to avert the worst impacts. 

Today, I’d like to talk about the national security impacts of our oil dependency 

right now, and not just in 10 years. 

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Our continued dependence on oil constitutes a clear and present danger to our national security—economically, militarily and diplomatically. 

• Data from the Energy Information Administration indicates that we imported 

about 60 percent of our oil and other petroleum products in 2006. Last year 

alone, our net imports were more than 12 million barrels per day. 

• The United States consumes 25 percent of the world’s annual petroleum production and depends on oil to supply 97 percent of its transportation fuels. 

• Yet the U.S. holds only 3 percent of the world’s oil reserves, while two-thirds 

of reserves are situated in that core of global instability, the Persian Gulf. Even 

if we tapped every last drop of oil in our soils and waters, we could not produce 

enough to meet U.S. oil demand. 

• As a key leader of the global economic community, we must rely on foreign energy sources, with many of them in hostile, unstable regions, to provide us with 

our economic lifeblood and quality of life. 

• Our burgeoning demand for oil weakens U.S. diplomatic leverage around the 

globe, burdens our armed forces and leaves the U.S. economy vulnerable to unpredictable price spikes and an ever growing trade imbalance. Taken together, 

these dynamics create a daunting national security challenge that must be met 

immediately. 

U.S. oil dependency weakens U.S. leverage, undermines foreign policy and leaves 

us vulnerable to unstable or hostile regimes. 

• According to a new Rice University study, 77 percent of the world’s 1.148 trillion barrels of proven reserves are in the hands of the national companies; 14 

of the top 20 oil-producing companies are state-controlled.1

• With oil at $60 a barrel, $500,000 a minute is flowing out of our country, increasing our trade deficit, creating huge opportunity costs and, most significantly, putting money into the hands of some regimes that are hostile to our 

interests. 

• Last year Iran’s supreme leader, Ayatollah Ali Khomeini warned that ‘‘if the 

Americans make a wrong move toward Iran, the shipment of energy will definitely face danger and the Americans would not be able to protect energy supply in the region.’’ 2

• In the southern hemisphere, we seem to be on a collision course with Venezuela’s President Huge Chavez over access to some of the most coveted energy 

resources outside the Middle East. Chavez represents a direct threat to the advances of democracy and free markets in our Hemisphere. The false promises 

of his populist appeal in Latin America have been compared with the panArabism of Col. Muammar el-Qaddafi of Libya two decades ago.3

• Terrorist networks have openly called for, planned and carried out attacks on 

the global oil infrastructure because they know oil is the economic lifeblood of 

the U.S. and the world’s economy. Just last week, a major oil infrastructure attack plan was disrupted in Saudi Arabia at the eleventh hour. Had it been successful, the adverse consequences would have been severe, global and immediate. 

• By enriching the coffers of fundamentalist regimes with our gasoline purchases, 

we are inadvertently financing, but directly enabling, the spread of a flawed 

and deadly brand of Islam which is tilting key regions in a more intolerant and 

dangerous direction.4

U.S. oil dependency burdens our military forces and exacts a huge price tag in protecting sea-lanes, military bases of operations and maintaining continuous high level 

of forward presence. 

• Our fine men and women in the Armed Forces serve our Nation with honor, 

protecting American interests throughout the globe. The major focus of their activities for nearly thirty years has centered in the Middle East, a region from 

which so much of the instability, strife, root causes of terrorism and Persian 

Gulf oil flow. 

• The October 2000 terrorist attack on the USS COLE, while on a refueling stop 

in Yemen, was a tragic reminder of the convergence of oil, instability, terrorism, 

and the need for ever vigilant presence by American servicemen and women 

who are forward deployed. 

• Recent energy-market disruptions and increasing awareness of the vulnerability 

and insecurity of supplies world-wide have added urgency to the U.S. military’s 

efforts to curb its use of oil and other fuels.5

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• One study estimates that in peacetime the ‘‘true’’ cost of oil in a given year is 

$800 billion dollars, assuming 2004 oil prices. 

• Retired Air Force General Charles Wald estimates that if the true cost of military security were incorporated into the price of gasoline, we would be paying 

between $6.50 and $7 a gallon. 

The economic impact of our oil dependency threatens national security. 

• We lose $25 billion from our economy every month, and oil imports now account 

for nearly a third of our Nation’s trade deficit. Our economy is exposed on a 

daily basis to oil price shocks and supply disruptions. Regardless of how they 

are caused, by global market dynamics, natural disasters, terrorist attacks, or 

politically motivated oil embargoes, the trends of our growing oil demand in a 

‘‘business as usual’’ mode will make those price shocks much more frequent, 

deeply felt and longer lasting. 

• Every event overseas—Iran’s capture of British soldiers, Nigeria rebels warn of 

attacks on oil industry—causes our stock market to roil. Just last week, oil 

prices surged causing stocks to tumble in response to political turmoil and possible election fraud in Nigeria underscoring our daily vulnerability resulting 

from oil dependency.6

• There are nightmare scenarios—much more than conjecture at this point—that 

are already having an impact on our economy. The Wall Street Journal recently 

wrote about oil traders’ concern over an obstruction of oil traffic through the 

Persian Gulf. Under the scenario, Iran, in a bid to preempt or respond to U.S. 

military action, closes the Strait of Hormuz, the Persian Gulf chokepoint 

through which 20 percent of the world’s oil supply passes. The consequence 

would be swift: by most experts’ reckoning, oil prices would soar to $100 a barrel and even higher, potentially plunging the world economy into a depression.7

• A Wall Street Journal survey of economists found strong support for government intervention in the transition away from fossil fuels. When asked to pick 

the greater geopolitical threat to the economy, by nearly a 3-to-1 margin the 

economists chose a disruption in crude oil supplies caused by tensions in the 

Mideast over the impact on spending and confidence that could follow a major 

terrorist attack.8

Our oil consumption puts money in pocket of terrorists. 

• Former Republic National Committee Director of Communications Clifford D. 

May wrote, ‘‘Every time we fill the tanks of our cars with gasoline we put 

money in the pockets of terrorists intent on killing Americans.’’ 9

There is great urgency to reverse our dependence on oil. 

The urgency is two-fold. As a result of our increasing oil consumption: (1) Our dependency on unfriendly regimes is increasing not decreasing; (2) The impacts of 

global warming emissions, if not swiftly and significantly reduced, will have profoundly negative national security impacts. 

The world oil supply is tightening as demand surges leaving little elasticity in a 

very volatile market and creating increased U.S. reliance on the Middle East. 

• Energy analysts expect global oil-demand growth to surge this year to an additional 1.39 million barrels a day from growth of 800,000 bpd in 2006, according 

to a new Reuters’ poll. OPEC’s biggest producer, Saudi Arabia, may be incapable of raising its production any time soon.10

• Government data shows U.S. crude and gasoline stockpiles are much lower than 

analysts had forecast.11

• Oil analysts say that the market has not fully recognized the constraints on oil 

supply in Venezuela, Iran and Kazakhstan. Other factors favoring higher prices: 

rapidly rising demand in China and India, and the location of much of the 

world’s oil reserves in politically volatile and unstable countries.12

• Mexico’s oilfield Cantarell—one of the largest offshore oil fields ever found—is 

dying, losing a staggering one-fifth of its production, with daily output falling 

to 1.6 million barrels from two million within the last year. Cantarell, which 

currently produces one of every 50 barrels of oil on the world market, is fading 

so fast analysts believe Mexico may become an oil importer in 8 years.13

• The continued deterioration of the world’s second-biggest field by output puts 

pressure on prices on the global oil market, where supplies are barely keeping 

up with growing demand as it is. Our growing dependence would leave the U.S. 

48 

even more dependent on Middle Eastern supplies—and that much more vulnerable to political tumult in that region.14

• Some predict we will reach peak of oil production within a few years, others 

say peak oil won’t arrive until 2030 or later. In either case, our demand is going 

in the opposite direction while oil is getting harder and more expensive to extract. 

OPEC, which added Angola as its newest member this year, will likely see its 

clout reinforced in coming years as it is poised to control more than 50 percent of 

the oil market in coming years, up from 35 percent today.15

The threat of climate change is a national security matter. 

Climate change acts as a threat multiplier for instability in some of the most volatile regions of the world. 

• According to top retired military leaders in a recent report from the Center for 

Naval Analysis, global warming poses a ‘‘serious threat to America’s national 

security’’, acting as a ‘‘threat multiplier for instability’’ in some of the world’s 

most volatile regions, adding tension to stable regions, worsening terrorism and 

likely dragging the U.S. into fights over water and other resource shortages. On 

the simplest level, it has the potential to create sustained natural and humanitarian disasters on a scale far beyond those we see today. The consequences will 

likely foster political instability where societal demands exceed the capacity of 

governments to cope.16

• Climate change is different from traditional military threats, according to 

C.N.A. report author Vice Admiral Richard H. Truly because it is not like ‘‘some 

hot spot we’re trying to handle.’’ ‘‘It’s going to happen to every country and 

every person in the whole world at the same time.’’ 17

• Not only will global warming disrupt the environment, but its effects will shift 

the world’s balance of power and money.18

• Drought and scant water have already fueled civil conflicts in global hot spots 

like Afghanistan, Nepal and Sudan, according to several new studies. The evidence is fairly clear that sharp downward deviations from normal rainfall in 

fragile societies elevate the risk of major conflict, according to experts at Columbia University.19

• The world’s leading scientific panel on climate change—including more than 200 

scientists and officials from more than 120 countries and the U.S.—released its 

most detailed portrait on the impacts of human induced climate change, predicting widening droughts in southern Europe and the Middle East, sub-Saharan Africa, the American Southwest and Mexico, and flooding that could imperil 

low-lying islands and the crowded river deltas of southern Asia.20

• Without action to curb carbon emissions, man’s livable habitat will shrink 

starkly, said Stephen Schneider, a Stanford scientist and IPCC report author. 

‘‘Don’t be poor in a hot country, don’t live in hurricane alley, watch out about 

being on the coasts or in the Arctic, and it’s a bad idea to be on high mountains 

with glaciers melting.’’ ‘‘We can fix this,’’ by investing a small part of the world’s 

economic growth rate, said Schneider. ‘‘It’s trillions of dollars, but it’s a very 

trivial thing.’’ 21

• James Hansen, a pioneering climate researcher at NASA’s Goddard Institute 

and at Columbia University, says, ‘‘If human beings follow a business-as-usual 

course, continuing to exploit fossil fuel resources without reducing carbon emissions or capturing and sequestering them before they warm the atmosphere, the 

eventual effects on climate and life may be comparable to those at the time of 

mass extinctions.’’ 22

Ignoring global warming undermines U.S. international leadership and influence. 

• The United States will emit about 20 percent more greenhouse gases by 2020 

than it did in 2000, according to a draft report that the Bush administration 

was scheduled to submit to the United Nations a year ago. 23

• Recently the U.N. Security Council held its first-ever discussion of the link between climate change and international conflict. An overwhelming majority of 

nations voiced grave concerns about climate change and many urged stricter 

worldwide controls on greenhouse gases. 24

• The harmful effects of global warming on daily life are already showing up, and 

within a couple of decades hundreds of millions of people will not have enough 

water, according to the authoritative IPCC. ‘‘Things are happening and hapVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00052 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\80033.TXT JACKIE
49 

pening faster than we expected,’’ said Patricia Romero Lankao of the National 

Center for Atmospheric Research, a report co-author.25

Climate change, national security, and energy dependence are an interrelated set 

of global challenges. As President Bush noted in his 2007 State of the Union speech, 

dependence on foreign oil leaves us more vulnerable to hostile regimes and terrorists, and clean domestic energy alternatives help us confront the serious challenge 

of global climate change. Because the issues are linked, solutions to one affect the 

other. Technologies that improve energy efficiency also reduce carbon intensity and 

carbon emissions.26

Without swift and serious legislative action and investment, the U.S. will continue 

barreling headlong toward the catastrophic national security, economic and human 

suffering effects of climate change. 

As retired Marin Corps General Anthony C. Zinni, former Commander of U.S. 

Central Command said ‘‘The intensity of global temperature change can be mitigated somewhat if the U.S. begins leading the way in reducing global carbon emissions.’’ He concluded ‘‘We will pay now to reduce greenhouse gas emissions today 

. . . or we will pay the price later in military terms and that will involve human 

lives.’’ 27

Key principles for reducing oil dependence and greenhouse gas emissions. 

First and foremost, the size and speed of the solution must match the size and 

speed of the problem. 

We must solve our oil dependency problem within the context of global warming— 

to do otherwise would be at the risk of our national security. 

The solution must include both market and mandates. We cannot do one without 

the other. 

Key players in the global market are already responding to their perception of 

regulation certainty. The right kind of regulations can create certainty and spur the 

market to a much more stable and productive future. Leading international businesses, investors and industry sectors recognize this fact and are asking for market 

certainty through an effective, long-term cap on emissions. 

• ConocoPhillips recently became the first U.S.-based oil company to join ten of 

the Nation’s largest companies, including GE, DuPont and Duke Energy, to call 

for mandatory cuts in global warming emissions. Such action likely means higher costs for these companies, but they fear the Administration’s failure to engage will leave them with a hodgepodge of state and foreign restrictions.28

The solution must include fuel economy standards for vehicles. 

• Vehicles are the source of 20 percent of U.S. greenhouse gas emissions and directly account for more than 40 percent of our oil dependency. 

• By mid-century, the world’s vehicle population is expected to reach 2 billion, almost triple the current figure. To limit global vehicle emissions to 50 percent 

more than today’s levels, the average fuel economy of cars and trucks on the 

road would have to rise to about 60 mpg in 50 years or less, according to calculations by the Carbon Mitigation Initiative at Princeton University, a research effort funded in part by Ford. Because it takes a decade or two for new 

technology to make it into every car on the road, all new vehicles within 35 

years or less would need to reach 60 mpg.29

• Yet, as a new report from National Highway Traffic Safety Administration 

(NHTSA) reveals, the average fuel efficiency of U.S. cars and trucks sold in the 

2006 model year showed no improvement from the year before at 25.4 mpg.30

Corporate Average Fuel Economy standards (CAFE) work. 

• After Congress set fuel economy standards for vehicles in 1975, our dependence 

on oil imports decreased very quickly from 46 percent in 1977 to 27 percent in 

1985, even though the price of oil fell in 1981. 

• Ten years of CAFE saved the U.S. billions in oil and money. Without standards 

that forced automakers to increase fuel economy from the 1975 level to today’s 

25 mpg, we would be using an additional 80 billion gallons of gasoline on top 

of the 140 billion gallons we will use this year. That would represent an increase in oil demand by 5.2 million barrels of oil per day, or a 25 percent increase in our oil addiction. At today’s average price for regular gasoline, about 

$2.75 per gallon, that represents $220 billion saved. 

• Even today, these standards continue to save nearly 3 million barrels of oil per 

day, according to the National Academies of Sciences. Since 1985, however, fuel 

economy has been stagnant and our imports have grown. 

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• IF CAFE hadn’t stalled after 1985, the U.S. would have saved additional billions more in oil and dollars, especially in light of tremendous advances in technology available to improve fuel economy. 

• The United States is falling behind other nations pushing for better fuel economy as concerns mount over global warming. Even China, oft touted as the reason why the U.S. shouldn’t act, has tougher fuel economy standards.31

Voluntary action does not work. 

• Automakers did not meet voluntary agreements to reduce greenhouse gas emissions in Europe. As a result, the European Commission in Brussels is moving 

to mandate automakers to limit carbon dioxide emission to an average of 130 

grams per kilometer for all new cars by 2012.32

Detroit plays a critical role in reducing U.S. dependency on oil. 

• James Hansen of NASA’s Goddard Institute and at Columbia University, says 

that the biggest obstacles to avoiding greater climate disaster are utility plants 

and motor vehicles that inefficiently use too much fuel. ‘‘Automakers oppose efficiency standards and prominently advertise their heaviest and most powerful 

vehicles, which yield the greatest short-term profits,’’ according to Hansen.33

• A recent draft report from the Environmental Protection Agency (EPA) finds 

that the U.S. transportation sector accounts for about a third of greenhouse gas 

emissions and is the fastest growing major source of greenhouse gases, according to a recent summary.34

• The automotive industry is in a period of unprecedented technology development but up to now, domestic automakers have used technology advances to 

nearly double power and increase weight by twenty-five percent instead of increasing fuel economy.35

• Americans do not have to sacrifice safety, comfort or utility in their vehicles in 

order to achieve much greater fuel economy. The technology advances that have 

been used for power and weight can now be directed to fuel economy. Data in 

the 2002 report by the National Academies of Sciences on CAFE indicate that 

the technology exists to reach 37 mpg in a fleet of the same make-up as the 

NAS analyzed, even ignoring hybrids and cleaner diesels.36

• Paul Portney, Chair of the NAS committee, noted that, ‘‘It might be possible to 

meet more stringent fuel economy standards at lower costs than the Committee 

foresaw.’’ 37

Detroit’s future competitiveness requires a more fuel-efficient fleet. 

• Toyota just unseated GM as the world’s number one automaker, shattering several sales records, as domestic automakers continue to lose sales and market 

share due to an over-reliance on fuel-inefficient cars and trucks, continuing the 

trend of the last 2 years.38

• Dr. Walter McManus, a former GM market analyst now at the University of 

Michigan, reported recently that if U.S. automakers increased their vehicle fuel 

efficiency to accommodate increasingly conservation-minded customers, they 

could collectively increase profitability by $2 billion in model year 2010. Following their current plans, Dr. McManus concluded, they are projected to lose 

$3.6 billion that year.39

The American people, and Michigan citizens, specifically, want the government to 

take action to reduce greenhouse gas emissions and increase fuel economy. 

• A new Gallup poll shows overwhelming support to strengthen government restrictions on greenhouse gas emissions and to spend more taxpayer money to 

develop alternative energy sources, with 79 percent supporting higher auto 

emissions standards.40

• The latest Detroit Free Press-Local 4 Michigan Poll shows a majority of Michigan citizens favor higher fuel economy standards for cars and trucks, with some 

supporting increases to 40 miles per gallon or more. Many would pay hundreds 

of dollars extra for more efficient vehicles. When asked how much they would 

be willing to pay for an 8 mpg improvement in fuel economy for vehicles similar 

to what they drive now, 47 percent said they would pay $1,000 to $2,000 more, 

and 20 percent said $500 to $700.41

• Forty-six percent of today’s car shoppers say the feds ought to force automakers 

to meet higher fuel economy standards, according to Kelly Blue Book Marketing 

Research.42

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• There is ‘‘a significant shift in public attitudes toward the environment and 

global warming [with] fully 83 percent of Americans now saying global warming 

is a ‘serious’ problem, up from 70 percent in 2004,’’ reports the Yale Center for 

Environmental Law and Policy.43

Policy Recommendations 

We can no longer afford any aspect of energy policy that undermines our national 

security by funneling billions of dollars to our enemies around the world, and continues to increase emissions of heat trapping gases that cause global warming. Our 

oil dependence and global warming problem require immediate and comprehensive 

action from Congress in order to address both challenges together. 

Scientists warn that we have only a short window for action to prevent catastrophic global warming. Delay—as many recent economic studies reveal in sharp 

relief—would make emissions reduction more difficult and more costly than action 

now. 

One of the most important steps Congress can take now to avert the worst consequences is to substantially raise fuel economy standards. 

In the immediate term, I urge the Congress to raise vehicle fuel economy standards to at least 35 miles per gallon by 2018—the level recommended by the National 

Academies of Sciences and consistent with the President’s proposal of 4 percent per 

year improvement. 

By making this level of improvement binding, rather than leaving it up to this 

or future administrations, we could save as much oil as we currently import from 

the Persian Gulf, benefiting our economy and our long-term strategic interests. 

Congress should follow key steps to realize substantial oil savings and emission 

reduction benefits from available vehicle technology: 

1. Require at least 35 mile per gallon fuel economy for cars and light trucks 

by 2018, and regular rate of improvement thereafter. 

2. Give the administration flexibility to restructure the standard, but do not 

leave goal-setting up to the administration. The only way to ensure guaranteed 

oil savings is for Congress to direct the Department of Transportation and 

NHTSA to raise standards to a certain level. 

3. Provide consumers and/or automakers with economic incentives to invest in 

technology for increasing fleet wide fuel economy. 

Current Congressional proposals will have significant impact on our oil dependency. 

As the chart below shows, a 4 percent per year increase in vehicle efficiency will 

produce significant savings and will make real progress in reducing our dependency 

on imported oil. 


503mcgin.eps
52 

As next chart shows, while a 4 percent per year path would still leave us 7 years 

behind Australia, 9 years behind China, and more than 15 years behind the European Union, the 4 percent per year path would cut oil dependence, slow global 

warming, and save American consumers billions at the pump. 

Conclusion 

Our actions as Americans cannot stop with these measures. As noted earlier—the 

size and speed of the solution must match the size and speed of the problem. 

Throughout our history, Americans have successfully met critical challenges in 

both war and peace. Building a new, clean energy economy has become one of the 

great challenges of our time. Together we can move our Nation toward clean and 

secure energy supplies with policies that promote energy efficiency and the greatly 

increased the use of renewable energy. As we have in our Nation’s past struggles, 

dedicated and concerned Americans from every part of the country want to play a 

key role in decisively winning the energy and environmental victory. 

How will the actions on CAFE by this Congress be viewed in ten or twenty 

years? Will we be able to look back and say that a bold, comprehensive and enlightened mandate produced substantial oil savings, increased our national security, helped our economy and significantly reduced carbon emissions? 

We have 10 years to change course in significant ways. Our Nation’s security depends on the swift, serious and thoughtful response of you, our elected leaders in 

Congress. 

Thank you. 

Endnotes 

1Krauss, Clifford and Simon Romero. ‘‘In Venezuela, a Showdown Looms Over 

Oil.’’ The New York Times (Apr. 10, 2007). 2Farivar, Masood and Ian Talley. ‘‘Crisis Sparks Oil-Supply Fear/U.K.-Iran 

Standoff/Has Traders Pricing/In Risks of a Disruption.’’ The Wall Street Journal 

(Apr. 2, 2007). 3Krauss, Clifford and Simon Romero. ‘‘In Venezuela, a Showdown Looms Over 

Oil.’’ The New York Times (Apr. 10, 2007). 4Friedman, Thomas. ‘‘The Power of Green.’’ The New York Times (April 15, 2007). 5Farivar, Masood. ‘‘Military Seeks Oil Savings/Rising Demand, Supply Risks/Spur 

Conservation Move.’’ The Wall Street Journal (Jan. 9, 2007). 6McKay, Peter. ‘‘Dow 13000 Takes Detour’’ Wall Street Journal (April 24, 2007) 

Wall Street Journal Roundup ‘‘Observers Call Election in Nigeria Deeply Flawed’’ 

The Wall Street Journal (April 23, 2007). 


503mcgin1.eps
53 

7Farivar, Masood and Ian Talley. ‘‘Crisis Sparks Oil-Supply Fear/U.K.-Iran 

Standoff/Has Traders Pricing/In Risks of a Disruption.’’ The Wall Street Journal 

(Apr. 2, 2007). 8 Izzo, Phil. ‘‘Is It Time for a New Tax on Energy?/Economists Say Government 

Should Foster/Alternatives—But Not How Bush Proposes.’’ The Wall Street Journal 

(Feb. 9, 2007). 9May, Clifford D. ‘‘Diversity Can Pave the Road Toward Energy Security.’’ Scripps 

Howard News Service (Jan. 25, 2007). 10Gongloff, Mark. ‘‘Oil Demand Growth to Double; Can OPEC Meet It?’’ The Wall 

Street Journal (Mar. 8, 2007). 11 Chambers, Matt. ‘‘Crude, Gasoline Prices Surge/Decline in Imports/Helps Cut 

Reserves; ‘Temporary Blip’?’’ The New York Times (Mar. 8, 2007). 12 Bruner, Jon. ‘‘Stock Focus/Sliding Back Into Oil.’’ Forbes (Feb. 2, 2007). 13Luhnow, David. ‘‘Mexico Tries to Save A Big, Fading Oil Field/Cantarell’s DropOff/Faster Than Expected;/Turning to Technology.’’ The Wall Street Journal (April 

5, 2007). 14 Ibid. 15Mouawad, Jad. ‘‘Oil Innovations Pump New Life Into Old Wells.’’ The New York 

Times (March 5, 2007). 16 CNA Report on ‘‘National Security and the Threat of Climate Change’’ 

http://securityandclimate.cna.org/report/National%20security 

%20and%20the%20Threat%20of%20Climate%20Change.pdf (April 16, 2007). 17 ‘‘Military on Climate Change’’ The Washington Post (April 15, 2007). 18 Informed Reader column ‘‘How Global Warming Will Play With Investors’’ The 

Wall Street Journal (March 9, 2007). 19 Revkin, Andrew ‘‘Global Warming Called Security Threat.’’ The New York Times 

(April 15, 2007) http://www.ciesin.columbia.edu/pdf/waterconflict.pdf. 20http://www.ipcc.ch/SPM6avr07.pdf Kanter, James and Andrew C. Revkin. 

‘‘Scientists Detail Climate Changes, Poles to Tropics.’’ The New York Times (April 

7, 2007). Jolis, Anne and Alex MacDonald. ‘‘U.N. Panel Reaches Agreement On Climate-Change Report.’’ The Wall Street Journal (Apr. 6, 2007). 21Max, Arthur. ‘‘Climate report: Poor will suffer most.’’ Associated Press (April 6, 

2007). 22 Brown, Peter and Harry Stoffer. ‘‘The heat is on/How global warming is closing 

in on the U.S. auto industry.’’ Automotive News (February 7, 2007). 23 Revkin, Andrew, ‘‘U.S. Predicting Steady Increase for Emissions.’’ The New 

York Times (March 3, 2007). 24The New York Times ‘‘Global Warming and Security’’ (April 20, 2007). 25 Associated Press Editorial Reprint. ‘‘Top Scientists Warn of Water Shortages 

and Disease Linked to Global Warming.’’ New York Times (March 12, 2007). 26 CNA Report on ‘‘National Security and the Threat of Climate Change’’ 

http://securityandclimate.cna.org/report/National%20security%20and%20the%20 

Threat%20of%20Climate%20Change.pdf (April 16, 2007). 27Washington Post ‘‘Military on Climate Change’’ (April 15, 2007). 28 Ball, Jeff ‘‘Conoco Calls for Emissions Cap’’ The Wall Street Journal (April 11, 

2007); Murray, Alan. ‘‘Bush Health-Care Plan Finds Business Backers.’’ The Wall 

Street Journal (January 24, 2007); Barringer, Felicity. ‘‘A Coalition for Firm Limit 

on Emissions.’’ The New York Times (January 19, 2007). 29 Brown, Peter and Harry Stoffer. ‘‘The heat is on/How global warming is closing 

in on the U.S. auto industry.’’ Automotive News (February 7, 2007). 30 Hyde, Justin. ‘‘U.S. Cars Show No Fuel Efficiency Gains’’ Detroit Free Press 

(April 24, 2007). 31Freeman, Sholnn. ‘‘Democrats Plan to Press Automakers on Fuel Efficiency.’’ 

The Washington Post (March 10, 2007). 32 Hutton, Ray. ‘‘Emissions row divides carmakers/Europe’s motor industry can’t 

decide how to deal with tough new limits on carbon emissions.’’ Sunday Times 

(March 18, 2007). 33 Brown, Peter and Harry Stoffer. ‘‘The heat is on/How global warming is closing 

in on the U.S. auto industry.’’ Automotive News (February 7, 2007). 34http://epa.gov/climatechange/emissions/usinventoryreport07.html. 35 EPA Fuel Economy Trends Report, 2006. 36 NRC, 2002. 37Portney, Paul. (February 9, 2005). 38 Chozick, Amy ‘‘GM Slips into Toyota’s Rearview Mirror.’’ The Wall Street Journal (April 25, 2007); Terlep, Sharon. ‘‘Big 3 Sales Sink’’ Detroit News (April 4, 2007). 38 (http://www.osat.umich.edu/research/economic/FuelEconStrat.pdf). 

54 

40Saad, Lydia. ‘‘Most Americans Back Curbs on Auto Emissions, Other Environmental Proposals/Solid majority opposes drilling for oil in Alaskan wilderness.’’ Gallup News (April 5, 2007). 41 Hyde, Justin. ‘‘Michigan Poll/Most favor tougher auto mileage rules, but not at 

Detroit’s expense.’’ Detroit Free Press (March 20, 2007). 42PR Newswire. ‘‘More Than Half of Vehicle Shoppers Still Affected by Gas 

Prices.’’ Kelley Blue Book Market Research (October 26, 2007). 43 http://www.yale.edu/envirocenter/yalelepoll2007lpr.pdf. 

The CHAIRMAN. Thank you very much, Admiral McGinn. 

Now may I call upon Mr. McCurdy? 

STATEMENT OF DAVE MCCURDY, PRESIDENT AND CEO, 

ALLIANCE OF AUTOMOBILE MANUFACTURERS 

Mr. MCCURDY. Thank you, Mr. Chairman. 

And I thank my colleagues. At one point, I counted six of my 

former colleagues on the panel. 

As an introduction, I want to make it clear that it’s the view of 

the Alliance of Automobile Manufacturers that enhancing energy 

security and reducing carbon dioxide emissions are priorities to all 

Americans and the auto industry, which must continue to aggressively pursue our innovation agenda. 

In a March 14th House Energy and Commerce Committee hearing, CEOs from DaimlerChrysler, Ford Motor Company, General 

Motors, and Toyota all committed to working with Congress to find 

new ways to address the issues of climate change and fuel economy. I’m here today to share that message with this Committee. 

As a former Member of Congress with an extensive national security background—I notice that Admiral McGinn mentioned the 

CNA report; I serve on their Defense Advisory Board—I’m very 

sensitive to how our dependence on foreign sources of oil impacts 

our foreign policy. However, autos are only one part of our energy 

security picture. 

Alliance members support enhancing energy security, promoting 

fuel diversity, and increasing fuel efficiency through accelerating 

the availability of the growing number of advanced technology and 

alternative fuel automobiles in the market. Alternative fuel autos, 

including vehicles that run on biofuels, diesel, electricity, hydrogen, 

natural gas, and others, will help our country address the growing 

concerns about U.S. gasoline consumption and oil imports. 

Today 10.5 million alternative fuel vehicles are already on the 

road, and the Alliance members are offering more for sale this 

year. Additionally, there are 60 models of alternative fuel vehicles 

on sale today, up from 12 in 2000, and many more models are 

planned for future production. 

However, many substantial infrastructure and technology challenges need to be overcome before the promise of alternative-fuel 

automobiles can be fully realized. Thousands of automotive engineers are working on innovative technologies every single day, but 

many promising technologies, such as plug-in hybrids and fuel 

cells, still need significant research and development before they 

will be commercially ready. 

Federal and State incentives for consumers who purchase alternative-fuel automobiles and incentives to help expand the alternative-fuel infrastructure will help accelerate the continued introduction of these highly fuel-efficient vehicles. Working together, we 

55 

believe that government and industry can put more alternative-fuel 

automobiles on our roadways. 

We’ve been talking about CAFE, enacted in 1975. But, as history 

has shown, the U.S. cannot achieve energy security through CAFE 

alone. CAFE is a one-dimensional and incomplete program. Additionally, higher CAFE standards would have no near-term impact 

on gasoline use. First, increases in the size of the overall fleet, and 

the number of vehicle miles traveled each year, are far greater 

influencers of U.S. oil consumption and gasoline prices than CAFE 

requirements. Because CAFE is based on the mix of vehicles sold 

each year, whether a manufacturer meets the CAFE standard or 

not depends both on what products are offered and, as importantly, 

on what products consumers purchase. And, while consumers value 

fuel economy, they also want many other attributes in today’s vehicles, such as safety, passenger and cargo room performance, towing 

and hauling capacity, and others. Our challenge is to develop vehicles that combine these attributes with improved fuel efficiency and 

an affordable price. 

Automakers offer close to 200 models that have an EPA estimated highway rating of 30 miles per gallon or more; however, 

each year since 2001, American consumers have purchased more 

light trucks than passenger cars. By failing to take into account the 

cost of fuel and consumer buying habits, CAFE addresses only one 

component of the fuel economy equation. Consumers value fuel 

economy, but they typically value more attributes of the vehicles 

that they purchase. 

Regarding S. 357, as well as S. 183 and S. 1118, the most important message of Alliance members is very clear. And, Mr. Chairman, this may actually come as a shock to some, but we support 

improving fuel efficiency to the maximum feasible level. Improving 

fuel economy is a consumer issue, an economic issue, a climate 

change issue, and an energy security issue, and, thus, a priority. 

The Alliance supports NHTSA obtaining the authority to reform 

the CAFE standard for cars into an attribute-based system, as 

we’ve heard today. The Alliance, however, opposes legislation that 

is not technologically feasible, because of the proposed arbitrary 

CAFE target and/or the proposed arbitrary lead time. 

The Alliance believes Congress should look beyond CAFE, and 

should consider a multisector integrated transportation energy policy that motivates all stakeholders to make decisions consistent 

with the shared goal of reducing petroleum imports. An effective 

transportation energy policy needs to foster more alternative-fuel 

choices, especially more low-carbon renewable fuels; implement an 

aggressive program to enhance the alternative fuels infrastructure 

in America; empower the research and development community to 

move us closer to breakthroughs on technologies like batteries for 

full electric vehicles, as well as for plug-in hybrids and fuel cells. 

We need to motivate consumers to conserve fuel and to consider 

purchasing one of the many fuel-efficient autos on sale today. 

Today, Mr. Chairman, there is a clear choice before the Committee. Policymakers can continue to look backwards, reworking a 

1970’s program that was created in a very different world, or policymakers can move forward, focusing on broader climate change 

issues in a rapidly changing world. 

56 

Increasing fuel economy and reducing carbon dioxide emissions 

is a shared responsibility that must include vehicle miles traveled, 

fuel substitution, and vehicle technology. Attempts to address concerns about energy security and carbon dioxide emissions cannot 

succeed by focusing only on one component of gasoline demand. An 

economywide approach is needed. A market-driven, market-responsive approach is needed. Any effective program needs to consider 

the realities of the marketplace. 

And finally, Mr. Chairman, an effective approach needs to be 

comprehensive and nationwide. The United States needs a consistent national policy that avoids the marketplace chaos that 

would surely arise from a patchwork of conflicting State fuel economy and carbon dioxide mandates. 

Once again, autos are only one part of the energy security picture. Broader-based policies in addressing fuels, and the use of 

those fuels by consumers, need to be explored, as well. 

And, Mr. Chairman, we look forward to working with you and 

the Committee, and I’d be glad to take questions. 

[The prepared statement of Mr. McCurdy follows:] 

STATEMENT OF DAVE MCCURDY, PRESIDENT AND CEO, 

ALLIANCE OF AUTOMOBILE MANUFACTURERS

Mr. Chairman, 

Good afternoon, my name is Dave McCurdy and I am the President and CEO of 

the Alliance of Automobile Manufacturers. The Alliance is the auto industry’s leading trade association representing nine manufacturers including BMW, 

DaimlerChrysler, Ford Motor Company, General Motors, Mazda, Mitsubishi, 

Porsche, Toyota and Volkswagen. 

On behalf of our members I’d like to thank you for giving me an opportunity to 

be here today to share with you both the industry’s progress in, and future challenges to, increasing fleet fuel economy. Alliance members share the concerns of our 

customers, the Congress and the American public about fuel economy and carbon 

dioxide emissions. 

As an introduction, it is the view of the Alliance of Automobile Manufacturers 

that enhancing energy security and reducing carbon dioxide emissions are priorities 

to all Americans, and the auto industry must continue to aggressively pursue its 

innovation agenda. At a March 14, House Energy and Commerce Committee hearing, CEOs from DaimlerChrysler, Ford Motor Company, General Motors and Toyota 

all committed to working with Congress to find new ways to address the issues of 

climate change and fuel economy. I am here today to share that message with this 

Committee. 

Because the only feasible way to reduce the amount of current carbon-based fuel 

from automobiles is to reduce the amount of fuel a vehicle uses, auto engineers are 

working hard to include a diverse range of highly fuel-efficient technologies in new 

vehicles. Today, every model is available with some kind of fuel-efficient technology, 

including direct fuel injection, four cylinder engines, variable valve timing, continuously variable transmissions, cylinder deactivation and more. 

Automakers are investing significantly in advanced technology vehicles powered 

by electricity, biofuels, diesel, hydrogen and compressed natural gas. Still, autos are 

only one part of the energy security picture. Through the Corporate Average Fuel 

Economy (CAFE) program, we are already a ‘‘carbon-constrained’’ industry and one 

that is heavily regulated. 

Manufacturers believe that the best way to enhance energy security and reduce 

carbon dioxide emissions is through the use of alternative fuels including E85 and 

flexible fuel vehicles. Today, 10.5 million alternative fuel autos that operate with hybrid technology or run on fuels like clean diesel, ethanol, hydrogen and others are 

already on the road, and Alliance members are offering more for sale this year. Additionally, there are 60 models of alternative fuel vehicles on sale today, up from 

12 in 2000 and many more models are planned for future production. 

Since the 1970s, new vehicles have continued to become more fuel-efficient. EPA 

data demonstrates that fuel efficiency has increased steadily at 1–2 percent per year 

on average from 1975 for both cars and light trucks. Passenger car fuel economy 

57 

has more than doubled from 14.2 mpg in 1974 to 29.8 mpg in 2006 and light truck 

fuel economy has increased by 60 percent since 1974. But as we have noted on many 

previous occasions, the ultimate decisions about what vehicles are purchased and 

how they are driven belong to American consumers. 

And while consumers value fuel economy, they also want many other attributes 

in today’s vehicles, such as safety, passenger and cargo room, performance, towing 

and hauling capacity. Our challenge is to develop vehicles that combine these attributes with improved fuel efficiency . . . and an affordable price. 

The auto industry leads the way when it comes to investing in research and development. Automakers are committed to being first to market with breakthrough technologies that can produce new generations of autos with advanced powertrains and 

fuels. Automakers are competing to bring these vehicles to market, as soon as the 

technology is feasible, affordable and meets consumer expectations. 

The U.S. cannot achieve energy security through CAFE alone. CAFE is a one-dimensional and incomplete program. Any transportation energy policy must be comprehensive and multi-dimensional to be effective, and we believe that all sectors of 

the economy, not just transportation and certainly not just automakers, should 

strive to reduce petroleum consumption. 

The Alliance believes Congress should look beyond CAFE and should consider a 

multi-sector, integrated transportation energy policy that motivates all stakeholders 

to make decisions consistent with the shared goal of reducing petroleum imports. 

An effective transportation energy policy needs to: 

• Foster more alternative fuel choices, especially more low-carbon, renewable 

fuels; 

• Implement an aggressive program to enhance the alternative fuels infrastructure in America; 

• Empower the research and development community to move us closer to breakthroughs on technologies like batteries for full electric vehicles, as well as for 

plug-in hybrids and fuel cells; 

• Encourage the U.S. investment community to stimulate economic investments 

in our future fuels and technologies; 

• Involve all levels of government; and 

• Motivate consumers to conserve fuel and to consider purchasing one of the 

many fuel-efficient autos on sale today. 

Corporate Average Fuel Economy 

The Corporate Average Fuel Economy (CAFE) program was established by Congress in 1975 to reduce U.S. dependence on foreign oil by reducing overall fuel consumption. The Energy Policy and Conservation Act directed the National Highway 

Traffic Safety Administration (NHTSA) to set national fuel economy standards at 

the ‘‘maximum feasible’’ level taking into account key elements such as technological 

feasibility, affordability, safety, emissions controls, consumer choice, disparate impacts on manufacturers and effects on American jobs. 

For Model Year (MY) 2008, each automaker’s fleet must average 27.5 mpg for cars 

and 22.5 mpg for light trucks (pickups, vans, minivans and sport utility vehicles). 

For light trucks, NHTSA recently reformed the standard setting system for light 

trucks. Automakers are currently in the fourth year of seven straight years of light 

truck CAFE increases, which started in MY 2005 and proceeds through MY 2011. 

When reforming light truck Corporate Average Fuel Economy (CAFE) standards, 

NHTSA used an attribute-based approach that acknowledged consumers require different sized vehicles for their business and family needs. NHTSA’s attribute-based 

approach addressed some of the previous concerns about safety and about inequitable effects on different manufacturers arising from the previous ‘‘one size fits all’’ 

standards. 

The Alliance supports NHTSA’s obtaining the authority to reform the CAFE 

standard for cars into an attribute-based system, but NHTSA should not prejudge 

the issue by assuming that the footprint-based system used in the light truck reform 

rulemaking makes the most sense for cars. The Alliance supports a rulemaking 

process that maximizes consumer choice, avoids safety concerns, and allocates the 

burdens of the CAFE program equitably among manufacturers, without injuring 

competition or any individual automaker. Attribute-based approaches, when properly designed, can help achieve these objectives, but ultimately, success in meeting 

these objectives depends on the provisions of the program, such as the specific attributes or set of attributes that are chosen, the level at which standards are set, 

and the adequate provision of lead-time. Whatever attributes are considered for cars 

must preserve the diverse types of passenger cars. 

58 

CAFE, Consumers and Gasoline Use 

While the CAFE program targets the fuel economy of the new vehicles that automakers produce, other factors have dramatically increased gasoline use in the light 

duty fleet. Relatively low fuel costs (compared to the rest of the world) coupled with 

increasingly fuel-efficient autos have resulted in consumers driving more miles. The 

Department of Transportation documents that ‘‘vehicle miles traveled’’ (VMT) has 

increased 40 percent during the timeframe CAFE has been in effect, from 10,000 

miles per licensed driver in 1977 to almost 14,000 miles per licensed driver in 2001. 

Analysts predict that, as auto fuel efficiency continues to improve, VMT will continue to increase. 

Higher CAFE standards would have no near term impact on gasoline use. First, 

increases in the size of the overall vehicle fleet and the number of vehicle miles 

traveled each year are far greater influencers of U.S. oil consumption—and gasoline 

prices—than CAFE requirements. (Even though the fuel economy of the light duty 

fleets of vehicles has increased dramatically since the 1970s, U.S. demand for oil 

has not declined and imports have increased substantially.) Second, with over 230 

million vehicles on the road and only 17 million new vehicles sold each year, it takes 

15–20 years for higher fuel economy vehicles to displace the ones on the road today. 

Automaker product decisions alone cannot guarantee compliance with CAFE 

standards. Because CAFE is based on the mix of vehicles sold each year, whether 

a manufacturer meets the CAFE standard or not depends both on what products 

are offered, and on what products consumers purchase. While the law holds manufacturers responsible for meeting CAFE standards, in reality consumer purchases 

play a huge role in determining whether a manufacturer meets, exceeds or falls 

short of the standard in any given year. 

When considering what kind of vehicle to buy, consumers evaluate all the different uses they will demand of their new car or light truck. Most consumers select 

vehicles that best serve their peak uses, whether carrying kids, carpooling adults, 

towing trailers, hauling supplies, accommodating handicapped, handling adverse 

terrain and weather, addressing recreational needs and/or meeting job/business demands—even if these attributes may be used infrequently. 

Automakers share the goal of increasing fuel efficiency as they develop vehicles 

that meet the various needs of American families and are committed to offering fuel 

efficient vehicles in every segment. According to www.fueleconomy.gov, automakers 

offer close to 200 models that have EPA-estimated highway ratings of 30 miles per 

gallon or more. However, each year since 2001 American consumers have purchased 

more light trucks than passenger cars. In 2006, for the fifth year in a row, pickups, 

minivans, vans and SUVs outsold passenger cars. More than 53 percent of all new 

vehicles purchased last year were light trucks. 

By failing to take into account the cost of fuel and consumer buying habits, CAFE 

addresses only one component of the fuel economy equation. Consumers value fuel 

economy, but they typically value even more the other attributes of the vehicles they 

purchase. As a result, when CAFE pushes automakers to add technology or reduce 

size/weight of vehicles, the additional costs involved and the tradeoffs of other attributes may not be embraced by consumers. These vehicle decisions can have dramatic and adverse competitive implications among automakers. 

Proposed CAFE Legislation 

Regarding S. 357, as well as S. 183, S. 1118, and S. 767, the most important message of Alliance members is very clear: 

We support improving fuel efficiency to the maximum feasible level. Improving 

fuel economy is a consumer issue, an economic issue, a climate change issue, 

an energy security issue, and a priority. 

The Alliance opposes legislation that is not technologically feasible, because of the 

proposed arbitrary CAFE target and/or the proposed arbitrary lead time. The Alliance also opposes CAFE targets that are not based on a balance of objective criteria. 

When setting ‘‘maximum feasible’’ fuel economy standards for the Nation, Congress 

required NHTSA to gather extensive data on technological feasibility, affordability, 

safety, emissions, consumer choice and effects on American jobs. This approach balances the many trade-offs and consequences, and it remains a solid policy approach. 

We oppose the provision in S. 357 that would combine car and light truck CAFE 

standards. Starting with the 2010 model year, the overall car/truck fleet would face 

an increase in CAFE requirements of over 40 percent by 2019. Based on today’s 50/ 

50 split between cars and light trucks, achieving this level would require the car 

fleet to reach nearly 40 mpg and the light truck fleet to reach nearly 32 mpg. These 

are essentially the same levels of increase that have been proposed legislatively in 

59 

the last three energy bill debates and soundly defeated in both the House and the 

Senate. 

Existing Federal law rightfully separates cars and light trucks in the CAFE program by setting differing fuel economy standards for each. Cars and light trucks 

have distinct characteristics, so the two programs should not be combined into a single standard, as these characteristics are essential and need to be preserved for consumers who value different attributes in their vehicles. Combining car and light 

truck standards would raise the costs of many popular utility and work-related vehicles, hurting small businesses, trades people, farmers and others who are dependent 

on light duty trucks for their livelihoods. However, automakers support both the car 

and light truck programs being based on attribute-based systems, though the attributes may differ since cars and light trucks have different characteristics. 

Alternative Fuel Autos 

Alliance members support enhancing energy security, promoting fuel diversity 

and increasing fuel efficiency through accelerating the availability of the growing 

number of advanced technology and alternative fuel automobiles in the market. Alternative fuel autos, including vehicles that run on hybrid-electric technology, clean 

diesel, and alternative fuels like E85 ethanol and hydrogen, will help our country 

address the growing concerns about U.S. gasoline consumption and oil imports. 

Federal and state incentives for consumers who purchase alternative fuel automobiles can accelerate the introduction of these highly fuel-efficient vehicles. Working together, we believe that government and industry can put more alternative fuel 

automobiles on our roadways. 

An important provision of the Energy Policy Act of 2005 (EPAcT 2005) is the increased promotion of renewable fuels in the transportation sector. Since 1996, auto 

manufacturers have been producing vehicles capable of using high concentration 

blends of ethanol, including E85. Currently there are more than five million of these 

E85 capable vehicles on the road with nearly one million more being added each 

year. 

And while EPAcT 2005 will help in E85 infrastructure development by raising the 

requirement for the use of ethanol and other renewable fuels to 7.5 billion gallons 

per year by 2012 and providing tax incentives aimed at making more E85 pumps 

available to the driving public and helping to reduce reliance on oil imports, we still 

have a long way to go before widespread availability of E85 is achieved. Of the more 

than 170,000 fueling stations nationwide, roughly 1,200 currently offer E85 to consumers. 

Hybrid-electric vehicles are on sale today and already saving fuel. The number of 

these vehicles will increase substantially over the next years. They offer significant 

improvements in fuel economy, up to 50 percent, and reduced emissions. These vehicles use electric motors for propulsion and to reduce some burdens on the traditional 

internal combustion engine, and they capture usable energy through regenerative 

braking. By 2010, more than 50 hybrid nameplates are expected to be available in 

North America, with volumes approaching one million vehicles. Hybrid technology 

can also be applied to diesels, alternative fuel and fuel cell vehicles. 

Vehicles that are powered by clean diesel technology, such as direct injection diesels, offer greater fuel economy and better performance than conventional gasolinepowered engines. In Europe more than 50 percent of all new vehicles purchased are 

diesel vehicles, compared to less than 1 percent in the U.S. Diesel-powered vehicles 

are popular in Europe for several reasons. Economic incentives have been established to enhance their appeal. Because of higher fuel costs, European drivers tend 

to put a premium on fuel economy. In the European Union, tax policies drive consumers to highly value fuel economy. The EU taxes gasoline at $4.02/gallon and diesel at $3.04, which incentivizes diesel. In contrast, the U.S. taxes gasoline at $.38 

per gallon and diesel at $.45 per gallon. 

The EU also prioritizes fuel economy over nitrogen oxides (NOX) emission standards. For instance, NOX standards for diesel in the light-duty fleet are more than 

seven times higher in the EU than in the U.S. Achievement of U.S.-level NOX

standards would require expensive after-treatment, raising the costs of diesel vehicles, eroding the fuel-economy benefits, and reducing consumer demand. 

Recently, ultra-low sulfur diesel fuel (ULSD) that is 97 percent cleaner went on 

sale in the U.S. This new diesel fuel opens the door for a new generation of highly 

fuel-efficient diesel vehicles to be sold in the U.S. that will run dramatically cleaner 

than their predecessors. 

These types of vehicles could provide fuel economy gains of up to 30 percent compared to conventional vehicles. In addition, most diesels are capable of running on 

good quality biodiesel blends of up to 5 percent (B5) and many are designed to use 

up to 20 percent or 100 percent biodiesel fuel (B20 or B100). If all diesel vehicles 

60 

on the road today were fueled with B5 (5 percent biodiesel) we could displace 1.85 

billion gallons of petroleum per year; and 7.4 billion gallons per year if B20 (20 percent biodiesel) were utilized. 

Several manufacturers have also announced progress toward the introduction of 

plug-in hybrid vehicles. Once batteries become available in affordable power trains, 

these products may be of interest to consumers. Plug-in hybrid-electric vehicles, 

which are hybrid cars with a larger capacity battery, look and perform much like 

‘‘regular’’ cars but they can be plugged into a 110-volt outlet (for instance each night 

at home, or during the workday at a parking garage) and charged. Plug-in vehicles 

can reduce oil consumption and rely on domestically produced energy for a greater 

portion of their operation. Once the range of the battery is exceeded, the vehicle will 

automatically switch to a conventional internal combustion engine. Manufacturers 

are still working on several significant issues, including size, lifetime cost and 

recyclability of the battery, but we remain optimistic. 

From a vehicle perspective, hydrogen-powered fuel cells offer the greatest potential improvement in fuel efficiency and emissions reductions. They also create a 

great opportunity for eliminating dependency on petroleum. However, widespread 

commercialization of this technology and establishment of the hydrogen infrastructure are some years away. 

Another promising and enabling technology is hydrogen-powered internal combustion engines (ICEs). The concept of using hydrogen ICEs offers several advantages: 

near-zero emissions, maintaining the utility, flexibility, and driving dynamic of today’s automobile, assisting in the development of hydrogen storage technology, and 

developing hydrogen distribution channels and helping to promote hydrogen refueling infrastructure. 

While fuel-efficient technologies are on sale today, more technology is being developed for possible future introduction. Thousands of automotive engineers are working on innovative technologies every day, but many promising technologies, such as 

plug-in hybrids and fuel cells, still need significant research and development before 

they will be commercially ready. 

Conclusion 

Today, there is a clear choice before the Senate Commerce, Science, and Transportation Committee. Policymakers can continue to look backward, reworking a 1970s 

program that was created in a very different world. Or, policymakers can move forward, focusing on broader climate change issues in a rapidly changing world. 

In March, the auto industry testified before the House Energy and Commerce 

Committee to consider the creation of a broad, multi-sector cap and trade approach 

to regulating carbon dioxide. While the Senate Commerce, Science, and Transportation Committee is focusing on CAFE, we encourage the Senate to consider autos 

in the context of a broader carbon dioxide program. There are strong reasons to do 

so. 

CAFE alone does not address consumer preferences. In the U.S., 70 percent of the 

new vehicles purchased by consumers have a 6-cylinder or 8-cylinder engine. In the 

European Union, fleet fuel economy is about 35 mpg, or the goal of S. 357. But in 

Europe, 89 percent of new automobiles are sold with a 4-cylinder or smaller engine. 

In the U.S., 92 percent of new autos are sold with automatic transmissions, compared to 20 percent in Europe. 

Vehicle miles traveled (VMT) will continue to increase in the United States. VMT 

is a result of population growth and affluence, two factors that policymakers should 

never seek to restrict. In fact, as autos become more fuel-efficient, consumers tend 

to drive more, which ultimately has the opposite effect of increasing gasoline use. 

CAFE has no effect on the price of gasoline, so a broader approach is needed. 

The carbon burden needs to be shared. Reducing carbon is dependent on three 

intertwined factors: VMT (which includes consumers), fuels substitution, and vehicle 

technology. Attempts to address concerns about energy security and carbon dioxide 

emissions cannot succeed by focusing only on one component of gasoline demand. 

Vehicle fuel economy will continue to increase as new and improved technologies 

find their way into the market, but vehicle technology alone will not slow the growing demand for gasoline in the U.S. transportation sector. 

Clearly, an integrated approach is needed. In 1999, President Clinton signed into 

law EPA’s landmark regulations called Tier 2. These regulations are noteworthy because for the first time, autos and fuels were regulated as a system. Our clean autos 

needed clean fuels, and the higher sulfur fuel sold in the 1990s would have disabled 

our new clean vehicle technology. As Congress considers the broader climate change 

issue, one important goal is to consider fuels and autos together. Automakers need 

to invest to accommodate alternative fuels, and energy providers need certainty that 

more alternative fuel autos will be on U.S. roads. 

61 

An economy-wide approach is needed. The costs of reducing a ton of carbon dioxide are not the same in every sector. For autos, the costs of reducing carbon dioxide 

are extremely high compared to other sectors. The most effective way to reduce carbon, as well as the most cost-effective way, may be through an economy-wide cap 

and trade program. 

An economy-sensitive approach is needed. Many segments of our economy depend 

on cars and light trucks. Farmers, tradesmen, small businesses and others need vehicles, especially larger cars and light trucks, for their livelihoods. Any program that 

reduces the availability of these work vehicles or significantly raises their costs represents a burden on the U.S. economy, and especially a burden on independent and 

small businesses. 

A market-driven, market-responsive approach is needed. Any effective program 

needs to consider the realities of the marketplace. CAFE can create distortions in 

the market, depending on the price of gasoline. By contrast, incentives in place for 

the renewable fuels program enable competitive pricing of ethanol, which is resulting in increased consumer demand for this alternative fuel. 

Incentives are needed to encourage real reductions in carbon dioxide. Incentives 

can encourage consumers to purchase the many advanced technology autos on sale 

today. Incentives can encourage energy providers to increase availability of alternative fuels. And incentives can reward automakers for high achievement in developing new technologies and producing more alternative fuel autos. CAFE, by contrast, has few incentives and fails to bring consumers into the equation. 

Any effective, broader program to reduce carbon dioxide needs to allow for companies to grow and thrive, without imposing provisions that would result in job loss. 

The ultimate goal is real reductions in tons of carbon dioxide, not wealth transfer 

among companies or higher cost autos. 

Fuel economy/carbon dioxide targets are important as part of a reformed, broaderbased economy-wide program, but lead time is critical. Some climate change program proposals incorporate a ‘‘step-down’’ approach, which includes reductions over 

a specified period of years, such as every 5 years. This approach provides more certainty to manufacturers, and a step-down approach enables an industry such as 

auto manufacturing that requires 5 years to develop and introduce a new model, 

and 7 years to make significant changes to power trains. 

Finally, any effective approach needs to be comprehensive and nationwide. The 

United States needs a consistent national policy that avoids the marketplace chaos 

that would surely arise from a patchwork of conflicting state fuel economy/carbon 

dioxide mandates. 

Once again, autos are only one part of the energy security picture. For 30 years 

we have been a ‘‘carbon-constrained’’ industry. Broader based policies addressing 

fuels and the use of those fuels by consumers need to be explored as well. To be 

effective, these policies must incorporate all stakeholders, including alternative energy suppliers, the R&D community, the investment community, government at all 

levels, and especially consumers. To be successful, the goal of reducing petroleum 

consumption and carbon dioxide must be viewed as a shared responsibility. 

I thank the Committee for giving me the opportunity to testify and welcome any 

questions you may have regarding the Alliance positions on improving fuel economy 

and reducing carbon dioxide. 

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

To demonstrate our interest in this issue, and because of the importance of this issue, I’m certain you’ve noted that we have not 

imposed any time limitation on speaking, and nor did I impose any 

limitation on Senators to speak. And I can assure you that this 

Committee will do its absolute best to try to come up with something workable. 

Senator Stevens? 

Senator STEVENS. Well, thank you very much, Chairman. I congratulate you. I do, too, agree with your concept of letting all the 

witnesses speak fully on the statements. And I’m sorry to say I 

have to go now, but I do want to thank Admiral Blair and Admiral 

McGinn for bringing in the security issue. I hope the Senate and 

the Committee listened to you, because the security issue is the 

turning point on this, as far as I’m concerned. And I think if we 

listen to you, we will get a bill that will make some sense. 

62 

I do thank you very much, Mr. Chairman. 

The CHAIRMAN. I thank you, sir. 

Senator Kerry? 

Senator KERRY. Mr. Chairman, thank you. 

Thank you, all, on the panel. 

Picking up on what Senator Stevens just said about the security 

issue, Admiral McGinn, I heard you use the reference to the 10- 

year window here. And I think that’s a really important framework. In my judgment, there’s a threshold that you’ve got to begin 

to, sort of, look at this whole picture through, if you will. And that 

is, sort of, what’s driving this. Really, we’re back here having this 

discussion, not because the, the automatics of 20 years of delay 

have suddenly expired or run their course, it’s because a whole new 

set of compelling facts are staring us in the face. And the bottom 

line of those facts is, essentially, if you accept Jim Hansen’s notion, 

and the scientific consensus, there’s a 10-year window here. We 

have a 10-year window within which to deal with the climate 

change issue appropriately. Now, that’s if you accept the science. 

I do. And I accept it, because the feedback that we’re getting from 

the predictions made by all of those scientists, 2,000-plus strong 

from 130 countries, is coming back at a greater rate and in greater 

amount than they had predicted. So, their alarm bells are ringing. 

Given that, and recognizing that we need a 10-year concept here, 

then if you also accept that you need an economywide cap, because 

the economywide cap is the only way you’re going to begin to get 

at all the pieces of this sufficiently to get somewhere between a 65 

to 80 percent reduction by 2050—and I assume it’s the 80 percent, 

frankly, because of the rate that things are coming back—therefore, 

everything’s got to be part of it, and that includes automobiles. 

One gallon of gasoline, I believe, is about 22 pounds of CO2. So, 

every gallon of gasoline that you don’t use because you’re not driving or you have a more efficient car, you’re beginning to reduce 

your CO2. So, that’s one reason to compel. 

The other is obviously the security issue about who we depend 

on for our fuel, and what we’re relying on, and how independent 

America is with respect to that. 

So, let me ask you, based on that, are we able to believe that the 

35 miles per gallon standard that they want to set, fleetwide—let 

me just say parenthetically here, I accept Senator Levin’s argument. Senator Levin and I met yesterday. I’ve talked to him over 

several years on this argument. And we had a runaround on this 

when Senator McCain and I were the leaders on the CAFE effort 

a number of years ago on the floor. And I believe there is a legitimate argument, Mr. Chairman, that we do have to take into account, about the discrimination. It doesn’t make sense that a foreign manufacturer can come in here and sell a light truck to a 

greater degree, which gets the same mileage, or worse, than an 

American truck, but they can do it, because the corporate average 

says you’ve got a whole—your fleet has a whole bunch less—you 

know, you’ve got a lot more small cars, a lot less trucks, so go 

ahead and sell the trucks, and you make up the difference, because 

we’re going to measure the whole average. It doesn’t make sense 

anymore. I believe we ought to have a nondiscriminatory attributebased system of some kind or another. 

63 

But the question, to come back, is: Is it adequate, is it responsible, within the framework of what you’re saying, to have 35? Senator Stabenow and Senator Levin said that, ‘‘We think maybe we 

ought to be pushing the’’—what was the term they used? I think— 

‘‘leap-ahead technology and large technology and so forth’’—well, 

one of those leap-ahead technologies is obviously a plug-in hybrid, 

which I talked about earlier. I mean, if you’ve got people who can 

drive around and get 150 miles per gallon today, why can’t we leap 

ahead and have a whole bunch more of those vehicles available to 

Americans, which doesn’t require them to give up size, to give up 

ability to take the kids to the soccer game, to do all the things 

we’ve heard about in these arguments for years, but could do it at 

much less cost and greater efficiency? And we could provide a 

$3,000 or $4,000 tax credit, which I, incidentally, proposed 3–4 

years ago, that would cover the entire cost for the consumer. 

So, should we be thinking of a larger concept than 35? And, do 

we get enough of what we’re trying to grab out of the standard 

we’re talking about here? And, the third part of the question is, 

why won’t it do the things that Alan Reuther has said it’ll do to 

the industry, in your judgment? 

Admiral MCGINN. Thank you, Senator Kerry. 

In my view, CAFE is not—it’s necessary, but not sufficient. It’s 

a good start. We have to start in a lot of areas. 

In terms of breakthrough technologies, certainly plug-in hybrids 

are a key part. I believe Mr. Reuther mentioned that in his testimony, that the idea of bringing some of the key components that 

would go into plug-in hybrids to be built here so for example we 

can manufacture longer-lasting, higher-capacity batteries to extend 

the vehicle miles on a daily basis of plug-in hybrids, reducing the 

requirement to burn any type of liquid fuel, whether it’s gasoline 

or, more importantly and more likely in the future, bio-based fuels. 

I think there’s a lot that can be done in this country, in terms of 

the entire choice of fuels. This needs to be done beyond gasoline or 

hydrocarbons, in carbohydrate-based fuels, in a way that isn’t simply, ‘‘Let’s make ethanol from corn,’’ but, rather, ‘‘Let’s make ethanol from prairie grass, switchgrass, biomass from farms.’’ And, I 

think, also there’s a great place for newer, high-efficiency diesels. 

In a plug-in hybrid, the internal combustion engine can be literally 

anything. It can be gasoline-powered, diesel-powered, the fuel that 

goes into it can be a whole variety of bio-based or hydrocarbon. 

Senator KERRY. That’s—sorry. 

Admiral MCGINN. But I think that we need to recognize that 

these technologies are available now, they can be improved by 

American manufacture—— 

Senator KERRY. Let me stop you there, just for a minute. If they 

are available now, then what’s going to get them out there into the 

marketplace faster? I met with one of the—— 

Admiral MCGINN. Right. 

Senator KERRY.—Big Three CEOs a few years ago, and I sat 

there and asked that question several years ago, and I won’t say 

who it was, but you know what the answer was from the CEO of 

one of the Big Three? ‘‘Well, the American consumer isn’t asking 

for it.’’ 

Admiral MCGINN. Yes. 

64 

Senator KERRY. So, we’ve lost those 3 years, essentially. You 

want to answer that, Mr. McCurdy, you can. I don’t want to—let 

the Admiral—— 

Admiral MCGINN. I would just—— 

Mr. MCCURDY. Let the Admiral finish. I want to—— 

Admiral MCGINN. I would just say that incentives, as you’ve 

pointed out, Senator, are certainly a way to help stimulate that 

market. There are external forces that you also mentioned that 

are—and I have really focused on in my testimony—that are really 

going to influence the market. People understand about high gas 

prices. They really got a dose of it—we got a dose of it—postKatrina. That is not going to get less frequent or less intense, it’s 

going to get more frequent and more intense. And we live in a very, 

very dangerous world. The threat of terrorism, the threat of political embargoes all are real, and the American people understand 

that, and they understand what it can do, right to their pocketbook, on practically a daily basis as the prices go higher at the gas 

pump. 

The other point I would make is that as a result of the science 

being more and more consistent, longer-term, things like the Intergovernmental Panel on Climate Change reports series that is going 

now, people understand that climate change is a real threat, not 

just in an abstract sense, but in a very personal way for us today, 

and, in particular, when we think about our children and grandchildren. 

Senator KERRY. The one part you didn’t answer is to Mr. 

Reuther’s testimony about this negative impact that it will have on 

the industry. 

Admiral MCGINN. I believe it’s an opportunity for the industry to 

seize on these technologies, the ones that exist, the ones that are 

about ready to come into production, or could come into production, 

and really do the leap-ahead. 

CAFE will, or rather could be, looked at in retrospect as an artifact of an old technology marketplace. If we really, really invest, 

the way that Americans can, the way American industry can, in 

the right kinds of automotive technology, CAFE does not preclude 

great advances in fuel efficiency, it motivates them to be produced. 

Senator KERRY. Mr. McCurdy? 

Mr. MCCURDY. Thanks, Senator. 

Couple of quick points. You asked the question why some of the 

technology is available. And, actually, Admiral McGinn, in his formal statement, quotes a person whom I have a great deal of respect, and, having an Air Force background, probably lean that 

way a little bit more—and that’s General Chuck Wald. And General Wald, who’s part of the group, indicated that if you factor in 

the cost of military security into gasoline, that the real price of gasoline is somewhere between $6.50 and $7 a gallon. And, as a matter of fact, Senator Lugar’s Committee last year, when he was 

Chair, had hearings and testimony that said it was closer to $10. 

The price of gasoline—equivalent—in London today is $6.17 a gallon. The reason that the European prices are high are because they 

have energy taxes. Those taxes drive consumer behavior. What’s 

available in Europe today, 53 percent of the vehicles in Europe are 

diesel. They’re clean diesel. It’s not the diesel that we used to think 

65 

about in the 1980’s, and, you know, in the United States. This technology could be available. Now, it’s having to be certified in California, but, you know, we’re getting to that point. 

But the fact is, the important factor—and that’s what I tried to 

raise earlier—it’s one thing to talk about vehicles, it’s another 

thing to talk about fuels, which have to go hand-in-hand. It’s why 

you have to have a comprehensive approach. But if you leave the 

consumer out, I don’t believe the market’s going to work. And the 

market does have a real role to play. 

And in some of my conversations with the SAFE group, one of 

the concerns I have is that they do not argue—they do not believe 

that gas tax or that the price signals are sufficient to drive that 

consumer behavior. However, within the NHTSA criteria, they 

would like to have a cost factor added on the cost-effectiveness that 

would, in effect, add 50 percent to the price of a gallon of gasoline. 

So, what we see here is a hidden tax that—I think it should be 

much more transparent, and that the consumer know what these 

costs are. We’re passing on the cost to one sector. And all we’re 

asking is—we’re prepared to do our share. We had the four CEOs 

testify. They support real movement on climate change and caps. 

And other groups may say they—— 

Senator KERRY. But are you suggesting that caps alone is— 

would—— 

Mr. MCCURDY. No. 

Senator KERRY. OK. 

Mr. MCCURDY. I think it has to be a combination. There will be 

a performance metric for automobiles that should be applied. I 

don’t think it’s the old CAFE, but it could be a CO2 equivalent 

grams per mile. That is fair, and that is an appropriate way to do 

it. 

Senator KERRY. I don’t want to abuse my time here, Mr. Chairman but I do have more questions. But I just—you know, again you 

come back to the 10-year framework, and you come back to the, 

sort of, leadership issue necessary, both on national—security in 

terms of global climate change and security in terms of supply of 

fuel and dependency on the Middle East and elsewhere. And, incidentally, we’re not—that’s not—the Middle East isn’t the numberone supplier. But the bottom line is that we have a responsibility 

to put in place whatever incentives are going to bring about that 

consumer behavior; not wait for the consumer, but we have to lead 

the consumer. And that’s what I think has been, sadly, absent 

somewhat in the leadership out in—you know, with respect to the 

designs and what they’ve been willing to embrace. 

Prius, you know, and Insight, are out there like crazy. They’re 

selling like mad. 

Go ahead. 

Mr. MCCURDY. Senator, I just want to make one comment here. 

For the last 3 months, there have been incentives on hybrids. I own 

a hybrid. And they’re great technologies. There are second generations that will be occurring. But when I was Chairman of the Subcommittees on Armed Services, and Science and Space, and the Intelligence Committee—and these gentlemen know it well—one of 

the biggest challenges the military faced and NASA faced is battery 

technology. It’s power storage. And we still have challenges there. 

66 

Senator KERRY. I completely—— 

Mr. MCCURDY. That is—— 

Senator KERRY.—understand that. 

Mr. MCCURDY.—where government can, in fact, help a great 

deal. But the fact of the matter is that fuel-efficient vehicles today, 

even at $3 a gallon, are not selling—there was early adoption, but 

there is less demand today for that, and manufacturers actually 

lose money on those sales. 

Senator KERRY. They do, today. And I understand that. But I 

don’t think they have to. If we were to put the right policies in 

place, is the bottom line. And also, you know, it depends partly on 

what you’re marketing to people. I mean, you can see the marketing differential between muscle vehicles and big power. We’ve 

even gone up in power nowadays. We’re—you know, this is—it’s a 

question of where your priority is and what you want to start to 

go out and tell—sort of, suggest to people is important. And, I 

might add, I think, from a leadership perspective, given what our 

troops are sacrificing on our behalf, it wouldn’t have been a bad 

idea to ask Americans to join in this effort. And that might have 

begun to change behavior. 

So, I think there are a lot of options that were available to us 

with respect to that. And I know, from personal experience, I own 

several hybrids, one here in Washington, one up in Massachusetts. 

I would have loved to have been able to buy a van. I have a van 

up there, because I have to run around the state with press in the 

car, and staff in the car, and I need the room. I couldn’t find the 

vehicle. 

So, we’re not getting the kind of choice that we ought to be getting. And I hope that that will change, rapidly. 

Mr. Reuther? 

Mr. REUTHER. Senator, there has been discussion about incentives to encourage quicker penetration of the advanced vehicles. 

And I just want to underscore, if all you do is have enhanced consumer incentives, we’re going to lose all the jobs associated with 

producing these vehicles and the key components. What we need 

is to have a manufacturer’s incentive that says, yes, here’s assistance that’s going to make it cheaper, and so we get the vehicles in 

quicker, but we want to tie it to the work being done in this country, so we also keep the jobs. 

Senator KERRY. As you recall very well, Alan, because you and 

I worked together closely on all of this, my proposal in 2004 was 

to put $1 billion on the table immediately for the retooling for the 

industry to assist in that, and $2 billion directly into some of the 

clean technologies so we could accelerate this development. We are 

playing at the margins right now, in terms of what is really the 

national emergency, urgent issue. It’s not being treated that way. 

Now, hopefully we have an opportunity—we do have an opportunity, and the Chairman’s leadership—and I appreciate it enormously, because this hearing is important and long overdue. 

The last question, Mr. Chairman, Mr. Friedman, or anybody on 

the panel, again, I think there are a lot of opportunities here. I 

think there’s an enormous amount of money to be made. I think 

we can resuscitate the industry. I think there’s just a brilliant opportunity staring us in the face, with the right marketing and the 

67 

right joint venture partnership here. Mr. Reuther is articulating 

concerns about what this does to the industry if we don’t put these 

other pieces in place. Do you accept the notion that we also have 

a responsibility to try to put these incentives and cushions in place 

in order to facilitate this transition? 

Mr. FRIEDMAN. Well, I think you’ve actually heard a remarkable 

amount of agreement today. Everyone says cars need to do something, but so does the rest of the economy. And I think you will 

probably get a lot of agreement that we need incentives. Automakers are going to be able to increase profits by selling higher 

fuel economy cars and trucks. Why? In part, because if consumers 

are spending less money on gasoline, they can buy better cars, they 

can buy more expensive cars. They can also, maybe, rent an extra 

DVD or also spend some time creating jobs in other parts of the 

economy. But, at the end of the day, increasing fuel economy will 

increase profits and increase jobs in the auto industry. 

Are there going to be transition costs? Absolutely. Are you going 

to need to make investments in technology? Absolutely. Is there a 

role for the Government to play to help industry making those investments? Absolutely. Consumers are in a position to save tens of 

billions of dollars a year. Consumers’ savings will dwarf the investment cost to the auto industry. So, it absolutely makes sense for 

consumer tax dollars to help the industry along the way. 

It also makes sense to recycle some of those tax dollars to help 

steer consumers toward better vehicles. I think part of the challenge here is, we absolutely need to address all parts of the issue, 

but you’ve got to start. You’ve got to start walking before you run. 

And the way you start is by raising fuel economy standards. 

I sat before you, about 6 years ago, December of 2001, talking 

about this very issue. You were chairing this Committee. And we 

were talking about 40 miles per gallon back then. We’ve gone backward in some ways, despite the fact that technology has gone forwards. So, absolutely can we do more. 

Can we switch to fuel-cell vehicles tomorrow? No. Can we switch 

to plug-in vehicles tomorrow? No. These are really exciting technologies, and they will have a substantial role to play 20 or 30 

years from now. Ten years ago, I helped build a plug-in hybrid vehicle while I was studying engineering in graduate school. We took 

a Ford Taurus, we converted it into a plug-in, and we got over 60 

miles per gallon. Clearly, it can be done. But right now, the batteries are too expensive, and they don’t last long enough. You can 

do it in small volume, but not yet in large volume. 

Fuel-cell vehicles are too expensive right now. But that doesn’t 

mean we should stand still. We should invest in that technology. 

But in that 10-year window you talked about, the single biggest 

thing that we can do to cut our oil dependence and reduce global 

warming pollution is to invest in auto mechanics, is to invest in engineering, it’s to take these simple steps with technologies automakers have already developed, that can raise fuel economy standards, by our analysis, to 40 miles per gallon over 10 years. I’ll take 

35 to start, but we can definitely go farther. 

I also, just quickly, in mentioning the price issue, I have to say 

that I’m a little concerned. It’s a little disingenuous to hear the 

auto industry talking about gas prices, when I don’t really hear the 

68 

auto industry lobbying to raise gas taxes. It also concerns me a little bit that the auto industry is talking about Europe, where gas 

prices are higher, and they absolutely are, and fuel economy is 

higher, but it’s not high enough. The European Union is setting 

standards to reduce global warming pollution from cars and trucks, 

because their prices haven’t been enough. So, even $6 a gallon gasoline in Europe isn’t enough. Before we raise prices for consumers, 

let’s save them money. Maybe down that road we’ll need to invest 

money in highways and make sure that we can do that, but let’s 

start off by saving consumers money, providing them incentives, 

and getting better fuels out there. 

Senator KERRY. Thank you very much. 

Mr. Chairman, thank you for the time. And, as I close, I’d just 

mention, I hope we will work through this issue. You know, I don’t 

know which one we’re going to wind up with, or where, but I just 

have a concern about the off-ramp piece, just given the record and 

experience we’ve had on NHTSA and so forth. I think we’ve got to 

really be firm here, and strong. So, I want to work through it. I 

talked to Fred Smith earlier today, and want to follow up on how 

we might think about it. 

But, Mr. Chairman, thank you very much. You’ve been very generous with the time. And I thank my colleague from Delaware for 

his patience. 

The CHAIRMAN. Thank you. 

Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

To our witnesses, welcome, and thank you very much for joining 

us today, and, for some of you, for joining us in recent days and 

weeks. 

Mr. Friedman, just a quick thought that comes to mind. Did you 

say it was 10 years ago that you and some of your colleagues in 

graduate school worked on a—did you say it was a hybrid? 

Mr. FRIEDMAN. A plug-in hybrid—— 

Senator CARPER. Plug-in hybrid on a—the Ford Taurus? 

Mr. FRIEDMAN. On a Ford Taurus, exactly. 

Senator CARPER. I’m just wondering why Ford didn’t hire you. 

Maybe if they had hired you and some of your friends, we’d still 

be making Ford Tauruses in this country, and selling them around 

the world. 

Mr. FRIEDMAN. Well, frankly, there are a lot of really talented 

engineers in the auto industry. They don’t need me there. They’ve 

got a lot of great engineers who have already developed a lot of this 

technology. But, even then, we knew that that plug-in wasn’t quite 

ready. But some of the technologies we put in that vehicle were 

ready. In fact, that vehicle was produced by Ford and made out of 

aluminum. The auto industry had the technology to cut the weight 

out of cars and trucks while maintaining, or even improving, safety, and increasing fuel economy. We also put in a more efficient engine design at that time. Many of those technologies are still here. 

The challenge I think we’ve heard before is, for the last 10 years— 

and really for the last 20 years—most of that technology has gone 

to nearly doubling the power of our cars and trucks. A family car 

today—you can buy a family car that accelerates as fast as a late1960s Mustang or a late-1960s Porsche 911. That’s great. Let’s 

69 

keep it. That’s what we did for the last 20 years. But let’s spend 

the next 20 years taking the technology we’ve got to increase fuel 

economy. 

Senator CARPER. Good. Thank you for that comment and for your 

insights. 

Mr. Chairman, there are just a couple of things I want to get off 

my chest, and then I want to ask a question or two. 

And some of the folks in the audience here have heard me say 

this before. I would just ask you to be indulgent with me. 

Lee Iacocca has a new book out. I think it’s, maybe, titled, ‘‘Leadership’’. And he was interviewed recently on NPR. They were talking about the auto industry and how we ended up in the situation 

where we have figured out how to lose market share, close plants, 

lay off employees, and lose a ton of money over the last 10 or so 

years, even longer than that. And he said—I’ll paraphrase him— 

he said we weren’t very smart. What he actually said, I think—I’m 

told he said we were very stupid. And, you know, it’s easier on this 

side of the dais, looking at the industry. But we could have gone 

to flexible manufacturing, where you’d make not just one vehicle in 

a plant, but maybe two, maybe three, maybe four; you’d be able to 

vary your production for the different vehicles in accordance with 

what’s being demanded by the marketplace. Or you’d have a pilot 

vehicle that you’re working on, we could have done that. Frankly, 

we’re sort of, ‘‘Johnny come lately’s’’ on it. 

Alan Reuther says, with great precision and accuracy, we spend 

a whole lot more money on healthcare for the folks that are building a—we’ll say, a Durango that we build in Newark, Delaware, 

compared to what they spend building a similar kind of SUV in another part of the world. 

Having said that, though, there are a lot of things we can do to 

reduce the cost of healthcare in this country, and I’m just going to 

go through a real quick list, real quick. We can harness health information technology. We can incentivize folks to actually take better care of themselves, to exercise, to eat the right foods, to not 

smoke, not drink to excess. We can do those things. We can do a 

better job of chronic disease management. We can adopt things like 

stem cell research, whether you want to get embryonic stem cell or 

different kinds. We can build more community-based health centers 

so that folks have, right in their communities, access to healthcare, 

that they’re not using the hospital emergency rooms. We can put 

employee-based health clinics for primary healthcare right in 

places where folks work. We can institute pay for performance, 

where we actually are paying for better healthcare and better results. We can actually use the mapping of the human genome to 

develop what I call boutique drugs that target in on certain populations that are going to be helped more by small molecule or large 

molecule drugs. We can help incentivize the creation of small business purchasing pools to enable small businesses to have the kind 

of advantages that we have as Federal employees. We can better 

inform consumers in consumer-directed health insurance, about 

health savings accounts, so they’ll make the right kinds of decisions. We can help bring down the cost of defensive medicine. We 

can do that. It’s not just the folks sitting here on this panel, but 

70 

the industry, the economy, a lot of our folks. There’s a lot that we 

can do. 

If we’re really smart, the auto industry and other industries in 

this country will figure out how to do a variety of those, to help 

rein in the grown of healthcare costs. And I hope we’ll be that 

smart. 

I want to—under the banner of ‘‘we weren’t very smart,’’ go back 

to Lee Iacocca. I remember a conversation I had with the leader in 

one of our Big Three auto companies back in 2001. I think, Mr. 

Friedman, you talked about testifying for a panel that Senator 

Kerry was a part of. That same year, I remember being in Detroit, 

meeting with the leader of one of our auto companies, I said to 

him, ‘‘Doesn’t it frost you that we’re letting Honda and Toyota steal 

an environmental march on you, and we’re not creating, really, any 

product to compete in that sector, something highly energy efficient?’’ And he said to me at the time, he said, ‘‘You know, for 

every Prius that they build over at Toyota, they’re going to lose 

$20,000.’’ They may lose some money on Priuses but one of the 

things they do is use that to draw people into the showrooms. And 

if they don’t buy a Prius, they buy something else. That’s smart. 

And our friends at GM have learned how to build Pontiac Solstices, 

at a loss. They build them in Wilmington, Delaware. They don’t 

make money on them, but it brings a lot of people into Pontiac 

showrooms, and they buy something else. They’ve learned how to 

build Saturn Skyes. They lose a little money, I believe, on the Saturn Skyes, but it sure brings a whole lot of people into the showroom. I think maybe Toyota figured that out with the Prius. Eventually, they may be smart enough to figure out how to make money 

on them. They’re also smart enough to figure out how to make not 

one vehicle in a plant, not two vehicles—maybe not three—but 

maybe four. We ought to be that smart, as well. 

Under the banner of ‘‘we weren’t very smart,’’ same company, 

someone—a fairly senior guy there said to me—we were talking 

about energy efficient vehicles, and he said, ‘‘Well, we’re going to 

put our eggs in the fuel-cell basket.’’ This is 6 years ago. ‘‘We’re 

going to put our eggs in the fuel-cell basket, because that’s where 

we think the future lies.’’ And I’d say, ‘‘Shouldn’t there be a bridge 

to the future? Maybe, shouldn’t there be something like a hybrid 

or like a flex-fuel hybrid, or a plug-in hybrid bridge to the future?’’ 

At the time, 6 years ago, ‘‘No, the future is fuel cells, and that’s 

where we’re going to invest our money.’’ To their credit, the hottest 

car I saw unveiled at the Detroit Auto Show this year was the 

Chevrolet Volt. A great-looking vehicle. It’s smart. It’s not just a 

plug-in hybrid. It recharges the battery by putting on the brakes. 

It’s a plug-in hybrid with a flexible-fuel power generator with it. 

The battery runs the wheels and you recharge the battery when 

you put on the brakes. You also recharge the battery with a fuelcell power system onboard, or a diesel-powered system, or an internal combustion engine onboard. They’re always recharging the battery. That is so smart. And as some of you have said, the impediment for us is: How do we—play catchup with the Japanese and 

others on the battery technology? And we’re going to come back to 

that in just a moment. 

71 

But the idea for us to have been saying, 6 years ago, ‘‘We’re 

going to put all of our eggs in the fuel-cell basket. There doesn’t 

have to be a bridge to the future’’—now we realize there does. 

We’re just behind the eight ball. 

And last rant and then I’ll get over it, and then I’ll, maybe, ask 

a question or two. We have a DaimlerChrysler plant in my state. 

It’s in Newark, Delaware, just south of the University of Delaware, 

right off of I–95. When I was State Treasurer, a million years ago, 

I actually negotiated a State’s loan to Chrysler to help—along with 

other states and the Federal Government—to help save the company when it was about to go under. This is something I care about 

a whole lot, and have thought about a whole lot. That’s a plant 

that has been on the bubble for a long time. 

2001, my first year, I had just stepped down as Governor, been 

elected to the Senate, 2001, and had a meeting here in Washington. Senator Biden, Congressman Castle and myself had the 

privilege of meeting with a number of the folks from 

DaimlerChrysler. At the time DamilerChrysler was saying, ‘‘We’re 

going to try to figure out whether to build a second-generation Durango, and where to build it, if we do.’’ And the great news they 

shared with us that day: they’re going to build a second-generation 

Durango. We were delighted. The first one was being built in Newark, Delaware. They said, ‘‘We’re going to build the vehicle in Delaware,’’ so that was great news. And they said, ‘‘The third piece of 

good news is that we’re going to offer a hybrid option starting in 

2004.’’ Bingo. It was like the hat trick, it was a triple play. And 

we were delighted, and left the meeting. A year later, we got back 

together with the same folks, you know, from DaimlerChrysler, 

‘‘Still going to build a second-generation Durango, still going to 

build it in Newark, Delaware. We’re not going to offer a hybrid option.’’ 

Now, last year, when gas prices rose over $3 a gallon, it was 

about 150-day inventory of unsold Durangos in dealer lots across 

the country. You know, we’re really—Iacocca’s right, sometimes, 

not very smart. Smart thing, though, that we did in—on the tail 

end of that is, our friends from GM, DaimlerChrysler, BMW got together, created a partnership, a consortium, and now that partnership has led to the creation of a new next-generation hybrid. 

They’re going to be in Dodge Durangos next year. They’ll be in 

Chrysler Aspens next year. That’s wonderful. It’s too bad they 

weren’t in them 2–3 years ago. 

All right, I’ve got that off my chest. Thank you for bearing with 

me. That’ll give us all something to think about. 

One of the great values of having panel like this—and I thought 

about this when Senators Levin, Feinstein, and Stabenow were before us—I thought, if we could get the three of them to agree on 

a path forward, we could probably get something done, and something good for our country. Just sitting here today, Mr. Chairman, 

looking at this panel, I’m thinking, you know, if we can get this 

panel to agree on a path forward, it would probably be pretty good 

for our country and for the industry, as well. 

As I’ve listened to y’all speak here today and our Senators before 

you, a couple of things have come to my mind that we agree on. 

I want to ask, Are we in agreement on this? 

72 

One, I think we agree that the status quo is unacceptable. I 

think we agree that we have a great deal at stake here, in terms 

of our national security—not just our economic security, but our 

national security. I think we agree on that. I think we agree that 

we need to get started, sooner rather than later, but there’s a need 

to acknowledge that there are start-up delays because of technology. You just can’t turn a crank and do this overnight, produce 

the vehicles overnight, because of the—R&D, engineering, developing the parts, and so forth. But, over time, we can do better. But 

we need to get started. I think we agree on that. 

I think I heard consensus here today that for manufacturers that 

do get started earlier, they ought to get credit for early action. I 

think I heard consensus on that. 

I think I heard consensus on the need for whatever approach we 

take, whether we take the attribute approach—which I think 

makes sense, and I think others do, too—that there be some exit 

ramps. In case we have missed something here, if the world 

changes in some way that we haven’t thought about, that there are 

sort of escape valves—not easy ones, but real ones. I think, for the 

most part, I’ve heard us say that. 

I think that we agree on the need to have not just a focus on, 

fuel efficiency, but also this issue of vehicle miles traveled. We’ve 

got to think about not just how much fuel we’re using in our vehicles, but how do we get people out of their vehicles sometimes. How 

do we actually deal with land use to promote that? I think I heard 

us agree on biofuels, say we need to turn some of those cornfields 

into oil fields, and some of those soybeans into oil fields. I believe 

I heard a number of people say that. 

A couple of you talked about a way to sort of morph from a 

CAFE-based approach to a more of an economy-wide approach that 

deals with CO2—to find a way to morph from one to the other as 

a good approach. I think I heard folks say that. 

Here’s my question. Did I misstate any of those? In terms of 

things that we agree on. Secondly, how do we not just say to the 

industry, ‘‘We’re going to have this tough-love approach with you 

on fuel efficiency and trying to change gears here’’? How do we help 

them? How do we help the industry? I know Mr. Reuther has 

called for us doing a good deal more on healthcare. I’m going to set 

that aside for right now. But how do we help the industry, especially the domestic industry? 

I think I’ve heard some of you say, ‘‘Invest in new battery technology. It’s one of the best things we can do.’’ Does it make sense 

for us to try to find a way to include in the legislation that we’re 

going to take to the floor or bring up on the floor authorization for 

significant new investments over, maybe, a 5-year period of time, 

but a multiyear period of time, in new battery technology? Does it 

make sense for us to include in the legislation that we move, either 

out of this Committee or on the floor, biofuel standards, to actually 

create a biofuel standard for—B20 or B30 fuel for greater biofuel 

content in our diesel? Does it make sense to try to include some 

adjustments of our tax credit for low-emission diesel so that—for 

example, does DaimlerChrysler, whose BLUETEC technologies is 

actually going to produce—is producing a Bin8—not Bin5, but a 

73 

Bin8 emission vehicle? Does it make sense to try to move up their 

eligibility to use Bin8 as a basis for consumer tax credit? 

Finally, does it make sense for us to include in the language we 

take to the floor further incentives, for the creation of additional 

biofuels? I’ll tell you what I have in mind. Not just how we turn 

corncobs into ethanol. How do we turn cellulosic materials into ethanol? Also, how do we develop follow-on biofuels, like biobutanol? 

At the DuPont company, do you know we’re making biobutanol out 

of sugar beets? We can make it out of switchgrass and a lot of 

other waste materials. Should we use this legislation as a way to 

incentivize not just R&D on that stuff, but to actually commercialize the technology? 

What do we append to this legislation of the, four areas that I 

discussed, things that can actually help the industry, but also help 

reduce our country’s dependence on foreign oil? 

Thank you. 

Mr. REUTHER. Senator, if I could say I think assistance with battery development is important, but I don’t think that should be the 

only thing. The retooling costs that the companies are going to 

have to incur to meet significantly higher CAFE standards are very 

large, and I think there’s a role for this Committee and the Senate 

to play in helping to provide that assistance through loan guarantees or otherwise. 

Yes, we’ve talked about healthcare, but it’s not just healthcare, 

it’s the whole range of retooling costs. And, you know, there has 

been a lot of talk on the panel in—today about the national security importance of reducing oil consumption. And we agree with 

that. But if you’re talking about national security, that’s something 

that benefits the whole country, and we share the cost of our national defense. And we think a similar rationale applies here, that 

we should be sharing, as a country, the cost of having the industry 

have these retooling costs, not have the costs all borne by the workers and retirees in the industry. 

Senator CARPER. All right, thank you. Again, let’s just say to the 

panel, my questions—just so we’re clear—of those things—I went 

through about eight or nine elements of things that I thought we 

agreed on, or I think we—I heard us agree on. And I want—did I 

miss something? Did I misstate something? And next, in terms of 

reporting language out of here, a bill out of here next week, to go 

to the floor, should we try to append to it some of the—I mentioned 

about four ideas to try to add either on the—in the Committee or 

on the floor. So, those are my questions. 

Yes. Mr. Friedman? 

Mr. FRIEDMAN. Senator—should I go down the line? Thank you. 

Well, relative to the list that you went through, I would say, generally, I think we agree very strongly with the majority of them. 

One question is exit ramps. I think we have to think very, very 

carefully about exit ramps. At a minimum, we know we’ve got the 

technology to hit at least 35 miles per gallon over the next 10 

years. Maybe after that, it might be time for some off-ramps. But, 

for the next 10 years, our country needs to stay on the highway, 

going at top speed toward cutting our oil dependence. 

Second, you asked about an economywide cap and morphing 

CAFE into some sort of similar approach. Well, the great thing is, 

74 

actually, CAFE is already set up to fit perfectly well within an 

economywide cap. How do you reduce global warming pollution 

from cars? You improve efficiency, you use low-carbon fuels, and 

you drive less. Well, if you have a cap on global warming pollution, 

and if you have a standard to increase efficiency, you’ve taken care 

of one of those things. What else do you need? A low-carbon fuel 

standard. I would actually say that’s even better than a renewable 

fuel standard, because you’re directly targeting global warming pollution, and you’re getting oil at the same time. Plus, you want to 

make sure, of course, that you’re growing those biofuels 

sustainably. But let’s target the carbon on those, and that way you 

know how to treat the different fuels. Not all biofuels are created 

equally. Let’s make sure we account for that. And, of course, we 

definitely need policies to reduce VMT. 

Do we need research for better batteries for better fuel cells, for 

cellulosic ethanol, for biobutanol—in part, to reduce some of the potential health hazards that you could get with low bends of ethanol? Absolutely. Government has that role to play. 

Senator CARPER. Good. 

Mr. FRIEDMAN. The Government also has a role to play to provide incentives and—there are already tax credits for diesel vehicles and hybrids. For the largest vehicles, there’s a Bin8 classification. Over time, actually, that should come down, because the technologies you’re talking about, they’re targeting Bin5—— 

Senator CARPER. I think in 2009 they’ll have the Bin5 ready to 

roll, and I think in 2008, they’ll still be with Bin8. Thank you very 

much. 

Congressman McCurdy and then Mr. Stanton. 

Mr. MCCURDY. Tom, I actually wrote 12 questions down, so the— 

and it’s a clean dozen, so I’ll put it that way. 

Yes, the status quo is unacceptable. And the Alliance—and I 

know Mike Stanton and I agree—between the two of us, our associations represent probably 100 percent of—or 99 percent of the 

automobile manufacturers that sell in the United States. And we 

both agree that there has to be fuel-economy improvements and 

performance improvements. We support, the reform of a passengercar rule, and we think attribute-based system makes sense. So, 

that is an important step. 

There is a lot at stake. There’s not only a lot at stake internationally from the climate change issue, but also economic and national security. 

We do want to get started. CAFE doesn’t really kick-start action 

on climate change but there are other things that can do it, and 

some of the things that you mentioned are not contingent on 

CAFE. 

I do want to spend a few minutes on exit ramps, but I’m going 

to leave it until last. 

Biofuels, yes, absolutely. Flex-fuels are important. I think Congress has to be a little careful, though, not to get swept up and try 

to pick winners and losers. The agriculture community is looking 

very excitedly at some of the technologies, and that’s important, 

but long-term cellulosic and other types of ethanol production are 

critical, and enzyme production, all those things that go with that 

are critical. 

75 

I do believe that it makes sense to—and I believe—because our 

CEOs testified before the Congress and made a commitment that 

they would work toward a—an economywide cap-and-trade system. 

The reason they did that is not to shift the cost from the transportation sector, or from just automotives. We believe it is a national 

problem. It’s a global problem. It’s not a State problem, or local. It’s 

a global problem. We have to deal with China and India and other 

developing countries, but we do believe it’s time to step up and try 

to do that. A good place to start is in transportation, by including 

the fuels that you mentioned here. 

There is—biofuels standards, absolutely. You know, MIL Spec— 

we know, where there’s a B20, there could be a civilian on commercial B20. They’re the kinds of steps that are important. 

Tax credits are good for consumers. And I think there need to be 

other incentives. 

Mr. Friedman mentioned exit ramps, and Senator Kerry did, as 

well. When you look at the—— 

Senator CARPER. I’m going to ask you to sum up quickly so we 

can hear from Mr. Stanton. 

Mr. MCCURDY. OK. 

Senator CARPER.The Chairman has been very—— 

Mr. MCCURDY. And if you’ve like to have a—— 

Senator CARPER.—generous with his time. 

Mr. MCCURDY.—separate discussion on off-ramps, we could do 

that after this, because I don’t want to interrupt the flow with the 

rest. 

But I do think it’s worth bearing just a couple of minutes on the 

off-ramps, of what it really means, and that they’re serious. 

Senator CARPER. OK, good. Well, let’s have that conversation. I’m 

sure we will. 

Mr. Stanton? 

Mr. STANTON. I’ll, kind of, pick up there, because the off-ramps 

are very important to us, too. 

Senator CARPER. OK. 

Mr. STANTON. Obviously, we don’t know what the world’s going 

to look like in 10 years. We are approaching this today—all of our 

members are because we recognize the fact that we do have a national problem, and we do have to move forward, and we do have 

to move forward aggressively. 

One of the recommendations that we would make is that we 

treat all of the alternative fuel sources equitably. We don’t know 

whether or not we’re going to get through to cellulosic ethanol. We 

know we need to do work there. We know we need to do work on 

battery technology development. We know to do work on raw materials. Nickel, right now, is a scarcity, and we’ve got nickel-metalhydride batteries, which we’re using a lot now for the hybrids. 

Every—obviously, everyone would like to go to lithium-ion batteries. We need breakthroughs to get there. So, there’s an urgency 

about all of this that we want to convey today. 

We certainly support all that Dave said, the need for the standards, as well. We would also, though, say that we’re very familiar 

with the CAFE program. We know what it is. We know that it’s 

not the answer, certainly; it’s a part of the answer. If there is 

changing to another metric, like CO2, the truth of the matter is, is 

76 

that CO2 is one way of measuring mpgs. You can go back and forth. 

We just want to make sure that, as the Committee goes forward, 

we work with you, and we come up with something that is reasonable. Our preference would be that NHTSA set the requirements 

to do that. We’re sensitive to the need that the members here want 

to have a number. If they pick a number, please give us good offramps. 

Senator CARPER. Admiral Blair? 

Admiral BLAIR. Yes, Senator Carper, your grasp of all of these 

aspects of this problem is certainly impressive. But I just want to 

emphasize one major thing. 

I remember a lesson in leadership I learned early on in my career as a Navy officer. There was something that really—the ship 

really had to do, everybody knew we had to do it. I asked for volunteers. Nobody volunteered. I went back and talked to some of the 

sailors later and said, ‘‘You know, what happened? We all know 

this has to be done. Asked for a volunteer. Nobody volunteered.’’ 

Our sailor he said, XO, if this has to be done, just tell us to do it, 

and we’ll do it, and we’ll support it. We all know this has to be 

done. Polls show it has to be done. People just want to be told to 

do it, and they’ll do it. 

And so this business of getting a big move that sets in a standard that we know is achievable with some work, that appeals to 

the best in America, that everybody wants to line up behind, I 

think that’s what we need to do, and not get too bogged down into, 

you know, a little incentive for this guy and a little one for that 

guy and so on. But let’s put it out there, where all the people will 

say ‘‘OK, let’s do it.’’ 

Senator CARPER. Thank you. I was an old naval flight officer for 

23 years. I—— 

[Laughter.] 

Senator CARPER.—appreciate what you just said. Thank you. 

Admiral MCGINN. Senator—— 

Senator CARPER. Vice Admiral? 

Admiral MCGINN.—I agree with Mr. Friedman on off-ramps. Offramps, to me, presume too much of a high probability of failure. 

We want to be focused on success and positive outcomes. And I do 

believe we have the technology to do that. 

We have a history of legislative action on fuel standards that are 

just fraught with loopholes. And we don’t want to do that, going 

forward. The problem is pretty clear, and the solution ought to be 

clear. 

I agree with a lot of the comments and subjects that you brought 

up. Investment in the battery technology. It is basically all about, 

how do you store electrons and can you do it for cars? We also need 

to be able to do it for renewable forms of energy, like wind energy 

and solar energy, when the wind isn’t blowing and the sun isn’t 

shining. So, this type of investment—national investment and private-sector investment in electron storage, battery storage, is very, 

very important, has a lot of implications for our future. 

Biofuels are not just about the feedstock, where it comes from. 

We need to be able to break biomass down for ethanol production. 

Cellulosic ethanol is an example of that. But we also need to have 

the right kinds of industrial processes or plants that have the abilVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00080 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80033.TXT JACKIE
77 

ity to capture and sequester carbon, not just from when we’re doing 

coal to electricity or—but, when we’re doing ethanol production or 

biodiesel production. 

Clean diesels, absolutely. There’s a lot of good progress that has 

been made, particularly in some of the European countries, that we 

need to either replicate, improve upon, or import. 

Incentives, selected incentives for consumers can, in fact, move 

the market in the right direction, but, as Admiral Blair said, I 

think it’s got to be an important message, ‘‘This is the right thing 

to do. It’s a real problem. Let’s get moving on it.’’ 

I think, also, there are aspects to planning land use, that you 

mentioned, total—trying to reduce vehicle miles traveled. Tremendously positive. 

But all of that said, I think the clarity of this CAFE legislation 

ought to be unencumbered by too much complexity in amendments. 

It ought to be clear. Yes, those other things are good, and there are 

other legislative bills that could deal with them more directly and 

more clearly. And my recommendation would be, let’s focus on the 

major opportunity here, and keep it to that. 

Thank you, sir. 

Senator CARPER. Thank you, all. 

Mr. Chairman, thank you for your patience and generosity. 

The CHAIRMAN. Thank you. 

Senator Klobuchar? 

Senator KLOBUCHAR. Mr. Chairman, thank you for allowing me 

to return with some questions. I was presiding over the Senate, as 

we do, many hours a week as freshmen. And I got back in time. 

So, I wanted to thank you. 

And I appreciated your remarks, Admiral Blair, about putting 

those standards in place. As I said in my opening comments, I 

think the American people are crying out for that kind of leadership right now. 

I’m on the Agriculture Committee, as well as the Environment 

and Public Works Committee and this one, so I, kind of, live and 

breathe these issues. And I knew things were getting bad when I 

came home the other day and my 11-year-old daughter was working on a big tagboard, and it had this sea with these little heads 

bobbing above, and I said, ‘‘What are you doing? What are those?’’ 

She said, ‘‘Those are drowning penguins.’’ She was doing a report 

on global warming. So, anyway hopefully, she has not been completely corrupted by all of this discussion. 

But I think that as we go forward, one of the things I struggle 

with is how we make sure we get to that economywide level that 

you’re talking about, Mr. McCurdy. And I understand that it may 

not all be in one bill, but I think we have to start doing it sector 

by sector. Certainly, these CAFE standards, and doing them in a 

way that we understand some of the issues that have been raised 

about the American auto industry, but also, we have to start somewhere, and I think if we are doing the CAFE standards, we’re 

doing some of the building efficiency work that the Energy Committee is working on. It’s going to be a lot easier for us to work 

on some of the power industry in the bills that Senator Carper and 

others have as we go forward. I think you certainly know this isn’t 

going to be singling out one industry as we go forward. 

78 

As I mentioned, Minnesota has a huge growing biodiesel, biomass industry. I’m taking the lead in the Senate side on the cellulosic ethanol issue in the Agriculture Committee, because we see 

so much potential there as we move forward and build on the other 

kinds of ethanol. I’m curious about the flex-fuel vehicle issue. And 

I just would ask both of you at the end there what the percentages 

are for how many vehicles we’re producing now that are flex-fuel, 

and if left to its own devices, where it’s going. 

Mr. MCCURDY. I’ll take a run at that. Last year, 2006, there were 

1.5 million flex-fuel vehicles sold. There are 10.5 million on the 

road today. The challenge, Senator, is that there’s not the appropriate fueling opportunities for those vehicles. There’s just over 

1,000—I think it’s 1,079—stations that provide E85—— 

Senator KLOBUCHAR. And, Mr. McCurdy, do you know how many 

are in Minnesota? 

Mr. MCCURDY. Most of them. Actually—— 

Senator KLOBUCHAR. 312. 

Mr. MCCURDY. That’s right. And that’s out of 177,000 gas stations in—— 

Senator KLOBUCHAR. Right. 

Mr. MCCURDY.—this country. So, there’s—— 

Senator KLOBUCHAR. Exactly. 

Mr. MCCURDY.—an infrastructure issue there. So, if ethanol is 

there, there are some standards issues, there are other issues that 

need to be addressed. And this is where we do have to work together. 

There will be more. And if you look at a map of the United 

States, where those 10 and a half million—there are 17 million vehicles sold every year, so you’re talking about 10 percent. That 

would increase dramatically, provided there was fuel. Unfortunately, consumers often don’t know that they have that capability, 

because it’s not there, they don’t see the fuel. 

And diesel—you know, I’m a big supporter of cellulosic and other 

forms of ethanol, but I think we really shouldn’t neglect diesel. 

Fifty percent or more of the vehicles in Europe, where they have 

25 to 30 percent more fuel efficiency—and they aren’t compromising on size and weight with that. 

Senator KLOBUCHAR. And also, I mean—— 

Mr. MCCURDY.—is an important technology—— 

Senator KLOBUCHAR.—diesel—I’m sorry to interrupt, but—— 

Mr. MCCURDY. Biodiesel is an important—— 

Senator KLOBUCHAR. Right. 

Mr. MCCURDY.—part of it. The Senator from North Dakota, 

who’s not here, they’re just producing the canola bean factory in 

biodiesel. So, there’s a lot going on there, and I think it’s an important component of this, and we support it. 

Senator KLOBUCHAR. Given that biodiesel’s more fuel efficient, do 

you think that the higher CAFE standard would actually encourage 

the promotion of more biodiesel and production if it? 

Mr. MCCURDY. No, I actually think where you get to that is if 

you are looking at a cap-and-trade, that you have some fuel standards, and you bring the fuels into the transportation mix. If you 

look at the amount of transportation fuels that are in the system, 

it is a significant part, but that’s—autos and light trucks are oneVerDate Nov 24 2008 12:03 Mar 21, 2013 Jkt 075679 PO 00000 Frm 00082 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\80033.TXT JACKIE
79 

half of the transportation fuels. That’s a lot of carbon going into it. 

It’s actually 2,000 million metric tons. That’s something that you 

could capture. And I think—if you were looking at the broader 

sense. So, we’re part of that. We’re half of that. But there’s a whole 

bunch more that you could capture. And that’s where these other 

standards on specs on B20 and others really come into play. 

Mr. STANTON. And, Senator, from our point of view—we support 

the research, development, and use of all biofuels, but we think 

that the jury’s still out on which ones will eventually be the winners. Maybe there’s a shared market for each one of the fuels. But 

it’s still early in the process, quite honestly. We need the breakthrough on the enzymes on the cellulose. 

Senator KLOBUCHAR. Mr. Friedman? 

Mr. FRIEDMAN. Thank you. 

I think everyone is justifiably excited about the potential for 

biofuels. They are, among the alternative fuels, probably the technology that is likely to be brought on the quickest, especially if we 

put smart policy in to support to them. 

One of the problems today, though, is our fuel economy policy is 

not smart about some of the biofuels. There’s a loophole in the current fuel economy policy that gives credit to flex-fuel vehicles, even 

if they’re not using alternative fuels. Now, does that mean flexiblefuel vehicles are bad? Of course not. It just means we need to close 

a loophole that’s draining away and increasing some of our oil dependence. I think we should just ask the auto industry to follow 

through on what they’ve talked about, in terms of the potential to 

deliver about half their fleet as flex-fuel vehicles. I think consumers would gladly pay an extra $50 or $100 to know that they 

can fill up their tank with an alternative fuel. Of course, we need 

the infrastructure, and your state has clearly been a leader. We 

need to replicate that around the country. And we need low-carbon 

fuel standards to get us out there. 

One other important issue about biodiesel that you mentioned, 

one of the challenges for many consumers today is, most diesel engines are only warranteed to about 5 percent biodiesel. So, one 

other things I’m looking forward to is the auto industry bumping 

up that warranty, getting in the technology on those diesels, so 

that you can take advantage of the efficiency benefit of a diesel, 

about 25 percent, plus, where you can get it, the biodiesel benefits, 

as well. 

Senator KLOBUCHAR. So, do you think raising the CAFE standards is helping to promote the production of biodiesel? 

Mr. FRIEDMAN. I would argue CAFE’s focus is vehicle efficiency. 

If you make a dedicated alternative-fuel vehicle, then, yes, it can 

have an impact. But right now, we’re—the vehicles are focused on 

flexible fuel, and so, you can’t guarantee they’re actually going to 

use the fuel. Maybe you can change that loophole so that you get 

credit based on the previous year’s alternative-fuel use. But I think 

the best way is just to—let’s get the vehicles out there, with one 

policy. Let’s get the fuels out there, with a low-carbon fuel policy. 

I think—you know, as other people have said, maybe you don’t 

marry them, maybe you do. I think it depends on what the Senate 

can deliver in the next few months. But let’s just not let the perfect 

80 

be the enemy of the good. There are a lot of really good solutions 

out there. 

Mr. MCCURDY. Since you’re on the Agriculture Committee, you 

know about the chicken and the egg. The problem is, you’re requiring the vehicles to be produced, but there’s no fuel. If the fuel’s not 

there, how in the world are they going to be able to do it? So, it 

is a tremendous technology, it should be explored, it can be expanded. But, again, you’re putting all of it on one sector. In the fuel 

sector, let me tell you, they’re not losing money. They actually 

ought to be in to—in this system. So, I think that’s something 

that—I know the other committees of jurisdiction are looking at 

that. The difference between the House and the Senate, there you 

have one big Committee that’s pulling all this together—— 

Senator KLOBUCHAR. Well—— 

Mr. MCCURDY.—here it’s a little more—— 

Senator KLOBUCHAR.—I just think we should think of it that 

there are a lot of eggs being laid everywhere. And I would—part 

of this is getting some incentives, which we’re working on, as well, 

into the Agriculture bill, to help farmers and co-ops and to put 

more of these pumps in place. Part of it is making sure that we 

have these flex-fuel vehicles, and getting that in place. And the 

other is, as we’ve talked about all day today, raising the CAFE 

standards in a way that is not going to destroy our auto industry, 

but in a way that encourages some changes that we just haven’t 

been seeing the last few years. 

Thank you. 

Mr. MCCURDY. Senator Carper, could we revisit, for just 1 

minute, your off-ramp issue? 

The CHAIRMAN. Is it my turn now? 

[Laughter.] 

Mr. MCCURDY. Mr. Chairman—— 

Senator CARPER. We yield to the Chairman. 

Mr. MCCURDY.—you always control the table. 

The CHAIRMAN. With all the discussions we’ve had this afternoon, my announcement may come as a surprise. This bill before 

us will be on a markup next Tuesday. However, based upon your 

testimony, and upon the studies that we have made, we have concluded that there’s much agreement among us. One, that there’s a 

fuel problem, an energy problem. As the Admiral stated, our national security is dependent upon the availability—steady availability of fuel. We know that none of us here want to put our domestic auto manufacturers out of business. We want to keep them 

not only alive, but prosperous. Based upon this, the Committee 

staff, together with the staffs of Senator Stevens, Senator Snowe, 

Senator Smith, Senator Dorgan, in consultation with the staff of 

Senator Levin and Senator Feinstein, have been working, for the 

last 10 days, day and night. I feel confident enough to tell you that, 

by tomorrow, close of business, we will have a bill, a managers’ bill, 

which we will present—we will send copies to all of you, and we 

will present at the markup on Tuesday as a substitute to the Feinstein bill. I think you’ll be pleased with it. Not completely, but sufficiently. 

It will not have credits in it, because that’s not within the jurisdiction of this Committee, but we will be recommending that that 

81 

be seriously considered. And I’m certain that when this measure is 

considered on the floor, some amendment will be presented to provide tax credits and grants. 

The record will be kept open for another 2 weeks. Now, you may 

be wondering why the record will be kept open for 2 weeks when 

the markup is on Tuesday. I’ve been in this business now for 50 

years, and I know that the best way to legislate is to have a target. 

If we have a managers’ bill, you’ll have something to work upon. 

If you have five bills, you don’t know which one to hit. You’ll have 

one bill to hit. And we invite all of you to study the managers’ 

package and come forth with any modification you wish to make. 

You will find that most of your concerns have been addressed. 

Having said that, I have just one question to ask. It will not be 

part of this bill, but it is an energy question. It’s obvious to me that 

you cannot develop an automobile in 6 months that will come forth 

with the golden answer. It’s going to take some time to do some 

research and some development and you don’t produce a new vehicle in a year. It takes a little while. I think it’s obvious that we 

will still be dependent upon a foreign source of fuel. Even if we do 

pass the bill, you’ll still be dependent upon foreign energy. 

So, my question is, what are your thoughts on ANWR? I realize 

it’s a very contentious, controversial question. But geologists tell us 

that the oil supply in ANWR is equivalent to that in the oil fields 

of Saudi Arabia. 

Let’s go down the line. 

[Laughter.] 

Mr. REUTHER. Quite frankly, we’ve had our hands full dealing 

with the CAFE issue. 

[Laughter.] 

Mr. REUTHER. I would defer to others on ANWR. 

Mr. FRIEDMAN. Senator, there have been studies that have 

shown that tapping into the Arctic National Wildlife Refuge would, 

maybe, affect gasoline prices by about a penny. 

The CHAIRMAN. You know, we speak of the Arctic Wildlife Refuge, but if the ANWR section is the size of California, the area that 

had been designated for drilling is less than the size of Los Angeles 

city. So, we’re not talking about all of Alaska. 

Admiral ADMIRAL MCGINN. Senator, each day, we consume, as 

Americans, about 19.5 million barrels of oil, an annual total of 

about 7 billion barrels. And, given this rate of consumption, if Arctic oil was our Nation’s only source, it would last for 6 months. 

There are not sufficient oil reserves, particularly in ANWR, to justify any type of a long-term policy resting on the assumption that 

it will be a big part of the solution. It could be, if we were desperate. But I believe there are so many more effective actions that 

we can take with fuel efficiency, energy efficiency, across the board, 

for every use of liquid fuel, that would return so much more, that 

we should put ANWR oil drilling at the very end of the list of available options. There are so many more productive things that we 

can do with our time and with our resources. 

The CHAIRMAN. Admiral Blair? 

Admiral BLAIR. Mr. Chairman, we handle lots of very dangerous 

materials in the Armed Forces of the United States every day, and 

the way that we do that is to set up very rigid and well-controlled 

82 

and -enforced procedures in order to make sure that things that 

are inherently dangerous get done in a safe way. And I believe that 

we are to the point where we have to drill for oil in places in the 

United States that run risks, and we, therefore, need to put in 

those sorts of tight controls, tight inspections on them, and that we 

ought to go ahead and do them, including ANWR. 

The CHAIRMAN. Mr. Stanton? 

Mr. STANTON. Senator, as an association, we have not taken a 

position on ANWR, but I think ANWR has been around almost as 

long as CAFE, and is—probably has been just as contentious. I remember the votes, back in the—1990s. 

I think it has taken on a symbolism that maybe it doesn’t deserve anymore. Today, we all testified about the need to move our 

country forward, to decouple us with the climate change issues and 

with the energy security issues. I think it ought to be back on the 

table, but in a rational way. If we could de-pedestalize it and have 

a good, honest discussion about whether or not it’s necessary, I 

think that would go a long way. 

The CHAIRMAN. Mr. McCurdy? 

Mr. MCCURDY. Mr. Chairman, you have a marvelous way of putting people on the spot. 

Since I now represent an association, our association, like Mike, 

has not taken a position on ANWR. But I think you know, sir, that 

I was a Congressman from an oil state, and so, I probably have less 

reservation about types of drilling than some, and I’m going to 

leave it at that. 

The CHAIRMAN. Well, I thank all of you. And I hope that we will 

succeed. As one who represents the State of Hawaii, I’m certain 

you realize that our gas prices are the highest in the Nation. While 

you were paying $2, we were paying $3, so we’ll reach $4 before 

you reach $4. 

With that in mind, I wish all of you the best. Tomorrow, we’ll 

have a new bill. 

The meeting is adjourned. 

[Whereupon, at 5:45 p.m., the hearing was adjourned.] 

(83) 

A P P E N D I X 

PREPARED STATEMENT OF HON. MARK PRYOR, U.S. SENATOR FROM ARKANSAS

Thank you Chairman Inouye and Vice Chairman Stevens for holding this important hearing on legislation to improve fuel economy standards for American vehicles. 

I want to also thank the witnesses for appearing here today to assist the Committee in this effort. 

I believe we must move forward quickly in this area for our constituents, our 

country, and the world we live in. 

More fuel efficient vehicles can help reduce our dependence on middle Eastern oil, 

decrease emissions, and make our country more secure. 

For these reasons, I look forward to this hearing as it will allow Congress to continue to make progress in our efforts to get a bill to the President that would make 

a substantial and committed step forward on this issue. 

Throughout this process, I intend to work in a bipartisan manner with my colleagues in the Senate so that we can make measurable progress this year on legislation to improve fuel economy standards and reduce our dependence on petroleum. 

Æ