[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE RENEWABLE FUEL STANDARD:
A TEN YEAR REVIEW OF COSTS AND BENEFITS
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON ENVIRONMENT &
SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
November 3, 2015
__________
Serial No. 114-47
__________
Printed for the use of the Committee on Science, Space, and Technology
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://science.house.gov
______
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma EDDIE BERNICE JOHNSON, Texas
F. JAMES SENSENBRENNER, JR., ZOE LOFGREN, California
Wisconsin DANIEL LIPINSKI, Illinois
DANA ROHRABACHER, California DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas SUZANNE BONAMICI, Oregon
MICHAEL T. McCAUL, Texas ERIC SWALWELL, California
MO BROOKS, Alabama ALAN GRAYSON, Florida
RANDY HULTGREN, Illinois AMI BERA, California
BILL POSEY, Florida ELIZABETH H. ESTY, Connecticut
THOMAS MASSIE, Kentucky MARC A. VEASEY, Texas
JIM BRIDENSTINE, Oklahoma KATHERINE M. CLARK, Massachusetts
RANDY K. WEBER, Texas DON S. BEYER, JR., Virginia
BILL JOHNSON, Ohio ED PERLMUTTER, Colorado
JOHN R. MOOLENAAR, Michigan PAUL TONKO, New York
STEVE KNIGHT, California MARK TAKANO, California
BRIAN BABIN, Texas BILL FOSTER, Illinois
BRUCE WESTERMAN, Arkansas
BARBARA COMSTOCK, Virginia
DAN NEWHOUSE, Washington
GARY PALMER, Alabama
BARRY LOUDERMILK, Georgia
RALPH LEE ABRAHAM, Louisiana
------
Subcommittee on Environment
HON. JIM BRIDENSTINE, Oklahoma, Chair
F. JAMES SENSENBRENNER, JR. SUZANNE BONAMICI, Oregon
RANDY NEUGEBAUER, Texas DONNA F. EDWARDS, Maryland
RANDY WEBER, Texas ALAN GRAYSON, Florida
JOHN MOOLENAAR, Michigan AMI BERA, California
BRIAN BABIN, Texas MARK TAKANO, California
BRUCE WESTERMAN, Arkansas BILL FOSTER, Illinois
GARY PALMER, Alabama EDDIE BERNICE JOHNSON, Texas
RALPH LEE ABRAHAM, Louisiana
------
Subcommittee on Oversight
HON. BARRY LOUDERMILK, Georgia, Chair
F. JAMES SENSENBRENNER, JR., DON BEYER, Virginia
Wisconsin ALAN GRAYSON, Florida
BILL POSEY, Florida ZOE LOFGREN, California
THOMAS MASSIE, Kentucky EDDIE BERNICE JOHNSON, Texas
BILL JOHNSON, Ohio
DAN NEWHOUSE, Washington
LAMAR S. SMITH, Texas
C O N T E N T S
November 3, 2015
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Jim Bridenstine, Chairman,
Subcommittee on Environment, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 10
Written Statement............................................ 11
Statement by Representative Suzanne Bonamici, Ranking Minority
Member, Subcommittee on Enviorment, Committee on Science,
Space, and Technology, U.S. House of Representatives........... 13
Written Statement............................................ 14
Statement by Representative Barry Loudermilk, Chairman,
Subcommittee on Oversight, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 15
Written Statement............................................ 16
Statement by Representative Donald S. Beyer, Jr., Ranking
Minority Member, Subcommittee on Oversight, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 17
Written Statement............................................ 18
Witnesses:
Dr. Terry Dinan, Senior Advisor, Congressional Budget Office
Oral Statement............................................... 19
Written Statement............................................ 21
Mr. Ed Anderson, CEO and President of WEN-GAP, LLC
Oral Statement............................................... 45
Written Statement............................................ 47
Dr. John DeCicco, Research Professor, University of Michigan
Energy Institute
Oral Statement............................................... 50
Written Statement............................................ 55
Mr. Brooke Coleman, Executive Director, Advanced Biofuels
Business Council
Oral Statement............................................... 73
Written Statement............................................ 75
Mr. Charles Drevna, Distinguished Senior Fellow, Institute for
Energy Research
Oral Statement............................................... 99
Written Statement............................................ 101
Discussion....................................................... 101
Appendix I: Answers to Post-Hearing Questions
Dr. Terry Dinan, Senior Advisor, Congressional Budget Office..... 132
Dr. John DeCicco, Research Professor, University of Michigan
Energy Institute............................................... 136
Mr. Brooke Coleman, Executive Director, Advanced Biofuels
Business Council............................................... 146
Mr. Charles Drevna, Distinguished Senior Fellow, Institute for
Energy Research................................................ 153
Appendix II: Additional Material for the Record
Documents submitted by Representative Suzanne Bonamici, Ranking
Minority Member, Subcommittee on Enviorment, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 162
Documents submitted by Representative Jim Bridenstine, Chairman,
Subcommittee on Enviorment, Committee on Science, Space, and
Technology, U.S. House of Representatives...................... 171
Statement submitted by Representative Eddie Bernice Johnson,
Committee on Science, Space, and Technology, U.S. House of
Representatives................................................ 10
Written Statement............................................ 177
THE RENEWABLE FUEL STANDARD:
A TEN-YEAR REVIEW OF
COSTS AND BENEFITS
----------
TUESDAY, NOVEMBER 3, 2015
House of Representatives,
Subcommittee on Environment and
Subcommittee on Oversight
Committee on Science, Space, and Technology,
Washington, D.C.
The Subcommittees met, pursuant to call, at 10:05 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Jim
Bridenstine [Chairman of the Subcommittee on Environment]
presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Bridenstine. The Subcommittee on Environment and
Oversight will come to order.
Without objection, the Chair is authorized to declare
recesses of the Subcommittee at any time.
Welcome to today's hearing entitled the ``Renewable Fuel
Standard: A Ten-Year Review of Costs and Benefits.'' I
recognize myself for five minutes for an opening statement.
Good morning, and welcome to today's joint hearing of the
Environment and Oversight Subcommittees examining the Renewable
Fuel Standard. Today, we will hear from witnesses on the cost
and environmental impact of this complex and misguided mandate,
as well as the future consequences if Congress does not take
action.
The RFS is an example of the federal government picking
winners and losers by forcing the use of renewables in
transportation fuels. The mandate was supported by a bipartisan
coalition, the ethanol industry, and environmental
organizations; and justified by claims of environmental
benefits and enhanced U.S. energy security.
Unfortunately, but not surprisingly, eight years after the
current RFS was expanded by Congress as part of the Energy
Independence and Security Act of 2007, these promises have yet
to materialize. Congress designed the RFS using flawed
projections about gasoline consumption, availability of
renewable fuel infrastructure, bio-refinery technology, and the
market demand for renewable fuels. In almost every category,
these projections do not reflect today's energy market.
Today, demand for gasoline is significantly lower than was
forecast when the RFS became law. A sluggish economy and
improvements in vehicle energy efficiency continue to hold down
gasoline consumption. And technology advancements have unlocked
our domestic resources of oil and gas to an extent that was not
anticipated when the RFS was designed.
Incorporating renewable fuels was supposed to deliver
environmental benefits. But time and again, researchers,
including one of our witnesses today, have found that corn
ethanol produced to meet the RFS makes air quality worse, and
has higher lifecycle emissions than gasoline. And while corn-
based fuel ethanol production, supported by the requirements of
this standard, has grown substantially since EISA became law,
the advanced biofuels and cellulosic ethanol industries
expected under the RFS still aren't ready for primetime.
The RFS is an egregious perversion of the free market.
Instead of a transportation fuel market driven by consumer
demand, we are stuck with a complex mandate based on outdated
assumptions about gasoline demand, environmental impact, and
technological readiness. Each year, the RFS requires still
higher volumes of renewable fuel, which now exceed the volumes
that can be accommodated given current gasoline demand.
The RFS mandate is unworkable even with EPA's dubious
assertion that E15 can safely be used in select vehicles, even
though most vehicles were designed to use E10, gasoline
containing not more than ten percent ethanol. This is on top of
the simple fact that consumers do not want these fuels. Just .5
percent of what HollyFrontier--a merchant refiner with
facilities in my district--sells are products greater than E10,
one-half of one percent.
And because the ethanol blending volumes required under law
are impossible to meet with the current production levels of
E10, E15, and other higher level ethanol blends, including E85,
refiners are left at the mercy of uncertain annual waivers from
the EPA. I'm going to repeat that. Refiners are left at the
mercy of uncertain annual waivers from the EPA to keep the
mandatory blending volumes at achievable levels. When EPA even
bothers to follow the law and announce annual requirements--and
that is when EPA bothers to follow the law and announce annual
requirements on time.
Refiners have had to file lawsuits to get the EPA to do
their job and announce the annual blend levels, which is
absurd. Congress cannot continue to sit back and leave the EPA
to manage the consequences of an unrealistic and poorly crafted
law.
So what is the end result of this confusing mandate?
American consumers are stuck with higher prices across the
economy. The mandate has already increased prices at the pump,
and if the RFS is enforced as enacted, the Congressional Budget
Office estimates that E10 fuel prices could increase by 15
percent or more by 2017.
By increasing demand for corn, the RFS also distorts
commodity prices, raising the cost of food for American
families. We will hear testimony that the RFS costs the chain
restaurant industry $3.2 billion a year in higher food prices,
which must be passed on to consumers, our constituents.
The federal government's RFS mandate has led to multiple
negative consequences, propelled by willful disregard for
consumer preferences and flawed economic and environmental
assumptions. Demand for fuels with blends of ethanol greater
than E10 is very limited, even with the most favorable market
conditions. And more corn ethanol hasn't helped the
environment. It hasn't reduced costs or encouraged the
development of commercial-scale advanced biofuels.
Federal mandates are the wrong approach to fuel innovation,
and the RFS is a prime example of the elites in Washington,
D.C., believing they know best, imposing a misguided standard,
then standing back while it damages our economy.
I want to thank our witnesses today for testifying on the
challenges of the RFS--testifying on the challenges the RFS has
created in today's energy market, and I look forward to a
discussion about the consequences caused by the federal
government's intervention in the American energy market.
It's time for Congress to fix the problems caused by this
outdated and ill-conceived law and pass legislation to repeal
the RFS.
[The prepared statement of Chairman Bridenstine follows:]
Prepared Statement of Subcommittee on Environment
Chairman Jim Bridenstine
Good morning and welcome to today's joint hearing of the
Environment and Oversight subcommittees, examining the Renewable Fuel
Standard. Today, we will hear from witnesses on the cost and
environmental impact of this complex and misguided mandate, as well as
the future consequences if Congress does not take action.
The RFS is an example of the federal government picking winners and
losers by forcing the use of renewables in transportation fuels. The
mandate was supported by a bipartisan coalition, the ethanol industry,
and environmental organizations, and justified by claims of
environmental benefits and enhanced U.S. energy security.
Unfortunately, but not surprisingly, eight years after the current
RFS was expanded by Congress as part of the Energy Independence and
Security Act of 2007, these promises have yet to materialize. Congress
designed the RFS using flawed projections about gasoline consumption,
availability of renewable fuel infrastructure, bio-refinery technology,
and the market demand for renewable fuels. In almost every category,
these projections do not reflect today's energy market.
Today, demand for gasoline is significantly lower than was forecast
when the RFS became law. A sluggish economy and improvements in vehicle
energy efficiency continue to hold down gasoline consumption. And
technology advancements have unlocked our domestic resources of oil and
gas to an extent that was not anticipated when the RFS was designed.
Incorporating renewable fuels was supposed to deliver environmental
benefits. But time and again, researchers--including one of our
witnesses today - have found that corn ethanol produced to meet the RFS
makes air quality worse, and has higher life cycle emissions than
gasoline.
And while corn-based fuel ethanol production, supported by the
requirements of this standard, has grown substantially since EISA
became law, the advanced biofuels and cellulosic ethanol industries
expected under the RFS still aren't ready for primetime.
The RFS is an egregious perversion of the free market. Instead of a
transportation fuel market driven by consumer demand, we are stuck with
a complex mandate based on outdated assumptions about gasoline demand,
environmental impact, and technological readiness. Each year, the RFS
requires still higher volumes of renewable fuel which now exceed the
volumes that can be accommodated given current gasoline demand.
The RFS mandate is unworkable even with EPA's dubious assertion
that E15 can safely be used in select vehicles, even though most
vehicles were designed to use E10, gasoline containing not more than 10
percent fuel ethanol. This is on top of the simple fact that consumers
do not want these fuels. Just 0.5 percent of what HollyFrontier, a
merchant refiner with facilities in my district, sells are products
greater than E10. One half of one percent!
And because the ethanol blending volumes required under law are
impossible to meet with the current production levels of E10, E15, and
other higher level ethanol blends, including E85, refiners are left at
the mercy of uncertain annual waivers from the EPA to keep the
mandatory blending volumes at achievable levels--when EPA even bothers
to follow the law and announce annual requirements on time. Refiners
have had to file lawsuits to get the EPA to do their job and announce
the annual blend levels, which is patently absurd. Congress cannot
continue to sit back and leave the EPA to manage the consequences of an
unrealistic and poorly crafted law.
So what is the end result of this confusing mandate? American
consumers are stuck with higher prices across the economy. The mandate
has already increased prices at the pump, and if the RFS is enforced as
enacted, the Congressional Budget Office estimates that E10 fuel prices
could increase by 15 percent or more by 2017.
By increasing demand for corn, the RFS also distorts commodity
prices, raising the cost of food for American families. We will hear
testimony that the RFS costs the chain restaurant industry $3.2 billion
a year in higher food prices, which must be passed on to consumers, our
constituents.
The federal government's RFS mandate has led to multiple negative
consequences, propelled by willful disregard for consumer preferences
and flawed economic and environmental assumptions. Demand for fuels
with blends of ethanol greater than E10 is very limited, even in the
most favorable market conditions. And more corn ethanol hasn't helped
the environment, reduced costs, or encouraged the development of
commercial scale advanced biofuels.
Federal mandates are the wrong approach to fueling innovation, and
the RFS is a prime example of the elites Washington, DC believing they
know best, imposing a misguided standard, then standing back while it
damages our economy.
I want to thank our witnesses today for testifying on the
challenges the RFS has created in today's energy market, and I look
forward to a discussion about the consequences caused by the federal
government's intervention in the American energy market.
It's time for Congress to fix the problems caused by this outdated
and ill-conceived law, and pass legislation to repeal the RFS.
Chairman Bridenstine. I now recognize the Ranking Member,
the gentlewoman from Oregon, for an opening statement.
Ms. Bonamici. Thank you very much, Mr. Chairman, and thank
you to our witnesses for being here today to discuss the
history and future of the Renewable Fuel Standard.
In 2005, Congress established the Renewable Fuel Standard
as a way to both reduce our dependence on foreign oil and
reduce greenhouse gas emissions. The RFS policy also had the
added benefit of advancing rural economic development. In 2007,
Congress expanded the RFS to drive additional innovation and
investment in the biofuels industry. And now, ten years later,
the original goals and motivation for the Renewable Fuel
Standard still remain valid.
Despite this fact, we will hear today from some who will
assert that the RFS is a failed policy and that it should be
repealed. I respectfully disagree. Our nation's long-term
economic and energy security is tied to our ability to
diversify our energy portfolio and to transition to lower
carbon energy sources.
Biofuels have an important part to play in this energy
future. It would be better if we were further along, but the
Renewable Fuel Standard has been, and should continue to be, a
critical mechanism for fostering the development of this
emerging industry.
In my home State of Oregon, we've recognized the
significant opportunities in biofuels, especially with our
State's strong agriculture and forestry industries. For
example, Red Rock Biofuels is investing about $200 million to
build a biorefinery facility in southern Oregon where they will
transform waste biomass from forests and sawmills into jet
fuel. Now, that's a place that really needs the jobs, down
there in southern Oregon. Red Rock plans to sell 6 million
gallons of its renewable jet fuel each year to Southwest
Airlines and FedEx Express. This type of innovation will
greatly reduce the carbon footprint of our airlines and create
jobs in an area that needs them.
Additionally, in my Congressional district, Summit Natural
Energy converts food processing and agricultural wastes into
bioethanol for racecars. And I've spoken with the racecar
drivers. They rave about this product.
The potential of biofuels, especially advanced biofuels, in
addressing climate change is real and it is something that we
should be encouraging, not trying to undermine. Reducing carbon
pollution from the transportation sector is critical in our
fight against climate change, and the economic costs of not
acting are catastrophic.
In fact, a recent report by Citigroup GPS shows that the
costs of climate inaction could be up to $44 trillion by 2060.
We need to use a variety of mechanisms to curb greenhouse
gases, and the RFS is one of these tools. Most recent estimates
of the Argonne National Laboratory's Greenhouse Gases,
Regulated Emissions, and Energy Use in Transportation model
have shown that corn ethanol can produce up to 48 percent less
greenhouse gases than gasoline across the entire lifecycle.
Investments in first-generation biofuels are serving as an
important bridge to the development of advanced biofuels,
including cellulosic biofuels. Just last week, DuPont opened
the world's largest cellulosic ethanol plant in Iowa. If done
correctly in a sustainable and thoughtful manner, we can
produce biofuels that will lower carbon emissions of our
transportation sector.
A viable competitive advanced biofuels industry relies on
the infrastructure developed for the first-generation
conventional biofuels. The RFS was designed to provide market
certainty to drive the production of domestically produced
biofuels. We have seen what an industry can do when given a
strong market signal, a signal that the RFS can provide.
Overreliance on a limited range of technologies and finite
resources is unreasonable. Our nation cannot drill our way to
energy security and a thriving economy. We must continue to
take steps to mitigate climate change. We need to unleash the
creativity of our scientists, engineers, and entrepreneurs, and
the Renewable Fuel Standard is an important tool in spurring
innovation and unlocking our energy potential.
Thank you very much, Mr. Chairman. I look forward to
hearing from the witnesses, and I yield back the balance of my
time.
[The prepared statement of Ms. Bonamici follows:]
Prepared Statement of Subcommittee on Environment
Minority Ranking Member Suzanne Bonamici
Thank you, Mr. Chairman, and thank you to our witnesses for being
here today to discuss the history and future of the renewable fuel
standard.
In 2005, Congress established the renewable fuel standard as a way
to both reduce our dependence on foreign oil and reduce greenhouse gas
emissions. The RFS policy also had the added benefit of advancing rural
economic development. In 2007, Congress expanded the RFS to drive
additional innovation and investment in the biofuels industry. And now
ten years later, the original goals and motivation for the renewable
fuel standard still remain valid.
Despite this fact, we will likely hear from some today who will
assert that the RFS is a failed policy and that it should be repealed.
I respectfully disagree.
Our nation's long-term economic and energy security is tied to our
ability to diversify our energy portfolio and to transition to lower
carbon energy sources. Biofuels have an important part to play in this
energy future. It would be better if we were further along, but the
renewable fuel standard has been and should continue to be a critical
mechanism for fostering the development of this emerging industry.
In my home state of Oregon, we have recognized the significant
opportunities in biofuels, especially with our state's strong
agriculture and forestry industries. For example, Red Rock Biofuels is
investing about $200 million to build a biorefinery facility in
Southern Oregon, where they will transform waste biomass from forests
and sawmills into jet fuel. Red Rock plans to sell 6 million gallons of
its renewable jet fuel each year to Southwest Airlines and FedEx
Express. This type of innovation will greatly reduce the carbon
footprint of our airlines, and create jobs in areas that need them.
Additionally, in my Congressional district, Summit Natural Energy
converts food processing and agricultural wastes into bioethanol for
race cars--and the drivers rave about it!
The potential of biofuels, especially, advanced biofuels, in
addressing climate change is real and it is something that we should be
encouraging, not trying to undermine. Reducing carbon pollution from
the transportation sector is critical in our fight against climate
change and the economic costs of not acting are catastrophic. In fact,
a recent report by Citigroup GPS shows that the costs of climate
inaction could be up to $44 trillion by 2060. We need to use a variety
of mechanisms to curb greenhouse gases--and the RFS is one of those
tools. Most recent estimates of the Argonne National Laboratory's GREET
(Greenhouse Gases, Regulated Emissions, and Energy Use in
Transportation) model have shown that corn ethanol can produce up to 48
percent less greenhouse gases than gasoline across the entire
lifecycle.
Investments in first generation biofuels are serving as an
important bridge to the development of advanced biofuels, including
cellulosic biofuels. Just last week DuPont opened the world's largest
cellulosic ethanol plant in Iowa. If done correctly--in a sustainable
and thoughtful manner--we can produce biofuels that will lower the
carbon emissions of our transportation sector.
A viable, competitive advanced biofuels industry relies on the
infrastructure developed for the first generation conventional
biofuels. The RFS was designed to provide market certainty to drive the
production of domestically produced biofuels. We have seen what
industry can do when given a strong market signal--a signal that the
RFS can provide.
Overreliance on a limited range of technologies and finite
resources is unreasonable. Our nation cannot drill our way to energy
security and a thriving economy. We must continue to take steps to
mitigate climate change. We need to unleash the creativity of our
scientists, engineers, and entrepreneurs and the renewable fuel
standard is an important tool in spurring innovation and unlocking our
energy potential.
Thank you, Mr. Chairman, and again thank you to our witnesses for
being here this morning. I yield back the balance of my time.
Chairman Bridenstine. I'd like to thank the Ranking Member.
I now recognize the Chairman of the Subcommittee on
Oversight, Mr. Loudermilk, for his opening statement.
Mr. Loudermilk. Well, thank you, Mr. Chairman, and
witnesses for being here with us today.
I'd like to thank you for taking your time to come here and
discuss this extremely important matter that we're facing.
Today, we're here to examine the big-picture challenge of
the Renewable Fuel Standard and its impact on our country and
the American people. Ten years ago, supporters of the RFS
promised to put our country on a path to being cleaner,
greener, and more energy independent in a time of heavy
dependence on foreign oil and high gas prices. Back then,
gasoline consumption was on the rise, America relied on foreign
oil, and renewable fuels were just starting to become an option
for consumers.
Fast-forward to today where the demand for gasoline is
decreasing, our country is now considering exporting crude oil,
and we know that ethanol and biofuels are not as clean as we
once thought.
In the Committee's hearing on the RFS this summer, we heard
testimony from Dr. Jason Hill from the University of Minnesota,
who debunked the misnomer that corn ethanol is cleaner than
regular gasoline. Dr. Hill acknowledged that while ethanol
fuels generally burn cleaner than gasoline at the tailpipe, if
you look at the lifecycle emissions of ethanol, you can see
that the process of growing and fermenting grain, and
distilling, distributing, and combusting ethanol releases far
more of the five particulate pollutants that contribute to
increased particulate matter 2.5 and ozone levels than
gasoline. In short, corn-based ethanol is simply not cleaner
than gasoline.
Dr. DeCicco, who joins us today, has conducted careful
analysis of more than 100 related studies concluding that
serious flaws exist in the government-sponsored modeling used
to justify the RFS. It comes as no surprise that the Office of
Inspector General for the EPA announced this month that they
are planning to investigate whether the EPA complied with the
reporting requirements associated with the RFS. The IG will
also be examining whether the EPA appropriately updated the
lifecycle analysis supporting the RFS with findings from
studies mandated in the statute on the environmental impacts of
biofuels. We look forward to their findings.
It is also clear that the demand today for biofuels is far
less than the EPA anticipated it would be. In our last hearing
we heard from CountryMark, a farmer-owned integrated oil
company that sells E10, E15, and E85 fuel at its stations. This
farmer-owned small business refiner cannot sell E85 to the very
farmers who grow the corn used for the ethanol it's blended
because there is no demand for this fuel.
It is also becoming clear that Americans are ill- equipped
to make smart decisions about gasoline choices entering the
marketplace. According to a recent study conducted by the
Outdoor Power Equipment Institute, Americans choose to purchase
gasoline based on price and simply don't pay attention to the
warning labels placed at the pump. This results in consumers
using fuels with higher blends of ethanol in lawnmowers,
chainsaws, generators, and other small engine equipment that
are not certified to use those fuels. This can cause damage or
permanently destroy those products.
And with that, Mr. Chairman, I would like to enter into the
record a letter from Todd Teske, President of Briggs &
Stratton, which outlines these points in further detail.
Chairman Bridenstine. Without objection, so ordered.
[The information appears in Appendix II]
Mr. Loudermilk. Finally, I want to thank our witnesses
today for testifying on the impact that the RFS has on the
American people. It's time for Congress to make a change. When
existing law is unworkable, Congress must listen to experts and
adjust the law as it is needed. I hope that this hearing will
bring to light some of the unintended consequences of the RFS,
and provide guidance to lawmakers as we decide the future of
this law.
And with that, Mr. Chairman, I yield back balance of my
time.
[The prepared statement of Mr. Loudermilk follows:]
Prepared Statement of Oversight Subcommittee
Chairman Barry Loudermilk
Good morning everyone. I would like to welcome and thank all of our
witnesses for being here today.
Today, we are here to examine the big picture challenge of the
Renewable Fuel Standard and its impact on our country and the American
people. Ten years ago, the RFS promised to put our country on a path to
being cleaner, greener and more energy independent in a time of heavy
dependence on foreign oil and high gas prices. Back then gasoline
consumption was on the rise, America relied on foreign oil, and
renewable fuels were just starting to become an option for consumers.
Fast forward to today where the demand for gasoline is decreasing,
our country is now considering exporting crude oil, and we now know
ethanol and biofuels are not as clean as we once thought.
In the Committee's hearing on the RFS this summer, we heard
testimony from Dr. Jason Hill from the University of Minnesota, who
debunked the misnomer that corn ethanol is cleaner than regular
gasoline. Dr. Hill's work showed us that while ethanol fuels generally
burn cleaner than gasoline at the tailpipe, if you look at the
lifecycle emissions of ethanol you can see that growing and fermenting
grain, and distilling, distributing, and combusting ethanol releases
far more of the five major pollutants that contribute to increased PM
2.5 and ozone levels than gasoline. Corn-based ethanol is simply not
cleaner than gasoline.
Dr. DeCicco who joins us today, has conducted careful analysis of
more than 100 related studies concluding that serious flaws exist in
the government-sponsored modeling used to justify the RFS. It comes as
no surprise that the Office of Inspector General for the EPA announced
this month they are planning to investigate whether the EPA complied
with the reporting requirements associated with the RFS and whether the
EPA appropriately updated the lifecycle analysis supporting the RFS
with findings from statutorily mandated studies on the environmental
impacts of biofuels. We look forward to their findings.
It is also clear that the demand today for biofuels is far less
than the EPA anticipated they would be. In our last hearing we heard
from CountryMark, a farmer-owned integrated oil company that sells E10,
E15, and E85 fuel at its stations. This farmer-owned small business
refiner cannot sell E85 to the very farmers who grow the corn used for
the ethanol it's blended with because there is just no demand for this
fuel.
It is also becoming clear that Americans are ill--equipped to make
smart decisions about new gasoline choices entering the market place.
According to a recent study conducted by the Outdoor Power Equipment
Institute, Americans choose to purchase gasoline based on price, and
simply don't pay attention to the warning labels placed at the pump.
This results in consumers using fuels with higher blends of ethanol in
lawnmowers, chainsaws, generators and other small engine equipment that
are not certified to use those fuels. This can cause damage or
permanently destroy those products. And with that, I would like to
enter into the record a letter from Todd Teske, President of Briggs &
Stratton, which outlines these points in further detail.
Finally, I want to thank our witnesses today for testifying on the
impact that the RFS has on the American people. It's time for Congress
to make a change. When existing law is unworkable, Congress must listen
to experts, and adjust the law as it is needed. I hope that this
hearing will bring to light some of the unintended consequences of the
RFS, and provide guidance to lawmakers as we decide the future of this
law.
Chairman Bridenstine. Thank you, Chairman Loudermilk.
I now recognize the Ranking Member of the Subcommittee on
Oversight, Mr. Beyer, for his opening statement.
Mr. Beyer. Thank you, Mr. Chairman.
And thank you, Chairmen Bridenstine and Loudermilk, for
holding today's hearing, and thank you to the witnesses for
testifying.
The greatest challenge of this generation--climate change--
requires innovative solutions if we ever hope to make a
meaningful difference. It requires us to look at every aspect
of our energy production and consumption. We must find ways to
end our dependence on fossil fuels and reduce our greenhouse
gas emissions.
The Renewable Fuel Standard has helped us push the
technological limits and the capacity of industry to innovate
our transportation fuels. In the past ten years, we've seen
increasing production of biofuels from both corn ethanol and
advanced biofuels. And this increase has come with considerable
advancements in how corn ethanol is produced, improving
production efficiencies, while decreasing both the costs and
the greenhouse gas emissions.
The Renewable Fuel Standard was designed to integrate all
biofuels into our fuel supply and lay the groundwork for growth
and development of advanced biofuels with a 50 percent
reduction in greenhouse gas emissions compared to that of
conventional gasoline. And I'm interested in learning more
about the advancements in this area and where we can expect
biofuels to be in the next ten years.
We realize there have been challenges. The EPA is prepared
to finalize the volumetric requirements for 2014, 2015, 2016
next month while missing--or later this month--after missing
the statutory deadline two years in a row. And while they're
inundated with public comments during the proposal process,
that doesn't excuse the lengthy delay.
The Agency has issued waivers for the required cellulosic
biofuels and plans to do so again, but I hope that the proposed
biometric obligations can be finalized by November 30 deadline,
provide market certainty, and signals to investors that the
United States intends to be a world leader in the development
and production of these advanced fuels.
With a wide-ranging body of research looking at every
aspect of production and a range of stakeholders that have
advocated for almost every different scenario available, we as
lawmakers are left with difficult decisions to make. And I want
to thank the witnesses again for providing expert testimony on
this pressing topic.
Mr. Chairman, I yield back.
[The prepared statement of Mr. Beyer follows:]
Prepared Statement of Subcommittee on Oversight
Minority Ranking Member Don Beyer
Thank you Chairmen Bridenstine and Loudermilk for holding today's
hearing and thank you to the witnesses for testifying.
The greatest challenge of this generation--climate change--requires
innovative solutions if we ever hope to make a meaningful difference.
It requires us to look at every aspect of our energy production and
consumption. We must find ways to end our dependence on fossil fuels
and reduce our greenhouse gas emissions.
The Renewable Fuel Standard has helped to push the technological
limits and the capacity of industry to innovate our transportation
fuels. In the past ten years we have seen increasing production of
biofuels from both corn ethanol and advanced biofuels. This increase
has come with considerable advancements in how corn ethanol is
produced, improving production efficiencies while decreasing both costs
and greenhouse gas emissions.
The Renewable Fuel Standard was designed to integrate all biofuels
into our fuel supply and lay the groundwork for the growth and
development of advanced biofuels with at least a 50% reduction in
greenhouse gas emissions compared to that of conventional gasoline. I
am interested in hearing more about the advancements in this area and
where we can expect biofuels to be in the next ten years.
All of this does not go without saying that there have been
challenges. The Environmental Protection Agency is prepared to finalize
the volumetric requirements for 2014, 2015, and 2016 next month, after
missing the statutory deadline two years in a row. While inundated with
public comments during the proposal process, it does not excuse this
lengthy delay. The agency has issued waivers for the required
cellulosic biofuels and plans to do so again. I hope the proposed
volumetric obligations can be finalized by the November 30th deadline
to provide market certainty and signal to investors that the U.S.
intends to be a world leader in the development and production of these
advanced fuels.
With a wide ranging body of research looking at every aspect of
production and a range of stakeholders that have advocated for almost
every different scenario available, we as lawmakers are left with
difficult decisions to make. Thank you again to the witnesses for
providing expert testimony on this pressing topic.
Thank you Mr. Chairman.
Chairman Bridenstine. Thank you, Mr. Beyer.
Let me introduce our witnesses. Our first witness today is
Dr. Terry Dinan, Senior Adviser at the Congressional Budget
Office. Dr. Dinan received her bachelor's degree from John
Carroll University and her Ph.D. in economics from Iowa State
University.
Our next witness is Mr. Ed Anderson, President and CEO of
WEN-GAP, LLC. Mr. Anderson received his bachelor's degree from
Guilford College and currently owns 11 Wendy's franchises.
Our third witness today is Dr. John DeCicco, Research
Professor at the University of Michigan Energy Institute. Dr.
DeCicco received his bachelor's degree in mathematics from
Catholic University, his master's degree in mechanical
engineering from North Carolina State University, and his Ph.D.
in mechanical engineering from Princeton University.
Our fourth witness today is Mr. Brooke Coleman, Executive
Director of the Advanced Biofuels Business Council. Mr. Coleman
received his bachelor's degree from Wesleyan University and his
law degree from Northeastern.
Our final witness today is Mr. Charles Drevna,
Distinguished Senior Fellow at the Institute for Energy
Research. Mr. Drevna has over 40 years of extensive experience
in legislative, regulatory, public policy, and marketplace
issues involving energy and the environment. Prior to joining
IER, he served as President of the American Fuel and
Petrochemical Manufacturers. Mr. Drevna received his bachelor's
degree in chemistry from Washington and Jefferson College.
I now recognize Dr. Dinan for five minutes to present her
testimony.
TESTIMONY OF DR. TERRY DINAN,
SENIOR ADVISOR, CONGRESSIONAL BUDGET OFFICE
Dr. Dinan. Good morning, Chairmen Bridenstine, Chairman
Loudermilk, Ranking Member Bonamici, Ranking Member Beyer, and
members of the committee. Thank you for the opportunity to
testify about the Renewable Fuel Standard. This testimony
updates a Congressional Budget Office's report on the RFS,
which was published in June 2014.
The RFS establishes minimum volumes of various types of
renewable fuels that suppliers must blend into the U.S.
transportation fuel supply. Those volumes, as defined by the
Energy Independence and Security Act of 2007, or EISA, are
intended to grow each year through 2022. To date, the
requirements of the RFS have been met largely by blending
gasoline with ethanol made from cornstarch. In the future, EISA
requires use of increasingly large amounts of advanced
biofuels, which include diesel made from biomass, ethanol made
from sugarcane, and cellulosic biofuels.
CBO concludes that the rising requirements of EISA would be
very hard to meet in the future because of two main obstacles.
First, making cellulosic biofuels is complex and costly.
Second, the increasing requirement for the total gallons of
renewable fuels would push the average concentration of ethanol
and gasoline to well above ten percent, the maximum
concentration that is feasible in order to avoid corrosion
damage in older vehicles.
Because of those challenges, EPA has been scaling back the
requirements of EISA. That strategy decreases compliance costs
in the short run, but it also reduces incentives for companies
to invest in the production capacity for advanced biofuels and
to expand the availability of high ethanol blends.
CBO also examined how prices for food and fuel would vary
in an illustrative year, 2017, based on three scenarios. The
first, the 2016 volume scenario, is one in which the EPA would
keep the RFS requirements for 2017 at the same amounts it has
proposed for 2016. The second, the EISA volume scenario, is one
in which fuel suppliers would have to meet the total
requirements for renewable fuels and for advanced biofuels that
are stated in EISA for 2017 but not the requirement for
cellulosic biofuels. The final scenario was one in which
lawmakers would immediately abolish the RFS.
CBO found that food prices would be similar under the three
scenarios. To the extent that the RFS increased the demand for
corn ethanol, it would raise corn prices and put upward
pressure on prices of foods made with corn.
Under the EISA volume scenario, CBO estimated--sorry. Under
the EISA volume scenario, CBO estimated that the resulting
increase in the demand for corn would raise the average price
of corn by about three percent relative to the 2016 volume
scenario. However, because corn and food made with corn account
for only a small fraction of total U.S. spending on food, that
total spending would only increase by about 1/10 of 1 percent.
The effect that repealing the RFS would have on the price
of corn is limited because suppliers would probably find it
cost-effective to use a roughly ten percent blend of corn
ethanol in gasoline in 2017 even in the absence of the RFS. As
a result, CBO estimates that, in comparison with the 2016
volume scenario, repealing the RFS would cause food prices to
fall by less than 1/10 of 1 percent.
In contrast, CBO found that the prices of transportation
fuels would vary significantly under the three scenarios.
Compared with the 2016 volume scenario, we found that complying
with the EISA volume scenario would increase the price of
petroleum-based diesel by 25 cents to 45 cents per gallon. We
also estimated that the price of E10, a blend of fuel that
contains up to ten percent ethanol and which is currently the
most commonly used transportation fuel in the United States,
would rise by 15 cents to 30 cents.
CBO found that complying with the EISA volume scenario
would reduce the price of E85, a blend containing up to 85
percent ethanol, by roughly 80 cents to $1.20.
Finally, compared with the 2016 volume scenario, CBO
estimates that repealing the RFS would have only small effects
on fuel prices. Specifically, we estimate that repealing the
RFS would have essentially no effect on the 2017 price of E10,
would lower the price of petroleum-based diesel by roughly 5
cents, and would increase the price of E85 by about 15 cents.
Thank you again for this opportunity to testify, and I will
be happy to answer any questions that you might have on CBO's
analysis.
[The prepared statement of Dr. Dinan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Bridenstine. Thank you, Dr. Dinan.
I now recognize Mr. Anderson for five minutes to present
his testimony.
TESTIMONY OF MR. ED ANDERSON,
CEO AND PRESIDENT OF WEN-GAP, LLC
Mr. Anderson. Good morning, Chairman Bridenstine, Chairman
Loudermilk, Ranking Members Bonamici and Beyer, and members of
the subcommittees.
My name is Ed Anderson. My wife Judy and I, with our sons
Eddie and Jeff, own a small Wendy's franchise with 11
restaurants in Virginia. We have 385 employees. I am also on
the board of Wendy's Quality Supply Chain Co-op, QSCC, a not-
for-profit purchasing co-op owned by Wendy's restaurant
operators like me. QSCC purchases the food for Wendy's and is
staffed by experts who understand and help us interpret
commodity markets.
The National Council of Chain Restaurants asked me to
testify on behalf of the local small business chain restaurant
community.
In July 2013, I testified at a similar hearing on the RFS
before the House Energy and Commerce Committee. Until then, I
had never done anything like this and never imagined that I
would. I run restaurants, but I have a responsibility to my
family, employees, fellow franchisees, customers, and our
industry to explain to policymakers that the well-intended RFS
has turned out to be a very serious problem.
Judy and I are the face of American small business men and
women. We've worked for decades to build our business, but when
Congress passed the Renewable Fuel Standard, it created a new
burden for businesses like ours. Now restaurant owners and
employers like us are being hurt at a time when our country
can't afford it.
The last time I was here I doubted many restaurant
operators, let alone our customers, knew that a federal
government mandate called the RFS is at the root of food cost
increases. But more and more of us in the food business
understand the RFS is a big mistake, and the average consumer
is starting to catch on, too.
There have been several studies of the RFS impact on food
commodity volatility and costs. A study from
PricewaterhouseCoopers in late 2012 found that the RFS is
costing the chain restaurant segment of the restaurant
industry, which is the segment I and thousands of small
business franchisees are in, up to $3.2 billion in higher food
commodity costs every year.
My own analysis is that the RFS is costing my small company
up to $34,000 more in higher food costs per restaurant each and
every year. For our family, that's up to $374,000 a year in
additional costs. That might not be a lot of money in
Washington, D.C., but for me and many others in the restaurant
business that's a lot of money.
If Congress repealed the RFS, it would level the playing
field and over time return normalcy to the commodities market
so everyone competes fairly and food becomes more affordable.
It's the RFS that distorts the market so much that restaurants,
our suppliers, and consumers are forced to pay more than we
would under normal market conditions.
Please understand we're not anti-ethanol. We know if it
wasn't for American farmers and ranchers, we wouldn't be here.
We get all our beef and chicken from the United States and
Canada. But this mandate is making food so expensive that it's
harder to continue investing in new or remodeled restaurants,
which would create badly needed construction and restaurant
jobs.
I believe with all my heart that we live in the greatest
country in the world. It was built on the hard work and the
ingenuity of those willing to risk it all to build something,
creating jobs and opportunity for others along the way.
Removing the mandate for ethanol allows that industry to stand
on its own, like Judy and I do, like our sons who work for us
do.
Capitalism allows us all to adjust and be successful. Let
the market, not a mandate, dictate the cost of corn. We can't
pass these costs on to our customers. They're already
struggling in this economy, and their own food costs at grocery
stores have also gone up because of the RFS.
We're appealing to Congress to provide relief from this
policy which distorts food commodity markets and harms
consumers and everyone in the food chain. Congress created the
RFS, so it's up to Congress to repeal it.
Thoughtful lawmakers in both the House and Senate
introduced legislation to repeal or significantly reform the
RFS. H.R. 703 and 704 would repeal the entire RFS or repeal the
worst part of it, the corn ethanol mandate. Both bills enjoy
growing bipartisan support.
The RFS was a big mistake and it's broken beyond repair. We
came here today to respectfully ask Congress to repeal it. Judy
and I are here as small business owners, as employers, and as a
family to bring attention to the real-life impact the RFS has
had and to ask Congress to take action for all of us, because
without your action, this situation will only get worse.
Thank you.
[The prepared statement of Mr. Anderson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Bridenstine. Thank you, Mr. Anderson.
Dr. DeCicco, you are recognized for five minutes.
TESTIMONY OF DR. JOHN DECICCO,
RESEARCH PROFESSOR,
UNIVERSITY OF MICHIGAN ENERGY INSTITUTE
Dr. DeCicco. Thank you. And I wish to thank the Chairman--
--
Chairman Bridenstine. Could you turn on your microphone?
Dr. DeCicco. Yes. I wish to thank the Chairmen and Ranking
Members, as well as other members of the subcommittee and full
committee for inviting me to today's hearing.
My name is John DeCicco, and I hold a doctorate in
engineering from Princeton. Before joining the University of
Michigan faculty in 2009, I worked professionally on energy
issues since 1977, including 21 years at major environmental
organizations. However, the findings I'm presenting today are
my own professional views as an independent academic and do not
reflect those of the University of Michigan, my past
affiliations, or funders.
My research shows that the Renewable Fuel Standard, or RFS,
has been harmful to the environment from its inception. Now,
ten years after the 2005 Energy Policy Act, the program has
resulted in higher CO2 emissions than would have
otherwise incurred. It also harms the environment in other
ways. Sadly, the adverse impacts of the RFS have grown worse
since it was expanded by the Energy Independence and Security
Act of 2007.
The notion that renewable fuels readily reduce CO2
is based on a scientifically incorrect understanding of carbon
neutrality. Only under certain conditions does substituting a
biofuel for a fossil fuel neutralize the CO2 leaving
a tailpipe. For that to occur, harvesting the feedstock must
significantly increase how rapidly cropland absorbs CO2
from the atmosphere on a net basis. That condition is not met
for corn ethanol mandated by the RFS. It might be satisfied for
cellulosic feedstocks, but once properly evaluated, the gains
may not be as great as advocates assume.
The lifecycle models used to calculate fuel carbon
footprints, including EPA's RFS model and the DOE-sponsored
GREET model, automatically credit all biofuels with complete
carbon neutrality without checking whether that assumption is
valid. My studies, which rely on crop data instead of computer
modeling, find that the carbon neutrality condition is not
being met.
We evaluated corn ethanol for which lifecycle analysis
claim to a 40 percent reduction in greenhouse gas emissions
compared to gasoline. But examining data for the croplands
actually supplying the facility finds no significant reduction
in emissions. Under some circumstances, the emissions could be
as much as 70 percent higher than those of gasoline. And these
results do not even include the indirect land-use change, which
would increase biofuel-related emissions even more.
The key problem is that diverting harvest from existing
productive land does not remove more carbon from the air than
was already being removed during prior crop growth. All it does
is it shuffle carbon around. In effect, it robs Peter to pay
Paul.
Our ongoing research involves a detailed carbon balance
analysis of U.S. renewable fuel production since 2005.
Preliminary results show that no significant direct CO2
reduction can be claimed for the RFS. Once indirect land-use
change is considered, the result is substantially higher
CO2 emissions overall.
Excess CO2 is not the only environmental harm
caused by this policy. Fellow University of Michigan
researchers have documented how ethanol production has
destroyed habitat for waterfowl and other wildlife. Expanding
corn ethanol production is worsening water pollution,
contributing to algae blooms in the Gulf of Mexico and Lake
Erie. And as for other air pollution, recent research found
that the country's third-largest corn ethanol refinery emits 30
times more air pollution than was assumed for the RFS
regulatory analysis.
Ethanol's corrosive properties are also incompatible with
cars already on the road and degrade the operation of
lawnmowers, motorboats, and other gasoline-powered equipment
used by homeowners and businesses alike.
In summary, a careful look at the data shows that the
studies used to justify the RFS were flawed. Scientifically
speaking, lifecycle analysis is an inappropriate method for
specifying public policy. Inserting lifecycle requirements into
the law has proven to be a mistake. Only a direct year-at-a-
time accounting provides a scientifically sound way to evaluate
the CO2 impact of fuels. Once that is done, it is
clear that the production and use of biofuels, as mandated by
the RFS, has increased CO2 emissions to date.
Thank you again for allowing me to share my findings, and
I'll look forward to any questions you may have.
[The prepared statement of Dr. DeCicco follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Bridenstine. Thank you, Dr. DeCicco.
Mr. Coleman, you're recognized for five minutes.
TESTIMONY OF MR. BROOKE COLEMAN,
EXECUTIVE DIRECTOR,
ADVANCED BIOFUELS BUSINESS COUNCIL
Mr. Coleman. Thank you. Good morning, Chairman Bridenstine,
Chairman Loudermilk, Ranking Members Bonamici and Beyer, and
Members of the Subcommittee. My name is Brooke Coleman. I run
something called the Advanced Biofuels Business Council.
The council represents worldwide leaders in the efforts to
develop and commercialize next-generation advanced and
cellulosic biofuels ranging from cellulosic ethanol made from
switchgrass, which is an agricultural waste, to advanced
biofuels made from sustainable energy crops, municipal solid
waste, and algae. We are honored to be here today to help
accurately assess the impacts of the federal Renewable Fuel
Standard.
When I was thinking about my testimony today, it was quite
clear that I would be giving a counter-perspective, and I want
to give it. The RFS in my opinion is one of the most effective
energy policies ever passed by Congress. Its notoriety stems
not from its failures and unforeseen costs, as alleged, but
instead its effectiveness in breaking the oil monopoly that
leaves our economy and our environment at risk.
So if we're going to assess the RFS from a ten-year
perspective, let's look a little bit back at what we--where we
were ten years ago. We were in the middle of an MTBE crisis
where the oil industry used a gasoline additive to avoid
ethanol that polluted drinking water. The political deal in
essence that happened on RFS1 was a way to facilitate getting
MTBE out of gasoline and out of our families' drinking water,
and it happened in less than a year because Congress sent a
clear market signal that ethanol, a homegrown American
renewable product, would replace MTBE in the marketplace.
A couple years later, Congress decided to pass a stronger
RFS, and RFS2 passed in December 2007, built upon those
successes and now supports more than 800,000 American jobs in
29 States, producing homegrown renewable fuels as an
alternative to foreign oil.
This industry now displaces the foreign oil equivalent
almost of Saudi Arabia and approximately Ecuador, and now we
are innovating. I just returned from Nevada, Iowa, where DuPont
just opened the largest cellulosic ethanol plant in the world.
The plant will produce biofuel from corn silver, the unused
part of the corn plant collected from local farms within 100
miles of the facility.
Quad County Syngenta was one of the first if not the first
to produce commercial volumes of cellulosic biofuels. Their
Cellerate technology produces cellulosic ethanol that is 129
percent better than gasoline on carbon emissions, reduces
energy inputs, and increases the quality and quantity of
production co-products like corn oil and cattle feed.
Abengoa and POET/DSM are deploying similar technologies
using agricultural waste to make the lowest carbon, most
innovative fuel in the world.
One more example, a member of mine, Fulcrum BioEnergy, just
signed a $60 million deal with United Airlines to make
intermediate biocrude and bioJet.
Unfortunately, the program's clear record of success is
often lost in the cloud of misinformation kicked up by the oil
industry and the so-called researchers, fellows, and experts
funded by them. Just as the oil industry has been able to
finance doubt about climate change, they are doing a heck of a
job financing doubt about their primary competitor in biofuels.
I want to touch on a couple of these examples, and I hope
that we can touch on some of the reports and positions that we
have mentioned during Q&A. The first is this notion that we are
in a free market. It has been mentioned--it was mentioned by
the Chairman; it was mentioned by multiple experts up here
today. This is not a free market. The oil markets are
controlled at the top by OPEC. They are controlled here in the
United States by vertically integrated, highly consolidated oil
companies.
We need the RFS because we can't get shelf space. We have
to sell to our primary competitors who want to see us fail in
order to gain market access. The problem is we are experiencing
what it is like to be in a market-controlled environment as we
speak. We don't have low gasoline prices because we have
efficiency, we don't have low gasoline prices because suddenly
our economy is doing something different. We have low gasoline
prices because OPEC made a decision one year ago to drive down
the price of fuel to put the U.S. oil boom on its heels and to
kill oil rig counts in this country.
So OPEC is killing the very thing that the oil industry
says we don't--is the reason we don't need the RFS anymore. In
essence, the RFS is a hedge against this market power and
allows our industry to grow and innovate over time with an
expectation of market. If you give us a true free market, we
will give you the RFS.
Finally, with my last 25 seconds, I'd like to say one of
the most incredible arguments made against us is the food price
argument. I have compassion, of course, for franchise owners,
but the problem is that corn prices today are lower than they
were when President Bush signed this law in 2007. It is hard
for me to believe that the RFS is increasing food costs when
the primary reason that the restaurants claim while they pull
in record profits over the last ten years, this year, is that
corn prices are increasing when they're actually decreasing.
So one of the things I would like to do and have the
opportunity to do as we move forward in Q&A is discuss some of
these issues, and I look forward to that very much. But I'm
confident that the facts will prevail on the RFS discussion,
and I appreciate the opportunity to speak today.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Coleman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman Bridenstine. Thank you, Mr. Coleman.
Mr. Drevna, you're recognized for five minutes.
TESTIMONY OF MR. CHARLES DREVNA,
DISTINGUISHED SENIOR FELLOW,
INSTITUTE FOR ENERGY RESEARCH
Mr. Drevna. Chairmen Bridenstine and Loudermilk, Ranking
Members Bonamici and Beyer, I am Charlie Drevna, Senior Fellow
at the Institute for Energy Research.
You know, once Milton Friedman famously posited that one of
the great mistakes is to judge policies and programs by their
intentions rather than their results. If he were alive today,
Friedman would point to the RFS as a prime example of his
belief.
In the mid-2000s and even before, so-called industry
analysts and renowned economists predicted ever-increasing
gasoline demand as they simultaneously declared the United
States to be energy-scarce. The Nation was on a path according
to the self-anointed experts to reliance on ever-increasing
foreign sources of energy, much of which came from potentially
unstable regions of the world.
Congress and the Administration accepted the reviews, and
in 2005 adopted the Energy Policy Act, which required refiners
to blend 7.5 billion gallons of ethanol into the gasoline pool
by 2012. In less than two years, this nuisance of free market
interference became a full-blown anti-consumer, anti-free
market debacle as EISA '07 mandated 36 billion gallons of
renewable fuels, some of which actually existed, be blended
into domestic transportation fuels by 2022.
In essence, the predictions of 2007 and earlier are the
polar opposite of the realities of 2015. Confounding the
problem is the undeniable fact that advanced biofuels
production, the anticipated linchpin of the RFS, has fallen
woefully short of the numerous promises made since 2007.
I'm sure the Committee is familiar with such names as Range
Fuels, KiOR, Blue Sugars, Absolute Fuels, New Energy Fuels,
Green Diesel, and a host of others, most of whom have
squandered taxpayer dollars or committed fraud, or both, and
yet today we continue to hear that the economic production of
cellulosic fuels is ``right around the corner.'' It's a big
corner.
What's clear is that neither Congress nor EPA can mandate
innovation or favorable economics, try as they may. The hard
sciences of chemistry and physics remain immune to political
science, and they remain formidable obstacles to economic
production of commercial-scale cellulosic fuels. However, one
should not discount the innovation provided by EPA to assist in
this effort. EPA stipulates that ethanol produced from
sugarcane qualifies in advanced biofuel. That's helping to meet
the statutory volume requirements. What's ironic about this
news is that ethanol produced from sugarcane is imported mostly
from Brazil. So much for that homegrown stuff. And the intent--
and what was the intent of the RFS to limit imported fuels?
Okay.
So what State virtually imports all of this biofuel? Well,
that would be California. And why California? The State's low
carbon fuel standard requires refiners to use millions of
gallons of advanced biofuel, and imported sugarcane is the only
available product that fits that definition, as unscientific as
that definition is. Yes, that's correct. California prohibits
ethanol from U.S. producers and imports it from Brazil. This
allows California legislators and regulators to promote
themselves as pioneers in the green movement.
So what happens to the ethanol from the U.S. producers that
would've otherwise gone and been delivered to California? The
Brazilians don't care if their ethanol comes from sugar or
corn, so California and Brazil swap their ethanol, literally
two ships passing in the night. The net outcome, higher
shipping costs, and ironically, increases in GHG emissions.
Not satisfied with the overall results, EPA then decided to
enhance the total production of cellulosic fuels not via
scientific breakthrough. Rather, it would be much simpler to
change the definition of cellulosic fuels to include a portion
of biogas produced from landfills. If you look at the volume
increases in cellulosic production 2014 through '15, it's
nearly all attributable to EPA semantics. Why let pesky little
details such as chemical structure and definition get in the
way of a predetermined outcome?
If one were to be intellectually honest, the RFS was never
about energy security, the environment, or national security.
It's been accurately described as crony capitalism, although
the use of the term capitalism in reference to the RFS is a
basic non sequitur. It may be much more accurate to label the
RFS and other anti-free market mandates, subsidies, and
giveaways for what they really are: government attempting to
pick the winners and losers in the marketplace. And the
government's track record is most illustrative as its penchant
for picking losers is quite outstanding.
Even if the intentions of the RFS were noble, the program
must be judged on its results. It's past time for Congress to
admit that the RFS has not delivered and will not deliver
anticipated results. The law should be repealed and allow for
American ingenuity, entrepreneurship, and free-market
enterprise to do what it does best. They haven't failed the
nation yet.
Thank you very much.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[The prepared statement of Mr. Drevna follows:]
Chairman Bridenstine. Thank you, Mr. Drevna.
I now recognize myself for five minutes of questions.
I just wanted to go back for a second to Dr. DeCicco,
looking at your bio, Research Professor at the University of
Michigan Energy Institute, bachelor's degree in mathematics
from Catholic University, master's degree in mechanical
engineering from North Carolina State University, Ph.D. in
mechanical engineering from Princeton University. You've been
involved in research on energy and environment issues for a
long time. Correct me if I'm wrong. You worked for the
Environmental Defense Fund. Is that correct?
Dr. DeCicco. That's right, for nine years.
Chairman Bridenstine. Would you be characterized as a
conservative witness in general? Would you characterize
yourself as that or somebody that's a hack for the oil industry
or anything like that?
Dr. DeCicco. I certainly would not so----
Chairman Bridenstine. Reading your bio and looking at your
background, I think that is fairly safe to assume. In fact,
when I read your bio, I was a little bit interested in why
Republicans were bringing you to testify. But hearing your
testimony, being somebody who's very concerned about the
environment, somebody who's very concerned about carbon
emissions, your testimony today--I heard you say 70 percent
higher carbon emissions in some circumstances because of the
Renewable Fuel Standard. Is that correct?
Dr. DeCicco. That's correct, Mr. Chairman.
Chairman Bridenstine. How do you get to 70 percent higher
with the Renewable Fuel Standard? Can you share with us how
that happens?
Dr. DeCicco. Sure. The thing to keep in mind is that all of
the claims for reduction on biofuels depend on this carbon-
neutrality assumption. When that's not met, you start with
essentially a wash when you're comparing, say, ethanol to
gasoline or biodiesel to petroleum diesel. And then you have to
look at the process emissions from that basis. And it's not
nearly as efficient to process corn ethanol from biomass as it
is to process gasoline from petroleum.
In fact, from a carbon-efficiency point of view, basic
chemistry tells us that when you ferment the fuel--and this
goes for any fermentation based ethanol, whether it comes from
a cellulosic feedstock or starch like corn or sugarcane--for
every molecule of ethanol that you produce, 1 molecule of
CO2 gets produced as beer bubbles. You know, when
you ferment, you have a frothy thing. It creates
CO2.
So if you can no longer assume that that's free
CO2, free carbon enough fuel, which is false by my
analysis of cropland data, then right there you lose a lot of
carbon back to the atmosphere during processing. So when you
add that back in, when you add in the emissions to make
fertilizer, when you add in the emissions to run the bio
refineries even for natural gas in a dry mill, which is a
pretty efficient form of biorefinery, and take away this
automatic credit that the lifecycle models assume, you can end
up with 70 percent higher emissions.
And that's not the end of the story. I mean that's not the
upper limit on the damage when you begin to look at the ripple
effects.
Chairman Bridenstine. So in your testimony I have heard you
mentioned harmful to the environment. I just heard you use the
word damage to the environment, higher CO2
emissions, in some cases 70 percent higher. You mentioned water
pollution, you mentioned algae bloom. Did you mention--I think
yesterday when I talked to you, you mentioned deforestation.
Can you talk to that for a second?
Dr. DeCicco. Sure. When you divert crops from the food and
feed market, and what's going on in the country now, around 40
percent of our corn harvest is going into ethanol production.
Now, some of that comes back as co-product, but it nets out to
about 30 percent. Well, does that mean people are eating 30
percent less food or that we're having 30 percent less cattle?
No.
We have a global commodity market, and what happens is that
when grains are diverted into the fuel market, that grain that
would otherwise be used for food has to get made up somewhere
else. And if you trace that, as a number of scientific analyses
have done in the past several years, and look at the ripple
effect, the loss of grain from American field due to the
biofuel mandate results, for example, in additional
deforestation in Brazil and sub-Saharan Africa as the food
markets try to compensate and have to put more land into
production.
This is a highly uncertain effect, but there's no doubt
because of the coupling of global commodity markets that this
effect, which is known as indirect land-use change, is
occurring.
Chairman Bridenstine. Thank you, Dr. DeCicco. I am out of
time, but it is important to note that if it's damaging to the
environment, if it's putting more CO2 emissions into
the atmosphere, if it's adding to prices for both food and
fuel, it leaves us wondering what are the reasons that we still
have the Renewable Fuel Standard.
I'd like to recognize the Ranking Member, Ms. Bonamici, for
five minutes.
Ms. Bonamici. Thank you very much, Mr. Chairman, and what
an interesting discussion this morning. I really appreciate the
conversation.
Mr. Coleman, in his testimony, Dr. DeCicco states that the
RFS has been harmful to the environment--I'm following up on
the Chairman's question--and that only under limited conditions
does substituting a biofuel for a fossil fuel neutralize
tailpipe CO2 emissions.
Now, it's my understanding that a number of analyses,
including from the U.S. Department of Energy, indicate that
most biofuels do reduce greenhouse gas emissions. We're getting
ready for the Climate Change Conference in Paris and we need to
do more, not less, to mitigate climate change.
So scientists at the Argonne National Laboratory, Purdue
University, and the Federal Aviation Administration have
responded to some of the criticisms Dr. DeCicco has raised in
writing regarding the ability of biofuels to reduce greenhouse
gas emissions. And, Mr. Chairman, I would like to enter this
paper into the record.
Chairman Bridenstine. Without objection, so ordered.
[The information appears in Appendix II]
Ms. Bonamici. Thank you.
Mr. Coleman, one of the conclusions reached in this paper
is that Dr. DeCicco does not take into account the carbon
emissions that are avoided when a biofuel displaces the use of
fossil fuels. This displacement seems fairly important. So can
you please respond to the assertion that the RFS does not
reduce carbon emissions and that it's broadly caused more harm
than good for the environment, particularly focusing on the
need to consider displacement of fossil fuels? And I do want to
save time for another question.
Mr. Coleman. Sure. I'll go quickly. So we obviously don't
agree with Dr. DeCicco, but I think it's important to
understand who doesn't agree with him is EPA, the Department of
Energy, U.S. Department of Agriculture, the national labs and
Oak Ridge and Argonne National Laboratory, the California Air
Resources Board, which is hardly pro-bio fuels.
What Dr. DeCicco does is he actually does something that's
quite provocative in the carbon accounting world, so it may be
different and might get your attention but it's not well
supported. And it's called additionality. So he doesn't
really--when you grow a plant, whether it's corn or switchgrass
or whatever, it absorbs sunlight and CO2 while it's
growing, and that's one of the benefits of using bioenergy.
Instead of having a solar panel to absorb the sunlight, you're
transferring it into gasoline.
He wants to take that credit away under the assumption that
the farmer would have done it anyway. And the problem with
doing that is it removes the whole notion of supply chain
emissions, and you can't account for it. So if you have a
State--or you want to put solar panels on your roof and you
have the government saying, oh, well, sorry, Ms. Bonamici, you
would have done that anyway so we're not going to give you
credit to do that, it's suspends reality with regard to carbon
accounting. And that's why responsible regulatory agencies
don't do it that way. It's an interesting academic exercise.
So I think we have to rely on the body of the evidence to
support what's going on in this space, and biofuels are carbon
reductive.
Ms. Bonamici. Thank you. And then I have a two-part
question. There's been some criticism of the EPA on its
implementation of the RFS. Some of it is certainly well placed.
The EPA has delayed the release of the volumetric obligations
for the past couple of years, and I want to note that the
proposed biometric obligations to be finalized this month were
actually proposed in part in 2013. The Agency received more
than 340,000 comments on the proposed rule that year, and
evaluation of the comments led to a delay. It's unfortunate,
but I still don't think it's acceptable that the program has
experienced such delays.
And I want you to discuss how that has affected the
biofuels industry. Do you agree that the consecutive delays
have hurt investments in the industry and innovative technology
and development?
And then I also want you to talk about--we've had a lot of
conversations here about corn, but obviously, based on the work
that your organization does, there's so much potential out
there in this second generation. So if the RFS is repealed, as
some are suggesting, what would that do to the advancement of
all the alternative second-generation biofuels and particularly
all the small businesses and businesses across the country that
are working to innovate and come up with new alternatives?
Mr. Coleman. Well, I appreciate the question. I spoke to
this a little bit when I talked about the market. So we need
policy because the market isn't free. And so when the policy is
suspended or not enacted, we're in a tough situation because we
don't know if the oil companies are going to buy our product.
And if we don't know if the oil companies are going to buy our
product, it's pretty hard to get financing to build those
projects.
And so what happened in 2013 and what has happened for two
years is a failure to finalize the rule has basically suspended
investment in advanced biofuels. And we are confident that we
can get back on track. The courts have actually required EPA to
get the final rule out by November 30 of this year. The key,
however, will be that EPA gets a good rule out and not just a
timely rule out.
And so while we expect the timeliness problem to be fixed,
EPA is also still proposing to have a waiver, a new waiver in
there that would allow the program to be waived if the oil
companies fail to distribute our fuel. And the whole purpose of
the RFS is to force the oil companies to do it because they
would not otherwise do it based on price because of the
subsidies and the protections they have overseas that protect
this industry.
And so if the RFS, to speak to your last question, were
repealed, we would basically lose our place on the shelf if you
will and would not have access to the consumer that would allow
these financing mechanisms to go, and we would lose these
projects overseas. DuPont, Enerchem, Abengoa, some of the
companies that I mentioned, have all built their second plant
overseas in places like China, Brazil, and France over the last
six months. So we've already lost second plants. I think the
goal now is to get the third, fourth, fifth plants back in the
United States.
Ms. Bonamici. Thank you. And my time is expired. I yield
back. Thank you, Mr. Chairman.
Chairman Bridenstine. I'd like to thank the Ranking Member.
And Chairman Loudermilk is recognized for five minutes.
Mr. Loudermilk. Thank you, Mr. Chairman.
Real quickly, Mr. Coleman, what your profession? What's
your education and your profession?
Mr. Coleman. I'm educated at Wesleyan University. I was
educated in Northeastern School of Law. I run the Advanced
Biofuels Business Council and represent the lowest carbon fuel
companies in the world.
Mr. Loudermilk. Okay. And so you're an attorney?
Mr. Coleman. Yes.
Mr. Loudermilk. Is that--okay. And you work for--can you--
--
Mr. Coleman. Advanced Biofuels Business Council.
Mr. Loudermilk. Okay, the business council?
Mr. Coleman. Yes.
Mr. Loudermilk. Okay. Thank you.
Dr. DeCicco, your profession?
Dr. DeCicco. I'm a mechanical engineer.
Mr. Loudermilk. You're a mechanical engineer. And who do
you work for?
Dr. DeCicco. I work for the University of Michigan at the
Energy Institute.
Mr. Loudermilk. Before I go into questions, is there
anything you would like to respond to to the claims that Mr.
Coleman has said?
Dr. DeCicco. Sure. Thanks for the opportunity.
You know, there's--science is never static. It moves. We
learn things as time goes on. I hate to admit this, but in the
mid-1990s I was the author of the first paper, first academic
paper to call for the use of lifecycle analysis and regulation
as an incentive to produce advanced biofuels, cellulosic fuels
in particular. And it was based on the early studies that are
the precursors and set the template for all the government
models now in use.
I didn't know then what I have since learned about the
realities of the carbon cycle, and what I realized several
years ago as I began picking apart the models and trying to
understand, okay, why is there so much controversy here that
never seems to get resolved? It's that the government models,
the GREET model, which has been the basis for so many of these
claims, effectively violate the law of conservation of mass.
They effectively, in the computer, create carbon for the sake
of offsetting the carbon out of the tailpipe without bothering
to check whether additional carbon has been removed from the
atmosphere.
Now, Mr. Coleman says, well, I'm raising some unproven
theory about additionality. Additionality, you know, the need
for additional carbon is just another word for conservation of
mass. There's no such thing as free carbon. Carbon is the fuel
of life. You know, we have to be careful when we say willy-
nilly we need to de-carbonize the economy. I personally don't
want to be de-carbonized, and I don't think any of us do. Our
whole food chain and the whole carbon cycle by which plants at
the base of the food chain take carbon from the air and utilize
it to feed everything else is what's going on here. And if you
take that, that's what I meant by you can't rob Peter to pay
Paul. If you just take that carbon, it has to be made up
somewhere else.
So I am in a situation of someone kind of saying, well, the
emperor has no clothes because the emperor in this case is the
Department of Energy and its models that became the template
for the RFS, and EPA's models, which did its own modeling using
a similar format, the same with the California Air Resources
Board. And here I am coming along and saying, oops, you guys
got it wrong. Your models violate conservation of mass. You
haven't checked whether that carbon that you're crediting
automatically against the tailpipe was actually additional
carbon in the sense that it came out of the air without
stealing from the food or feed system.
So I certainly realize that my criticism of these biofuel
policies does fly in the face of piles of publications, but
unfortunately, those publications got it wrong.
Mr. Loudermilk. One quick question, I'm trying to get my
hands around this carbon neutrality theory. And in layman's
terms, the idea the model was based on is we're going to grow
more corn plants, plants absorb carbon output, so therefore,
the increased output by burning ethanol or producing ethanol
would be absorbed by the increased production of corn plants.
Is that a fair summary of the idea----
Dr. DeCicco. Oh----
Mr. Loudermilk. --and have we--are we growing more plants
to absorb?
Dr. DeCicco. We are growing a bit more. The keyword that
you said here is more. You know, in other words, if we had a
barren piece of desert and then irrigated it, fertilized it,
grew corn on it, then that piece of desert would be growing
more corn in a way that takes more carbon out of the air than
was previously being taken out. And then you could legitimately
claim that that carbon in that corn feedstock offsets the
emissions when the ethanol is burned. But I'm not aware that
we're getting most of our corn from land that used to be barren
deserts.
Mr. Loudermilk. So it was used for other purposes? Okay.
Dr. DeCicco. That's right.
Mr. Loudermilk. I see I'm out of time, Mr. Chairman. I
think the world is turned upside down when we have the business
community advocating for more government regulation and the
environmental community advocating for not. So this is very
interesting. Thank you, Mr. Chairman.
Chairman Bridenstine. And real quick, just a point of
privilege here if you'll allow me, Mr. Beyer.
The question I guess we're--I'm trying to understand is if
you're replacing other crops with corn, then the carbon
accounting that Dr. DeCicco is talking about would actually be
more accurate than if you don't account for that, correct, Mr.
Coleman?
Mr. Coleman. No. So this is--I mean the way carbon
accounting works and the way the Clean Air Act works or the way
that any regulation works is pollute or pay. You're accountable
for what you do, right? And if you grow a plant to use in
bioenergy that absorbs carbon more or less, a little bit, not
very much, you get credit for doing that. Whether----
Chairman Bridenstine. But if you're producing that plant,
which in this case would be corn, and you're replacing another
plant, then you really haven't done anything to change the
accounting of the carbon removal. Am I incorrect on that?
Mr. Coleman. You are incorrect because the way that--the
way agricultural markets work is you have demand--put it this
way, agriculture they produce for price, okay? They don't say
I'm going to grow this--I'm going to grow this corn for
ethanol. They produce for price. And so you have--when you have
regulations that are changing the behavior amongst farmers, you
have--what you want in that industry is accountability for what
you do, right? And so if you have acres where you want to do
more corn this year and more wheat next year and your--that
corn gets used for a certain product, that's the product you
should be accountable for. That is it.
Chairman Bridenstine. Okay. I'm taking time that I don't
have. So, Mr. Beyer, you are recognized as the Ranking Member
for five minutes.
Mr. Beyer. Thank you, Mr. Chairman.
Mr. Anderson, thank you for coming up to talk to us. And
I'm sure I've eaten at many of your Wendy's over the years.
Dr. Dinan talked about with the existing fuel standard that
corn price or overall food prices will only rise about 1/10 of
one percent, and if repealed would fall less than 1/10 of one
percent. With some excellent research we found that the price
of corn per bushel was $3.77 when President Bush signed the law
in December of '07. It's $3.68 per bushel right now, 9 cents
cheaper. So how do you get $34,000 in increased food prices
directly related to RFS in your stores?
Mr. Anderson. PricewaterhouseCoopers did the study in 2012,
and then based on that process determined that the impact was
the $34,000.
Mr. Beyer. But if you look at the USDA, you also see that
the price is up to $6.60 or something in 2012 when they did
that study. So now we're back to $3.68, so my guess is if PwC
did the study again, you'd find literally no impact on your
business.
Mr. Anderson. Literally no impact would be incorrect. Our
prices are still up, and I would say also that we had two
record corn crops, and this year we're going to be followed by
an almost record corn crop. I think it's highly unlikely that
we will continue to have record corn crops to keep the price of
corn at that.
Mr. Beyer. And, Mr. Anderson, not to disagree with you at
all, it may well be true, but I think we need to isolate
increase in your food costs from the price of corn. They may
not be 1 to 1.
Mr. Anderson. I would respectfully disagree with that.
Mr. Beyer. Mr. Coleman, what about Brazil? Mr. Drevna
talked all about shipping ethanol from California there and
bringing sugarcane back.
Mr. Coleman. Yes, so there--he--Mr. Drevna is talking about
a different program when he talks about the low carbon fuel
standard in California. That program drives the lowest carbon
fuel. It does not have respect for State or country borders,
and if you have a low carbon fuel, California was to show that
there's a market for it. So Brazil is shipping sugar ethanol to
the marketplace.
In terms of the RFS, again, so Brazilian ethanol does hit
the advanced biofuel requirement. Ninety plus percent of the
fuel used under this program, however, has been U.S.-produced.
So the point of the RFS is to drive plant production and new
industries in this country. We have 210 ethanol plants alone.
We have another 60,000 jobs and hundreds of biodiesel plants in
this country alone, and now we're getting that first wave of
cellulosic plants that creates value-added agriculture. And so
we're really seeing tremendous benefit inside the United
States.
Mr. Beyer. Great. Thank you.
Dr. DeCicco, I want to give you one more chance to try to
out me explain this carbon neutrality. When we look at fossil
fuels, that was carbon taken out of the air millions and
millions of years ago and now burned. So we're taking carbon
that's been stored for these millions of years and putting it
back into the atmosphere, putting it into the ocean.
When you talk to cellulosics, you're taking carbon that was
taken out of the atmosphere last year or this year and putting
it back in. Why isn't that just on the surface of it--by the
way, if I recall my physics, the first law of thermodynamics is
the conservation of mass and energy there--because they're
interchangeable, E equals MC squared. So if we're taking carbon
out of the atmosphere now to burn to put back in, why is that
just on the surface of it not much less net carbon, then
burning something that was taken out millions of years ago?
Dr. DeCicco. Well, the thing to keep in mind is to
neutralize those emissions the way you're saying is that you
need to come up with more carbon that was already being taken
out of the air. Now, that can happen. So let me turn to an
example. I think, you know, this DuPont--new DuPont facility
that was--
Mr. Beyer. Can I interrupt for one second?
Dr. DeCicco. Yes.
Mr. Beyer. Why more carbon if you just take the same carbon
that was coming out anyway, so get rid of this alternative land
use----
Dr. DeCicco. Sure.
Mr. Beyer. --theory. It was going to come out in soy crops
or forest or whatever, no--leave the desert. You're still not--
you're still adding--putting carbon back into the atmosphere
that was coming out naturally rather than carbon that's been
stored.
Dr. DeCicco. Well, that's the rub here. In other words, if
you have corn that already removed carbon from the atmosphere,
it's quite true that that corn was already, you know, being
digested and, you know, calories burned results in CO2
being exhaled. If you take it and use it for fuel, that carbon
still comes out of the air in the tailpipe. So the question
then becomes, as I said before, does that mean that that
calorie consumption, the corn that was being consumed by people
and livestock, has disappeared? And the answer is no, it's
certainly not disappeared.
And this is again why it is, you know, the conservation of
mass. And yes, mass and energy were--we are fortunately dealing
with non-relativistic velocities in the commodity markets, that
you can't just assume that because the carbon was recently
grown that it's sufficient to balance out the system, which is
using huge volumes of carbon already for food and feed. And
that's the--you know, the essence of how I, you know, have
essentially picked apart and found the flaws in the lifecycle
models.
Mr. Beyer. Thank you, Mr. Chairman. I yield back.
Chairman Bridenstine. I'd like to thank the Ranking Member.
I recognize Mr. Weber from Texas for five minutes.
Mr. Weber. Thank you, Mr. Chairman.
And Dr.--is it Dinan?
Dr. Dinan. It's Dinan.
Mr. Weber. Dinan. They've been ignoring you, and so I just
wanted to come to you. I'm going to have a question for all
five of you, and it's a simple yes or no. And I don't want you
to give away the answer. Just do you know the answer? MTBE, do
you know what that is?
Dr. Dinan. Yes.
Mr. Weber. Mr. Anderson, since you run some Wendy's
franchises, you may or may not know what that is.
Mr. Anderson. No, sir.
Mr. Weber. Okay. And is it Dr. DeCicco?
Dr. DeCicco. [Nonverbal response.]
Mr. Weber. Okay.
Dr. DeCicco. Yes, I know what MTBE is.
Mr. Weber. All right. Mr. Coleman?
Mr. Coleman. Yes. I think I mentioned it. Yes, I know.
Mr. Weber. Okay. Dr. Drevna?
Mr. Drevna. Absolutely.
Mr. Weber. Okay. So this is a push to do away with MTBE,
a.k.a. methyl tertiary butyl ether, as I understand it,
ostensibly because MTBE was found in groundwater, is that
right, any of y'all? Dr. Drevna?
Mr. Drevna. MTBE was found in groundwater because we had a
leaking underground storage tank debacle in the country, and
EPA passed a bill--I mean passed a regulation that gave
underground storage tanks ten years to comply but then the RFG2
came into play and we had to put more oxygenate into the
gasoline.
Mr. Weber. Okay. Do we know what affect ethanol has in the
groundwater?
Mr. Drevna. If you have a leaking underground storage tank,
by what I've seen in the studies would indicate that the
ethanol will separate out first from the water and then it--
as--whereas the bacteria would go after the BTEX compounds--
benzene, toluene, xylene--in the underground water and the MTBE
would traverse further, the bacteria likes their cocktails
before dinner so they have the--they go for the ethanol first.
But in essence, you know, I think we've fixed the underground
storage tank problem in the country, which was the root of the
problem.
Mr. Weber. So according to Wikipedia--standby, Mr. Coleman,
I'll come to you----
Mr. Coleman. Okay.
Mr. Weber. --MTBE was not very soluble in water.
Mr. Drevna. Okay, it was very soluble in water.
Mr. Weber. It's very soluble in water?
Mr. Drevna. Yes. Yes.
Mr. Weber. Okay.
Mr. Drevna. So is ethanol.
Mr. Weber. And so ethanol is but you said it separates out
quicker.
Mr. Drevna. No, what happens--ethanol has an affinity for
water.
Mr. Weber. Okay.
Mr. Drevna. That's why when one of the previous witnesses
talked or maybe Mr. Chairman talked about the outdoor power
equipment and the marine people. The marine folks don't like a
lot of ethanol, if it all----
Mr. Weber. So----
Mr. Drevna. --in--to use in marine equipment because the
ethanol will separate out and marine----
Mr. Weber. That's because it's corrosive to the inside of a
steel engine, is that correct?
Mr. Drevna. Well, you know, it's corrosive to certain pumps
and flanges and hoses and things----
Mr. Weber. Okay.
Mr. Drevna. --but, you know, again, the reason for the
marine folks who don't want it is because ethanol has an
affinity for water.
Mr. Weber. Okay. Mr. Coleman, you wanted to weigh in.
Mr. Coleman. Yeah, just a quick thought. When ethanol--when
MTBE went in gasoline, we had a massive drinking water problem
because MTBE was highly soluble in water, and it actually
extended the plume into drinking water aquifers. When we
replace MTBE with ethanol, we no longer had that problem, and--
--
Mr. Weber. Okay.
Mr. Coleman. --and Mr. Drevna's view is that all of a
sudden the underground storage tanks are fixed, our view is
that it's a better biodegradable product.
Mr. Weber. Okay.
Mr. Coleman. And then I'll yield on the second part.
Mr. Weber. Mr. Drevna, you had another--or Dr.----
Mr. Drevna. Yes, I have a comment on that, and--some of the
things that my colleague here Mr. Coleman has been talking
about, a free market, MTBE, the RFG2 was a free market. The
ethanol folks clamored because the consumer didn't want
ethanol. The consumer still doesn't want it in massive
quantities.
Mr. Weber. Well, we've had another--in the committee that I
chair, the Energy Subcommittee, we've had a group of--a gas
station owned by farmers in Ohio area, I think, or maybe it was
Iowa--I'd have to go back and look--who actually couldn't sell
enough of this stuff in the very heart of corn country. So from
an economic standpoint, it just wasn't really flying.
Mr. Coleman. Mr. Weber, could I just add one quick comment
DD
Mr. Weber. Sure.
Mr. Coleman. --if he is attacking our industry? So I know
DD
Mr. Weber. Well, if we have a difference of opinion, that's
not an attack, right?
Mr. Coleman. No, no, no. Yes, yes, yes. But----
Mr. Weber. Okay.
Mr. Coleman. --the record is open for two weeks. We would
be happy to provide further information about this.
Mr. Weber. So you'd be happy to counterattack?
Mr. Coleman. Perhaps counter-argue.
Mr. Weber. Okay. All right. Well, I'm going to leave it at
that. Mr. Chairman, I'm going to yield back.
Chairman Bridenstine. Thank you. I guess we are out of
witnesses on that end, so we'll go with Mr. Babin also from
Texas.
Mr. Babin. Yes, sir. Thank you, Mr. Chairman, and thank
you, witnesses, for being here.
I--maybe I missed this a while ago but, Dr. DeCicco, can
you tell me a little more about why corn ethanol is worse for
air quality the gasoline? That may have already been asked and
hashed but----
Dr. DeCicco. Sure. I would be happy to explain that. In
particular, the part of air quality that I'm focusing on is the
CO2 emissions because that's the emissions that the
ethanol proponents claim that would be reduced by the use of
ethanol.
When it comes right down to it, it's a matter of chemistry
for the fuel. Carbon, as I said, is the fuel of life and it
provides energy both to people through calories and we can also
use carbon-based fuels to provide energy for cars and trucks
and airplanes. And it's a great energy carrier. So ethanol is a
carbon-based fuel, and that is somewhat compatible with
gasoline although, as we've heard, there's limits and problems
associated with putting too much of it into the gasoline.
But when you burn ethanol, the combustion still creates a
CO2 coming out of the tailpipe, same for biodiesel.
And so a short way of thinking about it is that if biofuels
were to have a benefit for CO2, it's not when
they're burned. I mean when you burn it, you have to burn that
carbon, CO2 comes out of the tailpipe.
So then you have to ask, okay, well, if the reduction of
CO2 does not occur at the tailpipe, where might it
occur? And this is where you have to go back and say, well, did
we remove more CO2 when we harvested the feedstock
than the plants were already absorbing from the air? And if you
haven't done that--and the vast majority of biofuel that we
grow--we are growing it on existing cropland, sourcing the corn
and soybeans from existing cropland--you've not removed more
CO2 from the air.
Now, yields have gone up a little bit. My analysis accounts
for that. But that's just a small increase in the removal. But
the bottom line is, because there's no benefit to the
atmosphere when the biofuel is burned, unless you pull more
CO2 out of the air, which you might do by harvesting
stover, corn stover, residues, so there's a potential there to
get a benefit that way, but unless you do something like that,
if all you do is divert existing crop production into the fuel
market, then right off the bat there's no benefit. And as I
said before, then you have to add in all those excess emissions
associated with processing the fuel, and the picture starts to
look very bad very soon.
Mr. Babin. Okay. Thank you.
And should corn ethanol be classified as a green fuel then,
given this environmental impact?
Dr. DeCicco. Absolutely not.
Mr. Babin. Yes. Okay. And now the Administration has
proposed lowering the ozone standard, ambient air quality, to
70 parts per billion. In your opinion, would the RFS complicate
efforts to attain a more stringent standard if that's the case?
Dr. DeCicco. Yes, it could. As you move into sort of the
various parts of the low-blend realm, you can worsen
evaporative emissions from ethanol. It's--I wouldn't want to
say that it's a large effect, but it's an aggravating effect.
Mr. Babin. But if you couple that with higher food prices
and the other negatives of the ethanol industry, it certainly
could have a detrimental effect, right?
Dr. DeCicco. Well, I'm sticking kind of myself on the
environmental side here. I know there's different views on
the----
Mr. Babin. Well, okay.
Dr. DeCicco. --food price impacts.
Mr. Babin. Okay. I was just thinking.
And, Dr. Dinan, what is your assessment of the impact of
the RFS on blending of biofuels into the transportation fuel
supply? And has the use of biofuels increased the cost of the
RFS, or would we have seen ethanol production grow without a
federal mandate? It's a three-part question.
Dr. Dinan. Okay. Well, we really don't actually answer the
question did corn ethanol use grow because of the RFS. Our
analysis is really about looking forward. So what we do look at
is whether or not the use of corn ethanol would decline very
much if we had a repeal of the law. And we indicate that we
don't think it would decline that much because there are other
benefits that blenders received by blending in the corn
ethanol. It helps them with octane requirements and with
meeting carbon monoxide emission reductions requirements. So
that's why we don't find a big drop in corn ethanol use.
But if the law was to push the amount of corn ethanol--of
total ethanol, total renewable fuels up to the levels required
under the law, EISA rather than the amount proposed by EPA,
then there would be a significant problem with the blend law.
Mr. Babin. Okay. Thank you. My time is expired. Thank you,
Mr. Chairman.
Chairman Bridenstine. Thank you, Mr. Babin. So if we're
blending ten percent now, if we were to repeal the RFS, we
would still be blending what according to your study?
Dr. Dinan. We think it would stay at roughly ten percent
for at least----
Chairman Bridenstine. So the idea that we're going to ruin
all these jobs and destroy these markets, that's incorrect?
Dr. Dinan. Well, what we say is that there's a tension
between keeping the costs down and pushing the technology. So
if you were to repeal the RFS, you would reduce incentives to
create more E85 stations and also for production facilities for
more advanced biofuels.
Chairman Bridenstine. Okay. The gentleman, Mr. Abraham, is
recognized from Louisiana.
Mr. Abraham. Mr. Coleman, I see you on the button. Give me
your opinion if we repealed the RFS. What would that do to
general farm prices right now? They're low already, the
commodity prices. What would the total repeal of the RFS do to
the----
Mr. Coleman. That's a question for----
Mr. Abraham. Yes, sir.
Mr. Coleman. --myself?
Mr. Abraham. I saw you wanted to answer.
Mr. Coleman. Yes, sure. The--well, if you repeal the RFS,
you're taking away a value-added agriculture market for the
agricultural community. And so I think the fundamental premise
of the RFS is that we have enough corn and we have as many
farms and as much agricultural product to do more than just one
thing, and that's to feed animals, that we can make bioplastics
out of them, we can make fuel, we can make a number of
different things.
If you ask the agricultural community, they don't feel like
they should be in a box of only producing food. And I think low
corn prices today bear that out. And so what you would have is
a situation where repealing the RFS would create more economic
pain in the heartland, and that is not something that we want
to see.
In terms of clarifying the jobs part of this, I represent
the advanced biofuels industry, and I think what's at stake
here, even though the debate that the oil industry tries to
have this conversation around is about corn ethanol, what's at
stake is the advanced biofuels part of the RFS.
And so if the thesis is that we're not going to lose corn
ethanol by repealing the RFS, my feeling is isn't that what
we're talking about? We're talking about innovation here.
Mr. Abraham. All right. Let me go back to you first, Mr.
Coleman. In view that we have RFS standards now, what's your
opinion? Why are our corn prices so low now?
Mr. Coleman. A couple of reasons. The first is, is that we
have plenty of supply against demand, and so we've come back to
a situation where after a couple years of drought, which drove
corn prices up, we are now in a healthy corn market and even an
oversupplied corn market where we have so much supply that it's
driving prices down.
The second reason is, is if you look at the correlation
analysis of corn prices and oil prices, you will see very, very
strong correlation because oil is a primary input for
agricultural commodity production, and also it is a huge driver
in terms of futures trading, et cetera. So you see corn and oil
matching together, and any time you have corn--oil prices
coming down, you almost always have agricultural commodity
prices coming down. And so with lower oil prices, you have
lower corn prices.
Mr. Abraham. And Dr. Dinan had said in her testimony that
the CBO report mentioned that fuel and food prices depend on a
number of factors outside of the RFS. Do you agree with that
statement, Mr. Coleman?
Mr. Coleman. Yes. I mean oil is the primary driver, and I
should note about the CBO report--and I believe that the doctor
did not set the program confines--but it did not analyze the
economic benefits of reducing petroleum dependence in that
report, and that's a little bit like looking at the economic
benefits of a jobs program and not looking at the economic
benefits of jobs creation.
And so we have a problem with that report and we think that
needs to be fixed. So I think if you look at the actual central
point of the RFS, which is to reduce petroleum dependence, if
we add that into the equation, the economic benefits of the RFS
would be astounding.
Mr. Abraham. Thank you, Mr. Chairman. I yield back.
Chairman Bridenstine. Mr. Westerman from Arkansas is
recognized for five minutes.
Mr. Westerman. Thank you, Mr. Chairman, and thank the
witnesses for being here today. These are some fascinating
subjects, and I'm struggling a little bit on which one to
address here. We've got land use and a clean environment. With
got the law of conservation of mass and energy and energy
conservation or net energy gain or the carbon cycle and
economics versus of real versus inflationary food costs. These
are all things that I like to talk about.
But let's start off with the carbon cycle and land use.
And, Dr. DeCicco, if I understand your argument that there's--
and getting back to the law of conservation of mass and energy,
there's only so much carbon in the world, and the question is
where's that carbon going to be located? It's either going to
be in the atmosphere or is going to be sequestered somewhere
under the ground or in biomass here on the earth. And if we
create a new crop source to make ethanol or corn, then you're
going to be clearing more land to produce this corn. So you're
changing land-use and putting a crop there that's going to be
planted and harvested every year.
I remember being at a conference on renewable energy where
they were showing in South America where they had cleared this
highly productive land to grow--I don't remember if it was
sugar beets or corn, but in the photo there was timber from a
rainforest stacked up in a perimeter around the land. It was
used to keep animals out of the crop.
But as we look at that, something we haven't talked about
is the energy gained from corn ethanol. And the research that
I've looked at show that somewhere between 1 to 1.3, maybe even
as high as 1.6 on the energy put into producing corn ethanol
versus the energy that you get out. We've been talking more
about the carbon balance on it. But if we look at other forms
of cellulosic ethanol or biomass, even though the processes
haven't been refined, the numbers on the net energy gain are
much higher than what we see on corn ethanol.
So are you saying we should totally abandon all renewable
fuels, or is there room for more research to develop some of
these cellulosic ethanol technologies maybe from woody biomass
that do have even a bigger carbon cycle effect?
Dr. DeCicco. Sure. I take issue with the mandating of the
fuels from an environmental point of view. I think it's
important to support the research side. In other words, as I've
pointed out, there is a potential if it's done right, if
technology materializes in an economically viable way at
commercial scale for forms of cellulosic production in a way
that has failed to materialize for nearly 40 years now--I mean,
this is not a new area of research--then, you know, that could
be a good thing provided the land use is properly managed and
that there are guarantees that the actual production of
whatever biomass is going to be going into the cellulosic fuel
is done in such a way that it increases the rate at which
carbon is removed from the atmosphere without depriving the
food and feed system of carbon.
So there's two big ifs that have not been met, are not in
my estimation close to being met for the commercial viability
of so-called advanced biofuels. So, yes, you know, in terms of
this committee's role in advising the research programs, we
should continue research in this area and maybe make, you know,
progress through that. But when it comes to intervening in the
marketplace and trying to force fuels in that are not
commercially viable that have a dubious carbon pedigree anyway
because the analyses backing them were done incorrectly, I
think that, you know, is very questionable----
Mr. Westerman. And if we look at----
Dr. DeCicco. --due to mandated----
Mr. Westerman. --in our forests across the country right
now, we've seen hundreds of millions of tons of carbon going up
in smoke every year from forests that are mismanaged. And if
that carbon were captured and used for energy, it seems to me
like there would be a net benefit from energy and the carbon
cycle to do that.
Dr. DeCicco. That's correct. I mean, that's an example
where if you're capturing carbon, harvesting carbon say from
forest residues that are at risk of causing a fire and burning
up anyway or corn stover to the extent you can do that without
overly degrading your soils, that would decay anyway, release
its carbon, those are examples of what I mean by additional
carbon. You know, you're getting additional carbon because
you're taking carbon that otherwise would either burn or decay
without being put to commercial use.
So those are potentially legitimate sources of carbon, but
I don't think that that then justifies some kind of mandatory
use. I think that you need to look at that situation carefully,
and then I would go back to we need to have the right market
signals here involved, and that's not something you get through
a technology winner-picking mandate.
Mr. Westerman. And I think I'm out of time, Mr. Chairman,
but if you'll oblige me just a few minutes, or are we going to
get a second round of questions?
Chairman Bridenstine. I'll give you another minute.
Mr. Westerman. All right. Thank you.
So if we look at where we're at on the cellulosic fuels, it
seems to me it would make sense that while conventional energy
prices are low, that we put more money into research to make
these cellulosic fuels competitive in a free market so that
when conventional fuel costs go up, we could use these
renewable fuels in a market-based economy so that we're not
subsidizing or mandating the use of them. But we just don't
have the technology yet to make them cost-effectively to do
that. Would you agree with that? Mr. Coleman, your finger is on
the button.
Mr. Coleman. Yes. That's the industry I represent. And so,
you know, I think I've made myself clear on this whole idea of
a price-driven marketplace that we don't have. If you look at
the history of ethanol use in this country, about 90 percent of
the last ten years ethanol has been vastly cheaper than
gasoline and the oil industry hasn't used more than it has been
required by the government to use. If we had a price-driven
marketplace, we would already have the things that we're
talking about wanting now, consumer choice at the pump, an
alternative to gasoline hedges against pump price spikes
associated with petroleum, et cetera.
The second thing I would take issue with is this cost
component of cellulosic. If you look at how much--we're at the
end of the era of light sweet crude that just squirts out of
the ground. We are at the deepwater, fracking, tight oil part
of the evolution of crude oil that is infinitely more expensive
than light sweet crude. And if you look at the costs of
cellulosic biofuel versus the marginal oil gallon such as the
money that was spent in the Bakken, we are cost-competitive
with those oil plays.
And so what we need to drive competition in the marketplace
is access to the marketplace that we are not going to get
unless we have either the RFS or we break up the oil companies,
which I don't think is very politically popular.
Mr. Westerman. Yes. And, you know, most consumers, I think,
care about what the price is on the gas pump, however it gets
there.
Mr. Drevna, would you like to address that?
Mr. Drevna. I don't know where to start. I just can't
believe what I just heard in this hearing room. First of all,
the--there still is--as the doctor said at the end of the table
said, there's still a ten percent maximum blend wall you can't
meet. And that automobile or that lawnmower or that chainsaw
doesn't give anything about where that ethanol comes from,
whether it's cellulosic or whether it's corn or whether it's
some still in West Virginia. It's ethanol. And we have blend
wall. Even EPA, who I very rarely agree with, says there's a
blend wall problem, and it will be for the distant future.
Number two, Mr. Coleman keeps on talking about this grand
conspiracy of the big oil trying to stop penetration into the
market. Well, the reality of the situation is big oil, little
oil, independent refiner in, you know, in the middle of the
corn belt, they do not control anything to do with the market.
Ninety-five percent of the retail market is controlled by
independent operators, just as my colleague down here, Mr.
Anderson, is an independent operator for a franchise. It's the
same thing. If those franchisees want to sell more ethanol or
want to put in E85 pumps, have at it.
If my friends from the advanced biofuel or the corn ethanol
folks want to invest rather than sup at the government trough
year in and year out, they can put the money--they could talk
to the owners of these--of the gas stations and say, hey, we're
going to invest with you because it's got to be--it's not oil
versus advanced.
Chairman Bridenstine. I would like to----
Mr. Drevna. It's what the consumer wants.
Chairman Bridenstine. I would like to say how much I've
enjoyed this exchange between Mr. Coleman and Mr. Drevna, but
in the interest of the folks on the committee, we're going to
go to our next questioner.
Mr. Westerman. Thank you for that extended minute, Mr.
Chairman.
Chairman Bridenstine. You bet.
Mr. LaHood, you're recognized for five minutes.
Mr. LaHood. Thank you, Mr. Chairman. And, Mr. Chairman and
Chairman Loudermilk, I look forward to working with you on this
issue, and appreciate the testimony of the witnesses here
today.
I'm brand new, come from Illinois, Ag is the number one
industry in our state. And in hearing the testimony
particularly from Dr. DeCicco and Mr. Drevna, I mean, it really
seems incongruent when you look at the genesis of the law and
going back and looking at the Energy Policy Act of 2005 and the
EISA law of 2007. And at the signing ceremony there, the
emphasis on why that was put in place, the RFS, you know,
President Bush talked about protecting the environment,
strengthening our energy security, supporting American farmers.
And you listen to that and also the Secretary of Energy at
the time Samuel Bodman and Secretary Johanns, who's now a U.S.
Senator, and you listen to what they said then and how that's
played out and then you hear the testimony here today, they're
in conflict. And I'm trying to rationalize that and figure out
where the truth lies.
And I guess in looking at my own district, I have a very
rural district in central and west central Illinois. And I
think in my district--ag is the number one industry in the
State of Illinois. We have--you know, we have some of the most
fertile farmland in the entire world. And I look at what it
does in Illinois in terms of what it's done for our consumers.
I don't--to be honest with you, Mr. Anderson, I don't hear
much complaints about food prices going up in my district. We
have some big livestock operations there, you know, we have
some of the highest yields we've had, energy prices and
gasoline prices have been low in Illinois, and then you--our
air pollution has gone down almost every year in Illinois.
So I look at those tangible benefits and I also look at the
jobs that are created in Illinois through agriculture, whether
that's John Deere or ADM or Caterpillar. There are lots of
small and medium-sized businesses that have benefited from this
law.
And I guess in looking at, Dr. DeCicco, the flaws that you
laid out--and I have to admit I don't know much about carbon
neutrality or violation of carbon mass--some of these flaws,
but I guess in looking at the genesis of this bill and what was
put forward and the rationale and how that's playing out, I
guess I have not heard from--whether that's Secretary Bodman or
Secretary Johanns--on acknowledging these flaws or making
statements that the law somehow was incorrect and we need to
amend that or revise that. Can you comment on that?
Dr. DeCicco. Sure. I think, as you pointed out, at the time
that the law was passed and especially when EISA greatly
expanded the renewable fuel mandate, there were really sort of
three public policy rationales. You can kind of think of them
as a three-legged stool that propped up this expansive
requirement for renewable fuels. And as you point out, one is
rural economy. And, you know, I'm certainly not going to
question that. I mean there's--I don't think there's a doubt
that creating additional demand for grains and other farm
commodities is going to help those economies.
Then there's the energy security rationale. Well, I think
that these commodity markets respond slowly, especially the oil
market. And I think we've seen a lot more energy security come
from increased petroleum than we have from relatively small and
relatively costly biofuel. So I'm not so sure about that second
leg.
The environmental lag, in spite of, I think, good
intentions and Department of Energy-sponsored analyses and so
on, that has not stood the test of time scientifically. I mean
I would have to say, you know, the way I look at my analyses is
I've essentially cut off that environmental leg.
So whether the RFS can stand on, you know, a rural economic
development leg and perhaps an energy security leg--and I'll
kind of let others debate it--there's certainly no longer an
environmental rationale for a mandate like this.
Mr. LaHood. I would just follow up on that. So in looking
at those flaws that you laid out and what you mentioned, I
mean, can--are you aware of--you know, for instance, Secretary
Bodman, who was a chemical engineer from MIT, that he has
acknowledged those flaws or put anything on record to say that
this was done inappropriately or the wrong way?
Dr. DeCicco. I'm not aware of that. I mean I do acknowledge
that the criticism--environmental criticisms that have come to
the fore in this policy in terms of the scientific literature
are relatively recent. We know more now than we did some time
ago.
I would say--and I'm happy to put this in the record--in
2002 I was at the Environmental Defense Fund and co-authored a
brief position statement on the prospect of a mandate. And
myself and the other colleague there, Tim Searchinger, now at
Princeton University, we raised red flags. Not all the science
was in place for me at that time to be able to give as strong a
criticism on the environment as I'm able to do today, but we
were certainly concerned and wary of the risks at that time.
Unfortunately, you know, it's taking some time for that to
be assimilated, digested by a lot of people, the Department of
Energy and elsewhere, who have been guided by analyses that we
now know were incorrect.
Mr. LaHood. And the last thing I would say, Mr. Chairman,
is, you know, I've tried to find evidence either from, you
know, Secretary Bodman or the EPA Director at the time Stephen
Johnson or from President Bush that somehow this was a flawed
law and was not done the right way, and I've had difficulty
finding that evidence.
Thank you very much, Mr. Chairman.
Chairman Bridenstine. Thank you.
Mr. Beyer has been listening patiently to my side of the
aisle for the better half of probably 30 minutes, so I'd like
to recognize you for five minutes and then I'll close it out.
Mr. Beyer. Thank you, Mr. Chairman.
And with due deference to the Chairman of the Subcommittee
on the Environment being from Oklahoma, I'd like to study--cite
a study from the University of Tulsa National Energy Policy
Institute that estimated that the United States has spent $8
trillion from 1976 to 2010 defending access to oil supplies in
the Persian Gulf.
So, Mr. Coleman, a rhetorical question, is the massive cost
that U.S. taxpayers pay every year to defend these shipping
lanes included in the price of oil?
Mr. Coleman. No, it's not and it's because we pay for it as
taxpayers. And so this is part of the reason that this whole
notion of let the market decide, which is probably the proper
notion to have in 90 percent of the markets in this country,
doesn't work for motor fuels. And so if the oil industry had to
pay for getting itself through the Straits of Hormuz, the cost
of gasoline would be much higher. But right now, the taxpayer
pays for it.
And the oil industry also--and I will point out with regard
to the Bakken and tight oil, one of the biggest lease-holders
in the Bakken testified before Senate Finance in 2012 that the
only reason that they were successful there is because of the
tax subsidies that allowed them to keep their money and
reinvest it.
And so when it comes to energy security, I think the
government is properly engaged because it matters that we have
enough energy to get to work and go to the grocery store, and
we should--and the government should stay engaged. But this
idea that the RFS is somehow distorting a free market is just
not a serious allegation.
Mr. Beyer. And as we talked about, the great promise of
advanced biofuels rather than simple corn ethanol, if we do
away with the Renewable Fuel Standard and that first-generation
ethanol plants goes away, what implication does not have for
being able to develop an advanced biofuels market?
Mr. Coleman. Well, if you look at renewables writ large, so
whether it's wind, solar, or any innovation product, you will
find that revenues created by first gen get poured into
innovation in second-generation. So first, the windmill
companies that built the big windmills are the ones financing
smaller windmills and distributed energy, same for solar, same
for geothermal, et cetera, et cetera.
In our industry that is starkly clear. So if you look at
the first movers in cellulosic ethanol, you will see Abengoa,
you will see POET/DSM, you will see DuPont, you will see Quad
County. Those are all first-gen corn ethanol companies who are
taking revenue streams from the selling of corn ethanol, and
because the RFS sends a clear signal to diversify feedstock and
innovate, they are doing that.
And so a lot of this discussion about corn ethanol is
really a distraction. The RFS stops requiring corn ethanol this
year. It flatlines over time. It is a stalking horse for
incumbents to come after the advanced biofuels industry, and
that is the largest part of the RFS going forward, 90 plus
percent of the RFS going forward. So if you repeal it or even
change of law, which scares investors, we will be in a
situation where we continue to build these next-generation
plants overseas, and that would be a huge opportunity lost.
Mr. Beyer. Great. Great. Mr. Chairman, I yield back. Thank
you very much.
Chairman Bridenstine. You bet. So you mentioned Tulsa
University, and you mentioned what we do in the United States
Navy, of which I spent many years of my life. I would just like
to let the record show that if terrorists or rogue nations
wanted to take control of the corn market, we would defend the
corn market as well.
Mr. Drevna, did you have a thought on that issue? I saw
you----
Mr. Drevna. Yes, I appreciate it, Mr. Chairman. This whole
thing, you know--and Mr. Coleman is right. The--and he used the
right term, too. He said the corn ethanol flatlines after this
year, 15, you know, some billion gallons. The problem is is
that the EISA '07 calls for 36 billion gallons of phantom
fuel--or 22 billion of which are phantom fuels by 2022. What
are we going to do? What's the refining industry--what are the
obligated parties going to do between now and 2022 when, you
know, if you look at the success/failure rate of these advanced
biofuels, there's--you know, as I said in my testimony, if it
weren't for EPA to change the--a scientific definition and you
look at the testimony, the production from these facilities is
minuscule, and it's going to be minuscule.
So are we supposed to say, well, it's right around the
corner so you obligated parties keep sending money to the
federal government and buying tax credit--or credits to keep
this industry going, or do you want to let investors invest in
this stuff just like every other entrepreneur in this country
has done forever and make a better product and take the risk
rather than have them being propped up by the government and
then having the taxpayer end up paying for it? That's the
choice you have to make. I appreciate the ability to respond.
Chairman Bridenstine. Absolutely. So in summary what I
learned, the Renewable Fuel Standard is damaging to the
environment, which was new to me, by the way, in this hearing
and it actually increases carbon emissions. Food prices have
been increased, although there's some debate about that, but I
think on average it will go up a little bit, which makes the
standard of living for all Americans a little bit harder to
achieve. And repealing the Renewable Fuel Standard would not,
you know, get rid of jobs.
I do believe that there may be a place for the government
to be involved in research and development for advanced
biofuels, but creating a mandate is not the right solution.
With that, I thank the witnesses for their valuable
testimony and the Members for their questions. The record will
remain open for two weeks for additional comments and written
questions from Members.
This hearing is adjourned. Thank you.
[Whereupon, at 11:55 a.m., the Subcommittees were
adjourned.]
Appendix I
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Answers to Post-Hearing Questions
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Appendix II
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Additional Material for the Record
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