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LEGISLATIVE HEARING ON DISCUSSION

DRAFT CONCERNING ALTERNATIVE

FUELS, INFRASTRUCTURE, AND

VEHICLES

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

OF THE

COMMITTEE ON ENERGY AND

COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

JUNE 7, 2007

Serial No. 110–53

(

Printed for the use of the Committee on Energy and Commerce

energycommerce.house.gov
COMMITTEE ON ENERGY AND COMMERCE

JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, JR., New Jersey

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

DIANA DEGETTE, Colorado

Vice Chairman

LOIS CAPPS, California

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

JAN SCHAKOWSKY, Illinois

HILDA L. SOLIS, California

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

G.K. BUTTERFIELD, North Carolina

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

BARON P. HILL, Indiana

JOE BARTON, Texas

Ranking Member

RALPH M. HALL, Texas

J. DENNIS HASTERT, Illinois

FRED UPTON, Michigan

CLIFF STEARNS, Florida

NATHAN DEAL, Georgia

ED WHITFIELD, Kentucky

BARBARA CUBIN, Wyoming

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

STEVE BUYER, Indiana

GEORGE RADANOVICH, California

JOSEPH R. PITTS, Pennsylvania

MARY BONO, California

GREG WALDEN, Oregon

LEE TERRY, Nebraska

MIKE FERGUSON, New Jersey

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

TIM MURPHY, Pennsylvania

MICHAEL C. BURGESS, Texas

MARSHA BLACKBURN, Tennessee

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff

GREGG A. ROTHSCHILD, Chief Counsel

SHARON E. DAVIS, Chief Clerk

BUD ALBRIGHT, Minority Staff Director

(II)
(III)

SUBCOMMITTEE ON ENERGY AND AIR QUALITY

RICK BOUCHER, Virginia, Chairman

G.K. BUTTERFIELD, North Carolina,

Vice Chairman

CHARLIE MELANCON, Louisiana

JOHN BARROW, Georgia

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

ALBERT R. WYNN, Maryland

MIKE DOYLE, Pennsylvania

JANE HARMAN, California

TOM ALLEN, Maine

CHARLES A. GONZALEZ, Texas

JAY INSLEE, Washington

TAMMY BALDWIN, Wisconsin

MIKE ROSS, Arkansas

DARLENE HOOLEY, Oregon

ANTHONY D. WEINER, New York

JIM MATHESON, Utah

JOHN D. DINGELL, Michigan (ex officio)

J. DENNIS HASTERT, Illinois,

Ranking Member

RALPH M. HALL, Texas

FRED UPTON, Michigan

ED WHITFIELD, Kentucky

JOHN SHIMKUS, Illinois

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

STEVE BUYER, Indiana

MARY BONO, California

GREG WALDEN, Oregon

MIKE ROGERS, Michigan

SUE WILKINS MYRICK, North Carolina

JOHN SULLIVAN, Oklahoma

MICHAEL C. BURGESS, Texas

JOE BARTON, Texas (ex officio)

PROFESSIONAL STAFF

SUE D. SHERIDAN, Senior Counsel

LORIE J. SCHMIDT, Counsel

RACHEL BLESHMAN, Legislative Clerk

DAVID J. MCCARTHY, Minority Counsel

(V)

C O N T E N T S

Page

Hon. Rick Boucher, a Representative in Congress from the Commonwealth

of Virginia, opening statement ............................................................................ 1

Hon. J. Dennis Hastert, a Representative in Congress from the State of

Illinois, opening statement .................................................................................. 3

Hon. Fred Upton, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 4

Hon. Henry A. Waxman, a Representative in Congress from the State of

California, opening statement ............................................................................. 5

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 7

Hon. John Shimkus, a Representative in Congress from the State of Illinois,

opening statement ................................................................................................ 7

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 8

Hon. Mike Rogers, a Representative in Congress from the State of Michigan,

opening statement ................................................................................................ 9

Hon. Michael C. Burgess, a Representative in Congress from the State of

Texas, opening statement .................................................................................... 10

Hon. Mike Doyle, a Representative in Congress from the Commonwealth

of Pennsylvania, opening statement ................................................................... 11

Hon. Jane Harman, a Representative in Congress from the State of California, opening statement ........................................................................................ 12

Hon. Tom Allen, a Representative in Congress from the State of Maine,

opening statement ................................................................................................ 13

Hon. Tammy Baldwin, a Representative in Congress from the State of Wisconsin, opening statement ................................................................................... 14

Hon. Joe Barton, a Representative in Congress from the State of Texas,

opening statement ................................................................................................ 15

Hon. Jay Inslee, a Representative in Congress from the State of Washington,

opening statement ................................................................................................ 17

Hon. Anthony D. Weiner, a Representative in Congress from the State of

New York, opening statement ............................................................................. 18

Hon. G.K. Butterfield, a Representative in Congress from the State of North

Carolina, opening statement ............................................................................... 18

Hon. Mike Ross, a Representative in Congress from the State of Arkansas,

opening statement ................................................................................................ 19

Hon. Tim Matheson, a Representative in Congress from the State of Utah,

opening statement ................................................................................................ 20

Hon. Charlie Melancon, a Representative in Congress from the State of Louisiana, opening statement ................................................................................... 21

WITNESSES

Bob Dinneen, president and chief executive officer, Renewable Fuels Association ........................................................................................................................ 22

Prepared statement .......................................................................................... 25

Charles Drevna, executive vice president, National Petrochemical and Refiners Association ...................................................................................................... 31

Prepared statement .......................................................................................... 34

Answers to submitted questions ...................................................................... 141

Letter of June 14, 2007 to Mr. Boucher ......................................................... 152

Phillip Lampert, executive director, National Ethanol Vehicle Coalition ........... 45

Prepared statement .......................................................................................... 46
Page

VI

Sonja Hubbard, chief executive officer, E-Z Mart Stores, on behalf of the

National Association of Convenience Stores and the Society of Independent

Gasoline Marketers of America ........................................................................... 48

Prepared statement .......................................................................................... 50

Answers to submitted questions ...................................................................... 145

John DeCicco, senior automotive fellow, Environmental Defense ....................... 53

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

Alan Reuther, legislative director, International Union of United Automobile,

Aerospace and Agricultural Implement Workers of America ........................... 76

Prepared statement .......................................................................................... 78

Hon. Dave McCurdy, president and chief executive officer, Alliance of Automobile Manufacturers .......................................................................................... 84

Prepared statement .......................................................................................... 86

Answers to submitted questions ...................................................................... 149

Alexander A. Karsner, Assistant Secretary, Energy Efficiency and Renewable

Energy, U.S. Department of Energy ................................................................... 115

Prepared statement .......................................................................................... 117

Robert J. Meyers, Acting Assistant Secretary, Office of Air and Radiation,

Environmental Protection Agency ...................................................................... 120

Prepared statement .......................................................................................... 122

SUBMITTED MATERIAL

‘‘Research Finds That Earth’s Climate is Approaching ‘Dangerous’ Point’’

NASA article submitted by Mr. Inslee ............................................................... 153

David Von Drehle, ‘‘An Auto Insider Takes on Climate Change’’ TIME.com

May 31, 2007, submitted by Ms. Harman .......................................................... 155

Letter of June 6, 2007, from Attorneys General of Massachusetts, California,

et al., to Messrs. Dingell and Barton, submitted by Mr. Waxman .................. 161

Letter of June 5, 2007, from Audubon, Defenders of Wildlife, Friends of

the Earth, et al., to Members of Congress, submitted by Mr. Waxman .......... 165

Letter of June 6, 2007, from David P. Littell, commissioner, Maine Department of Environmental Protection, to Mr. Allen, submitted by Mr. Allen ..... 170

Letter of June 6, 2007, from S. William Becker, National Association of

Clean Air Agencies, to Messrs. Boucher and Hastert, submitted by Mr.

Waxman ................................................................................................................ 172

Letter of June 6, 2007, from Arthur N. Marin, executive director, NESCAUM,

to Messrs. Boucher and Hastert, submitted by Mr. Waxman .......................... 174

Letter of June 7, 2007, from the Governors of California, New Mexico, Arizona, Massachusetts, Oregon, New York, Washington, and Pennsylvania,

to Mr. Boucher, submitted by Mr. Waxman ...................................................... 176

Letter of June 7, 2007, from Mr. Waxman, et al., to Messrs. Dingell and

Boucher, submitted by Mr. Waxman .................................................................. 178

Discussion Draft Part II .......................................................................................... 181

‘‘National Low Carbon Fuels Standard Scenario Analysis’’ by Brian Turner,

National Commission on Energy Policy, International Council on Clean

Transportation ...................................................................................................... 238

Statement of the Outdoor Power Equipment Institute, June 7, 2007 ................. 246

Statement of API, June 7, 2007 ............................................................................. 249

Letter of June 6, 2007 from American Council for an Energy Efficiency

Economy, et al., to Members of Congress, submitted by Mr. Waxman ........... 251
(1)

LEGISLATIVE HEARING ON DISCUSSION

DRAFT CONCERNING ALTERNATIVE FUELS,

INFRASTRUCTURE, AND VEHICLES

THURSDAY, JUNE 7, 2007

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ENERGY AND AIR QUALITY,

COMMITTEE ON ENERGY AND COMMERCE,

Washington, DC.

The subcommittee met, pursuant to call, at 10:00 a.m., in room

2123 of the Rayburn House Office Building, Hon. Rick Boucher

(chairman) presiding.

Members present: Representatives Butterfield, Melancon, Barrow, Waxman, Markey, Wynn, Doyle, Harman, Allen, Gonzalez,

Inslee, Baldwin, Ross, Weiner, Matheson, Dingell, Hastert, Hall,

Upton, Shimkus, Walden, Rogers, Sullivan, Burgess, and Barton.

Also present: Representatives Green and Stupak.

Staff present: Bruce Harris, Lorie Schmidt, Chris Treanor, Laura

Vaught, Jonathan Brater, Jonathan Cordone, Alec Gerlach, Rachel

Bleshman, David McCarthy, Tom Hassenboehler, and Matt Johnson.

OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF VIRGINIA

Mr. BOUCHER. The subcommittee will come to order. Before commenting on the subject matter of today’s hearing, I want to inform

members of the subcommittee that we will be meeting in that

markup session next Wednesday, June 13 at 10 o’clock. And during

that markup session, we will consider all of the titles that this subcommittee will contribute to Speaker Pelosi’s Independence Day

measure. The markup will encompass the matters relating to vehicles and fuel, which are the subject of today’s legislative hearing.

And also will encompass the titles relating to energy efficiency and

the other matters that were the subject of the legislative hearing

we conducted in May.

I want to encourage all of the members of the subcommittee to

submit their proposed amendments to the committee staff, if possible, by close of business tomorrow. That will give us time over the

weekend and in the first couple of days of next week to work with

the Members who are submitting the amendments and try to resolve any issues with their amendments prior to the markup taking

place. So for benefit of the Members, let me repeat that we would

like to have your draft amendments submitted to the subcommittee
2

staff by the close of business tomorrow, if at all possible, and that

will give us ample time to work with you prior to the markup. The

full Energy and Commerce Committee will convene a markup session the following week, that will be 2 weeks hence, for the purpose

of considering the work product of the subcommittee.

And then following House passage of the Speaker’s July independence energy agenda, the subcommittee’s attention will return

to our other principal topic for the year and that is global warming

and greenhouse gas control. It is our intention to draft and approve

in the subcommittee, and the full committee in September, a mandatory greenhouse gas control measure. Our goal is to present it

to the Speaker for House debate as early as October of this year.

A number of Members participated last week in an intensive

evaluation of the European emissions trading system during the

visit to four European Union member countries, and the knowledge

we gained during the course of that visit places us in a very strong

position to draft an appropriate control program for the United

States in the fall of this year.

This morning our legislative hearing focuses on vehicles and fuel.

It is a comprehensive treatment. It reflects suggestions that have

been made to the committee by subcommittee members following

our series of hearings in the spring. It promotes alternative fuels,

alternative fuels infrastructure, and motor vehicle advances.

Among other major provisions, it mandates the manufacture of

flexible-fuel vehicles on a stated schedule, with the requirement

that by 2020, 85 percent of the motor vehicle fleet be flexible-fuel

capable. Correspondingly, it mandates the installation of E–85 capable pumps at service stations when flex-fuel vehicle penetration

reaches 15 percent in a given area. There are exemptions from that

requirement for very small retailers and there are grants to make

the cost of compliance easier for those that need the financial assistance.

These twin mandates are designed to relieve the classic chicken

or egg dilemma where cars are not built because of the absence of

pumps and pumps are not installed because of the absence of flexible fuel-capable cars. We also respond to the President’s call for annual consumption of 35 billion gallons of alternative fuel by 2017,

but we require that volume of consumption not by 2017 but by

2025 instead. We concluded that the production of 35 billion gallons by 2017 was unlikely, given our current annual consumption

of less than 6 billion gallons and the absence of any empirical support for the 2017 date supplied by the administration.

Our draft bill authorizes grants of $1 billion to accelerate the

commercialization of cellulosic ethanol production; establishes a

feasibility study for a pipeline that would be dedicated to the transportation of alternative fuels from point of origination to point of

distribution and sale; creates an advanced battery loan guarantee

program to speed the introduction of promising new high performance batteries for electric vehicles, including lithium ion batteries;

creates a fund for development of a mass technology vehicle, such

as hydrogen fuel and plug-in all-electric vehicles; creates a mechanism to provide public information on higher fuel efficiency; mandates an increase in the CAFE fuel efficiency requirements; creates, starting in 2013, a low-carbon fuel standard applicable to all
3

motor vehicle fuels, with a formula assuring that, as the alternative fuel mandate increases over time, the requirement for the

usage of low-carbon fuels will also grow; and creates a biodiesel

fuel standard with identification numbers sufficient for the manufacturers of vehicles to build engines compatible with biodiesel fuel.

As a step toward the greenhouse gas control measure that we

will process through our committee later this year, we require the

Department of Transportation to begin issuing a CAFE requirement, both in miles per gallon, which is the historic metric, and

also in the equivalent grams of CO2 emitted per vehicle mile. And

we require the EPA to collect data from the auto manufacturers regarding the lifecycle CO2 footprint for the vehicles that they are

placing in commerce. We also respond to the regulatory confusion

which exists following the Supreme Court decision conferring authority on the EPA to regulate for greenhouse gas emissions in the

transportation sector, a subject which I am certain will stimulate

a lively discussion this morning.

That concludes my opening statement.

Let me simply note that we anticipate a number of unanimous

consent requests that will be made by various parties to insert material into the record during the course of today’s hearing. We will

consider all of these requests toward the conclusion of the hearing.

In the meantime, those who desire to insert material are asked to

provide copies of the material to the majority and minority staff so

that we can evaluate the material prior to the amount of consent

requests being made and acted upon.

At this time, it is my privilege to recognize the distinguished

ranking member of the Energy and Air Quality Subcommittee, the

former Speaker of the House, the gentleman from Illinois, Mr.

Hastert.

OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. HASTERT. Well, I thank you, Chairman Boucher, for holding

this hearing to review the draft legislation you introduced last

week. I also want to thank you for the study group that you put

together to look at what European standards are doing and how

well they are achieving those and some of the problems that they

have incurred as well. Your leadership is duly noted. Thank you for

your effort in that respect. I want to reiterate my commitment to

continue to work with you on commonsense energy legislation. I

would also like to thank our witnesses today for being here.

Like most policy proposals, there are some things which I generally support, others that I may have some concerns with and we

need to think about and talk about. I have already support increasing our supply of renewable and alternative fuels. Last Congress

we had the Energy Policy Act which contained the Renewable Fuel

Standard to get more alternative sources of fuel into the market.

The Alternative Fuel Standard in this draft builds upon this and

provides incentives to get a diverse mix of fuel into the marketplace. These alternative fuels will reduce our reliance on unstable

sources of foreign oil.

Alternative fuels, however, are not effective without the infrastructure in place to distribute them. Provisions in this draft will
4

level the playing field to get alternative fuels like E–85 into the

marketplace. It also provides grants for E–85 infrastructure and

the development of cellulosic ethanol facilities. I would even go further and provide liability protection to prevent the certification of

E–85 pumps today. Countries like Brazil have been using E–85

pumps for years with no problems or evidence of safety concerns.

The approval from Underwriters Laboratories has been slowwalked for too long and we must speed this process along.

I have also supported efforts by this committee in the past to update and reform the CAFE standards. While I do support reforming

and modernizing this program, we need to be mindful of setting an

arbitrary floor or ceiling for fuel standards. The Department of

Transportation is the agency with the expertise and is tasked with

the determining maximum fuel savings ability. We should let them

do their job.

I am also concerned about the flex-fuel mandate in the draft.

This is something that I think we need to talk about, something

that I think we need to negotiate. I personally believe it is largely

unnecessary and overly prescriptive, the market is working on its

own. But again, it is something that I think is well intentioned and

we need to work through it. Also, I want to say that I believe this

draft has potential to produce good policy and it could go a long

way towards improving America’s energy and security.

I look forward to hearing from our witnesses today to get their

thoughts on some of the issues that I have raised, as well as any

other ideas they feel might serve to strengthen the legislation.

Again, I want to thank you for holding this hearing, Mr. Chairman,

and I look forward to working with you on a bipartisan basis to further improve the bill as we work in markup and continuing discussion on it in the coming weeks. And I yield back the balance of my

time.

Mr. BOUCHER. Thank you very much, Mr. Hastert. And I too look

forward to working with you in a bipartisan mode to produce a bill

that will enjoy the broad support of Members on both sides of the

aisle. I would announce that, pursuant to the rules of the committee, any of the Members who desire to waive their opening statements will have the time allotted for that opening statement added

to the question time they will have for the first panel of witnesses

today. The gentleman from Georgia, Mr. Barrow, is recognized.

Mr. BARROW. Thank you, Mr. Chairman. I will waive.

Mr. BOUCHER. Mr. Barrow waives his opening statement. The

gentleman from Texas, Mr. Hall, is recognized for 3 minutes. I

think he is no longer here. The gentleman from Michigan, Mr.

Upton, is recognized for 3 minutes.

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. UPTON. Well, thank you, Mr. Chairman, and I want to say

that I am convinced that legislation, as we look back at the 110th

Congress in December 2008, I am convinced that legislation that

moves through this subcommittee will indeed be viewed as probably the most significant legislation enacted in the 110th Congress.

I appreciate your leadership, Mr. Chairman, and your commitment

to work on a bipartisan basis to work on legislation that is going
5

to be helpful to not only business and industry but obviously the

consumers across our great land. I also appreciate the constructive

work of our ranking member, Mr. Hastert, the former Speaker, and

the relationship that he has with you and our staff to make sure

and ensure that, in fact, it will be bipartisan legislation.

There are many very positive elements of the draft that has been

produced that we are going to be discussing today. Important to

that is the provision that Ms. Harman and I have been working on

as it relates to light bulb efficiencies. And even as we go beyond

that, as we look at the first appropriation bills on the House floor,

she and I—and your colleague last night, all of our colleagues looking to see that the Federal Government, in fact, pursue that same

course and to be able to purchase only Energy Star light bulbs, as

we look at the next fiscal year, for all of our agencies. And I would

like to think that we are going to have the support of the full committee in terms of their votes on the House floor when this will be

debated as early as next week.

The bottom line is this: we need to work together for all of Americans. Your leadership, with the hearings that we have had, with

the hearing today, the legislation that we are going to pursue, the

fast track that we are on to be able to get this bill out the door

before the end of this month and on the House floor after the 4th

of July is very important and I look forward to working with you

on that basis, and I yield back my time.

Mr. BOUCHER. Thank you very much, Mr. Upton. The gentleman

from California, Mr. Waxman, is recognized for 3 minutes.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. WAXMAN. Mr. Chairman, I am not going to talk about the

importance of energy independence or the crisis of global warming

in the few minutes I have this morning. We should all know that

already. The question facing the Congress is whether we are going

to step up to that urgent challenge. In a recent Tom Friedman column about energy legislation and Congress, he wrote, ‘‘you can

very comfortably drive a Hummer to the gap between our words

and deeds.’’ And that was before he read this subcommittee’s draft

proposal. This discussion draft doesn’t step up to the urgent challenge facing us. It blinks and then steps back.

Last November, voters elected a new Congress and demanded

change. They wanted an end to politics as usual and legislation

driven by special interests. This bill unfortunately reflects none of

that. It would not only overturn the recent landmark Supreme

Court ruling that the EPA has the authority to regulate greenhouse gas emissions from cars and trucks, but would also block the

efforts by California and 11 other States to reduce these pollutants.

And this draft has as its centerpiece promoting coal. Even worse,

the draft encourages high-carbon, coal-based liquid fuel to be used

for planes and jets, with little protection against the inevitable increases in greenhouse gas emissions.

Because this draft is so deeply flawed, I intend to offer a substitute bill at next week’s markup. The substitute will include commonsense vehicle efficiency and low-carbon fuel standards to re-
6

duce our dependence on fossil fuels and our emissions of global

warming pollution. It will include a renewable electricity standard

to increase the amount of clean renewable electricity used in this

country. It will include an energy efficiency performance standard

to reduce our Nation’s emissions of global warming pollution and

to save consumers money. And instead of discouraging States from

taking action, the substitute will make it the policy of the United

States Government to support State programs and policies that direct global climate change.

When this committee passed the 1990 Clean Air Act, we were

able to forge consensus to craft legislation that dramatically reduced pollution while still allowing our economy to grow. Many

thought that was impossible, but we did it. We did it by working

together. We did it by not listening to those who said we couldn’t,

and we did it by rising above regionalism and special interests, and

recognizing that urgent problems require innovative and strong solutions. The draft before us doesn’t come close to that standard and

I look forward to working with my colleagues to develop a bill that

our country can be proud of.

Mr. BOUCHER. Thank you very much, Mr. Waxman. The gentleman from Texas, Mr. Hall, is recognized for 3 minutes.

Mr. HALL. Mr. Chairman, thank you. You did a very good job in

the opening statement. I will waive my opening statement.

I would like to take a part of my time, though, to recognize one

of the panelists who is a highly recognized young lady in the southwest part of this country and she is from my district and that

makes her special to me, but she has been before this committee

before, as have some of her colleagues, Bill Douglass and the others

who have graced us with their presence.

Sonja Hubbard is vice chairman of government relations and

chief executive officer of the E-Z Mart Stores that operate in five

States and she is located in Texarkana—founded by her father and

still runs by her mother—operating and leading the company. But

she serves her first term, though, as National Association of Convenience Stores chairman of government relations in five States. I

can tell you other things about her. She is a CPA. She is a part

of almost everything in the eastern part of Texas. She serves as the

director of the Texas Petroleum Convenience Store Association; is

chairman of the local branch of the St. Louis Federal Reserve

Bank. And what she and I appreciate more than ever, and I do at

my age, she loves jazz music and her favorite movie is ‘‘It’s a Wonderful Life.’’ And like her, I make my kids listen to that and watch

it annually at Christmastime. Thank you for being before us and

giving us your time. And all of you, we know it takes time to prepare to get here to give your testimony and you render a real good

service to us and we appreciate all of you. I especially appreciate

you, Sonja. Thank you, Mr. Chairman.

Mr. BOUCHER. Thank you very much.

Mr. HALL. I have campaigned enough.

Mr. BOUCHER. Thank you, Mr. Hall. The gentleman from Massachusetts, Mr. Markey, is recognized for 3 minutes.
7

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH

OF MASSACHUSETTS

Mr. MARKEY. Thank you, Mr. Chairman. Mr. Chairman, this

draft is one that I cannot support. I do not think it reflects the

spirit of what this country wants to see happen, as we are challenged by 60 percent of our oil being imported as opposed to only

27 percent of our oil being imported 20 years ago. Global warming

is now viewed universally as a scientific fact and one that requires

urgent action. This bill does not respond to those twin challenges.

Fourteen attorneys general have all come out in opposition to

this bill, but they are not going to be allowed to testify here today.

This bill is cutting the legs out from under the States, just as they

are starting to sprint forward on carbon pollution regulation. And

it is cutting the legs out from under the EPA, just as it has begun

lacing up its shoes after the decision in Massachusetts v. EPA. This

bill overrides the Supreme Court decision in Massachusetts v. EPA. This bill requires the EPA to deny California in its label request,

and 11 other States as well, including Massachusetts, to its use of

the Clean Air Act authority to set vehicle greenhouse gas emission

standards.

As I have done since 2001, initially with Sherri Boehlert from

New York and now with other Members of Congress led by Congressman Platts from Pennsylvania, it will be my intention next

week to once again bring an amendment that will raise the fuel

economy standards for our country to 35 miles per gallon, and we

will have a vote on that issue. At 35 miles per gallon, we back out

all of the oil which we import from the Persian Gulf. We must send

that signal to all of those OPEC nations. We have the technological

capacity to do that. In 10 years we can once again reclaim our control of our own energy agenda if we take those actions. And the

same thing is true for global warming. We have to ensure that we

reduce dramatically the greenhouse gases that are creating this potential catastrophic condition for the planet. Sadly, this bill does

not do that.

And so we have a historic debate about to break out and led by

the clean coal, the coal-to-liquid issue, which is only going to worsen greenhouse gases, and the absence of meaningful fuel economy

standards for our vehicles that we drive, which would help. This

debate is historic and about to begin. Thank you, Mr. Chairman.

Mr. BOUCHER. Thank you, Mr. Markey. The gentleman from Illinois, Mr. Shimkus, is recognized for 3 minutes.

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. SHIMKUS. Thank you, Mr. Chairman. I agree with my colleague from Massachusetts. This will be a historic debate and I

would ask people to reserve their speech because next week we

start. Illinois has 250 years worth of coal in the Illinois basin. It

can make a major impact on decreasing our reliance on imported

crude oil and help bring security and that is going to be part of this

debate. And we relish the opportunity to bring this to our colleagues and talk about energy security.
8

Thank you and I appreciate the chairman’s efforts in trying to

replace foreign oil imports by building up a strong domestic alternative fuel supply. We must put everything on the table to increase

our energy security. All alternative fuel should be considered. Coalto-liquid fuel, biodiesel, corn-based ethanol, and also cellulosic, all

hold great promise and will compliment and strengthen our domestic energy portfolio. As we all know, the recent expansion of

biofuels, primarily ethanol, is happening at record rates. With consumption running at nearly 400,000 barrels per day, equivalent to

an annual consumption rate of 6.1 billion gallons, this is well in excess of the current Renewable Fuel Standard established under

EPAct 2005, which we passed through this committee. And I am

happy to see that this effort had us on what seemed to be a progressive path for renewable fuel.

With EPA’s promulgation of the RFS credit trading and compliance system, largely viewed as a success, ethanol and biodiesel are

positioned to only increase their impact on the domestic fuel supply

and further reduce our use of imported foreign oil. However, there

is work to be done and concerns remain. There is infrastructure

limitations, conflicting environmental impact and methodologies

and measures to develop. Even affects on fuel prices should be

looked at as to not exceed a smooth transition to greater use of

these fuels in our everyday transportation mix. All of these issues

merit careful consideration before we act to further mandate the

use of these fuels.

While I appreciate the chairman’s efforts to follow up with hearings and markups, I do have concerns that the timeline he has may

be too fast for some of the provisions that we are trying to enact.

And maybe we will hear today from our witnesses that this is the

case. It may be more valuable to take a step back and that is what

we are trying to do with the Alternative Fuel Standard and especially section 102, the Low-Carbon Fuel Standard. I think there is

a lot of uncertainty and we are giving ourselves a very limited

amount of time to deal with these broad policy issues. If we are

looking to expand the use of alternative fuels, we should remain—

and technology neutral. We should also expand our traditional fossil fuel expiration and protection and strengthen our domestic energy supplies. We must not underestimate our current reliance on

unstable foreign sources of fossil fuels and we must be smart and

responsible with further actions.

With that, I welcome our panelists and I yield back the balance

of my time, Mr. Chairman.

Mr. BOUCHER. Thank you very much, Mr. Shimkus. The gentleman from Michigan, the chairman of full committee, Mr. Dingell,

is recognized for 5 minutes.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. DINGELL. Mr. Chairman, I will not use 5. I will take 3 and

be happy. First, Mr. Chairman, thank you. This is an important

hearing. It addresses a number of questions that need to be dealt

with before we proceed further. I want to commend you for the way

in which you are handling this matter and the extraordinary lead-
9

ership that you are providing to the committee and the subcommittee. At the outset, I note that the draft legislation is well balanced,

and for that I commend you. It provides us a starting point for our

consideration of these critical issues. With that, Mr. Chairman, I

look forward to hearing the views of my colleagues on the committee.

Mr. BOUCHER. Thank you, Mr. Dingell. The gentleman from

Michigan, Mr. Rogers, is recognized for 3 minutes.

OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN

Mr. ROGERS. Thank you, Mr. Chairman, for holding today’s hearing. Addressing the twin problems of our dependence on foreign oil

and climate change requires sensible action on transportation fuel.

Developing diverse fuel sources is a goal in this committee and it

has been pursued for some time. Much of this bill continues our bipartisan tradition of pursuing market-based solutions to America’s

energy needs. However, several provisions in this bill can be cause

for concern.

The Renewable Fuel and Alternative Fuel Standards are particularly complex and I am concerned that they may limit rather than

encourage the growth of alternative fuels. Several provisions related to alternative fuel infrastructure raise serious questions about

the respect for private property rights. The report on CAFE standards contemplated in this bill is immense. I am very concerned that

the bill, while well intentioned, continues the system of using arbitrary numbers that distort the marketplace, limiting consumer

choice and making it exceptionally difficult for the American auto

industry to effectively compete in the United States.

Finally, the provisions providing assistance for battery research

and alternative propulsion are laudable. However, I have serious

questions regarding how this legislation will actually work in this

area and the consequences, Mr. Chairman, are very, very real. Recently in Michigan, within the last year, we opened up a plant just

outside Lansing, Michigan, the most high tech manufacturing automobile plant in North America that builds the Buick Enclave and

the Saturn Outlook and it is a marvel of modern manufacturing

technology and represents the best in cooperation between the

UAW and management to build very high quality vehicles, crossover SUVs that get in the mid 20 miles per gallon. Twenty-five

hundred direct manufacturing jobs and another 2,500 jobs were

created in the area just in the supply chain, direct manufacturing

jobs. Five thousand jobs directly, not counting all of the supply that

will supply the supply chain. It is an incredible feat. It is an incredible vehicle. They are building incredible vehicles, high quality

vehicles. They are making that march toward better miles per gallon. We should not punish them.

And I would just caution you, Mr. Chairman, please do not rush

this legislation. The consequences if we get this wrong are very

real to America’s manufacturing base, consumer choice and just

jobs in our local neighborhoods that have been, I think, the backbone for our middle class for the better half of this century. And

with that, Mr. Chairman, I look forward to working with you on

the issues in this bill. Again, I would ask that we continue that
10

working relationship to get to the right place for a better America,

and I yield back the remainder of my time.

Mr. BOUCHER. Thank you very much, Mr. Rogers. The gentleman

from Maryland, Mr. Wynn, is recognized for 3 minutes.

Mr. WYNN. Thank you, Mr. Chairman. I will waive.

Mr. BOUCHER. The gentleman waives his opening statement. The

gentleman from Texas, Mr. Burgess, is recognized for 3 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BURGESS. I thank the chairman. I also want to thank you for

your willingness to work with the Republican side of the dais as

we craft energy independence legislation.

I am pleased to see the language is in the discussion draft covering a provision I have been working that would help to incentivize

biodiesel. The reliance on foreign energy sources undermines our

economy and security. Homegrown fuels, such as biodiesel, can

help move the United States towards greater energy independence.

Despite the energy and security and clean air benefits, biodieselcapable cars and trucks have been slowly hitting the market, mainly because of concerns by original equipment manufacturers for

automobiles and engines. Although manufacturers are comfortable

with the B–5 biodiesel blend, most of them certified their engines

to run on the biodiesel B–20. Section 103 of the draft seeks to clarify the definition of biodiesel and the blends, which I think is a necessary step towards the widespread use of biodiesel. My provision,

included in the draft looks at the hardware, if you will, and tries

to incentivize the B–20-capable automobiles by making B–20 eligible for alternative fuel credit of the Corporate Average Fuel Economy Program.

Alternative fuels receive an additional CAFE credit because they

help reduce the use of petroleum fuel and provide clean air benefit.

Biodiesel, in fact, does both. An October 2005 EPA study shows diesel vehicle fuel economy improvements of between a third to almost

40 percent of the lifecycle carbon savings, and a lifecycle carbon

savings of 16 to 20 percent compared with gasoline vehicles. In addition, for every unit of diesel fuel which is replaced by biodiesel,

the total lifecycle greenhouse gas emissions that would have been

produced from that unit of diesel fuel would be reduced by 13 percent, numbers that Kermit the Frog would love.

Mr. Chairman, I ask you and your staff to work with me and my

staff on this provision and ensure that it is included in the final

draft when the subcommittee comes to markup next week. I would

be remiss if I forgot to say I have some concerns about the provisions in the discussion draft, particularly with regard to the wisdom of adopting a low-carbon fuel standard without first doing

some analysis to determine its effect on the prices paid by the consumer at the pump. I am hopeful that the bipartisan spirit set

forth by Chairman Dingell and you, Chairman Boucher, will prevail and that we will be able to work through some of these issues.

I thank the chairman for today’s hearing and I look forward to

working with you to keep the B–20 provisions in the final draft of

the bill, and I will yield back the final 25 seconds.
11

Mr. BOUCHER. Thank you very much, Mr. Burgess, and thank

you for recommending the biodiesel provision to us. That was a

substantial contribution to our work and we do look forward to continuing our discussions with you about that provision. The gentleman from Pennsylvania, Mr. Doyle, is recognized for 3 minutes.

OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA

Mr. DOYLE. Thank you, Mr. Chairman. Let me begin by showing

my appreciation to you for putting this discussion draft together.

While I know it is not been easy and that there are members on

this committee with legitimate concerns with this draft, you should

be commended for your efforts as we continue this process.

As we all know, the short deadline for completion of this legislation was a deadline imposed by the Speaker. This was not your

choice nor was it the choice of Chairman Dingell, and there are

many on this committee who would like more time to address some

of these important matters. And while I understand this concern,

I just hope we can all move forward together to build the best

package we can. I want to remind all of the members of this committee that the vast majority of us in both parties share the same

goal. We all want to reduce carbon emissions by 80 percent by the

year 2050. What we are essentially arguing about is how we are

going to reach this goal. I would like to challenge everyone here to

keep their eyes on the prize, so to speak, and not get bogged down

in one path towards its achievement versus another. It doesn’t matter to me if the line of progress is perfectly straight with mandated

reductions annually, or if the line of progress is one that is gradual

over the early years and explodes upwards in future years as technology is developed. We arrive either way at an 80 percent reduction in greenhouse gas emissions and that is no small accomplishment.

In the end, this committee is going to pass a bill that will, for

the first time, put our Nation on a path towards energy independence. We are going to do this in a bipartisan and bicameral way.

This process will allow us to investigate multiple paths towards the

same goal and I think it is critical that we explore all of these options. After all, Mr. Chairman, this is not the first time you have

heard me say that all options are on the table. But what I think

is critical is that we don’t let ourselves be swayed by some of the

rhetoric that we have heard here today. We should instead keep

our focus on our mutually shared goal and work together in a manner and with a dignity befitting this great body in which we serve.

So Mr. Chairman, I will again express my sincere desire to continue working closely with you, and all of the members of this committee, to produce an energy bill that makes our country more

independent, expands development of new technologies, and protects the American economy as it transitions to a carbon-constrained world. It is our challenge to blend our political parties’

goals with those of the American people and those who fuel our

economy. They don’t have to be mutually exclusive anymore. This

is a unique time in our history and a time that presents us with

this tremendous but extremely beneficial challenge. I am ready to,

in good faith and in an open forum, do my part and I hope that
12

is the case with everyone on this committee. Mr. Chairman, I yield

back the balance of my time.

Mr. BOUCHER. Thank you very much, Mr. Doyle, and thank you

for your very substantial contributions to the work which is before

us. The gentleman from Oklahoma, Mr. Sullivan, is recognized for

3 minutes.

Mr. SULLIVAN. I waive, Mr. Chairman.

Mr. BOUCHER. The gentleman waives his opening statement. Are

there other Members on the Republican side who have not been

called on? The gentle lady from California, Ms. Harman, is recognized for 3 minutes, with the Chair’s thanks for her contributions

to the light bulb provision and to other matters.

OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Ms. HARMAN. Thank you, Mr. Chairman, very much. Mr. Chairman, the luckiest members of this committee hail from California.

Among other things, our State is an active revolutionary low-carbon fuel standard and tailpipe emissions standard that throw into

sharp relief the Federal Government’s failure, at least up until this

point, to act adequately on climate change. Having said that, however, I commend you, as well as Chairman Dingell, for this draft

legislation.

While I favor a number of changes to it, as I have mentioned to

you, I urge that our consideration of climate change legislation in

the House follow the regular order. The product of this committee’s

labor should be the basis for what the House will pass this summer

and fall. There should not be end runs around this committee. But

I think our bill should leave room for States to maneuver. States,

Justice Louis Brandeis said, are America’s laboratories of democracy.

California has been this Nation’s principal laboratory for climate

change policy and the legislation we are considering today, in my

view, is due in no small part to the effort to my home State over

the past decade. As I have told you, I cannot vote to strip away

California’s authority to exceed Federal greenhouse gas standards

and I will plan to offer an amendment, hopefully a bipartisan

amendment, since Governor Arnold Schwarzenegger agrees with

this position, to strike the preemption section.

Again, I applaud your instinct to be open to improvements in the

draft. I really know we can produce a smart bill that both reduces

our reliance on oil, reduces our carbon emissions and with Mr.

Upton, provides the perfect light bulb provision. Let me finally say

that I would like to ask unanimous consent to insert in the record

a three-page color spread in this week’s Time magazine on our

chairman, Mr. Dingell, entitled ‘‘A Mastodon Takes On Global

Warming.’’ I am not sure I agree with the animal choice, but I do

agree with the very positive tone of the article, and I yield back.

Mr. BOUCHER. Thank you very much, Ms. Harman. I think most

of us are familiar enough with that article to agree at this time to

the unanimous consent request. So thank you for making it and let

me say that the portrait of our chairman portrayed in that article

is interesting, I think largely accurate and it is a salute to his

many years of strong leadership in the Congress and the continu-
13

ing role that he has played in leading this committee, and I want

to congratulate the chairman on that depiction of the wonderful

things that he has done for energy and other policies over the

years. So without objection, it is inserted within the record.

The gentleman from Maine, Mr. Allen, is recognized for 3 minutes.

OPENING STATEMENT OF HON. TOM ALLEN, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF MAINE

Mr. ALLEN. Thank you. Mr. Chairman, I regret that I am disappointed by the draft legislation before us. It rolls back recent

progress made by the courts on climate change, preempts the

States’ abilities to control greenhouse gas emissions, and doesn’t do

enough, in my opinion, to reduce carbon emissions and halt global

climate change. The bill overturns Massachusetts v. EPA, a landmark Supreme Court decision that confirmed that the EPA has authority under the Clean Air Act to regulate carbon dioxide as a pollutant. The Supreme Court decision is spurring the administration

to action, changing the dynamic on climate change and making it

more likely we can pass meaningful legislation this year. Overturning Massachusetts v. EPA takes us takes us in the wrong direction.

We should preserve the power of the EPA to regulate air pollutants

under the Clean Air Act.

Further, this bill prevents California and 12 other States, including Maine, from enacting strict automobile greenhouse gas emission standards. Today, many people have lost confidence that the

Federal Government will effectively respond to air pollution and

global warming. Therefore, we should not block States from developing their own measures, especially on the basis of a promise that

later on we will do more on greenhouse gas emissions. Mr. Chairman, I would ask unanimous consent, at this point, to enter into

the record a letter from David Littell, commissioner of the Maine

Department of Environmental Protection, in opposition to the bill

as drafted because of these two provisions.

Mr. BOUCHER. Thank you, Mr. Allen. Why don’t you submit that

to us and we will consider that along with all of the other materials

we will be receiving for insertion in the record and offer unanimous

consent approval at a uniform point later in the proceeding.

Mr. ALLEN. Thank you, I will do that. In my statement at the

legislative hearing on the first part of this energy package, I expressed my hope that the final product of this subcommittee would

include a strong section on plug-in hybrids combined with coal

plants that employ the latest technology for carbon capture and sequestration plus state-of-the-art technology. This was not done.

Further, I expressed my hope that the subcommittee would produce

an energy independence package with a renewable energy standard

in language similar to Mr. Markey’s CAFE proposal. There is no

renewable energy standard in the bill and the CAFE language, in

my opinion, is weak compared to Mr. Markey’s proposal.

Finally, Mr. Chairman, I believe that cleaner air and a comprehensive strategy to combat global climate change go hand-inhand with action to achieve energy independence. I am disappointed that the bill before us today falls short of this vision, but
14

I certainly hope that we can work together to make it better. And

with that, Mr. Chairman, I yield back.

Mr. BOUCHER. Thank you very much, Mr. Allen. The gentleman

from Texas, Mr. Gonzalez, is recognized for 3 minutes. Mr. Gonzalez waives his opening statement. The gentleman from Washington State, Mr. Inslee. I don’t believe he is here. The gentle lady

from Wisconsin, Ms. Baldwin, is recognized for 3 minutes.

OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Ms. BALDWIN. Thank you, Mr. Chairman. I want to begin by

thanking you for your dedication and your efforts in crafting the

discussion draft that we have before us. I recognize the very difficult task that you have and for that reason I wish I could be more

excited and more supportive of its provisions. But unfortunately, I

am concerned that the discussion draft, as it is currently written,

fails to take significant steps toward reducing our Nation’s energy

consumption and putting us on a path to energy independence.

Many times over the course of this committee’s energy independence and climate change hearings, I have said that we need to

push the envelope in terms of creating efficient, effective and environmentally friendly legislation. But rather than taking bold steps,

this draft appears to threaten some of the progress that we have

made thus far. For instance, the language in the draft bill to overturn the Supreme Court’s important decision in Massachusetts v.

EPA undermines the achievements we have made and rehashes old

arguments over whether the EPA has authority under the Clean

Air Act to regulate emissions of greenhouse gases for motor vehicles.

Moreover, the discussion draft preempts the progress made thus

far by 12 States to regulate and reduce greenhouse gas emissions

from automobiles. We should be encouraging and commending the

States for not sitting idly by over the past several years while the

Federal Government dragged its feet on emission standards. Instead, the bill precludes their efforts while also failing to increase

our energy independence and slow the effects of global climate

change.

Also, as I expressed at our last legislative hearing, I remain concerned about the coal-to-liquid projects. If we are truly going to

make our Nation energy independent, we must do so in a manner

that reduces our greenhouse gas emissions and we must aspire to

a higher standard than do no harm. The treatment of coal-to-liquid

in the draft before us has done little to alleviate my concerns.

Rather than limiting its use, the bill opens up the possibility that

high-level greenhouse gas emitting fuel source will supply our Nation’s aviation industry without having to meet the low-carbon fuel

standard. This cuts directly against all the steps we are taking and

will take to decrease our energy use and lower our greenhouse gas

emissions.

Mr. Chairman, while I have concerns with this discussion draft,

I believe that we still have an opportunity to perfect it and I hope

that we will. There are several provisions in here that are sensible

policy approaches. For instance, I am pleased to see that we will
15

be making significant improvements to increasing the use of E–85

and improving the E–85 infrastructure and flex-fuel vehicles. These

are necessary improvements that will help spur increased development of renewable fuels and move us in the right direction on energy independence and global climate change.

In all, this bill offers us a chance to show the world that our Nation is ready to take bold action and address our Nation’s energy

issues. We must not let this opportunity pass us by. Thank you,

Mr. Chairman.

Mr. BOUCHER. Thank you very much, Ms. Baldwin. The gentleman from Texas, Mr. Barton, the ranking member of the full Energy and Commerce Committee, is recognized for 5 minutes.

OPENING STATEMENT OF HON. JOE BARTON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. BARTON. Thank you, Mr. Chairman. I once again want to

commend you for a process that you and Chairman Dingell have

engaged in on this emerging package of energy items. It is an open

process and it has been a fair process and I am sincere in saying

that I am very appreciative of it. Because of that, myself and Mr.

Hastert and the Republicans are really looking for ways to work

with you and Mr. Dingell to craft an energy package that is good

for the American people.

Having said that, your timetable is, to say the least, ambitious.

In previous Congresses, energy packages of similar scope took

years of discussion, dozens of hearings, numerous markups at subcommittee and full committee, false starts and working with the

other body before they became law. Your discussion draft, for example, on the fuels and vehicles part alone is one of the biggest

changes, would be one of the biggest changes in the history of the

Clean Air Act. It is also very complicated. I spent 2 hours yesterday with some very smart people discussing it and trying to figure

out exactly what it means and how it would work in practice and

what the implications of it are.

I am certainly not the smartest guy on energy policy, but I know

a little bit about it and I am having trouble just adjusting to the

thesis of some of those time frames. I have got numerous questions

that I want to ask later today in this hearing and I know that

other Members on both sides do too.

The discussion draft would require monumental changes in the

automotive and refining industries. We need to know what the cost

and the benefit of those changes might be. Although the provisions

to expand the renewable fuel standard can set the market to include other types of alternative fuel such as natural gas and coalto-liquid have real merit, no one yet knows how these fuels would

actually be used when they also need and if and when they would

have to be assimilated into some sort of a carbon cap under the low

carbon fuel standard as proposed in section 102. We simply have

to understand the practical effects of these proposals. How much

are they going to add to the cost of transportation fuels for American drivers? Gasoline prices are high enough already and it would

appear to me that on the first glance that if this proposal were to

become law, gasoline prices would easily go up to at least a dollar,

perhaps $1.50 a gallon. I hope I am wrong about that.
16

Your section 301 does grant the authority to set CAFE standards, similar to a bill that this committee reported last year, but,

it is unclear whether it would allow the fuel economy standards to

be greater than 36 miles per gallon by 2021. At the same time, it

sets an aggressive carbon cap on refineries and fuel providers and

those come on top of the many other environmental requirements

that are already mandated under the Clean Air Act to control the

existing criteria pollutants.

I had difficulty trying to understand what kind of a CO2 baseline

the bill would envision. I also had trouble understanding the totality of CO2 that the bill would attempt to regulate or monitor. There

is just a lot of these types of technical questions that I am having

trouble with. In several places the bill authorizes new Federal

spending, including ‘‘such sums as are necessary.’’ I think I speak

for most Republicans when I say that we are opposed to ‘‘such

sums as are necessary.’’ That is basically a blank check. I don’t

even know how the CBO would score such a phrase.

I also don’t know whether it would square with the current

House rules against unfunded mandates. I also don’t know how it

would square against the new rule on PAYGO that the new majority has instigated in this Congress. There are many, many possible

unintended consequences of these kinds of provisions. I think it

would normally take a lot of weeks to tease these out and to understand them. Apparently, we are going to have to get it done in the

next 2 or 4 weeks. That seems to me to be a little bit ambitious.

Mr. Chairman, I apologize for giving you so many questions, but

I think that shows you how seriously we are taking your discussion

draft. We are not just saying we are against it or rubberstamping

it. I think there is room here for a bipartisan compromise and Mr.

Hastert and myself, we met on this yesterday; both decided that we

want to be a part of that compromise, if it is possible. So take my

questions or take my comments on the opening statement in the

spirit of which they are given, which is intense seriousness.

I have sat in the chair that you are sitting, I have sat in the

chair that Mr. Dingell is sitting in. It is not an easy job. It is a

very important job. I will promise you this, if you are open and fair

and work with the minority, we will be open and fair and work

with you and Mr. Dingell. We will try to put together a bill that

everybody on both sides of the aisle can be proud of. With that, I

yield back, Mr. Chairman.

Mr. BOUCHER. Well, thank you very much, Mr. Barton, and I appreciate the gentleman’s candor. His careful attention to the measure that we have forward in draft form, and I will say that I also

appreciate his willingness to work with us in a bipartisan mode to

arrive at a measure that we can all support and that is a willingness that we will express back to you. We will do our best to provide the answers we have for the questions that you have raised

now and those that you raise later and I thank the gentleman for

his interest and attention to this.

The gentleman from Washington State, Mr. Inslee, is recognized

for 3 minutes.
17

OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. INSLEE. Thank you. First, I want to thank the Chair on how

he has handled this incredibly challenging effort. It has just been

remarkable to try to give everyone a say in this.

I want to put in the record, and circulate to my colleagues, an

article about a NASA report that came out last week and the reason I want to circulate it is that timing is an issue here and I want

to make it clear that we need to work on global warming this July,

as well as energy independence and this article will make it clear

why. Our scientists at NASA, the group that put a man on the

moon, in this article basically told us that we have got about 10

years, not 50 years, not 40 years.

We have got about 10 years to make significant changes in our

CO2 emissions or the world is bound for a tipping point where we

melt the tundra and the methane, which is 16 times more powerful

than CO2, tips the climatic system in the world into places we don’t

want it to go. I point this out and I am going to circulate this article because this July, I believe we have to take action with significance on CO2 in addition to energy independence and I am looking

forward to achieving that.

A couple of things that I will be working on I am very appreciative of the Chair putting in a provision on low-carbon fuels. It

is absolutely imperative that we work towards an effort for advanced forms of biofuels and electricity for our cars and a whole

host of advanced non-CO2 emitting fuels. And this is a first step.

I will be suggesting some additions that will make the low-carbon

fuel provision much stronger so that it will apply particularly with

a long-term fixed, enforceable guarantee to our kids that we are

going to have low-carbon fuel.

One of the things we have learned is that we have to give certainty to the investment community so that decisions in investment

can be made to make investments in these low-carbon fuels. And

this is one way we need to do it, not by giving too much flexibility

or alternatives, but in fact, a guarantee to get that done.

Second, we will have some suggestions to try to advance the

plug-in hybrid technology, which I believe will be here, could be

here, in fairly short order if we take the right strong measures to

perfect the lithium battery technology that is so promising, to run

our cars on 1 cent a mile for pure electricity, zero CO2, 150 miles

a gallon of low-carbon advanced fuels after that. That is quite a

deal and if we play our cards right, we can do that in that regard.

With that, I look forward to moving, not just on energy independence on July 4, pretty good theme, but independence of the world

to continue to have a climate for our grandkids. Thanks.

Mr. BOUCHER. Thank you very much, Mr. Inslee. The gentleman

from New York, Mr. Weiner, is recognized for 3 minutes.

OPENING STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW

YORK

Mr. WEINER. Thank you, Mr. Chairman. I won’t use the full 3

minutes. First, I want to honor you and Mr. Dingell for tapping

what is an extraordinarily difficult task. It is a difficult issue that
18

is wrapped up in regional conflicts and here in Congress, it is

wrapped up in different views of the future and it is wrapped up

in trying to envision a technological future that obviously none of

us can say with certitude we can predict.

There are two elements to the bill that I think are two abiding

ethos that as we should keep in mind. One has been mentioned

earlier, this notion of first do no harm. New York is among the

States that has taken the opening provided by Massachusetts v.

EPA to push the envelope on trying to figure out ways to reduce

CO2 emissions for residents of New York, to try to figure out ways

to be innovative.

In the recent campaign that we had for Governor, there was a

great deal of conversation about what would the State legislature

do, what will the governor do if given the opportunity and New

York was one of the parties to the suit—so we should be very cautious about doing anything that slows down innovation at the State

level. I know you are sensitive to that, Mr. Chairman. You have expressed that to me and I think that we need to keep that in mind

as we go forward.

The second is going to be a question that is going to hover above

a lot of our deliberations about how far to push, how bold to be.

There is going to be discussion on whether or not pushing the outer

limits of innovation will push too far and create job loss and put

us in a competitively disadvantaged place. Well, I think that when

you look at the innovation going on in the energy sector, the innovation going on in the transportation sector, the quality of the

automobiles being made, the fact that hybrid automobiles are

among the fastest growing sector of the economy—I think that we

have to be setting up a goal line here that is variable.

I think we should be as bold as possible. This is an opportunity

for us to say we are not going to be halfway where other jurisdictions are, we are going to push all out. And I think there are indications that in Europe, for example, they are going to be setting

standards that are much higher than ours which are going to force

our technology providers, our transportation sector, to compete at

a higher level, anyway. I would like very much for us to be bouncing our grandkids on our knee and talking about 2007 as the year

that we crafted perhaps the single most important legislation ever

passed out of Congress to deal with the issues of global warning

and energy independence.

I am confident this committee, on both sides of the aisle, is up

that. I am confident that you are, Mr. Chairman. So long as we

keep in mind those sheer values of trying not to harm things that

are out there that are working and also trying to be as absolutely

bold as we can be. And I yield back my time.

Mr. BOUCHER. Thank you very much, Mr. Weiner. The gentleman from North Carolina, Mr. Butterfield, is recognized for 3

minutes.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH

CAROLINA

Mr. BUTTERFIELD. Thank you very much, Mr. Chairman. I don’t

have a lengthy opening statement except to thank you for your
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leadership and your boldness in taking on this issue. Certainly, it

is going to be debated on both sides of the aisle and within our own

respective caucuses, but I want to thank you and the chairman of

the full committee for your leadership and I look forward to this

debate. At the end of the day, I am confident that we can reconcile

our differences and have a good piece of legislation to take to the

floor and to the American people. Thank you. I yield back.

Mr. BOUCHER. Thank you, Mr. Butterfield. The gentleman from

Arkansas, Mr. Ross, is recognized for 3 minutes.

OPENING STATEMENT OF HON. MIKE ROSS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

Mr. ROSS. Thank you, Mr. Chairman, for holding today’s hearing

and all the witnesses who have come before the subcommittee to

testify. I especially want to recognize and thank Ms. Sonja Hubbard, who is testifying today on behalf of the National Association

of Convenience Stores. Like Congressman Hall, I claim Ms. Hubbard. If you are not familiar with the geography of Texarkana, it

is a twin city. There is Texarkana, Arkansas and Texarkana, Texas

and the only thing that separates them is State Line Avenue.

As you drive south down State Line Avenue, the right hand side

of the road or the west side, if you will, you can vote for or against

Congressman Hall and buy lottery tickets, and on the left hand

side or east side of the road, you can vote for or against me and

buy whiskey. But you can’t do either one on the other side of the

road. So we are all pleased. Congressman Hall and I both are

pleased to claim Ms. Hubbard and as he indicated, she is the CEO

of E-Z Mart Stores, which supply gasoline to many of my constituents in Arkansas and I welcome her here today. I look forward to

hearing her testimony.

I also want to thank Chairman Boucher and the committee staff

for all their work on this legislation. I am particularly pleased to

see provisions regarding specifications for biodiesel and an increase

in the authorized amount of cellulosic ethanol production grants.

Mr. Chairman, you have heard me state before that we talk a lot

about alternative and renewable fuels in this Congress and yet, we

will spend more money in Iraq in the next 8 hours than we will

spend in the next 365 days on research and development for alternative and renewable fuels. I hope this is one step toward changing

that.

Increasing funding for cellulosic ethanol projects would help to

achieve the increased levels of alternative fuels outlined in this legislation. In addition, these alternative and renewable fuels provide

an incredible opportunity to provide new markets for our farm families and trigger what I believe could be an economic revival in the

Delta region of this country, much of which I represent. I am also

pleased to see that the draft legislation encourages the development of the alternative fuels infrastructure in this country for the

grant program to assist retailers with the installation and conversion of E–85 infrastructure.

I know a number of people in Arkansas that are trying to do the

right thing and they bought flex-fuel vehicles, but they have no

place to fill them up. Expanding the number of alternative fuel

pumps at the station is crucial to the future of alternative fuels in
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this country and key to lessening our dependence on foreign oil.

However, like Ms. Hubbard, before the committee today, I want to

ensure that the supply and cross-implications of the proposed mandate to install an alternative fuel infrastructure are thoroughly

analyzed in order to ensure that the demand for alternative fuels

supports this transition.

Finally, I am glad to see provisions that increase the number of

flex-fuel vehicles on the road and the supply of alternative fuels in

this country, including biodiesel, ethanol, coal-to-liquid, hydrogen

and natural gas. Once again, thank you, Chairman Boucher, for

your work on this legislation. I look forward to today’s hearing and

testimony of the benefits of this bill as well as possible ways to improve upon this draft. And with that, I yield back the negative 32

seconds that I remain.

Mr. BOUCHER. Thank you very much, Mr. Ross. The gentleman

from Utah, Mr. Matheson, is recognized for 3 minutes.

OPENING STATEMENT OF HON. TIM MATHESON, A

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH

Mr. MATHESON. Thank you, Mr. Chairman. As all of these opening statements have helped illustrate, this is a complicated piece

of legislation and as Mr. Doyle indicated earlier, we are working

on a timeframe that is not necessarily the first choice of folks on

this committee, but I applaud you for taking on this task in terms

of trying to move a complex piece of legislation forward. When you

are working with complex legislation, often there are nuances to

the legislation that sometimes get glossed over when people start

talking about it. And I think if people really dive into this discussion draft, they will see that some of these issues that they have

been praising here, as a group, are not quite as simple as they are

made out to be.

For example, it is not clear to me that the discussion draft necessarily overturns the Supreme Court’s decision. To me, the portion

of the Supreme Court decision it affects is in relation to a subject

that is already regulated by the Federal Government and that is

motor fuel, the current motor vehicle fuel economy. The discussion

draft preserves the ability of States to regulate criteria pollutants,

such as from motor vehicles, under the Clean Air Act. The discussion draft preserves the ability of States to regulate the carbon content of fuels under the Clean Air Act. The discussion requires EPA

to establish a first every Federal low-carbon fuel standard.

The discussion draft, for the first time, requires automakers to

report the lifetime carbon footprint of their vehicles to the EPA.

And while it is not more vehicles, the discussion draft preserves

the preserves the ability of States and EPA to regulate CO2 emissions from stationary sources. I think it is important that that information be put out for people to understand what this draft does

accomplish. I think we have heard some statements that don’t indicate those factors are actually part of this discussion draft and I

think we all have acknowledged that.

Second thing I think we ought to acknowledge is that our automobile industry—let me take a step back. Any industry in this

country appreciates a predictable transparent policy environment

in which they make decisions. And when you are a capital inten-
21

sive industry, like the auto industry, that is all the more important. And so the fact that this discussion draft makes an attempt

to try to clarify where right now we may have two different Federal

agencies setting standards and possibly States setting standards,

as well, I applaud you, Mr. Chairman, for trying to create a greater

sense of clarity so people can work in a transparent predictable environment.

I think that makes sense in terms of good policy. I think it is

good for our economy, as well. Thank you for all your work on this

discussion draft and I look forward to participating in the hearing.

I will yield back.

Mr. BOUCHER. Thank you very much, Mr. Matheson. The gentleman from Louisiana, Mr. Melancon, is recognized for 3 minutes.

OPENING STATEMENT OF HON. CHARLIE MELANCON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA

Mr. MELANCON. Thank you, Mr. Chairman. First, I would like to

commend you and Chairman Dingell for the work that you have

done, particularly for the common sense to attempt to bring together what is a very complex issue for this Nation. I feel very honored to be in the Congress at a time when we are taking on something that probably—I shouldn’t even say probably—that we know

should have been addressed in the past. I realize that we have people in the Congress that believe that tomorrow everything should

happen and as Mr. Doyle said yesterday, instead of having things

go like this, maybe they need to go like that so that we don’t damage our economy, lose the jobs and at the same time, we do want

to set an example to the people of the world that America is ready

to face the problems of global warming.

I have always said that a good deal is one where both parties

walk away happy. A bad deal is when one party walks away mad

and the other party walks away happy. I have seen that here in

this Congress and I hope, with this legislation, we will see the

makings of a good deal as we bipartisanly work towards achieving

the issues that are involved in the energy policy that we are addressing right now. I would like to thank you, Mr. Chairman, for

the inclusion of two items that I requested or we had talked about.

One was to include natural gas in the definition section of alternative fuels and also, the second one was the investment of cellulosic ethanol technology.

I thank the chairman, also, for addressing regulatory uncertainty

arising from the recent Supreme Court ruling in Massachusetts v.

EPA and as noticed by opening statements, this will be a contentious issue. However, I feel that we can’t have multiple jurisdictions trying to address gas mileage and manufacturing of automobiles State by State, the blending of fuel in the manufacturing

of cars will just add to the additional cost to the consuming public.

I believe that to remove uncertainty from markets, particularly

from capital intensive industries like automobile manufacturing,

we must have a common regulatory authority and because of the

recent Supreme Court interpretation, I think that we are moving

in the right direction. I believe that the authority to regulate fuel

economy should rest with the Department of Transportation and I
22

hope that our final draft arrives at a solution that reinforces this

point.

I would also hope that we can reach agreement on the pace of

increasing fuel economy standards. The discussion draft contains a

thoughtful substantive approach that addresses the issue more responsibly than the proposal offered by the administration. I want

to thank the chairman again for his thoughtful work on the issues

and Mr. Dingell, also, and I work forward to working with the people on both sides of the aisle to try and bring to America and to

the world a common sense legislation that will move this country

forward. Thank you. I yield back the rest of my time.

Mr. BOUCHER. Thank you very much, Mr. Melancon. All of the

Members now having delivered their opening statements, I am

pleased to welcome today’s witnesses and I want to thank each of

you very much for taking the time to prepare and deliver your comments to us this morning.

Our first panel of witnesses contains people highly knowledgeable about individual sectors of our economy that will be affected

by the legislation pending before us. And we want to welcome Mr.

Bob Dinneen, the president and chief executive officer of the Renewable Fuels Association; Mr. Charlie Drevna, the executive vice

president of the National Petrochemical and Refiners Association;

Mr. Phillip Lampert, the executive director of the National Ethanol

Vehicle Coalition; Ms. Sonja Hubbard, the chief executive officer of

E-Z Mart Stores, testifying on behalf of the National Association of

Convenience Stores and the Society of Independent Gasoline Marketers of America; Mr. John DeCicco, the senior automotive fellow

for Environmental Defense; Mr. Alan Reuther, the legislative director for the International Union of United Automobile, Aerospace

and Agricultural Implement Workers of America; and Mr. Dave

McCurdy, president and chief executive officer of the Alliance of

Automobile Manufacturers and a former colleague of this committee who we welcome back.

Thanks to each of our witnesses for sharing your comments with

us. Without objection, your prepared written statements will be

made a part of our record. We would welcome your five-minute oral

summaries and Mr. Dinneen, we will be pleased to begin with you.

STATEMENT OF BOB DINNEEN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, RENEWABLE FUELS ASSOCIATION, WASHINGTON, DC

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

Congressman Hastert, members of the committee, for holding this

very important hearing. The work that you are doing is going to

be critically important, as you well know, to the Nation’s energy,

economic and environmental future and I applaud the hard work

that has gone into the discussion draft. As you all know, the ethanol industry is a result of the Energy Policy Act of 2005 that this

committee got passed, has been growing at an unprecedented rate.

There are now 120 ethanol plants in operation across the country

capable of producing more than 6 billion gallons of ethanol a year.

Ethanol is blended in almost half of the Nation’s fuel today.

But because of the signal that that bill sent to the marketplace,

there are also 77 ethanol plants that are currently under construc-
23

tion that will add another 6 billion gallons of ethanol across the

country and will allow ethanol virtually to be blended in every single gallon of gasoline that this country sells every year. As I look

across the panel today, there is ethanol expansion, new construction or development in every single one of the States that you represent; in Louisiana, in Georgia, in North Carolina, in Maryland,

in California, in Washington and Congressman Barton, you will

probably be pleased to know that there are more ethanol plants

under construction in Texas today than in Congressman Shimkus’

home State of Illinois because of the bill that you passed.

But if ethanol is going to be more than just a gasoline additive,

if we are going to be able to produce ethanol from cellulosic feedstocks and commercialize that very promising new technology; if we

are going to motivate the marketplace to put more FFEs on the

road, to have more E–85 being used across this country, that more

obviously needs to be done. EPAct has shown what an inspired

marketplace can do. This Congress proposed a 7.5 million gallon

RFS and everybody at the time thought that that was going to be

way too much and that we would never be able to do it. Well, we

have got 12 million gallons of ethanol that will be in production

within the next 18 months, far in advance of the 2012 deadline and

certainly far more than was required by EPAct.

If you set the old agenda, the marketplace will absolutely respond and I think that is what this bill is trying to do and I commend the chairman and the members of the committee for putting

together a discussion draft that is very thoughtful, is very comprehensive, it is very proficient and it will move the date about

where we need to be in terms of energy policy far down the field.

We do have issues. We, for example, do not believe that an alternative fuel program, as outlined in the discussion draft, as opposed

to the more specific renewable fuel program, provides the market

with adequate certainty for any of the available alternative fuels

to attract sufficient investment to grow with the confidence the

RFS has provided ethanol and biodiesel. There is no question that

America’s energy needs demands that we utilize all of our energy

resources, renewable and alternative. But our assessment is that

we ought to be trying to do that with independent programs to assure that other alternatives are able to grow at the same pace that

our industry has.

I understand the motivation about wanting to pick winners. But

if you don’t ensure that all of these emerging technologies can be

winners, we all might lose. The discussion draft maintains and expands the compliance items included in EPA’s rulemaking implementing the RFS. While this is an appropriate mechanism for

rationalized AFS market, it magnifies our concerns about an equitable approach to fuel policy. These compliance values have the effect of creating a significant but as yet unknown number of paper

credits that actually work to reduce the volume of petroleum potentially displaced by this program.

For example, if there is a billion gallons of renewable diesel that

is used in this program under EPA’s compliance guides, that means

that 700 million gallons of petroleum is not displaced by this program. If the committee determines that an alternative fuel program, as opposed to a renewable fuel program is preferred, the
24

RFA would suggest either increasing the volume required or modifying the compliance values to be paid to gasoline as opposed to

ethanol to preserve the petroleum to strengthen potential of this

program.

We support, generally, the low-carbon fuel standard. We believe

that there are a number of questions with respect to that. We look

forward to working with the committee to answer some of those

questions so that there is more clarity with respect to the criteria

that would go into a full fuel cycle analysis, but we believe the discussion draft that you have put forward, again, is a very thoughtful, comprehensive draft and I thank you, Mr. Chairman, and look

forward to working with you on it.

[The prepared statement of Mr. Dinneen follows:]
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Mr. BOUCHER. Thank you very much, Mr. Dinneen. For the benefit of Members, let me note that we have recorded votes pending

on the floor in a series of two votes. We will continue receiving testimony for as long as we can. We will certainly get through Mr.

Drevna’s testimony. And at that point, I think it will be necessary

to declare a brief recess in the committee while we cast these votes,

so Members should be apprised that we will recess in order to respond to these roll calls. Mr. Drevna, we will be happy to hear from

you.

STATEMENT OF CHARLES DREVNA, EXECUTIVE VICE PRESIDENT, NATIONAL PETROCHEMICAL AND REFINERS ASSOCIATION, WASHINGTON, DC

Mr. DREVNA. Chairman Boucher, Congressman Hastert and

members of the subcommittee, I am Charlie Drevna, executive vice

president of NPRA, the National Petrochemical and Refiners Association. We thank you for the opportunity to provide our perspective on the proposed fuels title. We understand and appreciate the

challenges the subcommittee faces in satisfying the energy needs of

the American consumers and the various industries and entities invited to testify today. We share the subcommittee’s objective, to

provide clean, affordable fuels to the American consumer as well as

other energy products that meet their needs. As you will hear

today, however, we believe that elements of the alternative fuels

discussion draft, as currently constructed, will not fully achieve

those objectives and may ultimately be counterproductive.

While there is universal agreement that alternative fuels will

continue to be a strong and growing component of the Nation’s

transportation fuel mix, NPRA’s longstanding position opposes the

mandated use of alternative fuels and supports the integration of

these alternative fuels into the marketplace based on market principles and demands. That being said, however, I would like to address several provisions of the draft and share some general

thoughts on a stable fuels policy.

To begin, the requirements of the Alternative Fuels Program, the

AFP, and the Low-Carbon Fuel Standard, the LCFS, are large and

ambition. NPRA appreciates that compared to similar legislation in

the Senate and the administration’s alternative fuel proposal. The

implementation timeline for the AFP reflects a relatively measured

and gradual progression. We would note, however, that by placing

an overlapping carbon limit on alternative fuels, the aperture

through which industry must travel may be much too narrow. The

tension, we believe, between the increasing AFP and the decreasing

LCFS could potentially interfere with the implementation of both

programs. While the AFP allows for a wide variety of fuels to meet

its mandated volume, the strict limitations of the LCFS may disqualify use of these same alternative fuels to meet the standard

after a very finite number of years.

Now, to the extent that there is some misunderstanding between

what the draft intends and what our calculations show in our written statement—we believe the arithmetic to be correct—but if there

is some misunderstanding between the intent and how we developed those calculations, we, naturally, would want to continue

working with the committee and the staff to make sure that it is
32

not the intent that we have somewhere of a 22 to 30 percent reduction in carbon, as opposed to California’s 10 percent. Again, if there

is some misunderstanding there, we definitely want to work with

you on that.

Turning to the draft fuel waiver provision, we are concerned that

the language should result in restricting or undermining capital investment. A preferable approach to this ‘‘off-ramp labor’’ would be

the development of, perhaps, an on-ramp trigger. By this, I mean

under this system, the EPA administrator would be required to certify that certain positions necessary for successful implementation

and compliance are in place at least 2 years before the AFP commences. Those conditions would include projection for an adequate

supply of alternative fuels at competitive prices, based upon commercially proven technology. The AFP allows for use of an expanded fuel base, thereby providing incentives for a wider array of

fuels and thereby promoting flexibility, allowing for the development of a myriad of alternatives.

State biofuel mandates, however, could frustrate and undermine

this purpose by limiting refiners’ choices in specific geographic

areas. Further, these mandates create cumbersome boutique markets requiring special fuel formulation in transportation logistics,

thereby vulcanizing the national fuel market. If Congress wishes to

allow for as diversifiable alternative fuels as possible and to promote flexibility in the system, State and local biofuel mandates

should be preempted.

We also have concerns related to the overall supply of natural

gas. One unintended, but nevertheless a likely consequence of the

AFP could be additional pressures on the natural gas marketplace.

The production of ethanol requires significant volumes of natural

gas throughout its production cycle, converting corn into potentially

cellulosic material into useful fuel requires energy and natural gas

currently provides much of that necessary energy. In addition to

the magnified natural gas demand cause by increased production

of biofuels, the natural gas demand would also, likely, rise, as obligated parties attempt to comply with the LCFS. In order to meet

the significant carbon reductions outline in the discussion draft,

the technology to require on natural gas would have to be added

to the transportation section.

Turning to the alternative fuels dispensing requirement in the

draft, and while NPRA does not speak comprehensibly to fuel marketers, our members, nevertheless, oppose mandates that require

installation of dispensers for products which we do not make or for

which we cannot vouch. As companies are required to install these

pumps and potentially distribute E–85, the company should be indemnified for claims related to product quality arising from the

sale of unbranded E–85 or other alternative fuels.

Finally, but not least importantly, legislation requires regulations within 2 years and begins that gradual climb to 35 billion gallons. NPRA believes that energy security, public health and environment infrastructure, job creation and economic development are

topic most relevant today and should not be relegated to a review

of 13 to 18 years from now. We therefore suggest that the study

provision be pushed forward.
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Thank you very much, Congressman. I will be happy to answer

any questions you may have.

[The prepared statement of Mr. Drevna follows:]
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Mr. BOUCHER. Thank you very much, Mr. Drevna. The subcommittee will stand in recess, pending completion of the last vote.

[Recess]

Mr. BOUCHER. The subcommittee will come to order. Mr. Drevna

had completed his testimony. Mr. Lampert, we will be pleased to

hear from you.

STATEMENT OF PHILLIP LAMPERT, EXECUTIVE DIRECTOR,

NATIONAL ETHANOL VEHICLE COALITION, JEFFERSON

CITY, MO

Mr. LAMPERT. Thank you very much, Mr. Chairman. My name

is Phil Lampert. I appreciate the opportunity to be here today.

Thank you Mr. Hastert and all of the members of the committee.

I want to also thank your staff, Mr. Chairman. They have done and

outstanding job and been very communicative with all of us, and

we thank them.

Mr. Chairman, I was here April 18 and provided testimony, so

I will not be duplicative in that sense. I want to must make a couple very quick comments. In regard to the establishment of an alternative fuel infrastructure development grant program, the National Ethanol Vehicle Coalition strongly supports that. We believe

that incentives continue to be the proper mechanism to promote E–

85 installation. We would continue to issue our opposition to mandatory alternative fuel installation. And if you would allow me just

to make a very simplest analogy, we like to consider ourselves the

bottled water salesmen of 20 years ago, and I go to the store and

suggest that let us take out 5 feet of refrigerator space that is

being sold for Bud Lite or Michelob or what have you to put in bottled water, and we think it should, frankly, be the decision of that

convenience store operator whether or not to sell bottled water.

And 20 years ago, a lot of convenience stores did not have bottled

water. Today, that is the number-on profit center in that refrigerator case. We think the same will be occurring in the market

place for E–85 infrastructure. That is as more people demand it,

as more vehicles are out there, as there are incentives available to

put in that E–85 infrastructure that the marketplace will continue

to promote it, and should they not, then they will lose the tremendously profitable profit center for the future.

In respect to proposed language that prohibits franchise agreement restrictions on placing the E–85, we strongly support the inclusion of that language. I have, as I mentioned, participated in

several hearing and watched other that you have very diligently reviewed in this testimony and as you crafted this legislation, and

some members of the petroleum industry have indicated that there

are no restrictions on the placement of E–85 under canopies. Well,

if that is the case, then I don’t think there will be any objection

to including this statement, and we would encourage you to do so.

The dispenser requirements, I again would encourage you to look

very closely at those, the provision of a $200 million grant program,

also the proposal of a grant program to the Department of Energy

to provide technical assistance and support is going to be very important, and we applaud the committee for including that. Yesterday, the Superintendent of the Capitol grounds received a phone

call from the Speaker’s office and was directed to place an E–85
46

fueling system in operation here in the Capitol. Many Members are

driving E–85 vehicles, and law enforcement officials and others can

use E–85. It is easy to talk about putting in an E–85 station, but

because of the lack of experience in that, the superintendent of the

Capitol calls my office, and because I am in DC this week, I will

be meeting with him this afternoon. But the provision of technical

support to continue to develop the program is, again, very key, and

we very much applaud the provision of that title.

I would like to simply close by bring to the committee’s attention

a recent statement by Rick Wagner, chief executive officer of the

General Motors Corporation, and one of our members, and I will

quote Mr. Wagner: ‘‘It is increasing clear that of anything we can

do over the next decade, ethanol has, by far, the greatest potential

to actually reduced U.S. oil consumption, reduce oil imports, and

reduce carbon-gas emissions.’’ And we applaud what the committee

has done regarding the alternative fuels and renewable fuel standards and stand available to provide any support. Thank you, Mr.

Chairman.

[The prepared statement of Mr. Lampert follows:]

TESTIMONY OF PHILLIP J. LAMPERT

Good morning, Chairman Boucher, Ranking Member Hastert, and distinguished

members of the committee, my name is Phillip Lampert and I serve as the executive

director of the National Ethanol Vehicle Coalition. On behalf of the NEVC, I would

like to thank you for the opportunity to appear before you this morning.

As I mentioned during my April 18, 2007 testimony to the committee, the NEVC

is the nation’s primary advocate of the use of 85 percent ethanol as a form of alternative transportation fuel. Our members include automakers; state and national

corn grower associations; ethanol producers; equipment manufacturers and suppliers; ethanol marketers; the 37 States that comprise the Governors’ Ethanol Coalition; farmer cooperatives; chemical and seed companies; petroleum marketers; and

individuals.

Our written and verbal comments this morning will be focused on the June 1,

2007 Discussion Draft that the Committee has provided for comment, specifically

title I-Fuels, title II-Alternative Fuels Infrastructure, title III-Vehicles.

In regard to title I-Fuels, the NEVC strongly supports an increase in the Renewable Fuel Standard. The ethanol industry is clearly proving that it can meet the levels of the RFS established in the 2005 Energy Policy Act and that an aggressive

expansion is feasible. In terms of national security, energy independence, and domestic economic growth, and increased RFS is positive for the nation.

With respect to the volume levels, the relative amounts of each form of fuel, and

the potential multiplier associated with each form of fuel, we encourage further discussions with each of the stakeholders. It is important to note that the NEVC is

strongly supportive of policies that promote the future production of alternative

fuels such as ethanol from cellulosic materials. That being said, the maintenance

of a strong system of ethanol production based on corn as a feedstock remains critical to the strength of the entire industry.

Title II-Section 201 deals with the establishment of an alternative fuel ‘‘infrastructure development grant’’ program and a ‘‘retail technical and marketing assistance’’ effort.

The NEVC strongly supports the provision of Federal financial incentives, both

through the provision of grants and an increase in the Federal income tax credit,

to support the establishment of alternative fueling infrastructure. We believe that

entrepreneurs in the fueling industry who wish to take advantage of such programs

will do so and as restrictions are lifted which may be preventing branded stations

from selling alternative fuels, the market penetration of E–85 fueling sites will increase to meet the related demand presented by the FFVs being produced.

The proposed establishment of a ‘‘retail technical and marketing assistance’’ effort

will be key to ensuring that new vendors are able to market and offer E–85 at a

price on a gasoline equivalent basis to regular unleaded, that equipment standards

are being maintained, that promotional materials are available, and that a central

clearinghouse is available to respond to questions from consumers. The addition of
47

such a sub-program to the basic DOE grant effort is critical and we applaud the

Committee for including this new subsection.

We also believe the Committee has been wise to outline the selection criteria that

would be used to make such infrastructure grants. Basing the allocation of funds

on the numbers of FFVs, opportunities to establish fueling corridors, displacement

of petroleum, and commitment on the part of the applicant are all criteria that will

assist with maximizing the wise use of scarce taxpayer resources.

The NEVC also appreciates the Committee language which requires that all such

infrastructure grant recipients prepare a marketing plan, provide information to

consumers, and report on sales and pricing of alternative fuels. As we have mentioned, it is easy to establish an E–85 fueling station. However, it is much more difficult to establish a successful E–85 fueling facility. These obligatory marketing and

outreach provisions for all grant recipients will make this program exceedingly

stronger.

In regard to the proposed language that ‘‘prohibits franchise agreement restrictions related to alternative fuel infrastructure’’ , over the past several weeks, testimony has been provided by representatives of the petroleum industry to this Subcommittee stating that there are no restrictions on the sale of alternative fuels by

so called ‘‘branded’’ operations. While not wishing to debate that matter, this language will serve to clarify the previous statements made by those representatives

and address this issue. An owner/operator of a fueling station should have the right

to sell any form of alternative transportation fuel. This new section will simply clarify such right.

Regarding the section of the draft language that establishes ‘‘alternative fuel dispenser requirements,’’ it has been the position of the National Ethanol Vehicle Coalition that there is little benefit in the promulgation of Federal law which requires

the installation of alternative fueling infrastructure. As we have often noted, the

key to successfully selling E–85 and any other form of alternative fuel is proper pricing, marketing, and the provision of educational resources. While the Committee’s

goals in regard to the mandatory establishment of E–85 infrastructure based on

market penetration of FFVs are admirable, we continue to believe that the marketplace is the mechanism most appropriate to ensure such E–85 fueling sites are installed.

It is our observation that mandating E–85 fueling facilities may result in placement of the sites in poor locations, setting high prices for E–85, and lack of customer outreach and marketing. While unlikely, it would be possible that opponents

of alternative fuels could use high pricing of fuel at sites they were forced to establish to confirm a lack of demand and establish an ‘‘I told you so’’ prophecy of failure

of the site. The Committee draft includes a general grant program that, complementary to the existing tax credit program, could be used to offset the cost of new E–

85 fueling equipment. In the future, vendors choosing not to sell E–85 will be facing

the loss of a significant new revenue stream and potential profit center. As in the

sale of other commodities, vendors who do not rapidly respond to market demands,

are those that rapidly exit the marketplace. We believe that this will also be true

in the sale of alternative fuel. The NEVC supports the market in this endeavor and

continues to resist embracing such mandatory programs. It may be necessary to reevaluate this position in the future, but presently, we oppose such mandates.

In regard to the production requirements of Flexible Fuel Vehicles as outlined in

section 302 of the draft, the Chief Executive Officers of General Motors,

DaimlerChrylser, and Ford have each stated their company’s commitment to the

production of 50 percent of their entire fleet as FFVs by model year 2012. Selected

imports are also producing FFVs and it is our understanding that additional models

may be forthcoming this fall.

Unlike most motors vehicles manufactured today that are only warranted to operate on up to 10 percent ethanol, a flexible fuel vehicle can operate on any level of

ethanol from 0 percent up to 85 percent. As the Congress begins to consider Renewable Fuel Standards exceeding 35 billion gallons, it is important to note that with

today’s vehicles, the maximum amount of ethanol that can legally be consumed approaches 14 billion gallons nationally in a 10 percent blend. While the potential use

of E12 and E15 use in existing vehicles is being debated, we know that a flexible

fuel vehicle can operate on E15, E30, or E–85 absent adjustments or modifications.

The impetus for today’s production of alternative fuel vehicle was provided by the

2nd Session of the 100th Congress via passage of the Alternative Motor Fuels Act

(AMFA) of 1988, extended by the Automotive Fuel Economy Manufacturing Incentive for Alternative Fueled Vehicles Rule of 2004. These laws encourage the production of motor vehicles capable of operating on any form of alternative fuel. This incentive has been tremendously valuable in that prior to 1988 there were zero alternative fuel vehicles on the nation’s highways. As a result of AMFA, today, there are
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more than 6 million E–85 vehicles and a number of electric, CNG, and LPG cars

and trucks across the nation.

The provision of new incentives to further grow the production of flexible fuel vehicles, especially by foreign manufactures, may be an appropriate mechanism to ensure the wide scale and massive integration of such vehicles into our nation’s fleet

of passenger autos and light duty trucks.

In summary, to advance the use of E–85 as a form of alternative transportation

fuel, we believe the following are needed:

• Federal financial incentives to assist with offsetting the cost of new or converted

infrastructure. These may be provided in the form of grants as recommended by the

discussion draft or as an increase in the existing Federal income tax credit.

• A much stronger emphasis being placed on the provision of technical support,

marketing support, and promotional assistance to new and existing E–85 vendors.

• The massive introduction of flexible fuel vehicles into the nation’s auto and light

duty truck sectors, and;

• Finally, while outside the jurisdiction of this Committee, an increase in the existing incentive that is available for ethanol to reflect the lower BTU value of the

product.

Mr. Chairman and Members of the committee, we appreciate the work that you

are doing on behalf of the American people to address our nation’s growing dependence on imported petroleum. The National Ethanol Vehicle Coalition thanks you for

the opportunity to provide these comments and we are available to respond to questions at your convenience.

The National Ethanol Vehicle Coalition is a non-profit organization located in Jefferson City, MO.

Mr. BOUCHER. Thank you very much, Mr. Lampert. Ms. Hubbard.

STATEMENT OF SONJA HUBBARD, CHIEF EXECUTIVE OFFICER, E-Z MART STORES, ON BEHALF OF THE NATIONAL ASSOCIATION OF CONVENIENCE STORES AND THE SOCIETY OF

INDEPENDENT GASOLINE MARKETERS OF AMERICA, TEXARKANA, TX

Ms. HUBBARD. Thank you very much. Good morning, Mr. Chairman and members of the subcommittee, my name is Sonja Hubbard. I am CEO of E-Z Mart stores, based in Texarkana Texas, and

our company owns and operates over 300 stores in Texas and the

surrounding States of Arkansas, Oklahoma, Louisiana and Missouri. Today, I appear on behalf of the National Association of Convenience Store and the Society of Independent Gasoline Markets of

America. Together NACS and SIGMA members account for approximately 80 percent of all motor fuels sold in the United States,

annually.

Before I begin, let me make it perfectly clear that retailers are

agnostic about which motor fuels we sell, with one caveat: we do

want to sell motor fuels that are available and that consumers

want.

With that, let me begin with a comment regarding the proposed

alternative fuel program. The discussion draft before this committee appears to be a more conservative approach than others because it provides additional time to implement the increase. NACS

and SIGMA believe it can be further improved by conditioning any

inquiries beyond existing programs upon the finding that there be

both sufficient supplies of renewable fuels and sufficient distribution infrastructure to deliver the product to retail without placing

and undue finical burden on consumers. Regarding the proposed

E–85 mandate, let me state clearly and unconditionally, NACS and
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SIGMA strongly oppose the provision. It is anti-free market, and

it will put retailers in significant financial jeopardy. NACS and

SIGMA appreciate the committee’s efforts to address some of our

itemized concerns. These are positive provisions that do help mitigate the negative consequences of the mandate. However, the only

provision that could earn our endorsement would be to eliminate

the mandate, all together. The fundamental problem is that if a retailer is forced to install E–85 equipment against its will, nothing

will ensure that consumers will actually purchase the fuel. In other

words, the proposal proposes extensive mandates without any

promise that that forced investment will make a return. This problem explains why many have been slow to make the investment on

their own accord. It is not due to animosity towards an alternative

fuel, and it is not due to limitations imposed by our suppliers.

Rather, it is because consumer demand for the product is insufficient to justify the cost of the investment.

To illustrate the basis of our concerns, let me start by explaining

the costs associated with the E–85 system. In preparation for this

hearing today, I inquired of my equipment suppliers and industry

colleagues to establish what it would cost to convert a station to

sell E–85. I found the cost range from a low of $11,000, part-only,

no installation cost, to convert my most modern facility, the most

up-to-date current one I have, and also to a high of $200,000 in

California. In addition, many of my colleagues who have installed

E–85 report that it has not been beneficial. The fundament fact is

that most drivers with flexible-fuel vehicles do not want to buy E–

85 unless it is offered at substantial discounts compared to gasoline. That is in part due to the mileage benefit. Unfortunately, it

is not always possible for retailers to obtain product at a price that

enables them to sell it at this discount. This lack of consumer acceptance is a major problem. Fuel sales, which generate incredibly

low margins, drive traffic to our store where the margins are much

stronger. Many retailers now lament their decisions to install E–

85 systems, because they have been unable to generate enough

sales to support the overall business model.

Our opposition to the proposed mandate is not necessarily a justsay-no position, and the need for retailers to protect the finical stability of their very own businesses and preserve for themselves the

right to make any decisions that could affect that stability.

This brings me to my final mission, the ability of franchise retailers to install the E–85 equipment. NACS and SIGMA are not opposed to Congress clarifying the retailer’s right to convert its own

equipment and land for the sale of E–85. However, NACS and

SIGMA strongly oppose granting someone who does not own the

equipment and land on which it operates the right to expose the

landowner to substantial and long-term liability. Congress must

amend the discussion draft to ensure that only the owner of the

land, who also owns that liability, should be empowered to make

that decision.

In conclusion, NACS and SIGMA urge the committee to, one,

condition any increase in renewable and alternative-fuels mandates

upon the finding that there is sufficient supply and distribution infrastructure to accommodate this increase. Two, do not expose

those of us who lease outlets to dealers to a potentially huge liabil-
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ity resulting from a third-party decision to convert or install such

equipment. Three, please do not mandate the installation of E–85

systems. And four, consider carefully the supply and price implications of policies under you jurisdiction. Our customers, your constituents, deserve no less.

Thank you again for the opportunity to share our thoughts regarding this discussion.

[The prepared statement of Ms. Hubbard follows:]

STATEMENT OF SONJA HUBBARD

Good morning. My name is Sonja Hubbard. I am the chief executive officer of EZ Mart Stores, Inc., headquartered in Texarkana, Texas. My company owns and operates over 300 motor fuel outlets in five states—Texas, Oklahoma, Louisiana, Arkansas, and Missouri. Our company sells nearly 200 million gallons of gasoline and

diesel fuel each year and we employ over 2,200 clerks, managers, and other personnel in these five states. We sell gasoline under our own brand and, at some locations, under the brand of our refiner suppliers.

I appear today on behalf of the National Association of Convenience Stores

(NACS) for whom I currently serve as Vice Chairman of the Board. NACS is a nonprofit trade association representing the convenience and petroleum retailing industry. Our industry operates more than 145,000 retail locations and, in 2006, sold

$405.8 billion worth of motor fuels.

I also appear on behalf of the Society of Independent Gasoline Marketers of America (SIGMA), of which I am a member. SIGMA is an association of more than 250

independent motor fuel marketers operating in all 50 states. SIGMA members sell

more than 30 percent of all motor fuels sold in the United States and supply more

than 35,000 retail outlets across the Nation.

Together, NACS and SIGMA members account for approximately 80 percent of all

motor fuels sold at retail in the United States every year.

Thank you for providing me with the opportunity to share our industry’s perspective on the Committee’s discussion draft legislation regarding alternative and renewable fuels. Before I begin, let me make it perfectly clear that retailers are agnostic about which motor fuels we sell, with a single caveat: We want to sell motor

fuels that are available and that our customers want to buy.

Today, I will focus my comments on those provisions of this discussion draft that

most directly affect the motor fuels retail industry.

ALTERNATIVE FUELS PROGRAM

Let me begin with a couple of comments regarding the proposed Alternative Fuels

Program. Two years ago, the Energy Policy Act of 2005 established a renewable

fuels standard (RFS), mandating that at least 7.5 billion gallons of renewable fuels

be sold in the United States by the year 2012. As everybody should by now be well

aware, the industry is implementing the program ahead of schedule and is on pace

to exceed the 2008 requirement to blend 5.4 billion gallons.

Now, however, it seems there is widespread interest on the part of political leaders to accelerate and expand upon this accomplishment. The discussion draft before

us proposes to increase the mandate to 35 billion gallons by the year 2025, beginning with 14 billion gallons in the year 2013. Another proposal calls for the program

to expand to 36 billion gallons by 2022, beginning with 8.5 billion gallons in 2008.

Still another requires 35 billion gallons by 2017, starting with 10 billion gallons in

2010.

In light of these competing proposals, one can say that the discussion draft before

this Committee appears to be a more conservative approach because it provides additional time to implement the increase. Regardless, each of these proposals contains very ambitious goals, and we must ask if they are the best course of action.

The market is proceeding to offer renewable fuels ahead of the federally mandated

schedule. There is no reason to believe that this will not continue in the absence

of an increased mandate. However, as we have testified before, if Congress feels

compelled to accelerate this transition through a revised Federal mandate, NACS

and SIGMA call upon Congress to construct the revised program with the interests

of consumers in mind.

Any increase beyond the existing RFS should be predicated upon a finding by the

Secretaries of Energy and Agriculture that there will be both sufficient supplies of

renewable fuels and sufficient distribution infrastructure to deliver that product to
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retail without placing an undue financial burden on consumers. If these assurances

cannot be made, then the proposed increase should be delayed until conditions are

sufficient to support its implementation. Further, such a decision should be made

with enough lead time to enable the petroleum industry to make necessary arrangements to accommodate the requirements.

If such consumer protections based upon market analysis are not provided, we

will be concerned about potential market disruptions and the impact these could

have on our customers. Last year, the disruptions we experienced in this area due

to the transition from MTBE to ethanol were primarily the result of inadequate distribution infrastructure and insufficient supply in appropriate markets. It is critical

that this program protects against a repeat of that experience.

ALTERNATIVE FUELS INFRASTRUCTURE

I would like to direct the rest of my testimony toward the provisions in the discussion draft focusing on alternative fuels infrastructure.

The proposal before the Committee implements a mandate for retailers to install

E–85 compatible equipment. Let me state clearly and unconditionally: NACS and

SIGMA are strongly opposed to this provision. It is anti-free market; it will put retailers in significant economic jeopardy; it is an extreme overreaching by the Federal Government into private enterprise; and, it is unsupported by existing or anticipated market conditions.

Further there seems to be little support for the mandate within any segment of

motor fuels industry. For example, the National Ethanol Vehicle Coalition, the primary advocate for the use of E–85 fuel, testified on April 18 that it ‘‘opposes the

mandatory establishment of E–85 fueling locations.’’ The Coalition’s Executive Director, Phil Lampert, said, ‘‘Mandated establishment of E–85 fueling locations is

counter productive and will lead to poor pricing, disinterested marketing, lackadaisical vendor performance, undesirable locations and general dissatisfaction by the

consumer.’’

Given the apparent lack of support, we are at a loss as to why the Committee

would propose implementing this retailer mandate.

CONSIDERATIONS FOR MANDATE IMPLEMENTATION

To be fair, the discussion draft before us perhaps represents the best effort to date

by Congress to reflect market factors when imposing an E–85 retailer mandate.

NACS and SIGMA appreciate the Committee’s efforts to address some of our

itemized concerns centered around such a program. Specifically, we appreciate that

the draft directs the Secretary of Energy to determine an appropriate schedule and

plan for implementation, contingent upon the promulgation of a rule. Further, we

appreciate that Congress directs the Secretary to consider: (1) the availability of E–

85 within a region and number of competing E–85 wholesale suppliers; (2) the level

of financial assistance available to retailers within a region; (3) the potential inability of retailers to install E–85 due to property restrictions; (4) the economic burden

the mandate will impose on a business; and, (5) the time it will take a retailer to

comply with the mandate.

These are positive provisions that do help mitigate the negative consequences of

the mandate. However, they do not explain how the Secretary will select, from a

list eligible retailers in a market, which will be required to make the mandatory

investment and which will not. The legislation does not give the Secretary any direction as to how to determine the winners and losers in this system.

I cannot think of any provision or combination of provisions that would be sufficient to secure the support of the retail community other than elimination of this

mandate.

The fundamental problem is that if a retailer is forced to install E–85 against its

will, the bill before the Committee fails to ensure that consumers will actually purchase E–85. In other words, the proposal imposes an expensive mandate on us without any promise that our forced investment will provide any return.

This is the critical question for retailers and explains why many have been slow

to make the conversion investment on their own accord. It is not due to animosity

towards an alternative fuel and it is not due to limitations imposed by our suppliers.

Rather, it is because consumer demand for the product is insufficient to justify the

cost of the investment. Trust me, my fellow NACS and SIGMA members and I will

make E–85 pumps available when the market calls for it. But to illustrate the basis

of our concerns, let me start by explaining the costs associated with E–85 systems.
52

COST TO CONVERT E-Z MART STORE TO SELL E–85

The primary impediment to retailers converting a dispenser to E–85 is equipment

compatibility. Because E–85 is more corrosive than regular gasoline or E–10, it requires equipment that is certified compatible with the fuel.

In preparation for this hearing, I inquired of my equipment supplier to determine

what would be required to convert one of my newer stations to sell E–85. These stations have the newest equipment and, therefore, hold the best chance for existing

equipment compatibility. I learned that my new steel tanks and my fiberglass tanks

were certified compatible with E–85. Our automatic tank gauges were listed compatible as were our fiberglass piping systems. However, we would have to replace several of the ancillary fittings, including the submersible turbine pump, the overfill

drop tube and others like flexible hoses, spill buckets, ball valves, etc. In addition,

our hanging hardware, which includes conventional nozzles, swivels, breakaways

and curb hoses would have to be replaced with nickel plated units at an increased

cost. For all of these conversions, including tank cleaning, we estimated the cost to

be between $6,000 and $7,000.

However, this does not include the dispenser itself. The two dispenser manufac- turers each charge an additional fee for a new E–85 compatible dispenser—$8,000

for Dresser-Wayne and $7,300 for Gilbarco. Thus, a typical E–85 dispenser can cost

upwards of $17,000 per unit. And this cost is for equipment that has not yet been

certified compatible with E–85 by Underwriters Laboratories.

While it is conceivable to convert an existing dispenser, this would require at a

minimum replacing the meters, internal piping, filter inlets, compression fitting,

control valves and seals, and any non-ethanol compatible sealants. Consequently,

converting an existing dispenser would cost in excess of $5,000.

In short, to convert one of my newer stores to sell E–85, I would face an expense of at least $11,000, not including labor expenses. For older locations, the cost would

be considerably higher than this. According to colleagues in the industry who have

installed E–85 systems, such an investment would be considered a bargain. One reported spending upwards of $55,000 on a new system, while another in California

reports the cost of installing a basic diesel system at more than $200,000—not including the up-charge associated with compatible equipment.

CONSUMERS ARE NOT BUYING THE FUEL

As we have testified repeatedly, fuel retailers are not picky. We will sell whatever

products our customers want to buy. As an industry, we have been watching the

development of E–85 and flexible fuel vehicles quite closely, and many of my colleagues have taken the initiative to convert a dispenser to sell E–85. The results

have not been overwhelmingly positive.

The fundamental fact is that most drivers of FFVs (Flex Fuel Vehicles) do not

want to buy E–85 unless it is offered at a substantial discount compared to gasoline.

Because these drivers can purchase either E–85 or gasoline, they make economic decisions when at the pump.

Clearly, consumers have made the economic calculation regarding the decreased

fuel economy associated with E–85 (approximately 25 percent fewer miles per gallon

than gasoline) and they are demanding a benefit in price. Absent that benefit, they

will follow their economic interests and purchase gasoline.

NACS and SIGMA have spoken with retailers throughout the Nation who sell E–

85, and we have learned that sales of E–85 fall off dramatically when the price is

not significantly lower (at least 20 cents per gallon) than gasoline. Some retailers

report that the price differential to maintain volumes is actually closer to 40 cents

per gallon.

Unfortunately, it is not always possible for retailers to obtain supplies of E–85 at

a price that enables them to sell it at such a discount. The provision in the proposal

requiring consideration of the number of E–85 wholesale suppliers is important, because without adequate competition in the E–85 supply market, retailers will have

little to no chance to obtain competitively priced product. However, there are no

guarantees that even a competitive market will produce E–85 supplies that can be

priced well below gasoline.

The lack of consumer acceptance of E–85 is a major problem. Fuel sales, which

generate incredibly low margins, drive traffic to the store, where margins are much

stronger. We have spoken with several retailers who lament their decision to install

E–85 equipment because they have been unable to generate sufficient sales from

these fueling positions to support their overall business model.

Our opposition to the proposed mandate is not necessarily a ‘‘just say no’’ position.

Rather, it is reflective of actual market conditions and the need for retailers, who,

on average, generated less than $34,000 in pre-tax profit per outlet in 2006, to pro-
53

tect the financial stability of their business and to preserve for themselves the right

to make any decisions which might affect that very stability.

The government has no responsibility to generate sales sufficient to pay my employees. By the same token, it should not make decisions affecting my ability to sell

a marketable commodity.

FRANCHISE AGREEMENTS

Let me address one final provision of the discussion draft. There is some confusion

about whether retailers are not voluntarily installing E–85 because they are prohibited from doing so by their franchise agreements. Neither NACS nor SIGMA have

heard from any of our members complaining that their suppliers were preventing

them from installing E–85 dispensers. Rather, we believe this is a red herring being

used to cover the fact that consumer demand for the product is not strong to make

such investment a viable option for most retailers.

Regardless, neither NACS nor SIGMA are opposed to Congress enacting legislation that will clarify a retailer’s right to convert their own equipment for the sale

of E–85. The proposal in this discussion draft, however, does require some modification to ensure that only the entity which owns the fueling equipment, and assumes

the liability for that equipment and the land on which it sits, shall be empowered

to make the decision to convert and install an E–85 compatible system.

There are instances where the operator of a retail outlet does not own the land

or equipment which it operates. Rather, that individual may lease the land and

equipment from his franchisor, which could be a refiner but is more likely an independent wholesale distributor. In these circumstances, the individual operator who

does not own the equipment should not be permitted to make conversion decisions

about that equipment. Converting existing equipment, much less installing a new

storage and piping system, has significant potential liability implications for the

owner of the real estate. I submit that none of you would permit another the unilateral right to create this kind of long-term liability for you. It is simply not fair. It

is simply not right. We encourage this Committee to amend the proposed language

to reflect this reality.

NACS and SIGMA are not antagonistic to the expanded market availability of alternative and renewable fuels, provided our customers want to buy them. Expanding the mandate for these fuels as provided in this proposal can be dramatically improved by requiring the executive branch to find that sufficient supplies and distribution infrastructure exist to support the specific increase. Absent such a finding,

a pending increase should be suspended. This will protect consumers from market

disruptions associated with insufficient supplies.

The effort to eliminate any potential for a supplier to prevent an independent retailer from installing E–85 infrastructure must not endanger the legitimate interests of the owner of the land or the equipment, even if that be the supplier, to make

decisions concerning the conversion or installation of such equipment.

While we appreciate the efforts made by the Committee to address itemized retailer concerns regarding an E–85 retail mandate, NACS and SIGMA consider such

proposals completely unnecessary. NACS and SIGMA will oppose legislation like the

discussion draft unless and until it offers the petroleum marketplace a chance to

work in the best interest of consumers.

Finally, NACS and SIGMA members are extremely sensitive to our customers’

concerns about motor fuel prices. Our businesses compete with each other on the

basis of pennies per gallon as we seek to attract the increasingly price conscious

consumer. Consequently, we become very concerned regarding any proposals that

could potentially affect supplies or distributing efficiencies or otherwise put upward

pressure on prices. Therefore, we urge this Committee to consider carefully the supply and price implications of policies under your jurisdiction. Our customers, your

constituents, deserve no less.

Thank you again for the opportunity to share our thoughts regarding the discussion draft pending before the Committee.

Mr. BOUCHER. Thank you very much, Ms. Hubbard. Mr. DeCicco.

STATEMENT OF JOHN DECICCO, SENIOR AUTOMOTIVE

FELLOW, ENVIRONMENTAL DEFENSE, WASHINGTON, DC

Mr. DECICCO. Thank you, both to the chairman and ranking

member for the opportunity to testify today. On behalf of Environmental Defense and our 500,000 members, I want to express appre-
54

ciation for the thoughtful process through which this subcommittee

has approached the issues of energy and climate.

We appreciate your statements, Mr. Chairman, but the legislation before you is about energy security and not a solution to the

climate challenge. It is critically important for the public to understand that this bill cannot substitute for a cap on greenhouse gas

emissions. I think we agree that the efforts to enhance energy security should not interfere with that goal or come at the expense of

climate protection. Unfortunately, this discussion draft contains

provisions specific to climate change and in very troubling ways

puts climate at risk. That is why Environmental Defense must unfortunately, but vigorously, oppose this draft in its current form.

Most damaging are the draft’s provisions that nullify California,

and now 11 other States’ actions to address greenhouse gas emissions for cars. Also troubling is its evisceration of EPA’s authority

to do the same. It is simply unacceptable to undermine State leadership to combat global warming.

That being said, we appreciate your efforts to look for new ways

to address transportation sector greenhouse gas emissions. A low

carbon fuel standard and a requirement that automakers report

their product’s lifetime emissions are useful building blocks for a

policy that could ultimately drive deep emissions cuts. But the

draft falls short in limiting emissions to the levels that leading

U.S. businesses have called for and that scientists say are necessary to avoid catastrophic climate change. The U.S. Climate Action Partnership recommends a specific path of emissions reductions for the United States. Environmental Defense supports the

stricter end of the U.S. CAP range.

The graph I displayed compares what the discussion draft might

achieve, which is the blue curve, against climate-protective auto

emission levels proportional to the economy-wide cap recommended

by U.S. CAP. Those are the green lines. It is clear that this draft

does not go nearly far enough, and that brings me to another concern. Such weak targets risk creating expectations among other industries that they too can get by with little need to limit emissions.

Alternatively, other industries might come to fear that they would

be unfairly saddled with a disproportionate burden. Either way,

the politics of building consensus for a truly comprehensive climate

policy will be that much more challenging.

Mr. Chairman, as you and Mr. Dingell have said, all industries

and sectors will need to chip in their fair share. We can’t let some

parties leave the table early and stick everyone else with the bill.

To sum up, Environmental Defense believes the current draft

would make it much more difficult to mitigate the dangers of climate change. We oppose it based on four concerns. It destroys California’s ability to lead other States in the Nation in climate protection through its path-breaking greenhouse gas standards for cars.

It restricts the Environmental Protection Agency’s authority to regulate automotive greenhouse gases as air pollutants under the

Clean Air Act as recently clarified by the U.S. Supreme Court in

Massachusetts v. EPA. It sets stringency levels for fuels and vehicle

regulation that fall far short of what is needed to ensure an appropriate sector contribution to climate protection. And fourth, it may
55

undermine the development of climate legislation that is truly comprehensive and effective.

We are happy to do whatever we can, Mr. Chairman, to help you

improve this bill as it moves forward. In the meantime, Environmental Defense will continue to emphasize that the most effective

solution to both energy security and climate change is a comprehensive carbon cap, one that cuts emissions as much as the scientific community tells us they must be cut, allows permit trading

to keep costs low and to spur innovation. We look forward to working with you as you bring such a bill to the floor in October as you

have indicated that you intend to do.

Thank you for the chance to share our views.

[The prepared statement of Mr. DeCicco follows:]
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Mr. BOUCHER. Thank you, Mr. DeCicco.

Mr. Reuther.

STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR,

INTERNATIONAL UNION OF UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF

AMERICA, WASHINGTON, DC

Mr. REUTHER. Thank you, Mr. Chairman. My name is Alan Reuther. I am the legislative director for the UAW. We appreciate the

opportunity to testify before this subcommittee on the discussion

draft.

The UAW strongly supports this draft legislation. We believe it

would achieve significant reductions in oil consumption and greenhouse gas emissions. At the same time, this legislative would help

to protect and expand jobs for American workers. We believe the

draft legislation contains a number of very positive provisions relating to vehicle fuel economy and carbon efficiency. First, it would

amend the CAFE program to mandate that all vehicle manufacturers must meet a 36 MPG standard for passenger cars by 2022 and

a 30 MPG standard for light trucks by 2025. This would represent

a 31 percent improvement in fuel economy for passenger cars and

a 35 percent improvement for light trucks. The UAW supports this

mandate because we believe it is technologically and economically

feasible for the auto manufacturers.

Second, the UAW supports the provision that would authorize

DOT to adopt an attribute-based CAFE system for passenger cars.

This would enable DOT to reform the CAFE structure for passenger cars so it does not discriminate against particular manufacturers based on their product mix.

Third, the UAW is particularly pleased the draft legislation

maintains the existing domestic-foreign fleet distinction for passenger cars and also requires companies to meet an anti-backsliding requirement. This critically important provision will provide

a strong incentive for companies to continue small car production

in the United States, thereby protecting the jobs of 67,000 American workers who assemble or make parts for these vehicles.

Fourth, the UAW applauds the provision that would require DOT

to publish the new CAFE standards both in a miles-per-gallon format and a grams-of-CO2-per mile format as well as the provision

requiring auto manufacturers to report the projected lifetime carbon emissions of their vehicles. We hope these two provisions will

facilitate the integration of the CAFE program with an economywide cap and trade program that may ultimately be developed to

reduce greenhouse gas emissions.

Fifth, the UAW supports the provision in the draft legislation reinforcing the longstanding policy that DOT has the exclusive authority to regulate the fuel economy and carbon efficiency of motor

vehicles through the CAFE program. In order for vehicle manufacturers to be able to retool factories and redesign vehicles to meet

the challenging new fuel economy requirements, it is essential that

they have the security of knowing that they will only have to comply with a single national standard and not be pulled in a variety

of directions by a multitude of State standards. We recognize that

some groups may advocate for much more stringent fuel economy
77

standards or for provisions giving States the ability to establish

such standards. However, the UAW is deeply concerned that extreme fuel economy standards such as the CAFE proposal in H.R.

1506 or the vehicle CO2 standard approved by California are not

economically feasible and could seriously threaten the jobs and

benefits of active and retired workers in the auto industry.

The UAW believes the goals of reducing oil consumption and

greenhouse gas emissions can best be achieved by addressing the

fuels that go into vehicles as well as the efficiency of the vehicles

themselves. Thus, we support the provision in the draft legislation

that would require vehicle manufacturers to make certain percentages of their fleets flex fuel capable by specified dates. The technology needed to do this is readily available and relatively inexpensive. All companies easily should be able to meet this mandate. The

UAW also supports the provisions establishing an alternative-fuel

standard and a low-carbon-fuel standard. These provisions will assure that we continue to expand the amount of alternative fuels

that are produced in our Nation while at the same time requiring

movement towards fuels that produce lower carbon emissions. The

UAW applauds the provision requiring DOE to mandate the installation of alternative-fuel dispensers when the market penetration

of flex fuel vehicles reaches a certain level. Expanding the distribution network for alternative fuels is critically important if we are

to make substantial progress in increasing the actual use of alternative fuels by consumers.

To meet the challenge of higher fuel economy standards, vehicle

manufacturers will have to rapidly accelerate the introduction of

advanced technology vehicles including hybrids and clean diesels.

We therefore strongly support the provision in the discussion draft

that would create a grant program to encourage domestic production of these advanced technology vehicles and their key components. This will help to ensure that these vehicles of the future and

their key components are built in this country, thereby creating

jobs for tens of thousands of American workers. As this draft legislation moves forward, we would like to work with the subcommittee

and House leaders to refine and expand these provisions so there

is a reliable and substantial source of funds provided to support

this critically important program.

In conclusion, we appreciate the opportunity to testify on the discussion draft and look forward to working with the subcommittee

as we move forward in considering it.

[The prepared statement of Mr. Reuther follows:]
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Mr. BOUCHER. Thank you very much, Mr. Reuther.

Mr. McCurdy.

STATEMENT OF HON. DAVE MCCURDY, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, ALLIANCE OF AUTOMOBILE MANUFACTURERS, WASHINGTON, DC

Mr. MCCURDY. Thank you, Mr. Chairman. I want to commend

the chairman and Speaker Hastert for the spirit in which you are

working together to develop this landmark legislation. Having been

on that side of the table, I can assure you I understand it is no

small task.

The Alliance joins all Americans and the Congress in considering

the matters of increasing vehicle fuel economy and reducing carbon

dioxide emissions as among the most important issues our country

faces. A certain chairman that was alluded to earlier in the hearing

has recently said: ‘‘Either work with me and I will do everything

I can to get you a bill that you probably won’t like but with which

you can live, and if you don’t, you will have a bill that you won’t

like and you can’t live with.’’ Well, Chairman Boucher, we are here

to work with you, and Chairman Dingell is right: this discussion

draft is a bill that the industry as a whole really doesn’t like but

recognizes it is probably going to be forced to live with it, and as

Mr. Melancon so aptly said, a good deal is when both parties either

walk away happy or probably not so happy, and a bad deal is when

one seems overjoyed. I can assure that we will be nursing a very

bruised arm when we walk through this process.

In simple terms, this proposal presents the largest technology

challenge automakers have ever encountered. Although we remain

committed to CAFE reform and support the increases in CAFE, we

do so with a great deal of pain and angst. You must also understand that these changes would require unprecedented levels of financial resources and engineering commitment, and in the end we

do not know the answer to the most fundamental question in all

of this: Will consumers respond? Our experience has taught us that

we cannot turn a blind eye to the factors that must be considered

if we are to produce automobiles that consume less fuel but still

appeal to the American consumers, who demand a wide variety of

features.

The Alliance supports preserving the car and light truck distinction, and I think everyone on the panel currently understands that

distinction well. While Americans value fuel economy, their buying

habits have shown that they also want room for passengers and

cargo. They want performance. They want towing ability and much

more. In fact, in 2006, for the fifth straight year, light trucks including pickups, minivans, vans and SUVs outsold passenger cars.

More than 53 percent of last year’s new vehicle purchases were

light trucks. Mr. Hall, in Texas that is 60 percent of the new registrations. Mr. Melancon, in Louisiana it is 63 percent of new registrations. In Utah, Mr. Matheson, who was here earlier, it was 59

percent. Even in Massachusetts and California, it is 50/50, light

trucks versus passenger cars. The properties in light trucks that

business owners, trades people, farmers, families, sports enthusiasts and others value are the very properties that differentiate
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them from cars. These qualities make it impossible to put all vehicles in a single category.

Alliance members also recognize the importance of establishing

a comprehensive and nationwide energy policy. It needs to be done

on the Federal level. A patchwork of conflicting State fuel economy

and carbon dioxide mandates would surely create marketplace

chaos for our consumers and manufacturers who would have to sort

problems, products and parts based on complex systems of inconsistent standards and regulations. A single comprehensive Federal

policy must preempt State laws because this is a national issue.

We support the National Highway Traffic Safety Administration

being granted authority to reform passenger car standards using

an attribute-based approach. This approach is essential to preserving the diverse range of vehicles currently on the market.

The Alliance also supports legislation funding the advancement

of promising technologies. More research and development is needed for plug-in hybrids, fuel cells and hydrogen internal combustion

engines to truly provide us with their full potential. We also value

efforts to improve the support technologies we have already

brought to the market such as alternative-fuel automobiles. Legislation should increase alternative-fuel availability to keep pace

with the alternative-fuel autos we are working hard to build and

sell. Likewise, we support increasing consumer education and making the public fully aware of the ever-increasing amount of alternative-fuel options. We have increased the number of alternativefuel automobile models 500 percent in just the past 7 years. Just

this week we were pleased to announce that 2007’s first quarter alternative-fuel automobile sales were our best ever, a 27 percent increase over the same period last year.

Automakers understand that what our Nation truly requires to

address our energy needs is wider focus. Carbon reduction depends

on three intertwined factors: consumers, fuels and vehicle technology. Focusing only on one component while ignoring the others

will not move our Nation closer to its energy goals. Now, having

said that, the Alliance is concerned with the flexible-fuel mandates

under consideration in section 302 of the bill. The ones under discussion today include an unachievable target and a time frame that

is just too aggressive. Furthermore, the legislation allows no alternatives should the E–85 fuel fail to make it to the market on time

or not be found in as many locations as needed. The Alliance must

also express concern over the doubling of the CAFE penalty. This

proposal discriminates against smaller manufacturers and those

with limited product lines. Ultimately, this provision will cause

consumers to pay more for certain vehicles while similar and possibly less efficient vehicles will have not had the same cost hike

simply because the manufacturers of these vehicles produce a

wider product range.

Finally, Mr. Chairman, a complex change of massive technical

changes that must be repeatedly tested and fine-tuned is required

to adjust a car’s fuel economy by just one tenth of a mile.

Mr. BOUCHER. Mr. McCurdy, we are running a little bit over on

time, so if you could conclude, that would be great.

Mr. MCCURDY. I will conclude with this, Mr. Chairman. The targets we are talking about today would require that we do that 900
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fold. The proposed standards of 36 miles per gallon for passenger

cars and 30 for trucks represent a 30 or 31 percent increase and

35 percent increase in fuel efficiency. That is an unprecedented reformulation that will again create the largest challenge this industry has ever seen. Mr. Chairman, it is a big challenge. We do have

angst and concern whether the American consumers will choose to

buy these products so we will continue to work with the subcommittee and the full committee to try to move the bill forward.

[The prepared statement of Mr. McCurdy follows:]

STATEMENT OF HON. DAVE MCCURDY

Mr. Chairman, good morning. 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 comment on the draft legislation before the Committee. Alliance

members share the interests and concerns of our customers, the Congress and the

American public about increasing vehicle fuel economy and reducing carbon dioxide

emissions.

At a March 14, House Energy Subcommittee hearing, CEOs from

DaimlerChrysler, Ford Motor Company, General Motors and Toyota all committed

to working with Congress to find ways to address these issues. That is our focus

today. Let me summarize my main points:

• First, the Alliance of Automobile Manufacturers supports several of the provisions in the proposed legislation, and we want to work with policymakers to create

a bill that is effective, achievable and inclusive.

• That said, we urge the Congress to recognize that automakers are investing significantly in advanced technology vehicles powered by electricity, biofuels, clean diesel, hydrogen and compressed natural gas.

• While many fuel-efficient and advanced technologies are on sale today, more

technology is being developed for future introduction.

• Promising technologies, such as plug-in hybrids and hydrogen-powered autos,

need significant research and development before they will be commercially available on an even larger scale.

• Through the Corporate Average Fuel Economy (CAFE) program, the light duty

vehicle segment has been carbon-constrained for more than 30 years. We recognize

that fuel economy requirements will continue to increase for our products, but these

regulations need to recognize the competitive conditions of the automotive market,

the vehicle needs of American consumers, and the resource and economic challenges

involved in achieving future fuel economy levels.

INCREASING FUEL EFFICIENCY, DECREASING CARBON DIOXIDE

Auto engineers are working hard to include a diverse range of highly fuel-efficient

technologies in new vehicles, because in the short term, this is the only feasible way

to reduce the amount of carbon-based fuel used by automobiles. At the same time,

it is equally important to start now to reduce the carbon intensity of our fuel infrastructure.

I must stress one key point here:

Alliance members support the goal of improving fuel economy 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 high priority.

Automakers pursue the goal of increasing fuel economy as they develop vehicles

that meet the various needs of American families in every segment. But while consumers value fuel economy, they also want many other attributes in today’s vehicles, such as safety, passenger and cargo room, performance, and towing and hauling capacity. In 2006, for the fifth year in a row, light trucks, including pickups,

minivans, vans and SUVs, outsold passenger cars. More than 53 percent of all new

vehicles purchased last year were light trucks. Our challenge is to develop automobiles that combine all the vehicle attributes demanded by Americans’ with improved fuel efficiency—and at an affordable price.
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Automakers are competing to bring these vehicles to market as soon as the technology is feasible, affordable and meets consumer expectations. We have made the

investments, and we are beginning to see results.

Alliance members are working now to offer more alternative fuel and advanced

technology autos, including vehicles that run on hybrid-electric technology, clean

diesel, and alternative fuels like E–85 ethanol and hydrogen, because these autos

will help our country address the growing concerns about U.S. gasoline consumption

and oil imports, as well as carbon dioxide emissions.

Just this week, the Alliance reported that sales of alternative fuel autos continue

to grow. According to R.L. Polk & Company, the first quarter of 2007 showed record

sales for alternative fuel autos. In the first three months of this year, more than

430,000 alternative fuel autos were sold nationwide, an increase of more than 27

percent over the same period last year.

Last October, government, auto industry and fuel suppliers partnered to introduce

the ultra-low-sulfur diesel needed for clean diesel engines. Since the year 2000, sales

of light-duty diesel vehicles have almost doubled.

Today, more than 11 million alternative fuel autos that run on hybrid technology

or fuels like clean diesel, ethanol, hydrogen and others are already on the road.

Automakers are offering 60 models of alternative fuel autos on sale today, up from

12 in 2000, and many more models are planned for future production. Guiding Principles

Automakers understand the desire of Congress to reduce carbon dioxide, and we

support that goal. Reducing carbon is dependent on three intertwined factors: consumers, fuels, and vehicle technology. Attempts to address concerns about energy

security and carbon dioxide emissions cannot succeed by focusing only on one component.

There are many provisions in the proposed legislation that treat fuels and autos

as a system. In 1999, EPA finalized its landmark regulations called Tier 2, which

for the first time regulated autos and fuels as a system. Future legislation needs

to consider fuels and autos together.

Today, I will limit my testimony to provisions that affect autos, but I would like

to recite several principles that have guided automakers in responding to this legislative proposal.

A consumer-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. For example, 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 advanced technology autos on sale today and

encourage energy providers to increase availability of alternative fuels and to reduce

the overall carbon intensity of the fuels that power them.

Consideration of effects on competitiveness is needed. Any effective program to reduce carbon dioxide needs to allow for companies to grow and thrive, without imposing provisions that would result in job loss. Sufficient lead time is critical in this

industry, since auto manufacturing requires five years to develop and introduce a

new model, and seven years to make significant changes to powertrains.

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. Therefore, it is crucial that there be Federal pre-emption of State

laws.

PROVISIONS IN THE PROPOSED LEGISLATION

With these principles as a guide, let me address several of the specific provisions

in the proposed legislation.

The Alliance Supports Granting NHTSA Authority to Reform Passenger Car

CAFE Standards.

The Alliance supports providing authority to NHTSA to reform the way it sets

fuel economy requirements for passenger cars. A rulemaking process that maximizes

consumer choice and avoids safety trade-offs, without injuring competition or—any

individual automaker is clearly desirable. Attribute-based approaches, when prop-
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erly 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.

The Alliance supports authorizing NHTSA 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. When reforming light truck 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 PRESERVING THE DISTINCTION BETWEEN CARS AND LIGHT

TRUCKS.

The proposed legislation preserves consumer choice by maintaining the 30-yearold statutory distinction between cars and light trucks. Americans value fuel economy, but they also want passenger and cargo room, performance, towing ability and

more. The fuel economy of light trucks can and should increase, but we need to acknowledge that light trucks and cars need separate fuel economy standards. Existing Federal law rightfully separates cars and light trucks in the CAFE program by

setting different fuel economy standards for each.

THE ALLIANCE SUPPORTS SETTING CAFE AT THE MAXIMUM FEASIBLE LEVEL.

The Energy Policy and Conservation Act directed NHTSA to set national fuel

economy standards at the ‘‘maximum feasible’’ level taking into account key elements such as the need of the U.S. to reduce energy use, as well as technological

feasibility, affordability, safety, emissions controls, consumer choice, disparate impacts on manufacturers and effects on American jobs. This approach balances petroleum conservation needs with technological feasibility, safety, affordability, jobs and

consumer choice.

By directing NHTSA to continue to set annual standards at the maximum feasible

level, this legislation acknowledges that progress may be faster some years than

others. While the draft bill includes targets that must be ultimately achieved, this

approach acknowledges that progress and breakthroughs are not always governed

by the calendar. Fuel economy varies depending on the introduction of models and

technologies, along with consumer purchases. For example, a new model may sell

well in its first few years, but then decline in popularity.

The dual approach of ultimate targets and standard-setting year-by-year allows

NHTSA to make adjustments based on available technologies and manufacturers’

product plans to fine-tune progress toward the legislation’s ultimate fuel economy

targets. The ultimate fuel economy targets, however, remain extremely ambitious

and challenging to our member companies.

THE ALLIANCE SUPPORTS FUNDING THE DEVELOPMENT OF PROMISING

TECHNOLOGIES.

While fuel-efficient technologies are on sale today, more technology is being developed for future introduction. Thousands of automotive engineers are working on innovative technologies every day, but many emerging technologies, such as plug-in

hybrids, fuel cells and hydrogen internal combustion engines, still need significant

research and development before they will be commercially ready. Moreover, the hydrogen fueling infrastructure needs to be developed.

Setting aside funds collected from the automakers under the CAFE program to

speed up commercialization and production of advanced technology vehicles and vehicle components in the U.S. makes sense. Added to the billions of dollars automakers are already investing in research and development each year, this money

can assist in getting more fuel efficient vehicles to market less expensively and faster. Similarly, the advanced battery loan guarantee program in Section 305 will help

make leap-ahead technology a reality.
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1 Tires and Passenger Vehicle Fuel Economy: Informing Consumers, Improving Performance,

Transportation Research Board Special Report 286, National Academy of Sciences, Washington,

DC, 2006.

THE ALLIANCE SUPPORTS IMPROVING THE AVAILABILITY OF ALTERNATIVE FUELS TO

KEEP PACE WITH THE AVAILABILITY OF ALTERNATIVE FUEL AUTOS.

Autos and the alternative fuels to power them must be developed in harmony.

Automakers are putting millions of alternative fuel autos on U.S. roads, but many

consumers are still searching for the alternative fuels to power them. Today, there

are 6 million E85 ethanol-capable vehicles on our roads. In the first quarter of 2007,

sales of E85 autos were up 40 percent over the same period last year. But only

about 1,200 of the 170,000 gas stations in the U.S. offer E85 and even fewer offer

alternative fuels like hydrogen and biodiesel. As a general matter, the Alliance does

not support mandates, but we do support incentives that can help speed up the introduction of biofuels and other fuels to the marketplace.

THE ALLIANCE SUPPORTS INCREASING CONSUMER INFORMATION.

This proposed legislation would seek to raise consumer awareness in three important areas.

First, a public campaign would be undertaken to inform consumers of the availability of both Flexible Fuel Vehicles and where alternative fuels can be purchased.

Automakers have been advertising their vehicles, and we support groups like the

National Ethanol Vehicle Coalition and the Clean Diesel Fuel Alliance that provides

a consumer Web site on fuels availability at www.E85.com and www.clean-diesel.org.

Second, a Fuel Conservation Education Program would be created to ensure consumers are given more information on how to conserve fuel through proper use and

maintenance of their vehicles. The Alliance has already initiated this effort, working

with EPA, through the Web site, www.MileageWillVary.com. On this site, consumers can test their knowledge of fuel savings practices. We have been advertising the

Web site on consumer sites like www.Edmunds.com, and certainly we support further education.

Third, this legislation proposes to educate consumers on replacement tire fuel efficiency. The Alliance currently educates the public about the influence that tires

have on vehicle fuel economy through its Web site, www.CheckMyTires.com. According to the National Academy of Sciences, a 10 percent reduction in average rolling

resistance, if achieved for the population of passenger vehicles using replacement

tires, promises a 1 to 2 percent increase in the fuel economy of these vehicles. About

80 percent of passenger cars and light trucks are equipped with replacement tires.

Assuming that the number of miles traveled does not change, a 1 to 2 percent increase in the fuel economy of these vehicles would save about 1 billion to 2 billion

gallons of fuel per year. This fuel savings is equivalent to the fuel saved by taking

2 million to 4 million cars and light trucks off the road 1

We support the tire manufacturers’ providing additional information about the

contribution of tires to vehicle fuel consumption, either at the point of sale or

through other means like advertising.

THE ALLIANCE SUPPORTS THE FOCUS ON CARBON EMISSIONS.

For more than 30 years, corporate average fuel economy has been focused on reducing oil consumption, but CAFE alone cannot address the broader problem of climate change. To affect climate change, the Congress must address carbon dioxide

emissions through a comprehensive program that touches fuel producers, vehicle

manufacturers and consumers.

This proposed legislation expands the policy focus to carbon dioxide (CO2) emissions in several ways. For example, the Department of Transportation would be required to issue fuel economy standards in both ‘‘grams per mile of CO2’’ and miles

per gallon. In addition, EPA would be directed to develop a Low Carbon Fuels

Standard.

These are good initial efforts that focus on carbon dioxide and climate change

while maintaining the options to develop a broader climate change policy.

PROVISIONS FOR FURTHER DISCUSSION

The CAFE Targets Are Very Aggressive and Will Be Difficult for Manufacturers

to Achieve.
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2 Effectiveness and Impact of Corporate Average Fuel Economy (CAFE) Standards, Transportation Research Board, National Academy of Sciences, Washington, DC, 2002. believes that the

identification of trade-offs should reside with elected officials, the consideration of these tradeoffs in the selection of fuel economy targets and levels is appropriate for the expert Federal Government agency to set.

Under the proposed legislation, car CAFE standards would increase by more than

30 percent while light truck standards would increase by 35 percent. The legislation’s proposed standards of 36 mpg for passenger cars by 2022 and 30 mpg for light

trucks by 2025 represent significant increases over the current standards. Indeed,

the proposed increases in fuel economy requirements would present major technology challenges for automakers, requiring tremendous investments over a sustained period of time. An automaker can spend well over $1 billion to develop a

brand new engine or transmission or a new vehicle that is not based on an existing

platform. If passed into law, this legislation would result in the largest increase in

CAFE standards to cars and light trucks. Automakers traditionally have supported

standard-setting by NHTSA, the expert agency with long experience with CAFE.

The NHTSA notice and comment rulemaking process is based on thorough development of a factual record regarding technical feasibility, affordability, effects on safety or jobs, and environmental benefits, that is built with input from all interested

parties. While the 2002 NAS Committee on CAFE 2

Automakers are deeply committed to working with Congress and NHTSA to develop standards that achieve the fuel savings and CO2 reductions desired, while at

the same time maintaining jobs, a sound economy and a vibrant automotive industry.

In May, Standard and Poor’s issued a report stating that stringent fuel economy

and vehicle emissions legislation would ‘‘pose a real risk to global automakers’’ financial performance, particularly as some are already under pressure from razorthin margins.’’

As a result, overly aggressive fuel economy standards could undermine the economic health and stability of automakers, and they could raise costs to consumers

and result in restrictions on certain models.

The Flexible Fuel Mandates Offer No Flexibility if Circumstances Change.

As a general matter, the Alliance does not support technology mandates, and we

are extremely concerned about the technology mandate for flex fuel vehicles proposed in the discussion draft. This mandate proposes targets that may be

unachievable, as well as a time frame that is very aggressive, and it allows no alternatives should E85 fail to make it to the market in the anticipated volumes and

needed locations. Company product plans for 2012 are firming-up now and legislating a 45 percent mandate by that date would impose an enormous resource burden

on some companies. This mandate would compete with engineering resources needed to improve vehicle fuel economy. Moreover, 2012 provides insufficient lead time

for small-to intermediate-size automakers that are not already producing those

types of vehicles.

Doubling the CAFE Penalty Unfairly Hurts Small-Line Manufacturers.

The Alliance does not support the doubling of the CAFE penalty. This proposal

discriminates against smaller manufacturers and those with limited product lines.

Ultimately, it will cause consumers to pay more for certain vehicles, while similar,

possibly less efficient, vehicles from manufacturers with a wider product range will

not carry the additional costs.

Extending Flex Fuel Credits Will Incentivize Production and Reduce the Cost of

Compliance.

The Alliance does support two provisions that are not currently in the proposed

legislation. First, the Alliance supports extending CAFE credits for flexible fuel vehicles. An incentive-based approach such as this will continue the growth in numbers of Flexible Fuel Vehicles without harming manufacturers. Second, the Alliance

supports extending the carry-forward, carry-back credits to five years from three

years for additional flexibility in adjusting to constantly varying market conditions.

There are also many provisions in the proposed legislation that require further

review and analysis, and we want to continue constructive discussions with policymakers to move this bill forward.

Again, thank you for the opportunity to comment on this legislation. We look forward to working with you and all members of the House of Representatives as this

legislation moves forward. We want to ensure that the important priorities of climate change and energy security are addressed in a meaningful way without disproportionately harming consumers or an industry that provides jobs to millions of

Americans.
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I welcome any questions you may have regarding the Alliance’s positions on improving fuel economy and reducing carbon dioxide.
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Mr. BOUCHER. Thank you very much, Mr. McCurdy, and the

Chair thanks all of the witnesses for your extremely helpful testimony here today.

Mr. Lampert, let me begin my questioning with you. And first,

I want to compliment something that you have done. I was just

handed a compelling graph. This is about my congressional district.

I represent a very rural area, 27 counties and cities, literally hundreds of very small municipalities, and you have prepared for my

district, and I understand for the districts of every member of this

subcommittee on both sides of the aisle, a similar graph. And what

this graph shows in the case of my congressional district is that we

have, in our area, 10,583 flexible fueled vehicles, by your estimate,

and in my district, across these 27 counties and cities, and hundreds of small municipalities, we have zero service stations with a

flexible fuel pump.

Mr. LAMPERT. That is correct.

Mr. BOUCHER. So, not a single E–85 pump in 27 counties or cities, that potentially could be servicing, even today, more than

10,000 flexible fuel vehicles. Do I read that correctly?

Mr. LAMPERT. That is exactly right, Mr. Chairman. What we

tried to do here is designate by ZIP Code the concentration of flexible fuel vehicles, as is registered and reported to the automakers,

and that is a matter of public record.

Mr. BOUCHER. Well, it is certainly a compelling chart. It is startling in what it demonstrates. It says to me that we have got to

do something to stimulate the introduction of flexible fuel pumps

at service stations, and I want to thank you for preparing this.

Let me ask if you would make available to the committee the

chart you have prepared for all of the members of the subcommittee. I would personally like to make sure that each of them gets

the chart that is designed for their particular district.

Mr. LAMPERT. That has been made available to staff already, Mr.

Chairman.

Mr. BOUCHER. Thank you. Thank you very much, Mr. Lampert.

Mr. LAMPERT. You are very welcome.

Mr. BOUCHER. For Mr. Reuther and Mr. McCurdy, I want to say

first, thank you for your support of the discussion draft, which you

have announced in your testimony here today.

It is designed, as I think I indicated in my statement, and Chairman Dingell has indicated in his other statements, to be a down

payment on the later action that this committee will take in October, and at that time, in the September-October timeframe, we intend to construct a mandatory greenhouse gas control program.

And what we are doing in this draft is a bridge to that, the first

step in that direction.

I appreciate the support you have expressed for the discussion

draft. My question to both of you is should our discussion draft, in

major part, be adopted into law? Will you continue to work with

us in fashioning a mandatory greenhouse gas control measure that

we can present to the House in October? Mr. McCurdy.

Mr. MCCURDY. Mr. Chairman, on March 14 in this very room,

four CEOs from the Alliance of Automobile Manufacturers said yes,

they would continue to work with the subcommittee. We under-
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stand this is a bridge. It is a difficult bridge, but it is a bridge, and

we will continue to try to work to reach that ultimate goal.

Mr. BOUCHER. Thank you very much, Mr. McCurdy. Mr. Reuther.

Mr. REUTHER. At that same hearing, the president of the UAW

indicated that we strongly support an economy-wide cap and trade

program, and we look forward very much to working with you to

help develop that.

Mr. BOUCHER. Thank you very much, Mr. Reuther.

Mr. Drevna, in your testimony, you indicated that there might

have been some miscalculation in the numbers that you used in the

testimony you provided regarding the percentage reductions that

would be required under our Low Carbon Fuel Standard. You have

acknowledged that perhaps that was in error. I also think that

your numbers are.

I am going to ask Mr. DeCicco, who I think has some information

with regard to what the actual effect of that Low Carbon Fuel

Standard to be is, and would you, Mr. DeCicco, care to respond?

What Mr. Drevna said in his written testimony is that if our Low

Carbon Fuel Standard were adopted, that it would require a 26

percent reduction in the carbon content of automotive fuels the

first year, and that would lead eventually to a 38 percent reduction

by 2020, and that if those numbers are accurate, that we would actually have a far more stringent Low Carbon Fuel Standard than

what California has proposed, which is a 10 percent reduction in

the carbon content by 2020.

So, Mr. DeCicco, how do you interpret our Low Carbon Fuel

Standard, in terms of the percentage reductions that in fact it

would require?

Mr. DECICCO. Mr. Chairman, we do interpret it differently than

Mr. Drevna’s calculations. In our written submission, we have a

table, table 3 on page 12, in which we provide preliminary estimates of the overall covered motor fuel pool carbon intensity reduction implied by the discussion draft. Our estimate, and we emphasize that these are preliminary, we have not done a full calculation

in the short term, but we estimate that by 2020, the implied reduction is 3.3 percent, and again, as you pointed out, that is actually

much less, a third of what has been proposed in California’s Low

Carbon Fuel Standard.

Mr. BOUCHER. Thank you very much, Mr. DeCicco. Mr. Drevna,

would you concede that perhaps his calculations are accurate?

Mr. DREVNA. Mr. Chairman, based upon how we read the draft,

and I think there is a lot of confusion about as to exactly what is

and what isn’t covered under the calculations, and to be quite candid, in very recent conversations we had with staff, they tried to

explain to us what the intent was, our numbers are based upon

what we thought the draft had said and does say, so I think that

is the confusion with the draft that we want to work with staff and

you on, to make sure we are at least speaking from the same hymnal here.

Mr. BOUCHER. Well, thank you, Mr. Drevna, and we will all endeavor to come to a common understanding about precisely what

the effect is. I personally think Mr. DeCicco has it right.

My time has expired. The gentleman from Illinois, Mr. Hastert,

for 5 minutes.
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Mr. HASTERT. I thank the chairman. Just to follow up on the

comment. I have some questions, too, about what goes into these

things. I come from a stretch of about 120 miles that is all cornfields and beanfields, it starts on the very western edge of the Chicago suburbs, and goes all the way to the Mississippi River. Those

fields are going to be producing soybeans and corn, regardless of

those, if it is going to be soy diesel or if it is going to be ethanol.

And so, if you are going to start to add in what the cost of corn

is, and the fuels that go to produce corn, and the dry corn, and

those things, and add them into the cost of fuel, I don’t know if you

are also going to add that into the cost of bacon when it gets to

the market. Because there are two ways that that corn can go. It

can go to be making fuels that reduce our emissions, or we could

be making bacon. So, there are two cost dispersions out there, and

I am not sure how we add all these things in.

That being said, Mr. Lampert, I appreciate that map, because it

does show my district, that has got the I–80 corridor there, with

most of those stations, because there is a lot of traffic down there,

and actually, I did a little calculation. I have about 7,200 square

miles, and if you take out the I–80 stations that are right on the

edge of my district, I have only got seven stations in there, and I

bought an E–85 truck last year. That was a good thing to do; a

kind of symbolism of what we are trying to do. The trouble is, I

have to drive 25 miles to fill it up. If I have to drive 25 miles to

find a gas station to fill it up, and then 25 miles back home, you

kind of shoot all the economy and savings that are already there.

So, contrary to what Ms. Hubbard said, we need to be able to

make sure that those pumps are available to people, because I am

sure we have, in my district, almost 24,000 flex fuel vehicles with

approximately seven stations, if you take out the I–80 stations. It

just doesn’t calculate.

But one of the things that we have to think about is what really

causes the problems that prohibit E–85 availability, and one of the

things that really, when you talk about all the new fuels that may

come along stream, whether it be cellulosic, or ethanol, or soy diesel, and when you talk about the coal to liquid, what are the mix

of low emission fuels with the traditional old petroleum fuels that

we have to find? What is the ideal out there where you get the

maximum fuel efficiency and the least emissions. I am not sure

that we have found that number yet. I am not sure if the true

number is E–85 or E–45 or E–50 or E–28. I don’t know that yet.

We are going to have to do, probably ought to do a couple studies,

and I think maybe the private sector might be able, best thing to

do that may be the Government. But I think that is something you

need to think about.

But in your mind, you have been very helpful in trying to bring

along and find ways to implement E–85 distributors. What has

been one of the biggest prohibitions that you have found?

Mr. LAMPERT. Well, the continued prohibition that we see of placing E–85 under a canopy, testimony has been made here that if the

owner of a station or a vendor did not own the facility, there may

be some liability issues. I clearly understand that. I think to your

question, if I would own a station, and I was a branded operator,

in many cases, we could not put E–85 under the canopy. I have a
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recent statement from ConocoPhillips where they are now allowing

that in four States in the country. So, apparently, 46 States in the

Nation, ConocoPhillips does not allow alternative fuel under the

canopy.

That has certainly been an issue. We have, today, Mr. Speaker,

about one gas station for every 1,500 motor vehicles in the United

States. We have one E–85 station for every 5,000 flexible fuel vehicles. So, clearly, we have a long way to go. But this is a very infant

industry. E–85 has only been around for 12, 15 years, where obviously, the gasoline business is 110 years old. So, we have made

progress, but certainly have a long way to go.

Mr. HASTERT. I have just a short period of time left, but one of

the things we are trying to do is make sure that the liability for

an E–85 station isn’t any different from the liability of somebody

that is doing 100 percent petroleum. I think that is fair, and that

may expedite the placement of pumps. We have found that the

whole issue of certification has become a slow walk through this

process, and we are seeing, I don’t know how, why that has happened with Underwriters Laboratories, but we need to expedite

that process as well.

And one thing, if the chairman will allow me to say, that I don’t

necessarily think the mandating of pumps and stations is the right

thing to do, until I heard Mrs. Hubbard’s testimony, and the stalling tactics of vertically owned retail distributors, I think has certainly been on the record, and maybe we have to mandate that

part. I heard her testimony, and I think maybe she has tilted me

over the other way, a tipping point, I guess is the term that we

have today.

So, I appreciate your testimony, and I think we have a lot of

things that we really need to mull over before we get this whole

thing to move. Thank you.

Mr. BOUCHER. Thank you very much, Mr. Hastert. The gentleman from Georgia, Mr. Barrow, is recognized for 8 minutes.

Mr. BARROW. Thank you, Mr. Chairman.

At the outset, this is how I see the problem. As I see the problem, we have got a three legged stool. One leg is the infrastructure

that is going to be tasked with providing us with a clean alternative fuel in the future. The second leg is an industry that is

going to be tasked to provide the infrastructure to deliver that fuel

to the customers. And the other leg of the tool is an industry that

is going to be tasked with providing the fleet that can run on it.

And the problem is both between legs and within legs, because

nobody wants to go first, and nobody can afford to go first, because

anybody is going first, they are going to get whipped. If this whole

industry on one leg is going to be moving forward to be reaching

the goals we want in the future, it is going to be an economic train

wreck for the rest of us, and we are trying to avoid, trying to get

all this moving at the same time. And that is the problem, as I see

it.

Mr. Dinneen, I want to begin with you. Asking, this business

about the supply of the clean fuel, just how in regard to that, that

one of the legs of the stool, OK. Right now, our policy is to require

that a certain percentage of the fuel in this country, a certain percentage of the fuel, have a certain percent of ethanol in it, but not
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requiring all the fuel in the country to have that percentage means

that some areas of the country end up sucking up all the E–10 that

we have got in order to meet environmental standards or constraints imposed as a result of nonattainment in certain areas.

What I want to ask you is, and apparently, the working draft is

going to continue, that is going to build on that model. We are not

going to require all the fuel to have a certain percentage. We are

just going to require a certain percentage of the fuel to have a certain percentage. And the question I want to ask is, can your industry, does it have the capacity to provide a certain minimum percentage of alternative fuels in every gallon of gas sold in the entire

country? Can we produce enough ethanol to have E–10 everywhere

in the country, and still provide enough for those folks who have

got to have it in order to meet their local constraints?

Mr. DINNEEN. Congressman, absolutely we can. Quite frankly,

we are probably going to get there even without legislation. We

have got 12 million gallons of ethanol production, either in service

today or under construction. We have 140 billion gallon gasoline

market. So, we are already getting to the point where we are going

to reach the saturation point, in terms of the existing blend market, which is why this legislation is really important, because it envisions other markets of E–85, flexible fuel vehicles, and it addresses the other two legs of that stool.

But in terms of the production, our own single leg, I would also

suggest to you that while we see the opportunity to get the 10 percent blends, and I think we are going to get there, the flexible fuel

market may not be developing quite as fast as our industry is

building, and you may have a situation very soon, Congressman,

where we have more than enough ethanol to satisfy the 10 percent

market across the country.

Mr. BARROW. Will that market address the other legs of the stool,

because if there was an infrastructure to deliver it, and there was

a fleet to run on it, I think you all’s problem would be solved.

Let me turn to Ms. Hubbard with that thought in mind. Ms.

Hubbard, you and your colleagues, and your associates probably,

the folks I represent depend on you all for a whole lot more than

they get from this Congress, it seems to me from time to time, so

I want to turn to you with a great deal of concern and interest, because you all are going to be tasked with trying to deliver this, and

I share your concerns about not being forced to do something you

can’t do, and meet a demand that ain’t there.

The question I want to ask you is what can we do to help you

all do that? If we get these other two legs of the stool moving, so

you get the supply of the fuel coming, we get the fleet ramping up

more or less, what can we do to help facilitate it? First of all, to

make sure that your entire leg of the stool ain’t out of line with

everybody else, but also to make sure that folks within that leg,

folks who are competing with the, for the business that is done by

you and your colleagues and your competitors, that nobody is put

at a disproportionate disadvantage in trying to get on board.

What can we do to help you all?

Ms. HUBBARD. Obviously, if the demand exists, our industry has

historically been early adopters of new products, and we also are

pretty significant risk-takers. So, as the demand was there, we
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have talked about some of these vehicles within the marketplace,

10,000 or 7,500 vehicles in a widespread area could not be serviced

by one or two locations, and if we don’t have the volume, the rate

of return would take decades.

Mr. BARROW. How do you evaluate the working draft’s approach

to this problem, by trying to make sure that mandates don’t kick

in until you have got a 15 percent penetration in the market? I am

not sure if I can get the 15 percent, but how do you all assess that?

Ms. HUBBARD. Well, the problem even with the 15 percent, if

that was determined to be a justifiable amount, how do you determine, then, who becomes that either sacrificial lamb or the risktaker? How do these retailers pick out in their force to, as kind of

the Field of Dreams, build it and they will come, but it is almost

a nightmare, because we don’t know that they will come, and we

don’t know how do you choose which is the retailer that unfortunately has to take that risk?

Mr. BARROW. Let me turn to the other leg. So, Mr. McCurdy, in

terms of the ability to deliver the fleet of vehicles that can run on

this, provided we get this supply, and we get the infrastructure to

deliver it, I got to tell you, in my part of the country, the folks depend upon their vehicles to work. I just completed an 11 city town

hall tour of the rural areas of my district, and the truck, the pickup

truck is the all-purpose vehicle, and a pickup’s got to have pickup.

We just can’t afford to have little itty-bitty pickup trucks that may

look big on the outside, but they can’t carry any load, or they can’t

pull off from a dead stop. We have got to have pickups that can

really pick up and go.

What is the future? What can you tell us is coming, in terms of

strike a balance, because we don’t want to sacrifice, we want to get

fuel economy, and we want to get low emissions, but we have got

to have working trucks that can do real work. They have got to be,

and we have to have lots of them. So, what is the future on that?

What can you all tell us?

Mr. MCCURDY. Congressman, it is a great question, and you are

exactly right, as far as the consumer demand and need for the

types of vehicles that provide work throughout most of the country.

And there is a chicken and egg problem here, but from a technology standpoint, we already manufacture over 60 different models that are alternative fuel available, or capable.

Mr. BARROW. I think we got the fuel. I think you have got the

fuel part, it is the economy standards that I am concerned about.

Mr. MCCURDY. We have talked some about E–85, we have talked

about other types, but there is also diesel, biodiesel, and other

things that are there, as well. We see in Europe and other places

that diesel provides a lot of torque.

Mr. BARROW. Indeed.

Mr. MCCURDY. And diesels, I think, are quite capable for large

vehicles, including trucks. And flex fuel vehicles can, again, have

internal combustion engines that use other forms of fuel. So, as I

said, there are 10.5 million of those vehicles out there. The challenge is there isn’t the infrastructure, there is not the fuel available, and that is exactly what the committee is attempting to address.
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So, we can produce it, and it really does address one of the major

concerns of this committee, and I think the Congress, and that is

energy dependence, dependence on foreign oil, and there can be

major reduction there. On the flip side of that the movement towards a lower carbon intense society. And you don’t have to have

a complete tradeoff of lower carbon for, as you said, itty-bitty

trucks or small vehicles.

Mr. BARROW. Well, big trucks with itty-bitty engines.

Mr. MCCURDY. That is right. Well, you can have workhorse vehicles with high technology, provided the infrastructure is there and

the fuel is there.

Mr. BARROW. Well, you are right. That describes a chicken and

egg problem of the hearing, I said this is not just a chicken and

egg problem, it is a chicken, chickenfeed, chicken coop, and rooster

problem, not to mention the chickenhawks that are out there.

Thank you, Mr. Chairman. Yield back.

Mr. BOUCHER. Thank you very much, Mr. Barrow. The gentleman from Illinois, Mr. Shimkus, is recognized for 5 minutes.

Mr. SHIMKUS. Thank you, Mr. Chairman. And I appreciate the

map. Of course, my district is doing well, I think. In my district

line, there are about 22 E–85 stations. I think in the ZIP Code

area, you have got 36. I have 30 counties. They say here, in the

ZIP Code calculations, 22,000, so comparable, we have done well.

And, but I know 4 years ago, we had zero. So, this promotion of

flexible fuel retail locations has come about based upon our work

here, and I can guarantee my colleagues that their districts will—

I do not have a single ethanol refinery in my district. So, it is not

because I have one in my district. It is because the public demanded it, and I like Mr. Barrow’s comments, too. I have 30 counties in southern Illinois. We want working trucks. Now, I have a

little itty-bitty truck. I am a politician, I really don’t work, but a

lot of my folks do. I had the bean producers in. We have got the

pork producers. We have got farmers. We have got to have trucks

that work, and they got to be big trucks, and that is part of this

debate.

Mr. DeCicco, has the Earth climate ever, in the history—I am a

creationist—in the world’s history, has it ever been in balance?

Mr. DECICCO. Balance is a question of time, and it has changed

slowly through time. What we are seeing now are changes of an

unprecedented nature, in terms of their danger and rapidity.

Mr. SHIMKUS. Thank you. I would submit to you that the Earth

has never been in balance, and to assume that human beings can

balance the climate is very arrogant on our part. And it is interesting how this has now taken a worldwide application based upon

one election in which I would guess not a single congressional election was won on climate change, and now we are going to affect

manufacturing and the world environment, the whole economy of

our country, and maybe the world, based upon this debate, and it

is very frustrating for those of us who do believe, of the arrogance

of the human being thinking that we will control the world’s climate.

Mr. Dinneen, where is the ethanol industry on a Low Carbon

Fuel Standard?
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Mr. DINNEEN. We generally support the effort to try to use carbon emissions, and we are supportive of the effort in the discussion

draft, that moves us forward.

Mr. SHIMKUS. I am going to get to my question, because my time

is running pretty quick, would this Low Carbon Fuel Standard

limit the use of certain renewable fuels?

Mr. DINNEEN. They may limit it. I think there are a lot of questions about how it would be imposed, because how you do the

lifecycle analysis.

Mr. SHIMKUS. And that is the point I want to highlight to the

chairman is the lifecycle debate on this, is where we need to, I need

to move quicker. What about compliance values in this bill?

Mr. DINNEEN. As I said in my testimony, I think it does undermine the potential petroleum displacement in the act, in the program.

Mr. SHIMKUS. Would it be helpful, on the Alternative Fuel Standard, if we apportion percentages and goals to be achieved by the

different fuel mixes? Would that be helpful? Because the issue is,

we have got the corn ethanol debate, and then we have the cellulosic debate. We are putting great hope in cellulosic. We had

great testimony here in this committee, but that is still further

down the line for permitting and application than the coal-to-liquid

debate, since we know we can do it, all we have to do is start building them. Does a percentage debate help or hurt in this discussion?

Mr. DINNEEN. I haven’t really given a great deal of thought to

it. I would want to analyze it a little bit better. I do think that

there are ways to make the program more effective, though.

Mr. SHIMKUS. And if I could, Mr. McCurdy, let us talk about this

other blend. The reality is, in my district, when we have E–85

pumps, there are folks, they self-mix, when gas prices are high. So

they are doing that experimentation, of course, the retailers have

a little concern on the debate, but I do want to highlight, all these

22 stations, maybe 20 of them now are all independent retailers,

and I have great, Ms. Hubbard, I have great relations with the

folks in my district. They are the ones who took the risk, and they

are getting the benefit now.

But Mr. McCurdy, can you talk about this whole E–15, E–20 debate, and where we should head?

Mr. MCCURDY. Well, that is a good question, and one that we

have had internally as well. E–10, obviously, is the current plan.

E–85 is a standard, that I think the industry supports. There is a

debate about what happens when you start blending in between.

The key here is to have harmonization of those standards, and I

think that the committee is going the right direction to look at

those, too, and at least develop that standard.

Mr. SHIMKUS. Thank you, Mr. Chairman, and I think I have

found one issue that I think the autoworkers might rally in support

behind Congressman Shimkus on this bill, and I look forward to

working with you all.

Mr. BOUCHER. Thank you very much, Mr. Shimkus. The gentleman from Massachusetts, Mr. Markey, is recognized for 5 minutes.

Mr. MARKEY. Thank you, Mr. Chairman, very much.
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We have a huge national security issue that is looming in our

country, and that is this dramatic increase in our dependence upon

imported oil, from 27 percent in 1986 to 60 percent of our oil imported last year, and it is all. And much of it is related to the fact

that, the doubling of our fuel economy standards from 1975 to 1986

reduced dramatically our dependence upon foreign oil, and once

that standard was allowed to erode, we now see this dramatic increase.

The consequences, of course, are that we wind up as Americans

more dependent upon Middle Eastern oil, and we also wind up

funding countries and, unfortunately, radical elements in those

countries, that have come back to haunt our country, in the form

of al-Qaeda. And it is critical for us to reduce dramatically our dependence upon oil from these countries.

Now, in Europe, I just returned from a visit to Europe with the

Speaker, we found that Europe is going to increase, by 2012, their

CAFE standards to 43.4 miles per gallon. That is by 2012. And in

its reflection of this critical issue, not only of climate change, but

of national security interests. They already meet a 35 mile per gallon standard, but they are saying over the next 5 years, they want

to dramatically increase it.

That is my feeling as well. This is a national security crisis for

our country, and we cannot allow this to continue, not with 170,000

young men and women over there, and 1.6 million young men and

women who have already gone over there to the Middle East for

Iraq. The higher that goes is the more likely other young men and

women will have to go over there.

So, Mr. McCurdy, it is very difficult for me to understand why

General Motors, Ford, for example, can meet a standard of 43.4

miles per gallon by 2012. They are already meeting the 35 mile per

gallon standard. Ford and General Motors are the top of the list

of European auto sellers right now. They outsell Toyota and Honda

in Europe. My question is, the laws of physics are the same in the

EU and here in the United States. I am asking that 10 years from

now, in my amendment that I will be making next week, that the

United States meet a standard which the EU meets today.

Can you tell me why that is unreasonable, given one, what is

going on in Europe, and how the American automotive industry is

going to meet that challenge in 2012, and this incredible threat to

our national security, which is represented by the importation of

oil, and how much of that oil money is used to then come back to

haunt our country?

Mr. MCCURDY. I thank my friend of 27 years for asking the question, and since I was in your office recently, and you showed me

that chart, I thought I would bring you a chart as well.

And with regard to the question of autos in Europe, I think it

is actually pretty clear, Mr. Chairman, and when you look at the

difference, the first one as being fuel, in the United States, we are

99.8 percent gasoline fueled or driven automobiles. In Europe, it is

51 percent diesel and 49 percent gasoline. That is a huge difference.

Second, look at the issue of transmissions. Mr. Barrow mentioned

he likes trucks, and Mr. Shimkus said they need trucks that work.

In the United States, 92 percent of our vehicles are automatic. In
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Europe, they are 80 percent stick shift, all right? Let us look at the

real question here. In the United States, 23 percent are 8 cylinders,

47 percent are 6 cylinders, while only 28 percent are 4 cylinders.

In Europe, 84 percent of the vehicles are 4 cylinder engines, and

only 1 percent is an 8 cylinder. So, there is a difference. You are

right, this is a big change, but when you are looking at the size

of the cars, the weight of the cars, the classification, the requirements of the automobiles, they are not as heavily penetrated with

pickups.

Mr. MARKEY. My time is going to run out. All I am saying to you

is you are telling us that it can be done, and that it is being done

already, and let me add this, a Ford Escape hybrid SUV today gets

36 miles per gallon, and a Ford Escape does not with equal safety,

so Ford is already doing it in the United States today. It is being

done in Europe, it is being done in the United States for SUVs or

these light trucks by Ford.

We are saying 10 years from now.

Mr. MCCURDY. You are mixing apples and oranges.

Mr. MARKEY. Not at all.

Mr. MCCURDY. Yes, it can be done, Mr. Markey, if you want

smaller vehicles, if you want 4 cylinder engines, if you want stick

shifts.

Mr. MARKEY. No, I am talking about a Ford Escape SUV hybrid

getting—I am talking a large——

Mr. MCCURDY. The Ford Escape is a great hybrid. They are hybrid technologies, it is an important technology. It is being introduced. I have a hybrid. There are hybrids, and we want to see that

expand, but that is not the only answer to this question.

Mr. MARKEY. But you don’t have to do it the same way, my only

point is that Ford is already doing it with their Ford Escape hybrid. It can be done. It must be done. The national security of our

country remains in jeopardy.

Mr. MCCURDY [continuing]. hybrids, but I think it is last, because of the penetration in Europe is diesel. And why have they

had more diesel penetration? Because there is almost a $4 gasoline

tax, and there is a dollar cheaper tax for diesel.

Mr. MARKEY. They are mandating this 43.4. This is not a gasoline tax increase. It is an absolute mandate.

Mr. MCCURDY. They don’t have a CAFE requirement. They have

not had a CAFE requirement.

Mr. MARKEY. They are going to—they are mandating——

Mr. MCCURDY. We are going to see——

Mr. BOUCHER. Mr. Markey, some of us are actually interested in

hearing the answers to these questions. They are such good questions, but the gentleman’s time is expired, in any event.

The gentleman from Oregon, Mr. Walden, is recognized for 5

minutes.

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

I would like to follow up on this line of questioning. Mr. McCurdy, do the European countries have the same clean air standards

as the United States?

Mr. MCCURDY. No. Actually, on particulates and oxides of nitrogen, NOx, we have a three times more stringent standard on diesel

than there currently is in Europe, and that is the challenge for the
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introduction of diesel and biodiesel, clean diesel in the United

States. Now, that is the bad news. The good news is that we are

making improvements there. There is new technology available.

There is branded technology, such as BlueTech and others, that

will now be capable of meeting the stringent U.S. requirements on

diesel for the NOx.

Mr. WALDEN. And my understanding is, and I was over in Europe last week with Mr. Boucher and Mr. Hastert, and others, that

in Europe, there are 370,000 premature deaths in Europe due to

poor air quality, a lot of which is coming out of the tailpipes of diesel burning, dirty burning cars. In the United States, it is about

20,000 premature deaths due to air quality problems.

So, there is a tradeoff here that has occurred in Europe where

people just die earlier, but they get better gas mileage. Isn’t that

almost what is being said? Now, what we are doing, and what you

are doing, and what we are going to push you to do, as your industry, is give us other fuel alternatives under our clean air standards,

so that we can have both, clean emissions or reduced emissions, or

as minimal emissions as possible, cleanest air as possible, and get

us better gas mileage, or diesel mileage.

And my understanding is there are automakers who are going to

come out with diesels in the next year that will do both. Do you

know what kind of mileage they are going to achieve?

Mr. MCCURDY. Generally, the diesels get 20 to 25, maybe 30 percent more efficiency than the gasoline equivalent.

Mr. WALDEN. So, what will that get them to? Because we are

going to argue here about this notion of trying to increase the fuel

economy standards.

Mr. MCCURDY. Right. Well, Congressman, that is one of the challenges that this committee and the Congress and the public faces.

What is the improvement in gas mileage? It depends on the vehicle, it depends on how the vehicle is used. But there are percentage

improvements. But many of the diesels, again, can be applied to

trucks, to pickups, and you will see significant increases in fuel efficiency.

Mr. WALDEN. All right.

Mr. MCCURDY. And as you said, cleaner.

Mr. WALDEN. I am going to have to cut you off, just because I

only have about 2 minutes here.

Mr. Karsner, is he still—no. Sorry?

Mr. BOUCHER. Next panel.

Mr. WALDEN. Next panel, I should leave these on when I read.

All right. Well, then, I want to go to who can talk to me about ethanol and the renewable fuels? Now, I come from the West, and

when I was out touring around my district, we actually have a couple ethanol plants that are under construction or in the design

phase, and yet, the concern I consistently hear is that we are driving up the cost of corn, which we don’t raise a lot of out on the west

coast. In fact, these ethanol plants are going to have to truck it in,

hopefully, from Mr. Hastert’s district. That is the only place I

would really like to see it come from. That is important to his economy and mine.

But I get cattle ranchers and dairy lots that are saying this is

driving us to the drink here with higher finishing costs. Now, I
105

don’t think on the west coast, and this is where I hope somebody

can answer this, and I don’t know who is best to do that, but what

are we going to see in terms of E–85 outlets on the west coasts?

I understand it in the Midwest, but what are the odds we are going

to actually get E–85 on the west coast, and benefit from all the ethanol portfolio requirements we are contemplating here?

Mr. DINNEEN. Well, let me first try to address some of the issues

with respect to the rising price of corn, because it is indeed true

that the increased demand for ethanol in this country has indeed

created new markets for farmers, and they are seeing a better price

for their product today.

Mr. WALDEN. Right.

Mr. DINNEEN. And the days of cheap corn are probably, indeed,

over, but I believe that the marketplace will absolutely respond,

and I believe that we are going to see a great deal more corn being

grown across the country. Indeed, the crop intention report that

was just released a couple of months ago suggested that the marketplace is working, because farmers are going to plant as much

as 90 million acres, 15 percent more acres than they did just a year

ago, so farmers are absolutely responding.

What this bill is about is trying to, however, motivate the marketplace, so that we are able to move beyond grain, because there

are going to be limitations to what you are going to be able to

produce from grain, and as with the grant program for cellulose,

and most importantly, by creating a marketplace for greater volumes of ethanol in the form of E–85 for flexible fuel vehicles. You

are going to be incentivizing more cellulose ethanol to get out

there.

What it is going to take to get more flexible fuel vehicles and

more E–85 is sort of the three legs of the stool that Congressman

Barrow talked about. It is going to take more ethanol, it is going

to take more vehicles, and it is going to take greater infrastructure.

Those three legs of the stool are addressed in this bill in one fashion or another.

Mr. WALDEN. All right. And I know my time has expired. Thank

you all for your testimony and your answers.

Mr. BOUCHER. Thank you very much, Mr. Walden. The gentleman from Pennsylvania, Mr. Doyle, is recognized for 5 minutes.

Mr. DOYLE. Thank you, Mr. Chairman.

I got this graph. I am just curious. Is three stations for 11,000

flex fuel vehicles enough, too little?

Mr. LAMPERT. Well, as I had mentioned earlier, on a national average, there is approximately one gasoline outlet per 1,500 vehicles.

So, to answer your question, there is approximately one E–85 outlet in your district for every 3,500 or 4,000 vehicles. So, obviously,

that is not meeting the national average of gasoline outlets.

Mr. DOYLE. And Ms. Hubbard, you said your industry is quick

responders and risk-takers, so why aren’t there more——

Ms. HUBBARD. Well, the problem, of course, is the concentration

of those vehicles, and if there are enough of those vehicles within

a serviceable market area, as you know, probably within your own

community, you don’t drive the whole city to shop at a convenience

store. It is close to where either you live or you work. And so, the

demand, if there were 20 gallons per vehicle every single week,
106

that still doesn’t put the volume of fuel that goes through there. It

doesn’t make it adequate to justify the investment.

Mr. DOYLE. Thank you.

Mr. DeCicco, you said that one of the things that concerned you

about the bill is that the levels that are set for the vehicles fall far

short of what is needed, and when you look at the draft, section

301 that starts on page 41, as I understand it, the draft directs

NHTSA Administrator to set CAFE standards at the maximum feasible level every year, beginning in model year 2012, with the express requirement that under no circumstances are CAFE standards to be lower than 36 miles per gallon for cars in model year

2022, and 30 miles per gallon for trucks in model year 2025.

So, I would like to ask you some questions. Is there any language

in the draft, as you read it, that would prohibit NHTSA, provided

the agency deems it feasible, from setting the CAFE standards for

model year 2025 at 40 miles per gallon?

Mr. DECICCO. No.

Mr. DOYLE. 50 miles per gallon?

Mr. DECICCO. No.

Mr. DOYLE. 150 miles per gallon?

Mr. DECICCO. No.

Mr. DOYLE. So, the draft would, in effect, give future administrations the ability to meet or exceed the CAFE targets set out by this

proposal or any others, regardless of the specific number in the

draft, and I think that is an important point to keep in mind.

These are floors, not ceilings.

Mr. Reuther or Mr. McCurdy, perhaps you both might respond,

too. Given what you are seeing in the technology in hybrid vehicles

and other types of vehicles that are being developed, is it reasonable to expect that by the year 2025, that there is a high probability that we could probably exceed what this floor is?

Mr. MCCURDY. Alan is punting here.

Well, first of all, the targets that are in the bill are extremely

aggressive. And the average efficiency in cars are far more efficient

today than they were in the ’70’s. There has been roughly 1 percent

a year. To get that level of advancement takes incredible investment of time, money, and engineering, and some potential breakthroughs.

I am not discounting the potential for breakthroughs. If we have

breakthroughs in plug-in hybrids, if we have breakthroughs in hydrogen, and some of the other capabilities, fuel cells, then in fact

you might be able to see miles per gallon achievement in excess of

those targets that you see. But the other critical factor here is

availability of fuels, and the third and most important is whether

or not the consumer supports it.

I don’t know if you saw the announcement this week, that Honda

announced it was canceling, terminating its hybrid Accord. That is

a decision they make based on the model. That doesn’t mean it is

a technology failure. That was, perhaps, a model failure that didn’t

catch on with the public. That is always the risk that manufacturers face, is that we can build it, but if they don’t buy it, then we

haven’t accomplished their goals, and we——

Mr. DOYLE. Isn’t that basically the argument you were making

with Mr. Markey about European culture and American culture,
107

that basically, that it isn’t a technology issue. You are obviously

making cars in Europe that meet these fuel economy standards. It

is just that Americans, from the chart that I saw, they don’t drive

stick shift, diesel, four cylinder cars, or they do, but in much smaller percentages than the Europeans do. So, it is not that you don’t

know how to make the car, it is that, will Americans start to drive

those kinds of cars that get that kind of mileage, and that is a culture change that has to take place in the country, too.

I have a Ford Escape hybrid. I want to tell you, it is a great vehicle. I just by choice buy American cars only, and I have been railing at Detroit for years about you know, why doesn’t an American

car manufacturer make a hybrid. I have never had a lick of trouble

with that car. It says it gets 36 miles to a gallon. I am getting more

like about 29, but I am very happy that when I fill the tank up,

it is still under $30, even with the price of gasoline now.

And I don’t know what it would take to wake up Detroit that

Americans want these kinds of cars, and they should be gearing up

for it. This CAFE standard battle really shouldn’t be a battle much

longer, once Detroit starts to get it, and once technology helps us

to get there.

Mr. MCCURDY. Well, Congressman, if I could respond just quickly.

Mr. BOUCHER. Well, Mr. McCurdy, I am afraid the time for that

questioning has expired.

Mr. DOYLE. Thank you, Mr. Chairman. I am sorry for taking so

much time.

Mr. BOUCHER. Thank you very much, Mr. Doyle. The gentleman

from California, Mr. Waxman, is recognized for 5 minutes.

Mr. WAXMAN. Thank you, Mr. Chairman.

I would like to start by seeking unanimous consent to put in the

record a letter from a dozen members of this committee to you and

Chairman Dingell, expressing our concerns about and opposition to

this discussion draft. We are also going to release this letter to the

public.

Mr. BOUCHER. Without objection.

Mr. WAXMAN. And second, I would like to request unanimous

consent to put six additional letters in the record. These letters express the concerns and opposition of eight Governors, 15 members

of the National Association of Attorneys General, the National Association of Clean Air Agencies, the Clean Air Association of the

Northeast States, and leading environmental and consumer groups.

Mr. BOUCHER. Mr. Waxman, we have agreed that unanimous

consent requests for submitting materials for the record will be

granted as a group at the end of the hearing, and we would ask

that the material be submitted to the staff on both sides, so we can

evaluate it in advance of that.

Mr. WAXMAN. That is fine, if you will put them all together.

Mr. BOUCHER. Thank you.

Mr. WAXMAN. We will certainly make them available.

Mr. DeCicco, the subcommittee has developed the legislation we

are discussing today to address two of the Nation’s most important

issues, the Nation’s threatened energy security and global climate

change. If we are careful, we can address both issues simulta-
108

neously, and leave a planet for our children and grandchildren,

that is clean, sustainable, and more secure.

I am concerned, however, that the draft before us will lead the

Nation in a dangerous and wrong direction. Earlier this year, the

Supreme Court issued a landmark ruling on global warming. This

case came to the Supreme Court when EPA rejected a petition from

the States and others for EPA to regulate greenhouse gas emissions from automobiles. Is that right?

Mr. DECICCO. That is right.

Mr. WAXMAN. And the States had petitioned EPA, because global

warming is a critically important issue, and they read the Clean

Air Act to provide EPA with the necessary authority to regulate

automobile emissions.

EPA argued they didn’t have that authority, and denied the

State petition. The Court found that EPA was wrong. Congress had

given EPA authority to regulate motor vehicles under the Clean

Air Act, and EPA must do so unless greenhouse gases don’t contribute to climate change. Is that an accurate description of the

case?

Mr. DECICCO. That is my best understanding of it.

Mr. WAXMAN. The legislation we are examining today addresses

this precise issue. It amends the Clean Air Act to rescind EPA’s authority to regulate greenhouse gas emissions from motor vehicles.

Am I correct in that reading?

Mr. DECICCO. Yes.

Mr. WAXMAN. It seems like we are heading in exactly the wrong

direction. Is there anything you would add to that? It just seems

to me that we are removing EPA’s ability to regulate in this area,

and we are also denying the States the ability to regulate in this

area.

Mr. DECICCO. That is right, Mr. Waxman, and those are very serious concerns, as we pointed out in our testimony. Just when the

Nation needs to act quickly on climate change, just as California

and now 11 other States, with others pending, have stepped up to

the plate with some breakthrough proposals to lead in that direction, and just as the Supreme Court has found that greenhouse

gases can be considered pollutants under the Clean Air Act, to take

that leadership away, to take that authority away from EPA is a

huge step backward, in our view.

Mr. WAXMAN. It seems to me we have a global problem, and we

ought to have a global solution to it. If we can’t do that, we ought

to at least have a national one. If we can’t get a good national one,

we ought to at least let the States do what they want, even the cities, because oftentimes, whoever takes action will become the leader, and I have always regretted the fact that we are becoming less

of a leader in some of the technology that would be developed if we

actually got started to do the regulations as necessary.

EPA has regulated pollution from motor vehicles for almost 40

years. Vehicles today are dramatically cleaner than they were in

1970, thanks to EPA and State efforts, and we all breathe cleaner

air as a result. EPA has the authority and the responsibility to

produce the same strong results for global warming pollution. In

my view, the last thing that the Congress should be doing is to stop

EPA from beginning to address this problem.
109

I thank you for your testimony, and yield back the time, Mr.

Chairman.

Mr. DOYLE [presiding]. Thank you, Mr. Waxman. The Chair now

recognizes the gentleman from Utah, Mr. Matheson, for 5 minutes.

Mr. MATHESON. Thank you, Mr. Chairman. As I mentioned in my

opening statement, I would like to just flesh out this issue a little

bit.

When it comes to the automobile industry, and the nature of how

you develop new product lines, and the timeframes and the capital

required to do that, I would like to get a sense if my concern is

valid or not, about uncertainty created by the potential of two different Federal agencies offering different standards, plus potentially various States also offering different standards, and how

does, how will our auto industry respond to that level of uncertainty?

Mr. McCurdy, maybe you could start.

Mr. MCCURDY. Thank you, Congressman. It is a shame Mr. Waxman has to leave, because I wanted to respond to his point, but I

think we can build on it with your question.

The industry would like to——

Mr. MATHESON. I don’t want to be in the position of opposing

Mr.——

Mr. MCCURDY. No, no, that is all right. I think it is important.

One thing that manufacturing needs is some transparency and certainty and predictability.

Mr. MATHESON. Right.

Mr. MCCURDY. And the challenge is that NHTSA today has 30

years of experience in addressing the technology for primary information, having the models to actually develop fuel efficiency requirements for the auto industry. That is an experience base that

States do not have. That is an experience base in technology that

EPA currently does not have.

And as I understand Massachusetts v. EPA, the Court did not

say EPA, you must go regulate that. They have to do a determination of whether or not it is a pollutant, but they also can work, it

encouraged, the Supreme Court actually encouraged the agencies

to work together, the Department of Transportation, and the EPA,

and probably, in the future, the Department of Energy.

So California can still provide leadership. It is just that they

can’t, they should not, in our opinion, be able to develop regulation

that is contrary to what NHTSA and the expertise existing within

that agency, and create different standards. This industry cannot

survive with 50 different standards, or a dozen different standards,

or five different standards.

Congressman, you are exactly right. It is a global problem. It is

a national problem. There is a potential for a national solution. You

are now in the majority. Let us have a national resolution. Let us

not have local. One of the keys, again, even with California or

other States, they can continue to provide significant leadership on

this front. Look at the incentives for HOV lanes. Look at dealing

with congestion. There are a number of things they can do to

incentivize, alert, educate consumers about the alternatives out

there, and the technology available.
110

But please don’t strap an industry that is already highly competitive with additional regulation, and if you look at the testimony

of some of the cases, the experts even at CARB, which is the Air

Resources Board in California, did not take into consideration the

very important questions of technology, cost, economic feasibility,

impact on jobs and the economy, and those are all critical for having reasonable, balanced, livable regulation.

Mr. MATHESON. It seems to me that there are two issues we

ought to be talking about here. One is what is the appropriate set

of standards we want to meet, in terms of fuel economy. And the

second issue is should we have one set of standards, or should we

have a basket of standards of 2, 3, 10, whatever. And as I said, I

have expressed concern about that second issue, about what it

should——

Mr. WAXMAN. Will the gentleman yield?

Mr. MATHESON. May I get one more question here?

Mr. WAXMAN. Sure.

Mr. MATHESON. In terms of what this committee has indicated

it is going to be looking at in the fall, and ideally, maybe, we would

have not bifurcated this process, because these are related issues,

and we are kind of dealing with them on different schedules. In the

fall, the chairman of our subcommittee, the chairman of the full

committee has indicated that we are going to pursue a mandatory

economy-wide greenhouse gas control regimen. Is this the circumstance under which, when we do that in the fall, where we are

going to create, if you will, the standards that are really going to

drive where this industry goes, how do those play with each other?

I guess that is what I am trying to ascertain, is how do you see

those two dynamics working with each other?

Mr. MCCURDY. Well, CAFE is a 1970’s regulation, and it is a

challenge. Our industry has stepped up to the plate, and said it

will work with this committee to explore climate change legislation,

and do so in a constructive way. A number of our companies have

joined groups, such as USCAP and others, that are considering

this. It is a challenge, but if, we agreed that using industry terms,

there is a key sequencing problem with the schedule. I realize this

committee didn’t dictate the schedule, and so, you have to move the

legislation. I think the preferable approach would be to take more

time within this Congress, and we want it to be done in this Congress, and develop more comprehensive legislation, and a solution

that addresses the national issue.

Our industry is prepared to be part of the solution. We are part

of the challenge. We have a responsibility. But it needs to be a

shared responsibility, and it should include all sectors of the economy, not just the one that has been—the only carbon constrained

sector of the economy for the last 30 years has been the automotive

industry. Let us expand it.

Mr. DOYLE. The gentleman’s time has expired.

Mr. MATHESON. Thank you.

Mr. DOYLE. The Chair now recognizes the gentleman from Texas,

Mr. Green, for 5 minutes.

Mr. GREEN. Thank you, Mr. Chairman, for the opportunity to

participate in the subcommittee’s legislative hearing, and on the

discussion draft on alternative fuels infrastructure. While I am not
111

a member of the Energy and Air Quality Subcommittee, this draft

is of great importance in the district I represent in Texas, and

where refineries, chemical plants, and pipelines play an important

role in our economy. And I have just a few questions within the 5-

minute timeframe.

Mr. Drevna, you state that it would be difficult to be obligated

party to comply with simultaneous with an increasing Alternative

Fuel Program, AFP, and a decrease in low carbon standard, the

LCF, because the compliance strategies would have to change frequently. The LCF would change every year, potentially.

Can you further elaborate on your statement that, how could this

hinder actually being able to sell alternative fuels?

Mr. DREVNA. Well, Congressman, it is a problem that, again,

there is tension, as we see it, in the draft, between the Alternative

Fuel Standard and the Low Carbon Fuel Standard. There may be,

at times, it may be year 1, 2, how man you want to assign, that

a particular fuel may meet the standard, but once, as Mr. Dinneen

has spoken earlier, once the lifecycle question gets thrown into

these fuels, and the amount of carbon intensity that it is allowed,

it may eliminate those particular fuels from being used.

So we are stuck with the dilemma of what kind of investments

do we make, what kind of fuels do we make, on a going forward

basis? We can’t, we don’t want to be switching fuels every other

year.

Mr. GREEN. Well, and I know there is concern now, because of

the price run-up in fuels, because of the number of fuels we have

in different markets that if you don’t have a refinery in Texas, for

example, our product typically doesn’t go to California, because the

pipeline system, but also, but if they have to produce a fuel for

California, then it continues to limit it. The supply issue would be

even more of a problem on a basis it seems like.

If the EPA on a yearly basis were to issue an LCFS that reduces

the average carbon intensity allowed for fuels, how does that affect

the economics of the fuels used in the FEP, and how would it affect

the FEP mandates?

Mr. DREVNA. Well, Congressman, one of the concerns we have

with the draft as of right now, is we are getting mixed signals. We

are getting the signal that we want, we want capacity expansion

to go forward, on a refinery by refinery basis, but yet, we are trying

to add more and more renewables.

Now, and we understand renewables are going to play a very

vital role on a going forward basis, in the Nation’s transportation

fuel mix. Again, one of the concerns, we have, is that, and in our

written testimony, we did say we are putting the cart before the

horse on this one, we are assuming the advent of technology, and

we are hopeful that the appropriate technology, especially for cellulosic, will be forthcoming.

Our concern is, and the way the bill is written now, the waiver

process, it is not the same as a waiver, as if we had a pipeline outage or a refinery outage, where a certain area can’t get the fuel.

We are talking a waiver where we would have already put the capital in to make a certain kind of fuel, with the renewable, that may

or may not exist at the time we have to deliver that product.
112

What we are suggesting is that the staff, the draft legislation,

allow the EPA Administrator to actually say within a given timeframe, say, 2 years, there will be the quantity of fuels needed on

a commercial basis.

Mr. GREEN. OK. So, you don’t think the EPA Administrator has

the ability, under this draft, to adjust either AFP or the LCFS

mandates if necessary?

Mr. DREVNA. We don’t see it under this draft. We see that those

numbers have to be implemented, and the waiver would take place

after the fact, whether or not they are available.

Mr. GREEN. Would you feel more comfortable, for a certainty of

investment, if the LCFS reductions, instead of using it on a yearly

basis, would be over a group of years, so that there would be time

to recoup investments, or even tool up to do?

Mr. DREVNA. Well, Congressman, what we are suggesting is that

before these, what I think, whatever you would consider these huge

volumes of renewables be implemented, that the Administrator

make a determination that they actually are commercially available. That is what we are asking for.

Mr. GREEN. Thank you, Mr. Chairman. As a guest, I won’t wear

out my welcome.

Mr. DOYLE. Thank you, Mr. Green.

We have two votes coming up on the House floor, but we still

have about 13 minutes, so I am going to recognize the chairman

of the full committee, Mr. Dingell, for his questions.

Mr. DINGELL. Mr. Chairman, you are most gracious. Thank you.

These questions are for Mr. DeCicco. Would the staff please see

to it that the flow sheet on fuel economy regulations is put up on

the screen, so that we can all have an understanding of what it

does. It is a delightful piece of work.

Mr. DeCicco, I hope that you and the rest of the panel will take

a look at this. Now, let us take a look, and I ask unanimous consent, Mr. Chairman, that this be put in the record of the committee.

Mr. DOYLE. Without objection.

Mr. DINGELL. Now, Mr. DeCicco, these questions will require

only a yes or no answer. When we started out on this business, we

had the Federal Government regulating fuel efficiency through

CAFE at Department of Transportation, and we had the air pollution questions regulated by the Federal EPA.

Then, because of the California experience, they asked for and

got authority to have their own regulation of air pollution, and that

went on for a long time, until the recent decision by the Supreme

Court. Now, we have the potential, is my statement that correct?

Mr. DECICCO. Yes.

Mr. DINGELL. All right. Now, I want you to look at this flow

sheet. It tells you what a wonderful experience that we are going

to have, in terms of getting regulation under the situation as we

are looking at it, with the most recent Supreme Court decision.

And in that, you now have the Federal EPA regulating air pollution. You have California and 10 other States regulating air pollution. You have the Department of Transportation regulating fuel efficiency. You will then have the States regulating fuel efficiency by

regulating carbon dioxide emissions. Is that a fair statement?
113

Mr. DECICCO. I would like to check with counsel.

Mr. DINGELL. No, no, yes or no. Is that a fair statement? We are

going to have all these wonderful folks regulating all these things,

and I am trying to figure out how we are going to sort out this confusion, and whether you folks at EDF favor that or not?

Now, please answer the question, because the clock is running,

and we have a vote coming up. Is the answer to that question yes

or no?

Mr. DECICCO. Yes, we favor this approach.

Mr. DINGELL. OK. So, you favor it. Do you agree with me that

factually, the statement that I have made, with regard to all these

goodhearted folks regulating different things, is a factual statement?

Mr. DECICCO. No.

Mr. DINGELL. You don’t. What is wrong with my statement? Tell

me in just a brief bit.

Mr. DECICCO. Under the Clean Air Act——

Mr. DINGELL. No. Please tell me who regulates what, under this,

and what is wrong with the statement that I have made. Let me

give it to you again. DOT regulates fuel efficiency under CAFE,

and EPA regulates air pollutants. California and 10 States regulate

air pollutants under their law. Now, under the new change that the

Supreme Court has brought forward, the EPA will continue to do

what it is doing, the States will continue doing what they are

doing, and DOT will continue doing what it is doing. But the States

and EPA will now get in and regulate fuel efficiency, too, by regulating CO2, which is essentially a substitute regulatory program for

CAFE. Isn’t that a true statement? Yes or no.

Mr. DECICCO. No.

Mr. DINGELL. Why is that statement not true?

Mr. DECICCO. Greenhouse gases are a much broader category——

Mr. DINGELL. Is my statement about who is going to regulate

true or false? I hope you were listening. If you were not, please tell

us so.

Mr. DECICCO. In terms of the regulatory pathways, yes.

Mr. DINGELL. Regulatory structure, I am not going by who is

going to, what is right or wrong. Is my statement factual?

Mr. DECICCO. Yes.

Mr. DINGELL. I don’t know how many regulators are getting in

there to regulate, but you have got a lot of people regulating.

Now, please tell me how this regulatory system is going to give

expedited, sensible, balanced regulation that will consider the

whole problem of fuel efficiency, pollutants, global warming, in an

intelligent way? How do we set up a structure which does that? I

will ask you to submit that for the record.

Mr. DECICCO. We will do that.

Mr. DINGELL. I had hoped for better answers from you, Mr.

DeCicco. Maybe if you get a chance to submit in writing something,

we will have something we can deal with.

Mr. DECICCO. We will do that.

Mr. DINGELL. Mr. McCurdy, what are your comments on this

matter?
114

Mr. MCCURDY. Well, Mr. Chairman, there is no one in this room,

or probably in this building, that knows more about the Clean Air

Act and EPCA than you do, and you were there in 1963.

Mr. DINGELL. Though is my statement with regard to all these

regulatory——

Mr. MCCURDY. The structure is correct.

Mr. DINGELL. Now the law, as it is interpreted by the Supreme

Court, going to be diligently administered?

Mr. MCCURDY. Absolutely. There is going to be multiple——

Mr. DINGELL. Dealing with all of this wonderful confusion this is

going to create, because you are going to have EPA coming forward

with one set of regulations, you are going to have DOT coming forward with one set of regulations. You are going to have the States

coming forward with one set of regulations. Each State is going to

regulate both fuel efficiency, and they are going to also regulate

pollutants.

Now, with how many different regulators are we going to be confronted with, and what is industry, and what are the environmentalists going to do to get some kind of a rational decision,

where everybody isn’t standing there quarreling with everybody

else about what is going to happen?

What we are going to have is going to be a magnificent situation

where nothing is going to happen, we are going to have vast gridlock, and an enormous mess on our hands. Isn’t that right?

Mr. MCCURDY. Yes, sir. This could be marketplace chaos, and

certainly, a lack of predictability for the industry, which takes 3

years to develop a model, and 7 to 8 years to develop a power train.

How in the world can they develop these technologies with all

these multiplicity of regulatory agencies involved?

Mr. DINGELL. I would like to welcome my old friend, Mr. Reuther. Mr. Reuther, you are a dear friend, tell us what this says to

you, please.

Mr. REUTHER. What it says to us is that the industry will have

a much more difficult time economically trying to meet the challenges of the new fuel economy standards.

Mr. DINGELL. It will also afflict, will it not, the environmentalists, who are going to have the same problems that the industry

has?

Mr. REUTHER. That is true, and our concern, though, is that if

the industry has these difficulties economically, that is going to

translate into more job loss, more benefit loss, for the workers and

retirees in the industry.

Mr. DINGELL. This regimen is going to create a tremendous number of jobs. It is going to be in the legal profession, because we are

going to have a magnificent proliferation of litigation.

Mr. Chairman, you have been very patient. Thank you.

Mr. DOYLE. Thank you, Mr. Dingell.

We want to thank the first panel for your participation today,

and we are going to take a recess while we do these two votes. We

will come back and start the second panel.

Thank you very much.

[Recess.]

Mr. MATHESON [presiding]. For our second panel for the day, we

have Mr. Alexander Karsner, who is the Assistant Secretary for
115

Energy Efficiency and Renewable Energy with the U.S. Department of Energy, and we have Mr. Robert Meyers. He is the Acting

Assistant Administrator with the Office of Air and Radiation, with

the Environmental Protection Agency.

And gentlemen, we welcome you both. If you could summarize

your testimony in about 5 minutes, we would appreciate that, and

Mr. Karsner, we will start with you.

STATEMENT OF ALEXANDER A. KARSNER, ASSISTANT SECRETARY, ENERGY EFFICIENCY AND RENEWABLE ENERGY,

U.S. DEPARTMENT OF ENERGY, WASHINGTON, DC

Mr. KARSNER. Thank you, sir. I would like to thank you, Mr.

Chairman, and members of the committee for the opportunity to

present the Department’s views on the discussion draft concerning

alternative fuels infrastructure and vehicles.

While the administration has not had sufficient time to evaluate

or coordinate our agency views on the discussion draft, I am happy

to provide some preliminary comments.

This subcommittee conducted an oversight hearing on alternative

fuels on May 8, in which I testified on the President’s 20 in 10

plan. The President has called for a very robust Alternative Fuel

Standard, requiring the equivalent of 35 billion gallons of renewable and alternative fuel in 2017. Many of the provisions of the discussion draft appear consistent with the administration’s policies,

and may also benefit from further review and discussion.

First, the discussion draft expands on the Renewable Fuels

Standard established by the Energy Policy Act of 2005 to include

alternative fuels, which is consistent with the President’s proposal.

Encouraging the broadest range of fuel technologies is critical to

the type of transformational change necessary to improve our Nation’s energy security. We urge the committee to adopt a more ambitious timeframe of substantially decreasing projected gasoline

consumption within the next decade. The administration believes

that we must have a manageable timeframe for fuels and infrastructure deployment, and that a 10-year goal is an ambitious and

appropriate metric. I would also urge the committee to consider an

economic safety valve, like the one included in the President’s AFS

proposal, to provide obligated parties additional means to comply

with the Alternative Fuel Standard requirements.

Title 2 of the discussion draft, suggests a number of possible

steps towards building the infrastructure necessary to support the

domestic alternative fuels industry. Section 201 proposes a $200

million infrastructure development program. It is not clear that

Government grants and regulation alone can sufficiently ensure

the supply chain viability of the production and delivery of alternative fuels. Creating a clear major incentive to supply fuels, like

the AFS, will be amongst the most important tools to stimulate the

necessary investment in infrastructure.

The Federal Government’s greatest contribution to energy security is the enactment of durable policy that signals to private investors in a predictable way our long-term commitment to alternative

and renewable sources of energy. If we are serious about changing

our Nation’s energy portfolio, we must unleash and enable the vast

potential of our capital markets. Government funding and regula-
116

tion alone will be insufficient to bring about the magnitude of

change at the rate required to address our critical security, economic, and environmental concerns.

The challenge for large-scale, upfront investments in clean energy is that the potential for outstanding returns must be realized

over extended period of time, or what is called the lifecycle of the

technologies used. This is true in the case of alternative fuel biorefineries, solar rooftops, large wind farms, nuclear power plants,

energy efficient products, like compact fluorescent lights, or transmission linking our clean energy sources to our urban loads.

Though clean energy sources are domestically available and generate little to no greenhouse gases, uncertainty over the necessary

technologies’ lifecycle risks and capital costs severely retards the

amount and type of private capital being deployed. Effective capital

formation requires the Federal Government to provide the necessary policy predictability and economic climate that enables massive investments at an accelerated rate.

Additionally, on the issue of infrastructure development, the Department believes that an E–85 delivery system is an important

goal of an alternative fuels infrastructure, that intermediate blends

may also be a necessary and important goal. Intermediate blends

may provide for more rapid absorption of renewable fuels into the

consumer markets, and extend our capacity to utilize alternative

and renewable fuels.

As the Department begins to assess the impact of higher blends

of ethanol, and study their viability and potential, we recommend

that the committee consider a balanced approach for all potential

higher blends of biofuels deployment, especially in any provisions

related to retail, technical, and marketing assistance.

Because flexible fuel vehicles can easily consume ethanol blends

up to E–85, it is important and essential to maximize the availability of options, to scale clean biofuels deployment as expeditiously

as possible. This flexibility also ensures that Government does not

force the economy to over-commit to a specific fuel class, given the

many other potential alternative fuels and technological pathways

that may become available. In addition, both the President and

Secretary Bodman have emphasized their concern over any potential artificial impediments to biofuels infrastructure.

Finally, on the vehicles provisions, while the Department believes that it is important to encourage domestic manufacturing of

advanced energy technologies, section 305, which establishes a new

Loan Guarantee Program for advanced battery manufacturing facilities, may in fact duplicate existing authority under EPCA title

17.

Mr. Chairman, the President has called for legislation that he

can sign on this issue with urgency, and there is clear consensus

that legislative action is needed to substantially reduce our dependence on oil and deploy clean energy technologies into the marketplace at an unprecedented scale and rate.

The administration looks forward to working constructively with

the Congress and this committee to achieve the 20 in 10 goal, and

deliver legislation that the President can sign this summer.

This concludes my prepared remarks, and I would be pleased to

answer any questions the committee may have.
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[The prepared statement of Mr. Karsner follows:]

STATEMENT OF ALEXANDER KARSNER

Mr. Chairman, members of the committee, thank you for the opportunity to

present the Department’s views on the Discussion Draft Concerning Alternative

Fuels, Infrastructure, and Vehicles, and to discuss programs under way in the Office

of Energy Efficiency and Renewable Energy (EERE) at the Department of Energy

(DOE) to accelerate the development and deployment of renewable fuels and other

alternative fuels that will reduce our Nation’s dependence on oil and enhance our

energy security. While the administration has not had sufficient time to coordinate

interagency views on the Discussion Draft, I am happy to provide some preliminary

comments.

This Subcommittee conducted an oversight hearing on alternative fuels on May

8, 2007, at which I testified on the President’s ‘‘Twenty in Ten’’ plan. The President

has called for a robust Alternative Fuel Standard (AFS), requiring the equivalent

of 35 billion gallons of renewable and alternative fuel in 2017. Many of the provisions in the Discussion Draft appear consistent with the Administration’s policies,

and may also benefit from further review and discussion.

First, the Discussion Draft expands on the Renewable Fuels Standard established

by the Energy Policy Act of 2005 to include alternative fuels, which is consistent

with the President’s proposal. Encouraging the broadest range of fuels technologies

is critical to the type of transformational change necessary to improve our nation’s

energy security. However, I would urge the Committee to adopt a timeframe of substantially decreasing projected gasoline use within the next decade. The Administration believes that we must have a manageable timeframe for fuels and infrastructure deployment, and that a 10-year goal is an ambitious and appropriate metric.

I would also urge the Committee to adopt an economic safety valve like the one

included in the President’s AFS proposal to provide obligated parties additional

means to comply with the alternative fuel standard requirements. The economic

safety valve would allow obligated parties to purchase credits (priced at $1 gasolineequivalent) from the Federal Government. This is intended to guard against ‘‘price

spikes’’ where an insufficient supply of alternative fuel or alternative fuel credits

drives up the prices.

Turning to title II, the Discussion Draft suggests a number of possible steps toward building the infrastructure necessary to support a domestic alternative fuels

industry. Sec. 201 proposes a $200 million infrastructure development program. It

is not clear that government grants will ensure the supply chain viability of the production and delivery of alternative fuels. Creating a clear, major incentive, like the

AFS will be the most important tool to stimulate investment in infrastructure.

If we are serious about changing our Nation’s energy portfolio, we must unleash

the vast potential of capital markets. The Federal Government’s greatest contribution to energy security is the enactment of durable policy that signals to private investors our long-term commitment to alternative sources of energy. Government

funding alone will not be enough to bring about the magnitude of change at the rate

required to address our critical security, economic, and environmental concerns.

The challenge for large scale, up front investments in clean energy is that the potential for outstanding returns must be realized over an extended period of time,

or the ‘‘lifecycle’’ of the technology’s use. This is true whether dealing with a solar

rooftop, cellulosic biorefineries, large wind farms, nuclear power plants, energy efficient products like the compact fluorescent lamp, or transmission linking our clean

energy sources with urban loads. Though clean energy sources are domestically

available and generate little to no greenhouse gases, uncertainty over the necessary

technologies’ ‘‘lifecycle’’ risks and costs severely retards the amount and types of private capital being deployed. Rapid commercialization of clean energy technologies

requires sophisticated capital risk management to facilitate complex financial transactions. That risk assessment is what the private sector does best. Effective capital

formation requires the Federal Government to provide the necessary policy predictability and economic climate that enables massive investments at an accelerated

pace.

Additionally, as I have previously testified to this Committee, the Department believes that an E85 delivery system is an important goal of an alternative fuels infrastructure, but that intermediate blends may be a necessary short-term goal. Intermediate blends may provide for more rapid absorption of renewable fuels into consumer markets in the near-term. As the Department begins to assess the impact

of higher blends of ethanol, and study their viability and potential, we recommend

that the Committee consider a balanced approach for intermediate blends and E85
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deployment, especially in provisions related to retail technical and marketing assistance. Because flexible fuel vehicles can easily consume any biofuel blend up to E85,

it is important to maximize the availability of options to scale clean biofuel deployment as expeditiously as possible. This flexibility also ensures government does not

force the economy to over-commit to a specific fuel class (e.g., E85) given the many

other potential alternative fuels that become available (e.g., bio-butanol or other

fuels that work in existing infrastructure). In addition both the President and Secretary Bodman have emphasized their concern over any potential artificial impediments to biofuels infrastructure; however, our shared interest must be balanced

with a respect for freely negotiated private party arrangements.

Finally, on the vehicles provisions, while the Department believes that it is important to encourage domestic manufacturing of advanced energy technologies, Sec.

305, establishing a new loan guarantee program for advanced battery manufacturing facilities, but duplicates existing authority under EPACT Title XVII.

There is clear consensus that legislative action is needed to substantially reduce

our dependence on oil and deploy new energy technologies into the marketplace at

an unprecedented scale and rate. The administration looks forward to working constructively with the Congress to achieve the ‘‘Twenty in Ten’’ goal, and deliver legislation for the President’s signature this summer.

Supporting the ‘‘Twenty in Ten’’ and longer term clean energy goals is the Department’s portfolio of research, development, and commercialization activities. The Department is particularly focused on solving technical problems to overcome barriers

to biofuels growth, including infrastructure, through forging strategic cost-shared

partnerships with private industry, collaborating with other agencies, and working

with the different regions of our country to bring the promise of biofuels to fruition.

We believe that a multi-pronged effort will expand the role of alternative fuels in

our Nation’s energy supply and economic future.

BIOENERGY RESEARCH AND DEVELOPMENT

EERE’s Biomass Program and Vehicle Technologies Program, as well as other Department programs such as those within the Office of Science, are working closely

together to overcome barriers to advancing technology pathways to help support

achievement of the ‘‘Twenty in Ten’’ goal. The Office of Science is conducting basic

research for breakthroughs in understanding the systems biology of biofuel-producing organisms and bioenergy crops that could lead to cost reductions for cellulosic

ethanol and other biofuels. To accelerate the transformational scientific breakthroughs necessary for cost-effective production of biofuels and bioenergy, including

cellulosic ethanol, the Office of Science is investing $375 million over five years to

support the establishment and operation of three Bioenergy Research Centers.

These centers, selected by competitive, merit-based scientific review, will conduct

comprehensive, multidisciplinary research programs on microbes and plants to develop innovative biotechnology solutions to energy production.

EERE and various U.S. Department of Agriculture (USDA) agencies conduct the

applied research for advancing biomass feedstocks and conversion technologies for

biorefineries. Currently, ethanol is the renewable fuel with greatest market penetration and potential for both near and long-term displacement of gasoline. EERE’s

Biomass Program is focused on making cellulosic ethanol cost-competitive by 2012,

a target put forth in the President’s 2006 Advanced Energy Initiative (AEI). Recently, Secretary Bodman announced the availability of up to $200 million for

cellulosic biorefineries at 10 percent of commercial scale, subject to appropriations.

This effort will help enable industry to resolve remaining technical and process integration uncertainties and allow for more predictable, less costly scale up of ‘‘next

generation’’ biorefinery process technologies. The 10 percent- scale demonstrations

have the potential to help reduce the overall cost and risk to industry and contribute to the quicker commercialization of larger-scale facilities. Additionally, DOE will

invest up to $385 million for as many as six commercial-scale biorefinery projects

over the next four years, subject to appropriations. The EERE Biomass Program will

continue in FY 2007 to support its cost-shared efforts with industry to develop and

demonstrate technologies to enable cellulosic biorefineries for the production of

transportation fuels and co-products.

ETHANOL AND BIOFUELS INFRASTRUCTURE DEVELOPMENT

The Department is working with other public and private sector partners to encourage development and deployment of a biofuels distribution infrastructure in the

United States to provide for displacement of gasoline and increased consumer

choice. To support this effort and help promote growth of the biofuels industry, the

Department has developed a biofuels infrastructure team. This team works to pro-
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mote convergence between Vehicle Technologies and the Biomass Programs to promote a biofuels industry and commercially competitive alternative fuels and vehicles. Currently, there are more than six million flexible-fuel vehicles (FFVs) on the

road in this country, a significant number, but still a relatively small percentage

of the approximately 225 million light duty vehicles in the U.S. One goal is to expand the use of biofuels. Another goal is to encourage all automobile manufacturers

serving the U.S. market to meet and exceed state voluntary targets for increasing

sales of FFVs? and significantly increase production of FFVs.

In support of these goals the Department is pursuing a number of infrastructure

activities, including analyses of pipelines, water issues, and advanced vehicle technologies. The biofuels infrastructure team is also assessing the impacts of higherlevel intermediate blends of ethanol (e.g., E–15 and E–20), renewable fuels pipeline

feasibility and materials research, and optimization of E85 alternative fuel vehicles.

This work is being coordinated with the Department of Transportation, which has

responsibility for setting integrity management standards for pipeline transportation and ensuring that these products can be safely handled, and with the Environmental Protection Agency, which has responsibility for testing the emissions impacts of fuels and vehicles, and registering and certifying fuels and fuel additives

before they can be used in the transportation system. Such research, analysis,

standards and safety regulation is an appropriate role of government in supporting

infrastructure deployment.

The Vehicle Technologies Program has embarked on several new efforts to address vehicle efficiency, beyond ongoing combustion and fuels research. These new

efforts include evaluation of the Biowagon produced by SAAB, a manufacturing subsidiary of GM, which is sold exclusively in Europe and has been reported to use ethanol-based fuels much more efficiently than current U.S. FFVs. Another new effort

is focused specifically on optimizing engine efficiency with biofuels. These projects

are aimed at mitigating the lower energy content of biofuels. The program is also

evaluating other biofuels such as biodiesel that may contribute to future gasoline

displacement. And, Vehicle Technologies has initiated an effort to engage international collaborations to address fuel standards, data sharing, and other common

interests.

INTERAGENCY ENERGY PARTNERSHIPS

In addition to infrastructure and fuels research within the Department, there are

important collaborations with other Federal agencies and entities, including the

Interagency Biomass Research and Development Board, which I co-chair with

USDA. The Board is the governing body that coordinates biomass R&D activities

across the Federal Government. In November 2006, DOE hosted the National

Biofuels Action Plan workshop in Washington DC, where representatives from multiple Federal agencies came together to identify agency roles and activities, assess

gaps and synergies, and begin developing agency budgets in the area of biofuels.

The Federal participants also made recommendations for improved coordination and

collaboration across Federal agencies. Input from the workshop is currently being

collected into the National Biofuels Action Plan workshop report. Ultimately, the

goal is to improve the Board’s ability to provide coordinated Federal support for

biofuels production and use.

DOE is also working with the Regional Biomass Energy Feedstock Partnerships

with USDA and the Sun Grant Initiative universities, which are funded through the

Department of Transportation. These partnerships will help to identify the regional

biomass supply, growth, and biorefinery development opportunities. We believe that

using regionally available feedstocks, produced and processed locally, promotes a

‘‘distributed’’ transportation fuels approach that may reduce shipping and transportation issues. These regional partnerships are designed to collect and store data on

a publicly available Web site.

FINANCIAL INCENTIVES

To provide increased incentives for financing a multitude of innovative energy

technologies, including biofuels, EPACT 2005 included a provision in Title XVII for

a DOE Loan Guarantee Program. With its central focus on innovative technologies

to avoid, reduce, or sequester air pollutants or anthropogenic greenhouse gas emissions, the Loan Guarantee Program provides broad authority for DOE to guarantee

loans that support early commercial use of advanced technologies, including potentially cellulosic biorefineries that employ new or significantly improved energy technologies.

I am pleased to report that the funding contained in the FY 2007 Continuing Resolution is allowing the Department to move forward in implementing the Loan
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Guarantee Program. We have published for public comment a Notice of Proposed

Rulemaking to implement the program; the public comment period closes July 2.

Secretary Bodman has said that our goal is to have a high-quality program, and the

Department is working to do just that. As you know, the Department undertook a

process in FY 2006 to solicit pre-applications for the first round of loan guarantees

and those pre-applications are currently undergoing technical and financial reviews.

The President’s ‘‘Twenty in Ten’’ goal holds the promise of accelerating penetration of cellulosic ethanol and other alternative fuels into the marketplace and bringing the benefits of a clean renewable and alternative energy source more quickly

to our Nation. To meet these challenges, cutting edge research, development, deployment, and commercialization must be supported by transformational policy

changes—the types of proposals that the President articulated in the State of the

Union. The Administration looks forward to working with Congress to shape policies

and legislation that will make this happen. This concludes my prepared statement,

and I would be happy to answer any questions the committee members may have.

Mr. MATHESON. OK. Thank you, Mr. Karsner. And now, Mr.

Meyers, we will hear from you.

STATEMENT OF ROBERT J. MEYERS, ACTING ASSISTANT SECRETARY, OFFICE OF AIR AND RADIATION, ENVIRONMENTAL

PROTECTION AGENCY, WASHINGTON, DC

Mr. MEYERS. Mr. Chairman and members of the subcommittee,

I appreciate the opportunity to appear before you today, and to provide testimony regarding your June 1 discussion draft.

As you know, the June 1 discussion draft contains many provisions affecting motor vehicle and fuel programs, alternative fuel infrastructure, and Corporate Average Fuel Economy standards for

passenger vehicles and light trucks.

The discussion draft also extends and expands certain programs

established by the Energy Policy Act of 2005, and imposes new requirements respecting biodiesel standards, flexible fuel vehicle production, and tire efficiency. EPA has experience and expertise in

many of the areas addressed by the legislation.

As noted in my prepared testimony, there has not been sufficient

time for interagency review of the legislation, and therefore, the

administration does not have a statement of position. However, a

few initial observations can be made.

First, the Alternative Fuel Program established in the draft is

similar to the administration’s Alternative Fuel Standard legislation in several important respects. The discussion draft would expand the existing RFS definition to include many alternative fuels

contained in the AFS, and in the Energy Policy Act definition of alternative fuels.

The discussion draft also incorporates many of the implementation measures specified in the AFS, including use of identification

numbers and compliance values to demonstrate compliance. Some

of these measures were pioneered in EPA’s recent rulemaking implementing the Renewable Fuels Standard. The draft also provides

for a similar enforcement of fuel requirements, and for a transition

between the current RFS credit system, and credits used in the

new program.

The discussion draft, however, also differs in important respects

from the AFS legislation. The legislation would not require 35 billion gallons of renewable and alternative fuel use until 8 years

after the schedule provided in the AFS. As you know, setting an
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aggressive schedule for alternative fuel use was an important part

of the AFS and the President’s 20 in 10 initiative.

The discussion draft also incorporates a Low Carbon Fuel Standard as part of the Alternative Fuel Program, starting in 2013. The

standard is additive to other requirements, and assumes or sets a

standard for average carbon intensity, based on assumptions about

volumes associated with three different levels of carbon intensity.

The draft also does not incorporate the temporary annual waiver

structures contained in the President’s proposal, or incorporate an

economic safety valve, to guard against price fights for alternative

fuels and alternative fuel components.

The discussion draft additionally adds a new title to the Clean

Air Act for the first time in 17 years. The title contains the aforementioned Low Carbon Fuel Standard plus greenhouse gas reporting requirements for motor vehicles. It also amends sections 202

and 211 of the current Clean Air Act to effect EPA regulatory authority concerning fuel and new motor vehicle standards. It additionally adds new criteria to section 209 in the Clean Air Act concerning waivers of preemption for State standards on new motor

vehicles and new motor vehicle engines.

The President provided a bold plan for decreasing our Nation’s

dependence on oil in his State of the Union speech, and in his subsequent calls for action on his 20 in 10 legislation. EPA stands

ready to draw upon its considerable analytical and technical expertise, and work with this subcommittee and the full committee as

you move forward to consider the discussion draft or other related

legislation.

Again, I appreciate the opportunity to testify, and stand ready to

answer your questions.

[The prepared statement of Mr. Meyers follows:]
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Mr. MATHESON. Well, thank you, Mr. Meyers. We will start with

our questions. I guess the Chair will recognize himself for 5 minutes.

Both of you mention the 20 in 10 proposal that the President

made, I believe in the State of the Union address when we first

heard about it. The discussion draft that we are talking about

today pursues a comparable amount of gallon savings, I believe,

over a longer period of time.

Is there, can you help me out, what was the data, or is there an

analysis that shows how to achieve the 20 in 10, and that that is

the right timeframe for doing that, or can you share with us how

that number was arrived at, and that timeframe?

Mr. KARSNER. Well, sir, it is not a central plan, in the sense that

the Government is going to plan out how 20 in 10 will happen.

What we do is actually assess the state of the technology—and our

most recent data validating that technology—and in terms of when

we believe it will be available to enter into the marketplace. Then,

the question is, if the technology is available, and capital is not a

constraint, what will be the policies necessary to enable the outcome?

And so, 20 in 10 does not say well, here is 16 percent electricity,

and 23 percent biofuels, and everything else. We basically look at

all the tools that we have in the tool chest to displace gasoline consumption, including efficiency, and then make a calculated guess.

If the President were to get a mandate for alternative fuels, what

would be the most aggressive and ambitious timeframe that could

be pursued? That was the task.

Mr. MATHESON. Recognizing you haven’t had a lot of time to review the discussion draft, does the administration have a position

on the fact that this discussion draft has a longer period of time

to achieve the 20 percent savings, if you will?

Mr. KARSNER. I think in general, as I say, we commend the spirit

and intent, that we are happy to see in both chambers, that legislation is moving. But the administration’s position generally is that

a sense of urgency requires more and faster.

Mr. MATHESON. To the extent that there was an analysis of the

existing technology in your projection of where the technology is

going to be, I think it would be helpful to have that provided to

the committee, because that was an open item, if you will, as I understand it, at discussions among members of the committee about

the data that was the basis for the 20 in 10 proposal.

And I think this committee discussion draft made a decision,

based on its estimate of where technology was going to go. That is

why it is the longer period. So, it would be good to have that discussion, and figure out the data to help us find what is a good, aggressive, but also achievable goal.

Next question. In terms of the provisions in the discussion draft

about trying to roll out an ethanol or E–85 infrastructure, we have

had a lot of discussion we did with the first panel about it. It is

the chicken and egg challenge that we have to face. Are you comfortable with the approach the discussion draft has taken? Do you

have suggestions for amendments for that, or additions that we

ought to be looking at? What are your thoughts on that issue?
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Mr. KARSNER. We really don’t have any sort of formal policy position, because of the short timeframe to look over the precise texts

in the discussion draft, but knowing what that issue is, dealing

with the regularity, thematically, our thoughts are chronically the

same, that we need as much as possible as early as possible. I

know, and of course, we would be happy to offer technical assistance—but the truth is, when you talk about incrementalism, and

year by year buildups, when you tend to think of these things, as

well, we are taking the whole fleet, so that if we get 70 percent in

year X of flex fuel vehicles, we have taken care of 70 percent of the

fleet. But in the meantime, doing it incrementally, we are still putting out many more cars that are non-flex fuel. In effect, we are

foreclosing on the options for vehicles when in fact, the flex-fuel

that option is available at a very incremental and marginal cost.

Mr. MATHESON. Do you think, in terms of, since you are involved

in the renewable energy side of things, in terms of the development

of cellulosic ethanol, and creating an infrastructure where we actually produce that, are there policy issues we have not addressed in

this legislation? Is there a research and development component we

ought to be looking at? What public policy decisions should we be

making to help encourage that industry to become actually viable

in this country?

Mr. KARSNER. I think you all, I think the Congress discussed

right now, in real time, the most important issues. How does that

market have some degree of predictability and foresight, as to

allow people to invest in it? As I said, the technology, there is no

need for a super technology breakthrough. It is process integration.

It is standing up a commercial facility that is replicable. The Department has now funded at least six that are meant to be commercial scale and operable by 2012, and so, to replicate that, to

proliferate that, to have confidence in the capital markets to continue into biofuels and other technologies, Congress needs to act on

this durable timeframe.

Mr. MATHESON. OK. I appreciate your response. My time has expired. We will recognize Mr. Walden now for 5 minutes.

Mr. WALDEN. Thank you, Mr. Chairman.

Mr. Karsner, I would like to know, one of the issues that we are

dealing with is this dispute over whether we are doing anything on

global greenhouse emissions in the United States versus other

countries, and whether we are lagging or not.

Can you talk to me a little bit, having just gotten back from Europe, it seems like when it comes to air quality, certainly, we are

ahead of the Europeans by a long measure, and when it comes to

us lagging versus them, what are the sorts of things we have done,

what do we need to do to deal with this?

Mr. KARSNER. Well, with all due respect, sir, I don’t accept the

predicate of the question, which is that we are lagging at all when

it comes to greenhouse gas emissions. I know rhetorically that

seems to be the discussion at hand, but if you measure this country’s progress, not by the rhetoric, but by the reality of the record,

we are doing those things that are necessary to reduce greenhouse

gas emissions in practice faster. That is to say, we are deploying

low emission and zero emission generating sources faster and more
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abundantly than anyone else in the world last year. So, it is very

difficult to say what do we need to do to get on par.

Mr. WALDEN. The President announced last week a plan to bring

together the biggest emitters in the world, including China and

India, and some of the other countries that are not part of the G8.

Can you tell us how that proposal may work to actually get everybody in the same room, that are not now under Kyoto, in the Kyoto

Accords?

Mr. KARSNER. Right. Well, I think that is quite important, because some of those people that haven’t been in the same room that

you have just named, China and India, for example, are amongst

the fastest growing economies on Earth. It is predicted that next

year, China will have more greenhouse gases than this country, be

the largest greenhouse gas emitter on Earth, and so, it is very difficult to have a substantive discussion without all the parties, the

serious emitters, if you are serious about the end goal. We have

been doing that through the Presidential Initiative, the Asia Pacific

Partnership, which accounts for about 53 percent of the greenhouse

gas emissions, including India and China. We are now wanting to

expand that, to include our European allies and friends in the

other industrialized nations of the world, to have a much more

practical bottom up approach about deploying the technologies that

will make a difference.

Mr. WALDEN. And isn’t that really the issue, is getting the technologies that work, and then making them available to the developing world?

Mr. KARSNER. To my knowledge, sir, there are only three means

to deal with greenhouse gas emissions. There is an increase in efficiency, there is an increase in alternative carbon displacing sources

of supply, and there is curtailment of economic growth. This country prefers doing the former and not the latter, and so, we are seeing continued robust growth at the same time that we are, in fact,

deploying technologies very fast.

Mr. WALDEN. Now, are either of you familiar with the various attempts to get at carbon sequestration in coal plants, for example?

We went out to visit one, in theory, to watch, in Germany, the sequestration of the carbon dioxide of the coal plant. We never quite

got, we got to the plant, we never quite saw the technology at

work. They are still under construction.

Can you speak to me about where technology stands when it

comes to reducing carbon emissions from coal plants?

Mr. KARSNER. Regrettably, the fossil fuel is actually outside of

my domain, but what I can say from the experience I have had

with carbon-based fuels and in the Department, is that the entire

program, the Federal program that the Department of Energy dedicated to coal, is dedicated to clean coal technology and deployment,

including carbon capture and storage. And so, this Nation invests

substantially in that, and I think is working collaboratively with

the Europeans to that end.

Mr. WALDEN. And Mr. Meyers.

Mr. MEYERS. Yes and EPA has also been working in this area.

One they are working with regard to is the underground injection

standards that, and guidance at this point in time. And then, also,
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we have been working with advanced coal technology. We would be

happy to provide the information.

Mr. WALDEN. I would really like to get that, because as we try

to put standards in place, we need to know the technology is there.

It was there when we put the cap and trade provisions in place to

get sulfur dioxide emissions out of coal plants. It was a known

technology, the scrubbers you could put on, and I am not sure we

have the same technology available to us, so that would be helpful.

Additionally, there are issues that were raised to us about legal

implications. Apparently, in Europe, carbon is treated as a waste,

and it is illegal to dispose of a waste underground. And I am wondering about those sort of legal issues that may accompany any activity here, to put what would be a waste underground.

Mr. MEYERS. There could be legal issues. Again, we will provide

more for the record. There could be issues under statutory law,

both, and common to——

Mr. WALDEN. I would appreciate some followup on that. That

would be helpful. And also, what happens if it comes back up after

you inject it and all of that.

Finally, there are those who have said that this legislation would

overturn the recent Supreme Court decision, Massachusetts v. EPA.

Do either of you, in your reading of this bill, believe that to be the

case?

Mr. MEYERS. The bill does have provisions with respect to

amending parts of the Clean Air Act. The effect of these provisions

is really to say that the authority in the new title 7 regarding

motor vehicles and fuels, regarding greenhouse gas emissions from

motor vehicles and fuels, is limited to the authority in the new title

7. So, it is sort of, it is not a legal term, but it is a sort of a dependency clause, is that within the Clean Air Act, we will put a new

title, and here is where we will locate EPA’s authority for greenhouse gas and motor vehicles.

The Supreme Court decision had a number of holdings. One of

them, which was that EPA had the authority under the Clean Air

Act to regulate greenhouse gas emissions from new motor vehicles.

So, certainly, the legislation could be read to effect that opinion. I

would be happy to provide more for the record, in terms of whether, from our general counsel’s perspective, et cetera, we thought it

would overturn the decision.

Mr. WALDEN. All right. I appreciate that. Thank you, Mr. Chairman.

Mr. MATHESON. Thank you. The Chair would now like to recognize the ranking member of the full committee, Mr. Barton, if he

has questions.

Mr. BARTON. I thought it was the Democrats turn.

Mr. MATHESON. Well, we are going to let you go now.

Mr. BARTON. OK. Walk in the room, get recognized. OK. Good

deal.

Well, let me preface what I am about to say. The question is that

I am really trying to find a way to be supportive of the process and

of the draft, but I have some really tough concerns about it.

My first question, I guess, would be to the gentleman from the

EPA, Mr. Meyers. The current ethanol mandate that we have in
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law, that we put in the Energy Policy Act 2 years ago, is, I want

to say about 7?

Mr. KARSNER. 7.5 in 2012.

Mr. BARTON. And we are already past that, right?

Mr. KARSNER. We are not past it actual use. We project that we

will pass it well before 2012.

Mr. BARTON. OK.

Mr. MEYERS. The actual use, I think, in the last year was somewhere around 5, but we would project, and EIA does project that

we will far exceed 7.5 by the——

Mr. BARTON. Now, the discussion draft sets, increases that mandate for corn, I think for corn-based ethanol, to 12 billion gallons.

Is that correct?

Mr. MEYERS. Well, the discussion draft is a little complex in the

way it addresses these issues. It creates a new mandate, like the

AFS, and it is ramped up to 35 billion gallons by the year 2022 or

2025. But then, it also has a Low Carbon Fuel Standard. If you

read the provision in the Low Carbon Fuel Standard added to the

requirement, and it effectively says the levels would be 12 billion

gallons from carbon fuels of 80 percent or less. What that means,

sort of, in translation is our current estimate of GHG offset for a

fuel like ethanol is a little bit over 20 percent, so fuels would seem,

it would seem to be 12 percent, or 12 billion gallons for corn-based

ethanol and there are other fuels that are in that range.

Mr. BARTON. Well, let me ask a little bit different question a little bit different way. Would it be possible to fence off the current

ethanol mandate for corn-based ethanol, then create a new mandate for cellulosic ethanol, and then a different mandate for other

alternative fuels that are not corn-based or cellulosic ethanol? Is

that technically possible?

Mr. MEYERS. It is technically possible. I would just say that the

current mandate is for renewable fuel, and not specifically for cornbased ethanol, so there are a number of fuels which qualify for the

current Renewable Fuels Standard.

Mr. BARTON. Well, I am told that we are about to max out the

amount of ethanol we can get from corn grown in the United

States. So I don’t see a lot of sense, and this is as much for Mr.

Dingell and Mr. Boucher as it is for the witnesses, I don’t see a lot

of sense in increasing a mandate on something that the market is

going to take care of and max out.

Now, I will buy the approach that for the cellulosic ethanol, we

may need to create a mandate to jumpstart that. In the discussion

draft, it says they get, cellulosic ethanol gets, each gallon is worth,

I think, 2.5 gallons, so I understand that. So, what I am trying to

begin to think about is let us fence off the current mandate, let us

create, perhaps, some new mandates, and then grow those.

If we were to do that, and I haven’t talked to either Boucher or

Dingell, is that something the administration might want to look

at, too?

Mr. MEYERS. We would be happy to work with the ranking minority member, and we would be happy to work with the committee

on any ideas that the committee would want to put forward. We

haven’t taken a position on the discussion draft, and we have our
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bill, which we are, of course, in favor of. We could get back to you

on the specifics, though.

Mr. BARTON. OK. Let me ask Mr. Karsner, are you aware of how

much gasoline is currently consumed in the United States today on

an annual basis?

Mr. KARSNER. I believe it is approximately 140 billion gallons.

Mr. BARTON. Our number is 160, but if you say 140, we will——

Mr. KARSNER. We will check with EIA.

Mr. BARTON. That is only 20 billion off. That is pretty good.

Mr. KARSNER. Well, thank you. It is a billion here and there.

[Mr. Karsner responded for the record:]

EIA’s monthly supply surveys indicate that the total U.S. gasoline consumption

in 2006 was approximately 141.5 billion gallons.

Mr. BARTON. Do you know how much ethanol it will take to

make E–10 penetrate the gasoline market as it exists today?

Mr. KARSNER. We thank that is going to be in the neighborhood,

because you probably won’t have a 10 percent displacement all

across the country, Texas in the summers, and Florida, et cetera,

probably going to be closer to the neighborhood of 12 to 13 billion

gallons.

Mr. BARTON. So, if you use 140, 10 percent of 140 is 14, if it is

160, 10 percent of 160 is 16.

Mr. KARSNER. Certainly.

Mr. BARTON. Do you agree or disagree that the ability to create

ethanol from corn is about 12 billion gallons?

Mr. KARSNER. That comports with current estimates from Department of Agriculture.

Mr. BARTON. From corn. Now, what if we repeal the current ethanol tariffs? How much ethanol could we import, if we didn’t have

the tariffs and the quotas?

Mr. KARSNER. We are not seeing anything that suggests that

there is a surplus of ethanol on global markets that would make

a substantial difference right now. There is a potential for that

growth, particularly in Brazil and in the Western hemisphere,

but——

Mr. BARTON. So, we can’t really import much. We can’t grow

much. So, this new mandate in the discussion draft is really a cellulosic ethanol mandate, logically.

Mr. MEYERS. Well, Mr. Chairman, I would say there are provisions in the bill, with regard to the Low Carbon Fuel Standard,

that require that 50 percent of the remaining volume of AFS have

a carbon intensity equal to 25 percent of the carbon intensity of

gasoline. Right now, according to our figures, I think the only fuel

that would qualify would be cellulosic, under that figure of 25 percent.

Mr. BARTON. And again, I haven’t had a detailed conversation

with Mr. Boucher or Mr. Dingell, but this, and my time expired a

minute and 28 seconds ago, but it really looks like the discussion

draft is more about creating a new mandate for cellulosic ethanol.

Mr. MEYERS. It would depend on how you read the language of

the bill. We are in the process of doing that. The bill says that one

should assume the Alternative Fuel Standard is met as follows,
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and then, indicates that the 25 percent carbon intensity figure,

which as I indicated, at this point in time, cellulosic.

Mr. BARTON. Now, I got those answers when you used to sit behind me. I yield back, Mr. Chairman, and I hope I am given another 5 minutes after everybody else is given their first 5 minutes.

Thank you, sir.

Mr. MATHESON. OK. Thank you. The Chair recognizes Mr. Stupak from Michigan for 5 minutes.

Mr. STUPAK. Well, thank you, Mr. Chairman.

Mr. Meyers, if I may, I have a number of questions I would like

to ask you about the court case Massachusetts v. EPA. Congress

clearly intended the Department of Transportation to regulate

motor vehicle fuel economy when it established the CAFE, Corporate Average Fuel Economy Program in 1975, which has really

served as the only effective constraint on greenhouse gas emissions

throughout the economy for over 30 years. In establishing these

standards, DOT must consider economic practicability, technological feasibility, and the effect of other motor vehicle standards

on fuel economy. Congress also set out many specific provisions related to these standards in statute, and exactly how rulemaking

should be conducted.

When the Supreme Court interpreted the Clean Air Act to authorize the EPA, and by proxy, California, if you will, to regulate

the vehicle fuel economy through tailpipe emissions of CO2, it did

not set out any specific criteria for setting these new standards, did

it?

Mr. MEYERS. Congressman, we are still assessing the Supreme

Court case and its implications for the Clean Air Act. However, you

would be correct that, or it is my review of the case, that there

would be nothing that said exactly how——

Mr. STUPAK. Right. The Court didn’t lay out any specifications

there, or criteria, I should say. Other than one sentence, then, and

I am quote now from the ruling: ‘‘The two obligations may overlap,

but there is no reason to think that two agencies cannot both administer their obligations, and yet avoid inconsistency.’’ But yet,

the Supreme Court did not explain how EPA should reconcile its

new authority and resulting regulations with that of DOT’s specific

statutory mandate, did it?

Mr. MEYERS. I am unaware of anything in the Court opinion

which would do that.

Mr. STUPAK. So, the answer to that would be no, then, right? Because the Court did not explain how EPA should reconcile its authority.

Mr. MEYERS. I have read the case, and I caution that it is the

legal opinions that are difficult to render, but I am not aware of

anything in the case that would tell, instruct that.

Mr. STUPAK. Well, I agree when the Supreme Court made its decision, it is directing EPA and DOT to do certain things. In the

court case, and not necessarily attorneys would be administering

this, so that is why I was trying to look for some specific criteria.

Mr. MEYERS. Sure.

Mr. STUPAK. The Supreme Court did not instruct the EPA to reconcile its new authority under the Clean Air Act with that of the

Department of Transportation, as set out by Congress, did it?
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Mr. MEYERS. No.

Mr. STUPAK. OK. Let me ask you this question. If EPA and California both issued different standards, without regard for the requirement Congress placed on DOT, it is possible that there could

be three separate conflicting standards which vehicle manufacturers would have to comply with, then, right, DOE, EPA, and California?

Mr. MEYERS. If the California standards met the waiver criteria

under 209 in the Act, and EPA essentially granted a waiver, the

California standard, EPA could. We have made no decisions on how

we are responding to establish a standard.

Mr. STUPAK. Right.

Mr. MEYERS. And then, my presumption is you are referring to

a third standard being CAFE standards.

Mr. STUPAK. Correct.

Mr. MEYERS. Yes, that is——

Mr. STUPAK. You have three different standards.

Mr. MEYERS. Yes.

Mr. STUPAK. The conflicts that I am referring to are not really

just about numbers and stringency. There could well be different

standards applying to different types of vehicles, for each of these

category regimes, with no requirement how they are going to be

harmonized. Isn’t that correct?

Mr. MEYERS. It is at least theoretically possible, yes.

Mr. STUPAK. OK. So, for example, DOT is required to establish

standards for passenger cars separately from light trucks, and

manufacturers are required to comply with DOT passenger car

standards for both their foreign and domestic fleet. Neither of these

requirements would be placed on the EPA or California under the

Supreme Court’s interpretation of the Clean Air Act, would it?

Mr. MEYERS. Those requirements are not contained in the Clean

Air Act. They are only contained in the CAFE statute.

Mr. STUPAK. So, it would not apply, then, to California or EPA,

underneath the Supreme Court’s interpretation?

Mr. MEYERS. The EPA would not be restricted by those provisions.

Mr. STUPAK. OK. In fact, the Clean Air Act, as interpreted by the

Supreme Court, does not require the EPA or California to set

standards as a fleet-wide average, and certainly, no requirement

that they utilize the complex averaging system undertaken by the

DOT. Isn’t that correct?

Mr. MEYERS. There is nothing in section 202 of the Clean Air Act

which requires a fleet-wide standard.

Mr. STUPAK. Well, then, it is possible that even under the best

of circumstances, that vehicle manufacturers would have difficulty

complying with these conflicting standards, and in the worst case

scenario, it could be impossible for a vehicle manufacturer to comply with these conflicting regulations, if you get three different

standards put forth by three different entities. Correct?

Mr. MEYERS. I wouldn’t be able to predict how these authorities

will be exercised or not exercised by DOT or EPA with any degree

of certainty at this point in time, so I can’t predict the outcome. I

think my responses have accurately, or to the best of my ability,

provided accuracy in terms of the authority, that your question
136

goes to, what would the net result of exerting that authority be,

and I am not in a position to be able to predict that.

Mr. STUPAK. If we have three different regimes, three different

standards, depending on some cars, if it was domestic, foreign,

light truck, small truck, passenger, correct?

Mr. MEYERS. These are, yes, possible, yes.

Mr. STUPAK. And the requirement that would be made, or placed

on the manufacturers of vehicles in this country, correct?

Mr. MEYERS. Well, the EPA’s authority goes to new motor vehicles in this country, and those vehicles and engines imported for

use in this country. I am not sure about CAFE authority for DOT.

You would have to let them respond.

Mr. STUPAK. Thank you.

Mr. MEYERS. Thanks.

Mr. STUPAK. Thanks for your time.

Mr. MATHESON. The Chair recognizes Mr. Hall from Texas for 5

minutes.

Mr. HALL. I thank the Chair. I really didn’t intend to ask any

questions. I wanted to be sure the API energy statement made it

in. And in sense of my being here, will be allowed to put in the

usual questions later?

Mr. MATHESON. Absolutely. Written questions, absolutely.

Mr. HALL. Questions later.

Mr. MATHESON. Right.

Mr. HALL. Then I will ask just one question, for fear that Sonja

Hubbard did get into it, and I will ask, I guess, Mr. Karsner.

Section 203 would require retailers to install very expensive E–

85 facilities to serve customers that they say may or may not exist.

Does DOE agree that the 15 percent threshold is appropriate?

Mr. KARSNER. Well, sir, I would begin by saying the customer exists in every citizen. The question is whether the value proposition

for the customer to buy it is the right value proposition, and so

then, the question becomes if you have the right value proposition,

how much is enough? And what we would like to do is have as

much as possible as early as possible, priced correctly for the market. So, we are more ambitious in the amount than 15 percent.

Mr. HALL. What is appropriate?

Mr. KARSNER. You are asking——

Mr. HALL. Just give me your best educated guess or your——

Mr. KARSNER. Well, we think there is a minimum threshold to

begin with, that about a third of the stations need to have infrastructure for E–85 to become viable, so that is already 50,000 to

70,000 stations, and that is a third. There are reports and laboratory analysis that would say it would have to be much higher in

order to reduce the amount of drive time and search time by your

average user, to know that they could reliably go to the gas station

and use it. So, it shouldn’t have to be a chore to go find a station,

and we think that at a minimum, that is about a third of the stations out there.

Mr. HALL. Should the Federal Government be making these decisions?

Mr. KARSNER. Well, the President’s policy is certainly that we

should be putting in place a mandate that guarantees a sufficient

amount of supply for the market to allocate that through retail out-
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lets appropriately. I think the challenge for Congress right now is

to try to understand what the state of the markets, can we extrapolate whether the market will, in fact, take those actions. We have

incremental Government programs that do this today, both through

tax credits, tax policies, and through our Clean Cities Programs for

deploying infrastructure, but clearly, those are insufficient to get to

the numbers you are inquiring about.

Mr. HALL. Well, I really thank you, and I may have some followup questions on that, but if I do, I will submit them.

Mr. KARSNER. Yes, sir.

Mr. HALL. And I thank both of you. Good to see Mr. Meyers

again.

Mr. KARSNER. Thank you, sir.

Mr. MATHESON. Thank you, Mr. Hall. The Chair recognizes the

chairman of the full committee, Mr. Dingell, for 5 minutes.

Chairman DINGELL. Mr. Chairman, I thank you for that courtesy.

I would like to welcome our panel here. Mr. Karsner, welcome.

Mr. KARSNER. Thank you, sir.

Chairman DINGELL. Mr. Meyers, welcome back. We have seen

you on the other side of that table on many occasions, and delighted to see you back. I hope you are doing well in your new appointment.

Mr. MEYERS. Thank you, Mr. Chairman.

Chairman DINGELL. Gentlemen, I am going to ask that the staff

show on the screen again that wonderful flow sheet which we had.

And I am going to ask the staff to make a copy available for each

of you. I would appreciate your comments, gentlemen, as to whether you find that to be a factual representation of the situation as

it is with regard to enforcement by the different agencies, Federal

and State, that will have to take place for fuel efficiency, carbon

dioxide releases, and also, releases of the different statutory pollutants covered under the Federal Clean Air Act.

And I don’t want you to feel that we are taking advantage of you.

If you want to comment later, I will be happy to have additional

comments from you. But just quick and dirty, looking at that, do

you find that to be a factual statement of how it will work under

current law, or rather under the law as set forth by the Supreme

Court in the recent case?

Mr. MEYERS. Similar to the questions asked by Congressman

Stupak, I think it is clear, and we will provide further detail for

the record, that EPAct is one stream of authority, the Clean Air

Act is a second stream of authority, and the third column, my assumption here is that we are talking about California’s unique status in the Clean Air Act, and California’s ability under the Clean

Air Act to set separate standards, subject to EPA review.

Chairman DINGELL. So now, let us try and look and see what

happens. We have 11 States which have decided that they want to

have a separate standard fixed by the State of California. Under

old law, that could only relate to the requirements of meeting the

Clean Air Act, is that correct?

Mr. MEYERS. By old law, if you mean pre Massachusetts v. EPA, correct.

Chairman DINGELL. OK.
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Mr. MEYERS. It is still the case that that——

Chairman DINGELL. Under the law as it was, EPA fixed standards under Clean Air, the Department of Transportation fixed the

standards on fuel efficiency. Is that right?

Mr. MEYERS. Yes.

Chairman DINGELL. Now, under the new law, we find, or rather,

under the Supreme Court case, we find now that the States will

fix standards along with the State of California, under the California exemption, for both clean air requirements and carbon dioxide

emissions. Is that correct?

Mr. MEYERS. Well, the Supreme Court case went to greenhouse

gas emissions generally, not specifically carbon dioxide. We are

looking at how that impacts our authority. California has already

established the greenhouse gas emission requirements under its

State law, and we are currently looking at that.

Chairman DINGELL. Right. I don’t want to overcomplicate this.

Mr. MEYERS. Sure.

Chairman DINGELL. I am just trying to understand, and you will

help me mightily if we stay to it, so I can get this picture understood. So, now, let us say under the old law, when a company wanted to market an automobile, they had to go in and get either approval from the State under the clean air requirements, or under

EPA, if the EPA had not given the State authority to act on its

own, and also, then, they had to go to DOT to get the OK with regard to meeting the CAFE standards. Is that right? Yes or no.

Mr. MEYERS. Yes.

Chairman DINGELL. OK. Now, let us go to the next step, if you

please. Under new law, if the State chooses to be a part of what,

of the California exemption, they go to the State of California, and

the State of California is able to regulate, first of all, the clean air

emissions requirements, and also to address CO2 emissions. Is that

right? Yes or no.

Mr. MEYERS. The State of California has issued regulations on

greenhouse gas emissions from motor vehicles.

Chairman DINGELL. OK. Now, those greenhouse gas emissions

are not only CO2. They can be releases also from the air conditioner, and things of that kind.

Mr. MEYERS. That is correct.

Chairman DINGELL. Now, that leaves us, then, in this wonderful

position where they have two agencies that they have to choose

from, where they are going to go to the Federal agencies or the

States. Now, there is a strong possibility of having conflict between

DOT and EPA with regard to the levels that are going to be committed, and we are going to have a major problem of coordinating

between them, are we not?

Mr. MEYERS. We have not decided our reaction on——

Chairman DINGELL. No, but there is a potential here. Let us not

complicate our business here. There is a potential for significant

conflict between two agencies at the Federal level.

Mr. MEYERS. There is a potential, if EPA acted under the Clean

Air Act.

Chairman DINGELL. All right. Now, we have also the problem

that there will be conflicts between the Federal Government and

the States, and inside the States, there is the possibility of conflict
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between at least two State agencies, the State Clean Air Agency

and the State Energy Agency. Is that not so? Yes or no.

Mr. MEYERS. I would have to get back for the record. I am not

sure a State Clean Air——

Chairman DINGELL. It is not illogical to expect that, though, is

it? Just yes or no.

Mr. MEYERS. I would like to submit that for the record. I am not

sure I fully understand the question.

Chairman DINGELL. All right. Well, apparently, you are having

as much trouble understanding this as I am, perhaps even a little

more. I am happy I am on this side of the witness table.

Now, having said that, so we have a potential, then, for as many

as 36 agencies regulating the levels of emissions of pollutants and

CO2, and we have also the fuel efficiency requirements that would

have to be met. Can either of you good gentlemen tell me how your

agencies, EPA, or the Department of Transportation, or the Department of Energy, are going to address this problem?

Would you like to submit a monograph on that for the record?

Mr. MEYERS. Sir, I think——

Chairman DINGELL. My time is expired 2 minutes ago. Gentlemen, please submit to us, for the record, a statement about how

you folks are going to do the job of administering this wonderful

array of conflicts that this Supreme Court decision has placed in

your lap.

And I will ask, Mr. Chairman, also that the Department of

Transportation be requested to make a similar submission. I ask

that they be included in the record, and I thank you, Mr. Chairman.

Mr. MATHESON. Thank you. We have gone through a round of

questioning for everyone. I ask unanimous consent that the ranking member, Mr. Barton, be recognized for another 4 minutes.

Mr. BARTON. And I will try to be very quick. And I want you to

give quick answers, if you can. I am going to follow up in a similar

vein of what Chairman Dingell just asked about, this Supreme

Court decision in Massachusetts v. EPA.

What that decision said was, is that the Court ruled 5–4 that the

EPA does have the authority to regulate CO2 in automobile tailpipe

emissions, where previously, EPA had said that they weren’t sure

they had the authority. Isn’t that correct?

Mr. MEYERS. Yes, sir. Our legal position prior to the case was we

did not have the authority.

Mr. BARTON. So, now we know, on a 5–4 decision, that the EPA

does have the authority. It could decide not to do anything, but it

definitely has the authority to do something if it chooses to do so.

Is that correct?

Mr. MEYERS. I think you have accurately said the holding of the

case, yes.

Mr. BARTON. All right. Now, if we are going to regulate CO2 out

of tailpipes, and I am not sold that that needs to be done, but if

we are going to do it, surely, we should agree with Mr. Dingell and

Mr. Boucher and the discussion draft that it ought to be done at

the Federal level, so that you have one standard. Isn’t that correct?

We don’t want 50 standards. We want, if we are going to do it, let
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us have one standard. That is the whole purpose of the Clean Air

Act. We preempt State law.

Mr. MEYERS. Well——

Mr. BARTON. Now, don’t tell me the Bush administration wants

50 State standards.

Mr. MEYERS. We are currently assessing that question in an

interagency process.

Mr. BARTON. Bullcorn. I sat in on some of those meetings. Unless

the Bush administration has changed its position, we want one—

if we decide to set a standard, Congress has the ability to do it, and

it should be one standard. We don’t want to give the great State

of California, as great as it is, or the great State of Massachusetts,

the Commonwealth of Massachusetts, as great as it is, or Vermont,

or even Texas the right to unilaterally set different standards. Almost everybody who testifies at that panel routinely says if you are

going to regulate us, do it with one uniform standard.

Now, if you all need to go through your interagency process, God

bless you, but I would hope before we move to markup that we can

get an administration position, you don’t have to take the position

on whether there should be a standard, but if it is going to be one,

let us let there be one national standard.

With that, I yield back, Mr. Chairman.

Mr. MATHESON. Thank you. A number of unanimous consent requests were made during the course of the hearing for items to be

included in the record.

All of those will be included in the record.

With that, we thank the witnesses for their participation today,

and this hearing is adjourned.

[Whereupon, at 3:15 p.m., the subcommittee was adjourned.]

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