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45–835 PDF 2009

S. HRG. 110–700 

TRANSFORMING FOREST WASTE 

TO BIOFUELS AND THE 

RENEWABLE FUELS STANDARD 

FIELD HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

AUGUST 18, 2008 

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry 

( 

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY 

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa 

MARK HALVERSON, Majority Staff Director 

JESSICA L. WILLIAMS, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

Transforming Forest Waste to Biofuels and the Renewable Fuels Standard ..... 1 

Monday, August 18, 2008 

STATEMENTS PRESENTED BY SENATORS 

Thune, Hon. John, a U.S. Senator from the State of South Dakota ................... 1 

Johnson, Hon. Tim, a U.S. Senator from the State of South Dakota .................. 4 

Panel I 

Bobzien, Craig, Forest Supervisor, Black Hills National Forest, Custer, South 

Dakota ................................................................................................................... 5 

Kramer, Randy, President, KL Process Design Group, LLC, Rapid City, South 

Dakota ................................................................................................................... 9 

Thompson, Hugh, Private Forest Owner, Aladdin, Wyoming .............................. 11 

Troxel, Tom, President, Black Hills Forest Resource Association, Rapid City, 

South Dakota ........................................................................................................ 7 

APPENDIX 

PREPARED STATEMENTS: 

Johnson, Hon. Tim ........................................................................................... 26 

Bobzien, Craig ................................................................................................... 28 

Kramer, Randy ................................................................................................. 31 

Thompson, Hugh .............................................................................................. 36 

Troxel, Tom ....................................................................................................... 40 

QUESTION(S) AND ANSWER(S): 

Bobzien, Craig: 

Written response to questions from Hon. John Thune .................................. 46 

(1) 

TRANSFORMING FOREST WASTE 

TO BIOFUELS AND THE 

RENEWABLE FUELS STANDARD 

Monday, August 18, 2008 

U.S. SENATE, 

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY, 

Rapid City, South Dakota 

The Committee met, pursuant to notice, at 2 p.m., at the South 

Dakota School of Mines and Technology, Classroom Building, Room 

204 East and West, Rapid City, South Dakota, Hon. John Thune, 

presiding. 

Present or submitting a statement: Senators Thune and Johnson. 

STATEMENT OF HON. JOHN THUNE, A U.S. SENATOR FROM 

THE STATE OF SOUTH DAKOTA 

Senator THUNE. Thank you all for attending today. This is an official hearing of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry, Energy Subcommittee. Today’s hearing is going 

to explore how biofuels are produced from forest waste and how 

that will help to meet our nation’s growing energy needs. In particular, we will focus on issues surrounding the definition of renewable biomass in the expanded Renewable Fuels Standard. 

We are joined today by a panel of experts within the biofuels and 

forestry industries. Their written comments have been submitted 

for the official record of the U.S. Senate Agriculture Committee. I 

also have statements from a number of environmental groups that 

wish to weigh in on this issue, as well. Although some of these 

groups were invited to attend the hearing, scheduling conflicts prevented representatives from testifying in person. Nevertheless, 

these statements will be included as part of the official hearing 

record. 

During today’s hearing, witnesses will have an opportunity to 

provide a verbal statement and answer a series of questions on cellulosic ethanol production from forest material. The verbal statements, questions, and answers will be made part of the official 

record, as well. 

I want to thank Senator Johnson for joining us today. Senator 

Johnson is a member of the Energy Committee in the U.S. Senate. 

I would also like to thank Dr. Robert Wharton, President of South 

Dakota School of Mines and Technology, for hosting this event 

today. I also want to thank the staff and faculty of the South DaVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
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kota School of Mines and Technology for hosting this event and for 

making their assistance available and making the event a success. 

Biofuels production has had a dramatic impact on our State and 

national economy. The ethanol industry has created thousands of 

jobs throughout the Midwest, decreased our dependence upon foreign oil, and lowered our gasoline prices. Many economists have determined that the additional nine billion gallons of ethanol that 

has been added to our fuel supply this year has kept record-high 

gas prices from increasing an additional 30 to 50 cents per gallon. 

According to a recent Merrill Lynch study, biofuels are the single 

largest contributor to new fuel supplies in the world. According to 

the International Energy Agency, this trend is expected to continue, and I will quote from their study. ‘‘Biofuels have become a 

substantial part of the non-OPEC supply growth and will contribute 50 percent of the new fuel supply growth in the 2008–2013 

period.’’ 

Clearly, ethanol has moved beyond a regional boutique fuel and 

is a major contributor to our transportation fuel supply. As we 

produce more ethanol, we must diversify the feedstocks that are 

used to produce the fuel, and we must also diversify ethanol production to include a much broader geographic area that stretches 

far beyond the corn and soybean belt. 

In December of 2007, Congress diversified our fuel supply by enacting the Energy Independence and Security Act of 2007. This law 

requires blenders and refiners to blend 36 billion gallons of ethanol 

into our fuel supply each year by 2022. Of that annual quota, 21 

billion gallons must be cellulosic ethanol that is made from renewable biomass other than corn. Renewable biomass includes nonfood-related feedstocks, such as wood chips, fast-growing trees, beta 

grasses, yard waste, algae, and crop residues, including corn cobs 

and stalks. 

However, the U.S. House of Representatives behind closed doors 

severely limited the definition of renewable biomass in the final 

phase of the energy bill debate in December of 2007. The final 

version of the definition of renewable biomass does not include any 

material removed or harvested from Federal lands and National 

Forests, regardless of how well these lands are managed. The definition of renewable biomass also excludes wood chips and tree 

thinnings from most non-industrial private forests. 

Accordingly, ethanol produced from this material, which is abundant in the Black Hills area, is not eligible for the Renewable Fuels 

Standard. Blenders and refiners have little incentive to purchase 

this fuel from an ethanol producer because it is excluded under the 

Renewable Fuels Standard which will go into effect next year. This 

problematic definition severely limits economic incentives for a substantial portion of the biomass originating from the Black Hills 

that could substantially produce biofuel. As a result, the Black 

Hills will be deprived from a great opportunity to improve forest 

health and reduce fire danger while growing the local economy and 

contributing to our nation’s home-grown fuel supply. 

In a 2005 report entitled, ‘‘The Billion Ton Study,’’ the United 

States Department of Energy and the United States Department of 

Agriculture determined that over 100 billion tons of woody biomass 

can be sustainably removed from our private and public forests. 

3 

This forest material is the byproduct of current logging activities 

or generated from hazardous fuel reduction treatments. If converted into ethanol, this material could produce between 5.5 and 

6.5 billion gallons of ethanol each year using current technologies. 

This figure is roughly the total amount of ethanol produced in the 

United States in the year 2007. 

According to the Environmental and Energy Study Institute, 

with improvements in technology, we would be able to produce up 

to 105 gallons of renewable fuel from a single ton of woody biomass. According to this conversion factor, over ten billion gallons 

of renewable fuel are off-limits to the definition of renewable biomass in the 2007 energy bill. Our witnesses will go into greater 

depth and detail of how this flawed definition limits biofuel production, particularly here in the Black Hills area. 

In January of this year, I introduced a bill that would address 

the narrow definition of renewable biomass and correct it to include 

waste materials and thinnings from Federal forest land. Also, as a 

member of the Senate Agriculture Committee, I worked to make 

sure that the definition of renewable biomass in the 2008 farm bill 

includes waste materials and thinnings from Federal forests and 

non-industrial private forests. Under the 2002 farm bill authorization, facilities that produce ethanol from these materials are eligible for loans, loan guarantees, and grants from the United States 

Department of Agriculture. 

Also, the 2008 farm bill includes a program that I authored 

called the Biomass Crop Assistance Program. This program takes 

a two-pronged approach to encouraging cellulosic ethanol production. It provides temporary targeted payments to producers who 

plant and harvest energy-dedicated crops in conjunction with the 

construction of a local biorefinery, and it also provides matching 

payments of up to $45 per ton for each ton of renewable biomass 

that is harvested, collected, stored, and then transported to a cellulosic biorefinery or used as another alternative fuel. This payment would include collection, storage, and transportation of forest 

waste collected here in the Black Hills. This type of assistance will 

help overcome the economic challenges of the first commercial-scale 

biorefineries. 

More recently, I joined a bipartisan group of Senators and proposed a comprehensive energy bill called the New Energy Reform 

Act. This bill includes aggressive offshore drilling for oil and natural gas, incentives for new nuclear power plants, incentives for 

biofuels infrastructure, and over $8 billion for wind, solar, advanced vehicle technology, and other energy conservation measures. The New Energy Reform Act would also change the definition 

of renewable biomass to more closely conform to the 2008 farm bill. 

We hope to have an opportunity to move this bill soon after Congress convenes in September. 

With that introduction, I would also like, as I said earlier, to welcome and introduce my colleague from South Dakota, Senator Tim 

Johnson, and allow him to make some opening remarks, and then 

I will introduce our witnesses and look forward to hearing their 

testimony. Senator Johnson? 

4 

STATEMENT OF HON. TIM JOHNSON, A U.S. SENATOR FROM 

THE STATE OF SOUTH DAKOTA 

Senator JOHNSON. Thank you, Senator Thune. I appreciate your 

holding this important hearing. I want to also welcome today’s witnesses and thank them for being here to provide us with their 

views. 

The National Forest lands in the U.S. are an abundant source of 

biomass capable of producing billions of gallons of renewable fuels. 

I am a member of the Senate Energy Committee, which echoes 

John’s work on the Agriculture Committee. 

As we will hear from Randy Kramer of KL Process Design 

Group, the technology to change wood waste into biofuels is ready 

for commercial development. In the Southeastern U.S. and right 

here in the Black Hills, advanced ethanol companies are already 

breaking ground on cellulosic ethanol plants capable of turning 

woody biomass into ethanol. 

The U.S. can displace 30 percent of current oil consumption by 

2030 through the efficient conversion of existing biomass supplies 

from agriculture feedstocks and by sustainably utilizing biomass 

from our National Forests. 

In December, Congress took a strong step toward achieving this 

ambitious target by passing the Energy Independence and Security 

Act. This bill doubles the amount of corn-based ethanol by 2015 

and creates a new standard for producing the next generation 

biofuels from switch grass, wood waste, and other non-grain feedstocks. 

But, as is often the case when Congress creates sweeping and 

ambitious legislation, it is necessary to revisit aspects of the law 

and correct shortcomings. Here, I am talking about Section 211 of 

EISA that limits slash and pre-commercial thinning to those removed from non-Federal forest lands. This poorly crafted definition 

of renewable biomass should be modified to unlock the sustainable 

collection of biomass from National Forest lands. 

Several bills have been introduced in the Congress, including one 

by my colleague, Senator Thune, to correct this omission. We have 

a panel of experts today to explain the impacts of the current limitation and to offer suggestions as to how to modify current law. I 

believe that any change in the renewable fuel definition must provide for the sustainable collection of biomass from our public lands. 

In this regard, I believe there is near complete agreement. 

According to the U.S. Department of Agriculture, there is enough 

woody biomass in National Forest lands to meet the nation’s goals 

for displacing all of our current oil imports from the Middle East. 

I would much rather that our country support the creation of a 

biofuels industry using the biomass from our forests than depend 

on Middle Eastern nations for our energy security. It also would 

provide clean air, employment, balance of trade, and control. 

Senator Thune, thank you again for holding this important field 

hearing and I look forward to the testimony from the witnesses. 

Senator THUNE. Thank you, Senator Johnson. 

I want to turn to our panelists now. We are going to start with 

Craig Bobzien, the Forest Supervisor of the Black Hills National 

Forest. Before coming to the Black Hills in 2005, Mr. Bobzien 

served as Deputy Forest Supervisor in the Panhandle National ForVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
5 

est in Idaho. Over the years, Mr. Bobzien has acquired a wide 

range of working experience in silviculture timberl range, recreation, wilderness management, and administration. He is a certified Forester and a member of the Society of American Foresters. 

I will introduce the other panelists, as well, and then I am just 

going to turn it over and let Craig start and we will go in the order 

of introduction. 

Tom Troxel is with us, as well. He is the President of the Black 

Hills Forest Resource Association. Tom has been an active member 

of the Black Hills community and represents a diverse set of forest 

producers—forest product consumers, rather. 

Randy Kramer is the President and co-founder of KL Process Design Group, a biofuels engineering and project development firm located in Rapid City. KL’s co-founder and Vice President, Dave 

Litzen, is also here with us today and I want to welcome them, as 

well, and look forward to their testimony. 

And finally, Hugh Thompson, who is a private forest owner. 

Hugh is a retired forest supervisor at Dixie National Forest in 

Utah and currently manages his family ranch along the border between South Dakota and Wyoming. 

So with that, those are the panelists who we will hear from and 

I want to start—and they have all been warned to try and confine, 

if they can, their oral comments to about 5 minutes. Anything that 

they have submitted in the form of written testimony will be made 

a part of the official record of the hearing. But I do want to begin 

now with Mr. Bobzien. Thanks for your work. 

STATEMENT OF CRAIG BOBZIEN, FOREST SUPERVISOR, 

BLACK HILLS NATIONAL FOREST, CUSTER, SOUTH DAKOTA 

Mr. BOBZIEN. Senator Thune, Senator Johnson, thank you for 

this opportunity to discuss renewable woody biomass and the 

changes made to the Renewable Fuels Standard by the Energy 

Independence and Security Act of 2007. I am going to summarize 

my written testimony as requested here with some remarks on 

definitions and then move into more specifics regarding wood biomass as a byproduct of our vegetation treatments on the Black 

Hills forests as a means to sustain forest health here. 

The definition of renewable biomass in the Energy Independence 

and Security Act excludes most forest biomass materials from Federal lands except those that are obtained from the immediate vicinity of buildings and other areas regularly occupied by folks. The 

definition of renewable biomass in the Energy Act excludes most 

forest biomass materials from Federal lands except those in this vicinity, which also then would preclude its consideration of being 

counted toward the Federal Renewable Standard. It also then 

would not allow for this to be a source of renewable energy in much 

of the National Forest System. 

I would like to shift more specifically to the Black Hills National 

Forest. The Black Hills area has the potential for woody biomass 

to support energy production. 

The ponderosa pine forest here grows abundantly, and over time, 

much of the forest has become overly dense and requires thinning 

to maintain forest health. We thin the trees to reduce the threat 

6 

of severe wildfires to communities, improve the forest health, and 

to improve wildlife habitat. 

In most cases, a portion of the forest is removed for commercial 

saw timber while desirable large trees are maintained. This activity also produces then woody biomass as the byproduct residue in 

the form of tops, limbs, and other small-diameter trees. We have 

a viable industry here in the Black Hills Forest, an extensive road 

system. The commercial timber harvest that occurs and the precommercial thinning that we use to thin these dense small-diameter stands produce approximately 207,000 green tons of biomass 

annually on the Black Hills Forest. About 90 percent of this is 

readily available along our forest roads in large piles. 

What I would like to do right now is illustrate some of the conditions on the forest with three photos for you, Senator Thune and 

Johnson, and for our audience. 

This first photograph here illustrates our conditions on the forest 

and how forest health is so important and our activities to maintain forest health is shown here. The upper area here is very 

dense. It has the gray—rather, in the red areas are the dense forest that has mountain pine beetle activity. This is a natural insect 

activity. We use thinning as a means to try to reduce these stand 

densities to curb some of the mortality caused by the mountain 

pine beetle and to create a different kind of an open forest structure, again, to reduce the chance of crown wildfire. 

In showing this activity, here are some of the piles that we have 

right now that are the biomass that reflects the residue that we 

have from this commercial removal of saw timber at sites. This is 

actually the central part of the forest, completed under a Healthy 

Forest Restoration Act project. 

The second photograph here illustrates an up-close version of the 

type of forest condition that remains after we have thinned the forest, showing removal of the fine fuels, which is biomass, and then 

these tops that have been placed here by the loggers that have 

taken these trees, and these are what are being stockpiled adjacent 

to these forest roads. This is a quantity that currently is available 

throughout much of the Black Hills Forest as we carry out these 

operations. 

And thirdly, over time, if we don’t have markets for this material, then we are in a position where we go out as this biomass actually degrades in quality and it remains a fire hazard so we go 

ahead and burn these areas, which of course has smoke released 

into the atmosphere, CO2, and also then you have to go back and 

rehabilitate these sites so that they are productive once again and 

re-seed them so there is not noxious weeds growing in the sites. 

As I illustrated in those photographs what I want you to understand is our opportunities to use this considerable resource of biomass are limited. Right now, small quantities of this material is removed by the public for firewood, for home heating. We have some 

that are removed for posts and poles. This last summer, approximately 180 truckloads were taken for home heating by our National Guard. It was in an exercise to take those to the Lakota 

Tribe for their home heat. 

We have relatively small quantities currently are chipped in the 

forest and then transported to cabinet manufacturers here in the 

7 

Black Hills and also for emerging markets that we have in public 

building heating systems and for cellulosic ethanol. In all, the total 

use of all these areas that I illustrated amounts to about ten to 20 

percent of all of these residue piles are currently being utilized. 

And as I showed in the photographs, most of these are burned 

so that we will not have hot fires in the summertime going through 

those piles. As I indicated in the photographs, the burning releases 

carbon in the atmosphere and it impacts the soils. 

Now, the situation of excess biomass in the Black Hills is much 

the same for other National Forests in terms of the supply. For example, in Northern Colorado, the bark beetle infestation has killed 

nearly 1.5 million acres of lodgepole pine there. Efforts to reduce 

the fuel to remove the hazard trees are creating vast amounts of 

biomass which could be used for this renewable energy. 

Development of additional markets for this material would help 

defray the cost of treatments and result in more revenue. Utilizing 

this material as a renewable resource could help reduce our dependence on fossil fuels. It is going to benefit our forests, our air, 

and our communities. 

Thank you for the opportunity to address the subcommittee and 

I will answer any questions that you may have. Thank you. 

[The prepared statement of Mr. Bobzien can be found on page 28 

in the appendix.] 

Senator THUNE. Thank you very much, Craig. 

Tom Troxel? 

STATEMENT OF TOM TROXEL, PRESIDENT, BLACK HILLS FOREST RESOURCE ASSOCIATION, RAPID CITY, SOUTH DAKOTA 

Mr. TROXEL. Thank you, Senator Thune and Senator Johnson. 

On behalf of our members, I appreciate this opportunity to testify 

today. 

By defining renewable biomass in the 2007 energy bill to exclude 

most woody biomass from our nation’s forest, Congress missed a 

tremendous opportunity to proactively contribute to our nation’s 

energy independence, the health of our forests, improved air quality, reduction of greenhouse gases, improved watershed health, reduced risk of forest fires, and the economic viability and diversity 

of local communities. 

As has been discussed, the Renewable Fuels Standard requires 

the use of 16 billion gallons of cellulosic biofuels, a product that can 

be manufactured from, among other things, woody biomass, annually by 2022. However, I am not sure that the United States can 

achieve the 16 billion gallon Renewable Fuels Standard without 

utilizing woody biomass. 

For purposes of discussion, I have identified three sources of 

woody biomass from our forests: Logging slash, sawmill residues, 

and submerchantable trees. 

Logging slash are the tops, limbs, and unmerchantable portions 

of the trees that are cut and most slash is piled on the landings 

for later burning. Every slash pile that is burned is energy produced, but wasted. Utilizing this slash for energy production would 

reduce management costs, increase revenues to the landowner, and 

significantly reduce emissions compared to burning piles. 

8 

Most sawmill residues are now utilized for products like animal 

bedding, landscaping, wood pellets, and particle board. However, 

about 200 railroad cars of wood chips are still shipped each month 

from the Black Hills to a pulp and paper mill in Longview, Washington, at considerable expense in freight and energy cost. 

Thinning small tress is very expensive, mostly because of limited 

markets for products from those trees. However, thinning those 

small trees is an important silvicultural treatment to improve vigor 

and growth of the forest and to reduce the risk of fires. New markets for these small trees would benefit all forest land owners. 

One of the long-term management challenges is that the annual 

forest growth in the Black Hills National Forest is about twice the 

rate of timber harvest. The recent fires and the ongoing mountain 

pine beetle epidemic in the Black Hills National Forest are symptoms of an overstocked forest combined with a period of severe 

drought. 

The Forest Service’s most recent estimate of their current year fire suppression cost is $1.6 billion. Rather than spending more and 

more money fighting fires, taking proactive steps to manage our 

forests to reduce the risk of catastrophic fires just makes good 

sense. 

If woody biomass from Federal lands does not contribute to the 

Renewable Fuels Standard, then the likelihood of producing cellulosic biofuels from woody biomass in the Black Hills is very slim. 

On the other hand, with a new definition of renewable biomass 

that includes Federal lands, the large quantity of woody biomass 

originating in the Black Hills National Forest could provide anchor 

volume for woody biomass from other forest lands. 

I have read about concerns from some groups about mining the 

National Forests for biomass and degrading our forests, but I believe those concerns are baseless. Like all National Forests, the 

Black Hills National Forest is sustainably managed according to an 

in-depth forest plan prepared in accordance with the National Forest Management Act. The forest plan contains sustainable management strategies and direction for sensitive areas, wildlife habitat, 

water quality, snags, and other environmental protections. 

The entire South Dakota Congressional delegation has been very 

supportive on issues regarding the Black Hills National Forest, especially funding, and I and our members are very appreciative. I 

want to specifically thank you, Senator Thune, for introducing S. 

2558 that would modify the definition of renewable biomass with 

regard to Federal forest land. We support that bill. 

We would also support language to further modify the definition 

of renewable biomass with regards to private forest land, similar 

to the definition of renewable biomass in the 2008 farm bill. Ideally, that would provide opportunities for local businesses to expand 

and diversify their utilization of sawmill residues and to explore 

better utilization of slash and submerchantable trees. With the possibility of better utilization, increased revenues, and reduced costs, 

we could expect better forest management by all forest land owners. 

By expanding the Renewable Fuels Standard definition of renewable biomass to include Federal lands, Congress would simultaneously contribute to better forest management, increase energy 

9 

independence, improve air quality, healthy watersheds, and 

strengthening and diversifying local businesses and communities. 

I appreciate the opportunity to testify today and I would be 

happy to answer questions after the others’ testimony. 

[The prepared statement of Mr. Troxel can be found on page 40 

in the appendix.] 

Senator THUNE. Thank you, Tom. 

We turn now to Randy Kramer. 

STATEMENT OF RANDY KRAMER, PRESIDENT, KL PROCESS 

DESIGN GROUP, LLC, RAPID CITY, SOUTH DAKOTA 

Mr. KRAMER. Senator Thune, Senator Johnson, thank you for the 

opportunity to provide testimony. 

Beginning in 2001, KL has collaborated with researchers at the 

South Dakota School of Mines and Technology to develop a thermal-mechanical process to make ethanol from ponderosa pine, 

which is found in abundance in the Black Hills National Forest. 

The research resulted in what we believe to be the first demonstration plant capable of commercial operations using wood waste to 

produce ethanol. Ethanol production from this plant will offset 

transportation for ethanol coming into the Black Hills from long 

distances. 

Our efforts and research are dedicated to forest stewardship that 

includes finding better uses for gathered forest and mill waste that 

otherwise provides added fuel to forest fires. The Black Hills National Forest supervisor and his staff have been cooperative in our 

research efforts and we all agree the Black Hills National Forest 

is an exemplary case study in proper use of a National Forest, respecting the interests of both citizens and forest products industries that coexist in and around the Black Hills. 

KL is uniquely qualified to discuss the implications and effects 

of the cellulosic ethanol provisions legislated in the 2007 energy 

bill. Beyond our experience in grain and cellulose-based ethanol 

plant design, our engineers are veterans of oil exploration and refining and our project managers are veterans of combat operations 

in oil-rich areas of the world. 

While our team’s cellulosic ethanol technology helps reduce the 

United States’ dependence on foreign oil, our plants eliminate particulate emissions resulting from controlled and uncontrolled fires 

in our National Forests, costing the Federal Government millions 

of dollars to manage. For all of the combustion engines on the road 

today, there is no better technology than biofuels produced from 

wood waste that can readily demonstrate a self-sustaining and environmentally responsibility solution to our nation’s current energy 

needs. 

With the new mandate to increase the use of ethanol made from 

feedstocks other than grain, commercialization of these technologies is needed now to meet the RFS. KL stands ready to meet 

that need. While we begin the commercialization of cellulose-based 

ethanol, we must protect grain-based ethanol and guard against 

misrepresentations driven by oil, grocery, and extreme environmental special interests that either link high grain prices to the 

production and use of ethanol or wrongly portray that the utilizaVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
10 

tion of wood waste coming from existing Federal timber sales will 

turn our National Forests into tank farms for biofuels production. 

There are many factors that cause food prices to rise, and it is 

well known through USDA statistics that oil price increases, not 

the production of ethanol, is the main reason for increases, the 

price of oil itself. Incentives and public support for both corn- and 

cellulose-based ethanol must be maintained, just as the incentives 

for oil discovery were put in place and maintained since 1925. 

This past spring, President Bush said the United States has not 

built a refinery since 1976. In fact, the 84 new ethanol plants built 

over the last 10 years have effectively replaced the need for approximately eight new average-sized oil refineries. Again, this 

bright spot in renewable energy growth was overshadowed by the 

media who conveyed the negative, misinformed messages sent out 

by special interests, which ultimately led to a slowdown in the capital markets that once supported this industrial growth of ethanol 

production. We need to get it back on track. 

As we grow our cellulosic-based business model, our plants will 

be smaller and decentralized throughout the United States, co-located with or close to biomass sources immune to the geo-agricultural constraints and dependence on regulated markets associated 

with grain-based ethanol production, thereby eliminating or reducing the cost of transporting biomass material and in close proximity to populated areas with a requirement to use biofuels. This 

design disarms critics who believe ethanol production is too remote 

from the end user and makes use of biomass that is either burned 

or landfilled. 

To illustrate, in the Black Hills National Forest, where tons of 

particulate matter are pushed into the atmosphere through the 

prescribed burning of underbrush, it can be used as a feedstock to 

produce renewable energy, potentially dropping the price of fuel in 

the Black Hills by five to ten cents. 

As we plan for our next plant, a key consideration is the ability 

to use the incentives put in place by the 2007 energy bill. However, 

as the bill was finalized, we now understand that the National Resources Defense Council influenced legislation that exempted biomass taken from the National Forests to count toward the Renewable Fuels Standard. Specifically, credits intended for cellulosic 

ethanol production from biomass harvested from our National Forest through Federal programs already in existence were taken 

away by special interests without the support of our legislators. 

The intent of this last-minute provision was to discourage the harvesting of material from the National Forests for biofuels production. 

However, the drafters failed to understand that existing timber 

harvest programs already allowed for the removal of material from 

the National Forest. Any reasonable person would understand that 

processing waste thinnings into a clean-burning fuel is less destructive to the environment than burning it in place. 

To illustrate, the Black Hills National Forest today has 1.2 million dry tons of thinnings and slash on the ground. As a feedstock 

for a cellulose plant with electrical power cogeneration capability, 

this material could be used to produce 50 million gallons of ethanol 

while exporting 100,000 megawatt hours of electrical power. To put 

11 

this amount of energy production into perspective, the Rapid City 

area consumes approximately five million gallons of ethanol per 

year and 650,000 megawatts of power. At today’s consumption rate, 

the material that is currently collected and piled in the Black Hills 

could provide 10 years of ethanol and 2 months of electrical power 

for Rapid City. 

In the case of commercial timber harvested through these Federal programs, mill waste from the operations fit perfectly with our 

business model, but the burden of segregating non-credit qualifying 

bits of National Forest mill waste from private or State timberland 

that do qualify is as impractical as it sounds. Imagine the complexity of separating mill waste for the sake of recovering valuable 

cellulosic ethanol credits. The cost would likely outweigh the credit. 

We live near a National Forest and consider ourselves active 

stewards of the environment. Our desire is not to clear-cut the forest to produce biofuels, but given existing timber harvest programs, 

credits from these operations are critical to the near-term success 

of cellulosic ethanol. 

To conclude, we want to thank Senators Thune and Johnson and 

Representative Herseth Sandlin for bringing this important forest 

management and renewable energy issue to Congress. Just as they 

joined in an effort to save Ellsworth Air Force Base, we are proud 

to see this demonstration of unity, along with assembling bipartisan support throughout the House and Senate for this legislation. 

Thank you. 

[The prepared statement of Mr. Kramer can be found on page 31 

in the appendix.] 

Senator THUNE. Thank you very much. We appreciate it. 

Now we will turn to Hugh Thompson. 

STATEMENT OF HUGH THOMPSON, PRIVATE FOREST OWNER, 

ALADDIN, WYOMING 

Mr. THOMPSON. I thank you kindly, both Senators, for inviting 

me to testify before the Senate Agriculture Committee today. As a 

South Dakotan hurt by high fuel prices, concerned about domestic 

energy security, and interested in seeing economic development in 

our State and in our area, this is an important hearing. 

As a rancher and landowner with timber and brush on my property, I am particularly interested in the potential use of wood as 

a feedstock for renewable energy and the production of cellulosic 

ethanol, in particular. It is common knowledge that most folks 

don’t eat a lot of wood waste, but you can make fuel from it and 

that is my interest as a land owner. 

Following my Federal assignment, I served 4 years as Deputy Director for the Utah Department of Natural Resources, where I also 

had oversight for the Utah Energy Office. I returned home back to 

the ranch in 2004 and am now fully engaged along with my farmer-rancher family in trying to make a living off the land. I have always been interested in how we can manage our lands in a sustainable manner to produce income. Raising hay, grain, livestock, leasing hunting privileges, and doing occasional timber harvest are all 

traditional sources of revenue for South Dakota and Wyoming 

ranchers. 

12 

In the 21st century economy, we are looking for new markets, including the potential of using our lands to grow feedstock and to 

use the residue we already have on hand for a future cellulosic 

biofuel industry. 

This Congress and this administration has done much to promote 

wood as a transportation fuel source. For all the good that has been 

done and for an issue that requires the utmost in professional management, it is distressing to see its definition cloaked in the thinly 

veiled environmentally preservationist terms used in the EISA. As 

currently written, the law places confusing parameters on significant acreages of private forest lands that do not fall within the category of, quote, ‘‘actively managed plantations.’’ Specifically, the 

present definition appears to restrict what can be collected for use 

as a biofuel feedstock from naturally growing and regenerating forests, which make up more than 90 percent of our nation’s non-Federal forests. 

Specifically, I see at least three fundamental problems with the 

current definition of renewable biomass in the Renewable Fuels 

Standard. The first one, potentially disqualifying material removed 

from the forest through necessary and appropriate forest management activities. Proper forest management focuses on moving the 

forest toward its desired condition. Whether that condition is to 

produce wood or fiber, to recruit desirable tree species, or protect 

against insects and disease, to improve habitat, or any other desired outcome, appropriate management often includes removing 

materials from the forest that can and ought to be used productively is impossible. By using definitions like slash, private trees, 

residues, pre-commercial thinning to limit the material that can be 

used productively, the definition contradicts rather than promotes 

good forest management. 

Second, creating a chain of custody confusion for transportation 

fuel producers. I think this has already been alluded to. The current definition suggests that different parts of the same tree may 

or may not be considered qualifying feedstock for renewable fuel 

production. Biofuel producers required to demonstrate compliance 

with the standard would have to sort out which of the incoming 

raw materials constitute qualifying feedstock. 

And the third one, preventing an opportunity to improve Federal 

forest management to the benefit of adjacent private forest owners. 

Private forest owners understand that the risk to their lands often 

is as much determined by the type of management occurring on adjacent lands as it is by their own management practices. By placing 

significant limitations on wood coming from Federal lands, the current definition discourages the opportunity to provide sufficient 

supply for a facility that could process feedstock from both the Federal and adjacent private lands at the same time. In this region, 

private forest feedstocks are probably not sufficient to be standalone economical and need the Federal land feedstocks to sustain 

a viable industry. 

Senator Thune, you have introduced legislation in the Senate, S. 

2558, which amends the definition so that our National Forest System can be responsibly managed for biofuel production. I strongly 

support your legislation as sensible public policy. I also support any 

13 

similar legislation that will bring forward the language in Section 

B of the farm bill definition. 

Thank you for the opportunity to testify and I will be happy to 

answer any questions that you may have. 

[The prepared statement of Mr. Thompson can be found on page 

36 in the appendix.] 

Senator THUNE. Thank you, Hugh, very much. I thank all of you 

for your testimony. 

What I would like to do is ask some questions of the panel and 

then allow Senator Johnson to pose some questions, as well, and 

I want to start with Mr. Bobzien. You had touched on, I think, in 

some of your testimony some of the answers to this, but I want to 

maybe get a little bit deeper into it. Are there characteristics of the 

Black Hills National Forest that make this forest particularly well 

suited for biofuels production? 

Mr. BOBZIEN. Yes, there are. First, it is really a tree growing forest from an environmental standpoint. Trees grow and they regenerate abundantly on the Black Hills Forest, and over time, there 

is a need to manage the density and environmentally it is good to 

remove the excess trees from the forest. 

Secondly, the industry that we have currently here on the forest 

and with potential markets also lend themselves toward utilization 

of biomass. 

And thirdly it would enhance the economics and the social support that we have through our principal management trying to 

maintain a diverse and healthy forest that the public is proud of, 

and when we remove these products in an environmentally sound 

and with economic benefits, this all lines up to be a very good 

source for biomass for our communities, the industry, and the forest. 

Senator THUNE. As a follow-up question to that, you kind of 

touched on this, too, but summarize the forest stewardship benefits 

of responsibly and sustainably removing biomass from the Black 

Hills. I mean, tell me how that is going to impact pine beetle management. Would it help with that? Fire suppression activities, wildlife habitat, those types of sustainability issues. 

Mr. BOBZIEN. Yes. The photograph, the first photograph I shared, 

Senator Thune, gave an illustration of that and how we are able 

to reduce this dense forest and reduce that stock in there, especially when we have had drought conditions, to try to maintain forest health through proper stocking and also provide different diversity and wildlife habitat. It is a renewable resource and the fact 

that we have an ongoing need to address wildfire risks, all those 

coupled together are part of our overall plan of stewardship. It includes using this excess material as biomass as an important component, to help us manage the forest and reducing burning that 

produces waste in the atmosphere. 

Senator THUNE. How about if there were greater economic demand for forest waste material, how does that impact some of the 

large fire suppression costs of the Forest Service operation budgets 

and outcomes, and obviously that is something we have dealt with 

a lot here in the last few years, with lots of fires, and I know that 

we in the delegation have worked to secure additional funding for 

dealing with fire—risk management, fire prevention, that sort of 

14 

thing. Tell me how this might impact the cost the Forest Service 

has to deal with as a result of the threat of fires. 

Mr. BOBZIEN. Well, Senator, I am aware of legislation, and while 

I can’t lobby, certainly information that we have show that the fire 

costs have gone from 13 percent of the Forest Service budget in 

1991 to 48 percent of the Forest Service budget today. And so in 

that scenario, where we have a flat budget, we have a substantial 

reduction in our forest programs as a result of all of this increased 

fire cost. That impacts our ability to do things such as some of the 

hazardous fuel reduction or the removal and management of the 

forests, as well as every other program including recreation, research, and things of that nature. So money there and large fire 

costs do reduce our ability to invest, say, in the proactive thinning 

of the forest to reduce some of these hazardous fuels out there, 

whether for forest health, to reduce the risk of wildfires, and those 

sorts of activities. 

Senator THUNE. How could we incentivize the production of 

biofuels from forest waste and tree thinnings without mining the 

forests for biomass? One of the arguments that is made against including these types of biomass from a National Forest in the definition that would allow for cellulosic ethanol production to meet the 

Renewable Fuels Standard is that these forests will then be—you 

know, we will start mining those and it will become more aggressive in terms of thinning in order to meet the RFS. What are some 

ways that you could think of we might be able to incentivize production of biofuels from forest waste that would not in any way 

jeopardize the forests or create this issue of mining our forests for 

biomass materials? 

Mr. BOBZIEN. Well, first, Senator, I look at mining typically used 

as something that is not renewable, and as I described earlier, is 

we look at this, where we are using it for forest health reasons, we 

have a renewable resource and our responsibility to all the American people is to manage that in a sustainable and renewable way 

that people like to see that done. So from a public policy standpoint, first and foremost, this is to maintain a healthy forest that 

the citizens of the country want to see. So that is on the public 

side. 

On the private side, that is to try to give as much flexibility, I 

think, to the private sector to develop this, as we have suggested 

today, to find new markets for this, that those kind of incentives 

then would actually be an environmental benefit, as well, with the 

ground, like not having to burn that material, and to provide energy for the country in several different forms. 

By having this material available and having the condition of the 

forests both renewable and sustainable; all make a desirable situation that our people want to see over time. It all fits together well 

as a renewable resource. 

Senator THUNE. Let me ask—thank you, Craig. Let me ask Tom 

Troxel here, how much biomass do you think could be removed 

from the Black Hills National Forest each year for biofuel production? That would include slash materials, small-diameter trees, logging residue, sawmill wood chips and sawdust. What is the universe that we are talking about here that you might be able to use 

to meet an RFS if that definition were changed? 

15 

Mr. TROXEL. I broke woody biomass into three categories, and 

one of those, the submerchantable trees, and I would look to the 

Forest Service to give an estimate of that quantity. 

The second is sawmill residues, and one thing I do want to be 

sure to clarify is that we have lots of existing uses for sawmill residues, and I used the Merillat particleboard plant as one example. 

I think it is in our best interests to try to complement the existing 

uses and not try and compete them and detract from the existing 

uses of those wood residues. 

So after we utilize as much of the sawmill residues as possible 

locally, we still ship about 200 rail cars of wood chips to pulp mills 

in Longview, Washington, every month. How long that makes economic sense or energy sense, I am not sure. The economics and the 

dynamics of that have changed with the cost of fuel increasing as 

sharply as it has. But there are roughly 100 tons per rail car, 200 

rail cars per month, and so that works out to about 240 tons a 

year. 

And then on the slash piles, our best estimate is that the loggers 

in the Black Hills on all ownerships produce about 5,000 of those 

slash piles every year, and I understand that Craig Bobzien and 

the folks in the Black Hills National Forest are working with some 

research people from Denver to try and quantify what the—try and 

quantify the amounts of material that are available from those 

piles. 

Senator THUNE. And back to Craig, in your testimony, you mentioned about 207,000 tons annually of biomass could be available 

in the Black Hills. 

Mr. BOBZIEN. Yes, I said that, sir, and that would be what would 

be readily available next to roads, like we showed in the photograph there. Some of our—while we have an extensive road system, 

some, you can take a chip truck currently to some, and not to some 

of the others. There is more biomass available that is more difficult 

and more expensive to retrieve. Yes, that is an estimate of what 

we have that is readily available next to main forest roads. 

Senator THUNE. Well, if the number that I had was accurate that 

came from the Renewable Energy Institute, it said you could actually get 105 gallons of cellulosic ethanol per ton of biomass, that 

would—if my arithmetic is correct, and there is a reason I didn’t 

go to South Dakota School of Mines and Technology—but there is 

over 20 million gallons just in the 207,000 tons that you talked 

about, which would be the equivalent, if you were going to build 

a biorefinery, of a 20–million-gallon refinery, which would be a substantial, I would think, refinery. So in any event, it seems to me, 

at least, that in the best of the readily retrievable amount that is 

out there, it is a significant amount. 

I have got some questions for Mr. Kramer and for Mr. Thompson, 

as well, but I want to allow Senator Johnson to ask some questions 

for these panelists, so go ahead. 

Senator JOHNSON. Thank you, Senator Thune. 

First, Mr. Bobzien, I believe that a robust renewable fuels industry using wood waste as a feedstock to produce cellulosic ethanol 

is another tool to managing our public lands. What types of benefits do you think communities located near National Forest lands 

can realize from a renewable fuels industry utilizing forest bioVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
16 

mass? Also, how do you think the management of public lands 

would be changed if we could establish a vibrant renewable fuels 

industry in the Black Hills? 

Mr. BOBZIEN. Thank you, Senator Johnson. Well, the first thing 

is, again, it is a condition where people could benefit from a 

healthy forest. That is where this all starts. And so the removal of 

some of the products from the forest are important to maintaining 

the forest health in much of the forest. 

Second, having the industry, as I pointed out, would reduce our 

smoke that we would be producing in the atmosphere, even though 

we try to burn when it is the very best ventilation in the atmosphere, we still produce smoke and it impacts the communities in 

the wildland burning, and so that would be a benefit to reduce 

that. 

Also, we would be taking that slash material that could threaten 

and create some hot fires prior to it being disposed. Those are some 

of the most important things I first see. 

And then for the industry, depending on how the renewable energy is developed, as several of the other panelists noted how that 

energy could be used locally, that would be an industry decision or 

a Congressional decision, based on how our laws relate to the use 

of this material. 

Senator JOHNSON. In the past few years, one of the most successful hazardous fuels reduction projects undertaken by the Black 

Hills National Forest was the Prairie Project along Highway 44 

west of Rapid City. Would the current definition of renewable biomass materials that is provided for in the 2007 EISA have excluded wood waste from the project from counting toward meeting 

the RFS? 

Mr. BOBZIEN. Actually, the Environmental Protection Agency still 

is responsible to interpret what are some of the definitions that 

apply there, so I don’t have a pat answer for you. I can’t say in regards to whether that would be included or not. Clearly, we have 

areas not only close to communities such as the Prairie Project, but 

in other parts of the forest where we have this residue that could 

be available for renewable energy production. 

Senator JOHNSON. Mr. Troxel, provided the Congress can modify 

the definition of renewable biomass, what improvements to the 

Forest Service Timber Sale Program or other commercial programs 

can the Forest Service pursue with producers in order to increase 

the value of harvesting the types of small-diameter trees and 

woody biomass necessary for incentivizing cellulosic ethanol plants? 

Mr. TROXEL. The most important thing that the Congress can 

help do is to give some stability and predictability to the National 

Forest Timber Sale Program, and most of what we have talked 

about here is driven by the values of the saw timber that the Forest Service sells in their Timber Sale Program. 

I have a graph. This top line is the allowable sales quantity from 

the Black Hills Forest Plan, and this is the line of actual accomplishments, going back to the remand of the Forest Plan by the 

Chief of the Forest Service in 1999. And all of the South Dakota 

delegation have worked very hard with us to increase funding and 

increase this program, but we are only now getting back to the 

level that the Forest Service predicted we would be at in 1998. 

17 

This is the sort of thing that is very tough to go to bankers or 

investors and say, we want you to put up 30 or 40 or 50 million 

dollars on a plant or a facility that is dependent for half to twothirds on supplies of woody biomass from the National Forest. 

Some specific ideas on how to do that, Mr. Bobzien alluded to the 

fire spending and how that is taking a larger and larger proportion 

of the Forest Service budget, and I think if the Congress would recognize that as part of the appropriations process, that would be 

very helpful. Right now, the Forest Service is on track to overspend 

their fire appropriations and they are actually in the process of 

going out and taking away money from forests like the Black Hills 

National Forest. They are taking away $400 million nationally, and 

that is a very disruptive step. 

Stewardship contracts are something that would be helpful. I 

think they allow the Forest Service to be more efficient. They can 

keep more of their money on the forests. It reduces the amount of 

overhead funding they send to the Washington office and the regional offices and allows them to combine more types of work in a 

single contract, which makes those more efficient. 

From the industry side, stewardship contracts tend to give more 

stability and predictability over the long term. There is still an 

issue with, we call it cancellation liability funding, that the Forest 

Service is required to maintain funds in the event that the contract 

was canceled, and there is legislation proposed that would deal 

with that. 

So I would say those things are steps that the Congress could 

take that would help get more stability and predictability, which is 

really the bottom line of what we need to see more of in order to 

incentivize the sorts of utilization that we are talking about today. 

Senator JOHNSON. Mr. Thompson, if the Black Hills can develop 

a viable cellulosic ethanol industry, utilizing biomass from public 

and private forest lands and thereby boosting the value of the timber from these lands, how would you predict that this type of energy production affects the development and highest and best use 

of private forest land in the Hills? Would land use and development patterns change? 

Mr. THOMPSON. I think, Senator Johnson, any time that you can 

develop a market for material that we have out there on our private forest lands that will help keep the farmer and the rancher 

on the land is going to be good for the local community. It is going 

to keep that land from being subdivided into 20–acre ranchettes. 

It is going to allow the tax structure and the assessment values on 

ag to provide those services for ag when sub-development will cost 

the county and the State additional dollars in infrastructure. Anything you can do to keep the rancher on the land, keep it from 

being unfragmented and keep it in more natural habitat will be a 

benefit to the community. 

Senator JOHNSON. Mr. Thompson, is there enough privately held 

land in the Black Hills to allow a meaningful and viable ethanol 

industry to exist? 

Mr. THOMPSON. Not on a stand-alone basis, Senator. I think it 

has to go hand-in-hand with the material that is on the Black Hills 

National Forest, as well. We need them both, and it is kind of a 

symbiotic relationship. They have got to go hand-in-hand. DefiVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
18 

nitely, the private lands can’t stand alone and support the kind of 

industry that we are talking about today. 

Senator JOHNSON. Mr. Kramer, it seems to me that one challenge 

facing your company caused by the new definition of renewable 

fiber is separating out wood waste collected from private lands and 

that collected off of public lands. If an ethanol company is supplied 

woody biomass material collected from different classifications of 

land, can you explain how that complicates your company’s compliance with the current law? 

Mr. KRAMER. [Off microphone.] Yes, sir. I can tell you [inaudible] 

we have a good idea where it came from, but we don’t know exactly 

where it came from. [On microphone.] How is that? We have a good 

idea where this came from, but we don’t know exactly where it 

came from. If it came from Hugh’s land, for instance, and his land 

was adjacent to the National Forest, and the Baker Brothers were 

out there doing the clean operation [inaudible] subscribed forest 

plan, and yet they might have gone onto Hugh’s land for some 

other reason, if this got into the same bin, the same truck, it would 

be very, very difficult to segregate the dust, the sawdust that is in 

here and to be able to understand what kind of [inaudible] from 

Hugh’s land or from the National Forest, which we can’t [inaudible]. So it is very difficult. 

Senator JOHNSON. What kind of penalty would you generate if 

you mixed products? 

Mr. KRAMER. I don’t think that we would have a legal issue as 

far as taking it or not or using it. It is the issue of losing the effect 

of the credit, which is financially credited on our balance sheet and 

cash-flow. We have to depend much like the corn plants did in the 

early days on some form of subsidy to keep us going while we develop commercialized technology. 

Senator JOHNSON. Thank you, Senator Thune. 

Senator THUNE. Mr. Kramer, as a manufacturer of ethanol from 

Black Hills wood chips, do you anticipate or see the need for any 

modifications from the current Black Hills National Forest Management Plan in order for the trimmings and slash to be utilized 

by a cellulosic ethanol plant? 

Mr. KRAMER. Senator, I don’t think that we need to change the 

existing plans that are out there today. From the numbers that we 

have done, there is enough to sustain at least one ethanol plant to 

the tune of about 50 million gallons, which is enough size for our 

business model. That means that you can produce about 50 million 

gallons over the course of a [inaudible] that location. But the Forest Plan is not [inaudible] today. It does need to be modified, and 

that is why I think it is important that we make sure that people 

understand we are not asking for more, just for what we are [inaudible]. 

Senator THUNE. What kind of transportation, feedstock transportation issues have you experienced with your current plant? It 

strikes me that one of the difficulties is, obviously, a kernel of corn 

is very deferent, and one of the issues that we tried to address in 

the 2008 farm bill with regard to cellulosic ethanol in the energy 

title was payment for storage, delivery, transportation, and that 

sort of thing. What types of issues have you dealt with in terms 

of transportation? 

19 

Mr. KRAMER. It has been exactly the cost of—what I pointed out 

in my testimony. Where corn prices are high, the reason for those 

prices going up has a whole lot to do with oil prices being high and 

production of corn and the transportation of corn to the ethanol 

plants. Those costs are no less as important for us when it comes 

to delivering the sawdust, for instance, from [inaudible] South Dakota or from Wyoming. At $45 a ton, the folks that are bringing 

us that sawdust are not making a lot of money and it really has 

a lot to do with the price of oil. So the learning point from that was 

for us to co-locate the plant with a sawdust mill waste provider. 

We have the keep that program that is out there [inaudible] put 

in place. It is going to offset about 50 percent of those costs if you 

look at that pair line. So it is important that we move along with 

the promulgation of the rules and start applying for those [inaudible]. 

Senator THUNE. Do you anticipate that transporting biomass 

feedstock to the Black Hills would negatively impact tourist travels 

or tourism in the Black Hills? if not, why not? What is your—— 

Mr. KRAMER. I am going to ask Dave Litzen to weigh in, and 

then I would like to have a little—— 

Mr. LITZEN. I am a graduate of South Dakota School of Mines 

and I did a little math before the hearing. 

Senator THUNE. That’s where all the smart people in my school 

went. 

[Laughter.] 

Mr. LITZEN. But using the amount that we believe is already in 

the Hills in terms of biomass slash on the ground, the 1.2 million 

tons that is existing, it would take about, we figure, 80,000 trucks 

to move that material out of the forest into a centralized location. 

Now, those 80,000 trucks would be spread over a 10–year period. 

Assuming that the consumption of ethanol in this area is about five 

million gallons a year, we would build a five million gallon-a-year 

plant. Therefore, that establishes a 10–year lifespan of this biomass that already exists, 8,000 trucks a year, more or less. Fortyfive trucks a day is what that amounts to. And according to some 

of the traffic maps that we have looked at, that is about a 1–percent increase in travel on the highways. So again, rough math 

based on some of the numbers that we are familiar with. 

Senator THUNE. And with regard to your business plan, how is 

the current definition of renewable biomass that is in the RFS affecting or impacting the plans that you have to produce cellulosic 

ethanol in the Black Hills National Forest? 

Mr. KRAMER. Like Craig Bobzien brought this up earlier, [inaudible] predictability is everything for us and capital markets, when 

it comes to looking for a loan for the next plant, it is based on contracts that we have, the input and the output, both the feedstock 

coming in and the ethanol going out. 

In the case of the input coming in, the Department of Energy has 

a loan guarantee program with 29 stipulations that you have to 

meet. One of them is that we have to be contracted for the feedstock to come into the plant. This—the way the law is written right 

now, we can’t take the credit from the National Forest material 

and thereby that negates that loan guarantee program. It cancels 

it out. So we really can’t use that loan guarantee program. 

20 

So from [inaudible], from looking at the next plant for us, knowing that the technology is still in commercial development, and 

every day we make advances on that, but the bottom line is we are 

going to be stuck with one plant until the capital markets improve, 

either for an adjustment—— 

[Inaudible] 

Mr. KRAMER [continuing]. Corn ethanol market improves, and 

that the negativity out there—the negativity that is out there on 

the corn-based ethanol, it influences the capital market for cellulose-based ethanol and absolutely hurts us. 

Senator THUNE. The Mines graduates are really talented. 

[Laughter.] 

Senator THUNE. Mr. Thompson, and Senator Johnson already 

asked a couple of questions that I wanted to get at with regard to 

the private land owners, but just sort of a general question. What 

information can the forest land owner community provide the committee, the Ag Committee and the Congress, to help in our oversight of the EPA and USDA’s efforts with regard to this issue? 

Mr. THOMPSON. I think the biggest assistance we can be to the 

committee and to the Federal agencies is the ability of the private 

land owners to give you quick feedback and quick turnaround. We 

are not constrained with all of the bureaucratic measures that are 

put on the Federal agencies and we can give you turnaround information very quickly. We can be adapting, and I think this industry 

has to be adapting. It has to be light on its feet. And land owners, 

I think, the producers of the biomass feedstock can be lighter on 

their feet than perhaps the Feds. 

Senator THUNE. Well, I do want to say, because I think it is— 

I toured the National Renewable Energy Laboratory last week in 

Golden, Colorado, and they are doing a lot of testing and experiments with cellulosic ethanol production from various feedstocks, 

including corn stover, including wood chips, including switchgrass, 

all of which we have an abundance of here in South Dakota. But 

their goal is to have cellulosic ethanol competitive with $65 oil by 

the year 2012, and furthermore, they believe that to hit the 21 million—21 billion, I should say, gallon RFS that is called for in the 

RFS by 2022, that we will have to build an additional 400 biorefineries, and that assumes 50 million, I guess, gallons per refinery, 

which would create up to 40,000 jobs. 

I think a lot of those jobs can be created right here in South Dakota, but it is going to take a change in the definition that will 

allow the feedstocks that are available here in the Black Hills, the 

biomass that is available out here, to be used, or cellulosic ethanol 

production in that definition changed so that it fits within the RFS. 

And that is why I hope that by continuing to elevate this issue and 

getting more people engaged in it, we will be able to persuade the 

Congress that that is the right direction to go. 

And I think it is really important that people realize that in 

many cases, what we are talking about here are these residues, or 

waste, slash piles, those sorts of things, are things that have no 

economic value and, in fact, impose a cost, an economic cost as well 

as an environmental cost. And we ought to be looking at ways that 

we can derive some value, some beneficial use from those things, 

and this is a remarkable opportunity, I think, for South Dakota 

21 

and it is very regrettable and unfortunate that this was excluded 

from the definition in the energy bill last year. We are going to try 

and rectify that. And so we appreciate your ongoing support and 

input on that. 

What I would like to do at this time—we have a few minutes— 

is just open it up to our panelists for some questions. If there is 

anybody in the audience, and we won’t be able to take a lot of questions, but we will take a few questions here if anybody has questions for any members of the panel. And we will bring you a microphone. 

Mr. KADIS. John Kadis, State Senator from Rapid City. Could 

you specify who in the middle of the night, who the forces were the 

prevented us from having the definition that you have to come back 

on at this stage? 

Senator THUNE. Well, the definition in the energy bill last year, 

the Senate bill included Black Hills National Forest. It went into 

conference with the House. All I know are reports that I have read, 

and some of the reporting that has been done on this suggests that 

at sort of the 11th hour, that the leadership in the House, and primarily Speaker Pelosi, had that definition changed so that it didn’t 

include Black Hills National Forest for eligibility in the Renewable 

Fuels Standard in the bill. So again, that is based upon reporting 

on that. All we know is that it was in there and then all of a sudden it wasn’t, and that happened very late in the process. 

Mr. CRANDALL. [sp.] I think you can hear me without the microphone. While you have Dave Litzen up there with a degree and experience, I would ask you to address the question [inaudible] are 

based upon having five gallon [inaudible]. Ask him to run the equation backwards. Ethanol comes from carbon. Carbon is in the trees. 

Carbon is in the cellulosic content. If you just count the carbon 

molecules in a ton, the amount of ethanol potential per ton escalates dramatically, and he is in a better position [inaudible], but 

since a big driver of the economics is that [inaudible] 105 gallons 

per ton [inaudible] ask him how much the potential is when science 

catches up with reality. 

The second point is that while that stuff is on the ground out 

there, it is 60 percent water. No one in South Dakota that is in the 

harvesting business with private land owners is going to haul 

water. They will reach the point where they will take the water out 

while it is in the pile. They will reduce it in size, [inaudible] pay 

for that [inaudible] 220, 240, 250 gallons per ton. When those 

compounding economics come back to South Dakota, they are going 

to take the form of a massive amount of [inaudible]. I would ask 

you the question, Senator. 

[Laughter.] 

Senator THUNE. Mr. Science? 

Senator THUNE. Do you want to take a shot at that, Dave? It is 

a good question. I can’t answer it. 

Mr. LITZEN. Thank you, Mr. Crandall, for putting me on the spot. 

The numbers that David brought up and just the maps [inaudible], 

the 100—I believe the 105–gallon per dry ton conversion is probably based on the theoretical availability in a ferment aging process. Some of the numbers that Dave is projecting, and I don’t know 

that it goes over 200 gallons a ton, again, depending on the feedVerDate Aug 31 2005 15:08 Jan 29, 2009 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 C:\DOCS\45835.TXT SAG2 PsN: SAG2
22 

stock, but it probably would take a technology like, for instance, 

you know, Chris [inaudible] is working on here through 

gassification-type processes that will convert the entire biomass to 

[inaudible]. 

There are differences of opinion as to [inaudible] we believe in 

the fermentation process because there is the opportunity to 

produce not only ethanol from the process, but also usable carbon 

dioxide and a solid byproduct that can be converted to electrical 

power, as well. So there are different applications for different circumstances. Again, our preferences are likely going to fall in that 

fermentation technology or 105 gallons per ton maximum. But 

again, there are other ways to do this and there is more than one 

solution. 

Senator THUNE. More questions, anybody? Yes, sir? 

Audience Member. If the Forest Service was meeting their allowable [inaudible], how much more biomass would be available [inaudible] on hand now? 

Mr. BOBZIEN. It is very close. It should be very close, because the 

operations we have right now are very close to the forest plan levels. 

Senator THUNE. Anybody else? 

[No response.] 

Senator THUNE. OK. Any closing comments from members of our 

panel? I want to give you all a chance before we adjourn here to 

make any final observations or thoughts. If there is a question that 

we didn’t ask you that you would like to have been asked or some 

information you would like to get on the record, please feel free to 

do that. Again, we appreciate very much your being here today and 

your input. 

All right, one more here. James? 

Audience Member. Senator Thune, maybe it would be appropriate to get on the record along with [inaudible] both you and Senator Johnson hereafter to get before us and help support the forests 

we have got and [inaudible] on the record and ask Mr. Bobzien 

what the actual growth [inaudible], and recognizing that since 1900 

this forest has grown from 1.5 million to over six million inventory, 

I think [inaudible] the current annual growth. 

Senator THUNE. Mr. Bobzien, do you care to answer that question, what the annual growth is? 

Mr. BOBZIEN. I would be happy to provide that fact for the 

record. I don’t have that right off the top of my head, Senator 

Thune. I will present the forest-wide growth amount, and then for 

those areas within the forest that we have managed for sustainable 

forest products. I will present those facts to you for the record in 

each one of those categories. 

Senator THUNE. OK. That, I would appreciate. That would be 

useful information to have, as well. 

Again, I want to thank everybody for their participation. This is 

an issue which, at the low end, it is 207,000 tons, at the high end, 

if it is 1.2 million tons, that is a lot of potential cellulosic ethanol 

and potentially a lot of jobs and economic development here for the 

Black Hills region. We certainly want to facilitate making that happen, particularly as cellulosic ethanol becomes commercially viable, 

and I don’t think that is very far away. The technology is there. 

23 

There is a lot of work being done already. KL is doing it. As I said, 

NREL in Golden, Colorado, is working on that. There are four [inaudible] right now from the Department of Energy that are working on converting other forms of feedstock into cellulosic ethanol, 

and I believe that that is the next generation of biofuels that will 

get us away from this debate of food versus fuel, which we hear 

a lot of these days with corn-based ethanol and which, I might add, 

incidentally, there is a lot of misinformation and distortion, as well. 

But nevertheless, the long range to get to 36 billion gallons of ethanol, we have got to move to the next generation of biofuels, which 

will be cellulosic ethanol made from many of the things that we 

talked about today, and many of which are in abundance right here 

in South Dakota and particularly here in the Black Hills. So I hope 

that we can fully utilize those in a way that not only preserves the 

health and the integrity of the Black Hills as a resource, but also 

takes many of these waste products that it generates and produces 

and reduce the fuel oil attributable to those and convert them into 

a beneficial and valuable resource from which we can derive an 

economic benefit here in Western South Dakota. 

So thank you all very much for attending. This hearing is adjourned. 

[Whereupon, at approximately 3:25 p.m., the committee was adjourned.] 

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A P P E N D I X 

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QUESTIONS AND ANSWERS 

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