[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OVERVIEW OF THE RENEWABLE FUEL STANDARD:
GOVERNMENT PERSPECTIVES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 26, 2013
__________
Serial No. 113-61
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
RALPH M. HALL, Texas JERRY McNERNEY, California
JOHN SHIMKUS, Illinois PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
ROBERT E. LATTA, Ohio LOIS CAPPS, California
BILL CASSIDY, Louisiana MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia DORIS O. MATSUI, California
CORY GARDNER, Colorado DONNA M. CHRISTENSEN, Virgin
MIKE POMPEO, Kansas Islands
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan
JOE BARTON, Texas HENRY A. WAXMAN, California (ex
FRED UPTON, Michigan (ex officio) officio)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 2
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 3
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 4
Prepared statement........................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 6
Witnesses
Adam Sieminski, Administrator, U.S. Energy Information
Administration................................................. 8
Prepared statement........................................... 11
Christopher Grundler, Director, Office of Transportation and Air
Quality, Office of Air and Radiation, U.S. Environmental
Protection Agency.............................................. 22
Prepared statement........................................... 24
Answers to submitted questions............................... 94
Joseph Glauber, Chief Economist, U.S. Department of Agriculture.. 30
Prepared statement........................................... 32
OVERVIEW OF THE RENEWABLE FUEL STANDARD: GOVERNMENT PERSPECTIVES
----------
WEDNESDAY, JUNE 26, 2013
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 2:34 p.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman of the subcommittee) presiding.
Present: Representatives Whitfield, Scalise, Hall, Shimkus,
Terry, Burgess, Latta, Cassidy, Olson, Pompeo, Kinzinger,
Griffith, Barton, Upton (ex officio), Rush, McNerney, Tonko,
Engel, Green, Doyle, Barrow, Castor, Matheson, Welch, and
Waxman (ex officio).
Staff Present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Press Secretary; Sean Bonyun, Communications Director;
Matt Bravo, Professional Staff Member; Allison Busbee, Policy
Coordinator, Energy & Power; Tom Hassenboehler, Chief Counsel,
Energy & Power; Ben Lieberman, Counsel, Energy & Power; Nick
Magallanes, Policy Coordinator, CMT; Mary Neumayr, Senior
Energy Counsel; Chris Sarley, Policy Coordinator, Environment &
Economy; Greg Dotson, Minority Staff Director, Energy and
Environment; Kristina Friedman, Minority EPA Detailee; Caitlin
Haberman, Minority Policy Analyst; Bruce Ho, Minority Counsel;
Elizabeth Letter, Minority Assistant Press Secretary; and
Alexandra Teitz, Minority Senior Counsel, Environment and
Energy.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call the hearing to order.
The topic of today's hearing is an ``Overview of the Renewable
Fuel Standard: Government Perspectives.'' As you know, this is
one of those issues where we have a lot of different viewpoints
on this important issue. And we have not really revisited the
Renewable Fuel Standard since it was last expanded in 2007. And
so we began these hearings, I don't think we have any
preconceived thoughts. We know that there are some areas of
concern, and it is time for us to simply revisit and re-explore
and look at the original expectations of this program.
I think we would all acknowledge that the landscape has
changed significantly since the RFS was revised in 2007. And
there was a long list of energy policy assumptions back then
that differ significantly from the realities of 2013. Perhaps
the biggest unexpected development has been the decline in
gasoline usage over the last 5 years. Certainly automobiles are
more efficient. We have had a slow economy. And this has led to
a number of issues we will address today, including the so-
called blend wall and the approval of E15.
We have also learned firsthand how the RFS implementation
would be affected by drought that reduced corn yields, ha
occurred last summer.
So we have a unique opportunity looking back on several
years now of practical experience with the RFS and it is time
to ask what that experience has taught us. It is also time to
project what the future might hold for the RFS as we continue
to implement the stringent and increasing targets.
We began this process, as many of you know, many of you
participated in it, by issuing a series of bipartisan white
papers on the major topics associated with the RFS--the blend
wall and fuel compatibility issues, agriculture sector issues,
environmental concerns, energy policy considerations--and we
are set to release the final white paper that deals with
implementation and enforcement issues.
The wide-ranging stakeholder responses to the questions
posed in these white papers attest to the fact that many people
have been affected by the RFS and that we need to be mindful of
all of its direct and indirect impacts.
We have a distinguished panel of witnesses with us today,
and I am going to introduce them after the opening statements.
And at this time, I would like to yield as much time as he may
consume the gentleman from Texas, Mr. Barton, for the purposes
of an opening statement.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
As many of you know, the renewable fuel standard, or RFS,
was created by Congress in 2005, and was greatly expanded in
2007. The RFS is a policy that originated in this committee,
which is why I believe we now have an obligation to assess how
it is going. That is the reason for today's hearing, and we are
pleased to be joined by three agencies that have a hand in
implementing the RFS and in studying its impacts--the
Environmental Protection Agency, the Energy Information
Administration, and the Department of Agriculture.
I've met with stakeholders on all sides of the issues, and
I think it's time to take a hard look at the RFS and compare
our original expectations for the program with the actual
experience. I think we'll find that in some respects the RFS is
going well, but in others there are emerging issues and room
for improvement.
The landscape has changed significantly since the RFS was
last revised in 2007. Indeed, there is a long list of energy
policy assumptions back then that differ greatly from the
realities of 2013.
Perhaps the biggest unexpected development has been the
decline in gasoline usage over that past 5 years. As a result,
we are facing the challenge of mixing the specified volumes of
renewable fuels into a significantly smaller pool of gasoline.
This has led to a number of issues we will address today,
including the so-called blend wall and the approval of E-15.
We have also learned, first hand, how the RFS
implementation would be affected by a drought that reduced corn
yields, as occurred last summer.
In other words, we can now look back on several years of
practical experience with the RFS, and it is time to ask what
that experience has taught us. It is also time to project what
the future might hold for the RFS as we continue to implement
its stringent and increasing targets.
We began this process by issuing a series of bipartisan
white papers on the major topics associated with the RFS--the
blend wall and fuel compatibility issues, agricultural sector
issues, environmental concerns, energy policy considerations,
and we are set to release the final white paper that deals with
implementation and enforcement issues. The wide-ranging
stakeholder responses to the questions posed in these white
papers attests to the fact that many people have been affected
by the RFS, and that we need to be mindful of all of its direct
and indirect impacts.
And today, we are initiating our first hearing on the RFS,
beginning with the agencies most knowledgeable about the
program's implementation.
The end result that we want is an RFS that can work for
everyone involved, be it farmers, renewable fuel producers,
refiners, and automakers. And most importantly, we want a
policy that benefits the American driving public. The first
step is to assess where we are with the program, and I look
forward to learning more from our witnesses.
# # #
Mr. Barton. Thank you, Mr. Chairman.
In 2005, I was chairman of the committee and chairman of
the conference committee that passed the Energy Policy Act, and
I supported the inclusion of Renewable Fuel Standard in that
bill. In 2007, I was the ranking member on the committee, and I
strongly opposed the bill in 2007 that greatly expanded it. So
I guess you could say I am 50-50 and I have been on that both
sides of the issue.
I don't want there to be any misunderstanding today,
however: The current law, as it is, is unworkable and
unsustainable, and I support total and full repeal. I think it
has outlived its usefulness.
I want to quote from the first line of the Energy
Information Administration's written testimony: ``The RFS
program is not projected to come close to achievement of the
legislated target.'' End quote.
So I welcome this hearing. I encourage the subcommittee and
the full committee under the leadership of Chairman Upton to
take a serious look at this. And I am hopeful that at some time
this year we can move a repeal bill.
And with that, I still have a minute to go, so I am happy
to yield to whoever the chairman would like for me to yield to.
Mr. Whitfield. Does anybody want the last 40 seconds?
OK. I yield back balance of my time. At this time,
recognize the gentleman from Illinois, Mr. Rush, for a 5-minute
opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I want to thank you, Mr. Chairman, for holding
this important hearing on the RFS.
Over the course of the past year my office has literally
taken dozens of meetings on this critical topic, most from
proponents who support the RFS as it is, as well as some of the
opponents who would like to see the RFS either modified or
repealed altogether.
Mr. Chairman, for stakeholders from my home State of
Illinois there are few energy issues as important as the matter
of the RFS. I have always been very supportive of this policy
because I believe since its inception it has achieved many of
the goals that it was first enacted to do.
During the debate on the Energy and Policy Act of 2005,
when the RFS was first established, and subsequently in the
Energy Independence and Security Act of 2007, when the policy
was significantly modified and expanded, there was always
strong bipartisan support for the RFS. Members of both sides of
the aisle touted the potential benefits of enacting a Renewable
Fuel Standard, which included reducing U.S. dependence on oil,
enhancing energy security, bolstering the agricultural economy,
and addressing the challenges of climate change by reducing
greenhouse gas emissions from the transportation sector.
Today, I believe the RFS has been successful in meeting
each of these objectives while also helping to drive job
creation and economic investment. For instance, the RFS has
played a key role in helping the American ethanol industry
support 400,000 jobs nationwide, including 54,000 jobs in my
State of Illinois alone, and it has resulted in over $40
million in economic activity.
Mr. Chairman, the RFS has indeed helped to make us more
energy secure with America's ethanol industry now producing 10
percent of the Nation's vehicle fuel supply, helping to reduce
our independence on foreign oil by 25 percent since 2005.
Additionally, the octane from ethanol will also be a key
component in helping auto manufacturers meet their CAFE
standards as they turn towards downsized, turbocharged engines
with increased combustion rations that will need higher octane
fuel, such as ethanol, to meet new mileage standards.
Mr. Chairman, as President Obama stated yesterday, we
cannot continue to overlook the fact that over the past year
and a half alone all across our Nation we are seeing more
frequent record-breaking temperatures and history-making
extreme weather events, including severe wildfires, hurricanes,
tornadoes, and flooding, events that scientists tell us all are
associated with manmade climate change.
So today, more than ever, it is essential to move towards
an energy policy that requires an even greater reliance on
renewable sources of energy and alternative fuels, as the RFS
mandates, and away from carbon-intense fossil fuels that emit
dangerous levels of greenhouse gases and contribute to climate
change.
Mr. Chairman, I am glad that we are having this hearing
today, one of several, where we can lay out all the facts,
including both the opportunities and the challenges to
implementing the RFS as currently drafted, and we can work to
find common ground on this issue moving forward.
Thank you, I yield back the balance of my time.
Mr. Whitfield. The gentleman yields back.
At this time recognize the chairman of the full committee,
Mr. Upton, for a 5-minute opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Thank you, Mr. Chairman.
It is an exciting time for energy policy and for the
possibilities created by our domestic energy abundance. Last
week, this subcommittee held two hearings, one on the Nation's
potential for increased energy exports, and the other on the
benefits of affordable energy to the domestic manufacturing
sector.
Just a few short years ago, many would have scoffed at the
suggestion that America could produce enough domestic energy to
expands its exports or that low natural gas prices would induce
a manufacturing renaissance, but it is happening, and it can
continue to happen if we have the right policies in place. And
while we strive to make good use of the Nation's coal, oil, and
natural gas, we also have to allow for renewable energy to be
part of that mix. But we need to make sure that it is done
right, and that is why we are undertaking our deliberate review
of the Renewable Fuel Standard.
The committee started the review process with a series of
bipartisan white papers on the RFS. Each white paper
highlighted a particular subtopic and solicited input from
stakeholders. And as you can imagine, the response has been
overwhelming, and I thank Ranking Member Waxman and his staff
for working cooperatively with us and the commenters for their
participation as well. And I can assure them that their input
will, in fact, help us inform our process.
And now we move on to our first hearing, which is going to
be the committee's first hearing specifically devoted to the
RFS since the program was last revised in 2007. The purpose of
this initial hearing is essentially to perform a checkup on the
RFS: What has gone according to plan and what has not. No
policy is certainly perfect, especially one that is now more
than 5 years old. It is time to assess the RFS in light of what
we now know.
Today, we commence our effort with three Federal agencies
that play a role in putting the RFS into action. Congress gave
the reins of the program to EPA, and the Agency's
responsibilities are indeed extensive. Several of these
responsibilities require input from other agencies, including
the Energy Information Administration as well as the Department
of Agriculture.
This hearing is going to cover a number of issues. I am
particularly mindful of the impact of the RFS on the auto
industry and on our car owners. Fuels and vehicles operate as a
system, and we need to make sure that provisions in the RFS are
compatible with existing vehicles as well as the new cars and
trucks that are going to be manufactured and sold in the years
ahead.
One of the things that Congress could not have anticipated
back in 2007 is the very ambitious CAFE/GHG standards that are
going to require a near doubling of the fuel economy by 2025.
Harmonizing these rules with the requirements of the RFS is
just one issue for which a constructive debate is needed.
The white papers and having today's hearing have gotten the
discussion off to a positive start. I look forward to working
with every one of our members on this committee in the coming
weeks as we continue to weigh our work in oversight towards
addressing the very real issues that implementation of the RFS
presents going forward.
And I don't know if there are other Republican members on
my side that wish the balance of my time. But seeing none, I
yield back.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
This is an exciting time for energy policy and for the
possibilities created by our growing domestic energy abundance.
Last week, this subcommittee held two hearings, one on the
nation's potential for increased energy exports and the other
on the benefits of affordable energy to the domestic
manufacturing sector. Just a few short years ago, many would
have scoffed at the suggestion that America could produce
enough domestic energy to expand its exports, or that low
natural gas prices would induce a manufacturing renaissance.
But it is happening, and can continue to happen if we have the
right policies in place.
And while we strive to make good use of the nation's coal,
oil, and natural gas, we also need to allow renewable energy to
be a part of the mix. But we need to make sure that it is done
right, and that is why we are undertaking our deliberate review
of the renewable fuel standard (RFS).
The committee started this review process with a series of
bipartisan white papers on the RFS. Each white paper
highlighted a particular subtopic and solicited input from
stakeholders. As you can imagine, the response has been
overwhelming, and I thank Ranking Member Waxman and his staff
for working cooperatively with us and the commenters for their
participation--I can assure them that their input will help
inform our process.
And now, we move on to our first hearing, which will be
this committee's first hearing specifically devoted to the RFS
since the program was last revised in 2007. The purpose of this
initial hearing is essentially to perform a check-up on the
RFS--what has gone according to plan and what has not. No
policy is perfect, especially one that is now more than 5 years
old. It's time to assess the RFS in light of what we now know.
Today we commence our effort with three federal agencies
that play a role in putting the RFS into action. Congress gave
the reins of this program to EPA, and the agency's
responsibilities are extensive. Several of these
responsibilities require input from other agencies, including
the Energy Information Administration and the Department of
Agriculture.
This hearing will cover a number of issues, but I am
particularly mindful of the impact of the RFS on the auto
industry and on car owners. Fuels and vehicles operate as a
system, and we need to ensure that provisions in the RFS are
compatible with existing vehicles as well as the new cars and
trucks that will be manufactured and sold in the years ahead.
One thing Congress could not have anticipated back in 2007
is the very ambitious new CAFE/GHG standards that will require
a near doubling of fuel economy by 2025. Harmonizing these
rules with the requirements of the RFS is just one issue for
which a constructive debate is needed.
The white papers and having today's hearing have gotten the
discussion off to a positive start. I look forward to working
with all of the members of this committee in the coming weeks
as we continue our oversight and work toward addressing the
very real issues that implementation of the RFS presents going
forward.
# # #
Mr. Whitfield. The gentleman yields back.
At this time I recognize the gentleman from California, Mr.
Waxman, for a 5-minute opening statement.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you, Mr. Chairman. Yesterday, President
Obama laid out a plan to cut carbon pollution, fight climate
change, and protect the health and future of America's
children. The plan sets us on the path to reduce carbon
pollution by 17 percent by 2020, which is what we need to do in
the near term.
In his speech, the President talked about the moral
imperative for action on climate change. As he told the college
students in the audience, quote, ``The question now is whether
we have the courage to act before it is too late. How we answer
will have a profound impact on the world that we leave behind,
not just to you, but to your children and to your
grandchildren,'' end quote.
As the President's plan recognizes, there is no silver
bullet. Success will require sustained action across multiple
fronts. One of the most critical fronts is transportation. The
transportation sector is our country's largest consumer of oil
and the second-largest emitter of carbon pollution. Thanks to
President Obama, we already have new standards to make vehicles
far more efficient and less carbon polluting. Those standards
are saving Americans money at the pump, enhancing our energy
security, and boosting our economy, as well as cutting carbon
pollution.
But as long as our transportation system relies exclusively
on fossil fuels, we will continue to make climate change worse.
Fuel efficiency alone will not achieve the 80 percent reduction
in climate pollution that we need by 2050 to avoid catastrophic
climate change.
The shift to hybrids and electric vehicles is a big part of
the solution. But low-carbon renewable fuels can also
contribute significantly. And for some transportation sectors,
such as aviation and shipping, low-carbon liquid fuels are the
only option, besides efficiency.
Today, we are examining a law, the Renewable Fuel Standard,
or RFS, that is driving development of those new low-carbon
renewable fuels. The RFS is one of the few laws adopted by
Congress that explicitly and directly reduces carbon pollution.
Under this law, U.S. companies last year produced 20,000
gallons of an advanced renewable fuel called cellulosic
ethanol, which is made from materials such as crop residues and
switch grass. That may sound like a small volume until you
understand that last year was the first time that cellulosic
ethanol has ever been produced commercially in this country.
The Energy Information Administration estimates that
production will grow to 5 million gallons this year and reach
250 million gallons by 2015. And the RFS requires that every
gallon of cellulosic ethanol reduce carbon pollution by at
least 60 percent compared to gasoline.
American companies are also producing large volumes of
biodiesel, another advanced renewable fuel, which reduces
carbon pollution by at least 50 percent compared to the diesel
it replaces. The RFS is incubating an advanced renewable fuel
industry that has the potential to offer tremendous climate
benefits and grow our economy.
But the RFS is not without flaws. As our gasoline
consumption goes down and the renewable fuel mandates increase,
we could reach the blend wall where adding more ethanol to the
fuel supply could damage some engines. Drop-in biofuels offers
one solution, but they are still being developed.
Over the last few weeks, Chairman Upton and I have released
a series of white papers discussing the RFS and soliciting
public comments on the law. This process has been bipartisan,
and I commend the majority for working together with Democrats.
Commenters highlighted both benefits of the RFS and concerns,
and they have a variety of recommendations for this committee,
which we should consider carefully.
This hearing gives us a further opportunity to take a
careful look at the RFS. As we move forward the key question we
need to ask is, what will the effects be on our climate? If we
consider changes to the RFS, they should preserve and
strengthen the law's climate benefits. As the President stated
so forcefully yesterday, quote, ``Someday our children and our
children's children will look at us in the eye and they will
ask us did we do all that we could when we had the chance to
deal with this problem and leave them a cleaner, safer, more
stable world,'' end quote. I encourage all members to
contemplate this question. We won't get a second chance.
Thank you, Mr. Chairman.
Mr. Whitfield. Thank you, Mr. Waxman.
At this time we have concluded opening statements. And
today we have only one panel of witnesses. And as I had
indicated earlier, we have representatives from agencies that
are responsible for implementing and studying the RFS.
And so I want to welcome all of you to this hearing. We do
look forward to your testimony and listening to your expertise
and observations.
And today we have Mr. Adam Sieminski, who is Administrator
of the United States Energy Information Administration. We have
Mr. Christopher Grundler, who is the Director of the Office of
Transportation and Air Quality at the United States
Environmental Protection Agency. And we have Mr. Joseph
Glauber, who is Chief Economist at the United States Department
of Agriculture.
So welcome. And each one of you will be recognized for 5
minutes. All of you have testified here before. And there are
two boxes, and when the red light goes on your 5 minutes is up.
But we do look forward to your testimony.
And, Mr. Sieminski, I will recognize you first for 5
minutes for your opening statement.
STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY
INFORMATION ADMINISTRATION; CHRISTOPHER GRUNDLER, DIRECTOR,
OFFICE OF TRANSPORTATION AND AIR QUALITY, OFFICE OF AIR AND
RADIATION, U.S. ENVIRONMENTAL PROTECTION AGENCY; AND JOSEPH
GLAUBER, CHIEF ECONOMIST, U.S. DEPARTMENT OF AGRICULTURE
STATEMENT OF ADAM SIEMINSKI
Mr. Sieminski. Chairman Whitfield, thank you. Ranking
Member Rush, members of the subcommittee, thank you all for the
opportunity to appear before you today to discuss the Renewable
Fuel Standards program. EIA, as you know, is the statistical
and analytical agency within the Department of Energy. And by
law, EIA's data, analysis, and forecasts are independent of
approval by any other officer, employee of the U.S. government.
I would like to make nine points in summarizing my testimony.
One, the RFS program is not projected to come close to
achieving the legislated target of 36 billion gallons of
renewable motor fuels by 2022. This is not a new finding. All
of EIA's Annual Energy Outlook Reference case projections since
the targets were enacted in 2007 have indicated that EPA would
need to apply the law's flexibility to reduce requirements for
cellulosic, advanced, and total biofuels. In the AEO2010, EIA
projected a shortfall of over 10 billion gallons of RFS credits
relative to the target for 2022. And in our most recent
AEO2013, that shortfall is now projected to be 17 billion
credits. So basically only about half of the legislated $36
billion target.
Two, substantially increasing the use of biofuels can only
occur in forms other than the low-percentage blends of ethanol
and biodiesel that account for nearly all of their current use.
Of the potential alternative pathways--one, increased use of
higher ethanol blends; two, the advent of drop-in biofuels; or
three, the development of compatible renewable fuel components
such as biobutanol--of those, so far none have achieved a
significant market role.
Three, the implicit premise that cellulosic and other
advanced biofuels would be available in significant quantities
at reasonable costs within 5 to 10 years following adoption of
the 2007 targets has not been borne out. The AEO Reference case
projections do not assume breakthroughs in transformational
technologies.
Four, ethanol potentially has three distinct roles in motor
fuels markets: one, as an octane source; two, as a volume
enhancer; and three, as a provider of energy content. So an
important behavioral question arises with the use of higher
percentage blends, such as E15 and E85, and that is whether the
shorter range provided by a tankful of fuel due to ethanol's
lower energy content per gallon will affect consumers' buying
decisions. In Brazil, where a high percentage of ethanol fuels
are sold, consumers do indeed consider energy content pricing
rather than simply buying the cheapest fuel.
Five, ethanol faces some major demand and distribution
system challenges that make it difficult to increase its use as
a motor fuel regardless of its source. Although the use of E15
in model year 2001 and newer light-duty vehicles is now
allowed, very few gasoline retailers offer it out of concerns
related to automobile warranties, potential liability for
misfueling, infrastructure costs, and consumer acceptance.
Ethanol blends above 15 percent, E85, are more widely available
but can only be used in flex-fuel vehicles, which make up only
about 5 percent of the light-duty fleet.
Six, the projected declining trend in motor gasoline in the
AEO2013 reflects a significant change from the growth
projections from 2007. Since 2007, fuel economy standards,
together with slower economic growth, higher gasoline prices,
and possible changes in consumer behavior have changed the
outlook. But lower gasoline demand is not at the root of the
past or projected shortfalls in achieving legislated RFS
targets.
Seven, projected reliance on oil imports in the AEO2013 is
significantly lower than in 2007 due primarily to lower
projected petroleum demand growth, coupled with a significantly
more robust outlook for domestic petroleum production.
Incremental biofuel volumes under the RFS program play only a
small part in reducing projected net import dependence. As a
result, among other things, there is a likely continuing use of
ethanol as an octane enhancer, even in the absence of a
Renewable Fuel Standard.
Eight, as discussed in my written testimony, the challenges
facing renewable fuels program are reflected in the value of
RINs, Renewable Identification Numbers, that are used by EPA to
implement the program.
Nine, and finally, I want you to know that EIA remains
actively engaged in monitoring and reporting on matters related
to the RFS program. We collect monthly data on biodiesel and
ethanol production, as well as weekly and monthly data on
ethanol blending.
The complexity of refined product markets, of which
biofuels are an important part, has led to a growing number of
requests for EIA analysis. Last fall, we published a report,
``Biofuels Issues and Trends''--it is attached to my
testimony--to provide an overview of the dynamics of
production, consumption, trade in ethanol, biodiesel, and
cellulosic fuels. We also hold regular workshops to solicit
feedback on a variety of these subjects.
Mr. Chairman, thank you for the opportunity to testify
today, and I look forward to answering your questions.
Mr. Whitfield. Thank you, Mr. Sieminski.
[The prepared statement of Mr. Sieminski follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
And, Mr. Grundler, you are recognized for 5 minutes.
STATEMENT OF CHRISTOPHER GRUNDLER
Mr. Grundler. Thank you, Chairman Whitfield, Ranking Member
Rush, and other members of the committee. I appreciate the
opportunity to testify on the renewable fuels program today.
The RFS program began in 2006 under the Energy Policy Act
of 2005. The statute requirements for the RFS program were then
modified by the Energy Independence and Security Act of 2007,
or EISA. EISA 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
requirements also included 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 1, 2010. EISA requires EPA to publish
annual standards for use of 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. If that
number is less than the statutory volume, EPA must lower the
standard accordingly.
Congress also provided EPA the discretion to lower the
advanced biofuel and total renewable mandate up to that same
amount. Before proposing annual volume standards, EPA conducts
a thorough review of the cellulosic industry to determine the
total production capacity. We consult with the USDA, the Energy
Information Administration, and the Department of Energy. We
propose the annual standards through a transparent process,
allowing for public review and comment.
We proposed the 2013 RFS standards in 2013, and we are
proposing to maintain the statutory level for total renewable
fuel of 16.55 billion gallons. We had a public hearing on this
rule on March 8, 2013, and we are currently in the midst of
reviewing the public comments, which were extensive, to prepare
the final rule.
Congress also tasked the 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
and pathways. We have a number of additional evaluations
underway for new ones.
EPA continues to expand the number of approved pathways,
including the recent finalization of a rule that includes
certain renewable fuels from camelina oils, ethanol from energy
cane, and renewable gasoline from various feedstocks. In
addition, just a few weeks ago, we proposed a rule that
included additional new advanced biofuels, which included
cellulosic fuels from landfill biogas and advanced biobutanol
from corn.
EPA is working with stakeholders to improve the
implementation of this program. Compliance under the RFS
program is demonstrated through the use of Renewable
Identification Numbers. These document the production and
distribution of renewable fuel. Obligated parties supported the
use of this approach to provide them added flexibility in
meeting the RFS standards.
This past February, we proposed to establish a voluntary
quality assurance program for verifying the validity of these
RINs. This voluntary program was proposed after receiving
extensive input from oil and renewable fuels industries, with a
goal of improving the liquidity of this marketplace and
allowing renewable fuel producers to sell their RINs. Again, we
are in the process of reviewing public comments on this
proposal and hope to finalize it by the end of this year.
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 on the market for the foreseeable
future. As the statutory 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 of 10 percent ethanol
and 90 percent gasoline, referred to as E10.
Additional volume of ethanol would then need to be used at
higher blend levels, such as E15 or E85, or significant volumes
of non-ethanol would be needed to meet the targets. As a
result, to the extent that ethanol is likely to be used to meet
RFS volume requirements, the volume of ethanol that can be
legally and practically consumed is a limiting factor in
meeting the statutory volumes. This is commonly known as the
blend wall.
For 2013, we expect compliance with the RFS standard
through the use of RINs generated in 2013 as well as carryover
RINs that were generated in 2012 by overcompliance with the
standards. However, 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 18.15 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.
Second, the number of carryover RINs from 2013 will also be
a critical factor to consider. We will continue to look at the
potential impacts of this blend wall over the near and longer
term. We are currently reviewing comments submitted in response
to the agency's proposed rulemaking for the 2013 RFS volume
standards and are carefully considering this input. EPA will
also engage with stakeholders on this issue as we move to
propose the RFS volume requirements for 2014.
We are continuing to work with our partners, our
stakeholders, and the public to implement this 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 an
orderly implementation of this program.
Thank you for this opportunity to be here today.
Mr. Whitfield. Thank you, Mr. Grundler.
[The prepared statement of Mr. Grundler follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. And, Mr. Glauber, you are recognized for 5
minutes.
STATEMENT OF JOSEPH GLAUBER
Mr. Glauber. Chairman Whitfield, Ranking Member Rush, and
members of the subcommittee, thank you for the opportunity to
be at today's hearing to address the question of how the
Renewable Fuel Standard has affected U.S. Agriculture.
Corn ethanol production increased dramatically over the
past decade from just over 2 billion gallons in 2002 to almost
14 billion gallons in 2011. Driven by favorable market forces
and encouraged by government biofuel policies, including the
RFS, that increase has spurred corn production and corn use for
ethanol and has been a factor in the recent grain price boom
and overall improvement in farm balance sheets, including
record farm incomes over the past few years.
This boom has not been shared equally by all segments of
the ag sector, however. Livestock, dairy, and poultry producers
have faced tighter margins due to higher feed costs.
Rapid expansion of corn-based ethanol production has had
significant impacts on U.S. Corn production and use. From 2006
to 2011, corn use for ethanol increased by about 700 million
bushels per year, rising to about 5 billion bushels. The sharp
increase in the demand for corn for ethanol was a major factor
behind the increase in prices over that period. From January
2000 to December 2005, the monthly average price paid to corn
producers averaged $2.10 per bushel. Over the period January
2006 to December 2010, corn prices averaged $3.61 per bushel, a
72 percent increase.
Higher prices encourage producers to plant more corn to
meet the increased demand. Corn-planted acreage, which had
averaged 79 million acres between 2000 and 2006, averaged over
90 million acres between 2007 and 2012. Increased plantings
combined with increased yields resulted in corn production of
13.1 billion bushels in 2009, a record, an increase of 2.8
billion bushels over average production levels over the period
2000 to 2006.
Despite the increase in corn production since 2006, other
uses for corn have declined as more corn has been diverted to
ethanol production. Corn feed and residual disappearance
declined by 26 percent from the marketing year 2005/2006 to
2011/2012 while corn exports declined by 28 percent over the
same period.
The decline in corn use for feed has been partially offset
by the increased availability of protein feeds, such as
distillers' dried grains, a co-product of the dry milling
process. Nearly one-third of a bushel of corn used for ethanol
production is returned in the form of DDGs.
The decline in U.S. Corn exports have been offset in world
markets by increased exports from foreign suppliers,
principally Brazil. Over the years 2000 to 2005, the U.S.
exported on average 1.9 billion bushels of corn and accounted
for about 60 percent of total world corn exports. By 2011/2012,
U.S. corn exports had fallen to 1.5 billion bushels and
accounted for 37 percent of total world exports. With drought-
related reduced supplies in 2012/2013, U.S. corn exports are
projected to fall to 700 million bushels, less than 20 percent
of total world exports. U.S. corn exports are projected to
recover to 1.3 billion bushels in 2013/2014, but they are
projected to account for about a third of total world exports.
In general, high commodity prices over the past few years
have strengthened the farm balance sheets by raising farm
receipts and produced record farm incomes. Over the period from
2000 to 2006, cash receipts for the farm sector averaged $217
billion. However, over the period 2007 to 2013, cash receipts
are projected to average about $339 billion, an increase of 56
percent. Net cash income increased from an average $68.7
billion per year over 2000 to 2006. That increased to a
projected $105 billion over 2007 to 2013, an increase of 53
percent.
Based on analysis of farm business data, net cash income
for grain and oilseed producers have shown significant
increases since 2006, with net cash income levels up by more
than 78 percent for corn, wheat, and soybean producers. By
contrast, livestock, dairy, and poultry producers have faced
more uneven, in some cases declining returns since 2006. In
general, higher feed grain prices have helped net cash income
for row crop producers, but have also raised feed costs at
lowered profit margins for livestock, dairy, and poultry
producers.
Feed costs make up about 51 percent of expenses for dairy,
19 percent for beef cattle, and 42 percent for hogs, and 35
percent for poultry farm business. Price-feed rations for most
species show a decline throughout most of the period since
2006.
Looking forward, increases in demand for corn to produce
ethanol are expected to slow due to constraints on domestic
ethanol consumption--as has been mentioned previous here, the
so-called blend wall--increases in blending efficiency, and
nearing the 15 billion gallon cap on conventional ethanol in
the RFS, and finally, due to increased supply of ethanol from
other feedstocks. Those will mitigate pressures on corn prices.
In addition, there are projections of potentially record
corn and soybean harvests this fall, rising stock levels, and
subsequent moderation of prices. This should support stronger
profits in the livestock and dairy and poultry industries.
The outlook over the next 10 years calls for moderate
productivity growth and flat, declining real prices for
agricultural commodities. However, as we have seen over the
past 7 years, an unexpected shortfall due to adverse weather
could precipitate higher prices.
Mr. Chairman, that completes my testimony.
Mr. Whitfield. Well, Dr. Glauber, thank you.
[The prepared statement of Mr. Glauber follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Whitfield. And thank all of you. We appreciate your
testimony. And at this time, we would like to ask questions of
the panel, and I would recognize myself for 5 minutes to begin.
Mr. Grundler, States have on three different occasions
petitioned the EPA to grant waivers from the RFS, and it is my
understanding that EPA denied all of those waivers. And I would
like to know, what is the criteria that you use in making a
decision to grant a waiver or not?
Mr. Grundler. You are correct, Mr. Chairman. We have
received two separate requests, one in 2008 from the State of
Texas, and then one again last year by a numerous number of
States, as well as other petitioners.
The criteria in the statute are severe economic harm. So
the Administrator was provided the discretion by the Congress
to waive the standard in the event he or she determines that
implementing that standard would create severe economic harm
for a State or region or the United States.
Mr. Whitfield. And how would you go about defining severe
economic harm?
Mr. Grundler. As you know, Mr. Chairman, Congress typically
provides the Agency across numerous environmental statutes
different waiver authorities to deal with unanticipated
circumstances. And it is pretty typical that the Administrator
is given discretion to view these on a case-by-case basis and
looking at the economic conditions at the time.
In the case of last year's situation, where we had this
devastating drought, which was creating very harmful conditions
across many parts of our country, for sure, we determined that
the RFS, in fact, was not having an impact. So the first
question that the agency had to answer was, is the RFS causing
this harm? And after extensive modeling and consultation with
other parts and experts in the government, some of which are
sitting right here, and something like 500 different model
scenarios, we found that the most likely result is that the RFS
was not having impact. In other words, the RFS was not binding.
And the reason for that is over the last many years, the
transportation fuel system has optimized around the use of
ethanol. As my colleague from the EIA has noted in his written
testimony, ethanol has a strong economic value to refiners. And
so what we determined was that if we had waived the standard it
would not have changed the demand for ethanol because refiners
were still demanding this to blend in their products for octane
and for volume enhancement. So that is why we felt that the
statutory criteria for issuing a waiver were not met, and we
had to deny it.
Mr. Whitfield. But you all did have consultations with the
Department of Agriculture before the decision was made and EIA?
Mr. Grundler. Oh, absolutely. And we saw public comment.
What we did was we did the analysis to determine if the RFS was
binding. And then we relied on the Ag Department and the DOE
department to give us estimates in those small number of cases
where it was binding, what would be the impact on food prices
and energy prices.
Mr. Whitfield. And you all had also made the decision that
model years 2001 and newer, that E15 could be used, but if it
was older than 2001 could not be used in those vehicles. How
did you decide that?
Mr. Grundler. That was based, again, on extensive analysis
and testing programs. The Department of Energy did an
extensive, statistically based testing program using a
statistical sample of many vehicles, both newer vehicles and
older vehicles.
Mr. Whitfield. But was it primarily based on your concern
about damage to engines in those older vehicles?
Mr. Grundler. Again, the Congress has given us very
specific guidance as to when we need to grant a waiver. And we
look at whether or not a new fuel would create the situation
where emission standards would be violated if this fuel was
used. So that was based on not only extensive DOE test program,
but also consulting with many different stakeholders and
reviewing over 30 different studies in the literature with
respect to the impacts of ethanol on engine systems.
Mr. Whitfield. Would you expect that E15 would ever be
approved for these older vehicles?
Mr. Grundler. Our engineering judgment wouldn't suggest,
and the available information would suggest that that would not
be a good idea.
Mr. Whitfield. Dr. Glauber, you touched on this in your
testimony, but we have some groups come and say, boy, this
raising, the prices of corn going up, it is affecting
feedstocks, whatever, whatever, in price, and other groups say,
well, it has no impact at all. Just from your analysis, your
experience, what would your view be on that?
Mr. Glauber. Well, I think, you know, it is clear that, as
I said in my opening statement, that increased ethanol
production has precipitated a large increase in corn production
and a large increase in corn demand. With that, you see
increased prices.
Now, a lot of other factors are out there in the world that
affect prices. There is a whole list of things that people
typically talk about. But things like we had some fairly
serious droughts over the period. We have had, you know,
increase in foreign demand, a number of things have affected
price.
But most of the studies that we have looked at show that
ethanol has contributed to some share of that increase. And I
think my own study showed about 30 percent. That is similar to
a lot of other studies that have been out there.
Mr. Whitfield. Thank you.
Mr. Glauber. I am sorry.
Mr. Whitfield. I am sorry. My time has expired. But thank
you for answering.
And at this time recognize the gentleman from Illinois, Mr.
Rush, for 5 minutes.
Mr. Rush. Mr. Grundler, has the RFS failed to meet the
overall gallon amount of the RFS in any year so far? Yes or no?
Mr. Grundler. The total RFS standard has been met so far,
yes.
Mr. Rush. Mr. Sieminski, in your estimation, what would
happen to domestic energy prices if ethanol was removed from
the vehicle fuel system?
Mr. Sieminski. We think that the use of ethanol would not
change very much if the Renewable Fuel Standards were
eliminated because of the use by the industry of ethanol as an
octane enhancer and a volume enhancer. It is cheap enough, they
are quite happy to add it to gasoline. The key thing is its use
as an octane and oxygenate enhancer.
Mr. Rush. Thank you.
Mr. Grundler, I am going to come back to you again. There
has been a tremendous amount of peer-reviewed research and
modeling conducted to estimate the reduced greenhouse gas
emissions realized with conventional biofuels, which would help
show that the RFS is working. These new numbers show that some
conventional biofuels are 50 percent less than the CO2
emissions of the 2005-based gasoline. When will EPA update
their numbers on the carbon index for conventional biofuels?
Mr. Grundler. Sir, right now, we have no plans to update
our basic methodology for doing lifecycle analytical work. That
is a pretty serious undertaking. But we do update our models as
we get new information. But right now we have no plans to
revise our basic lifecycle analytical methodology.
Mr. Rush. So because it is a serious undertaking, is that
the reason why you would not?
Mr. Grundler. Well, not only that it is an enormous amount
of work but many people have made plans based on the results
that we have already promulgated, and it would be fairly
disruptive for us to redo all of that work. But we are very
serious about keeping up with the science and are incorporating
new information as we get it through our pathway petition
process when we approve new fuels, when we do our lifecycle
work.
Mr. Rush. Dr. Glauber, can you discuss what has happened to
farm income in the U.S. since we adopted RFS in 2005? And,
conversely, can you discuss what is happening with government
payments to farmers?
Mr. Glauber. Yes. Thanks. It is a great point. As I
mentioned in my opening statement, both cash receipts are up by
over 50 percent, and net cash income, you know, that is, after
subtracting out all the expenses and adding in the government
payments, they are up about 53 percent or so. So a very large
increase.
Government payments have gone down. Understand that by
2005, for the most part, we weren't making--we have a lot of
government programs under the farm legislation that pay
producers when prices fall below certain legislated levels. And
prices have been above those levels for most commodities since
about the mid-2000 period. Now, again not all that was due to
the Renewable Fuel Standard, but there has been, as I
mentioned, a large increase in corn prices, a large increase in
soybean prices and others.
Mr. Rush. Thank you.
Mr. Sieminski, has the RFS reduced the need for foreign
oil?
Mr. Sieminski. I am sorry, could you repeat that?
Mr. Rush. Has the RFS reduced the need for foreign oil?
Mr. Sieminski. For foreign oil. The Renewable Fuel Standard
itself, where it is really having an impact at the margin is in
the advanced areas. So not the corn ethanol. And that number at
this point is very small. Probably 300,000----
Mr. Rush. Thank you so much.
Mr. Sieminski. Not so much.
Mr. Rush. Thank you.
Mr. Grundler, how will the development of advanced and
cellulosic ethanol projects be impacted if Congress were to
make changes to the RFS?
Mr. Grundler. I would really hate to speculate on that
matter. What Congress has told us is each year to make an
estimate of what the future production year would look like. So
long as we are following that process and establishing that
number based on good data and good science, I would think that
the cellulosic marketplace would have a steady signal.
Mr. Whitfield. Gentleman's time has expired.
At this time recognize the gentleman from Texas Mr. Barton
for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Grundler, you, in your written testimony, if I
understood you correctly, indicated that you don't, EPA doesn't
plan to do anything to revise the volumetric requirement for
RFS blending this year. Is that correct?
Mr. Grundler. Mr. Barton, what we have done is we have
proposed a 2013 standard that reflects the statutory volumes.
We are right now taking comment on that. We asked for comments
specifically for an adjustment of 200 million gallons, and we
are reviewing those comments right now.
Mr. Barton. What happens this year if, in spite of the rosy
scenario estimates, it is just not there? Is the EPA prepared
to waive the fines or come back later in the year and lower the
estimate, the requirement? Because in my conversations with
knowledgeable experts, they indicate that this year the blend
wall is going to be hit and they are just not going to be able
to meet the requirement unless they export gasoline, which
seems to me kind of a silly way to meet it.
Mr. Grundler. Congressman, we are quite confident in our
estimate of the number of excess RINs that are in the
marketplace to achieve compliance. And while we do believe that
there are some refiners who are facing this blend wall, there
are others who have not. And so each refiner is in a slightly
different market position. But they all have different
compliance options to meet their obligation. They can use these
carryover RINs, they can go to the market to buy RINs, they can
carry over a deficit into the next year. We really think the
blend wall and what we are seeing in the RIN market is
reflecting concerns about shortfall looking forward in 2014.
Mr. Barton. So for this year the EPA policy is basically
going to be cross your fingers and pray. What about next year?
Is there any doubt that next year, in spite of RIN carryforward
and everything else, it is not going to be met?
Mr. Grundler. Sir, we noted in our proposal for 2013--which
we haven't finalized yet, I want to again restate--we said that
2014 looks much more challenging. And we are seeking comment,
and we have gotten a lot of comment on----
Mr. Barton. You have been well briefed to testify before
Congress. It is much more challenging, like impossible, but I
will let that go.
Mr. Sieminski, do you care to speculate on, when the blend
wall is finally hit, which is going to happen this year or next
year, the expectation of refineries, if they are not given some
relief, having to export gasoline simply because they don't
have the ability to create the RINs?
Mr. Sieminski. Some refiners have said that in addition to
the possibility that they would just export to avoid the
problem, there is also the possibility of simply cutting back
on domestic production. The EIA kind of looks at that, and our
conclusion is that that is not really a viable long-term
strategy for refiners in a competitive market.
Another possibility would be that we end up with lower
retail prices to stimulate demand for E15 and E85. And how that
would happen is under the RINs program, the RINs themselves
would end up making it attractive for people to use more E85
and E15. But the cost of doing that or buying that down has to
come from the greater gasoline pool, or the E10 pool. That is
one way to get around this problem, but I am not sure. That is
a policy issue that Congress would have to look at to decide if
that is how they wanted to proceed.
Mr. Barton. Now, if I understood you, I think in response
to Mr. Rush, you indicated that if we repealed the RFS mandate
approximately the same amount of ethanol would be used to blend
in the gasoline because it makes economic sense for a number of
reasons. Is that fair----
Mr. Sieminski. Roughly speaking, yes, it might be a little
bit less but correct.
Mr. Barton. Dr. Glauber, do you agree with what Mr.
Sieminski just said that, absent a mandate you would still have
approximately the same amount of ethanol consumed and put into
gasoline?
Mr. Glauber. I think it depends on two factors and one was
mentioned, the octane enhancer, and I think that is a very
powerful thing to continue to blend ethanol at least in the
short run. Over the longer run, there may be other potentially
cheaper sources that they can move to, but the big thing will
be just that basic equation of the price of corn versus the
price of oil. And if corn is cheap relative to that, then they
will continue to make it. Understand with the blend, while you
kind of have an upper bound and I presume a lower bound at, you
know, the Clean Air Act reformulated gas pool, which is about 4
billion or so.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Whitfield. At this time, I recognize the gentleman from
California, Mr. Waxman, for 5 minutes.
Mr. Waxman. Mr. Sieminski, the climate scientists tell us
that to avoid dangerous climate change, the U.S. must reduce
greenhouse gas emissions by at least 80 percent by 2050. Based
on EIA's projections, is the U.S. currently on track to reduce
our greenhouse gas emissions by 80 percent by 2050.
Mr. Sieminski. No, sir, we are not. We are making quite a
bit of progress. The 1990 level that that target was based
against was about 5 billion metric tons of carbon dioxide
emissions from energy-related activity. We hit about 6 billion
metric tons in 2005. We are down now to about 5.3 but to get to
that level you would have to be down close to 1 billion metric
tons----
Mr. Waxman. Clearly, we are going to need to do a lot more.
Mr. Sieminski. You would have to do a whole lot more. There
would have to be policy----
Mr. Waxman. And a cleaner transportation system would be
part of the solution.
The renewable fuel standard is one policy that is designed
to achieve this goal. When Congress amended the RFS in 2007, we
specifically required that renewable fuel and in particular
advance biofuels, such as cellulosic biofuel and biodiesel,
reduced greenhouse gases compared to gasoline.
And Mr. Grundler, what aspects of the RFS produce climate
benefits? Do advanced biofuels reduce significantly less carbon
pollution than gasoline.
Mr. Grundler. Yes. There is no question about that. Our
detailed analysis looking at both the direct and the indirect
impacts of the advanced biofuels, clearly, the majority of the
benefits from the RFS will come from the advanced pool.
Mr. Waxman. Last year, American companies produced more
than 20,000 gallons of cellulosic biofuels. This is the first
time that such levels were produced commercially in the United
States, and both EPA and EIA expect production to grow. EPA
anticipates a production will reach 14 million gallons in 2013.
Earlier this year, EIA projected that we could reach 250
million gallons by 2015.
Mr. Grundler and Administrator Sieminski, would the
cellulosic biofuels industry be expected to grow this rapidly
without the advanced biofuels policy in the RFS?
Mr. Grundler. In my opinion, sir, there is no question that
the RFS policy has produced an enormous amount of private
investment in this advanced fuel sector.
Mr. Waxman. And is that your view, Mr. Sieminski?
Mr. Sieminski. It has, factually, it is just not moving
fast enough to come anywhere close to the targets that were set
in 2007.
Mr. Waxman. So it appears that we are at a critical
juncture in this industry. Companies report that they are
poised to scale up production of cellulosic biofuels
dramatically, but the next few years will be important to
achieve and solidify these gains.
Mr. Grundler, if Congress weakened or eliminated the RFS
requirements for advanced biofuels, do you think that would
undermine the development and growth of this industry?
Mr. Grundler. Well, of course, it would really depend on
how Congress went about that. The cellulosic standard right now
is a nested standard within the total and the advanced pool.
So if Congress chose to reduce both the cellulosic target
and the advanced target, the logical impact of that would be
considerable uncertainty and presumably financing issues for
the industry.
Mr. Waxman. And without an advanced biofuel industry, it is
clear, is it clear how to substantially reduce carbon pollution
from liquid transportation fuels?
Mr. Grundler. Sir, the RFS, as written by Congress, clearly
anticipated that that is where the growth would come from.
These are the lowest carbon liquid fuels, based on our
analysis.
Mr. Waxman. Mr. Chairman, I commend you for undertaking
this examination of the renewable fuels standard.
Stakeholders have raised a number of concerns with the RFS.
I am interested in understanding these concerns and working
with our colleagues to determine an appropriate course of
action. However, cutting carbon pollution to address climate
change must remain a priority for Federal fuels policies, and
the renewable fuels standard appears to be playing a key role
in supporting and encouraging innovation in low carbon advanced
biofuels. I think it is important to foster this innovation,
even as we continue to evaluate the law. Thank you very much.
I yield back.
Mr. Whitman. The gentleman's time has expired. At this
time, I recognize the gentleman from Louisiana, Mr. Scalise for
5 minutes.
Mr. Scalise. Thank you, Mr. Chairman.
I appreciate your having this hearing. I want to thank our
panelists for being here. We are starting to get a lot more
questions from constituents, as they recognize the impact of
the renewable fuel standards, not only how it would impact
refiners, how it may impact people that own older cars that are
concerned about warranties being violated, but also how
ultimately it will affect the price of gasoline at the pump,
which is already higher than it should be, too high for many
people, and getting higher.
But especially when you look at the fact that a lot of the
assumptions that were made in 2007, many of which were used to
pass this law, many of those assumptions just don't exist in
today's marketplace based on, number one, technologies that we
have today but also in economic conditions. I know when some of
our panelists talk about the problems that we are facing with
why these numbers were so off, some of it was based on
assumptions in ethanol and corn production, and we are seeing
now maybe higher food prices because of that. But we also are
seeing because of both efficiencies, as well as economic
conditions, people using less fuel. If somebody doesn't have a
job, they are not driving to work every day. That was not
anticipated back in 2007, yet that is part of the economic
reality we are dealing in today, and yet none of that is
factored into when we look at some of the rules coming out from
EPA.
So I am a strong supporter of repeal of the renewable fuel
standard; I cosponsored legislation to do that. But I think it
is important to get some of these facts out there about the
marketplace we are living in today.
I want to ask you, Mr. Grundler, when you were answering
one of the questions that Chairman Whitfield had brought up
about significant economic harm, and there is some discretion
you have in coming up with that definition, can you share with
this committee the models that you used because we don't have
that information, when you all are running these models to
determine significant economic harm, I think it would be
important for us to know what models you are actually using.
Could you share with the committee that information?
Mr. Grundler. I would be happy to.
Mr. Scalise. Thank you.
Regarding E15 engine testing, is it--what exactly kind of
vehicles did you use? Did you just look at emission failure?
Did you look at engine failure?
Mr. Grundler. First of all, we looked at a number of
different studies in the literature that looked at fuel effects
on across a variety of vehicles. The testing was actually done
and managed by the Department of Energy, and they looked at a
wide range of impacts, the priority, of course, was based on
the statutory criteria as to what is the impact of higher
ethanol blends on emission control systems, and would they lead
to violating the emissions standards. But they also looked at
materials compatibility about engine durability. They tore down
a number of engines----
Mr. Scalise. Would you share with the committee all of that
information that you used in coming up with those tests?
Mr. Grundler. Absolutely. All that was all shared with the
public. We can provide all that information to you from the
waiver.
Mr. Scalise. Thank you when you were answering one of
Barton's questions regarding RVOs, he was asking about the
timing, and I think under the law, you are supposed to, by
November 30th, come up with those standards for the following
year. And of course, we don't have those for 2013. And you said
you are still in the development process, getting information,
and of course, that creates uncertainty in the marketplace, I
hope you understand that. But then looking forward to 2014, can
we be assured, can you give us assurance that by November 30th,
we would have those rules available for 2014?
Mr. Grundler. The priority right now, frankly, for me, Mr.
Congressman, is to get 2013 done, and we are working very hard
to do that, and I hope we will get that final by this summer.
Mr. Scalise. You are like a year--a half year late already.
Mr. Grundler. I understand that.
Mr. Scalise. Maybe you are overwhelmed. Maybe another
argument for repealing RFS is that you are too overloaded to do
the things you are currently tasked with all these other things
that are coming down that are creating so much uncertainty with
waivers.
I think, Mr. Sieminski, you have touched on some of these
waivers, and I think, in your testimony, you talked about the
importance of EPA exercising that waiver ability, because just
the marketplace isn't going to be ready for what is coming. I
don't know if you want to expand on what you talked about in
your testimony regarding that.
Mr. Sieminski. In terms of your commentary, I would say
that shifts in demand that we have seen have played a part in
the blend wall problem, that the biggest problem post 2014 has
been in the slow development of the advanced technology and
that that is what is leading to the issues associated with
meeting the high targets that were set in 2007.
Mr. Scalise. I appreciate that. I look forward to hearing
more testimony.
And I yield back the balance of my time.
Mr. Whitman. At this time, I recognize the gentleman, Mr.
McNerney from California for 5 minutes.
Mr. McNerney. Thank you, Mr. Chairman.
Former Chairman Barton's opening statement indicated the
good intentions that went into the 2005 law and how the
changing technology and market conditions present significant
challenges to the RFS. However, one thing to me is quite clear,
the RFS has spurred innovation, and given the threat of climate
change, innovation is going to be a critical factor in moving
forward.
So my first question is to Mr. Grundler from the EPA, does
the agency have the necessary technical advances? Do you see
the necessary technical advances emerging to meet the projected
targets?
Mr. Grundler. Every year, as we go through this annual
process, particularly with respect to the cellulosic target, we
meet with the producers so we get detailed information about
where they are in scaling up their technology and from the
laboratory to a commercial scale facility. That takes a, that
is not an easy task and that, obviously, if you look at this
historical record, it has taken longer than the Congress
expected. But when we go through this process every year, we
get up-to-date information on where they are, on new ideas. We
get new petitions every year for new pathways and new processes
and new technologies. So there is--it is clear to me that there
is a lot of innovation. There is a lot of invention that is
going on, and the reality is that this takes time to scale up
to commercial production levels.
Mr. McNerney. Good, well as the EIA mentioned, we are now
on a path to meet the RSF targets by 2022, do you feel that
your agency has sufficient flexibility under current law to
meet the challenges of the changing technology and marketplace?
Mr. Grundler. Yes. The Congress gave us a number of
different kinds of authorities to adjust these standards as
well as the, actually, the nondiscretionary duty if we do
adjust the standard as we have now with cellulosic to reset the
statutory volumes beginning in calendar year 2016. We are not
ready to undertake that work we are focusing more on 2013 and
2014, but the Congress did provide the agency with a number of
tools to--for an orderly implementation of these standards.
Mr. McNerney. So you can say, we don't really need to
repeal the law; you have sufficient flexibilities if you are
given the resources to meet the changing marketplace?
Mr. Grundler. I am not here today to give you a
recommendation on legislation, but we are focused on using as
much common sense as we can muster to address the facts and
address the reality. And we are doing a lot of listening, we
are getting a lot of different advice from different
stakeholders on how to use those authorities, and we are
contemplating all these issues right now.
Mr. McNerney. Thank you.
Mr. Glauber, what steps are the USDA taking in helping
producers throughout the country develop the feedstocks
necessary to meet the future by biofuel demands.
Mr. Glauber. I think there is no question, as far as corn
is concerned, there hasn't been an issue. The farmers have
increased production. We are currently producing enough corn
certainly to meet the demands for corn use for ethanol.
Insofar as advanced biofuels are concerned, I think that
has been some of the discussion here about the underlying
economics of that. We have USDA, in association with other
departments, like the Department of Energy, have put forward
development of, say, drop-in fuels. We have a program right now
with the Navy for that. We have been talking to FAA about
looking at potential for drop in fuels for airplanes. We have
helped develop crop insurance products for things like for some
biodiesel feedstocks and things like that. So we are limited in
terms of programs we have for these, but we have been trying to
orient research and other things toward development of advanced
biofuels.
Mr. McNerney. Thank you, Mr. Chairman.
I will yield back.
Mr. Whitman. The gentleman yields back.
At this time, I recognize the gentleman from Texas, Mr.
Hall, for 5 minutes.
Mr. Hall. I thank you, Mr. Chairman, and I thank you for
this very important hearing today.
The renewable fuel standard has been successful in bringing
biofuels into the transportation fuel supply here in the U.S.,
but the approaching, quote, ``blend wall,'' unquote, raises a
lot of unanswered questions, and we need to be careful and
thoughtful about how we go forward and how we manage the
renewable fuel standards.
Mr. Sieminski, can you give us an overview of the changed
energy landscape today compared to 2007 and particularly speak
of gasoline demands and future projections and their effect?
Mr. Sieminski. Certainly, Mr. Hall, as I discussed in my
testimony, the outlook for gasoline demand is a lot lower,
while projected domestic oil production is significantly
higher. Lower gasoline demand projections reflect higher
vehicle efficiency standards, slower economic growth, higher
gasoline prices. Production is primarily reflecting the role of
tight oil in places like Eagle Ford in Texas and the Bakken in
North Dakota. That was not really foreseen in 2007, or if it
was, it was at the far end of the optimistic range.
Together those changes have resulted in a significantly
reduced projection for net dependence on imported oil, so that
is the biggest impact of the demand and supply shift since 2007
is the impact on imported oil has been dramatic.
Mr. Hall. And what has brought about that dramatic
situation? With regard to the Arabs that we have relied on I
think at one time in the last, 4 or 5 years, maybe the last 2
years, for 50 or 55 percent of our energy, and it is down to
about what percent is that relying on?
Mr. Sieminski. It was at 60 percent in 2005, and 2012,
2011, we got it down to about 40 percent, and right now, it is
just a little over 30 percent. So a lot of progress has been
made in doing that.
That is a net dependence on imported oil.
Mr. Hall. Do you think we are nearing the E10 blend wall?
Mr. Sieminski. It is going to be very difficult, given the
constraints on vehicle warranties and infrastructure issues and
just in terms of how you can sell at above 10 percent ethanol
mix at the pump, it is going to be very difficult, so, yes, I
think that that is an issue. The way around that is you have to
sell more E15 and E85, and the problem there is only about 5
percent of the vehicles are capable of using E85 and less than
2 percent of the gasoline stations of the ability to sell it.
Mr. Hall. Either of you other two gentlemen have any
improvement on that answer or criticism of it?
Mr. Glauber. I would just say I agree. I think that that is
the key thing is penetration of higher blends that you just
don't have the pumps and the, at least currently, those higher
blends are not being priced competitively enough on an energy
basis with gasoline.
Mr. Hall. And Mr. Scalise asked you about any doubts you
had about the approval of E15 in the face of overwhelming
skepticism from automobile makers, I didn't really get your
answer to them.
Can you describe the test at EPA and DOE undertook before
approving E15, and did you take into consideration things like
engine durability or fuel pumps or anything like that?
Mr. Grundler. The testing really was very extensive.
Mr. Hall. Was very what?
Mr. Grundler. Extensive DOE ran a lot of vehicles and ran a
lot of miles, up to 120,000 miles, to test the impact over the
full useful life of this vehicle. They tore down engines to
look at engine wear. They looked at components. So the answer
to your question is yes. I don't have any doubts that we made
that decision given the best information that we had at the
time.
Mr. Hall. And I didn't fully you understand your answer to
why you didn't grant the waiver that we sought. I wrote you a
letter back in 2012 and in response Texas and other States
talking about relief of the drought, and Mr. Barton got into
that a little bit. And I understood you to say, well, your
answer wouldn't have made any difference anyway; it wouldn't
have changed anything. Isn't it a fact that the reason we
requested that relief was a 2012 drought that reduced corn
yields and temporarily increased corn prices?
Mr. Grundler. There is no doubt that the drought had those
effects. The question in front of the agency under the law is,
did we think that--could we make a determination that
implementing the RFS would create severe economic harm to the
State of Texas or other parts of the United States? And we
could not make that determination.
Mr. Hall. Well, how you made that determination I would
like to get into that some time when we have a lot more time,
but I don't have much respect for the good data and the good
science that you say EPA has handled up to this time.
But I think I am near the end of my time. I will yield back
my time.
Mr. Whitfield. The gentleman's time has expired.
At this time, I recognize the gentleman from New York, Mr.
Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chairman.
Mr. Grundler, EPA has proposed to maintain the RFS volume
standard for 2013. In light of current conditions and EIA's
projections, many would ask why? I would think the current
conditions of the market would lead EPA to use the flexibility
under the law and adjust the required volume somewhat? Your
opinion on all of that.
Mr. Grundler. You are right that we did propose not to
adjust the volumes in 2013, although we did request comment on
making an adjustment, and we are taking those comments right
now. But in the proposal, and we laid out an explanation of
why, we do think that there is not going to be a difficulty in
2013 to comply because of the large amount of excess credits
that are available to meet the refiners' obligation.
But we are quite clear that, with respect to 2014, again
based on EIA's estimates as well, that the challenge becomes
much greater because the statutory volumes increase
substantially, and we have asked for the public to give us some
comments and some advice on whether or not we should consider
adjustments going forward, how to use our authorities to do so,
and we are looking at those comments very carefully right now.
Mr. Tonko. And when will you provide any sort of assessment
of that?
Mr. Grundler. We intend to finalize the 2013 standard very
soon, before the summer is over, and my goal is to propose a
2014 standard shortly thereafter.
Mr. Tonko. Thank you.
What does USDA predict would happen to corn acreage if we
were to reduce the target volumes for RFS?
Mr. Glauber. Well, first, I think it is instructive to know
what we are projecting if we maintain the standards, and that
is for corn area to fall a little bit, just because
productivity in corn yields were currently--this year, we will
have numbers out on Friday--but in the mid 90 range for corn
acreage. We anticipate that to fall to closer to 90, 91 million
acres over the next 10 years just because of improvements in
yields, and so more production off the current area.
If the RFS were to be removed, then the real question is,
obviously, does one continue to make ethanol out of corn? And I
think that we tried to address that in the earlier question and
that a lot will depend on the price of corn relative to oil.
Right now, given the projections, it is assumed that producers
would still or that ethanol producers would still have
incentives to make ethanol, but understand that that is very
sensitive now. Absent mandates, it would be very sensitive to
price disruption, so higher corn prices, for example, and you
could expect a reduction. And if indeed over the longer period
that were to cause a significantly lower area of ethanol from
corn being produced, then you would expect that to have some
impact on corn area.
Mr. Tonko. And if you repealed the RFS?
Mr. Glauber. I am sorry. That was the scenario I was
discussing.
Mr. Tonko. OK, I just wanted to make certain that is what
we were addressing. And the EPA, and for any of our witnesses
here, EPA has proposed designating biobutanol derived from corn
as an advanced biofuel. Does that move us away from using a
food crop for fuel? And I am not certain this would help with
food and feed prices, what benefit would this have, if any, in
addressing some of the other problems with current RFS program
anything from infrastructure to the blend wall and beyond?
Mr. Grundler. First of all, we estimate that it does
qualify for as an advanced biofuel, so it would provide
greenhouse gas reductions, and it would provide an easier way
to move this fuel into the transportation system.
Mr. Tonko. In some conversations that I have had with
individuals concerned about some smaller engines, those in
boats or motorcycles and other specialty vehicles, they have
had trouble running on even blends with 10 percent ethanol. Are
fuels with lower ethanol blends becoming more scarce? And are
they higher price than, what has the info feed your way been on
some of these smaller specialty engines?
Mr. Grundler. My understanding is practically the entire
fuel supply now is at a 10 percent blend. Marinas will often
provide E0 for their customers who may have older boat engines
who weren't designed for the 10 percent blend, but 10 percent
blends have been around for 30 years or so, so all the modern
boat engines are designed to operate well on E10.
Mr. Tonko. Is that true, too, with the motorcycle engines?
Mr. Grundler. Yes.
Mr. Whitman. The gentleman's time has expired.
At this time, I recognize the gentleman from Illinois, Mr.
Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
Too many questions, too little time. It is great to have
you all here. Let me start with just a couple statements in
response. Mr. Sieminski, I would say that no one wants to be a
prognosticator, especially after the fact. I don't want to do
it in sports, and I don't want to do it in politics, but just
for the record, in 2011, you said there would be 2.79 billion
gallons of ethanol, and production actually was 13.93 billion
gallons. So projections are great. They are projections. We
shouldn't take those to the bank as what will happen as things
will change.
I also have to respond to Mr. Waxman. I am glad the
President talked to college students. I would rather he come
talk to my coal miners, who won't be able to afford to send
their kids to college because of what his announcement did
yesterday, so I think you have to pick your audience, and I
think the President did and he just didn't pick the audience
that are in my district.
And so as many people in this room know that I have more
desire to get this fixed than anybody. I have two refineries in
my district. I have got the largest corn-producing district. I
have got the biggest high play of oil now because of the
fracking in my district. I have got coal mines. I have got
power-generating plants, so we are working hard to go through
this dilemma and walk away standing up, which I think we are
going to be able to do.
So let me go to a question. No one has mentioned, and Mr.
Grundler really because it really is part about the
requirements by law, no one has mentioned so far biodiesel and
no one has mentioned the fact that actually it has exceeded its
blending capabilities so it actually is helpful in this, is
that correct?
Mr. Grundler. That is correct the country----
Mr. Shimkus. And there is no blending debate. There is no
fueling debate. There is no engine debate, et cetera, et
cetera, et cetera.
Mr. Grundler. Not at current blends no.
Mr. Shimkus. That is kind of a success story that is kind
of getting lost. There is some success in this debate. And as I
think was said earlier, if you are a climate person, there is
reduction in the carbon emissions on that.
Mr. Grundler. That is true.
Mr. Shimkus. So there is biodiesel is part of the success
story that we just we have to keep in part of this debate.
I also want to talk about the greenhouse gas threshold a
little bit. We export corn-based ethanol is that correct
overseas?
Mr. Grundler. That is correct.
Mr. Shimkus. We import a cane-based advanced biofuels,
correct?
Mr. Grundler. That is correct.
Mr. Shimkus. Do we calculate the transportation cost of
these two ethanol products that are, in essence, no different
in a greenhouse gas calculation?
Mr. Grundler. Yes, we do.
Mr. Shimkus. You do. I would like to see that. I would
argue that, maybe, well, I would like to see how you calculate
that, but I would argue that that doesn't make a lot of sense
if you want to reduce greenhouse gasses and we are sending
ethanol outside and importing ethanol in and that is not a net
increase, versus a status quo or a decrease.
Let me go on.
Mr. Grundler. Can I clarify my answer, sir?
Mr. Shimkus. Go ahead.
Mr. Grundler. When we do the lifecycle determination as to
whether or not sugar cane ethanol qualifies as an advanced
fuel, we take into account the transportation emissions from
Brazil to the United States.
Mr. Shimkus. But not the refilling of sending of an equal
amount of ethanol and corn-based overseas to another country?
Mr. Grundler. Correct.
Mr. Shimkus. And that is maybe----
Mr. Grundler. But it is not an equal amount. It is not--the
trade relationship is not a direct one for one.
Mr. Shimkus. Let me go, what do you attribute--going back
to Mr. Grundler again, this 2013 and not having the standards
is a major problem because you can't expect refineries to meet
goals and objectives if we don't have that. Now I applaud your
most recent response on the shortly following, 2014 numbers
will be approved because that could ease a lot of our stress
and strain based upon the fact that you all have to set the
blending, you have to, you set the standards.
Mr. Grundler. Correct.
Mr. Shimkus. And my colleagues are right; we are 6 months
into a year, and we don't know what the 2013 standards are.
That is why people are crazy out there.
Mr. Grundler. I understand.
Mr. Shimkus. So I would say move rapidly on 2013 and
quickly follow 2014. That could help ease a lot of pressure
here. And I know my time has almost expired.
What do you attribute the increase in the RIN prices that
occurred earlier this year to?
Mr. Grundler. Most observers, EPA included, believe that
the market is reflecting the coming situation in 2014 and 2015,
as these statutory volumes go up, and they are anticipating a
scarcity of RINs or a higher cost in terms of moving higher
blends of ethanol.
Mr. Shimkus. So there is a risk and uncertainty premium
based upon the unknown----
Mr. Grundler. That is right.
Mr. Shimkus. Which is why giving some----
Mr. Grundler. I get it.
Mr. Shimkus. Data might be helpful to ease that risk.
Mr. Whitman. At this time, I recognize the gentleman from
Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
I have a habit of following my colleague from Illinois, I
guess.
Director Grundler, some have advocated E85 and E15 as
solutions to the E10 blend wall. What do you see as the major
barriers of these fuels as solution to the E10 blends wall?
Mr. Grundler. There are significant infrastructure barriers
at the moment, as has been referenced in some of my colleagues'
testimony. There are only roughly 3,000 E85 stations at the
moment selling 85 and roughly 11.5 million vehicles that are
capable of using it, and that is a significant challenge to
moving more volumes of E85. With respect to E15, there are very
stations today that are offering that product.
Mr. Green. I heard that there are only a few stations as
you said selling E15 in our country, and while E85 may be
popular in the Midwest, it is not in most regions. I understand
there was only one E85 station. I think in the Houston area, I
think I found the one, but so it is not very widely spread,
except in the Midwest.
Mr. Grundler. My understanding is that we have roughly
3,000 retail stations that are selling versus over 150,000
stations that sell gasoline.
Mr. Green. Do you believe the EPA has the tools available
to relieve the pressure on the blend wall in the short term?
And if so, will EPA exercise this authority in the coming
months?
Mr. Grundler. Sir, clearly, the Congress provided us with a
number of tools to adjust these standards. And right now, we
are in the midst of getting a lot of advice. We are doing a lot
of listening. And we are focusing on this very, very carefully.
And I am just not in a position today to forecast where we are
going to come out in 2013 and 2014.
Mr. Green. On Monday, the EPA won a victory when the
Supreme Court declined to hear three separate lawsuits on E15.
It seems, however, that the consumer will actually lose though.
Automakers with limited exemptions are warning consumers that
their automobiles will not be warranted for E15. How do you not
have doubts about the approval of E15 in the face of skepticism
by our automakers?
Mr. Grundler. Sir, that is a very good question. I guess
the way I would answer it is that we did do an enormous amount
of listening. We did an enormous amount of testing. We did all
the testing. We looked at all the data that was available, and
it simply did not show that there was going to be an impact on
emission control systems by E15. We are not mandating the use
of it, sir, and we are not advocates for E15. We are not
opponents of E15. We simply made a determination under the law
that it met the waiver criteria, and it will be up to the
marketplace as to whether or not people will be offering that
to their customers.
As to the warranties, I would have to defer to the
automakers why they make those sorts of decisions.
Mr. Green. I guess just alcohol and oil sometimes just
doesn't mix. I understand EPA and DOE has for years used the
Coordinated Research Council to conduct vehicle emissions
studies in research products likes the national surveys of E85
fuel quality, the advanced collaborative vehicle emission study
and the nonroad vehicle emission study.
Can you explain why you think the coordinated council of
research is valuable in these instances but discounts their E15
test results when it appeared that EPA and DOE played
significant roles directly through the National Renewable
Energy Lab and CRC's mid-level ethanol blends research program?
Mr. Grundler. You are correct, sir. We have a long history
of working with the CRC and cooperating on a whole variety of
test programs.
Frankly, we regret that we weren't given the kind of role
that we ordinarily have in their latest work on E15. We were
unable to, even though we asked, to be much more involved in
selecting the vehicles and selecting the criteria, and
regretfully, we were not allowed to do that. But we look
forward to continuing our historical relationship with the CRC
in the future.
DOE has also commented pretty extensively on the
shortcomings of the latest E15 work that you are referring to,
including that it hadn't been peer reviewed, that the criteria
that they chose as a failure criteria seemed arbitrary, that
there were no control vehicles chosen, and so on, and I would
be happy to provide to you their review of the scientific
shortcoming.
Mr. Green. I would be glad to see it. I appreciate it.
Administrator Sieminski, your 2013 annual energy outlook
early released presented a much dimmer picture for the growth
of E85 sales compared with last year. Can you discuss the
reasons why these projections are so much lower?
Mr. Sieminski. Well, the basic reason is that the projects
that were underway to produce cellulosic and advanced biofuels
just simply haven't materialized in the timeframe that we
believed that they would. There is consequence; our projections
for how much of these fuels can be produced just keep slipping.
As Mr. Grundler said earlier, at the end of last year, we
thought there would be 9.6 billion gallons of these fuels, and
we are now down to 4 to 5--excuse me, million gallons. And
these are, we only have two plants that are in the running at
this point. One of them is up and operating. At one point, it
appeared that there were as many as 10 or 12 plants to produce
these fuels. And so the inability of the technology to advance
as quickly as was expected in the years between 2007 and 2012
is the main factor.
Mr. Green. Well, obviously, it could cause a substantial
volatility in the market if the technology is not there that we
thought would be there and so that may be why we're having this
hearing today I hope.
Mr. Grundler, can you please describe the misfueling
mitigation measures EPA has in place and why EPA believes they
are adequate?
Mr. Grundler. I would be happy to Congressman. We required
anyone who wishes to market E15 to submit to us a misfuel
mitigation plan. That plan includes labeling the E15 pumps with
warning labels to make sure that customers don't improperly use
the fuel in vehicles that can't tolerate or small engines. We
require a survey and tracking and reporting so that we know
that E15 is being tracked carefully and is being used properly
and a number of other details in the mitigation. I would be
happy to get you the----
Mr. Green. If you could get that. The last question is, why
does EPA believe that 14 million gallons of cellulosic biofuels
is appropriate for 2013? How much is produced so far during the
first 5 months, 6 months?
Mr. Grundler. 8,332 RIN. I want to clarify that when we
came out with proposal, that was our best estimate at the time.
We are now updating that estimate based on the latest
information from both producers, and we are consulting with our
colleagues at EIA, and the final number will be based on that
most recent information.
Mr. Green. Thank you very much, Mr. Chairman.
I appreciate your courtesy.
Mr. Whitfield. The gentleman from Nebraska, Mr. Terry, is
recognized for 5 minutes.
Mr. Terry. Thank you, and I am not in the same position as
Mr. Shimkus; we only have corn. We don't have quite the
diversity of resources in Nebraska as Illinois.
But I want to focus on the waiver because I am just not
grasping the full extent of the waiver. When the RFS was
written, it included provisions for the administrator to issue
waivers if the requirements of the program would impose
economic harm or impose harm on the economy.
And I am very interested in better understanding to what
extent can the agency use this waiver authority? And do you
agree that there is a waiver authority?
Mr. Grundler. Indeed, sir, and there is more than one. If
we determine, as we have for the last 3 years, that there is
not the cellulosic volume to meet the Congressional standard,
we adjust it, and we can also, we have chosen not to in the
past, but we could also adjust the total and the advanced by
that same amount. In the past, we have chosen not to because we
determined that there was sufficient other advanced fuel to
meet that target.
The other waiver authority, which you referenced, is a
general waiver authority, where if the administrator can either
be petitioned by a party or can on her own determine that the
RFS implementation would create a severe economic harm to a
region or a State and that the previous conversation we have
been petitioned a couple of times and determined that, again,
because of market dynamics and the demand that the refining
industry has for ethanol that the statutory test simply was not
met, and we are not allowed to grant that waiver.
Mr. Terry. All right. Then, again, helping me grasp this,
so because cellulosic hasn't really gotten out of the pilot to
mass production yet, you were able to just waive that portion
that was designated for this cellulosic growth?
Mr. Grundler. That is correct. We adjusted the volume down
something like 98, 99 percent, based on our estimate about what
that volume would be in the forthcoming year.
Mr. Terry. So, then, the amount that could be done, normal
ethanol, corn-based ethanol, you increased though, still
increased the volume or number of gallons from 2011 to 2012,
and are you looking to do that again in 2013? I realize you
haven't finalized that, but you said you are working on it
diligently.
Mr. Grundler. The proposal would have us adopt the
statutory volumes for total and advanced, and then we are
proposing to waive the cellulosic portion of the standard, but
not, we are not----
Mr. Terry. Just the cellulosic, but there are still
advanced fuels that are on top of the regular ethanol.
Mr. Shimkus. Would the gentleman yield quickly?
Mr. Terry. Yes, I will yield.
Mr. Shimkus. But you reduce the one point of the advanced,
but you didn't reduce the overall level commensurate with the
loss of production. Is that true?
Mr. Grundler. That is correct.
Mr. Shimkus. And I think that is a problem.
Mr. Terry. Part of the confusion here I think as well.
So you do the estimates on the 2013 crop, and how much
advanced? What is your--any of your early thoughts of how much
cellulosic is going to be on the market this year?
Mr. Grundler. Our original estimate that was in the
proposal was 14 million gallons, and we are now updating that
based on the comments we received.
Mr. Terry. That is the totality.
Mr. Grundler. That is correct, and if I could just respond
to Congressman Shimkus, the reason we didn't make the
coincident adjustment in the advanced is because we determined
that there are many other fuels, including biodiesel, that can
make up that advanced pool, as well as in other advanced,
domestic advanced ethanol, as well as projected imports from
Brazil.
Mr. Terry. You mentioned with E15 or greater, there are
infrastructure problems. Could you state maybe at the gas
station level what the specific problems would be?
Mr. Grundler. With respect to E15, again, based on all the
people that we have been talking to and listening to, we
understand that there are both market barriers for the
widespread adoption of E15, as well as remaining regulatory
barriers. There are numerous kind of State and local
requirements that would need to be met to sell E15. Many States
still have a cap of E10 for sales in their States. There are
underground storage tank and dispenser requirements that need
to be met. So these all contribute to barriers to more E15
sales.
My own opinion is that these liability concerns are the
predominant challenge at the moment.
Mr. Whitman. The gentleman's time has expired.
At this time, I recognize the gentleman from Pennsylvania,
Mr. Doyle, for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman, and thank you to the
panelists.
Dr. Grundler, I see the President's Council of Economic
Advisers is warning us that increasing production of food-based
fuel, such as ethanol, not only increases the demand for
agricultural feedstocks but may also make demand less elastic,
through such measures as biofuel blending requirements, and as
such, the integration of food and energy markets can cause
shocks in one market that get transmitted to the other. We have
seen the expansion of corn ethanol increase corn prices by 36
percent from 2000 to 2009.
CBO estimated that the use of ethanol for fuel accounted
for about a 28 to 47 increase in the price of corn and a 10 to
15 percent increase in food prices. And it is important to note
that these increases occurred during a time when the U.S.
harvested a record 13.1 billion bushels of corn.
Grocery bills have been rising 3 to 4 percent every year,
and they will rise by the same margin in 2013. In 2011, retail
food costs rose 3.7 percent according to the USDA. After
increasing corn ethanol mandate in 2007, the consumer price
index for meat, poultry, fish, and eggs accelerated by 79
percent. The doubling of the ethanol mandate in 2007 caused a
30 percent increase in the price of corn from 2006 to 2010,
according to economists. And the USDA is warning us that corn
shortages, caused in part by the ethanol mandate, will drive up
U.S. food prices by another 3 to 4 percent in 2013.
In light of your comments and your written testimony on the
E10 blend wall, what tools does the EPA have to ensure that
higher blends of ethanol into gasoline will be filled by
cellulosic and advanced biofuels? As we are moving from E10 to
E15, what can you do to make sure that that space is not
entirely filed by corn ethanol that can negatively affect feed
prices and for farmers and food prices for consumers?
Mr. Grundler. As we have been discussing, the agency has a
number of tools, including its responsibilities on an annual
basis to set these different standards, these four different
standards. With respect to what will ultimately be the mix of
these different fuels is really something that is going to be a
market choice. We will be establishing, again, what our best
estimate of what the cellulosic volume will be. And with
respect to the total and advanced, we will also be setting
those targets. But how that gets sorted out in the marketplace
in terms of the mix will be left to the market.
Mr. Doyle. And also, I understand your testimony, you said
that EPA is recently proposing to broaden the specific fuels
that will qualify under the RFS program, can you tell me a
little bit more about that proposal, and what you are doing to
make this program as flexible as possible?
Mr. Grundler. Thank you. Yes, we have been very busy
evaluating these different feedstock and pathway petitions that
people submit to us and doing the necessary lifecycle analysis
to determine what their overall emissions would be and whether
or not they qualify for these advanced categories.
The reason this is important work and why it is important
that we continue to find ways to streamline this process and
make decisions faster is because this gives the marketplace
many different options and choices in terms of complying with
their obligations, as well as has been discussed fostering
innovation and invention in lower cost ways to meet the
standard as well as provide the greenhouse gas benefits.
So we have--and I would be happy to give you the details of
this--approved quite a number of advanced pathways that are
sourced domestically from these different feedstocks and using
these advanced technologies that will provide these benefits.
Mr. Doyle. Good, I will look forward to that detail. Mr.
Chairman, that is all I have.
Mr. Whitman. Thank you. At this time, I recognize the
gentleman from Ohio, Mr. Latta, for 5 minutes.
Mr. Latta. Well, thank you, Mr. Chairman, I appreciate it.
And thank you very much for our panel. And if I could ask Mr.
Grundler, thanks very much for your testimony today.
And one of the things I have been hearing, oh, in the last
year really deals with the renewable identification number,
RINs, and a company was out there and some others that were
selling fake RINs for the fuel credits. How is it, for one
thing, that these companies were doing that and they weren't
caught and that took so long?
Mr. Grundler. Well, sadly in addition to all the
innovations that the RFS policy has inspired in terms of new
technology, it has also inspired a lot of innovation in the
criminal mind. And we have discovered what can only be called
as counterfeiters, and we discovered this through our
enforcement arm at the agency, through hotlines and tip lines.
And as I hope you can appreciate, it takes a while to build a
criminal case and to gather the evidence to make the
prosecution.
But the good news is that the United States achieved
several convictions already with extended jail time, prison
time for these counterfeiters as well as very high fines and
confiscated private jets and luxury automobiles in the process.
So I think that is a good result. The bad result that you
are no doubt alluding to is this did create a chill in the
marketplace because of concern about the validity of RINs that
obligated parties were buying.
Mr. Latta. Could I just ask, and you are probably ready to
answer that, but what steps have the agency taken to prevent
this from happening in the future?
Mr. Grundler. I was just about to get to that. Again, we
did a lot of listening. We worked with the oil industry and the
producers and third party validators and proposed earlier this
year a voluntary quality assurance program that would provide
for an affirmative defense, so if you are an obligated party
and you utilize one of these quality assurance programs in
purchasing these RINs, and they later turn out to be
fraudulent, the government is going to hold you harmless from
penalizing you for that purchase. This is public comment, we
have got a number of different options we have proposed, and we
are going through those comments right now, and we will be
finalizing this at the end of the year. But I think it has been
successful, sir, in opening up this RIN market, and the
evidence there is we have got more biodiesel producers this
year than we did last year. And that was our concern, that
these small producers would be frozen out of the market because
people would only buy from large producers that they know that
have deep pockets.
Mr. Latta. Let me ask this, you say you have an affirmative
defense out there. Some of the information I have had, maybe
this is the affirmative defense is since that time, is there
still a buyer beware along with that affirmative defense?
Mr. Grundler. Yes.
Mr. Latta. May I ask this, this agency, is there a due
diligence that has to be exercised by that buyer of that RIN?
Mr. Grundler. We do expect some due diligence. But, again,
if they do that due diligence, if that RIN has been through
this quality assurance program, then the affirmative defense
would apply.
Mr. Latta. Could I just ask, what is your definition of due
diligence then that a company would have to exercise?
Mr. Grundler. Can I get back to you on the record on that?
This is a legal question that I would like to consult with my
enforcement.
Mr. Latta. Because I think, again, if there is an
affirmative defense on the one side, but then you are supposed
to be exercising due diligence and the two have to come
together at some point, I think it is pretty important that
folks know exactly what that is because you might think, well,
I have gone to the Web site, this is what the EPA says that
this company or this RIN is a good one, and I think, OK, even
if something goes wrong, I have got an affirmative defense, but
then if the question is then for that person or that company, I
should say is what happens with the definition of the due
diligence, and we will----
Mr. Grundler. We will be very clear on that.
Mr. Shimkus. I was----
Mr. Latta. I will yield to the gentleman.
Mr. Shimkus. I just wanted to--I just want to put from the
World Bank May 20, 2013, on this food fuel debate, the World
Bank says in the final paragraph, it concludes that most of the
price increases are accounted for--I am talking about food
prices--are accounted for by crude oil prices, more than 50
percent, followed by stock to use rations and exchange rate
movements, which are estimated about 15 percent each. Crude oil
prices mattered most during the recent boom period because they
experienced a large increase. So that was in reference to the
food fuel debate and escalation of prices mostly on energy
costs.
Mr. Latta. Thank you very much, Mr. Chairman.
My time has expired, and I yield back.
Mr. Whitman. At this time, I recognize the gentleman from
Kansas, Mr. Pompeo, 5 minutes.
Mr. Pompeo. Great. Thank you, Mr. Chairman.
Like Mr. Shimkus, I have got a lot of questions, too. It is
no secret to anybody here that I have a deep skepticism of
energy subsidies and mandates. This skepticism extends to the
RFS as well. I represent Kansas. We have got some of the
largest ethanol producers in the world, but we are past the
time when parochial interests can set policy for the country.
RFS is a bad policy. I think today's testimony bears it
out. Folks back home are listening to RINs and blend walls and
cellulosic mandates and RIN waivers and confiscation of
airplanes associated with a market, right, consumers trying to
buy gasoline at the pump and fuels to drive their trucks
around. I think their head would spin with a set of Rube
Goldberg device like the RFS that we have ended up with.
I hope we can move away from that. I expect we can't undo
it just yet, and I hope this hearing will lead us to a
thoughtful path forward on how we get how out of this mess.
Mr. Grundler, you talked about a minute ago a question I
think it was Mr. Terry's question, you talked about innovation
that has resulted from the RFS. I would tell you I think mostly
what has happened is rent seeking. So tell me what innovation
the RFS has lead to over the I guess we are between 2005 and
2007 and now.
Mr. Grundler. Thank you for that question, Congressman.
The innovation I was referring to was coming up with new
ways to make transportation fuel from a whole variety of
different feedstocks, from wastes, to switch grass to crop
residues in a way to power America's cars and vehicles.
Mr. Pompeo. And in spite of all that information, where,
according to Mr. Shimkus, if I understood it right, about half
the way to the 36 billion gallon target. Is that right?
Mr. Grundler. That is correct.
Mr. Pompeo. So we have got less than half of the innovation
that Members here who voted for this bill half a decade ago,
almost a decade ago, supposed we might get as a result of this
set of mandates.
Mr. Grundler, you have got a difficult challenge. You have
got to implement not only this RFS but the CAFE and GHG
standards for cars and trucks. The RFS last revised in 2007, we
have got new CAFE and GHG rules. Have the CAFE and GHG rules
affected compliance with the RFS in a material way?
Mr. Grundler. What they have done is reduced the demand for
gasoline in the country as my colleague, Mr. Sieminski, has
pointed out, and that makes the blending challenge that much
harder. So with respect to that, I don't think it has affected
it yet, but it has certainly accelerated this blend wall
phenomena faster than anyone expected in 2007.
Mr. Pompeo. So we have got two sets of rules and we are now
trying to mix too many renewable fuels into too little
gasoline, that is the mathematical challenge you face is that
correct?
Mr. Grundler. Essentially.
Mr. Pompeo. I have heard from Kansas refiners, pretty small
refiners, 130,000 barrels a day in some cases, I heard some
folks in Pennsylvania have the same problem, they are not
integrated merchant refiners, and there is no relief for them
specifically today. What I wanted to know I guess, Mr.
Grundler, do you think you have the authority to grant some
sort of relief to these nonmerchants smaller, although not
small by regulation, refiners?
Mr. Grundler. They are not eligible for the small refiner
provision under the law, which is the definition of 75,000, so
with respect to a particular facility, a specific relief, they
would not be eligible, no.
Mr. Pompeo. So you don't think you have the authority to
grant them relief or a waiver in any way under the statute as
currently drafted?
Mr. Grundler. I do not.
Mr. Pompeo. Thanks.
I guess the last question, and this is really both to Mr.
Grundler and Mr. Glauber, you both referred to that the
challenge of higher blends.
And you, I think, Mr. Glauber, said you called it a price
disruption as impacting how much is blended if we remove the
RFS.
I guess I don't think of markets creating price
disruptions. I think of mandates as creating market
disruptions. I am interested in what a price disruption is when
we have willing consumers and willing sellers trying to come to
an agreement to price and purchasing.
Mr. Glauber. Yes, let me clarify. All I am talking about is
price variability, and I am just saying when prices move the
opposite way, the market will respond, either by producing or
not producing.
Mr. Pompeo. Fair enough. And then you have both also
referred to absence of infrastructure pumps and the like. Isn't
that just price, too? When you talk about liability concerns,
isn't that just a price term, as well? Isn't what we really
face here, we just have consumers don't want this stuff because
they are not willing to pay for it. You can build
infrastructure; it is just money. You can buy insurance to take
your liability risk away. It is just money. Isn't it the case
it is just a price issue, and we have got an RFS that is trying
to artificially intervene to solve this lack of consumer demand
for this product? Do either of you agree with that or disagree
with it?
Mr. Grundler. There is no doubt that consumers have not
demanded high amounts of E85, and it is likely because of the
way the product is priced. It is not today priced consistent
with its energy content and I think consumers, some consumers
have figured that out.
And I would just say you are right, no one is going to put
in infrastructure unless they have--are going to make those
investments themselves unless they can see recouping those
investments.
Mr. Pompeo. Thank you, Mr. Chairman. I yield back.
Mr. Whitfield. Gentleman's time has expired.
At this time recognize the gentleman from Texas, Dr.
Burgess, for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Grundler, let me ask you a question, because I guess
back in the summer of 2010, the soon-to-be-departed Ed Markey
had a briefing where your agency, the EPA, the Department of
Energy were brought into this room, and it wasn't a hearing, so
there was no official transcript. It was a briefing. But I
asked the question of both the EPA and Department of Energy
about the testing being done on vehicles, automobiles, to allow
the introduction of E15 in a safe manner. And what I got from
both the Department of Energy and the Environmental Protection
Agency was the other guy is doing the testing.
Well, that was unsatisfactory. I really had a lot of
difficulty actually getting the testing data from either
Department of Energy or the EPA. But now you cite this
afternoon, in response to I think Mr. Barton's question, you
cite extensive vehicular testing. Can you give me a figure of
the number of vehicles in which this was tested?
Mr. Grundler. I don't want to give you a misleading figure,
so I would like to respond for the record.
But my recollection is that the DOE tested on the order of
80, 89 somewhere in that order of magnitude. But I would like
to respond for the record specifically.
And I would also like to, if you are interested, provide
you with any other technical information or reports as a result
of that testing. I can state with 100 percent confidence that
DOE did have the lead and did conduct this testing.
Mr. Burgess. Right. And that was the testing conducted out
at Sandia Labs.
Mr. Grundler. In part I believe it was in Sandia, but I was
not involved at the time. But I can certainly find out.
Mr. Burgess. Well, according to the USA Today from about a
year ago, May of 2012, the engine durability study took
duplicates of eight different vehicle models, spanning the 2001
to 2009 model years. All 16 vehicles were tested over a 500-
hour durability cycle corresponding to about 100,000 miles of
vehicle usage. A range of engine operating parameters were
monitored during the test, including cylinder compression,
valve wear, valve leakage, emissions, and emission control,
system diagnostics. Two of the engines tested on E15 had
mechanical damage, another engine showed increased tailpipe
emissions beyond the allowable limit.
So that is three out of the eight in this admittedly
limited, but I am given to understand, I mean, this was the
study upon which the agencies are relying to provide us with
this information.
Now, the question comes up for the retailer, for the mom-
and-pop store, the 7-Eleven that is selling gasoline, what
limit of liability do they have if someone doesn't read the
fine print on the little stick-on label that is going to be
affixed to the tank that ``don't put this in your car if your
vehicle model is earlier than 2001''? What limit of liability
does the retailer have in that situation?
Mr. Grundler. Congressman, I would like to respond for the
record with respect to the liability question, because I don't
feel I am qualified to answer that aspect of the question.
I do want to clarify that with respect to the testing that
you referenced, that is only part of the information that the
Agency relied on to make its determination. And I would like to
respond more fully for the record to describe the bulk of the
work that DOE conducted, as well as the other studies that EPA
looked at with respect to E15 and its impacts on emission
control systems.
Mr. Burgess. Well, I just have to tell you, I have got a
radio show, ``Car Guy,'' on Saturday mornings back in the
Dallas-Forth Worth market, Ed Wallace. And he has written about
this extensively in his own column in the Fort Worth Star-
Telegram and Businessweek. I just want to quote from an article
that he wrote in Businessweek in 2010: ``The older cars owned
by those less financially secure will likely be the first to
go. In fact, that has already happened in thousands of cases
nationwide.'' He is talking about the introduction of E15 of
these vehicles. ``Maybe when it starts happening to some of
those on more solid financial ground then someone will listen.
Adding an expensive, harmful, useless filler to gasoline is not
remotely the same thing as having a legitimate national energy
policy.''
Mr. Chairman, I thank you----
Mr. Shimkus. Will the gentleman yield for just 10 seconds?
Mr. Burgess. I will yield for 14 seconds.
Mr. Shimkus. Just a point. There is legislation that I have
introduced on liability protection, both for the retailer and
for the refiner, on selling an approved fuel----
Mr. Burgess. Reclaiming my time. I will also mention that I
have introduced legislation that would actually take us back to
the pre-2007 days, when the inadvised increase in the ethanol
mandate was passed by the House in 2007 and signed by President
Bush in that year. It is H.R. 1469, if members want to take a
look at the legislation.
Thank you, Mr. Chairman. I will yield back.
Mr. Whitfield. The gentleman's time has expired.
At this time I will recognize the gentleman from Texas, Mr.
Olson, for 5 minutes.
Mr. Olson. I thank the chair. And welcome to our witnesses.
This clearly is a very passionate issue that crosses party
lines. But we owe the American people a thorough review of the
RFS for one simple reason: The American energy outlook that
drove the creation of ethanol tax subsidies in RFS is in the
dustbin of history. Tax preferences for corn-based ethanol were
created last century and mutated into RFS this century.
Why the spur of government activity? Because we thought we
hit peak gas. Meaning that to feed our ever-growing demand for
gasoline we had to buy more and more oil from foreign sources
that weren't reliable. Our production was going down every
single day.
But the American innovator, with new technology, has pushed
peak oil back to the next century. And while I think the best
solution to this problem is to repeal RFS, my mind is not
closed. But it is not empty either.
Mr. Sieminski, it seems to me that the only way that RFS
could be viable in years ahead, without any modifications,
would be if market conditions dramatically change. And
following former Chairman Dingell's lead, I will ask you to
answer yes or no.
Yes or no: Does EIA expect a dramatic spike in gasoline
demand over the next few years?
Mr. Sieminski. Does EIA expect what?
Mr. Olson. A dramatic spike in gasoline----
Mr. Sieminski. No, sir, we do not.
Mr. Olson. Absolutely not.
Yes or no: Does the EIA expect a spike in the use of either
E15 or E85? Spike E15, E85, next couple years.
Mr. Sieminski. In production volumes?
Mr. Olson. Production volume, use in automobiles,
transportation.
Mr. Sieminski. No, we are seeing a lot of difficulty in
producing those fuels.
Mr. Olson. So I think that is a no; no spike there.
Yes or no: Does EIA expect sudden widespread production of
advanced biofuels in the next few years?
Mr. Sieminski. Not without a technological breakthrough.
Mr. Olson. There we go. So in your opinion, these facts
bode well for compliance with the RFS as it stands today?
Mr. Sieminski. As my testimony said, the RFS as it is
currently constituted simply can't be met.
Mr. Olson. OK. So my next question for you, sir, if it
doesn't match the standards, if all those answers were no, can
RFS be saved or is it easier to end it and start over making a
product and policy that reflects new U.S. energy reality? Think
so? Good idea?
Mr. Sieminski. That is a policy issue.
Mr. Olson. OK. Appreciate that.
And my next question is for Dr. Glauber.
Sir, in your opening remarks you touched on how corn-based
ethanol has increased the price of commodities. Conclusions
vary, but you cited several studies discussing ethanol
contributing to over 30 percent of the increase in corn prices.
And I have a copy of the USDA research piece that was put out
earlier this year by Dr. Richard Volpe, Ph.D., from the Food
Markets Branch.
[Slide shown.]
Mr. Olson. And the first panel is the outlook for 2013. And
I quote, ``But high-priced corn, soybeans, and wheat will
permeate supermarkets. Structural inflation for beef, pork will
intensify. Overall, inflation higher than the historical
average.''
Next slide.
[Slide shown.]
Mr. Olson. ``What does this mean for consumers? Food prices
increase.''
I heard from Wendy's restaurants last week. And they said
very publicly that their average retail location lost nearly
30,000 per store last year because of commodity price
increases. Restaurants have a tight profit margin. That is
money that doesn't go towards expansion and doesn't go towards
a new employee. Briefly, what are the ways in which commodity
prices increase have negatively impacted nonfarm businesses?
Mr. Glauber. Well, Congressman, understand last year most
of this is due to the fact that we had a very extreme drought
in the Midwest that sharply reduced corn and soybean yields and
pushing those crops' crop prices up substantially. I think what
is the surprising thing--that piece was written a while back--I
think the surprising thing is the fact that thus far we haven't
seen much increase in the overall retail price of food.
Now, this isn't saying that Wendy's or other businesses
that you have talked about haven't faced higher costs. I
understand that. But at least as measured by BLS, Bureau of
Labor Statistics, just the most recent report said prices for
food at home were about 0.8 percent higher than they were at
this time last year.
Now, to understand how inflation works, when you see higher
corn prices, it doesn't make itself known right away. And that
is largely because one of the major uses for corn is for cattle
feed and for livestock feed. So that takes time. You see
shorter, you know, smaller margins, and some producers
liquidate herds. That drives up the price of livestock
products, which then shows up in retail foods.
That effect is much, much, much smaller than the overall
effect on commodities. So corn prices can go up a lot, retail
prices go up much, much smaller percent. And that is largely
because the farm gate price in a retail food dollar is only
about 14 percent or so. You have transportation of it, you have
distribution.
But it is an impact on inflation. When ERS just put out new
numbers--the Economic Research Service, of which you were
quoting from there, they just put out new numbers yesterday.
They are talking about food inflation being on the average of
2.5 to 3.5 percent this year, which is certainly higher than it
was last year, but in line more or less with where we have been
over the last 10 years. It is not denying that these things
have inflationary pressure, because they do. But understand
again the main part was because of the drought that we saw.
Mr. Whitfield. Gentleman's time has expired.
At this time, recognize the gentleman from Virginia, Mr.
Griffith, for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman.
Mr. Grundler, let me ask you this question, and here is the
concern. Our retail gas folks--and you have heard the questions
earlier, and I am not going to go back through the history
about E15. And we heard about the question on, you know, legal
liability for the person if they put the wrong fuel into the
engine for a car that is pre-2001. Of course, I am driving a
2003, and I don't know if that will impact them a little bit or
not. But for these older cars we have heard about that, and you
are going to get us an answer, and I appreciate that.
But one of the concerns that a lot of the folks who sell
the gas, the convenience stores and the gas stations, is quite
frankly they are also concerned that, you know, if they decide
that they are going to sell the E15 alongside E10, what is the
risk to them that your agency will hit them with a violation of
the Clean Air Act? And there is some concern, they gave me some
history on it, because apparently when they were switching
from, you know, unleaded fuel to leaded fuel, if the gas
station owner didn't go out and physically say, no, you can't
buy, that is the wrong car for that leaded gas, they got fined,
and it appears the fines that can be assessed are up to
$37,500.
So what I am asking you is, is that there have been some
indications that certainly your agency wouldn't go in that
direction, but we have nothing in writing to assure these
folks. I am asking you, can you get us something in writing
that will assure the convenience store operators,the gas
station operators that, you know, if they are trying to do what
is right, they are not going to be fined when a consumer comes
up and puts the wrong kind of gas into the vehicle.
Mr. Grundler. Just to clarify, sir, the question is will
they be fined by----
Mr. Griffith. For a CAA violation.
Mr. Grundler. --the government----
Mr. Griffith. By the government, yes.
Mr. Grundler. --if a consumer ignores the label and----
Mr. Griffith. That is the question, sir.
Mr. Grundler. I would be happy to take that back and talk
to my counsel and see what our response would be.
Mr. Griffith. It would seem to me, you know, we heard
testimony it is going to be difficult to get the E15, it is
going to be difficult to use, that there are going to be some
problems, we have got a question about legal liability, would
seem to me at the very least that is something that the
government ought to be able do, is to reassure these folks that
on top of all the other headaches in trying to move forward
with this program that they don't have to worry about the
government coming in and hitting them with a pretty hefty fine.
Because if you are a small retailer, not a big chain--maybe the
big chains can handle it, but the small retailer, that is a lot
of money, particularly in a district like mine where the
average household income is only $36,000 a year. That is, you
know, annual salary for somebody.
Mr. Grundler. I understand. In fact, this issue was just
brought to my attention yesterday by the head of the
association of these kinds of businesses.
Mr. Griffith. Sure.
Mr. Grundler. So we are listening very carefully. And if
there are any kind of barriers that EPA is putting in the way,
we would like to address those.
Mr. Griffith. I appreciate that.
Dr. Glauber, you have talked a little bit about the corn
costs going up affecting the cost of food. But don't we also
have a situation where it affects those livestock dealers? And
I think you just mentioned that some of them are liquidating
their herds. And isn't it maybe the unintentional consequence
that we have helped the row farmers but we have hurt all these
other farmers? And it is certainly not the intent of the
government to hurt the livestock, poultry, and dairy farmers,
is it?
Mr. Glauber. Well, it is certainly the case that if you
look from 2005 to current that profits in those industries have
declined. And it is no mystery, it is due to the higher feed
costs. It is been exacerbated and particularly over the last
year exacerbated by the drought, which not only shot up feed
prices, but also reduced pasture conditions in most of the U.S.
Mr. Griffith. Right. And wouldn't we expect at some point
on the food inflation, I mean, not only because the feed costs
went up, but because the liquidation of some of those herds,
that at some point there may be pressure upward on the price of
beef, particularly?
Mr. Glauber. Well, again, that is how inflation typically
occurs in those industries. I would just point out that one
thing----
Mr. Griffith. Got to be quick, because I am running out of
time. I have got another question.
Mr. Glauber. I am sorry.
Mr. Griffith. I will get the rest of it from you at a later
time because it is important----
Mr. Glauber. I am a talkative guy. I apologize.
Mr. Griffith. That is all right. We are trying to get some
information here.
And the problem is these industries I think should factor
in on a decision when you are hurting these industries on the
waivers. But last year I one was of the Congressmen that wrote
a letter asking for a waiver--and this is coming back to you,
Mr. Grundler. The Governor of Virginia asked for a waiver
trying to help our farmers out. Do you need new legislation--
because the waiver wasn't granted in a time when I think it
probably screamed to be granted--do you need new legislation or
do you think that the EPA can actually look at these waivers in
an unbiased manner and grant some of these waivers? When, like
last year, we had a drought, it is affecting the farmers in my
district. And I have an agriculture and coal district. It is
two of my big industries. And we are under attack on coal now.
Seems like agriculture is not getting any help when it needs
it. Isn't there some waiver process or do you want me to put it
in a bill?
Mr. Grundler. Of course, it is completely up to Congress in
terms of how you would like the EPA to administer these
authorities. You gave us a pretty stringent test, which was
severe economic harm, and that the RFS is responsible for that.
Again, based on all the information and the objective analysis
we did in response to the Governor of Virginia's request, we
determined that the demand for ethanol is such that waiving the
RFS would not have influenced that demand, would not have
influenced feed prices, would not have influenced corn prices
at all.
Mr. Griffith. I would just say that my farmers in my
district, I can't speak to the rest of the country, disagree.
And I yield back.
Mr. Whitfield. Gentleman yields back. Gentleman's time has
expired.
At this time, recognize the gentleman from New York, Mr.
Engel, for 5 minutes.
Mr. Engel. Thank you, very much, Mr. Chairman. I appreciate
it.
And I first want to say that there has been a lot said,
both good and bad, obviously, regarding the Renewable Fuel
Standard. And the most important information I think to
remember is that the RFS reduces our dependence on foreign oil
and reduces our carbon emissions. And we will have to see
whether or not it will be a success or a failure.
But I think there are things we can do now to help
strengthen the RFS, decrease our reliance on foreign oil, and
improve our national security. For many years, and I just
recently introduced the bill for this Congress, I call it the
Open Fuel Standard Act, which I believe is a complement to the
RFS. I introduced it in a bipartisan way, as I always have,
with Congresswoman Ileana Ros-Lehtinen as my cosponsor.
And what the legislation essentially does is requires auto
manufacturers to build cars that can run on alternative fuels
in addition to gasoline. Mr. Shimkus and I have in previous
Congresses teamed together to push this. This could include
ethanol, methanol, natural gas, electricity, biodiesel,
hydrogen, or a new technology. It would empower consumers to
make a choice about which fuel was best for them. And I hope
that we would take up this legislation.
Got the idea for it many years ago when I was the chair of
the Western Hemisphere Subcommittee in the Foreign Affairs
Committee and I drove into a gasoline station in Brazil and saw
that there were many blends, many mixes, many choices that
consumers had. And since I believe that choice helps keep costs
down, it seemed to me that it was foolish for us not to do it
in this country.
And when I learned more in those years about what it would
cost to manufacture flex-fuel cars in America, no one told me
it would ever be more than $100 a car to manufacture them. In
fact, some experts said it was as low as $35 a car. The most
anyone told me was $100. And so for such a little amount of
money, it seemed to me almost criminal that we weren't doing
it.
So let me ask Mr. Grundler, one of the major concerns with
the RFS is the so-called blend wall. And can you comment on how
adoption of my Open Fuels Act and the adoption of more flex-
fuel vehicles might affect the blend wall?
Mr. Grundler. That is hard to answer, sir. Currently, as
has been stated, I think there are somewhere between 10 and 12
million flex-fuel vehicles on the road right now. But it
appears, based on the evidence, that consumers are not using
them to buy E85. I think roughly 100 million gallons of E85 was
sold last year. Perhaps Mr. Sieminski has got a better number.
And it is likely that is due to a number of factors. Some
owners don't know they have got a flex-fuel vehicle. Some
owners have these flex-fuel vehicles but they may live in Texas
where, I learned earlier, that there might be one station
selling E85. And some are discouraged by the price of E85.
So your question, if there were more flex-fuel vehicles
available would that change this pricing dynamic, and I don't
know if it would. Today, I think Ford is roughly making 40
percent of their vehicles as flex-fuel; General Motors is 40,
maybe, slightly above; Chrysler is making a significant
percentage. So they are on track to meet their commitment of 50
percent of production. And yet the evidence to date shows that
consumers have not been choosing to use the higher blend
ethanols.
Now, that condition may change if the pricing structure for
E85 changes. But that remains to be seen.
Mr. Engel. Yes. I believe that it would increase consumer
demand. But I do agree with your thinking that a lot of people
right now are not aware of it. It is not something that we
promote or we push. And if people don't see it is going to
bring them any kind of benefit at the pump, everyone likes to
think they care about the environment, but they care more about
their pockets, I think. I think that is part of it.
Let me ask Administrator Sieminski, would you agree, what
would be your opinion, do you think that adoption of the Open
Fuel Act would increase consumer demand for ethanol and other
alternative fuels?
Mr. Sieminski. I have to ask our people to take a look at
it. I think the market itself is driving some alternative
fuels. I just heard today from Ford that there is a very high
demand. They can't even meet the demand for heavy pickup trucks
that use compressed natural gas, for example.
So I think that there is some consumer demand out there for
these fuels. And as Mr. Grundler said, a lot of it has to do
with consumer behavior and what the price of the fuels is. If
we had, either through a regulatory system or through the
market itself, lower prices for these advanced fuels, then I
think that there would be a lot less consumer resistance.
Mr. Whitfield. The gentleman's time----
Mr. Engel. Well, let me say--I see my time is up-- but I
just want to say I believe with all my heart that if it works
in Brazil it can work here if we wish it to work. But I thank
you both for your comments.
Thank you, Mr. Chairman.
Mr. Whitfield. Now, some of you in the audience may noticed
that these two gentlemen on the left, Mr. Welch and Mr.
Matheson, have been here the entire hearing. And some of you,
when I stopped rotating, looked quizzically at me. And I want
you to know I have great admiration and respect for both of
these gentlemen, and I am not discriminating against them. But
we have a rule in the Energy and Commerce Committee that if you
are not a member the subcommittee you have to wait until every
member of the subcommittee has asked a question. So while they
are a member of other subcommittees on the Energy and Commerce,
and they are valuable members of the Energy and Commerce, that
is why we waited for that. So I didn't want you all to boo and
hiss at me when I left this afternoon.
But I am delighted to recognize them now. And I recognize
Mr. Matheson for 5 minutes.
Mr. Matheson. Well, thank you, Mr. Chairman. And I would
not boo or hiss you. I can tell you that. And I appreciate the
witnesses being here today.
I have a lot of questions. I assume maybe if we can't get
them all in, we can ask for written questions after. That would
be great.
Dr. Glauber, you have talked in response to a few different
questioners about RFS, the RFS impact on increasing corn prices
and how that translated into the broader issue of raising food
price. You mentioned that the drought may have been a more
significant factor in that 1 particular year. Has the
Department of Agriculture really tried to analyze this where
they normalize that 1 year where there was a severe drought?
I mean, this is something that has been around for a long
time. We are increasing the cost of corn over time, it has been
going up. In your testimony you mentioned that. I just think it
would be helpful to this committee to understand what the
impact is on food or if the Department has had a chance to
analyze that, taking out the factor of the significant drought
impact.
Mr. Glauber. Yes. And it is a great question and an obvious
one. We did actually look at this back in 2008. I believe I
testified before an Energy Committee over in the Senate. And
there, if I remember correctly, and I can get this to you in
writing and get the study to you.
Mr. Matheson. I appreciate that.
Mr. Glauber. But there the impact on corn again in the
order of 30 or so percent impact, on soybeans in the order of
40, 45 percent, as high as that, and how that translated in, in
terms of a percentage impact on retail food prices was actually
pretty small, like in the order of a percentage point increase
on CPI. Again, I want to be very careful here.
Mr. Matheson. I understand.
Mr. Glauber. But again the point is, is the transmission is
a little bit smaller----
Mr. Matheson. I would be interested to see how are going,
going forward, too. That was 2008.
Mr. Glauber. Happy to answer that.
Mr. Matheson. Mr. Grundler, we talked earlier, in response
to an earlier question, somebody was talking about the carbon
emission benefits of advanced biofuels. Can you speak briefly
to the carbon emissions from corn-based ethanol on a lifecycle
basis?
Mr. Grundler. I would be happy to. As you probably know,
Congress, in developing the RFS, came up with basically two
different categories of fuels and chose to grandfather any
facility that hadn't commenced construction at the time of
passage. So corn-based ethanol, most of that volume is, in
fact, grandfathered, and so it is not required by law to meet
the 20 percent greenhouse gas reduction threshold.
Now, we know over time that there are a number of economic
incentives to improve the efficiency of your operation to look
for cheaper crops, seek higher yield feedstocks. So we expect
that that efficiency will improve. And, in fact, in our
analysis of new plants and future plants out in 2022, when we
did the impact analysis, did determine that those new plants
would achieve the 20 percent reduction.
Mr. Matheson. But the current plants, because they are
grandfathered, are not.
Mr. Grundler. Well, it depends. It was going to be a plant-
specific thing. For example, those plants that may have
switched from coal to natural gas would be more efficient.
Mr. Matheson. Let me ask you, you have had a few questions
also from folks about how you undertook the testing for impact
on automobiles from going to E15. You may have answered this,
but I just want to clarify this. Did it just focus on emission
controls or did the tests include specific tests to evaluate
engine and fuel system durability?
Mr. Grundler. There has been a lot of confusion on that,
sir. And I would be happy to give you the details. But the
answer is that the Department of Energy looked at both, and in
fact did tear down a number of vehicles and did a number of
different types of testing to evaluate not just the emission
control catalyst durability question, but also these other
questions.
Mr. Matheson. OK. So you will submit that for the record?
Mr. Grundler. Be delighted to.
Mr. Matheson. Great.
Mr. Sieminski, I wanted to ask you a question about RINs.
Before 2013 they were selling for just a few cents. Beginning
of this year, we have the price skyrocket. It was over a dollar
at one point. I hear right now it is in the 80 to 90 cent range
for a RIN. What caused the huge jump in RIN prices? And will
rising RIN prices--what is its impact on the price of gasoline
for consumers?
Mr. Sieminski. I think we heard earlier from Mr. Glauber
that the RIN price increases probably had a lot--the increases
in the first quarter of this year had an awful lot to do with
the uncertainties in meeting the program targets. So RINs would
be very valuable if you thought that you weren't going to be
able to produce the right amount of fuel.
As far as we can tell, and we have tried to look at this at
EIA, we can't really see a big impact in the price of gasoline
from what happened with RINs in the first quarter of this year.
I do think that there might have been some impact in the diesel
prices because of the way the program works. Going forward, if
there aren't changes in the program, we would expect it to
begin to impact----
Mr. Matheson. Have you projected where you think RIN prices
are going to be in the next couple years? Have you projected
that out.
Mr. Sieminski. We haven't because it is extremely difficult
to do that without understanding what decisions ultimately are
going to be made by the EPA.
Mr. Matheson. Mr. Chairman, my time has expired. I will
submit other questions for the record. Thank you so much.
Mr. Whitfield. Well, thank you.
And, Mr. Welch, you are recognized for 5 minutes.
Mr. Welch. Thank you very much, Mr. Chairman. I appreciate
being here and I have enjoyed the hearing.
And I want to thank the witnesses for all the work that do
you on behalf of our country.
I have sat through this hearing because I have come to the
conclusion that corn ethanol is bad for the--it is a bad
environmental policy, bad energy policy, bad food policy. And
that is largely because of two things that I have been hearing
over and over again from everyday Vermonters, first farmers,
who have just been hammered with the increase in the feed cost
that is associated in part with the corn-based ethanol. And
then, secondly, a lot of the small engine repair people are
absolutely convinced that the ethanol is detrimental to these
engines. And if I didn't believe it, my own chain saw got
wrecked, and I am pretty upset about it, let me tell you.
So this is serious business for our farmers and for our
recreation industry, anybody using a small engine. And Congress
did it. So, you know, you are implementing it. But I just do
have a few questions about it.
One is, you know, we did provide a safety valve. And last
year when we had the worst drought in 50 years, more than 70
percent of the cattle country was impacted. Ten Governors, 156
Members of Congress, including me, in a broad coalition of farm
and food groups requested an EPA waiver. And that was denied--
on the RFS--that was denied. But in denying the waiver, the EPA
appears to have created a stricter standard than Congress had,
at least that is how I read it, rejecting harm to States or
regions and instead determining that the agency needed to show
that RFS implementation would severely harm the entire U.S.
Economy.
So I need some clarification on that, because the spike in
feed prices certainly hurt us. It hurt every agricultural
activity associated with livestock. So I am wondering what it
would take from the perspective of where you sit for a waiver
to have a valid factual basis for you to act. And I think I
will address that to Mr. Grundler.
Mr. Grundler. Thank you, sir.
There is no doubt that the drought had devastating effects,
and where I am from in the Midwest I have seen it. Again, but
the question before the agency was, was implementing the RFS
responsible for these severe economic conditions? And we
determined after extensive analysis and consultation and using
a probabilistic statistic modeling framework to look at all
these different variables in terms of corn yields and oil
prices, that the RFS itself wasn't driving this demand. And it
is because of the way our refining system has----
Mr. Welch. So does that mean that if you have--the RFS
standard requires more corn, obviously, to be going into the
ethanol production, and that means less corn going into feed.
And you have a drought. So the two probably work together. I
don't know how you can precisely attribute how much of it is to
the RFS and how much of it is to the drought. But obviously RFS
becomes more difficult when there is a drought impact. So you
are saying----
Mr. Grundler. We ask ourselves the question, if we waived
the RFS what would be the ethanol demand in the country? Which
was, again, the ethanol demand, which is getting the corn and
changing the commodity markets. And the answer was, in 89
percent of the scenarios that we ran, is that it would not
change that demand. The refiners are demanding this ethanol for
the reasons Mr. Sieminski mentioned, it is because they want
the octane. It has economic value because it is cheap, cheaper
than the other alternatives. And so we could have waived the
whole RFS and they would still have demanded that product.
So it is a case-by-case situation. So in 2012, and looking
at that year and looking at the price of oil and corn yields
and all the other variables, that was the determination that we
made. But that doesn't mean that if we were looking at the
situation this year or next year with different market
conditions that different result----
Mr. Welch. My time is almost up. Thank you. But, you know,
it sort of reinforces my concern about this demand that is
created for corn for ethanol as opposed to food, because as
many of my colleagues have pointed out, both sides of the
aisle, it is having a real impact on food prices and certainly
really wicked on these dairy farmers that are hanging on by
their fingernails.
Mr. Chairman, I really appreciate you having this hearing.
I think both sides of the aisle here share some concerns about
this policy. So thank you.
Mr. Whitfield. Thank you, Mr. Welch.
And I want to thank the witnesses. We appreciate your being
with us. And I hope that everyone in the audience enjoyed it as
much as we did. And we intend to have a couple more hearings on
this as well.
So that will conclude today's hearing. We will keep the
record open for 10 days.
And we look forward to working with all of you as we move
forward.
With that, the hearing is adjourned.
[Whereupon, at 5:05 p.m., the subcommittee was adjourned.]
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