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82–138 PDF 2013

UP AGAINST THE BLEND WALL: EXAMINING EPA’s 

ROLE IN THE RENEWABLE FUEL STANDARD 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY POLICY, 

HEALTH CARE AND ENTITLEMENTS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JUNE 5, 2013 

Serial No. 113–40 

Printed for the use of the Committee on Oversight and Government Reform 

( 

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

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

MARK POCAN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE AND ENTITLEMENTS

JAMES LANKFORD, Oklahoma, Chairman 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

JACKIE SPEIER, California, Ranking 

Minority Member 

ELEANOR HOLMES NORTON, District of 

Columbia 

JIM COOPER, Tennessee 

MATTHEW CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

(III) 

C O N T E N T S 

Page 

Hearing held on June 5, 2013 ................................................................................. 1 

WITNESSES 

Mr. Jack Gerard, President, American Petroleum Institute 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Joel Brandenberger, President, National Turkey Federation 

Oral Statement ................................................................................................. 11 

Written Statement ............................................................................................ 13 

Mr. Jeremy I. Martin, Ph.D., Union of Concerned Scientists 

Oral Statement ................................................................................................. 18 

Written Statement ............................................................................................ 20 

Mr. Lucian Puliaresi, President, Energy Policy Research Foundation Inc. 

Oral Statement ................................................................................................. 26 

Written Statement ............................................................................................ 28 

Mr. Christopher Grundler, Director, Office of Transportation and Air Quality, 

U.S. Environmental Protection Agency 

Oral Statement ................................................................................................. 72 

Written Statement ............................................................................................ 75 

APPENDIX 

Letter for the Record from The Honorable Bruce Braley, a Member of Congress from the State of Iowa Submitted by The Honorable Jackie Speier, 

a Member of Congress from the State of California .......................................... 94 

Letters for the Record from the Biotechnology Industry Organization and 

the Advanced Biofuels Association Submitted by Representive Speier ........... 95 

‘‘Economic Impacts Resulting from Implementation of RFS 2 Program’’ Report 

Submitted by Mr. Jack Gerard, American Petroleum Institute ....................... 100 

A National Renewable Energy Laboratory Study Submitted by The Honorable 

James Lankford, a Member of Congress from the State of Oklahoma ............ 163 

Written Testimony by Ms. Margaret Podlich, President Boat U.S., Submitted 

by Chairman Lankford ........................................................................................ 218 

A Letter for the Record from American Petroleum Institute (API) Energy 

and Submitted by Representative Speier ........................................................... 222 

An Article for the Record ‘‘The Navy’s Great Green Fleet Strikes Back’’, 

Submitted by Representative Speier .................................................................. 244 

(1) 

UP AGAINST THE BLEND WALL: EXAMINING 

EPA’s ROLE IN THE RENEWABLE FUEL 

STANDARD 

Wednesday, June 5, 2013, 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE & 

ENTITLEMENTS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2154, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Gosar, Jordan, Chaffetz, 

Meehan, DesJarlais, Farenthold, Woodall, Issa, Speier, Norton, 

Duckworth, Davis, Cardenas, and Horsford. 

Staff Present: Kurt Bardella, Majority Senior Policy Advisor; 

Richard A. Beutel, Majority Senior Counsel; Joseph A. Brazauskas, 

Majority Counsel; Daniel Bucheli, Majority Assistant Clerk; Caitlin 

Carroll, Majority Deputy Press Secretary; John Cuaderes, Majority 

Deputy Staff Director; Brian Daner, Majority Counsel; Linda Good, 

Majority Chief Clerk; Tyler Grimm, Majority Professional Staff 

Member; Ryan M. Hambleton, Majority Professional Staff Member; 

Scott Schmidt, Majority Deputy Director of Digital Strategy; Jaron 

Bourke, Minority Director of Administration; Nicholas Kamau, Minority Counsel; Adam Koshkin, Minority Research Assistant; and 

Rory Sheehan, Minority New Media Press Secretary. 

Mr. LANKFORD. The committee will come to order. 

I would like to begin this hearing by stating the Oversight and 

Government Reform mission statement. 

We exist to secure two fundamental principles: first, Americans 

have the right to know that the money Washington takes from 

them is well spent and, second, Americans deserve an efficient, effective Government that works for them. Our duty on the Oversight and Government Reform Committee is to protect these rights. 

Our solemn responsibility is to hold Government accountable to 

taxpayers, because taxpayers do have a right to know what they 

get from their Government. We will work tirelessly in partnership 

with citizen watchdogs to deliver the facts to the American people 

and bring genuine reform to the Federal bureaucracy. This is the 

mission of the Oversight and Government Reform Committee. 

Drivers across America today are going to fill up their gas tanks 

and they are going to complain about the price of energy. We are 

2 

Americans; that is what we do. We love to travel, but we hate to 

pay high gas prices. 

But there is also a new complaint: the frustration of filling up 

your car with ethanol, which is made from food and doesn’t burn 

as efficiently as gasoline; also, the variety of different options of 

what engine can take what fuel. 

I didn’t bring it with me today, but I have a 2011 vehicle that, 

when you open up the gas cap, on the door itself, on my vehicle, 

it has a big circle and a slash through it that says E15, telling me 

don’t you dare put that fuel in this vehicle, even though it is a 2011 

version. 

Renewable Fuel Standard, the RFS, requires that 35 billion gallons of ethanol equivalent biofuels and 1 billion gallons of biomassbased diesel be refined by 2022. To get there, refiners must have 

increasing amounts of renewable fuels, like corn ethanol into gasoline, each year. 

However, when this law was written, in 2005, and expanded in 

2007, we were living in a different time, and the drafters assumed 

that gas demand would continue to increase. Since then, the recession and the increased CAFE standards have pushed down the demand for gasoline. 

There is increasing evidence that RFS is not meeting the original 

bifold purpose to move the United States towards greater energy 

independence and security, and to increase the production of clean 

renewable fuels. 

Another market change since 2005 and 2007 is the current domestic energy boom, leading us to greater energy independence and 

security by leveraging our domestic petroleum supplies. Second, 

corn-based ethanol may not be any cleaner than gasoline and has 

other negative environmental consequences, such as using more 

water for reducing corn-based energy than refining gasoline. 

To account for these future uncertainties, Congress gave the EPA 

waiver authority to suspend RFS requirements for various reasons. 

EPA may waive requirements if there is an inadequate domestic 

fuel supply or if implementation of a requirement would severely 

harm the economy or environment of a State region of the United 

States. Last year, for example, in response to catastrophic drought 

conditions, several governors petitioned for a waiver. Although 

EPA found that the drought had created significant hardships, particularly for livestock producers, EPA did not grant the waiver. 

Now we have a new challenge; it is called the blend wall. Because the law requires increasing amounts of renewable fuels be 

blended into gasoline each year, if demand for gasoline goes down, 

the only way to meet the standard is by blending a higher percentage of ethanol. 

Currently, it is not uncommon to see E10 or 10 percent ethanol 

fuel. This year, however, refiners predict they will have to blend 

into E15. This presents two problems: it may be a defective product. Many automakers will void warranties if motorists use anything higher than E10 in their cars because of the engine damage 

it can cause, especially to older cars, boats, engines, and non-vehicle motors. As I have already mentioned, for my truck, at home as 

well, even though it is a newer vehicle. 

3 

Consumers don’t want it at times. In my home State of Oklahoma, you will frequently find gas stations advertising pure gasoline containing no ethanol in response to consumer demand. It is 

not uncommon for a gas station in Oklahoma City with a giant 

banner out front of it that says we sell real gas. 

By requiring refiners to produce a product that consumers can’t 

use and don’t want, it is only logical that this constriction of the 

market will increase fuel prices, causing economic damage as well. 

According to a study done by the economic consulting firm NERA, 

mandating E15 could increase the cost of gasoline by as much as 

30 percent by 2015 and increase the cost of diesel by as much as 

300 percent by 2015. 

In addition to refiners and consumers, other stakeholders are affected by this market distortion. Because of the over-reliance on 

food-based ethanol as a renewable fuel, the RFS has a negative impact on our food supply and security. 

The goal of this hearing is to see how we can alleviate the pressure on consumers. One way to do this is to change the law. That 

is the job of the Energy and Commerce Committee, not this committee. This committee oversees how the Executive Branch is implementing the current law. 

Today we will seek to learn what EPA can do, has done, or 

maybe has not done to ease the burden on consumers. 

I thank the witnesses, all of them, for their participation today 

and I look forward to hearing their testimony. 

I now recognize the distinguished ranking member, the 

gentlelady from California, Ms. Speier, for her opening statement. 

Ms. SPEIER. Mr. Chairman, thank you. I have a solution for you 

with your 2011 car. I just drove half way across the Country in my 

2008 Prius that takes any amount of fuel from any of those gas stations and got me 45 miles to the gallon. So I highly recommend 

Priuses as potential cars for the future. 

Mr. LANKFORD. I could actually, with my Ford truck, put that 

Prius in the back of it. 

[Laughter.] 

Ms. SPEIER. It is very roomy inside. I am going to take you for 

a ride in it. 

Mr. Chairman, thank you. Let me start off by reading this 

quotation: Our prediction, if things go very, very well, is that renewables could supply somewhere in the order of 30 percent of the 

world’s energy demands by the middle of this century. 

Now, as you think about who might have said that, I am sure 

lots of ideas come to mind that they may indeed be biofuel producers. But, as it turns out, the person who made this statement 

was the president of Shell Oil Company, Marvin Odum, in Qatar, 

at a recent conference that took place there. This is Shell Oil Company talking about the benefits of renewables. 

The majority has chosen today to focus this hearing on only one 

aspect of the Renewable Fuel Standard: our Nation’s signature law 

promoting the transition to cleaner fuel futures that Shell Oil and 

others say is on the rise. The so-called blend wall is an important 

and pressing issue for agriculture, refiners, and consumers. However, as we address the blend wall, we must not lose sight of the 

forest for the trees. 

4 

The RFS, on the whole, is about national security, clean energy 

innovation, and job creation. As a matter of fact, domestic biofuels 

have created 400,000 jobs and $50 billion in new activity. 

Mr. Chairman, I have a letter here from Congressman Bruce 

Braley that I would like to submit for the record, that references 

the fact that our hearing today does not have one renewable fuels 

producer testifying and, in his State, there are some 39 ethanol 

plants with over 3 billion gallons of annual fuel production offering 

jobs to 63,000 people, and about two of the first cellulosic ethanol 

plants in the entire Nation are under construction in his home 

State. Those two plants coming on line will generate 6 million tons 

of biomass available to convert to cellulosic ethanol. So I would like 

to submit this for the record. 

Mr. LANKFORD. Without objection. 

Ms. SPEIER. In light of calls from some quarters to repeal the 

RFS, I would remind my colleagues that the RFS originated as bipartisan legislation designed to achieve these critical goals. The 

RFS was first included in the 2005 Energy Policy Act under a Republican Congress and was signed into law by President Bush. In 

2007, the law was expanded with passage of the Energy Independence and Security Act, also signed into law by President Bush. 

To be sure, I have my own concerns over the impacts of the Renewable Fuel Standard on our vehicle fleet, on the food versus fuel 

problem, and on our environment. The law’s implementation has 

been far from perfect, but make no mistake, the EPA is charged 

with administering the RFS according to the law that Congress 

passed, and the RFS is still a relatively new policy. The EPA must 

use the flexible authority Congress granted it to ensure the RFS 

stays on track to meet our national clean energy goals. 

I look forward to hearing from the EPA today on how the agency 

intends to weed out any waste or inefficiencies in the programs and 

protect the integrity of its program moving forward. 

Moreover, as business works to scale up the production of cellulosic and other advanced biofuels, now is not the time to throw 

the baby out with the bath water by undermining the law before 

it has a chance to succeed. We are only one-third of the way into 

the RFS program; yet, renewable fuels remain capable of creating 

52 billion gallons of biofuels annually, decreasing dependence on 

foreign oil, reducing trade deficits, creating jobs, and reducing air 

pollution. 

The path forward demands continued support for those innovative technologies to produce alternative fuels such as biobutenol, 

cellulosic ethanol, green diesel, and green gasoline in order to provide clean energy now and for future generations. 

Thanks to the RFS, the first two commercial-scale second generation biofuel plants to be built in the U.S. are coming online this 

year, employing hundreds of Americans and injecting millions of 

dollars into local economies. Companies in Florida, Iowa, Kansas, 

Michigan, Nevada, Oregon, Texas, and Wyoming are leveraging the 

RFS to build the next wave of biorefineries in the years ahead, and 

not with one taxpayer dollar. 

In short, keeping the Renewable Fuel Standard on track is critical if America is to succeed in the clean energy race of the 21st 

century. These are not Democratic goals or Republican goals; these 

5 

are American goals. Our Nation’s top scientists and military commanders have repeatedly and urgently signaled the need to move 

forward on alternative fuels. 

At the end of the day, the question we need to ask is whether 

we want to produce real alternatives to oil in our fuel supply or 

not. American families who continue to suffer the consequences of 

a transportation system that is more than 95 percent dependent on 

oil know the answer to the question is yes. 

Mr. Chairman, I also have a couple other documents to submit 

for the record. One is from the Biotechnology Industry Organization and the other from the Advanced Biofuels Association. 

Mr. LANKFORD. Without objection. 

Ms. SPEIER. Thank you. 

Mr. Chairman, one more point. We also are in the middle of the 

mark on the National Defense Authorization Act, of which I am a 

member of, so I am going to have to move between committees for 

the next two hours, and I apologize in advance for my inability to 

be here for the whole hearing. 

Mr. LANKFORD. We will make sure that when we are talking 

about you is when you are gone, then. How about that? 

Ms. SPEIER. Thank you. 

Mr. LANKFORD. Okay. 

Members will have seven days to submit opening statements, as 

well, for the record. 

We will now recognize our first panel. 

Mr. Jack Gerard is the President and CEO of the American Petroleum Institute; Mr. Joel Brandenberger is the President of the 

National Turkey Federation; Dr. Jeremy Martin is the Senior Scientist of the Clean Vehicles Program of the Union of Concerned 

Scientists; and Mr. Lucian Pugliaresi is the President of the Energy Policy Research Foundation. 

Gentlemen, thank you all for being here. Pursuant to committee 

rules, all witnesses are sworn in before they testify. If you would 

please rise and raise your right hand. 

Do you solemnly swear or affirm the testimony you are about to 

give will be the truth, the whole truth, and nothing but the truth, 

so help you, God? 

[Witnesses respond in the affirmative.] 

Mr. LANKFORD. Thank you. You may be seated. 

Let the record reflect that the witnesses have all answered in the 

affirmative. 

In order to allow time for discussion, please limit your testimony 

to five minutes. Your entire written statement, of course, will be 

made part of the permanent record for this hearing. 

Mr. Gerard, you are up first, it looks like. We will be honored to 

receive your testimony. 

WITNESS STATEMENTS 

STATEMENT OF JACK GERARD 

Mr. GERARD. Great. Thank you, Mr. Chairman and Ranking 

Member Speier and members of the subcommittee. It is a privilege 

to be with you today. I appreciate the opportunity to share with 

you API’s concerns regarding the renewable fuels standard. 

6 

API, as you are probably aware, represents all aspects of the Nation’s oil and natural gas industry. We support employment for 

over 9.2 million Americans, constitute over 7.7 percent of our gross 

domestic product, and deliver more than $85 million a day to the 

Federal Government in the form of taxation, royalty, and other 

sorts of revenue. 

With the limited time we have today, I would just like to move 

right to the point: The Renewable Fuel Standard is irreparably broken and poised to do significant harm to consumers, the economy, 

and the Nation’s fuel supply. The impact of the mandate has been 

made worse by EPA’s unwillingness to let science, court decisions, 

and common sense guide its implementation. 

Now EPA is currently facing the biggest test of all that has been 

mentioned already this morning, the E10 blend wall. The renewable fuel mandates in the Renewable Fuel Standard increase yearly, while demand for fuel in the United States is dropping, creating 

a situation known as the E10 blend wall. When this happens, refiners will be forced to blend a fuel with more than 10 percent ethanol 

or reduce production to meet the mandate, thus creating a crisis 

for consumers, whose automobiles are built and warranted for E10. 

In fact, most consumer engines are designed for an E10 blend, including small engines, such as motorcycles, boats, and 

lawnmowers. 

EPA’s actions to approve E15 despite scientific evidence showing 

millions of automobiles could face engine and fuel system damage 

is an unnecessary risk to consumers, to automobiles, and to small 

engines. 

Quite frankly, EPA’s implementation of the RFS is galling. The 

agency has continued to set unrealistic cellulosic standards since 

2010, resulting in refineries having to pay the Government a fee 

for a fuel that doesn’t exist. Further, even after the industry successfully sued the Government for the return of our phantom fuel 

fees, EPA doubled down on its indefensible action by setting the 

2013 target volume even higher, flouting a U.S. Court of Appeals 

decision issued just days earlier striking down their 2012 mandate. 

To give you a big-picture view of the problem, let me summarize 

the study conducted by NERA Economic Consulting that Chairman 

Lankford mentioned earlier. The study found that once the blend 

wall is breached, the cost associated with diesel fuel would increase 

by 300 percent by 2015. Cost associated with gasoline would increase by 30 percent by 2015. In broad economic terms, the RFS 

could cause a $770 billion decrease in U.S. GDP by 2015 and reduce take-home pay for American workers by $580 billion. Staggering numbers. 

Keep in mind all of this stems from EPA’s dogged enforcement 

of an obsolete law, which was written at a time of assumed energy 

scarcity for our Nation and heavy dependence on foreign-sourced 

energy. That is not our reality today. 

These impacts are unnecessary. The fact is the blend wall and 

its harmful impact on consumers could be prevented today if EPA 

would simply use the waiver authority, mentioned earlier, contained in the law to waive the RFS completely or to at least waive 

down the volumes below the 10 percent. 

7 

Bottom line, EPA must act now to avoid the impending blend 

wall crisis. Longer-term, in our view, the best solution is for Congress to repeal the RFS once and for all. 

The stakes are simply too high for inaction, which could cost consumers millions of dollars, place at risk small engines and automobiles, and unnecessarily burden an already shaky economy. 

Thank you very much for your time and attention. I look forward 

to your questions. 

[Prepared statement of Mr. Gerard follows:] 

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Mr. LANKFORD. Thank you. 

Mr. Brandenberger. 

STATEMENT OF JOEL BRANDENBERGER 

Mr. BRANDENBERGER. Chairman Lankford, Ranking Member 

Speier, members of the subcommittee, my name is Joel 

Brandenberger. I am president of the National Turkey Federation, 

which represents 98 percent of the commercial turkey industry in 

this Country. I am testifying today on behalf of 148,000 growers 

and employees nationwide working at more than two dozen processors and 300 allied companies that comprise the $29 billion U.S. 

turkey industry. 

Our members and I thank you for this opportunity to discuss the 

impact of the Renewable Fuel Standard and to examine the role 

EPA plays in managing this exceedingly rigid Government mandate. We will look at the way the RFS has distorted feed costs and 

how that has increased the prices consumers pay at restaurants 

and in grocery stores. We will also show you how EPA has ignored 

or certainly underutilized the significant power Congress gave it to 

prevent this very situation. 

Everyone involved in the ethanol debate loves to cite facts and 

figures to support their case about what the RFS has or has not 

done, but the truth can be done in just a few key statistics. 

When the RFS was created in the 2005 energy bill, livestock and 

poultry consumed about 55 percent of the corn crop and ethanol 

about 14 percent. 

Today, by gobbling up 43 percent of a larger corn crop, compared 

to livestock’s 41 percent, ethanol has become the Nation’s top corn 

consumer. Ethanol consumption of corn has jumped by 3 billion 

bushels in that time and feed usage has dropped by 1.5 billion 

bushels. 

Turkey production, which was on the rise in 2006, began plummeting in 2008 and remains today almost 10 percent below its 10- 

year high. Most others in livestock and poultry would tell similar 

stories. 

The RFS is to blame, period. Corn is the major ingredient in turkey feed, as it is for almost all livestock and poultry. Higher corn 

prices led a North Carolina company earlier this year to announce 

it is ceasing turkey production after more than a half century in 

business. Last year, a California company declared bankruptcy, citing the RFS as the major factor in its decision. Under similar circumstances, in 2008, two turkey companies went out of business; 

a grower and cooperative in Iowa cut production by 50 percent and 

another cooperative in Mr. Chaffetz’s district closed its doors for 

three months. 

The turkey industry already has lost 750 jobs this year. You 

would have to build quite a few ethanol plants to replace those lost 

jobs. If the feed supply does not become more secure and feed costs 

do not stabilize, other companies could find themselves at risk. 

Many economists and meat and poultry producers predicted this 

outcome. The only ray of hope at the time the RFS was created was 

Congress’s decision to allow EPA to waive all or part of the mandate if economic circumstances warranted. Twice now States have 

petitioned the EPA for such a waiver and both times EPA has deVerDate Aug 31 2005 10:54 Jul 30, 2013 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\82138.TXT APRIL
12 

nied the request. The impact of the most recent waiver denial is 

still being felt today. 

The failed waiver process is the biggest indicator of just how 

flawed and rigid the RFS really is. I am sure no one intended to 

craft a policy that picked winners and losers among the Nation’s 

corn consumers and that hurt hardworking Americans, but that is 

what happened because the waiver process, as written, is not 

quick, is not efficient, and is highly politicized. 

Though it anticipated the potential need for RFS flexibility, Congress did not anticipate the RFS, after nearly a decade, would remain the primary force behind ethanol production. The ethanol industry’s extreme dependence on the RFS results in EPA facing 

enormous political pressure when a waiver request is submitted. 

In 2008, EPA denied a waiver request from Texas, despite circumstances that would have led anyone to believe that the corn 

crop was going to be short. In the end, EPA’s gamble paid off that 

year and the market adjusted. But last year, when several States, 

led by Arkansas and North Carolina, submitted waiver petitions, 

EPA went double or nothing on its bet and again denied the petitions, stating an RFS waiver would not impact ethanol production 

and thus ‘‘will have no impact on corn, food, or fuel prices.’’ The 

agency claimed to have extensive analysis to support that decision, 

but it didn’t actually release that analysis at the time it rendered 

its decision. 

EPA also failed to follow the statutory requirement that it consider regional impacts of the RFS, stating it was required only to 

determine the mandate’s national impact. With such a generalization, EPA effectively rendered the waiver mechanism meaningless. 

Unlike 2008, the outcome of EPA’s gamble is far from clear. The 

weather refuses to cooperate. In place of drought you have extreme 

rains in the heartland that are slowing corn and soybean plantings. 

Corn contracts for the month of May closed at more than $7 a 

bushel, more than two and a half times the price of corn pre-RFS. 

The Government can’t control the weather, or most factors that 

affect the corn supply, but it does have the power to take pressure 

off the corn markets. The consequences of not using that power are 

becoming more severe. Turkey companies and others that produce 

animal proteins are cutting production; income on livestock and 

poultry farms is declining; workers in meat and poultry plants face 

cutbacks; and every American is feeling the bite at the dinner table 

and at the gas pump. 

It is time to repeal a significant portion of, or drastically reform, 

the RFS, and we thank you for the opportunity to be part of that 

process today. I would be happy to answer any questions. 

[Prepared statement of Mr. Brandenberger follows:] 

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Mr. LANKFORD. Thank you. 

Dr. Martin. 

STATEMENT OF JEREMY I. MARTIN, PH.D. 

Mr. MARTIN. Chairman Lankford, Ranking Member Speier, and 

members of the subcommittee, thank you for the opportunity to testify about the opportunities and challenges facing biofuel policy 

today. My name is Jeremy Martin. I am a senior scientist at the 

Union of Concerned Scientists. UCS is the Nation’s leading sciencebased nonprofit putting rigorous, independent science to work to 

solve our most pressing problems. 

The goals of the Renewable Fuel Standard are smart goals; not 

just more biofuels, but better biofuels that go beyond fuel-based 

fuels. The RFS is a practical policy to cut oil use and increase domestic production of clean, low carbon biofuels. It will provide rural 

economic development and ensure that the U.S. converts its leadership in science and technology into good jobs in the growing clean 

energy industry. 

But there are certainly real problems posed by today’s fuels, both 

oil and corn ethanol. The solution is not to lock in the status quo. 

We need to move forward with the next generation of advanced 

biofuels. 

To get there, we need a stable Renewable Fuel Standard to serve 

as a foundation for investments in biofuels made from waste products, agricultural residues, and environmentally friendly energy 

crops. For this reason, we do not support legislative changes to the 

RFS. 

According to our analysis, ample domestic biomass resources are 

available to support RFS targets, and developing these biomass resources will provide economic opportunities, rural developments, 

and good jobs not just in the corn belt, but all over the Country. 

What is needed is to scale up the industry that will convert this 

biomass into clean fuel. 

The first commercial scale cellulosic biofuel facilities are now 

starting up in Florida and Mississippi, and several more are under 

construction in Iowa and Kansas. But while this progress is encouraging, it will take time to scale up a new industry, as it did for the 

oil and corn ethanol industries. In the meantime, the gap between 

the schedule laid out in 2007 and the actual scale-up means that 

EPA needs to adapt their implementation of the RFS to today’s circumstances. 

We have done extensive analysis, informed by the work of agricultural economists across the Country and around the world, on 

the options EPA has to administer the RFS consistent with the law 

that Congress passed in 2007. The smart approach is to limit the 

mandates for food-based fuels to 20 billion gallons in 2022. Under 

this approach, biofuels continue to grow, but at a slower rate than 

we have seen over the last few years, which will reduce pressure 

on food markets and slow agricultural expansion. Growth beyond 

this limit should come from non-food-based cellulosic biofuels. 

Realizing the full 36 billion gallon ambition of the RFS is critical 

to delivering on the economic and environmental benefits of the 

RFS, but our analysis and experience over the last few years shows 

that expanding food-based biofuels is not the smart path to get 

19 

there. Biofuels are now a major factor in U.S. and global agricultural markets, so the implementation of the RFS must be informed 

by, and responsive to, agricultural market factors. Failure to do so 

doesn’t just raise food prices, it undermines the goals of the RFS 

itself. 

We also need to acknowledge the challenges of adapting our vehicles and infrastructure to a changing set of fuels. What is called 

the blend wall is, in reality, more like a set of speed bumps. There 

is no reason we need to fuel up with at least 90 percent gasoline 

forever. But we do need to proceed with caution. 

Today’s RIN prices provide the economic driver to support expansion of drop-in biofuels and higher ethanol blends, but if we try to 

change our fuel mix faster than our vehicles and fueling infrastructure can accommodate, we may set back the transition we need to 

make. 

Under the RFS implementation strategy, we advocate the scaleup of advanced biofuels will be more gradual than is presently anticipated. This means we have time to get it right, coordinating the 

transition of our fuel mix, our vehicles, and our fueling infrastructure. 

Congress gave EPA the tools and flexibility it needs to administer the RFS in a smart way, adapting to changes that were unforeseen in 2007. Opening the RFS now will create regulatory uncertainty, delaying investment in the real solutions that the RFS 

is delivering. 

Instead, EPA needs to work with DOE, USDA, and all the stakeholders to set ambitious, but realistic, goals for the next phase of 

the RFS, from 2016 to 2022, consisting with the constraints in agricultural markets and vehicle and fueling infrastructure, but moving forward on the oil saving and climate solutions we need. The 

infrastructure for gasoline and corn ethanol is already built out, 

and they will be around with or without the RFS. What is at stake 

is the next generation of biofuels, fuels that do not compete with 

food and offer dramatically lower carbon emissions. 

We are not moving forward on these as fast as we hoped to be 

in 2007, but the RFS is pointing us in the right direction. We need 

to deal with today’s challenges and keep moving forward towards 

better biofuels tomorrow. 

Thank you again for the opportunity to be here today. I have provided additional details in my written testimony, and I would look 

forward to answering any questions. 

[Prepared statement of Mr. Martin follows:] 

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Mr. LANKFORD. Thank you, Dr. Martin. 

Mr. Pugliaresi. 

STATEMENT OF LUCIAN PUGLIARESI 

Mr. PUGLIARESI. Chairman Lankford, Ranking Member Speier, 

and members of the subcommittee, I want to thank you for this opportunity to testify on the Renewable Fuel Standard and EPA’s 

management of this program. Of particular importance is EPA’s 

use of its waiver authority, which will shortly become the most important policy instrument in determining the path of gasoline and 

diesel prices over the next two to three years. My testimony today 

includes an assessment of EPA’s waiver authority under the RFS 

and why it will be the main determinant in driving up gasoline 

prices in the near future. 

Go to the first slide. 

[Slide.] 

This is official data from the Energy Information Administration. 

This is really what is driving the high numbers in the NERA assessment, and, as you can see, the EIA shows that we just will not 

have these advanced biofuels until after 2020 do we start to see 

some real development. When you don’t have the fuels, you have 

only one choice: to cut production or to raise prices, and this is 

what is driving the NERA analysis. 

So we tried to look at an analysis in which we thought we could 

relax some of these real physical constraints. 

Next slide. 

[Slide.] 

We said what happens if we have all the gas stations we needed 

for E85 and we could actually have access to it by the whole driving public? Even under this case, in which we waive all cellulosic 

requirements, all advanced requirements, and we only rely on E85 

and, through some almost magic, we have enough marketing channels for it, the price of E10 goes up. The RFS causes a cost-shifting; 

it requires obligated parties to pay down the price of E85 and to 

put that cost on E10. This is why NERA gets such devastating consequences on the national economy. Rising gasoline prices are like 

an excise tax. A $0.50 increase in gasoline prices takes $70 billion 

out of consumers’ wallets. 

Next slide. 

The fundamental problem with E85 is it is too costly. At no time 

since 2000 have we seen E85 be more cost-effective to E10. This 

is the fundamental problem. You can’t get consumers to buy it for 

performance reasons, but you can’t also get them to buy it because 

it is too expensive. 

Next slide. 

This is Minnesota, a place not unfamiliar to E85, a place in 

which ethanol is embraced. But, as you can see, even as the number of fueling stations and outlets for E85 continue to grow, consumer demand, consumption of E85 fell. 

Next slide. 

[Slide.] 

One issue that some of the proponents of the mandate, by the 

way, we are not against ethanol. We think ethanol is a very valuable and important blending component for the production of gasoVerDate Aug 31 2005 10:54 Jul 30, 2013 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 C:\DOCS\82138.TXT APRIL
27 

line. We need it. It helps us to meet our oxygenate and our fuel 

specification standards. But, as you can see, there is no real constraint in adding additional fueling options at American service 

stations. There has been enormous growth in electric outlets, enormous growth in CNG. E85 is not showing up at gasoline stations 

because the consumers don’t want to buy it. 

Next slide. 

[Slide.] 

I think we have spoken about this a bit, but, as you can see, the 

forecast of long-run demand for gasoline and for diesel fuel have 

fallen dramatically from when we first put this program in place. 

This is why we are running up against the blend wall so quickly. 

Finally, the last slide. 

[Slide.] 

You know, all three conditions that were prevalent when the Renewable Fuel Standard was passed, which was rising imports, falling production, and rising demand, every one of those conditions 

are no longer with us today. 

So where we are now is we have this enormous strategic opportunity. The developments we have seen in shale gas are now moving to liquids and our production path from now to 2022 is an enormous shift, it is a paradigm shift, and basically we are now at the 

position where we have a large number of regulatory programs 

which are running head-on against this renaissance. We can’t figure out how to build out the midstream in a cost-effective way and 

have processing technologies that are cost-effective. We will push 

some of this crude back in the ground. 

With that, I will conclude my testimony. 

[Prepared statement of Mr. Pugliaresi follows:] 

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Mr. LANKFORD. Thank you all for your testimony. We will work 

our way through questions here five minutes at a time, as we get 

a chance to pass these questions around. If we have a moment, we 

will get a chance to follow through on some of those as well, depending on our time period. 

Mr. Gerard, let me just tell you a quick story, and this is for all 

of you, as well. You spoke specifically of fuel prices, several of you 

did, of the price of fuel as it goes. I spoke to an 8th grade class 

two weeks ago in Roosevelt Middle School, which is one of the poorest areas of Oklahoma City, and they submitted their questions to 

me in advance. And as I flipped through those questions, I was 

stunned at the number of them that asked the question about gas 

prices, and for their particular family to say what can be done because our family is having a tough time getting to work now and 

getting back and forth to school, and writing statements of I may 

have to walk in the days ahead because we cannot afford the gasoline. 

The statements that were made about what is really coming on 

the consumer, both in the price, as Mr. Brandenberger mentioned, 

of food and of fuel, that is a real issue that we are facing right now 

for people that are the poorest and most vulnerable in our communities. 

What can be done right now for EPA to provide some certainty 

in what is going to happen in energy prices for the next year? 

Mr. GERARD. Well, there are probably a number of things EPA 

could do. The first and foremost, back to the Renewable Fuel 

Standard, though, send a signal to the marketplace that we are not 

going to put undue pressure, use the waiver authority to not put 

undue pressure on the prices that exist today. 

Just very quickly, Mr. Chairman, I know that you understand 

this. The key drivers behind the price of gasoline are, first, crude 

oil trading on the global marketplace and second is taxation. Every 

State imposes somewhere between $0.35 and $0.70 a gallon on 

what it is that is produced. But what we are coming against under 

the Renewable Fuel Standard is the blend wall, where Government 

mandate is going to force us to make a decision as refiners. If we 

break through that blend wall and get forced to produce a fuel that 

the auto manufacturers have said don’t put that in our cars, back 

to your car situation, because it is going to hurt the engine and 

they are not going to function well, or do we get compelled in the 

marketplace to begin to move back on our production? That is 

changing the fundamental supply and demand equation, putting 

upward pressure on the price. 

So EPA needs to move quickly, with their waiver authority, to 

send a signal to the marketplace we are going to take this one variable out of play and not put upward pressure on the price of our 

fuels. 

As NERA reports, and I would like to submit that for the record, 

if it is appropriate, Mr. Chairman, the potential here is staggering. 

Mr. LANKFORD. Without objection. 

Mr. GERARD. The reason those numbers only go to 2015 is because it is so staggering and so infeasible the model doesn’t work 

after that. When you drive the price of diesel, the cost associated 

with diesel upwards of 300 percent, there is no place else to go in 

48 

2016; you have broken the system. That is how serious this is. 

epa’s announcement to the marketplace we are going to relieve the 

Government pressure and get us back to a pure free market would 

go a long way. 

Mr. LANKFORD. Okay. 

Mr. Brandenberger, you mentioned some of the same things dealing with food, as well, and the price of food, but you also, in your 

testimony, a little earlier referenced the shift in jobs that is occurring; as we are seeing an increase in jobs in corn-based ethanol and 

cellulosic and some of the renewable fuels, we see a dramatic decrease in job in the agricultural industry as well. Can you go into 

greater detail on that? 

Mr. BRANDENBERGER. Sure. Absolutely, Mr. Chairman. Even a 

small-to medium-sized turkey plant will provide several hundred 

jobs. A very large ethanol plant won’t come close to providing the 

same number of jobs. So there has been a real shift in rural America. 

As I mentioned, our production is still around 10 percent below 

its 10-year high; it is still about 6 to 7 percent below where it was 

in 2008. And those are real jobs that are lost. We have a lot of people about to be out of work in North Carolina, when the last turkeys run through the plant I mentioned there. There are a number 

of workers in California whose future is uncertain when the second 

largest turkey company there had to move to Chapter 11 protection. And this is going to continue. 

And the problem comes, as well, just very briefly, is in both instances, when the RFS has had a real impact on corn prices, it has 

come at an exact moment when the meat and poultry industry already had other problems that affected it. So there comes a limit 

as to how much cost can be absorbed. You have to start passing 

it along to your customer. If the economy is not strong, the customer quits buying the product and then you get into a vicious 

cycle where supplies grow and plummet. It is a vicious, vicious 

cycle. 

Mr. LANKFORD. We have faced this before. In 1979, the Government, at that point, Jimmy Carter was president, in the famous 

malaise speech made a speech to say that by the year 2000, because the Federal Government was going to coordinate all these efforts, 20 percent of the energy used in the United States would be 

done by solar power. And they were going to put a process in place 

to make sure 20 percent of the energy used in the United States 

was going to be solar by the year 2000. Obviously, that goal was 

not achieved. Not even close at that point. 

You can make the plan and make the proposal and say this is 

what is going to happen, but if the technology is actually not there 

to do it, you can’t actually get it there. As has been mentioned before, we can make this statement to say we are going to burn this 

much fuel, but if that fuel is not economically viable, if it is not 

really there, if the cellulosic fuel doesn’t exist, as you mentioned 

before, the phantom fuel that is out there demanding to be used, 

we can make all the federal demands we want to make; that 

doesn’t mean it actually exists in the real world. That is the challenge that we are facing currently right now. 

49 

As much as we would love, as Dr. Martin mentions, as much as 

we would love to get away from food-based fuel, it doesn’t exist in 

the quantities that is needed to actually achieve that, and we have 

to find some solutions to this in the days ahead. 

With that, I yield to the ranking member, Ms. Speier, for her 

questions. 

Ms. SPEIER. Thank you, Mr. Chairman. You know, I am somewhat baffled by our discussion so far. It is almost like we are going 

to say we really can’t move forward, we have to move backwards. 

I think that Dr. Martin made an excellent suggestion about how 

we can fix your problem, Mr. Brandenberger, when he said you 

could cap the amount of corn ethanol that can be produced. That 

would then kind of up the opportunity for cellulosic. What do you 

think about Dr. Martin’s proposal? 

Mr. BRANDENBERGER. Well, the amount of corn-based ethanol is 

about two, three years away from being capped at 15 billion gallons, anyway, under the law. It is already approaching 14 billion 

gallons. We are already having enormous problems. If you are talking about capping it where it is today, or even capping it slightly 

below where it is today, there could potentially be some benefit. 

But if you are talking about following the cap already in law, I 

don’t think that will give us or any of our brethren in the livestock 

and poultry world a whole lot of relief. 

Ms. SPEIER. Okay, so there is some opportunity here for both to 

flourish, for corn ethanol and cellulosic ethanol, and for turkeys to 

be properly fed, and we just need to find a way to get to a happy 

medium here, because here is the problem: the oil production is 

going to cap, even with fracking, in very short order. So we have 

to be prepared with alternatives. We have oil companies saying 

they are moving in that direction. BP, for a while there, was saying 

beyond petroleum, although they have kind of abandoned that particular moniker today. 

The military, the Navy wants to have 50 percent of its fuels coming from biofuel by 2020. So we cannot just dig our heads in the 

sand here. 

Dr. Martin, can you comment on what Mr. Brandenberger has 

just said? 

Mr. MARTIN. Sure. I would be happy to. I think the point here 

is to address some of the near-term challenges that people have 

raised, and there certainly are challenges with food-based biofuels, 

but to recognize that locking in place a status quo doesn’t advance 

the oil savings and climate solutions that we really need to move 

our Country forward. 

So I think my testimony pertained to a slightly longer view of 

this policy, but a longer view is necessary. You didn’t build the oil 

industry overnight. You didn’t build the corn ethanol industry overnight. So between now and 2015 we are not going to build a cellulosic biofuel industry that is the scale of the oil industry. So we 

need a steady path forward that allows investors the confidence to 

build this next industry and to create the jobs and opportunities 

that will come with it. 

Ms. SPEIER. The reference that Mr. Brandenberger made to jobs 

I think doesn’t square with some of the realities that we are seeing, 

so I would like to point out that the Ineos plant in Vero Beach, 

50 

Florida, a cellulosic biofuel plant, will produce 8 million gallons of 

ethanol from municipal solid waste, create more than 400 jobs, and 

contribute more than $25 million into the Florida economy. 

KiOR, in Columbus, Mississippi, will produce ethanol from woody 

biomass, yielding over 13 million gallons of gasoline, diesel, and 

other fuel oil blend stocks. The $220 million facility is expected to 

create several hundred jobs during operation and over 500 jobs onsite during peak construction. 

Additionally, there are new plants either in the planning stages 

or under construction in as many as 20 States and Canadian provinces, including BlueFire Renewables in Anaheim, California, 

POET–DSM Advanced Biofuels in Scotland, South Dakota, and 

Fiberright in Lawrenceville, Virginia, to just name a few. 

So here we have a real jobs engine being produced, real hopeful 

technology, an opportunity to reduce our dependence on foreign oil, 

and we are somehow suggesting we just have to cut this off and 

repeal the RFS. 

Mr. Martin, can you describe the new technology that is allowing 

these facilities to produce these volumes of cellulosic biofuel? 

Mr. MARTIN. Not in a few seconds, but one of the really exciting 

things is that there is not just one technology, there is quite a different variety of technologies. Some of them are biological, some of 

them are thermochemical, and they would take some time to get 

into, but different technologies are suitable to different feedstocks. 

So we have a lot of opportunities that can create different types of 

fuel using different types of resources all over the Country, so I 

think that is the opportunity that is in front of us and that is why 

it is so important to move forward. 

Ms. SPEIER. Thank you, doctor. 

I yield back. 

Mr. LANKFORD. Thank you. 

Mr. Chaffetz. 

Mr. CHAFFETZ. Thank you, Mr. Chairman, and thanks for calling 

this hearing. This is something that actually affects every single 

American. It affects them at the table where they eat; it affects 

them in their pocketbook at a time when we are struggling with 

jobs and the economy. This is not something the American economy 

can continue to sustain. 

Mr. Gerard, I would like to ask you a couple questions about the 

economic impact and the blend wall specifically. I know there was 

this NERA report. Could you talk to that? I believe it said it would 

result in a $770 billion decline in the GDP. Explain the economics 

behind that. 

Mr. GERARD. Yes. What NERA did is they went back and they 

looked at the situation on the Renewable Fuel Standard, and I 

wish Ranking Member Speier were here because there is a key connection, I think, with some of her comments earlier, and that is 

that we can all hope for the new fuels, the cellulosics and other 

things Dr. Martin has talked about. 

The reality is the statute mandates and it is forcing as if somehow it is going to compel technology to produce a fuel that doesn’t 

currently exist. Cellulosic is a perfect example. I think everyone 

would help we have cellulosic fuel today. The oil and natural gas 

industry happen to be some of the largest investors in some of 

51 

these renewable alternative forms of energy. The problem is it 

doesn’t exist today in the quantities necessary, but the statute 

mandates the blending of them. We paid millions of dollars to the 

EPA under the statute, finally got a court to compel them to give 

our money back, paying for a fuel that doesn’t exist. 

So when you look at the NERA study, what they did is took the 

assumptions under the statute, what the law required us to do, and 

said what does this result in. And we have four fundamental options: we can either cut back production because we can’t meet the 

statute, therefore, the volumes we are producing are limited and 

our requirement to certify we are using, called RIN, or Renewable 

Identification Number is met; or we can try to go to the E85 that 

Lu talked about, which the public has already said we are not 

going to buy that fuel, it is less efficient, essentially costs us more; 

we can go to E15, which is the approach the EPA has taken. Incidentally, all the research shows, and every automobile manufacturer asked by Congressman Sensenbrenner last year said we will 

not warranty our cars if you put E15 in them. And the last option 

is we can export the gasoline. Why? Because we don’t have to blend 

the piece we export. 

So you are driving us in a position in the United States where 

we have no alternative, no place to go. The NERA analysis says 

that greatly escalates price and, therefore, could add to the cost of 

producing diesel upwards of 300 percent, gasoline 30, taking $770 

billion out of our economy as a result of the ripple effect. 

Mr. CHAFFETZ. So what has happened to the ethanol RINs? My 

understanding is that this traded as a commodity. In early 2013 it 

was about $0.05 per gallon. It moved at one point north of $1.00 

per gallon. It is now, at least on May 30th it was $0.89. What is 

the economic impact of that? What does it mean for a regular family who has a regular job and just trying to get by? 

Mr. GERARD. Well, experts predict different things, but the bottom line is this: the price of the RIN, Renewable Identification 

Number, that we have to buy to certify we blended the fuel has increased over 1400 percent in the last few months, over the last four 

or five months; and that is being driven by the expectations of the 

market. The market can see the blend wall. The market understands the blend wall is upon us. And just like the EPA action, 

thinking they were going to take pressure out of the blend wall by 

forcing us to create a fuel that we understand will damage automobiles, that is where we stand as an industry. It is a hard thing 

to answer. The bottom line is it adds to cost. Clearly, everything 

this Government mandate will do prospectively, just like NERA 

concluded, significantly adds to cost and impacts the consumer. 

Mr. CHAFFETZ. The cost of running an automobile, to running 

that tractor, to the airline tickets that you are going to buy, it is 

all going to be affected. 

In my last few seconds here, Mr. Brandenberger, explain bigger 

and broader than just turkeys how feed is affected and what that 

does to the price. Turkey is one of the most consumable products 

we have out there, such a staple in the American diet. Go a little 

deeper in the economics on what this does to this industry. 

Mr. BRANDENBERGER. Absolutely. Thank you for the opportunity. 

To sort of lay the foundation for that, two things to what we have 

52 

been discussing here today. We are going to try to play it very 

straight with the subcommittee when we talk about jobs. We are 

talking about permanent, ongoing jobs in the plants themselves; 

not construction jobs that are created, not the many other jobs that 

are created in the support industry. We are talking about permanent jobs in the plants. And to give it a broader case, in all livestock and poultry, corn is the top feed ingredient. It is true for 

chickens, true for hogs, true for cattle in the feed lots. 

We have created a situation where, when we have a year like 

last year, when there was such a severe drought, we have corn 

stocks down near historic lows, we have to compete in the market 

for that corn. But the Federal Government has said one person gets 

to go to the head of the line because their customers have basically 

a regulatory gun to their head; their customers, the ethanol industry’s customers have to take their product. We don’t have a turkey 

consumption standard or a chicken consumption standard or a beef 

consumption standard. Our customers don’t have to buy our products; the ethanol industry’s customers have to. That gives them an 

incredible advantage when competing for corn in a short market. 

So I hope that maybe clarifies a little bit just exactly what the 

ripple effect is. We don’t have an ability always to pass our costs 

along. 

Mr. CHAFFETZ. I thank the chairman. Yield back. 

Mr. LANKFORD. Thank you. 

Mr. Cardenas. 

Mr. CARDENAS. Thank you very much. 

Well, lucky for the turkey industry, I have to buy your product 

because I don’t eat pork or beef. So that is my main source of protein. So you have one big consumer here. 

Mr. BRANDENBERGER. Thank you. 

Mr. CARDENAS. You are welcome. 

Dr. Martin, I would like to ask you a question. People might be 

thinking I am being facetious, but I am being serious. What scientists are concerned, why are they concerned, and what are they 

concerned about when you talk about concerned scientists? 

Mr. MARTIN. Thank you. We are concerned about a variety of 

problems. Probably at the top of the list is climate change. But we 

are also concerned about other impacts that oil causes to our economy, to our security, and, as I already mentioned, to the climate. 

We have other programs working on issues related to food, to agriculture, to tropic deforestation, to global security. So we work on 

a variety of issues and we are concerned about all of them. 

Mr. CARDENAS. Okay. Well, thank you for your concerns and the 

effort you are putting into that. 

I have a question to Mr. Gerard. You mentioned earlier something about costs increasing by 300 percent. What were you referring to, under what time frame, and what is the potential cause of 

that? 

Mr. GERARD. That is the NERA analysis I just mentioned to Congressman Chaffetz who was here. We are happy to provide that for 

the record. But what it does, congressman, is we come to this E10 

blend wall where we are forced to make decisions because they are 

pushing us into creating fuels, if you will, that the market cannot 

accept for technological reasons. We then get put in the position 

53 

where we have to find ways to justify or document that we are 

doing what the law requires. Therefore, the options to us are limited, but some of those options include to take fuel, for example, 

and to reduce the amount that we produce. The study itself, I believe, references this as rationing. So when you begin to impact the 

market by Government mandate like that, of course, others seeing 

this coming react to it and this particular economic group concluded that that would drive costs associated with diesel as high 

as 300 percent higher and gasoline 30 percent higher, in addition 

to the impacts on take-home pay and decrease in GDP activity. 

Mr. CARDENAS. So basically those are potential increases, they 

are not charted actual increases; they are potential increases based 

on cause and effect, correct? 

Mr. GERARD. Correct. Predicted to occur within the next two 

years. 

Mr. CARDENAS. And you represent the American Petroleum Institute, so if they had to write a letter right now and say either they 

are going to put in their letter to Congress about RFS, would that 

letter be talking about eliminate RFS or modify RFS? 

Mr. GERARD. Well, we take two approaches, congressman. First 

thing we do is we would suggest EPA act immediately under their 

waiver authority to send a signal to the marketplace, take the pressure out of it. The second approach we would take right now is a 

repeal request. The reason we pursue repeal, we believe the statute 

has become so complex and convoluted that we ought to step back 

and start over and look at the new reality we are faced with in the 

United States today, where we produce a lot of our own fuel right 

here at home and we are able to produce even more here at home 

in the forms of oil and natural gas. We should look at those realities to secure our own energy future. 

Right now, part of the mandates required under the Renewable 

Fuel Standard require significant imports from Brazil of sugar cane 

ethanol. Well, if the statute was originally enacted to get us off foreign imports, all we have done is shift it from one commodity to 

the other. 

So we would ask for repeal and then step back and say, okay, 

what is the vision of the Country as it relates to renewable fuel, 

cellulosic and others? We are big investors in those. If we had answers to that today, they would already be in the marketplace. 

Mr. CARDENAS. I have one more question to you guys. My time 

is limited. I have been dying to ask this question all my life, well, 

since I was 15 years old and I got my driver’s license and paid for 

my own gas. I always wonder that no matter what is going on in 

the world, whether there is a war going on, gas prices seem to 

jump up; whether the war ends, gas prices seem to stay stagnant 

or jump up; whether or not there is disasters or what have you 

going on affecting oil-producing countries, gas prices seem to either 

go up or stay stagnant, regardless. So in my personal experience, 

and many of my constituents, that seems to be the case. They go 

up a lot easier than they go down. So the question I have for you 

or your industry is do you document the spikes and let the public 

know the whys of those spikes as they occur, or is that too proprietary? 

54 

Mr. GERARD. Those movements in the price of gasoline, diesel 

fuel, whatever they might be, are all a matter of record by a number of agencies, particularly Government. But let me respond more 

generally, if I can, congressman. As you look at the price of gasoline and fuels generally, it is driven, as I mentioned earlier, primarily by the cost of crude oil. Now, what is significant about the 

new reality in U.S. production today? We are having a significant 

impact on the potential supply equation on a global scale. In the 

past two years, the United States is now the number one natural 

gas producer in the world. IEA, the International Energy Agency, 

has predicted that if we stay on this course of production increase, 

we will surpass Saudi Arabia as the number one world’s oil producer in seven short years. 

There was an article just as week or so ago talking about OPEC. 

OPEC is very concerned about what is going on in the United 

States today. This has geopolitical ramifications to it that will 

change the world as we know it. That is why we think we need to 

get back and refocus on reality, look at things like RFS that were 

put in place at a very different time, under very different assumptions, and deal with the reality today to maximize our potential as 

a Nation to become energy secure. 

Mr. CARDENAS. Thank you, Mr. Chairman. I yield back. 

Mr. LANKFORD. Mr. Jordan. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. Brandenberger, let me first start here. I kind of want to just 

cut to the chase, if I can. The law says the EPA can waive the Renewable Fuel Standard if ‘‘implementation of a requirement would 

severely harm the economy of a State, region, or the United 

States.’’ 

Does the Renewable Fuel Standard increase the cost of producing 

turkey, Mr. Brandenberger? 

Mr. BRANDENBERGER. Absolutely. 

Mr. JORDAN. Does the Renewable Fuel Standard increase the 

cost, I know you are in the turkey business, but does it increase 

the cost of producers in the pork industry? 

Mr. BRANDENBERGER. Absolutely. We have a lot of members who 

produce both turkey and pork. 

Mr. JORDAN. Does it increase the cost of producing beef? 

Mr. BRANDENBERGER. Yes. 

Mr. JORDAN. And, therefore, would it be logical to assume that 

because the cost of production is up, that the cost to the consumer 

of those products, turkey, pork, and beef, is also going to be increased? 

Mr. BRANDENBERGER. In most cases, yes. 

Mr. JORDAN. And, Mr. Gerard, does the Renewable Fuel Standard increase the actual cost of fuel? 

Mr. GERARD. Yes. Economists and experts say it does. 

Mr. JORDAN. Mr. Brandenberger, does the Renewable Fuel 

Standard increase the cost of other non-protein, non-livestock food 

products, the cost of production, corns used in all kinds of food 

products, does it increase the cost of those other food products? 

Mr. BRANDENBERGER. The people I talk to in those industries assure me it does. 

Mr. JORDAN. They tell me the same thing. 

55 

Mr. Martin, I think you even said in your testimony you don’t 

want to expand the food-based fuels and the Renewable Fuel 

Standard. 

So I guess I go finally to Mr. Pugliaresi. So is all this adding to 

the cost of the American consumer, the American family, increasing the strain on their budget? Is it harmful to the economy? 

Mr. PUGLIARESI. It is very harmful to the economy because it 

acts like a massive excise tax. But, more importantly, we are allocating resources to activities which have very low value added, and 

often harming activity in high value added activities which would 

help to foster high rates of economic growth. We now have 10 years 

of very low economic growth, less than 2 percent. We should take 

a very hard look at our entire regulatory program on the fuel sector, because that is one of the drags. 

Mr. JORDAN. Okay, so, if I could just quickly sum up, then, every 

food product that uses corn is seeing an increased cost; fuel itself 

is an increased cost, which, according to the economists here, is 

going to make it difficult for every family. Every family’s budget is 

being hit by this. 

So the simple question is, Mr. Chairman, for the second panel, 

Mr. Grundler, from the EPA, or, frankly, the acting head of the 

EPA, Mr. Perciasepe, or the nominee who is slated to be the head 

of the EPA, the question is way haven’t you waived the standard. 

I mean, the law is real clear: if implementation of the requirement 

would severely harm the economy of a State, region, or the United 

States, you can waive the standard. So these guys are all great and 

they are saying everything that I think a lot of us already knew, 

and I think the American consumer understands every time they 

go to the grocery store, every time they pull into a gas station. 

So the real question is, from the EPA, why in the heck haven’t 

you done what the law says you can do? And then we can think 

about how we are going to change the law, if we need to, but there 

is relief right now. I know we have to keep asking questions of 

these fine gentlemen, but I want the EPA guy up there to say what 

gives, what is the deal. This is as obvious and as plain and as simple as it can be. You guys have the authority to help every single 

family in this Country and you won’t do it. We want to know why. 

So I look forward to the second panel and I yield back. 

Mr. LANKFORD. Would the gentleman yield his final one minute? 

Mr. JORDAN. Be happy to. 

Mr. LANKFORD. Mr. Gerard, you made a comment earlier I would 

like to follow up on. You made a comment about one of the alternatives is to export more gasoline in this structure. What did you 

mean by that? 

Mr. GERARD. Well, what happens when we get forced into the 

blend wall, we have to make decisions about what we do with the 

product. Do we quit producing the product, thus leading to rationing, as some of the economic analyses suggest? Or the other out is 

you potentially export gasoline because you don’t have to attach a 

RIN to it. 

Mr. LANKFORD. Has that already started occurring? 

Mr. GERARD. Over time, we, as a Nation, have always exported 

some refined product and gasoline. 

56 

Mr. LANKFORD. But that is being seriously considered to solve 

this problem, we could export? 

Mr. GERARD. It is difficult. Where we are today and what is so 

difficult about where we stand, under the law, the EPA is supposed 

to tell us on November 30th of the previous year what the standard 

is going to be. 

Mr. LANKFORD. Do we know that yet for this year? 

Mr. GERARD. We don’t know it yet. 

Mr. LANKFORD. It is passed November 30, by the way. 

Mr. GERARD. It is passed November 30 of 2012, when we were 

supposed to learn what is going to happen for 2013, what is required for us. So we hear, in January, what their proposal is. It has 

not yet gone final. We don’t know, today, half way through 2013, 

what is expected of us in terms of where they are ultimately going 

to land, because they have the waiver authority that is being 

talked about on some of these standards. So as an industry, I can’t 

speak for the individual companies, but let me tell you there is a 

lot of hand wringing going on right now, trying to understand the 

Government mind-set, trying to understand where EPA is, frankly, 

trying to understand where the Congress goes next on this. EPA 

has that authority year by year. Ultimately, this needs to be repealed. It is creating great anxiety in the marketplace; it is forcing 

decisions unrelated to market factors because of governmental interference, if you will, or drivers. It is a serious problem. I wish I 

could tell you with clarity what each other individual company is 

going to do. I am merely laying out what the options are, none of 

which are good until you fix the Renewable Fuel Standard. 

Mr. LANKFORD. Thank you. 

Mr. Jordan? 

Mr. JORDAN. I thank the chairman for his indulgence. 

Real quickly, if I could just run down the list. Why won’t the 

EPA do what seems obvious to all of us? What do you think their 

motivation is for not doing what clearly needs to be done? 

Mr. GERARD. I can’t tell you what is in their head. What I can 

tell you, congressman, is if one believes that you can take a Government mandate and force the creation of a technology, which I 

believe is a silly notion, that is the only thing I can come to. Or 

they are literally trying to reorganize or re-craft, if you will, the entire fuel economy of the United States. 

We look at this from, for example, our situation under cellulosic 

fuel. As I mentioned earlier in my comments, in 2010, when they 

came out with a mandate, the fuel didn’t exist. We asked them, we 

said, please waive that down because the fuel doesn’t exist. They 

said, no, we are not going to do that. We got to the end of 2011; 

we actually had to petition them with a waiver that says please, 

in a formal way, waive it down to zero, because now we have gone 

through the year. We all know it doesn’t exist. Will you give us relief? And the response was no. 

So we paid over $5 million to the EPA. I might add that is a new 

taxing authority, from our vantage point. Gave $5 million to the 

EPA for a fuel that doesn’t exist. We came to the next year. What 

did they do? They raised the number on us, even though it didn’t 

exist in the previous year. So we had to go back to the U.S. Court 

of Appeals here in D.C. and get a court to instruct the EPA to 

57 

waive the standard down to zero. The fact is it is fascinating, I 

don’t know if any of you would be interested, but in the particular 

court decision, here is what the court says: The EPA is not allowed 

‘‘to let its aspirations for a self-fulfilling prophesy divert it from a 

neutral methodology.’’ 

Now, the court mandated that they say since there is no fuel, 

give the money back to the refineries. Within days the EPA issued 

their proposal for this year. They doubled down, they increased the 

mandate for us on cellulosic over what it was the previous year 

that the court had struck down literally five or six days earlier. So 

I can’t tell you what they are thinking. That is a long answer. It 

is hard for us to predict. I can tell you it is raising havoc in the 

marketplace. And you have industries trying to provide consumers 

benefits and values of fuel at affordable, reliable cost, and now we 

have Government that is dictating that. It is a real problem. 

Mr. LANKFORD. Thank you. 

Mr. Davis. 

Mr. DAVIS. Thank you very much, Mr. Chairman. I, too, want to 

thank you for calling this hearing because I think this issue is one 

of the most important ones that we face. Trying to strike the appropriate balance between protection of our environment and the 

health of the American people, and at the same time providing a 

reliable, safe product in terms of the production of oil and gasoline 

really is no easy task. So it is fraught with a tremendous amount 

of disagreement. 

Mr. Gerard, let me ask you has the EPA approved E15 for use 

in any car or light truck model year 2001 or later? 

Mr. GERARD. Yes, they have, Mr. Davis. In fact, what they did 

in two steps or in two processes, they granted two waivers. So now 

they have approved it for 2001 and later vehicles. Yet, going back 

to Mr. Lankford’s comment, our research, the Coordinated Research Council, which is a combination of automakers and our industry and the EPA and DOE, I might add, have come to the conclusion, based on research, that with E15 you put millions of cars 

at risk, not to mention what you potentially do to small engines; 

chainsaws, lawnmowers, motorcycles, etcetera. So, yes, they have 

used waiver authority under the Clean Air Act to grant that opportunity, and it is a real problem. And every automobile manufacturer that responded to Congressman Sensenbrenner last year said 

they will not warranty their cars if they use E15. But the EPA has 

granted that. 

Mr. DAVIS. Is it legal to use E15 in motorcycles? 

Mr. GERARD. I don’t think it is. I think they specifically excluded 

some of the smaller piece of that, perhaps motorcycles. Let me go 

back and find that specific detail. It is not legal in motorcycles, in 

small engines. 

Mr. DAVIS. Did the DOE find any increased risk of engine damage from using E15? 

Mr. GERARD. This is a great question I would encourage the committee to look at closely, because in the process of granting the E15 

waiver, the EPA had underway an emission standard for catalytic 

converters on cars. When they decided to grant the waiver, they 

took that study that was unrelated to E15 at the time and used 

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pating in, which originally had EPA part of it to design the study, 

they wouldn’t wait for that study to come out. That study was concluded and shows that you put millions of automobiles at risk. 

So we need to look closely at the science. We believe the science 

has not been done. In fact, California, the California Air Resources 

Board has said we will not use E15 in California; in fact, we believe it will take many years of study to determine if it should be 

used. 

Mr. DAVIS. Did they find if there were no significant changes in 

vehicle tailpipe emissions, vehicle driveability, or small non-road 

engine emissions as ethanol content is increased? 

Mr. GERARD. Well, their conclusions based on an emissions test 

about catalytic converters was they attempted to suggest that answered the fundamental question of auto durability and fuel systems. The analysis done by the Coordinating Research Council concluded it clearly showed impacts on fuel system and clearly showed 

impacts on some model years on durability, valves, etcetera. So 

while they attempted to extrapolate, in our view, an unrelated 

study for these purposes, real research that goes to the real question about the impacts of E15 shows there are serious problems. 

Mr. DAVIS. Thank you. 

Let me ask Mr. Pugliaresi a question here. Most consumers 

think that the numbers on the gasoline pumps, 85, 87, 89, are just 

synonyms for paying a low, medium, or high price for gas. What 

do these numbers actually represent? 

Mr. PUGLIARESI. If you are referring to the octane numbers, they 

refer to the performance that this gasoline does for specific engine 

types. So certain kinds of high-end cars require much more compression, they require higher octane. But most automobiles in 

America today can operate on 87 to 89 octane. 

Mr. DAVIS. Thank you very much, Mr. Chairman. I yield back. 

Mr. LANKFORD. Mr. DesJarlais. 

Mr. DESJARLAIS. Thank you, Mr. Chairman, and I thank the 

panel for being here today. 

I wanted to talk about a couple different things. Mr. 

Brandenberger, in Tennessee we have a lot of poultry; Hubbard 

LLC in Pikeville, Tennessee. I don’t know if you know Jay Daniels, 

the director of operations. We have sat down and had many discussions. I believe he said about 85 percent of the cost for them is in 

feed. So this has a huge impact. We also have Tyson in Shelbyville, 

Tennessee; and I know you are turkey, these are chickens. But 

what is the amount of corn that this needs compared to other livestock? 

Mr. BRANDENBERGER. Well, you are right, I can speak a little 

more specifically to the amount of what feed costs in turkey production. For turkey it is about 70 to 75 percent of the cost of production, so pretty similar to the numbers you are quoting for chicken. 

I think the most telling thing is there isn’t any real substitute 

for the corn. Yes, there are some byproducts from ethanol production that can be blended in a little bit, but it is not a one-for-one 

substitution. When corn becomes less available, prices go up. I 

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dustry have chosen to handle it. We are buying 1.5 billion fewer 

bushels of corn now than we were when the RFS was created. 

Mr. DESJARLAIS. So that is your biggest competitor, really, to 

bring in lower cost to the consumer in the stores, is your competition with the ethanol program? 

Mr. BRANDENBERGER. That is the way it has turned out. I am 

sure that is not what Congress intended. 

Mr. DESJARLAIS. Okay. And you can’t use the distilled dried 

grain or the DDGs with turkey and they really can’t with chicken. 

Mr. BRANDENBERGER. That is the byproduct. We can use it in a 

limited amount. Some would try to characterize this as, oh, well, 

it is no problem, we put the distiller’s grains back into the market. 

That is not true. In turkeys, as a rule, 10 percent of the feed ration 

is about the maximum a distiller’s grain can go. And distiller’s 

grains are not of equal quality. In poorer quality grains, you are 

lucky to get to 5 percent you can blend in. 

Mr. DESJARLAIS. Okay. 

Mr. Gerard, I want to talk a little bit about small engines. This 

is a little bit of a pet peeve of mine. I just cleaned out my storage 

shed and I have a pressure washer, a weed eater, and a lawnmower, about $1,000 worth of equipment that were initially damaged by ethanol fuel, the 10 percent ethanol. It damaged the fuel 

lines. I have had all these repaired once. I try to buy pure gasoline 

for them, but I have teenage boys who I think have put the wrong 

kind in, and it has kind of worked on the weed eater because I 

have convinced my wife that spraying Roundup along the fence line 

is better than using the weed eater; it is certainly less labor intensive. But I am not sure she is still with me on that. 

But really, if you own a leaf blower, a weed eater, a lawnmower, 

a pressure washer, I hail from Sturgis, South Dakota. We have a 

lot of motorcyclists who have talked to me about the ethanol in gasoline. Tennessee is a great hunting State; we have people who use 

four-wheelers, we have fishing boats. So can you talk to me a little 

bit about the impact on small engines and why people should be 

forced to deal with this? 

Mr. GERARD. In that context, congressman, I am not an expert 

on small engines, but let me just say when you look at the breadth 

and scope of everybody that is very concerned and, in many instances, opposed to what the mandates of the Renewable Fuel 

Standard are, this is clearly a focus on many people’s minds. In 

preparation for today, I was reading some material by some of the 

small engine manufacturers. For example, one piece of testimony, 

a direct quote from one who had a chainsaw that said these additional blends or these higher blends of ethanol make the machine 

run too hot, and on occasion his chainsaw would engage, whether 

he wanted it to or not, in the course of doing his work. 

So clearly an adverse impact, particularly on the smaller engines, 

be they lawnmowers, weedwackers, whatever they might be. And 

we find in the marketplace, obviously, much like yourself, a lot of 

people come in and say I don’t want any blend in my fuel, I want 

the gasoline, because as the small engine repairmen and others are 

telling them, it won’t hurt their product or the equipment they 

have paid so much money for. So, generally speaking, yes, that 

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60 

clists groups, they are all a part of a broader coalition seeking repeal and reform of the statute. 

Mr. DESJARLAIS. I think you mentioned earlier the actual cost of 

producing a gallon of ethanol and blending it in is not cheaper than 

just regular gasoline. 

Mr. GERARD. That is correct. The thing to remember there, when 

you look at it on an energy content, on a Btu basis, gasoline is generally always cheaper than ethanol. When you look at it on a volumetric basis, they will say, no, ethanol is cheaper, but the reality 

is you don’t get as much energy out of it. 

Mr. DESJARLAIS. Let me ask one thing. I was recently traveling 

to South Dakota and I had not seen these in Tennessee, but in 

Iowa, I saw my first pump that you could choose 10, 20, or 30 percent ethanol, and the 30 percent was the cheapest of the three. 

Does that make any sense at all to you, then, from what we just 

talked about from a cost standpoint? 

Mr. GERARD. It is hard to predict, unless somebody has used that 

as a marketing tool, etcetera. As Lu talked about a little earlier, 

when you look at the heavier amounts of ethanol, like in E85, the 

consumer is telling us with their buying practices they don’t want 

it. You look at Minnesota, you look at Iowa, the number of service 

stations that will sell the higher content fuels, the actual demand 

for the fuel is going down, even though you are increasing the 

number of service stations. 

There is about 4 percent of our fleet today that are flex fuel vehicles that can burn it; only about 1 percent of that 4 percent actually use it on a day-to-day basis. So consumers are deciding what 

they are going to buy, and regardless what the statute mandate or 

the EPA regulatory mandate is, that is the marketplace. We need 

to be thinking consumers, number one, two, and three in this discussion. 

Mr. DESJARLAIS. And that is what my consumers in Tennessee 

are telling me, so thank you for your input. 

I yield back. 

Mr. LANKFORD. Thank you. 

I would like to submit for the record a study that was conducted 

by the National Renewable Energy Laboratory, done in 2011, specifically dealing with 4-stroke engines, small engines and such, and 

to be able to get this into the record as well. Without objection. 

Mr. LANKFORD. Mr. Horsford, you are up to bat. 

Mr. HORSFORD. Thank you. Good morning, Mr. Chairman. 

Thank you to the witnesses who are here. I do want to just start. 

I know a previous colleague of mine, a couple questions back, kind 

of implied what is in the mind of the EPA and the regulators; why 

don’t they just change their direction, I guess at the behest of the 

industry. I would note that while people may not agree, RFS is the 

law and it was a law that many Republicans and former President 

George Bush implemented. So to somehow suggest that the EPA 

should indiscriminately choose which laws it should properly implement and which ones it shouldn’t I think is questionable. 

Let me get to my question on ethanol production, which has been 

around for a long time. In the years since passage of the RFS, fuel 

blends of 10 percent ethanol to 90 percent gasoline have become 

deeply entrenched in the transportation fuel production apparatus. 

61 

Dr. Martin, if the RFS was repealed, is it likely that ethanol 

would no longer be blended with gasoline? 

Mr. MARTIN. No, it is not at all likely. In fact, that was the substance of epa’s analysis last year in considering this request for a 

waiver, and, in theory, there is complicated economic analysis behind that, but in practice these RIN prices tell you a story, and last 

year RIN prices were very, very low, only a few pennies, and that 

is evidence that people could have avoided complying with the law 

by purchasing those RINs, and there wasn’t much interest in doing 

that. So I think that is reasonably clear evidence backed up by 

much more detailed analysis that, in fact, waiving the RFS would 

not reduce the amount of ethanol use dramatically, and I think 

that was an important part of their decision. 

Mr. HORSFORD. So, as a follow-up, if the repeal of the RFS would 

not likely have a large impact on core production for ethanol, what 

would be its effects? 

Mr. MARTIN. Well, it would certainly stop immediately investment in next generation biofuels, so that is precisely our concern. 

We are quite conscious of a lot of the problems with the expansion 

of corn ethanol, but at this point stopping the RFS, even trying to 

rewrite the RFS would stop investment in next generation biofuels 

and sort of lock in 10 percent ethanol, 90 percent gasoline. So we 

don’t think that is the smart solution to the challenges that oil 

causes our economy. We think we need to move forward, but we do 

need to be conscious of some of the challenges and make sure that 

the policy is flexible to address those. 

Mr. HORSFORD. Okay, so according to the EIA, total U.S. oil production peaks in 2019 and oil production extracted from tight formation through hydraulic fracturing will peak in 2020, as the 

Ranking Member talked about earlier. Then U.S. oil production begins a steady slide. In essence, the shale boom just delayed the inevitable by a decade or so. The EIA projects imports will continue 

to contribute roughly half of total U.S. crude oil supply. That 

means Americans will continue to spend roughly $300 billion per 

year on oil imports, a large share of which comes from politically 

unstable and hostile regions. 

Mr. Gerard, since the RFS was adopted in 2007, the private sector has invested billions of dollars in the renewable fuel space. 

What actions, and at what level of investment, has the oil industry 

made in the past five years to ensure that our Nation’s distribution 

infrastructure is ready to distribute higher blends and new fuels? 

Mr. GERARD. That is a great question. We are the leaders in investment and technology, particularly as it relates to fuels, zero 

carbon, and many low carbon and many technologies. Let me give 

you one quick fact. I can’t tell you the last five year number; I can 

tell you the last decade number. From 2000 to 2010, the Federal 

Government spent about $43 billion to develop these new technologies. The oil and natural gas industry spent about $71 billion 

over the same time frame, and the entire rest of the industry outside the oil and gas industry spent about what we did, and that 

is $74 billion. So when you look at those investing in new cuttingedge, breaking technologies, the oil and natural gas as a sector is 

the leader in making those investments and making things happen. 

62 

Now, there may be a second part of your question that is an important one, congressman, to answer, and it goes to the infrastructure question, and this is a myth I would like to dispel. Ninetyseven percent of all the service stations you see out there today are 

not owned by the oil and natural gas industry, they are small businesses, they are Ma and Pa operations. In fact, 58 percent of those 

service stations that are out there are single station owners, meaning they only have one station in their portfolio. 

So when you look at potential costs associated with infrastructure attached to a Government mandate to distribute a fuel, you 

need to look at the actual ownership. It is estimated between 

$25,000 and $200,000 per retrofit of a service station to be able to 

implement, to change the station. 

Mr. HORSFORD. Can I ask specifically, then, what have the oil 

companies, your members done to support those Ma and Pa station 

owners? 

Mr. GERARD. We have relationships with most of them to produce 

the fuel that they request and ask for to make their business 

strive. That is the business we are in. 

Mr. HORSFORD. But specifically and monetarily what have you 

done, what have your companies done? 

Mr. GERARD. We have done everything that we should do to promote the use of the product longer-term, from promoting the product to producing the product to distributing the product. Everything associated with that we do, we continue to do, and we invest 

billions of dollars here in the U.S. doing it. 

Mr. HORSFORD. Thank you. I know my time has expired. If you 

could please provide the committee with those examples in how the 

oil companies work with those small business owners. 

Mr. GERARD. Happy to do so. 

Mr. HORSFORD. Thank you. 

Mr. LANKFORD. Dr. Gosar. 

Mr. GOSAR. Thank you. 

Mr. Gerard, I am going to ask you kind of a general question because you understand the dynamics of our economy. A family is 

having harder time putting food on the table, true or false? 

Mr. GERARD. All economic indicators are true, they are having a 

difficult time. 

Mr. GOSAR. More people are on food stamps, are they not, true 

or false? 

Mr. GERARD. That is my understanding. I am not an expert in 

that area by any means. 

Mr. GOSAR. Mr. Brandenberger, could you answer the same questions? 

Mr. BRANDENBERGER. That is my understanding as well, and obviously, in the current budgetary times, snap is under a lot of pressure right now. 

Mr. GOSAR. Gotcha. 

Mr. Martin, true or false on both those questions? 

Mr. MARTIN. I have no expertise in those. 

Mr. GOSAR. Oh, come on, now. You are a consumer. Do you go 

to the store? Come on. You can’t be a heartless scientist. Come on. 

63 

Mr. MARTIN. I am not a heartless scientist, but I try hard to stay 

within my area of expertise, and I don’t have any special expertise 

in this area. 

Mr. GOSAR. There is no need of expertise like this. Don’t hide. 

Mr. MARTIN. What is that? 

Mr. GOSAR. Don’t hide. You don’t need expertise on this. This is 

general economics 101. There are more people on food stamps than 

five years ago. 

Mr. MARTIN. I have read that in the newspaper. 

Mr. GOSAR. Okay. Food prices are going up. 

Mr. MARTIN. Compared to when? 

Mr. GOSAR. Five years ago. 

Mr. MARTIN. I really don’t know off the top of my head. 

Mr. GOSAR. Have you bought turkey lately? 

Mr. MARTIN. You would have to ask my wife. 

Mr. GOSAR. It has gone up. So it wasn’t so hard. 

Mr. Pugliaresi, can you answer those two questions? 

Mr. PUGLIARESI. Yes. 

Mr. GOSAR. Yes. Definitely gone up there. 

The ranking member introduced this letter by Mr. Braley and he 

quotes that it has supported over 63,000 jobs in the State of Iowa 

with ethanol. I want to go back through this and just show the implications to this economy, because I want to put people to work 

under your numbers of $770 billion. When converted to ethanol, a bushel of corn yields $1.80 per gallon for its energy content, which can produce up to 2.5 gallons of 

ethanol. Alternatively, a bushel of corn fed livestock can produce 6 

pounds of beef, 13 pounds of pork, 20 pounds of chicken, and 28 

pounds of catfish. 

In terms of job growth, critics argue that 1 million tons of corn 

used to produce meat and poultry can produce 3600 direct jobs. 

However, 1 million tons of corn used to produce ethanol only supports 145 jobs. 

If Mr. Braley is correct that these ethanol jobs created 63,000 

jobs in the State of Iowa, he just gave up 1,564,000 jobs. That is 

the same number, because of what it would be in the industry. I 

am doing the calculation based upon what everybody else has given 

me as numbers. 

So do we have a jobs crisis in this Country, Mr. Gerard? 

Mr. GERARD. Absolutely. And I will tell you from the only gas 

perspective we are doing everything we can to create good paying 

jobs to provide stability to help families. 

Mr. GOSAR. So I want to come back to this. So when we are 

trucking, most of this is trucked to little towns here and there, 

major fuels for trucks is what? 

Mr. GERARD. Diesel fuel. 

Mr. GOSAR. That is the great answer. So technically, in the next 

couple years, we may run, technically, out of being able to produce 

any diesel fuel, true? 

Mr. GERARD. Under the RFS, it has clearly brought us to the 

brink of a crisis. 

Mr. GOSAR. So we are not really asking for not to use these ethanol, it is expanding beyond that, right? So it is just common sense. 

So let me ask you another question. When we are talking about our 

64 

economy, and I am from the State of Arizona, so a lot of it is tourism and recreation, right? So a lot of people take, just like my 

friend, Dr. DesJarlais was talking about, they take their fourwheelers, they go on a boat ride, all these things. 

When you don’t have access to that fuel, it causes a problem, 

which means cars will break down, because that is what it does. 

If I am not mistaken, alcohol lifts rust, right? It causes problems 

and it jams up the engine. That is one of the biggest problems that 

we have with ethanol. So when mom and pop are driving across the 

Country, cars break down; can’t find the fuel, so they are on the 

boat, the boat breaks down; when they are in the woods, the fourwheeler breaks down; when they are on the road going to Sturgis, 

the bike breaks down. So we are spending more time trying to fix 

things than in actually enjoying the tourism industry, which is a 

huge impact. 

So not only does this hit us at our food table, because more and 

more people are having harder times putting cost-effective food on 

the table, but when we try to have enjoyment of tourism, which is 

a huge industry in Arizona, it is going to make a major crimp into 

that. And I just want to make sure we are asking the right question. It is not about that we believe in the standard of the ethanol 

10 rule, it is just to have some common sense in its application, because, as the science is, we are back-dropping ourselves into a catastrophic situation, which everybody loses, and what we are asking 

is some common sense. Isn’t that true? 

Mr. GERARD. That is our view. It just boils down to, in our view, 

common sense. 

Mr. GOSAR. And do you think that Congress, when they gave, 

and you alluded to this court case, when Congress gave the rules 

to the EPA, did they intend to have common sense being used? 

Mr. GERARD. I do not believe for a minute it was the intention 

of the Congress for this to get us to the point it is today. 

Mr. GOSAR. I think that is one of the problems. We see this over 

and over, big government saying that they know better than the 

rest of us and common sense is being kicked out the window. 

I yield back. 

Mr. LANKFORD. I would like to submit for the record, as well, a 

written statement from Boat U.S., just talking specifically about 

the recreation engines and the effect of the RFS on boating in 

America. Without objection. 

Mr. LANKFORD. With that, I would like to recognize Ms. 

Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. 

Thank you, gentlemen, for being here today to share your views 

about this very important issue. 

Dr. Martin, I very much appreciate your thoughtful analysis and 

forward-looking recommendations for the Renewal Fuel Standard. 

I agree that while not perfect, the RFS is a critically important and 

promising policy for our Nation’s energy future. The RFS is critical 

to U.S. energy security; it is a national security imperative; it promotes price stability at the pump and holds promise to significantly 

improve our environmental footprint. It is also a major driver of innovation and job creation. In fact, the biofuel industry supports 

54,000 jobs in my home State of Illinois. 

65 

Many of these jobs are in the Chicagoland area for things like 

research and development, construction, engineering, grain purchasing, transportation logistics, legal services, financial services, 

and accounting; and we are at the forefront of innovation for advanced biofuel production. In fact, when I bought my F–150, I 

made sure there it was a flex fuel vehicle and I burned E85 for the 

entire 120,000 miles I have on my truck, and my engine runs very, 

very clean, and I happen to know, Mr. Gerard, where every single 

E85 gas pump is within a 100-mile radius of my house. And you 

are right, some of those are going away, but I am trying to drive 

up that demand as quickly as possible. In fact, my husband and 

I are strong supporters of aviation biofuel. 

Dr. Martin, you state that the RFS has the right goals, and I 

agree. Can you provide more details about why these goals are so 

important and why it is worth sticking with a policy that even you 

have acknowledged is not perfect? 

Mr. MARTIN. Yes, I would be happy to. Thank you. So when I 

look at the RFS, I see sort of three primary goals, more biofuels, 

but not just the same biofuels that we have, but moving on to better biofuels. And, really, when you look at the scale of what we are 

trying to achieve with bringing clean, low-carbon, domestically produced biofuels into the market, we can’t get there with just expanding the current biofuels for some reasons that have been discussed 

today. So we really need to bring the next generation that are 

made from agricultural residues like corn stover and from perennial grasses; and there is a lot of work going on in Illinois in the 

science and agriculture of producing those fuels. 

So that is where we are trying to get. That is what those key 

goals are. And the technology is really the foundation for the investments that are moving us in that direction and I think that is 

what I hear from people in the industry, is their ability to continue 

to raise money, to continue to innovate and to make the U.S. a 

leader in this technology, and to convert that technology and R&D 

leadership into actual fuel that we can use. That really rests on a 

stable policy foundation like the RFS. 

Ms. DUCKWORTH. Thank you. I would rather my dollars at the 

gas pump go to American innovation and research, and supporting 

American biofuels than to Middle Eastern oil any day. 

Dr. Martin, in your testimony you acknowledge that the cellulosic biofuels have not yet lived up to their potential. Why is that 

and can you explain how you see these fuel markets developing in 

the future and how your policy recommendations will help move 

the industry forward so that we get to a better place with them? 

Mr. MARTIN. Sure. Well, if you look at the time it takes to develop any large industry, and the fuel industries are exceptionally 

large industries, it is clear that this is going to take some time, and 

I think one of the things that sometimes confuses people is you will 

hear somebody say we are five years away, and then five years 

passes and people say, where are you? But the guy that told you 

he was five years away brought that pilot plant, brought this technology from a laboratory and built a big factory, and is making, instead of gallons or tens or hundreds of gallons, they are making 

millions of gallons of fuel; and that is a huge step forward and that 

66 

is where we are. We have really moved into the early commercial 

phase of this industry. 

But millions of gallons of fuel doesn’t get you to mandate levels 

that are in billions, so it just takes time for the next round of 

plants to expand capacity and to follow those investments. So the 

ability to scale up to really provide those opportunities really does 

rest on continuing to develop this industry and to kind of providing 

the stable regulatory framework that gives the investors the clarity 

about whether there will be a market for this fuel when they have 

made their investments. 

Ms. DUCKWORTH. Thank you, Dr. Martin. 

I am out of time, Mr. Chairman. 

Mr. LANKFORD. Thank you. 

Mr. Meehan. 

Mr. MEEHAN. Thank you, Mr. Chairman. 

Dr. Martin, I think I tried to understand. Did you make a point 

about the RINs, the cost being a couple cents, and there was an 

opportunity to purchase them? 

Mr. MARTIN. Yes. The way the RIN system works, you don’t need 

to blend ethanol; if you are an obligated party, you can purchase 

RINs instead of blending ethanol. 

Mr. MEEHAN. And how does that work? What is the market, you 

said, it was a couple pennies per gallon? 

Mr. MARTIN. The point I was making was that last year RIN 

prices had been very low, almost nothing, and that was indicative 

of a situation where the mandate wasn’t binding. Essentially, nobody was needing to buy fuel because of the mandates, and if they 

didn’t like to buy fuel, they could avoid that by buying RINs. So 

the mandate hasn’t been binding until now. 

Mr. MEEHAN. So has the market changed since the mandate has 

been binding? 

Mr. MARTIN. Yes, absolutely. 

Mr. MEEHAN. How has it changed? 

Mr. MARTIN. Well, now RIN prices have real value, they are 

about $0.80. 

Mr. MEEHAN. They are how much? 

Mr. MARTIN. Eighty something cents, I think. Somebody said $0.89 today, which actually is not a bug, it is a feature. 

Mr. MEEHAN. What do you mean it is a feature? 

Mr. MARTIN. I mean that provides the economic support that 

makes drop-in fuels, that makes the higher blends more attractive; 

that is the design of the policy. 

Mr. MEEHAN. The design of the policy? Let me go through this, 

because I am trying to understand when you are talking about the 

design of the policy. The design of the policy was that I have a refinery in my backyard that probably supports about 10,000 jobs 

and is critical to the airline industry, so critical to the support of, 

had they not been there, the implications of what happened during 

the storms in New York and New Jersey would have been significant. There are a lot of implications. 

But just the other year, when they were dealing with these RINs, they were about $0.04 per gallon. They are now about $1.00 per 

gallon. So the implication for this refinery is it is now costing them 

$150 million more a year to operate because of these RINs. They 

67 

purchased the refinery for that price. So, in effect, the regulatory 

policy is driving this refinery right back into a point in which it is 

non-competitive and is going to shut down. What do you tell the 

workers? 

Mr. MARTIN. I don’t have anything to say about the specifics. 

Mr. MEEHAN. Have you ever been unemployed? 

Mr. MARTIN. Yes, I have. 

Mr. MEEHAN. All right. 

Mr. MARTIN. So I think what is important here is that there are 

big opportunities in the next generation of fuels, and we need to 

manage the challenges. 

Mr. MEEHAN. How do we manage it? I know there are big opportunities. And I share your goal of trying to get here, but this is the 

unintended consequences of compelling something to happen in a 

market when the market isn’t able to do it. This has real-life consequences on the workers in my district and this is your quote. ‘‘We 

didn’t build it overnight,’’ but you can destroy it overnight. 

You could destroy this industry. You could destroy the refineries 

in my backyard overnight because all they need is a couple years 

of losing $150 million or more and they shut down. And then when 

you close a refinery, it doesn’t come back. So how do we work in 

this market, during this period of time, to adjust for the realization 

that people are manipulating this, this RIN market, to the disadvantage of people who are doing their best to keep the planes flying in the sky? 

Mr. MARTIN. Clearly, as far as transparency and making sure the 

RIN market is working effectively, that is an important part of the 

policy working, because it is key to the policy. 

Mr. MEEHAN. Mr. Pugliaresi, what do you say about this? 

Mr. PUGLIARESI. Look, the RIN prices are rising because they reflect the high cost of crossing the blend wall, and this is the fundamental flaw in the program. So we are going to impose very large 

costs on the production of E10 jet fuel. We will raise the cost of producing petroleum products in the United States. So it is a very 

high cost program with very little yield. It is not a cost-effective 

way to advance our programs to bring on the fuels of the future. 

Mr. MEEHAN. I am curious, are foreign airlines having to live by 

these same standards where they are? 

Mr. PUGLIARESI. Absolutely not. 

Mr. MEEHAN. So, in other words, what we are doing is we are 

subsidizing a situation in which it now becomes more competitive 

for foreign airlines to fly into our Country than it does for ours to 

operate globally. 

Mr. PUGLIARESI. Absolutely. What is going to happen is we are 

going to raise the cost of all the petroleum products in the United 

States. By the way, when we export these products out of the U.S., 

our foreign purchasers are not asking for them to be blended with 

ethanol or cellulosic or anything. So you are going to impose a very 

large cost on the national economy and foreign operators and producers will not face that cost. 

Mr. MEEHAN. So we are creating the proverbial sending jobs 

overseas. 

Mr. PUGLIARESI. Absolutely. 

68 

Mr. MEEHAN. With the unintended consequences of policies that 

aren’t doing anything to clear the air, because the bottom line is 

you will move some of that product overseas and it will be used 

over there at higher emission standards and won’t really change 

anything in the overall atmosphere. 

Mr. PUGLIARESI. Absolutely. It is actually more serious than that. 

Mr. MEEHAN. So there needs to be some recognition, a workout 

in the meantime. And I share your goal, but this is where we are 

talking about the variance or the stop or the something, instead of 

this dead-ahead objective that the EPA is going to do it, regardless 

of the implications that are happening to real people, working in 

real communities, with real American jobs here at home, which 

this Administration and others pretend to stand up and want to 

fight for. 

And I can’t see another person who finally got back to work looking at the idea of that gate closing because somebody has a policy 

that might work somewhere 15 years down the road, while we are 

also, simultaneously, exporting the very same products that are impacting the air just as bad because they are being done in China 

or someplace else at an economic competitive disadvantage to us. 

Frustration with the fact that people aren’t using common sense in 

the implication of where we need to go together. 

Mr. Gerard, my time is up, but I don’t know if you have a 

thought on that as a closing point. 

Mr. GERARD. No, Congressman, I can’t articulate as well as you 

did, but let me just thank you for your leadership. You have made 

a bit difference in those refineries up there. But you have hit the 

nail right on the head. We have a Government policy now that is 

bringing us to the brink of a crisis. EPA has the authority that you, 

the Congress, granted them to waive this and to take this pressure, 

in the short-term, off of the crisis, but ultimately the Congress 

needs to deal with that. 

We don’t disagree with all the noble goals that have been talked 

about in terms of energy production in the United States and, as 

I mentioned earlier, we are the leaders in trying to find the next 

breakthrough, but the reality is, getting back to people and jobs 

and what it is going to take to fuel this economy, we better get 

smart quick, or we are going to have a self-inflicted wound that is 

going to be very difficult to recover from in a lot of different ways. 

Mr. MEEHAN. Thank you, Mr. Chairman. I thank you for your indulgence and I yield back. 

Mr. LANKFORD. Thank you. 

Ms. Norton. 

Ms. NORTON. Thank you very much, Mr. Chairman. 

Dr. Martin, like every red-blooded American, I am always looking 

for science to rescue us from the last dilemma, and I am afraid that 

when we embraced ethanol that was, for many, such a quick and 

ready, much too quick and ready an answer. Now, as far as I can 

understand, one of the reasons that environmentalists me wanted 

to do it was to save energy. I understand it costs, by the time we 

get to the finished product, it costs more in energy, or certainly as 

much as fossil fuels. So we are not meeting that goal. 

So instead of just jumping to the next generation, that was the 

first generation of biofuels, let me ask you about the second generaVerDate Aug 31 2005 10:54 Jul 30, 2013 Jkt 000000 PO 00000 Frm 00072 Fmt 6633 Sfmt 6633 C:\DOCS\82138.TXT APRIL
69 

tion, which looks so hopeful to me, but I have to ask somebody, and 

there you sit. And I am talking about the cellulosic biomass that 

apparently we have in plentiful supply. That is what we thought 

about ethanol, too, because we didn’t think about the effects on the 

cost of corn and sugar, and especially not only here, where we can 

absorb it more easily, but has had a terrible effect in other parts 

of the world which are very dependent on such food stuffs now. 

So when I look at this 1.3 billion in harvestable cellulosic biomass that we have ‘‘identified’’ in the United States, before I get 

my hopes up and grow too rosy in my expectations, since there are 

some estimations that that could more than meet a third of the domestic transportation fuel demand, before I go there, I need to 

know more about what I understand is happening. 

You seem, in your testimony, not to believe that we have yet 

found an answer to the blend wall dilemma, and you speak very 

specifically about the effect of food-based fuels on food, to be blunt 

about it, and that is a major concern, that we don’t jump from the 

frying pan into the fire itself. And you seem to call for rulemaking 

that would reset expectations. I need to know what that means, but 

specifically I need to know what it means in light of the fact that 

it looks like the private sector is finally getting into this new second generation energy supply, that there may be as many as 20 in 

20 States maybe plants under construction, also in Canada. When 

you get private investment taking the risk, does that mean we are 

on our way to very significant use of second generation biofuels, 

and what could EPA do to adjust to that if it is a real answer? I 

am most interested in whether it is a real answer. 

Mr. MARTIN. I think there is a big opportunity and, as you mentioned, there are facilities that are starting up all over the Country. 

But because the energy industry is so large, it is sort of important 

to kind of keep the time line and the expectations sensible. 

Ms. NORTON. Look what natural gas has done. 

Mr. MARTIN. What is that? 

Ms. NORTON. Look what natural gas has done. Once it became 

true and viable, it shot up and has affected the supply here and 

across the world. That is why I don’t want my expectations to be 

raised again. 

Mr. MARTIN. Well, so if we look at where we are and what can 

be achieved when there is a stable investment environment, I think 

we see, over the next 20 years, that these next generation biofuels, 

together with more efficient vehicles and other technologies, can 

really help us to cut projected oil use in half in that time frame. 

So in that 20-year time frame we can make a very dramatic impact 

on the impact that consumers, because, of course, the biggest way 

to address the impact to consumers of fuel is to use less of it. And 

biofuels are a significant part of a comprehensive solution. 

Ms. NORTON. What would be the effect on energy, on climate 

issues, any difference? 

Mr. MARTIN. Absolutely. I mean, the next generation cellulosic 

biofuels have dramatically lower carbon emissions than the conventional biofuels, and even lower compared to the fossil fuels that we 

are relying on now. So that is why they are an important part of 

the strategy going forward. 

70 

Ms. NORTON. You say it could grow rapidly from 2013 forward. 

What do you envision? 

Mr. MARTIN. I mean, well, obviously, it takes several years to 

build one of these facilities, and you don’t build 100 of them at 

once. 

Ms. NORTON. So if we already have 20 States, when do you think 

some of this could get to market? 

Mr. MARTIN. Oh, it is going to get to market this year. I mean, 

the first facilities are commercial facilities that are completely 

built; that are starting up now. So the gallons will start coming in, 

but there is a difference between millions and billions and tens of 

billions, and it takes time to move up that scale. 

Ms. NORTON. Well, thank you, Dr. Martin, and I will keep my expectations high for the moment. 

Thank you, Mr. Chairman. 

Mr. LANKFORD. Thank you. 

Mr. Farenthold. 

Mr. FARENTHOLD. Thank you very much, Mr. Chairman. I do 

want to thank the panel and do have a couple questions. 

Dr. Martin, in your testimony you say that the goals of the RFS, 

Renewable Fuel Standard, are more biofuels, better biofuels, and 

beyond biofuels. If you take a step back, you want to talk about 

what some of the broader policy goals are besides just biofuel? 

Mr. MARTIN. Sure. Absolutely. And it was beyond food-based 

biofuels, not beyond biofuels. 

So the overall goal is to cut our oil use. As I was just alluding, 

the challenges that our oil use causes to our economy, to our security, and to our climate are substantial, and the best way to address those are to take practical steps to cut our oil use. 

Mr. FARENTHOLD. So you are basically saying cleaner air, more 

domestic production, and doing away with the need for importing 

foreign oil, would that be fair? 

Mr. MARTIN. We can cut our oil use dramatically, yes. 

Mr. FARENTHOLD. So let me go to Mr. Pugliaresi. You are talking 

about coming up on the blend wall. So as we have less use of fossil 

fuels, we are coming up on the blend wall, which means we have 

to use more ethanol than we can blend at a reasonable percentage, 

is that correct? 

Mr. PUGLIARESI. Yes. 

Mr. FARENTHOLD. I guess what I am getting at is aren’t we kind 

of on a collision course with ourselves as we promote more fuel-efficient vehicles and as we move to alternative electric cars or as we 

move to natural gas powered vehicles? It is going to get worse and 

worse over time, isn’t it? 

Mr. PUGLIARESI. I think we sort of get stuck on these volumetric 

or these mandates, instead of looking at how do we want the economy to function most efficiently to get the most economic growth. 

And if we try to wrench the economy too fast to very high cost, and 

often infeasible fuels, we are going to impose a very large cost. 

Mr. FARENTHOLD. All right, let’s talk a little bit about natural 

gas. I can go out and buy a natural gas powered pickup truck for 

about $6,000 to $9,000 more than a normal pickup truck; much 

more clean burning than oil-based and economical for me. Once I 

hit 90,000 miles on that truck, I will have paid for it and will be 

71 

saving money every time. So why shouldn’t we be focusing some of 

the efforts there? 

Mr. PUGLIARESI. You are asking a very good question, because is 

this mandate really a cost-competitive or a low-cost strategy compared to the other things that are out there? And the answer to 

that is probably not. 

Mr. FARENTHOLD. All right, Mr. Gerard, you represent the oil 

and gas industry. We have great technological breakthroughs in 

hydraulic fracking and we are all but giving away natural gas. 

What is gas today, in the $4.00 range? 

Mr. GERARD. Yes, give or take. 

Mr. FARENTHOLD. And do you see any substantial increase in 

that over the next few years? 

Mr. GERARD. Well, if you look at the quick history of this, which 

has literally occurred in the past few years in the United States, 

once again, calling into question the assumptions under the Renewable Fuel Standard, which is a very different day, but when you 

look at natural gas today, going back to this broader objective, if 

we talk about climate issues and carbon, today we are at 1994 level 

for our carbon emissions. Why is that? Because of natural gas. 

That was driven by the marketplace, not by a Government mandate. 

Mr. FARENTHOLD. Cleaner and domestic. We are within Kyoto 

standards now, right? Didn’t we get there, even though we are not 

a signatory? 

Mr. GERARD. We are getting very close to that as the leader in 

the world in terms of reducing our carbon emissions. But the market brought it about, and that is why we have to take away some 

of these efforts to compel technology. The movement to natural gas 

in vehicles is occurring. 

Mr. FARENTHOLD. With no Government involvement. 

Mr. GERARD. Precisely. And that will happen. That is what we 

need to inject back into this conversation. 

Mr. FARENTHOLD. And just as far as projected reserves of natural 

gas, are we in trouble in five years? 

Mr. GERARD. It depends on whose estimates you look at, anywhere from 100 to 250 years. 

Mr. FARENTHOLD. All right, so we are talking a couple hundred 

years. 

Mr. GERARD. At least. 

Mr. FARENTHOLD. So it kind of takes the heat off developing. 

Mr. GERARD. That number keeps growing every year. 

Mr. FARENTHOLD. So it kind of takes the heat off of some of these 

numbers. 

Let me go with one question with respect to food prices, these renewable food standards. They are affecting meat, poultry, your turkeys, chickens, you name it. It is also affecting just corn for people, 

isn’t it, worldwide? 

Mr. BRANDENBERGER. It certainly is. I think Ms. Norton made a 

very good point about the impact, and we would agree. We have 

talked a lot about the impact on our energy here, and we ought to 

talk about the impact on people who are facing food insecurity as 

well. 

72 

Mr. FARENTHOLD. And in other countries, particularly not as 

wealthy as we are, substantial increase in corn prices. Corn is a 

part of the staples in many countries. I think in Mexico there was 

one study that said since the Renewable Fuel Standard took effect, 

tortilla prices are up 69 percent. 

Mr. BRANDENBERGER. There is actual civil unrest at times in 

Mexico over the corn prices; there have been demonstrations there. 

But it is other countries, but it is also the food insecure in this 

Country, as well, that are affected by this. 

Mr. FARENTHOLD. I see I am out of time. I just want to conclude 

by saying we really do need to take a step back and see if we can 

solve some of our energy problems and our environmental problems 

in the marketplace with technology that is there today, rather than 

trying to force something. 

I yield back. 

Mr. LANKFORD. Thank you. 

Gentlemen, thank you for being a part of this panel. We are 

going to shift to the second panel. All of you, great contributions 

in this. Lu, I think I counted mispronunciation of your name probably eight times through the course of this, so I appreciate all of 

you being here and for what you are contributing, both your prepared statements and your oral. Thank you. 

We will take a short shift into the second panel. 

[Pause.] 

Mr. LANKFORD. We will have several other members that will 

come and join us as we get started here. 

So we welcome our second panel in the continuation of this hearing. Mr. Christopher Grundler is the Director of the Office of 

Transportation and Air Quality, U.S. Environmental Protection 

Agency. 

Pursuant to committee rules, all witnesses are sworn in before 

they testify. Mr. Grundler, thanks for being here. If you don’t mind 

standing and raising your right hand so you can take the oath. 

Do you solemnly swear or affirm the testimony you are about to 

give will be the truth, the whole truth, and nothing but the truth, 

so help you, God? 

[Witness responds in the affirmative.] 

Mr. LANKFORD. Thank you. You may be seated. 

Let the record reflect that the witness has answered in the affirmative. 

Glad that you are here. Obviously, you had the opportunity to be 

able to listen in on the first panel, as well, and we are looking forward to your testimony and getting a chance to dialogue a little bit 

back and forth on that. We will be honored to receive that testimony now. 

STATEMENT OF CHRISTOPHER GRUNDLER, DIRECTOR, OFFICE OF TRANSPORTATION AND AIR QUALITY, U.S. ENVIRONMENTAL PROTECTION AGENCY 

Mr. GRUNDLER. Thank you, Mr. Chairman, Ranking Member 

Speier, and other members of the committee. I appreciate the opportunity to testify on the Renewable Fuel Program today. I am the 

Director of epa’s Office of Transportation and Air Quality, and I 

have been a career official at EPA since 1980. 

73 

The RFS program began in 2006 under the Energy Policy Act of 

2005. The statutory requirements for the RFS program were then 

modified by the Energy Independence and Security Act of 2007, or 

EISA, which established new volume standards for renewable fuel, 

reaching a total of 36 billion gallons by 2022, including 21 billion 

gallons of advanced biofuels. The revised statutory requirements 

also include new greenhouse gas emission thresholds and a number 

of other provisions. After an extensive notice and comment process, 

EPA finalized regulations to implement EISA requirements, which 

went into effect on July 1st, 2010. 

EISA requires EPA to publish annual standards for total advanced biomass-based diesel and cellulosic renewable fuels. These 

standards apply to obligated parties, typically refiners and fuel importers. The statute directs EPA to determine the projected volume 

of cellulosic biofuel production for the following year, and if that 

number if less than the statutory volume, EPA must lower the 

standard accordingly. EPA also has the discretion to lower the advanced biofuel and total renewable mandate up to the same 

amount. Before proposing annual volume standards, EPA conducts 

a thorough review of the cellulosic industry to determine the total 

production capacity. EPA also consults with our colleagues at the 

Department of Agriculture, the Energy Information Administration, and the Department of Energy’s Bioenergy Technologies Office. We propose the annual standards through a transparent process, allowing for public comment and review. 

The 2013 RFS volume standards were proposed in February of 

this year and would maintain a statutory level for total renewable 

fuel of 16.55 billion gallons. A public hearing on the proposed hearing was conducted on March 8th, 2013, and we are currently in the 

process of reviewing the public comments in preparing to develop 

the final rule. 

Congress also tasked EPA with evaluating and qualifying new 

biofuels for use in the RFS program. We have already approved a 

significant list of advanced and cellulosic biofuels. We have a number of additional evaluations underway for new pathways. We continue to expand the number of approved fuel pathways, including 

the recent finalization of a rule that includes certain renewable 

fuels from camelina, ethanol from energy cane, and renewable gasoline from various feedstocks. We also just proposed a rule that included additional new advanced biofuels, including cellulosic fuels 

from landfill biogas and advanced biobutanol from corn. 

Although both ethanol and non-ethanol biofuels can be used to 

meet the RFS, ethanol has and will likely continue to be the predominant renewable fuel in the market for the foreseeable future. 

As the volume requirements of the RFS program increase, it becomes more likely that the volume of ethanol projected to meet 

those requirements will exceed the volume that can be consumed 

in the common blend ratio of 10 percent ethanol and 90 percent 

gasoline, referring to as E10. Additional volumes of ethanol would 

then need to be used at higher blend levels, such as E15 or E85. 

As a result, to the extent that ethanol is likely to be used to meet 

RFS volume requirements, the volume of ethanol that can legally 

and practically be consumed is a limiting factor in meeting the 

74 

statutory volumes. This is commonly known as the E10 blend wall 

and was discussed at length during the first panel. 

Compliance under the RFS program is demonstrated through the 

use of Renewable Identification Numbers, or RINs, which document the production and distribution of the fuel. For 2013, we expect compliance for the RFS standards through the use of RINs 

generated in 2013, as well as the substantial number of RINs generated in 2012 that are available for compliance this year as carryover RINs. 

In 2014, the situation could be different. First, the advanced 

biofuel and total renewable fuel requirements rise substantially 

under the law, to 3.75 billion gallons and 18.5 billion gallons, respectively. While non-ethanol biofuels are anticipated to continue 

to grow, an estimated 16 billion gallons or more of ethanol might 

still be needed to comply with the 2014 statutory target for the 

RFS program. Second, the number of carryover RINs from 2013 

will also be a critical factor. 

Given these facts, we will continue to look at the potential impacts of the E10 blend wall both now and in the longer term. We 

are currently reviewing comments submitted in response to our 

proposal for the 2013 RFS volume standards, and we will carefully 

consider and are carefully considering this input. 

EPA is intensively engaged with all the stakeholders in this policy matter, and we are going to continue to further engage these 

stakeholders as we move to propose the RFS volume requirements 

for 2014. EPA will continue to work with our partners, stakeholders, and the public to implement the RFS program as directed 

by the Congress. EPA will also further evaluate and consider 

whether any further action under the authorities established by 

Congress is appropriate to help ensure orderly implementation of 

the program. 

I thank you for the opportunity to serve as a witness and look 

forward to your questions. 

[Prepared statement of Mr. Grundler follows:] 

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80 

Mr. LANKFORD. Thank you for your testimony and thanks for 

your testimony as well. 

Do you agree we are facing a blend wall in the coming months 

here? 

Mr. GRUNDLER. Congressman, it is quite clear from the dynamics 

in the RIN market that the market is anticipating the blend wall. 

It is not clear exactly when we will face that blend wall. We know 

that some refiners, because each is in a slightly different situation, 

are likely to hit that blend wall this year; whereas, others are likely to face it in 2014. But the market clearly is anticipating its approach, which is why we see the increase in the value in these 

RINs. 

Mr. LANKFORD. Once Goldman Sachs jumps in and starts actually trading in RINs, you know this has become a valuable commodity and it is spreading at that point. So the questions come up 

for us, and you heard all the testimony, as well, and some of the 

issues, and you are very aware of this, not that you are blind to 

all these issues. A couple of questions. One is is it good for our vehicles to continue to increase the amount of ethanol and require 

that, and to be able to push that out? Multiple vehicle manufacturers said that is going to void our warranty. So we have that one 

question. With the amount of gasoline decreasing and the amount 

that is required increasing, is that good for our vehicles? 

And the second part of this is is it good for us to continue pushing food-based fuel when the hope was, at some point, non-foodbased ethanol would rise up and we would have other products 

that would substitute for that? We are not seeing the rise as fast 

as we had hoped, so is it good to be able to press on both those? 

Would you address both of those for me? 

Mr. GRUNDLER. So with respect to your first question, congressman, is it good for our vehicles, the answer depends on what you 

are driving, of course. 

Mr. LANKFORD. Correct. The majority of vehicles in America 

right now. We are talking 70 percent of the vehicles that are not 

tagged or that have a problem with using a higher amount of ethanol. 

Mr. GRUNDLER. Yes. So with respect to E15, as you are aware, 

EPA did an extensive study, along with the Department of Energy, 

of the question of will E15 cause or contribute to a violation of the 

emission standards of those vehicles. We looked at something like 

30 different studies. DOE did an extensive testing program and our 

determination was that E15 would be safe to use in 2001 and later 

vehicles. We did not allow it to be used in small engines or boats 

or off-road vehicles. 

Mr. LANKFORD. I am aware the EPA allows that, but my warranty expires if I use E15. So in my 2011 vehicle I already have 

a notification and a sticker on my gasoline lid as it opens that reminds me, if I use E15 in this, my warranty is void, because the 

manufacturers tell me this is not safe for this vehicle. So while 

EPA says go ahead and use it, I take it at my own risk. If my vehicle breaks down, I am on my own. I don’t anticipate EPA is going 

to fix my vehicle at that point. 

Do you anticipate that? 

Mr. GRUNDLER. No, we will not fix your vehicle. 

81 

Mr. LANKFORD. Okay, well, I am assuming that. So I am in a 

tough spot as a consumer on that. 

Mr. GRUNDLER. Mr. Chairman, I appreciate that, but EPA is not 

requiring you to use E15. We are not requiring anyone to sell E15. 

We simply looked at our responsibilities under the law, did an extensive amount of science and data development, and reached the 

determination based on that data and based on the law that there 

was no evidence to suggest, after millions of miles of accumulated 

miles by the Department of Energy’s test program, that E15 would 

harm engines or create a violation of emission standards. 

Mr. LANKFORD. How many manufacturers out there disagree 

with you? 

Mr. GRUNDLER. Most of them. 

Mr. LANKFORD. And that is the spot that consumers are in. The 

Government says go ahead; the manufacturers say at your own 

risk, because this does not work in all of their testing. So now we 

are stuck between a Government mandate that is sitting out there 

and the consumer trying to determine where do I go at this point. 

Mr. GRUNDLER. The Government is not saying go ahead. The 

Government is simply saying that this is a legal fuel to sell if the 

market demands it and if there are people who wish to sell it. 

Mr. LANKFORD. But if the market is not demanding it, there is 

still a requirement we have to get more out there, is that correct? 

So let’s say, for instance, in my State, in Oklahoma, you were not 

here earlier, but are lots of stations that promote that they sell allgas gasoline. I mean, that is their selling feature. And they sell all 

the time on that. There are stations that sell both side-by-side; 

there is gasoline, there is gasoline blended with ethanol on it; and 

the consumers have the opportunity to choose. But at some point 

it gets tougher to give consumers the option to choose, because if 

they choose the all-gasoline, we can’t meet the standards that have 

been set to sell out there, and we have to find some way to get that 

product to market. That is kind of where we are now. So what do 

we do? 

Mr. GRUNDLER. You are exactly right. And I think when Congress wrote this statute, back in 2005 and particularly in 2007, it 

created a dramatic change in the transportation fuels market and 

anticipated these increasing volumes. It is clear Congress anticipated that the market would solve this problem. The blend wall is 

not a new issue. Clearly, the market has not solved this problem 

yet; there are market realities that we are very much aware of and 

need to address. 

Mr. LANKFORD. So when does this get resolved from the EPA? I 

know you all are dealing with this all the time. This is not critical 

of that. You all have to live in this all the time. We have decisions 

for 2013 and decisions for 2014 coming down during the summer, 

I hope, but to be able to determine what are we going to do, is 

there going to be a waiver, are the numbers for 2014 going to be 

implemented? A lot of folks have to prepare for that and the market is trying to determine, as the price goes up, they are gambling 

you are not, you are going to keep the same number and these 

prices continue to rise, and manufacturers and individuals and 

suppliers of fuel are hoping that there is going to be some kind of 

gap. How does this get determined and when? 

82 

Mr. GRUNDLER. We are talking to all of these folks regularly. We 

raised this issue in our 2013 proposal as an issue; we sought comment, we got an enormous amount of comment. As you can appreciate, those comments span a diverse perspective based on where 

they sit and what they make, and it will be our job to sort through 

those and to look at the law and look at the data, and the administrator will need to make a determination. We feel a very strong 

sense of urgency to sort through this. We are doing a lot of analytical work and we hope to make a decision this summer on both 

2013 and a proposal for 2014. 

Mr. LANKFORD. Welcome to America. Okay, so let me come back 

to that again, because I want to be able to pass on to Ms. Speier, 

honoring her time as well. 

We are talking about this summer, so we are talking about the 

end of August, we are talking about the end of July? Because this 

is important to us, to be able to determine when the decision is 

going to be made. The decision is important, obviously, what is 

made, but the when is also very important. So when will we know? 

Mr. GRUNDLER. I appreciate that and I also understand why the 

market needs to know. I don’t have a target date for you other than 

we are working as hard as we can. 

Mr. LANKFORD. But all the comments are in. 

Mr. GRUNDLER. Yes. 

Mr. LANKFORD. Everything from outside is done; it is now sitting 

on your all’s desk, and at this point there is nothing else pending 

out there to say we can’t decide until we get this. 

Mr. GRUNDLER. That is exactly right. 

Mr. LANKFORD. So everything is in now; it is just time to make 

the decision. 

Mr. GRUNDLER. That is right. 

Mr. LANKFORD. Is there anything that we can do as Congress to 

help in this process? 

Mr. GRUNDLER. I think you are doing it, sir. 

Mr. LANKFORD. Well, there is a need for a decision. The certainty 

is very important to the consumer, to the producers, to the manufacturers. The certainty is very key to us, so getting the when will 

help us significantly; then there will be the large national debate 

on the what at that point, once you settle it. But the when cannot 

come fast enough if all the information is gathered in. 

With that, I would like to recognize Ms. Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. 

Mr. Grundler, thank you for the service you have provided to our 

Country for some how many years? Thirty-two years. Almost a lifetime. Certainly a generation. Anyway, thank you. 

The first law that was passed and signed by President Bush, in 

2005, was really a bipartisan bill; it was sponsored by Representative Barton of Texas, Representative Pombo of California, and Representative Thomas of California. And when President Bush signed 

it, he said it will strengthen our economy and it will improve our 

environment, and it is going to make the Country more secure. The 

Energy Policy Act of 2005 is going to help every American who 

drives to work, every family that pays a power bill, and every small 

business owner hoping to expand. 

83 

So, from your perspective, what has been the impact of that 2005 

Act, and have President Bush’s statements been seen to come to 

fruition? 

Mr. GRUNDLER. Congresswoman, certainly the impact we have 

seen is a significant increase in the production of renewable 

biofuels in America. We have seen an enormous amount of private 

investment in advanced biofuel research and development and production; I would say in the billions of dollars of private investment 

in discovery and new innovation in this area and I think, as well, 

a new recognition about what the promise could be of having a 

more diverse fuel supply for America. 

Ms. SPEIER. Okay. So for all the concern here, there are still a 

lot of positives, right? Dr. Martin had mentioned in the earlier 

panel, I don’t know if you were present to hear him or not. 

Mr. GRUNDLER. I was. 

Ms. SPEIER. That there are some solutions that are pretty simple 

and could protect the turkey farmers and also still allow for continued exploration in terms of cellulosic ethanol and the developing of 

that and plants, and venture capital coming in, and the like. Do 

you have any comments on that? Do you see that as a pathway to 

resolving this issue? 

Mr. GRUNDLER. I have not had an opportunity to talk to Dr. Martin about his recommendations in terms of his thinking with respect to the longer term strategy. I probably would disagree with 

that it is going to be simple in this policy debate comment. 

Ms. SPEIER. That was my comment, not his. 

Mr. GRUNDLER. But clearly we have heard through this public 

notice and comment period we are getting a lot of advice about how 

EPA can address this situation, address this blend wall situation; 

and some have suggested how we can do it in a way that could still 

preserve this advanced biofuel innovation promise. Others have 

come at it from a different point of view. We, right now, are doing 

the hard work analyzing those comments, looking at the law, looking at the data and giving recommendations to the administrator. 

Ms. SPEIER. So last August Chairman Issa and Subcommittee 

Chairman Lankford had sent a letter expressing the concerns 

about RFS to EPA Administrator Lisa Jackson, and subsequently, 

in the review that EPA did, it found that there was not severe 

harm to the economy, of a State, a region, or the United States in 

waiting. Could you explain to us the analysis that EPA uses to arrive at that conclusion? From what I understand, it is not something where you just kind of see what way the wind is blowing, 

that there is a lot of data collection and expert testimony and review that takes place. Could you share that with us? 

Mr. GRUNDLER. Yes. You are talking about the petitions we receive from a number of States in 2012 in response to the severe 

drought that America experienced and asked the administrator to 

waive the standard in whole or in part. First, in deliberating over 

that, we all recognize, and the administrator certainly said in her 

decision, recognized the devastating impact of the drought across 

all of America in many different sectors, in many different families 

that were impacted by that drought. 

The question before the agency and the administrator at that 

time actually was a pretty narrow question, though, which is would 

84 

waiving the RFS change any of that situation, would waiving the 

RFS change the supply-demand question. And after extensive analysis and modeling, we looked at 500 different scenarios using a 

satastic model and consulting with experts at the Agriculture Department and at the Energy Department, we found that it was 

highly unlikely that, if we waived the standard, it would have 

made any difference to the people suffering and the prices of corn, 

so the law required us to deny that waiver. 

We were careful to say that this is a fact-specific question, a 

case-by-case situation, and it was based on the market conditions 

at the time; it was based on our estimate of how many so-called 

rollover RINs were available to refiners to meet their obligations, 

as well as how quickly a refinery within this waiver time period, 

this one-year period, could change their operation. The fact of the 

matter is that the U.S. refining industry and fuel distribution has 

optimized around the use of ethanol as a blending agent, and we 

found that the evidence suggested that there is a strong demand 

by the refining industry to use this product to blend their gasoline 

products and that, if EPA had waived that standard, that that 

practice would continue, certainly over the near term, and therefore would not have made any difference in feed prices or corn 

prices. So we were required to deny the waiver based on how the 

law asked us to exercise that authority. 

Ms. SPEIER. Thank you. My time has expired. 

Mr. Chairman, thank you. 

Mr. JORDAN. [Presiding] The lady can have additional time if she 

would like here. 

I ask unanimous consent to enter a couple reports and letters 

into the record. We have the API Energy letter and NERA economic impacts resulting from implementation from RFS2 program. 

Without objection, those will be entered into the record. 

Mr. Grundler, I apologize for missing your testimony. I have 

been trying to read it. Let me go back to where I was with the first 

panel. I went through and asked them and we sort of established 

the fact that the cost to produce turkey is up because of RFS and 

the impact on corn prices; the price to produce pork is up; the price 

to produce cattle is up; and, therefore, the cost to consumers who 

consume those products is certainly up. Other food products not in 

the protein or livestock area are up as well. The price of fuel is up, 

according to the witnesses on the first panel. According to the witnesses on the first panel, it is difficult for many cars to, as the 

chairman has pointed out, Mr. Lankford pointed out, can’t use this 

type of fuel burned at levels that it is; and, therefore, every single 

family, according to the economist who was part of the first panel, 

every single family in the Country is going to have to pay more for 

food, fuel, and that obviously impacts their family budget and our 

overall economy. 

As I said, we were looking forward to hear what you say, and I 

missed some of what took place here earlier, but are you going to 

waive it, and what is the time frame? Walk me through it again. 

Are you going to waive the standard as we move forward? 

Mr. GRUNDLER. Thank you, congressman, for those questions. I 

can’t tell you what the administrator is going to decide. 

Mr. JORDAN. When are you going to decide? 

85 

Mr. GRUNDLER. This summer. 

Mr. JORDAN. This summer. Next month? 

Mr. GRUNDLER. Summer goes until September 21st. 

Mr. JORDAN. So are we going to get a decision on September 20th 

or 21st, or are we going to get something sooner? People are driving; people are buying burgers for the grill and brats for the grill 

and everything else. 

Mr. GRUNDLER. Sir, I want you to know that we are taking this 

very, very seriously. We have sought public comment. We are meeting with all the stakeholders who you have heard this morning and 

more. This is a very serious question. We are hearing them loud 

and clear. We are doing the analysis right now. We have a lot of 

advice on how EPA should proceed and address this blend wall 

both now and in the future, and we are going to be making a decision as soon as we can. 

Mr. JORDAN. Okay, there were four witnesses on the first panel; 

the economist, the turkey, and the petroleum gentleman. 

Ms. SPEIER. He doesn’t like being called a turkey. 

[Laughter.] 

Mr. JORDAN. Well said. The gentleman representing the turkey 

industry. All agreed that there are real problems. Even the Democrat witness said the Renewable Fuel Standard for cellulosic fuel 

shouldn’t be increased. So everyone understands this is a problem, 

so it seems to me you have the data. Even the witness on the other 

side. I mean, this is Congress; if you get four people, different sides 

inviting folks in and they all say there is a problem here, it seems 

to me that is pretty clear. So, again, any chance you can get this 

done sooner? 

Mr. GRUNDLER. We are going to be working very hard to make 

that happen, sir, but this is a consequential decision. There are 

consequences on all sides of this question, which I am sure you can 

appreciate. There are consequences for the people who have invested millions of dollars in research and development costs and innovation to produce more advanced fuels. They have a particular 

point of view. We have heard very clearly from the oil industry 

what their perspective is. People who have invested in corn-based 

ethanol have a view. 

Mr. JORDAN. Do you have the definition of what level of harm, 

severe harm? Do you have a definition, increase in cost to consumers of X percent? Do you have something that is tangible, 

measurable, or is it you are looking at it and bureaucrats and employees in the Environmental Protection Agency are going to make 

a decision? Is it based on objective criteria or is it just sort of what 

the experts in Government think it is? 

Mr. GRUNDLER. Well, the Congress was quite specific and used 

the word severe. We don’t have a definition of what severe means, 

but we read it as pretty significant. 

Mr. JORDAN. Well, then how can you decide? Well, is it not severe harm when the price of food is up significantly, the price of 

fuel is up significantly, cars can’t use the fuel that, as we get to 

the blend wall, some cars can’t use it, the price is going to go up 

and the economist who was here said this is, in effect, a tax on 

families and overall harms our economy, not to mention some of 

86 

the data we have been living with for the last several years, the 

high unemployment rate and everything else? Is that not severe? 

Mr. GRUNDLER. All the things you mentioned, congressman, go 

into this consideration, go into this analysis, and it will be the administrator’s judgment. 

Mr. JORDAN. Let me ask it this way. If that is not severe, what 

is? 

Mr. GRUNDLER. I can’t answer that question, Mr. Congressman. 

Mr. JORDAN. Well, that is the problem. That is our concern, because if there is no objective definition, if you can’t tell me what 

severe is, if you can’t tell me what I just described and what the 

four witnesses just described, you can’t tell me if that is severe or 

not, then how in the heck are you going to make a decision? 

Mr. GRUNDLER. We are going to do the best we can based on 

what the law states. 

Mr. JORDAN. Are you developing a criteria? Are you developing 

some objective standards, some definition for what severe harm 

means? 

Mr. GRUNDLER. Right now what we are doing, sir, is looking at 

all the information that the public has provided on those very questions. 

Mr. JORDAN. But that is not what I asked. Is the EPA developing 

a definition, some kind of criteria, objective standards that would 

say you reach this, that is severe, we raise the standards; you don’t 

reach this, it is not severe, we don’t waive the standards? Then we 

can decide if you have a good standard or not. But if it is just we 

are going to tell you what we think and we don’t think it is severe, 

well, how do we know? We don’t know what info, what data, all the 

information you are using to make that decision. It would be nice 

if we had something objective. It would be nice if you had something objective so we could examine and see whether it makes 

sense or not. 

Mr. GRUNDLER. Sir, first of all, I would say that this will all be 

based on, again, on a case-by-case basis, based on what the market 

conditions are telling us at the time this decision is made, and then 

there will be an extensive record that will be supporting that decision. I also want to point out that that is only one of our waiver 

authorities. We also have the authority to adjust the standard 

based on the total amount that we adjust for the cellulosic standard. So there are a couple of ways for the agency, a couple of tools. 

Mr. JORDAN. Do you have standards for how you do that? Do you 

have criteria on when you are going to adjust the standard, not 

just waive it? 

Mr. GRUNDLER. Yes, for the cellulosic standard, what we do is we 

go every year and we look at actual production estimates from people producing this fuel. That is why we have adjusted or waived 

the cellulosic standard. 

Mr. JORDAN. No, what I am asking is do you have something 

that says if it reaches X level, we are going to make this change? 

Do you have some objective criteria? 

Mr. GRUNDLER. There is no objective criteria that we have stated 

with respect to how Congress determines severe economic harm. 

We have this other authority where it is just a math problem, 

87 

where we subtract from the statutory-based standard for cellulosic 

fuel how much is available. 

Mr. JORDAN. Well, if you have no objective standard, how can 

you make a decision? One day you decide this is bad enough, we 

are going to change it; maybe it is not bad enough, we are not 

going to waive it. This law has been around a while, I think since 

2005, 2006, and was revised in 2007. You don’t have a standard? 

Mr. GRUNDLER. So we have, with respect to this general waiver 

authority that you have mentioned, we have considered that twice, 

once in 2008 and once in 2012, and in those cases we went through 

an extensive set of economic analysis, working with the Department of Agriculture on impacts, working with the Department of 

Energy on impacts, using an economic model to estimate what 

these impacts would be, and based on that record and that evidence and the data that produced, we determined that it was not 

severe economic harm, based on the numbers that that showed, in 

relationship to the total economy or the total economy of that 

State. It is a judgment call. 

Mr. JORDAN. I get what you are saying. I just don’t know how 

you can say it is not severe if you don’t have a definition for severe. 

I mean, don’t you think that is a logical question for the American 

consumer, for families to ask? How do you decide whether it is severe or not? Because, well, in 2008, we said it wasn’t, but we didn’t 

develop any criteria; in 2012 we said it wasn’t, but we didn’t have 

any criteria, even though it was four years later, we just did some 

analysis. I mean, it can be some subjective analysis you throw together every year that you get faced with this question. Unless you 

have some objective standard, I don’t know how anyone can determine what, if you don’t know what severe is, how are we going to 

know, and how are you going to reach that level? To me, that is 

the $64,000 question. 

Ms. SPEIER. Mr. Chairman? 

Mr. JORDAN. The gentlelady is recognized. 

Ms. SPEIER. Mr. Chairman, you have now extended another four 

minutes. Can we give Mr. Grundler an opportunity to just try to 

explain? 

Mr. JORDAN. I have given him several, but I would be happy to 

give him another one. 

Mr. GRUNDLER. It is a difficult question, sir. The Congress wrote 

this law and gave the administrator the ability to waive standards 

if he or she determined that implementation of the standard would 

create severe economic harm. We have used that in terms of the 

continuum of insignificant to extreme, at the far end of that continuum, but there is no hard and fast definition for it, and it has 

to be a judgment call that the administrator exercises. 

Mr. JORDAN. Okay. And I went way over time, but I will just say 

this: Any other time there is a standard, there is some definition 

to it in the law. If there is a standard of proof, there are certain 

elements you have to meet to satisfy that standard in law, and 

anything else there is some objective measure, some number. When 

we write laws, typically, the agencies write rules to implement the 

law. What you are saying is you don’t even have a rule or definition to define severe harm; it is whatever you think it is at that 

particular time. That is how we operate. Well, if that is the case, 

88 

we will never know if this is ever going to get waived. No matter 

how close we get to the blend wall, what happens, we will never 

know; and that is a problem as we move forward. 

The gentlelady is recognized. 

Ms. SPEIER. Mr. Chairman, thank you. Let’s be clear, we pass 

laws every day. Well, actually not, but occasionally. 

[Laughter.] 

Ms. SPEIER. Three hundred a year. 

Mr. ISSA. You know, we can go back to naming post offices, then 

we can do them every day. But we are trying to stay off of that. 

Ms. SPEIER. And I appreciate that, Mr. Chairman. But, in any 

case, we do pass laws that do not define certain terms. I am reminded that we passed a law that said that 501(c)(4) should be operated exclusively for social welfare purposes, and then the agency 

itself came up with a regulation that termed it primarily; and, 

frankly, we don’t have a definition for either of those. 

So I think Mr. Grundler has made the point that it is done on 

a case-by-case basis; and the term severe harm is one that is assessed at the time and that it is a judgment call. There are judgment calls that people within the bureaucracy make every single 

day. We hope that there will be good judgment used here, as there 

is often, and I think I will leave it at that time. 

I yield back. 

Mr. JORDAN. Well, if I could just respond. The gentlelady makes, 

I think, an excellent point. She cited the Internal Revenue Service 

and the lack of a clear definition. One thing we do know is when 

you have that situation people aren’t given equal treatment. We 

found out that the only groups who were in fact targeted were conservative groups applying for 501(c)(4) status; no one else was targeted. So it would make sense to have a standard so it is not so 

subjective. That is exactly the point I am making here. What is the 

definition of severe harm? Without a definition, how in the world 

are we going to make a determination? 

With that, I recognize the chairman of the full committee. 

Mr. ISSA. I thank you, chairman. 

Ms. Speier, you and I represent the same State, but not at the 

same time in the beginning. When I first arrived here, it was 52 

and then 53 members of the California delegation, every single one, 

including Henry Waxman, who tried to get a waiver on the 10 percent ethanol, because at the time we were using MTBE because 

that was the oxygenate that we could get our hands on, and it was 

destroying our ground water. EPA never saw fit to consider the destruction of our watershed as sufficient, and the lack of availability 

of ethanol, and, of course, the fact that we didn’t produce it in California. 

Mr. Grundler, the fact is you don’t have to have a perfect definition, but if you don’t have anecdotal examples of what is, then you 

fail the most important test, and I think the chairman was making 

that very clear. You have to say this is out of bounds and this is 

inbounds. Even the IRS at least had some examples of things 

which would be excessive; they said you had to have at least 51 

percent of something for it to be primary, because there is a noun. 

We are in a situation right now in which the Stanford study still 

says that the cost in fuel of producing ethanol, for example, still 

89 

rises to effectively the same amount of fuel as it generates in Btus, 

meaning there is not really a renewable fuel because it consumes 

mostly non-renewable fuels making the renewable fuel. So the idea 

that we are not going to grant a waiver simply because any damage it causes isn’t offset by any benefit to speak of, that is not a 

new item; those studies have been around for a while. And I understand that the ethanol lobby is very effective at sort of demanding 

that we keep a subsidy going. 

My question to you is isn’t it true that if the goal of clean air, 

which is your mandate, your primary mandate, if the goal of clean 

air can be achieved with a different blend, don’t you essentially 

have a fundamental obligation to grant the waiver, regardless? 

And, by the way, if you say no, you won’t be the first person from 

EPA to walk in saying no. It has always been kind of interesting. 

Before we ever talked about renewables or CO2 as a pollutant, 

EPA seemed to always want to have its ability not to grant waivers. But please answer. 

Mr. GRUNDLER. Sir, I am not familiar with the specifics of the 

example you are relating to in terms of the MTBE question. I am 

not really prepared to address that. 

Mr. ISSA. Perhaps you are not as old as I am. But we were trying 

to get rid of MTBE; we knew that it had damaged, in huge 

amounts, our watersheds. We knew it was a dangerous pollutant. 

There actually had to be waivers granted as they tried to get 

enough ethanol into California to replace it. Ultimately, it is a good 

piece of history for you to become familiar with because there was 

egregious harm being done to the drinking water of the people of 

California, and the years 2001, 2002, 2003 went by while we saw 

no willingness to say that even a small amount of damage to California’s watershed should have been a sufficient danger to cause a 

waiver to be granted. 

Mr. GRUNDLER. If I could, sir, I would like to address the rest 

of your question with respect to what situation we are dealing with 

today. You weren’t here earlier, but we very much appreciate the 

seriousness of the situation. We have heard loud and clear from a 

number of different stakeholders in this policy question; advice in 

terms of how they think we ought to approach the science and the 

law and this decision, and we are going to be considering those 

very, very carefully as we make a decision and the administrator 

makes his or her judgment later this summer. 

Mr. ISSA. But let me rephrase my fundamental question, though. 

Going from 10 percent to 0, that is a big decision; and I think the 

law assumes that it is going to take a big threshold. But going from 

10 to 9, 10 to 8, 10 to 7, 10 to 6, aren’t those incrementally decisions that could be made where the balance of harm, including economic harm, versus the benefit can be measured? In other words, 

why wouldn’t you be considering blends that were not zero, but 

were significantly lower, with a lower standard for it, so that it will 

not be an all or nothing? 

Mr. GRUNDLER. That is precisely the process we are going 

through right now; what are those considerations, what are those 

options before the administrator, and what is the best decision to 

be made. We have that discretion. 

90 

Mr. ISSA. Mr. Chairman, just one other piece of history. I was 

also here when we dealt with arsenic in States like your own, in 

the southwest, where incredibly small amounts in wells that had 

been around for decades and decades, in which there was no known 

science to actually come up with why the number that they came 

up with as an arbitrary number was necessary, but we knew the 

economic cost. And I think that Chairman Jordan said it very well: 

if you don’t have a number, then the number is arbitrary. We have 

seen arbitrary numbers in the past in arsenic, where they didn’t 

have science; they picked a hypothetical number. That hypothetical 

number cost hundreds of millions of dollars to people of New Mexico and other States. This is another situation in which the number 

that is currently there is costing a large fortune without having a 

known benefit, if in fact blends can be as clean with a different 

number. 

I yield back. 

Mr. GOSAR. [Presiding.] I am going to recognize myself for five 

minutes. 

The EPA asserts that more E15 gasoline must be blended in 

order for producers to meet the RFS, true? 

Mr. GRUNDLER. No. 

Mr. GOSAR. Does EPA believe that the E15 is safe for all automobiles? 

Mr. GRUNDLER. No. 

Mr. GOSAR. Let me ask you, do you think we are headed for a 

train wreck, as currently defined by Congress? 

Mr. GRUNDLER. I am not aware of the definition of train wreck 

by the Congress. 

Mr. GOSAR. Well, let’s look at the train wreck in regards to what 

we are coming here within this mandate. It is a train wreck left 

as is, right? If you are going to hold up the letter of the law, it is 

a train wreck. 

Mr. GRUNDLER. Again, I am not sure of your definition of train 

wreck, but we realize that the blend wall is a significant issue. 

Mr. GOSAR. Well, let me ask you a question. So if we continue 

on this standard, we will have a huge problem within diesel fuel 

production, true or false? 

Mr. GRUNDLER. I would like to answer it this way, Mr. Chairman. We clearly see, particularly in 14 and 15, and the pace by 

which Congress anticipated the growth of this mandate, is confronting very real market barriers right now, and we are looking 

at all kinds of comments today in terms of what the best way to 

address that. 

Mr. GOSAR. And how would you weight those comments? 

Mr. GRUNDLER. How would I weight them? 

Mr. GOSAR. How do you weight those comments? I am asking you 

because what I want to do is I want to see from the agency how 

you rationally start to look at those. You know, the consumer, food 

prices, transportation costs, because this has a staggering effect in 

which our economy could come to almost a deadlock. 

Mr. GRUNDLER. That is certainly the conclusions of the NERA 

study, which was, I would note, a worst case scenario. There are 

other studies that we are looking at in terms of what is the actual 

impact on the consumers, and we are looking at those very, very 

91 

carefully. All of these will go into this decision and what is the best 

thing to do for the Country, and the administrator will make that 

judgment. As I noted, there are consequences on all sides of this 

equation, and people are sharing with us directly and often what 

their views are, and they are not always the same. 

Mr. GOSAR. I would agree. Let me ask you this. What science are 

you going to use? Because it seems like we are in absence, if we 

are looking at the E15, there is no science that really backs it. We 

have the automotive industry that says we are taking away warranties on cars. So it doesn’t seem like we can go that way. So it 

looks like we are back-treading ourselves into a different position, 

true or false? 

Mr. GRUNDLER. You asked the question what science will we use. 

It is really a matter of a judgment call in terms of what are the 

market conditions; how much complying fuel can be moved through 

this system and at what cost. 

Mr. GOSAR. But it is more than that. It is just not an arbitrary 

aspect. You are talking about realistic, real world values, and it is 

based on science. So you have to point to science. Science helps set 

you free here. And in the absence of a study, you have to err in 

that aspect, because I think any time you are looking at the value 

of what scientists have given us, we actually used a methodology 

that has got us into a cleaner fuel. So with absence of science you 

are in no-man’s land and you don’t know if you can actually support a hypothesis. 

Mr. GRUNDLER. Well, there is science as well as market reality. 

If the science told us, a couple years ago, that E15 would not harm 

certain kinds of vehicles, and yet we also need to consider, as we 

make this decision, what the likelihood is of increases in E15 fuel 

being produced and sold and bought by consumers. So we need to 

look at both, sir. 

Mr. GOSAR. And when you look at the average consumer, do they 

have lots of dispendable money sitting around? 

Mr. GRUNDLER. No, they do not. 

Mr. GOSAR. I mean, I have an E15 vehicle, I have a flex fuel vehicle, so it makes it easy for me, but that is a little different than 

the average American. We can’t just go around looking at the troubleshooting that will happen with 70 percent of the cars on the 

marketplace. The American economy, the American households just 

can’t go buy another vehicle to surmount this. And I think that is 

my biggest key is, is that I see a lack of common sense here. 

I am a dentist, by the way, impersonating a politician, so things 

have, to me, have to have a science base to me that I have to understand where am I going, what is my investment, and what is 

it going to have as results; and I don’t think that that is what we 

are actually seeing, because I think if we saw a detrimental aspect 

to our economy when we look at return on investment, when you 

look at ethanol subsidies, which so many of the members talked 

about here, you don’t have a true open market here. And number 

two is based on corn ethanol, you are taking an awful lot off the 

table in feeding your population and you are artificially raising everything on the table; not just beef, pork, turkey, chicken, you 

name it, and diesel fuel, all those aspects. 

92 

But I guess what my offer is is there is an un-clarity, if there 

is uncertainty by the EPA, why wouldn’t you reach back up to this 

body to say could you help us in that clarification? 

Mr. GRUNDLER. Sir, the way we are going to approach this decision, and I hope we will use common sense, we will ask ourselves 

three questions: What is the law saying? What does the science tell 

us? And what is the right thing to do here? 

Mr. GOSAR. Let me ask you a question. If you were uncertain 

about what the law said, there was a gray area, so many times we 

pass a law that there is lots of gray areas, why wouldn’t you entertain coming back to Congress and asking can you clarify? 

Mr. GRUNDLER. That wouldn’t be my judgment to make, sir, but 

I think the law is quite clear in terms of the levels of renewable 

fuels that the Congress mandated over the next few years. 

Mr. GOSAR. But that was a different subset of an equation. They 

looked in the future and looking at there were going to be people 

utilizing more fuel. But when you use a finite and dwindling more 

supplies, it becomes an antiquated equation. So the rational mind 

says, listen, this wasn’t anticipated; how do we review this? And 

I think that brings a better set of ideals and opportunity as a working relationship between a legislative body and an administrative 

body. Wouldn’t you agree? 

Mr. GRUNDLER. Sir, my job is to administer the law with as 

much common sense as we can muster, as the law is today. I have 

no position, EPA has no position today in terms of future legislation. 

Mr. GOSAR. Well, that shows you the lack of what is happening 

in administrative law, that it has to be an enigmatic, dynamic type 

of interface. You want to strive for ideals, but you always sometimes have to come back to common sense applications. And I see 

a very big lack of that, particularly from your agency; not just in 

this aspect, but in numerous other aspects. I think sometimes we 

go a lot further when we start to work with other bodies like the 

executive branch, along with the legislative branch, to try to define 

how do we solve problems, instead of saying, listen, this is what 

we entertained, this is all we are going to do, and that is it. 

Ms. SPEIER. Mr. Chairman? 

Mr. GOSAR. Yes. 

Ms. SPEIER. I have one last submission that I would like to ask 

unanimous consent be added to the record. 

Mr. GOSAR. So ordered. 

Mr. GOSAR. With that, we will adjourn the meeting. 

Thank you very much, Mr. Grundler. 

Mr. GRUNDLER. Thank you. 

[Whereupon, at 12:55 p.m., the subcommittee was adjourned.] 

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