<DOC>
[110th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:42440.wais]
LEGISLATIVE HEARING ON DISCUSSION DRAFT CONCERNING ALTERNATIVE FUELS,
INFRASTRUCTURE, AND
VEHICLES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JUNE 7, 2007
__________
Serial No. 110-53
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
U.S. GOVERNMENT PRINTING OFFICE
42-440 PDF WASHINGTON : 2008
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan,
Chairman
HENRY A. WAXMAN, California
EDWARD J. MARKEY, Massachusetts
RICK BOUCHER, Virginia
EDOLPHUS TOWNS, New York
FRANK PALLONE, Jr., New Jersey
BART GORDON, Tennessee
BOBBY L. RUSH, Illinois
ANNA G. ESHOO, California
BART STUPAK, Michigan
ELIOT L. ENGEL, New York
ALBERT R. WYNN, Maryland
GENE GREEN, Texas
DIANA DeGETTE, Colorado
Vice Chairman
LOIS CAPPS, California
MIKE DOYLE, Pennsylvania
JANE HARMAN, California
TOM ALLEN, Maine
JAN SCHAKOWSKY, Illinois
HILDA L. SOLIS, California
CHARLES A. GONZALEZ, Texas
JAY INSLEE, Washington
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
DARLENE HOOLEY, Oregon
ANTHONY D. WEINER, New York
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana JOE BARTON, Texas
Ranking Member
RALPH M. HALL, Texas
J. DENNIS HASTERT, Illinois
FRED UPTON, Michigan
CLIFF STEARNS, Florida
NATHAN DEAL, Georgia
ED WHITFIELD, Kentucky
BARBARA CUBIN, Wyoming
JOHN SHIMKUS, Illinois
HEATHER WILSON, New Mexico
JOHN B. SHADEGG, Arizona
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
STEVE BUYER, Indiana
GEORGE RADANOVICH, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
SUE WILKINS MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
<RULE>_________________________________________________________________
Professional Staff
Dennis B. Fitzgibbons, Chief of
Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff
Director
(ii)
Subcommittee on Energy and Air Quality
RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina, J. DENNIS HASTERT, Illinois,
Vice Chairman Ranking Member
CHARLIE MELANCON, Louisiana RALPH M. HALL, Texas
JOHN BARROW, Georgia FRED UPTON, Michigan
HENRY A. WAXMAN, California ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania CHARLES W. ``CHIP'' PICKERING,
JANE HARMAN, California Mississippi
TOM ALLEN, Maine STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas MARY BONO, California
JAY INSLEE, Washington GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
------
Professional Staff
Sue D. Sheridan, Senior Counsel
Lorie J. Schmidt, Counsel
Rachel Bleshman, Legislative Clerk
David J. McCarthy, Minority Counsel
C O N T E N T S
----------
Page
Hon. Rick Boucher, a Representative in Congress from the
Commonwealth of Virginia, opening statement.................... 1
Hon. J. Dennis Hastert, a Representative in Congress from the
State of Illinois, opening statement........................... 3
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 4
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 5
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 7
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 7
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 8
Hon. Mike Rogers, a Representative in Congress from the State of
Michigan, opening statement.................................... 9
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 10
Hon. Mike Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 11
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 12
Hon. Tom Allen, a Representative in Congress from the State of
Maine, opening statement....................................... 13
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 14
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 15
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 17
Hon. Anthony D. Weiner, a Representative in Congress from the
State of New York, opening statement........................... 18
Hon. G.K. Butterfield, a Representative in Congress from the
State of North Carolina, opening statement..................... 18
Hon. Mike Ross, a Representative in Congress from the State of
Arkansas, opening statement.................................... 19
Hon. Tim Matheson, a Representative in Congress from the State of
Utah, opening statement........................................ 20
Hon. Charlie Melancon, a Representative in Congress from the
State of Louisiana, opening statement.......................... 21
Witnesses
Bob Dinneen, president and chief executive officer, Renewable
Fuels Association.............................................. 22
Prepared statement........................................... 25
Charles Drevna, executive vice president, National Petrochemical
and Refiners Association....................................... 31
Prepared statement........................................... 34
Answers to submitted questions............................... 141
Letter of June 14, 2007 to Mr. Boucher....................... 152
Phillip Lampert, executive director, National Ethanol Vehicle
Coalition...................................................... 45
Prepared statement........................................... 46
Sonja Hubbard, chief executive officer, E-Z Mart Stores, on
behalf of the National Association of Convenience Stores and
the Society of Independent Gasoline Marketers of America....... 48
Prepared statement........................................... 50
Answers to submitted questions............................... 145
John DeCicco, senior automotive fellow, Environmental Defense.... 53
Prepared statement........................................... 56
Alan Reuther, legislative director, International Union of United
Automobile, Aerospace and Agricultural Implement Workers of
America........................................................ 76
Prepared statement........................................... 78
Hon. Dave McCurdy, president and chief executive officer,
Alliance of Automobile Manufacturers........................... 84
Prepared statement........................................... 86
Answers to submitted questions............................... 149
Alexander A. Karsner, Assistant Secretary, Energy Efficiency and
Renewable Energy, U.S. Department of Energy.................... 115
Prepared statement........................................... 117
Robert J. Meyers, Acting Assistant Secretary, Office of Air and
Radiation, Environmental Protection Agency..................... 120
Prepared statement........................................... 122
Submitted Material
``Research Finds That Earth's Climate is Approaching `Dangerous'
Point'' NASA article submitted by Mr. Inslee................... 153
David Von Drehle, ``An Auto Insider Takes on Climate Change''
TIME.com May 31, 2007, submitted by Ms. Harman................. 155
Letter of June 6, 2007, from Attorneys General of Massachusetts,
California, et al., to Messrs. Dingell and Barton, submitted by
Mr. Waxman..................................................... 161
Letter of June 5, 2007, from Audubon, Defenders of Wildlife,
Friends of the Earth, et al., to Members of Congress, submitted
by Mr. Waxman.................................................. 165
Letter of June 6, 2007, from David P. Littell, commissioner,
Maine Department of Environmental Protection, to Mr. Allen,
submitted by Mr. Allen......................................... 170
Letter of June 6, 2007, from S. William Becker, National
Association of Clean Air Agencies, to Messrs. Boucher and
Hastert, submitted by Mr. Waxman............................... 172
Letter of June 6, 2007, from Arthur N. Marin, executive director,
NESCAUM, to Messrs. Boucher and Hastert, submitted by Mr.
Waxman......................................................... 174
Letter of June 7, 2007, from the Governors of California, New
Mexico, Arizona, Massachusetts, Oregon, New York, Washington,
and Pennsylvania, to Mr. Boucher, submitted by Mr. Waxman...... 176
Letter of June 7, 2007, from Mr. Waxman, et al., to Messrs.
Dingell and Boucher, submitted by Mr. Waxman................... 178
Discussion Draft Part II......................................... 181
``National Low Carbon Fuels Standard Scenario Analysis'' by Brian
Turner, National Commission on Energy Policy, International
Council on Clean Transportation................................ 238
Statement of the Outdoor Power Equipment Institute, June 7, 2007. 246
Statement of API, June 7, 2007................................... 249
Letter of June 6, 2007 from American Council for an Energy
Efficiency Economy, et al., to Members of Congress, submitted
by Mr. Waxman.................................................. 251
LEGISLATIVE HEARING ON DISCUSSION DRAFT CONCERNING ALTERNATIVE FUELS,
INFRASTRUCTURE, AND VEHICLES
----------
THURSDAY, JUNE 7, 2007
House of Representatives,
Subcommittee on Energy and Air Quality,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:00 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Rick
Boucher (chairman) presiding.
Members present: Representatives Butterfield, Melancon,
Barrow, Waxman, Markey, Wynn, Doyle, Harman, Allen, Gonzalez,
Inslee, Baldwin, Ross, Weiner, Matheson, Dingell, Hastert,
Hall, Upton, Shimkus, Walden, Rogers, Sullivan, Burgess, and
Barton.
Also present: Representatives Green and Stupak.
Staff present: Bruce Harris, Lorie Schmidt, Chris Treanor,
Laura Vaught, Jonathan Brater, Jonathan Cordone, Alec Gerlach,
Rachel Bleshman, David McCarthy, Tom Hassenboehler, and Matt
Johnson.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. The subcommittee will come to order. Before
commenting on the subject matter of today's hearing, I want to
inform members of the subcommittee that we will be meeting in
that markup session next Wednesday, June 13 at 10 o'clock. And
during that markup session, we will consider all of the titles
that this subcommittee will contribute to Speaker Pelosi's
Independence Day measure. The markup will encompass the matters
relating to vehicles and fuel, which are the subject of today's
legislative hearing. And also will encompass the titles
relating to energy efficiency and the other matters that were
the subject of the legislative hearing we conducted in May.
I want to encourage all of the members of the subcommittee
to submit their proposed amendments to the committee staff, if
possible, by close of business tomorrow. That will give us time
over the weekend and in the first couple of days of next week
to work with the Members who are submitting the amendments and
try to resolve any issues with their amendments prior to the
markup taking place. So for benefit of the Members, let me
repeat that we would like to have your draft amendments
submitted to the subcommittee staff by the close of business
tomorrow, if at all possible, and that will give us ample time
to work with you prior to the markup. The full Energy and
Commerce Committee will convene a markup session the following
week, that will be 2 weeks hence, for the purpose of
considering the work product of the subcommittee.
And then following House passage of the Speaker's July
independence energy agenda, the subcommittee's attention will
return to our other principal topic for the year and that is
global warming and greenhouse gas control. It is our intention
to draft and approve in the subcommittee, and the full
committee in September, a mandatory greenhouse gas control
measure. Our goal is to present it to the Speaker for House
debate as early as October of this year.
A number of Members participated last week in an intensive
evaluation of the European emissions trading system during the
visit to four European Union member countries, and the
knowledge we gained during the course of that visit places us
in a very strong position to draft an appropriate control
program for the United States in the fall of this year.
This morning our legislative hearing focuses on vehicles
and fuel. It is a comprehensive treatment. It reflects
suggestions that have been made to the committee by
subcommittee members following our series of hearings in the
spring. It promotes alternative fuels, alternative fuels
infrastructure, and motor vehicle advances. Among other major
provisions, it mandates the manufacture of flexible-fuel
vehicles on a stated schedule, with the requirement that by
2020, 85 percent of the motor vehicle fleet be flexible-fuel
capable. Correspondingly, it mandates the installation of E-85
capable pumps at service stations when flex-fuel vehicle
penetration reaches 15 percent in a given area. There are
exemptions from that requirement for very small retailers and
there are grants to make the cost of compliance easier for
those that need the financial assistance.
These twin mandates are designed to relieve the classic
chicken or egg dilemma where cars are not built because of the
absence of pumps and pumps are not installed because of the
absence of flexible fuel-capable cars. We also respond to the
President's call for annual consumption of 35 billion gallons
of alternative fuel by 2017, but we require that volume of
consumption not by 2017 but by 2025 instead. We concluded that
the production of 35 billion gallons by 2017 was unlikely,
given our current annual consumption of less than 6 billion
gallons and the absence of any empirical support for the 2017
date supplied by the administration.
Our draft bill authorizes grants of $1 billion to
accelerate the commercialization of cellulosic ethanol
production; establishes a feasibility study for a pipeline that
would be dedicated to the transportation of alternative fuels
from point of origination to point of distribution and sale;
creates an advanced battery loan guarantee program to speed the
introduction of promising new high performance batteries for
electric vehicles, including lithium ion batteries; creates a
fund for development of a mass technology vehicle, such as
hydrogen fuel and plug-in all-electric vehicles; creates a
mechanism to provide public information on higher fuel
efficiency; mandates an increase in the CAFE fuel efficiency
requirements; creates, starting in 2013, a low-carbon fuel
standard applicable to all motor vehicle fuels, with a formula
assuring that, as the alternative fuel mandate increases over
time, the requirement for the usage of low-carbon fuels will
also grow; and creates a biodiesel fuel standard with
identification numbers sufficient for the manufacturers of
vehicles to build engines compatible with biodiesel fuel.
As a step toward the greenhouse gas control measure that we
will process through our committee later this year, we require
the Department of Transportation to begin issuing a CAFE
requirement, both in miles per gallon, which is the historic
metric, and also in the equivalent grams of CO\2\ emitted per
vehicle mile. And we require the EPA to collect data from the
auto manufacturers regarding the lifecycle CO\2\ footprint for
the vehicles that they are placing in commerce. We also respond
to the regulatory confusion which exists following the Supreme
Court decision conferring authority on the EPA to regulate for
greenhouse gas emissions in the transportation sector, a
subject which I am certain will stimulate a lively discussion
this morning.
That concludes my opening statement.
Let me simply note that we anticipate a number of
unanimous consent requests that will be made by various parties
to insert material into the record during the course of today's
hearing. We will consider all of these requests toward the
conclusion of the hearing. In the meantime, those who desire to
insert material are asked to provide copies of the material to
the majority and minority staff so that we can evaluate the
material prior to the amount of consent requests being made and
acted upon.
At this time, it is my privilege to recognize the
distinguished ranking member of the Energy and Air Quality
Subcommittee, the former Speaker of the House, the gentleman
from Illinois, Mr. Hastert.
OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. Hastert. Well, I thank you, Chairman Boucher, for
holding this hearing to review the draft legislation you
introduced last week. I also want to thank you for the study
group that you put together to look at what European standards
are doing and how well they are achieving those and some of the
problems that they have incurred as well. Your leadership is
duly noted. Thank you for your effort in that respect. I want
to reiterate my commitment to continue to work with you on
commonsense energy legislation. I would also like to thank our
witnesses today for being here.
Like most policy proposals, there are some things which I
generally support, others that I may have some concerns with
and we need to think about and talk about. I have already
support increasing our supply of renewable and alternative
fuels. Last Congress we had the Energy Policy Act which
contained the Renewable Fuel Standard to get more alternative
sources of fuel into the market. The Alternative Fuel Standard
in this draft builds upon this and provides incentives to get a
diverse mix of fuel into the marketplace. These alternative
fuels will reduce our reliance on unstable sources of foreign
oil.
Alternative fuels, however, are not effective without the
infrastructure in place to distribute them. Provisions in this
draft will level the playing field to get alternative fuels
like E-85 into the marketplace. It also provides grants for E-
85 infrastructure and the development of cellulosic ethanol
facilities. I would even go further and provide liability
protection to prevent the certification of E-85 pumps today.
Countries like Brazil have been using E-85 pumps for years with
no problems or evidence of safety concerns. The approval from
Underwriters Laboratories has been slow-walked for too long and
we must speed this process along.
I have also supported efforts by this committee in the past
to update and reform the CAFE standards. While I do support
reforming and modernizing this program, we need to be mindful
of setting an arbitrary floor or ceiling for fuel standards.
The Department of Transportation is the agency with the
expertise and is tasked with the determining maximum fuel
savings ability. We should let them do their job.
I am also concerned about the flex-fuel mandate in the
draft. This is something that I think we need to talk about,
something that I think we need to negotiate. I personally
believe it is largely unnecessary and overly prescriptive, the
market is working on its own. But again, it is something that I
think is well intentioned and we need to work through it. Also,
I want to say that I believe this draft has potential to
produce good policy and it could go a long way towards
improving America's energy and security.
I look forward to hearing from our witnesses today to get
their thoughts on some of the issues that I have raised, as
well as any other ideas they feel might serve to strengthen the
legislation. Again, I want to thank you for holding this
hearing, Mr. Chairman, and I look forward to working with you
on a bipartisan basis to further improve the bill as we work in
markup and continuing discussion on it in the coming weeks. And
I yield back the balance of my time.
Mr. Boucher. Thank you very much, Mr. Hastert. And I too
look forward to working with you in a bipartisan mode to
produce a bill that will enjoy the broad support of Members on
both sides of the aisle. I would announce that, pursuant to the
rules of the committee, any of the Members who desire to waive
their opening statements will have the time allotted for that
opening statement added to the question time they will have for
the first panel of witnesses today. The gentleman from Georgia,
Mr. Barrow, is recognized.
Mr. Barrow. Thank you, Mr. Chairman. I will waive.
Mr. Boucher. Mr. Barrow waives his opening statement. The
gentleman from Texas, Mr. Hall, is recognized for 3 minutes. I
think he is no longer here. The gentleman from Michigan, Mr.
Upton, is recognized for 3 minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman, and I want to say
that I am convinced that legislation, as we look back at the
110th Congress in December 2008, I am convinced that
legislation that moves through this subcommittee will indeed be
viewed as probably the most significant legislation enacted in
the 110th Congress. I appreciate your leadership, Mr. Chairman,
and your commitment to work on a bipartisan basis to work on
legislation that is going to be helpful to not only business
and industry but obviously the consumers across our great land.
I also appreciate the constructive work of our ranking member,
Mr. Hastert, the former Speaker, and the relationship that he
has with you and our staff to make sure and ensure that, in
fact, it will be bipartisan legislation.
There are many very positive elements of the draft that has
been produced that we are going to be discussing today.
Important to that is the provision that Ms. Harman and I have
been working on as it relates to light bulb efficiencies. And
even as we go beyond that, as we look at the first
appropriation bills on the House floor, she and I--and your
colleague last night, all of our colleagues looking to see that
the Federal Government, in fact, pursue that same course and to
be able to purchase only Energy Star light bulbs, as we look at
the next fiscal year, for all of our agencies. And I would like
to think that we are going to have the support of the full
committee in terms of their votes on the House floor when this
will be debated as early as next week.
The bottom line is this: we need to work together for all
of Americans. Your leadership, with the hearings that we have
had, with the hearing today, the legislation that we are going
to pursue, the fast track that we are on to be able to get this
bill out the door before the end of this month and on the House
floor after the 4th of July is very important and I look
forward to working with you on that basis, and I yield back my
time.
Mr. Boucher. Thank you very much, Mr. Upton. The gentleman
from California, Mr. Waxman, is recognized for 3 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Mr. Chairman, I am not going to talk about the
importance of energy independence or the crisis of global
warming in the few minutes I have this morning. We should all
know that already. The question facing the Congress is whether
we are going to step up to that urgent challenge. In a recent
Tom Friedman column about energy legislation and Congress, he
wrote, ``you can very comfortably drive a Hummer to the gap
between our words and deeds.'' And that was before he read this
subcommittee's draft proposal. This discussion draft doesn't
step up to the urgent challenge facing us. It blinks and then
steps back.
Last November, voters elected a new Congress and demanded
change. They wanted an end to politics as usual and legislation
driven by special interests. This bill unfortunately reflects
none of that. It would not only overturn the recent landmark
Supreme Court ruling that the EPA has the authority to regulate
greenhouse gas emissions from cars and trucks, but would also
block the efforts by California and 11 other States to reduce
these pollutants. And this draft has as its centerpiece
promoting coal. Even worse, the draft encourages high-carbon,
coal-based liquid fuel to be used for planes and jets, with
little protection against the inevitable increases in
greenhouse gas emissions.
Because this draft is so deeply flawed, I intend to offer a
substitute bill at next week's markup. The substitute will
include commonsense vehicle efficiency and low-carbon fuel
standards to reduce our dependence on fossil fuels and our
emissions of global warming pollution. It will include a
renewable electricity standard to increase the amount of clean
renewable electricity used in this country. It will include an
energy efficiency performance standard to reduce our Nation's
emissions of global warming pollution and to save consumers
money. And instead of discouraging States from taking action,
the substitute will make it the policy of the United States
Government to support State programs and policies that direct
global climate change.
When this committee passed the 1990 Clean Air Act, we were
able to forge consensus to craft legislation that dramatically
reduced pollution while still allowing our economy to grow.
Many thought that was impossible, but we did it. We did it by
working together. We did it by not listening to those who said
we couldn't, and we did it by rising above regionalism and
special interests, and recognizing that urgent problems require
innovative and strong solutions. The draft before us doesn't
come close to that standard and I look forward to working with
my colleagues to develop a bill that our country can be proud
of.
Mr. Boucher. Thank you very much, Mr. Waxman. The gentleman
from Texas, Mr. Hall, is recognized for 3 minutes.
Mr. Hall. Mr. Chairman, thank you. You did a very good job
in the opening statement. I will waive my opening statement.
I would like to take a part of my time, though, to
recognize one of the panelists who is a highly recognized young
lady in the southwest part of this country and she is from my
district and that makes her special to me, but she has been
before this committee before, as have some of her colleagues,
Bill Douglass and the others who have graced us with their
presence.
Sonja Hubbard is vice chairman of government relations and
chief executive officer of the E-Z Mart Stores that operate in
five States and she is located in Texarkana--founded by her
father and still runs by her mother--operating and leading the
company. But she serves her first term, though, as National
Association of Convenience Stores chairman of government
relations in five States. I can tell you other things about
her. She is a CPA. She is a part of almost everything in the
eastern part of Texas. She serves as the director of the Texas
Petroleum Convenience Store Association; is chairman of the
local branch of the St. Louis Federal Reserve Bank. And what
she and I appreciate more than ever, and I do at my age, she
loves jazz music and her favorite movie is ``It's a Wonderful
Life.'' And like her, I make my kids listen to that and watch
it annually at Christmastime. Thank you for being before us and
giving us your time. And all of you, we know it takes time to
prepare to get here to give your testimony and you render a
real good service to us and we appreciate all of you. I
especially appreciate you, Sonja. Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much.
Mr. Hall. I have campaigned enough.
Mr. Boucher. Thank you, Mr. Hall. The gentleman from
Massachusetts, Mr. Markey, is recognized for 3 minutes.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman. Mr. Chairman, this
draft is one that I cannot support. I do not think it reflects
the spirit of what this country wants to see happen, as we are
challenged by 60 percent of our oil being imported as opposed
to only 27 percent of our oil being imported 20 years ago.
Global warming is now viewed universally as a scientific fact
and one that requires urgent action. This bill does not respond
to those twin challenges.
Fourteen attorneys general have all come out in opposition
to this bill, but they are not going to be allowed to testify
here today. This bill is cutting the legs out from under the
States, just as they are starting to sprint forward on carbon
pollution regulation. And it is cutting the legs out from under
the EPA, just as it has begun lacing up its shoes after the
decision in Massachusetts v. EPA. This bill overrides the
Supreme Court decision in Massachusetts v. EPA. This bill
requires the EPA to deny California in its label request, and
11 other States as well, including Massachusetts, to its use of
the Clean Air Act authority to set vehicle greenhouse gas
emission standards.
As I have done since 2001, initially with Sherri Boehlert
from New York and now with other Members of Congress led by
Congressman Platts from Pennsylvania, it will be my intention
next week to once again bring an amendment that will raise the
fuel economy standards for our country to 35 miles per gallon,
and we will have a vote on that issue. At 35 miles per gallon,
we back out all of the oil which we import from the Persian
Gulf. We must send that signal to all of those OPEC nations. We
have the technological capacity to do that. In 10 years we can
once again reclaim our control of our own energy agenda if we
take those actions. And the same thing is true for global
warming. We have to ensure that we reduce dramatically the
greenhouse gases that are creating this potential catastrophic
condition for the planet. Sadly, this bill does not do that.
And so we have a historic debate about to break out and led
by the clean coal, the coal-to-liquid issue, which is only
going to worsen greenhouse gases, and the absence of meaningful
fuel economy standards for our vehicles that we drive, which
would help. This debate is historic and about to begin. Thank
you, Mr. Chairman.
Mr. Boucher. Thank you, Mr. Markey. The gentleman from
Illinois, Mr. Shimkus, is recognized for 3 minutes.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman. I agree with my
colleague from Massachusetts. This will be a historic debate
and I would ask people to reserve their speech because next
week we start. Illinois has 250 years worth of coal in the
Illinois basin. It can make a major impact on decreasing our
reliance on imported crude oil and help bring security and that
is going to be part of this debate. And we relish the
opportunity to bring this to our colleagues and talk about
energy security.
Thank you and I appreciate the chairman's efforts in trying
to replace foreign oil imports by building up a strong domestic
alternative fuel supply. We must put everything on the table to
increase our energy security. All alternative fuel should be
considered. Coal-to-liquid fuel, biodiesel, corn-based ethanol,
and also cellulosic, all hold great promise and will compliment
and strengthen our domestic energy portfolio. As we all know,
the recent expansion of biofuels, primarily ethanol, is
happening at record rates. With consumption running at nearly
400,000 barrels per day, equivalent to an annual consumption
rate of 6.1 billion gallons, this is well in excess of the
current Renewable Fuel Standard established under EPAct 2005,
which we passed through this committee. And I am happy to see
that this effort had us on what seemed to be a progressive path
for renewable fuel.
With EPA's promulgation of the RFS credit trading and
compliance system, largely viewed as a success, ethanol and
biodiesel are positioned to only increase their impact on the
domestic fuel supply and further reduce our use of imported
foreign oil. However, there is work to be done and concerns
remain. There is infrastructure limitations, conflicting
environmental impact and methodologies and measures to develop.
Even affects on fuel prices should be looked at as to not
exceed a smooth transition to greater use of these fuels in our
everyday transportation mix. All of these issues merit careful
consideration before we act to further mandate the use of these
fuels.
While I appreciate the chairman's efforts to follow up with
hearings and markups, I do have concerns that the timeline he
has may be too fast for some of the provisions that we are
trying to enact. And maybe we will hear today from our
witnesses that this is the case. It may be more valuable to
take a step back and that is what we are trying to do with the
Alternative Fuel Standard and especially section 102, the Low-
Carbon Fuel Standard. I think there is a lot of uncertainty and
we are giving ourselves a very limited amount of time to deal
with these broad policy issues. If we are looking to expand the
use of alternative fuels, we should remain--and technology
neutral. We should also expand our traditional fossil fuel
expiration and protection and strengthen our domestic energy
supplies. We must not underestimate our current reliance on
unstable foreign sources of fossil fuels and we must be smart
and responsible with further actions.
With that, I welcome our panelists and I yield back the
balance of my time, Mr. Chairman.
Mr. Boucher. Thank you very much, Mr. Shimkus. The
gentleman from Michigan, the chairman of full committee, Mr.
Dingell, is recognized for 5 minutes.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, I will not use 5. I will take 3
and be happy. First, Mr. Chairman, thank you. This is an
important hearing. It addresses a number of questions that need
to be dealt with before we proceed further. I want to commend
you for the way in which you are handling this matter and the
extraordinary leadership that you are providing to the
committee and the subcommittee. At the outset, I note that the
draft legislation is well balanced, and for that I commend you.
It provides us a starting point for our consideration of these
critical issues. With that, Mr. Chairman, I look forward to
hearing the views of my colleagues on the committee.
Mr. Boucher. Thank you, Mr. Dingell. The gentleman from
Michigan, Mr. Rogers, is recognized for 3 minutes.
OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Rogers. Thank you, Mr. Chairman, for holding today's
hearing. Addressing the twin problems of our dependence on
foreign oil and climate change requires sensible action on
transportation fuel. Developing diverse fuel sources is a goal
in this committee and it has been pursued for some time. Much
of this bill continues our bipartisan tradition of pursuing
market-based solutions to America's energy needs. However,
several provisions in this bill can be cause for concern.
The Renewable Fuel and Alternative Fuel Standards are
particularly complex and I am concerned that they may limit
rather than encourage the growth of alternative fuels. Several
provisions related to alternative fuel infrastructure raise
serious questions about the respect for private property
rights. The report on CAFE standards contemplated in this bill
is immense. I am very concerned that the bill, while well
intentioned, continues the system of using arbitrary numbers
that distort the marketplace, limiting consumer choice and
making it exceptionally difficult for the American auto
industry to effectively compete in the United States.
Finally, the provisions providing assistance for battery
research and alternative propulsion are laudable. However, I
have serious questions regarding how this legislation will
actually work in this area and the consequences, Mr. Chairman,
are very, very real. Recently in Michigan, within the last
year, we opened up a plant just outside Lansing, Michigan, the
most high tech manufacturing automobile plant in North America
that builds the Buick Enclave and the Saturn Outlook and it is
a marvel of modern manufacturing technology and represents the
best in cooperation between the UAW and management to build
very high quality vehicles, crossover SUVs that get in the mid
20 miles per gallon. Twenty-five hundred direct manufacturing
jobs and another 2,500 jobs were created in the area just in
the supply chain, direct manufacturing jobs. Five thousand jobs
directly, not counting all of the supply that will supply the
supply chain. It is an incredible feat. It is an incredible
vehicle. They are building incredible vehicles, high quality
vehicles. They are making that march toward better miles per
gallon. We should not punish them.
And I would just caution you, Mr. Chairman, please do not
rush this legislation. The consequences if we get this wrong
are very real to America's manufacturing base, consumer choice
and just jobs in our local neighborhoods that have been, I
think, the backbone for our middle class for the better half of
this century. And with that, Mr. Chairman, I look forward to
working with you on the issues in this bill. Again, I would ask
that we continue that working relationship to get to the right
place for a better America, and I yield back the remainder of
my time.
Mr. Boucher. Thank you very much, Mr. Rogers. The gentleman
from Maryland, Mr. Wynn, is recognized for 3 minutes.
Mr. Wynn. Thank you, Mr. Chairman. I will waive.
Mr. Boucher. The gentleman waives his opening statement.
The gentleman from Texas, Mr. Burgess, is recognized for 3
minutes.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the chairman. I also want to thank you
for your willingness to work with the Republican side of the
dais as we craft energy independence legislation.
I am pleased to see the language is in the discussion draft
covering a provision I have been working that would help to
incentivize biodiesel. The reliance on foreign energy sources
undermines our economy and security. Homegrown fuels, such as
biodiesel, can help move the United States towards greater
energy independence. Despite the energy and security and clean
air benefits, biodiesel-capable cars and trucks have been
slowly hitting the market, mainly because of concerns by
original equipment manufacturers for automobiles and engines.
Although manufacturers are comfortable with the B-5 biodiesel
blend, most of them certified their engines to run on the
biodiesel B-20. Section 103 of the draft seeks to clarify the
definition of biodiesel and the blends, which I think is a
necessary step towards the widespread use of biodiesel. My
provision, included in the draft looks at the hardware, if you
will, and tries to incentivize the B-20-capable automobiles by
making B-20 eligible for alternative fuel credit of the
Corporate Average Fuel Economy Program.
Alternative fuels receive an additional CAFE credit because
they help reduce the use of petroleum fuel and provide clean
air benefit. Biodiesel, in fact, does both. An October 2005 EPA
study shows diesel vehicle fuel economy improvements of between
a third to almost 40 percent of the lifecycle carbon savings,
and a lifecycle carbon savings of 16 to 20 percent compared
with gasoline vehicles. In addition, for every unit of diesel
fuel which is replaced by biodiesel, the total lifecycle
greenhouse gas emissions that would have been produced from
that unit of diesel fuel would be reduced by 13 percent,
numbers that Kermit the Frog would love.
Mr. Chairman, I ask you and your staff to work with me and
my staff on this provision and ensure that it is included in
the final draft when the subcommittee comes to markup next
week. I would be remiss if I forgot to say I have some concerns
about the provisions in the discussion draft, particularly with
regard to the wisdom of adopting a low-carbon fuel standard
without first doing some analysis to determine its effect on
the prices paid by the consumer at the pump. I am hopeful that
the bipartisan spirit set forth by Chairman Dingell and you,
Chairman Boucher, will prevail and that we will be able to work
through some of these issues. I thank the chairman for today's
hearing and I look forward to working with you to keep the B-20
provisions in the final draft of the bill, and I will yield
back the final 25 seconds.
Mr. Boucher. Thank you very much, Mr. Burgess, and thank
you for recommending the biodiesel provision to us. That was a
substantial contribution to our work and we do look forward to
continuing our discussions with you about that provision. The
gentleman from Pennsylvania, Mr. Doyle, is recognized for 3
minutes.
OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Doyle. Thank you, Mr. Chairman. Let me begin by showing
my appreciation to you for putting this discussion draft
together. While I know it is not been easy and that there are
members on this committee with legitimate concerns with this
draft, you should be commended for your efforts as we continue
this process.
As we all know, the short deadline for completion of this
legislation was a deadline imposed by the Speaker. This was not
your choice nor was it the choice of Chairman Dingell, and
there are many on this committee who would like more time to
address some of these important matters. And while I understand
this concern, I just hope we can all move forward together to
build the best package we can. I want to remind all of the
members of this committee that the vast majority of us in both
parties share the same goal. We all want to reduce carbon
emissions by 80 percent by the year 2050. What we are
essentially arguing about is how we are going to reach this
goal. I would like to challenge everyone here to keep their
eyes on the prize, so to speak, and not get bogged down in one
path towards its achievement versus another. It doesn't matter
to me if the line of progress is perfectly straight with
mandated reductions annually, or if the line of progress is one
that is gradual over the early years and explodes upwards in
future years as technology is developed. We arrive either way
at an 80 percent reduction in greenhouse gas emissions and that
is no small accomplishment.
In the end, this committee is going to pass a bill that
will, for the first time, put our Nation on a path towards
energy independence. We are going to do this in a bipartisan
and bicameral way. This process will allow us to investigate
multiple paths towards the same goal and I think it is critical
that we explore all of these options. After all, Mr. Chairman,
this is not the first time you have heard me say that all
options are on the table. But what I think is critical is that
we don't let ourselves be swayed by some of the rhetoric that
we have heard here today. We should instead keep our focus on
our mutually shared goal and work together in a manner and with
a dignity befitting this great body in which we serve.
So Mr. Chairman, I will again express my sincere desire to
continue working closely with you, and all of the members of
this committee, to produce an energy bill that makes our
country more independent, expands development of new
technologies, and protects the American economy as it
transitions to a carbon-constrained world. It is our challenge
to blend our political parties' goals with those of the
American people and those who fuel our economy. They don't have
to be mutually exclusive anymore. This is a unique time in our
history and a time that presents us with this tremendous but
extremely beneficial challenge. I am ready to, in good faith
and in an open forum, do my part and I hope that is the case
with everyone on this committee. Mr. Chairman, I yield back the
balance of my time.
Mr. Boucher. Thank you very much, Mr. Doyle, and thank you
for your very substantial contributions to the work which is
before us. The gentleman from Oklahoma, Mr. Sullivan, is
recognized for 3 minutes.
Mr. Sullivan. I waive, Mr. Chairman.
Mr. Boucher. The gentleman waives his opening statement.
Are there other Members on the Republican side who have not
been called on? The gentle lady from California, Ms. Harman, is
recognized for 3 minutes, with the Chair's thanks for her
contributions to the light bulb provision and to other matters.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman, very much. Mr.
Chairman, the luckiest members of this committee hail from
California. Among other things, our State is an active
revolutionary low-carbon fuel standard and tailpipe emissions
standard that throw into sharp relief the Federal Government's
failure, at least up until this point, to act adequately on
climate change. Having said that, however, I commend you, as
well as Chairman Dingell, for this draft legislation.
While I favor a number of changes to it, as I have
mentioned to you, I urge that our consideration of climate
change legislation in the House follow the regular order. The
product of this committee's labor should be the basis for what
the House will pass this summer and fall. There should not be
end runs around this committee. But I think our bill should
leave room for States to maneuver. States, Justice Louis
Brandeis said, are America's laboratories of democracy.
California has been this Nation's principal laboratory for
climate change policy and the legislation we are considering
today, in my view, is due in no small part to the effort to my
home State over the past decade. As I have told you, I cannot
vote to strip away California's authority to exceed Federal
greenhouse gas standards and I will plan to offer an amendment,
hopefully a bipartisan amendment, since Governor Arnold
Schwarzenegger agrees with this position, to strike the
preemption section.
Again, I applaud your instinct to be open to improvements
in the draft. I really know we can produce a smart bill that
both reduces our reliance on oil, reduces our carbon emissions
and with Mr. Upton, provides the perfect light bulb provision.
Let me finally say that I would like to ask unanimous consent
to insert in the record a three-page color spread in this
week's Time magazine on our chairman, Mr. Dingell, entitled ``A
Mastodon Takes On Global Warming.'' I am not sure I agree with
the animal choice, but I do agree with the very positive tone
of the article, and I yield back.
Mr. Boucher. Thank you very much, Ms. Harman. I think most
of us are familiar enough with that article to agree at this
time to the unanimous consent request. So thank you for making
it and let me say that the portrait of our chairman portrayed
in that article is interesting, I think largely accurate and it
is a salute to his many years of strong leadership in the
Congress and the continuing role that he has played in leading
this committee, and I want to congratulate the chairman on that
depiction of the wonderful things that he has done for energy
and other policies over the years. So without objection, it is
inserted within the record.
The gentleman from Maine, Mr. Allen, is recognized for 3
minutes.
OPENING STATEMENT OF HON. TOM ALLEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MAINE
Mr. Allen. Thank you. Mr. Chairman, I regret that I am
disappointed by the draft legislation before us. It rolls back
recent progress made by the courts on climate change, preempts
the States' abilities to control greenhouse gas emissions, and
doesn't do enough, in my opinion, to reduce carbon emissions
and halt global climate change. The bill overturns
Massachusetts v. EPA, a landmark Supreme Court decision that
confirmed that the EPA has authority under the Clean Air Act to
regulate carbon dioxide as a pollutant. The Supreme Court
decision is spurring the administration to action, changing the
dynamic on climate change and making it more likely we can pass
meaningful legislation this year. Overturning Massachusetts v.
EPA takes us takes us in the wrong direction. We should
preserve the power of the EPA to regulate air pollutants under
the Clean Air Act.
Further, this bill prevents California and 12 other States,
including Maine, from enacting strict automobile greenhouse gas
emission standards. Today, many people have lost confidence
that the Federal Government will effectively respond to air
pollution and global warming. Therefore, we should not block
States from developing their own measures, especially on the
basis of a promise that later on we will do more on greenhouse
gas emissions. Mr. Chairman, I would ask unanimous consent, at
this point, to enter into the record a letter from David
Littell, commissioner of the Maine Department of Environmental
Protection, in opposition to the bill as drafted because of
these two provisions.
Mr. Boucher. Thank you, Mr. Allen. Why don't you submit
that to us and we will consider that along with all of the
other materials we will be receiving for insertion in the
record and offer unanimous consent approval at a uniform point
later in the proceeding.
Mr. Allen. Thank you, I will do that. In my statement at
the legislative hearing on the first part of this energy
package, I expressed my hope that the final product of this
subcommittee would include a strong section on plug-in hybrids
combined with coal plants that employ the latest technology for
carbon capture and sequestration plus state-of-the-art
technology. This was not done. Further, I expressed my hope
that the subcommittee would produce an energy independence
package with a renewable energy standard in language similar to
Mr. Markey's CAFE proposal. There is no renewable energy
standard in the bill and the CAFE language, in my opinion, is
weak compared to Mr. Markey's proposal.
Finally, Mr. Chairman, I believe that cleaner air and a
comprehensive strategy to combat global climate change go hand-
in-hand with action to achieve energy independence. I am
disappointed that the bill before us today falls short of this
vision, but I certainly hope that we can work together to make
it better. And with that, Mr. Chairman, I yield back.
Mr. Boucher. Thank you very much, Mr. Allen. The gentleman
from Texas, Mr. Gonzalez, is recognized for 3 minutes. Mr.
Gonzalez waives his opening statement. The gentleman from
Washington State, Mr. Inslee. I don't believe he is here. The
gentle lady from Wisconsin, Ms. Baldwin, is recognized for 3
minutes.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. I want to begin by
thanking you for your dedication and your efforts in crafting
the discussion draft that we have before us. I recognize the
very difficult task that you have and for that reason I wish I
could be more excited and more supportive of its provisions.
But unfortunately, I am concerned that the discussion draft, as
it is currently written, fails to take significant steps toward
reducing our Nation's energy consumption and putting us on a
path to energy independence.
Many times over the course of this committee's energy
independence and climate change hearings, I have said that we
need to push the envelope in terms of creating efficient,
effective and environmentally friendly legislation. But rather
than taking bold steps, this draft appears to threaten some of
the progress that we have made thus far. For instance, the
language in the draft bill to overturn the Supreme Court's
important decision in Massachusetts v. EPA undermines the
achievements we have made and rehashes old arguments over
whether the EPA has authority under the Clean Air Act to
regulate emissions of greenhouse gases for motor vehicles.
Moreover, the discussion draft preempts the progress made
thus far by 12 States to regulate and reduce greenhouse gas
emissions from automobiles. We should be encouraging and
commending the States for not sitting idly by over the past
several years while the Federal Government dragged its feet on
emission standards. Instead, the bill precludes their efforts
while also failing to increase our energy independence and slow
the effects of global climate change.
Also, as I expressed at our last legislative hearing, I
remain concerned about the coal-to-liquid projects. If we are
truly going to make our Nation energy independent, we must do
so in a manner that reduces our greenhouse gas emissions and we
must aspire to a higher standard than do no harm. The treatment
of coal-to-liquid in the draft before us has done little to
alleviate my concerns. Rather than limiting its use, the bill
opens up the possibility that high-level greenhouse gas
emitting fuel source will supply our Nation's aviation industry
without having to meet the low-carbon fuel standard. This cuts
directly against all the steps we are taking and will take to
decrease our energy use and lower our greenhouse gas emissions.
Mr. Chairman, while I have concerns with this discussion
draft, I believe that we still have an opportunity to perfect
it and I hope that we will. There are several provisions in
here that are sensible policy approaches. For instance, I am
pleased to see that we will be making significant improvements
to increasing the use of E-85 and improving the E-85
infrastructure and flex-fuel vehicles. These are necessary
improvements that will help spur increased development of
renewable fuels and move us in the right direction on energy
independence and global climate change.
In all, this bill offers us a chance to show the world that
our Nation is ready to take bold action and address our
Nation's energy issues. We must not let this opportunity pass
us by. Thank you, Mr. Chairman.
Mr. Boucher. Thank you very much, Ms. Baldwin. The
gentleman from Texas, Mr. Barton, the ranking member of the
full Energy and Commerce Committee, is recognized for 5
minutes.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman. I once again want to
commend you for a process that you and Chairman Dingell have
engaged in on this emerging package of energy items. It is an
open process and it has been a fair process and I am sincere in
saying that I am very appreciative of it. Because of that,
myself and Mr. Hastert and the Republicans are really looking
for ways to work with you and Mr. Dingell to craft an energy
package that is good for the American people.
Having said that, your timetable is, to say the least,
ambitious. In previous Congresses, energy packages of similar
scope took years of discussion, dozens of hearings, numerous
markups at subcommittee and full committee, false starts and
working with the other body before they became law. Your
discussion draft, for example, on the fuels and vehicles part
alone is one of the biggest changes, would be one of the
biggest changes in the history of the Clean Air Act. It is also
very complicated. I spent 2 hours yesterday with some very
smart people discussing it and trying to figure out exactly
what it means and how it would work in practice and what the
implications of it are.
I am certainly not the smartest guy on energy policy, but I
know a little bit about it and I am having trouble just
adjusting to the thesis of some of those time frames. I have
got numerous questions that I want to ask later today in this
hearing and I know that other Members on both sides do too.
The discussion draft would require monumental changes in
the automotive and refining industries. We need to know what
the cost and the benefit of those changes might be. Although
the provisions to expand the renewable fuel standard can set
the market to include other types of alternative fuel such as
natural gas and coal-to-liquid have real merit, no one yet
knows how these fuels would actually be used when they also
need and if and when they would have to be assimilated into
some sort of a carbon cap under the low carbon fuel standard as
proposed in section 102. We simply have to understand the
practical effects of these proposals. How much are they going
to add to the cost of transportation fuels for American
drivers? Gasoline prices are high enough already and it would
appear to me that on the first glance that if this proposal
were to become law, gasoline prices would easily go up to at
least a dollar, perhaps $1.50 a gallon. I hope I am wrong about
that.
Your section 301 does grant the authority to set CAFE
standards, similar to a bill that this committee reported last
year, but, it is unclear whether it would allow the fuel
economy standards to be greater than 36 miles per gallon by
2021. At the same time, it sets an aggressive carbon cap on
refineries and fuel providers and those come on top of the many
other environmental requirements that are already mandated
under the Clean Air Act to control the existing criteria
pollutants.
I had difficulty trying to understand what kind of a CO\2\
baseline the bill would envision. I also had trouble
understanding the totality of CO\2\ that the bill would attempt
to regulate or monitor. There is just a lot of these types of
technical questions that I am having trouble with. In several
places the bill authorizes new Federal spending, including
``such sums as are necessary.'' I think I speak for most
Republicans when I say that we are opposed to ``such sums as
are necessary.'' That is basically a blank check. I don't even
know how the CBO would score such a phrase.
I also don't know whether it would square with the current
House rules against unfunded mandates. I also don't know how it
would square against the new rule on PAYGO that the new
majority has instigated in this Congress. There are many, many
possible unintended consequences of these kinds of provisions.
I think it would normally take a lot of weeks to tease these
out and to understand them. Apparently, we are going to have to
get it done in the next 2 or 4 weeks. That seems to me to be a
little bit ambitious.
Mr. Chairman, I apologize for giving you so many questions,
but I think that shows you how seriously we are taking your
discussion draft. We are not just saying we are against it or
rubberstamping it. I think there is room here for a bipartisan
compromise and Mr. Hastert and myself, we met on this
yesterday; both decided that we want to be a part of that
compromise, if it is possible. So take my questions or take my
comments on the opening statement in the spirit of which they
are given, which is intense seriousness.
I have sat in the chair that you are sitting, I have sat in
the chair that Mr. Dingell is sitting in. It is not an easy
job. It is a very important job. I will promise you this, if
you are open and fair and work with the minority, we will be
open and fair and work with you and Mr. Dingell. We will try to
put together a bill that everybody on both sides of the aisle
can be proud of. With that, I yield back, Mr. Chairman.
Mr. Boucher. Well, thank you very much, Mr. Barton, and I
appreciate the gentleman's candor. His careful attention to the
measure that we have forward in draft form, and I will say that
I also appreciate his willingness to work with us in a
bipartisan mode to arrive at a measure that we can all support
and that is a willingness that we will express back to you. We
will do our best to provide the answers we have for the
questions that you have raised now and those that you raise
later and I thank the gentleman for his interest and attention
to this.
The gentleman from Washington State, Mr. Inslee, is
recognized for 3 minutes.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Thank you. First, I want to thank the Chair on
how he has handled this incredibly challenging effort. It has
just been remarkable to try to give everyone a say in this.
I want to put in the record, and circulate to my
colleagues, an article about a NASA report that came out last
week and the reason I want to circulate it is that timing is an
issue here and I want to make it clear that we need to work on
global warming this July, as well as energy independence and
this article will make it clear why. Our scientists at NASA,
the group that put a man on the moon, in this article basically
told us that we have got about 10 years, not 50 years, not 40
years.
We have got about 10 years to make significant changes in
our CO\2\ emissions or the world is bound for a tipping point
where we melt the tundra and the methane, which is 16 times
more powerful than CO\2\, tips the climatic system in the world
into places we don't want it to go. I point this out and I am
going to circulate this article because this July, I believe we
have to take action with significance on CO\2\ in addition to
energy independence and I am looking forward to achieving that.
A couple of things that I will be working on I am very
appreciative of the Chair putting in a provision on low-carbon
fuels. It is absolutely imperative that we work towards an
effort for advanced forms of biofuels and electricity for our
cars and a whole host of advanced non-CO\2\ emitting fuels. And
this is a first step. I will be suggesting some additions that
will make the low-carbon fuel provision much stronger so that
it will apply particularly with a long-term fixed, enforceable
guarantee to our kids that we are going to have low-carbon
fuel.
One of the things we have learned is that we have to give
certainty to the investment community so that decisions in
investment can be made to make investments in these low-carbon
fuels. And this is one way we need to do it, not by giving too
much flexibility or alternatives, but in fact, a guarantee to
get that done.
Second, we will have some suggestions to try to advance the
plug-in hybrid technology, which I believe will be here, could
be here, in fairly short order if we take the right strong
measures to perfect the lithium battery technology that is so
promising, to run our cars on 1 cent a mile for pure
electricity, zero CO\2\, 150 miles a gallon of low-carbon
advanced fuels after that. That is quite a deal and if we play
our cards right, we can do that in that regard.
With that, I look forward to moving, not just on energy
independence on July 4, pretty good theme, but independence of
the world to continue to have a climate for our grandkids.
Thanks.
Mr. Boucher. Thank you very much, Mr. Inslee. The gentleman
from New York, Mr. Weiner, is recognized for 3 minutes.
OPENING STATEMENT OF HON. ANTHONY D. WEINER, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW YORK
Mr. Weiner. Thank you, Mr. Chairman. I won't use the full 3
minutes. First, I want to honor you and Mr. Dingell for tapping
what is an extraordinarily difficult task. It is a difficult
issue that is wrapped up in regional conflicts and here in
Congress, it is wrapped up in different views of the future and
it is wrapped up in trying to envision a technological future
that obviously none of us can say with certitude we can
predict.
There are two elements to the bill that I think are two
abiding ethos that as we should keep in mind. One has been
mentioned earlier, this notion of first do no harm. New York is
among the States that has taken the opening provided by
Massachusetts v. EPA to push the envelope on trying to figure
out ways to reduce CO\2\ emissions for residents of New York,
to try to figure out ways to be innovative.
In the recent campaign that we had for Governor, there was
a great deal of conversation about what would the State
legislature do, what will the governor do if given the
opportunity and New York was one of the parties to the suit--so
we should be very cautious about doing anything that slows down
innovation at the State level. I know you are sensitive to
that, Mr. Chairman. You have expressed that to me and I think
that we need to keep that in mind as we go forward.
The second is going to be a question that is going to hover
above a lot of our deliberations about how far to push, how
bold to be. There is going to be discussion on whether or not
pushing the outer limits of innovation will push too far and
create job loss and put us in a competitively disadvantaged
place. Well, I think that when you look at the innovation going
on in the energy sector, the innovation going on in the
transportation sector, the quality of the automobiles being
made, the fact that hybrid automobiles are among the fastest
growing sector of the economy--I think that we have to be
setting up a goal line here that is variable.
I think we should be as bold as possible. This is an
opportunity for us to say we are not going to be halfway where
other jurisdictions are, we are going to push all out. And I
think there are indications that in Europe, for example, they
are going to be setting standards that are much higher than
ours which are going to force our technology providers, our
transportation sector, to compete at a higher level, anyway. I
would like very much for us to be bouncing our grandkids on our
knee and talking about 2007 as the year that we crafted perhaps
the single most important legislation ever passed out of
Congress to deal with the issues of global warning and energy
independence.
I am confident this committee, on both sides of the aisle,
is up that. I am confident that you are, Mr. Chairman. So long
as we keep in mind those sheer values of trying not to harm
things that are out there that are working and also trying to
be as absolutely bold as we can be. And I yield back my time.
Mr. Boucher. Thank you very much, Mr. Weiner. The gentleman
from North Carolina, Mr. Butterfield, is recognized for 3
minutes.
OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Butterfield. Thank you very much, Mr. Chairman. I don't
have a lengthy opening statement except to thank you for your
leadership and your boldness in taking on this issue.
Certainly, it is going to be debated on both sides of the aisle
and within our own respective caucuses, but I want to thank you
and the chairman of the full committee for your leadership and
I look forward to this debate. At the end of the day, I am
confident that we can reconcile our differences and have a good
piece of legislation to take to the floor and to the American
people. Thank you. I yield back.
Mr. Boucher. Thank you, Mr. Butterfield. The gentleman from
Arkansas, Mr. Ross, is recognized for 3 minutes.
OPENING STATEMENT OF HON. MIKE ROSS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS
Mr. Ross. Thank you, Mr. Chairman, for holding today's
hearing and all the witnesses who have come before the
subcommittee to testify. I especially want to recognize and
thank Ms. Sonja Hubbard, who is testifying today on behalf of
the National Association of Convenience Stores. Like
Congressman Hall, I claim Ms. Hubbard. If you are not familiar
with the geography of Texarkana, it is a twin city. There is
Texarkana, Arkansas and Texarkana, Texas and the only thing
that separates them is State Line Avenue.
As you drive south down State Line Avenue, the right hand
side of the road or the west side, if you will, you can vote
for or against Congressman Hall and buy lottery tickets, and on
the left hand side or east side of the road, you can vote for
or against me and buy whiskey. But you can't do either one on
the other side of the road. So we are all pleased. Congressman
Hall and I both are pleased to claim Ms. Hubbard and as he
indicated, she is the CEO of E-Z Mart Stores, which supply
gasoline to many of my constituents in Arkansas and I welcome
her here today. I look forward to hearing her testimony.
I also want to thank Chairman Boucher and the committee
staff for all their work on this legislation. I am particularly
pleased to see provisions regarding specifications for
biodiesel and an increase in the authorized amount of
cellulosic ethanol production grants. Mr. Chairman, you have
heard me state before that we talk a lot about alternative and
renewable fuels in this Congress and yet, we will spend more
money in Iraq in the next 8 hours than we will spend in the
next 365 days on research and development for alternative and
renewable fuels. I hope this is one step toward changing that.
Increasing funding for cellulosic ethanol projects would
help to achieve the increased levels of alternative fuels
outlined in this legislation. In addition, these alternative
and renewable fuels provide an incredible opportunity to
provide new markets for our farm families and trigger what I
believe could be an economic revival in the Delta region of
this country, much of which I represent. I am also pleased to
see that the draft legislation encourages the development of
the alternative fuels infrastructure in this country for the
grant program to assist retailers with the installation and
conversion of E-85 infrastructure.
I know a number of people in Arkansas that are trying to do
the right thing and they bought flex-fuel vehicles, but they
have no place to fill them up. Expanding the number of
alternative fuel pumps at the station is crucial to the future
of alternative fuels in this country and key to lessening our
dependence on foreign oil. However, like Ms. Hubbard, before
the committee today, I want to ensure that the supply and
cross-implications of the proposed mandate to install an
alternative fuel infrastructure are thoroughly analyzed in
order to ensure that the demand for alternative fuels supports
this transition.
Finally, I am glad to see provisions that increase the
number of flex-fuel vehicles on the road and the supply of
alternative fuels in this country, including biodiesel,
ethanol, coal-to-liquid, hydrogen and natural gas. Once again,
thank you, Chairman Boucher, for your work on this legislation.
I look forward to today's hearing and testimony of the benefits
of this bill as well as possible ways to improve upon this
draft. And with that, I yield back the negative 32 seconds that
I remain.
Mr. Boucher. Thank you very much, Mr. Ross. The gentleman
from Utah, Mr. Matheson, is recognized for 3 minutes.
OPENING STATEMENT OF HON. TIM MATHESON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH
Mr. Matheson. Thank you, Mr. Chairman. As all of these
opening statements have helped illustrate, this is a
complicated piece of legislation and as Mr. Doyle indicated
earlier, we are working on a timeframe that is not necessarily
the first choice of folks on this committee, but I applaud you
for taking on this task in terms of trying to move a complex
piece of legislation forward. When you are working with complex
legislation, often there are nuances to the legislation that
sometimes get glossed over when people start talking about it.
And I think if people really dive into this discussion draft,
they will see that some of these issues that they have been
praising here, as a group, are not quite as simple as they are
made out to be.
For example, it is not clear to me that the discussion
draft necessarily overturns the Supreme Court's decision. To
me, the portion of the Supreme Court decision it affects is in
relation to a subject that is already regulated by the Federal
Government and that is motor fuel, the current motor vehicle
fuel economy. The discussion draft preserves the ability of
States to regulate criteria pollutants, such as from motor
vehicles, under the Clean Air Act. The discussion draft
preserves the ability of States to regulate the carbon content
of fuels under the Clean Air Act. The discussion requires EPA
to establish a first every Federal low-carbon fuel standard.
The discussion draft, for the first time, requires
automakers to report the lifetime carbon footprint of their
vehicles to the EPA. And while it is not more vehicles, the
discussion draft preserves the preserves the ability of States
and EPA to regulate CO\2\ emissions from stationary sources. I
think it is important that that information be put out for
people to understand what this draft does accomplish. I think
we have heard some statements that don't indicate those factors
are actually part of this discussion draft and I think we all
have acknowledged that.
Second thing I think we ought to acknowledge is that our
automobile industry--let me take a step back. Any industry in
this country appreciates a predictable transparent policy
environment in which they make decisions. And when you are a
capital intensive industry, like the auto industry, that is all
the more important. And so the fact that this discussion draft
makes an attempt to try to clarify where right now we may have
two different Federal agencies setting standards and possibly
States setting standards, as well, I applaud you, Mr. Chairman,
for trying to create a greater sense of clarity so people can
work in a transparent predictable environment.
I think that makes sense in terms of good policy. I think
it is good for our economy, as well. Thank you for all your
work on this discussion draft and I look forward to
participating in the hearing. I will yield back.
Mr. Boucher. Thank you very much, Mr. Matheson. The
gentleman from Louisiana, Mr. Melancon, is recognized for 3
minutes.
OPENING STATEMENT OF HON. CHARLIE MELANCON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF LOUISIANA
Mr. Melancon. Thank you, Mr. Chairman. First, I would like
to commend you and Chairman Dingell for the work that you have
done, particularly for the common sense to attempt to bring
together what is a very complex issue for this Nation. I feel
very honored to be in the Congress at a time when we are taking
on something that probably--I shouldn't even say probably--that
we know should have been addressed in the past. I realize that
we have people in the Congress that believe that tomorrow
everything should happen and as Mr. Doyle said yesterday,
instead of having things go like this, maybe they need to go
like that so that we don't damage our economy, lose the jobs
and at the same time, we do want to set an example to the
people of the world that America is ready to face the problems
of global warming.
I have always said that a good deal is one where both
parties walk away happy. A bad deal is when one party walks
away mad and the other party walks away happy. I have seen that
here in this Congress and I hope, with this legislation, we
will see the makings of a good deal as we bipartisanly work
towards achieving the issues that are involved in the energy
policy that we are addressing right now. I would like to thank
you, Mr. Chairman, for the inclusion of two items that I
requested or we had talked about. One was to include natural
gas in the definition section of alternative fuels and also,
the second one was the investment of cellulosic ethanol
technology.
I thank the chairman, also, for addressing regulatory
uncertainty arising from the recent Supreme Court ruling in
Massachusetts v. EPA and as noticed by opening statements, this
will be a contentious issue. However, I feel that we can't have
multiple jurisdictions trying to address gas mileage and
manufacturing of automobiles State by State, the blending of
fuel in the manufacturing of cars will just add to the
additional cost to the consuming public.
I believe that to remove uncertainty from markets,
particularly from capital intensive industries like automobile
manufacturing, we must have a common regulatory authority and
because of the recent Supreme Court interpretation, I think
that we are moving in the right direction. I believe that the
authority to regulate fuel economy should rest with the
Department of Transportation and I hope that our final draft
arrives at a solution that reinforces this point.
I would also hope that we can reach agreement on the pace
of increasing fuel economy standards. The discussion draft
contains a thoughtful substantive approach that addresses the
issue more responsibly than the proposal offered by the
administration. I want to thank the chairman again for his
thoughtful work on the issues and Mr. Dingell, also, and I work
forward to working with the people on both sides of the aisle
to try and bring to America and to the world a common sense
legislation that will move this country forward. Thank you. I
yield back the rest of my time.
Mr. Boucher. Thank you very much, Mr. Melancon. All of the
Members now having delivered their opening statements, I am
pleased to welcome today's witnesses and I want to thank each
of you very much for taking the time to prepare and deliver
your comments to us this morning.
Our first panel of witnesses contains people highly
knowledgeable about individual sectors of our economy that will
be affected by the legislation pending before us. And we want
to welcome Mr. Bob Dinneen, the president and chief executive
officer of the Renewable Fuels Association; Mr. Charlie Drevna,
the executive vice president of the National Petrochemical and
Refiners Association; Mr. Phillip Lampert, the executive
director of the National Ethanol Vehicle Coalition; Ms. Sonja
Hubbard, the chief executive officer of E-Z Mart Stores,
testifying on behalf of the National Association of Convenience
Stores and the Society of Independent Gasoline Marketers of
America; Mr. John DeCicco, the senior automotive fellow for
Environmental Defense; Mr. Alan Reuther, the legislative
director for the International Union of United Automobile,
Aerospace and Agricultural Implement Workers of America; and
Mr. Dave McCurdy, president and chief executive officer of the
Alliance of Automobile Manufacturers and a former colleague of
this committee who we welcome back.
Thanks to each of our witnesses for sharing your comments
with us. Without objection, your prepared written statements
will be made a part of our record. We would welcome your five-
minute oral summaries and Mr. Dinneen, we will be pleased to
begin with you.
STATEMENT OF BOB DINNEEN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, RENEWABLE FUELS ASSOCIATION, WASHINGTON, DC
Mr. Dinneen. Thank you very much, Mr. Chairman. Thank you,
Congressman Hastert, members of the committee, for holding this
very important hearing. The work that you are doing is going to
be critically important, as you well know, to the Nation's
energy, economic and environmental future and I applaud the
hard work that has gone into the discussion draft. As you all
know, the ethanol industry is a result of the Energy Policy Act
of 2005 that this committee got passed, has been growing at an
unprecedented rate. There are now 120 ethanol plants in
operation across the country capable of producing more than 6
billion gallons of ethanol a year. Ethanol is blended in almost
half of the Nation's fuel today.
But because of the signal that that bill sent to the
marketplace, there are also 77 ethanol plants that are
currently under construction that will add another 6 billion
gallons of ethanol across the country and will allow ethanol
virtually to be blended in every single gallon of gasoline that
this country sells every year. As I look across the panel
today, there is ethanol expansion, new construction or
development in every single one of the States that you
represent; in Louisiana, in Georgia, in North Carolina, in
Maryland, in California, in Washington and Congressman Barton,
you will probably be pleased to know that there are more
ethanol plants under construction in Texas today than in
Congressman Shimkus' home State of Illinois because of the bill
that you passed.
But if ethanol is going to be more than just a gasoline
additive, if we are going to be able to produce ethanol from
cellulosic feedstocks and commercialize that very promising new
technology; if we are going to motivate the marketplace to put
more FFEs on the road, to have more E-85 being used across this
country, that more obviously needs to be done. EPAct has shown
what an inspired marketplace can do. This Congress proposed a
7.5 million gallon RFS and everybody at the time thought that
that was going to be way too much and that we would never be
able to do it. Well, we have got 12 million gallons of ethanol
that will be in production within the next 18 months, far in
advance of the 2012 deadline and certainly far more than was
required by EPAct.
If you set the old agenda, the marketplace will absolutely
respond and I think that is what this bill is trying to do and
I commend the chairman and the members of the committee for
putting together a discussion draft that is very thoughtful, is
very comprehensive, it is very proficient and it will move the
date about where we need to be in terms of energy policy far
down the field.
We do have issues. We, for example, do not believe that an
alternative fuel program, as outlined in the discussion draft,
as opposed to the more specific renewable fuel program,
provides the market with adequate certainty for any of the
available alternative fuels to attract sufficient investment to
grow with the confidence the RFS has provided ethanol and
biodiesel. There is no question that America's energy needs
demands that we utilize all of our energy resources, renewable
and alternative. But our assessment is that we ought to be
trying to do that with independent programs to assure that
other alternatives are able to grow at the same pace that our
industry has.
I understand the motivation about wanting to pick winners.
But if you don't ensure that all of these emerging technologies
can be winners, we all might lose. The discussion draft
maintains and expands the compliance items included in EPA's
rulemaking implementing the RFS. While this is an appropriate
mechanism for rationalized AFS market, it magnifies our
concerns about an equitable approach to fuel policy. These
compliance values have the effect of creating a significant but
as yet unknown number of paper credits that actually work to
reduce the volume of petroleum potentially displaced by this
program.
For example, if there is a billion gallons of renewable
diesel that is used in this program under EPA's compliance
guides, that means that 700 million gallons of petroleum is not
displaced by this program. If the committee determines that an
alternative fuel program, as opposed to a renewable fuel
program is preferred, the RFA would suggest either increasing
the volume required or modifying the compliance values to be
paid to gasoline as opposed to ethanol to preserve the
petroleum to strengthen potential of this program.
We support, generally, the low-carbon fuel standard. We
believe that there are a number of questions with respect to
that. We look forward to working with the committee to answer
some of those questions so that there is more clarity with
respect to the criteria that would go into a full fuel cycle
analysis, but we believe the discussion draft that you have put
forward, again, is a very thoughtful, comprehensive draft and I
thank you, Mr. Chairman, and look forward to working with you
on it.
[The prepared statement of Mr. Dinneen follows:]
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Mr. Boucher. Thank you very much, Mr. Dinneen. For the
benefit of Members, let me note that we have recorded votes
pending on the floor in a series of two votes. We will continue
receiving testimony for as long as we can. We will certainly
get through Mr. Drevna's testimony. And at that point, I think
it will be necessary to declare a brief recess in the committee
while we cast these votes, so Members should be apprised that
we will recess in order to respond to these roll calls. Mr.
Drevna, we will be happy to hear from you.
STATEMENT OF CHARLES DREVNA, EXECUTIVE VICE PRESIDENT, NATIONAL
PETROCHEMICAL AND REFINERS ASSOCIATION, WASHINGTON, DC
Mr. Drevna. Chairman Boucher, Congressman Hastert and
members of the subcommittee, I am Charlie Drevna, executive
vice president of NPRA, the National Petrochemical and Refiners
Association. We thank you for the opportunity to provide our
perspective on the proposed fuels title. We understand and
appreciate the challenges the subcommittee faces in satisfying
the energy needs of the American consumers and the various
industries and entities invited to testify today. We share the
subcommittee's objective, to provide clean, affordable fuels to
the American consumer as well as other energy products that
meet their needs. As you will hear today, however, we believe
that elements of the alternative fuels discussion draft, as
currently constructed, will not fully achieve those objectives
and may ultimately be counterproductive.
While there is universal agreement that alternative fuels
will continue to be a strong and growing component of the
Nation's transportation fuel mix, NPRA's longstanding position
opposes the mandated use of alternative fuels and supports the
integration of these alternative fuels into the marketplace
based on market principles and demands. That being said,
however, I would like to address several provisions of the
draft and share some general thoughts on a stable fuels policy.
To begin, the requirements of the Alternative Fuels
Program, the AFP, and the Low-Carbon Fuel Standard, the LCFS,
are large and ambition. NPRA appreciates that compared to
similar legislation in the Senate and the administration's
alternative fuel proposal. The implementation timeline for the
AFP reflects a relatively measured and gradual progression. We
would note, however, that by placing an overlapping carbon
limit on alternative fuels, the aperture through which industry
must travel may be much too narrow. The tension, we believe,
between the increasing AFP and the decreasing LCFS could
potentially interfere with the implementation of both programs.
While the AFP allows for a wide variety of fuels to meet its
mandated volume, the strict limitations of the LCFS may
disqualify use of these same alternative fuels to meet the
standard after a very finite number of years.
Now, to the extent that there is some misunderstanding
between what the draft intends and what our calculations show
in our written statement--we believe the arithmetic to be
correct--but if there is some misunderstanding between the
intent and how we developed those calculations, we, naturally,
would want to continue working with the committee and the staff
to make sure that it is not the intent that we have somewhere
of a 22 to 30 percent reduction in carbon, as opposed to
California's 10 percent. Again, if there is some
misunderstanding there, we definitely want to work with you on
that.
Turning to the draft fuel waiver provision, we are
concerned that the language should result in restricting or
undermining capital investment. A preferable approach to this
``off-ramp labor'' would be the development of, perhaps, an on-
ramp trigger. By this, I mean under this system, the EPA
administrator would be required to certify that certain
positions necessary for successful implementation and
compliance are in place at least 2 years before the AFP
commences. Those conditions would include projection for an
adequate supply of alternative fuels at competitive prices,
based upon commercially proven technology. The AFP allows for
use of an expanded fuel base, thereby providing incentives for
a wider array of fuels and thereby promoting flexibility,
allowing for the development of a myriad of alternatives.
State biofuel mandates, however, could frustrate and
undermine this purpose by limiting refiners' choices in
specific geographic areas. Further, these mandates create
cumbersome boutique markets requiring special fuel formulation
in transportation logistics, thereby vulcanizing the national
fuel market. If Congress wishes to allow for as diversifiable
alternative fuels as possible and to promote flexibility in the
system, State and local biofuel mandates should be preempted.
We also have concerns related to the overall supply of
natural gas. One unintended, but nevertheless a likely
consequence of the AFP could be additional pressures on the
natural gas marketplace. The production of ethanol requires
significant volumes of natural gas throughout its production
cycle, converting corn into potentially cellulosic material
into useful fuel requires energy and natural gas currently
provides much of that necessary energy. In addition to the
magnified natural gas demand cause by increased production of
biofuels, the natural gas demand would also, likely, rise, as
obligated parties attempt to comply with the LCFS. In order to
meet the significant carbon reductions outline in the
discussion draft, the technology to require on natural gas
would have to be added to the transportation section.
Turning to the alternative fuels dispensing requirement in
the draft, and while NPRA does not speak comprehensibly to fuel
marketers, our members, nevertheless, oppose mandates that
require installation of dispensers for products which we do not
make or for which we cannot vouch. As companies are required to
install these pumps and potentially distribute E-85, the
company should be indemnified for claims related to product
quality arising from the sale of unbranded E-85 or other
alternative fuels.
Finally, but not least importantly, legislation requires
regulations within 2 years and begins that gradual climb to 35
billion gallons. NPRA believes that energy security, public
health and environment infrastructure, job creation and
economic development are topic most relevant today and should
not be relegated to a review of 13 to 18 years from now. We
therefore suggest that the study provision be pushed forward.
Thank you very much, Congressman. I will be happy to answer
any questions you may have.
[The prepared statement of Mr. Drevna follows:]
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Mr. Boucher. Thank you very much, Mr. Drevna. The
subcommittee will stand in recess, pending completion of the
last vote.
[Recess]
Mr. Boucher. The subcommittee will come to order. Mr.
Drevna had completed his testimony. Mr. Lampert, we will be
pleased to hear from you.
STATEMENT OF PHILLIP LAMPERT, EXECUTIVE DIRECTOR, NATIONAL
ETHANOL VEHICLE COALITION, JEFFERSON CITY, MO
Mr. Lampert. Thank you very much, Mr. Chairman. My name is
Phil Lampert. I appreciate the opportunity to be here today.
Thank you Mr. Hastert and all of the members of the committee.
I want to also thank your staff, Mr. Chairman. They have done
and outstanding job and been very communicative with all of us,
and we thank them.
Mr. Chairman, I was here April 18 and provided testimony,
so I will not be duplicative in that sense. I want to must make
a couple very quick comments. In regard to the establishment of
an alternative fuel infrastructure development grant program,
the National Ethanol Vehicle Coalition strongly supports that.
We believe that incentives continue to be the proper mechanism
to promote E-85 installation. We would continue to issue our
opposition to mandatory alternative fuel installation. And if
you would allow me just to make a very simplest analogy, we
like to consider ourselves the bottled water salesmen of 20
years ago, and I go to the store and suggest that let us take
out 5 feet of refrigerator space that is being sold for Bud
Lite or Michelob or what have you to put in bottled water, and
we think it should, frankly, be the decision of that
convenience store operator whether or not to sell bottled
water. And 20 years ago, a lot of convenience stores did not
have bottled water. Today, that is the number-on profit center
in that refrigerator case. We think the same will be occurring
in the market place for E-85 infrastructure. That is as more
people demand it, as more vehicles are out there, as there are
incentives available to put in that E-85 infrastructure that
the marketplace will continue to promote it, and should they
not, then they will lose the tremendously profitable profit
center for the future.
In respect to proposed language that prohibits franchise
agreement restrictions on placing the E-85, we strongly support
the inclusion of that language. I have, as I mentioned,
participated in several hearing and watched other that you have
very diligently reviewed in this testimony and as you crafted
this legislation, and some members of the petroleum industry
have indicated that there are no restrictions on the placement
of E-85 under canopies. Well, if that is the case, then I don't
think there will be any objection to including this statement,
and we would encourage you to do so.
The dispenser requirements, I again would encourage you to
look very closely at those, the provision of a $200 million
grant program, also the proposal of a grant program to the
Department of Energy to provide technical assistance and
support is going to be very important, and we applaud the
committee for including that. Yesterday, the Superintendent of
the Capitol grounds received a phone call from the Speaker's
office and was directed to place an E-85 fueling system in
operation here in the Capitol. Many Members are driving E-85
vehicles, and law enforcement officials and others can use E-
85. It is easy to talk about putting in an E-85 station, but
because of the lack of experience in that, the superintendent
of the Capitol calls my office, and because I am in DC this
week, I will be meeting with him this afternoon. But the
provision of technical support to continue to develop the
program is, again, very key, and we very much applaud the
provision of that title.
I would like to simply close by bring to the committee's
attention a recent statement by Rick Wagner, chief executive
officer of the General Motors Corporation, and one of our
members, and I will quote Mr. Wagner: ``It is increasing clear
that of anything we can do over the next decade, ethanol has,
by far, the greatest potential to actually reduced U.S. oil
consumption, reduce oil imports, and reduce carbon-gas
emissions.'' And we applaud what the committee has done
regarding the alternative fuels and renewable fuel standards
and stand available to provide any support. Thank you, Mr.
Chairman.
[The prepared statement of Mr. Lampert follows:]
Testimony of Phillip J. Lampert
Good morning, Chairman Boucher, Ranking Member Hastert, and
distinguished members of the committee, my name is Phillip
Lampert and I serve as the executive director of the National
Ethanol Vehicle Coalition. On behalf of the NEVC, I would like
to thank you for the opportunity to appear before you this
morning.
As I mentioned during my April 18, 2007 testimony to the
committee, the NEVC is the nation's primary advocate of the use
of 85 percent ethanol as a form of alternative transportation
fuel. Our members include automakers; state and national corn
grower associations; ethanol producers; equipment manufacturers
and suppliers; ethanol marketers; the 37 States that comprise
the Governors' Ethanol Coalition; farmer cooperatives; chemical
and seed companies; petroleum marketers; and individuals.
Our written and verbal comments this morning will be
focused on the June 1, 2007 Discussion Draft that the Committee
has provided for comment, specifically title I-Fuels, title II-
Alternative Fuels Infrastructure, title III-Vehicles.
In regard to title I-Fuels, the NEVC strongly supports an
increase in the Renewable Fuel Standard. The ethanol industry
is clearly proving that it can meet the levels of the RFS
established in the 2005 Energy Policy Act and that an
aggressive expansion is feasible. In terms of national
security, energy independence, and domestic economic growth,
and increased RFS is positive for the nation.
With respect to the volume levels, the relative amounts of
each form of fuel, and the potential multiplier associated with
each form of fuel, we encourage further discussions with each
of the stakeholders. It is important to note that the NEVC is
strongly supportive of policies that promote the future
production of alternative fuels such as ethanol from cellulosic
materials. That being said, the maintenance of a strong system
of ethanol production based on corn as a feedstock remains
critical to the strength of the entire industry.
Title II-Section 201 deals with the establishment of an
alternative fuel ``infrastructure development grant'' program
and a ``retail technical and marketing assistance'' effort.
The NEVC strongly supports the provision of Federal
financial incentives, both through the provision of grants and
an increase in the Federal income tax credit, to support the
establishment of alternative fueling infrastructure. We believe
that entrepreneurs in the fueling industry who wish to take
advantage of such programs will do so and as restrictions are
lifted which may be preventing branded stations from selling
alternative fuels, the market penetration of E-85 fueling sites
will increase to meet the related demand presented by the FFVs
being produced.
The proposed establishment of a ``retail technical and
marketing assistance'' effort will be key to ensuring that new
vendors are able to market and offer E-85 at a price on a
gasoline equivalent basis to regular unleaded, that equipment
standards are being maintained, that promotional materials are
available, and that a central clearinghouse is available to
respond to questions from consumers. The addition of such a
sub-program to the basic DOE grant effort is critical and we
applaud the Committee for including this new subsection.
We also believe the Committee has been wise to outline the
selection criteria that would be used to make such
infrastructure grants. Basing the allocation of funds on the
numbers of FFVs, opportunities to establish fueling corridors,
displacement of petroleum, and commitment on the part of the
applicant are all criteria that will assist with maximizing the
wise use of scarce taxpayer resources.
The NEVC also appreciates the Committee language which
requires that all such infrastructure grant recipients prepare
a marketing plan, provide information to consumers, and report
on sales and pricing of alternative fuels. As we have
mentioned, it is easy to establish an E-85 fueling station.
However, it is much more difficult to establish a successful E-
85 fueling facility. These obligatory marketing and outreach
provisions for all grant recipients will make this program
exceedingly stronger.
In regard to the proposed language that ``prohibits
franchise agreement restrictions related to alternative fuel
infrastructure'' , over the past several weeks, testimony has
been provided by representatives of the petroleum industry to
this Subcommittee stating that there are no restrictions on the
sale of alternative fuels by so called ``branded'' operations.
While not wishing to debate that matter, this language will
serve to clarify the previous statements made by those
representatives and address this issue. An owner/operator of a
fueling station should have the right to sell any form of
alternative transportation fuel. This new section will simply
clarify such right.
Regarding the section of the draft language that
establishes ``alternative fuel dispenser requirements,'' it has
been the position of the National Ethanol Vehicle Coalition
that there is little benefit in the promulgation of Federal law
which requires the installation of alternative fueling
infrastructure. As we have often noted, the key to successfully
selling E-85 and any other form of alternative fuel is proper
pricing, marketing, and the provision of educational resources.
While the Committee's goals in regard to the mandatory
establishment of E-85 infrastructure based on market
penetration of FFVs are admirable, we continue to believe that
the marketplace is the mechanism most appropriate to ensure
such E-85 fueling sites are installed.
It is our observation that mandating E-85 fueling
facilities may result in placement of the sites in poor
locations, setting high prices for E-85, and lack of customer
outreach and marketing. While unlikely, it would be possible
that opponents of alternative fuels could use high pricing of
fuel at sites they were forced to establish to confirm a lack
of demand and establish an ``I told you so'' prophecy of
failure of the site. The Committee draft includes a general
grant program that, complementary to the existing tax credit
program, could be used to offset the cost of new E-85 fueling
equipment. In the future, vendors choosing not to sell E-85
will be facing the loss of a significant new revenue stream and
potential profit center. As in the sale of other commodities,
vendors who do not rapidly respond to market demands, are those
that rapidly exit the marketplace. We believe that this will
also be true in the sale of alternative fuel. The NEVC supports
the market in this endeavor and continues to resist embracing
such mandatory programs. It may be necessary to re-evaluate
this position in the future, but presently, we oppose such
mandates.
In regard to the production requirements of Flexible Fuel
Vehicles as outlined in section 302 of the draft, the Chief
Executive Officers of General Motors, DaimlerChrylser, and Ford
have each stated their company's commitment to the production
of 50 percent of their entire fleet as FFVs by model year 2012.
Selected imports are also producing FFVs and it is our
understanding that additional models may be forthcoming this
fall.
Unlike most motors vehicles manufactured today that are
only warranted to operate on up to 10 percent ethanol, a
flexible fuel vehicle can operate on any level of ethanol from
0 percent up to 85 percent. As the Congress begins to consider
Renewable Fuel Standards exceeding 35 billion gallons, it is
important to note that with today's vehicles, the maximum
amount of ethanol that can legally be consumed approaches 14
billion gallons nationally in a 10 percent blend. While the
potential use of E12 and E15 use in existing vehicles is being
debated, we know that a flexible fuel vehicle can operate on
E15, E30, or E-85 absent adjustments or modifications.
The impetus for today's production of alternative fuel
vehicle was provided by the 2nd Session of the 100th Congress
via passage of the Alternative Motor Fuels Act (AMFA) of 1988,
extended by the Automotive Fuel Economy Manufacturing Incentive
for Alternative Fueled Vehicles Rule of 2004. These laws
encourage the production of motor vehicles capable of operating
on any form of alternative fuel. This incentive has been
tremendously valuable in that prior to 1988 there were zero
alternative fuel vehicles on the nation's highways. As a result
of AMFA, today, there are more than 6 million E-85 vehicles and
a number of electric, CNG, and LPG cars and trucks across the
nation.
The provision of new incentives to further grow the
production of flexible fuel vehicles, especially by foreign
manufactures, may be an appropriate mechanism to ensure the
wide scale and massive integration of such vehicles into our
nation's fleet of passenger autos and light duty trucks.
In summary, to advance the use of E-85 as a form of
alternative transportation fuel, we believe the following are
needed:
<bullet> Federal financial incentives to assist with
offsetting the cost of new or converted infrastructure. These
may be provided in the form of grants as recommended by the
discussion draft or as an increase in the existing Federal
income tax credit.
<bullet> A much stronger emphasis being placed on the
provision of technical support, marketing support, and
promotional assistance to new and existing E-85 vendors.
<bullet> The massive introduction of flexible fuel vehicles
into the nation's auto and light duty truck sectors, and;
<bullet> Finally, while outside the jurisdiction of this
Committee, an increase in the existing incentive that is
available for ethanol to reflect the lower BTU value of the
product.
Mr. Chairman and Members of the committee, we appreciate
the work that you are doing on behalf of the American people to
address our nation's growing dependence on imported petroleum.
The National Ethanol Vehicle Coalition thanks you for the
opportunity to provide these comments and we are available to
respond to questions at your convenience.
The National Ethanol Vehicle Coalition is a non-profit
organization located in Jefferson City, MO.
----------
Mr. Boucher. Thank you very much, Mr. Lampert. Ms. Hubbard.
STATEMENT OF SONJA HUBBARD, CHIEF EXECUTIVE OFFICER, E-Z MART
STORES, ON BEHALF OF THE NATIONAL ASSOCIATION OF CONVENIENCE
STORES AND THE SOCIETY OF INDEPENDENT GASOLINE MARKETERS OF
AMERICA, TEXARKANA, TX
Ms. Hubbard. Thank you very much. Good morning, Mr.
Chairman and members of the subcommittee, my name is Sonja
Hubbard. I am CEO of E-Z Mart stores, based in Texarkana Texas,
and our company owns and operates over 300 stores in Texas and
the surrounding States of Arkansas, Oklahoma, Louisiana and
Missouri. Today, I appear on behalf of the National Association
of Convenience Store and the Society of Independent Gasoline
Markets of America. Together NACS and SIGMA members account for
approximately 80 percent of all motor fuels sold in the United
States, annually.
Before I begin, let me make it perfectly clear that
retailers are agnostic about which motor fuels we sell, with
one caveat: we do want to sell motor fuels that are available
and that consumers want.
With that, let me begin with a comment regarding the
proposed alternative fuel program. The discussion draft before
this committee appears to be a more conservative approach than
others because it provides additional time to implement the
increase. NACS and SIGMA believe it can be further improved by
conditioning any inquiries beyond existing programs upon the
finding that there be both sufficient supplies of renewable
fuels and sufficient distribution infrastructure to deliver the
product to retail without placing and undue finical burden on
consumers. Regarding the proposed E-85 mandate, let me state
clearly and unconditionally, NACS and SIGMA strongly oppose the
provision. It is anti-free market, and it will put retailers in
significant financial jeopardy. NACS and SIGMA appreciate the
committee's efforts to address some of our itemized concerns.
These are positive provisions that do help mitigate the
negative consequences of the mandate. However, the only
provision that could earn our endorsement would be to eliminate
the mandate, all together. The fundamental problem is that if a
retailer is forced to install E-85 equipment against its will,
nothing will ensure that consumers will actually purchase the
fuel. In other words, the proposal proposes extensive mandates
without any promise that that forced investment will make a
return. This problem explains why many have been slow to make
the investment on their own accord. It is not due to animosity
towards an alternative fuel, and it is not due to limitations
imposed by our suppliers. Rather, it is because consumer demand
for the product is insufficient to justify the cost of the
investment.
To illustrate the basis of our concerns, let me start by
explaining the costs associated with the E-85 system. In
preparation for this hearing today, I inquired of my equipment
suppliers and industry colleagues to establish what it would
cost to convert a station to sell E-85. I found the cost range
from a low of $11,000, part-only, no installation cost, to
convert my most modern facility, the most up-to-date current
one I have, and also to a high of $200,000 in California. In
addition, many of my colleagues who have installed E-85 report
that it has not been beneficial. The fundament fact is that
most drivers with flexible-fuel vehicles do not want to buy E-
85 unless it is offered at substantial discounts compared to
gasoline. That is in part due to the mileage benefit.
Unfortunately, it is not always possible for retailers to
obtain product at a price that enables them to sell it at this
discount. This lack of consumer acceptance is a major problem.
Fuel sales, which generate incredibly low margins, drive
traffic to our store where the margins are much stronger. Many
retailers now lament their decisions to install E-85 systems,
because they have been unable to generate enough sales to
support the overall business model.
Our opposition to the proposed mandate is not necessarily a
just-say-no position, and the need for retailers to protect the
finical stability of their very own businesses and preserve for
themselves the right to make any decisions that could affect
that stability.
This brings me to my final mission, the ability of
franchise retailers to install the E-85 equipment. NACS and
SIGMA are not opposed to Congress clarifying the retailer's
right to convert its own equipment and land for the sale of E-
85. However, NACS and SIGMA strongly oppose granting someone
who does not own the equipment and land on which it operates
the right to expose the landowner to substantial and long-term
liability. Congress must amend the discussion draft to ensure
that only the owner of the land, who also owns that liability,
should be empowered to make that decision.
In conclusion, NACS and SIGMA urge the committee to, one,
condition any increase in renewable and alternative-fuels
mandates upon the finding that there is sufficient supply and
distribution infrastructure to accommodate this increase. Two,
do not expose those of us who lease outlets to dealers to a
potentially huge liability resulting from a third-party
decision to convert or install such equipment. Three, please do
not mandate the installation of E-85 systems. And four,
consider carefully the supply and price implications of
policies under you jurisdiction. Our customers, your
constituents, deserve no less.
Thank you again for the opportunity to share our thoughts
regarding this discussion.
[The prepared statement of Ms. Hubbard follows:]
Statement of Sonja Hubbard
Good morning. My name is Sonja Hubbard. I am the chief
executive officer of E-Z Mart Stores, Inc., headquartered in
Texarkana, Texas. My company owns and operates over 300 motor
fuel outlets in five states--Texas, Oklahoma, Louisiana,
Arkansas, and Missouri. Our company sells nearly 200 million
gallons of gasoline and diesel fuel each year and we employ
over 2,200 clerks, managers, and other personnel in these five
states. We sell gasoline under our own brand and, at some
locations, under the brand of our refiner suppliers.
I appear today on behalf of the National Association of
Convenience Stores (NACS) for whom I currently serve as Vice
Chairman of the Board. NACS is a non-profit trade association
representing the convenience and petroleum retailing industry.
Our industry operates more than 145,000 retail locations and,
in 2006, sold $405.8 billion worth of motor fuels.
I also appear on behalf of the Society of Independent
Gasoline Marketers of America (SIGMA), of which I am a member.
SIGMA is an association of more than 250 independent motor fuel
marketers operating in all 50 states. SIGMA members sell more
than 30 percent of all motor fuels sold in the United States
and supply more than 35,000 retail outlets across the Nation.
Together, NACS and SIGMA members account for approximately
80 percent of all motor fuels sold at retail in the United
States every year.
Thank you for providing me with the opportunity to share
our industry's perspective on the Committee's discussion draft
legislation regarding alternative and renewable fuels. Before I
begin, let me make it perfectly clear that retailers are
agnostic about which motor fuels we sell, with a single caveat:
We want to sell motor fuels that are available and that our
customers want to buy.
Today, I will focus my comments on those provisions of
this discussion draft that most directly affect the motor fuels
retail industry.
Alternative Fuels Program
Let me begin with a couple of comments regarding the
proposed Alternative Fuels Program. Two years ago, the Energy
Policy Act of 2005 established a renewable fuels standard
(RFS), mandating that at least 7.5 billion gallons of renewable
fuels be sold in the United States by the year 2012. As
everybody should by now be well aware, the industry is
implementing the program ahead of schedule and is on pace to
exceed the 2008 requirement to blend 5.4 billion gallons.
Now, however, it seems there is widespread interest on the
part of political leaders to accelerate and expand upon this
accomplishment. The discussion draft before us proposes to
increase the mandate to 35 billion gallons by the year 2025,
beginning with 14 billion gallons in the year 2013. Another
proposal calls for the program to expand to 36 billion gallons
by 2022, beginning with 8.5 billion gallons in 2008. Still
another requires 35 billion gallons by 2017, starting with 10
billion gallons in 2010.
In light of these competing proposals, one can say that
the discussion draft before this Committee appears to be a more
conservative approach because it provides additional time to
implement the increase. Regardless, each of these proposals
contains very ambitious goals, and we must ask if they are the
best course of action.
The market is proceeding to offer renewable fuels ahead of
the federally mandated schedule. There is no reason to believe
that this will not continue in the absence of an increased
mandate. However, as we have testified before, if Congress
feels compelled to accelerate this transition through a revised
Federal mandate, NACS and SIGMA call upon Congress to construct
the revised program with the interests of consumers in mind.
Any increase beyond the existing RFS should be predicated
upon a finding by the Secretaries of Energy and Agriculture
that there will be both sufficient supplies of renewable fuels
and sufficient distribution infrastructure to deliver that
product to retail without placing an undue financial burden on
consumers. If these assurances cannot be made, then the
proposed increase should be delayed until conditions are
sufficient to support its implementation. Further, such a
decision should be made with enough lead time to enable the
petroleum industry to make necessary arrangements to
accommodate the requirements.
If such consumer protections based upon market analysis
are not provided, we will be concerned about potential market
disruptions and the impact these could have on our customers.
Last year, the disruptions we experienced in this area due to
the transition from MTBE to ethanol were primarily the result
of inadequate distribution infrastructure and insufficient
supply in appropriate markets. It is critical that this program
protects against a repeat of that experience.
Alternative Fuels Infrastructure
I would like to direct the rest of my testimony toward the
provisions in the discussion draft focusing on alternative
fuels infrastructure.
The proposal before the Committee implements a mandate for
retailers to install E-85 compatible equipment. Let me state
clearly and unconditionally: NACS and SIGMA are strongly
opposed to this provision. It is anti-free market; it will put
retailers in significant economic jeopardy; it is an extreme
overreaching by the Federal Government into private enterprise;
and, it is unsupported by existing or anticipated market
conditions.
Further there seems to be little support for the mandate
within any segment of motor fuels industry. For example, the
National Ethanol Vehicle Coalition, the primary advocate for
the use of E-85 fuel, testified on April 18 that it ``opposes
the mandatory establishment of E-85 fueling locations.'' The
Coalition's Executive Director, Phil Lampert, said, ``Mandated
establishment of E-85 fueling locations is counter productive
and will lead to poor pricing, disinterested marketing,
lackadaisical vendor performance, undesirable locations and
general dissatisfaction by the consumer.''
Given the apparent lack of support, we are at a loss as to
why the Committee would propose implementing this retailer
mandate.
Considerations for Mandate Implementation
To be fair, the discussion draft before us perhaps
represents the best effort to date by Congress to reflect
market factors when imposing an E-85 retailer mandate. NACS and
SIGMA appreciate the Committee's efforts to address some of our
itemized concerns centered around such a program. Specifically,
we appreciate that the draft directs the Secretary of Energy to
determine an appropriate schedule and plan for implementation,
contingent upon the promulgation of a rule. Further, we
appreciate that Congress directs the Secretary to consider: (1)
the availability of E-85 within a region and number of
competing E-85 wholesale suppliers; (2) the level of financial
assistance available to retailers within a region; (3) the
potential inability of retailers to install E-85 due to
property restrictions; (4) the economic burden the mandate will
impose on a business; and, (5) the time it will take a retailer
to comply with the mandate.
These are positive provisions that do help mitigate the
negative consequences of the mandate. However, they do not
explain how the Secretary will select, from a list eligible
retailers in a market, which will be required to make the
mandatory investment and which will not. The legislation does
not give the Secretary any direction as to how to determine the
winners and losers in this system.
I cannot think of any provision or combination of
provisions that would be sufficient to secure the support of
the retail community other than elimination of this mandate.
The fundamental problem is that if a retailer is forced to
install E-85 against its will, the bill before the Committee
fails to ensure that consumers will actually purchase E-85. In
other words, the proposal imposes an expensive mandate on us
without any promise that our forced investment will provide any
return.
This is the critical question for retailers and explains
why many have been slow to make the conversion investment on
their own accord. It is not due to animosity towards an
alternative fuel and it is not due to limitations imposed by
our suppliers. Rather, it is because consumer demand for the
product is insufficient to justify the cost of the investment.
Trust me, my fellow NACS and SIGMA members and I will make E-85
pumps available when the market calls for it. But to illustrate
the basis of our concerns, let me start by explaining the costs
associated with E-85 systems.
Cost to Convert E-Z Mart Store to Sell E-85
The primary impediment to retailers converting a dispenser
to E-85 is equipment compatibility. Because E-85 is more
corrosive than regular gasoline or E-10, it requires equipment
that is certified compatible with the fuel.
In preparation for this hearing, I inquired of my
equipment supplier to determine what would be required to
convert one of my newer stations to sell E-85. These stations
have the newest equipment and, therefore, hold the best chance
for existing equipment compatibility. I learned that my new
steel tanks and my fiberglass tanks were certified compatible
with E-85. Our automatic tank gauges were listed compatible as
were our fiberglass piping systems. However, we would have to
replace several of the ancillary fittings, including the
submersible turbine pump, the overfill drop tube and others
like flexible hoses, spill buckets, ball valves, etc. In
addition, our hanging hardware, which includes conventional
nozzles, swivels, breakaways and curb hoses would have to be
replaced with nickel plated units at an increased cost. For all
of these conversions, including tank cleaning, we estimated the
cost to be between $6,000 and $7,000.
However, this does not include the dispenser itself. The
two dispenser manufacturers each charge an additional fee for a
new E-85 compatible dispenser--$8,000 for Dresser-Wayne and
$7,300 for Gilbarco. Thus, a typical E-85 dispenser can cost
upwards of $17,000 per unit. And this cost is for equipment
that has not yet been certified compatible with E-85 by
Underwriters Laboratories.
While it is conceivable to convert an existing dispenser,
this would require at a minimum replacing the meters, internal
piping, filter inlets, compression fitting, control valves and
seals, and any non-ethanol compatible sealants. Consequently,
converting an existing dispenser would cost in excess of
$5,000.
In short, to convert one of my newer stores to sell E-85,
I would face an expense of at least $11,000, not including
labor expenses. For older locations, the cost would be
considerably higher than this. According to colleagues in the
industry who have installed E-85 systems, such an investment
would be considered a bargain. One reported spending upwards of
$55,000 on a new system, while another in California reports
the cost of installing a basic diesel system at more than
$200,000--not including the up-charge associated with
compatible equipment.
Consumers Are Not Buying the Fuel
As we have testified repeatedly, fuel retailers are not
picky. We will sell whatever products our customers want to
buy. As an industry, we have been watching the development of
E-85 and flexible fuel vehicles quite closely, and many of my
colleagues have taken the initiative to convert a dispenser to
sell E-85. The results have not been overwhelmingly positive.
The fundamental fact is that most drivers of FFVs (Flex
Fuel Vehicles) do not want to buy E-85 unless it is offered at
a substantial discount compared to gasoline. Because these
drivers can purchase either E-85 or gasoline, they make
economic decisions when at the pump.
Clearly, consumers have made the economic calculation
regarding the decreased fuel economy associated with E-85
(approximately 25 percent fewer miles per gallon than gasoline)
and they are demanding a benefit in price. Absent that benefit,
they will follow their economic interests and purchase
gasoline.
NACS and SIGMA have spoken with retailers throughout the
Nation who sell E-85, and we have learned that sales of E-85
fall off dramatically when the price is not significantly lower
(at least 20 cents per gallon) than gasoline. Some retailers
report that the price differential to maintain volumes is
actually closer to 40 cents per gallon.
Unfortunately, it is not always possible for retailers to
obtain supplies of E-85 at a price that enables them to sell it
at such a discount. The provision in the proposal requiring
consideration of the number of E-85 wholesale suppliers is
important, because without adequate competition in the E-85
supply market, retailers will have little to no chance to
obtain competitively priced product. However, there are no
guarantees that even a competitive market will produce E-85
supplies that can be priced well below gasoline.
The lack of consumer acceptance of E-85 is a major
problem. Fuel sales, which generate incredibly low margins,
drive traffic to the store, where margins are much stronger. We
have spoken with several retailers who lament their decision to
install E-85 equipment because they have been unable to
generate sufficient sales from these fueling positions to
support their overall business model.
Our opposition to the proposed mandate is not necessarily
a ``just say no'' position. Rather, it is reflective of actual
market conditions and the need for retailers, who, on average,
generated less than $34,000 in pre-tax profit per outlet in
2006, to protect the financial stability of their business and
to preserve for themselves the right to make any decisions
which might affect that very stability.
The government has no responsibility to generate sales
sufficient to pay my employees. By the same token, it should
not make decisions affecting my ability to sell a marketable
commodity.
Franchise Agreements
Let me address one final provision of the discussion
draft. There is some confusion about whether retailers are not
voluntarily installing E-85 because they are prohibited from
doing so by their franchise agreements. Neither NACS nor SIGMA
have heard from any of our members complaining that their
suppliers were preventing them from installing E-85 dispensers.
Rather, we believe this is a red herring being used to cover
the fact that consumer demand for the product is not strong to
make such investment a viable option for most retailers.
Regardless, neither NACS nor SIGMA are opposed to Congress
enacting legislation that will clarify a retailer's right to
convert their own equipment for the sale of E-85. The proposal
in this discussion draft, however, does require some
modification to ensure that only the entity which owns the
fueling equipment, and assumes the liability for that equipment
and the land on which it sits, shall be empowered to make the
decision to convert and install an E-85 compatible system.
There are instances where the operator of a retail outlet
does not own the land or equipment which it operates. Rather,
that individual may lease the land and equipment from his
franchisor, which could be a refiner but is more likely an
independent wholesale distributor. In these circumstances, the
individual operator who does not own the equipment should not
be permitted to make conversion decisions about that equipment.
Converting existing equipment, much less installing a new
storage and piping system, has significant potential liability
implications for the owner of the real estate. I submit that
none of you would permit another the unilateral right to create
this kind of long-term liability for you. It is simply not
fair. It is simply not right. We encourage this Committee to
amend the proposed language to reflect this reality.
NACS and SIGMA are not antagonistic to the expanded market
availability of alternative and renewable fuels, provided our
customers want to buy them. Expanding the mandate for these
fuels as provided in this proposal can be dramatically improved
by requiring the executive branch to find that sufficient
supplies and distribution infrastructure exist to support the
specific increase. Absent such a finding, a pending increase
should be suspended. This will protect consumers from market
disruptions associated with insufficient supplies.
The effort to eliminate any potential for a supplier to
prevent an independent retailer from installing E-85
infrastructure must not endanger the legitimate interests of
the owner of the land or the equipment, even if that be the
supplier, to make decisions concerning the conversion or
installation of such equipment.
While we appreciate the efforts made by the Committee to
address itemized retailer concerns regarding an E-85 retail
mandate, NACS and SIGMA consider such proposals completely
unnecessary. NACS and SIGMA will oppose legislation like the
discussion draft unless and until it offers the petroleum
marketplace a chance to work in the best interest of consumers.
Finally, NACS and SIGMA members are extremely sensitive to
our customers' concerns about motor fuel prices. Our businesses
compete with each other on the basis of pennies per gallon as
we seek to attract the increasingly price conscious consumer.
Consequently, we become very concerned regarding any proposals
that could potentially affect supplies or distributing
efficiencies or otherwise put upward pressure on prices.
Therefore, we urge this Committee to consider carefully the
supply and price implications of policies under your
jurisdiction. Our customers, your constituents, deserve no
less.
Thank you again for the opportunity to share our thoughts
regarding the discussion draft pending before the Committee.
----------
Mr. Boucher. Thank you very much, Ms. Hubbard. Mr. DeCicco.
STATEMENT OF JOHN DECICCO, SENIOR AUTOMOTIVE FELLOW,
ENVIRONMENTAL DEFENSE, WASHINGTON, DC
Mr. DeCicco. Thank you, both to the chairman and ranking
member for the opportunity to testify today. On behalf of
Environmental Defense and our 500,000 members, I want to
express appreciation for the thoughtful process through which
this subcommittee has approached the issues of energy and
climate.
We appreciate your statements, Mr. Chairman, but the
legislation before you is about energy security and not a
solution to the climate challenge. It is critically important
for the public to understand that this bill cannot substitute
for a cap on greenhouse gas emissions. I think we agree that
the efforts to enhance energy security should not interfere
with that goal or come at the expense of climate protection.
Unfortunately, this discussion draft contains provisions
specific to climate change and in very troubling ways puts
climate at risk. That is why Environmental Defense must
unfortunately, but vigorously, oppose this draft in its current
form. Most damaging are the draft's provisions that nullify
California, and now 11 other States' actions to address
greenhouse gas emissions for cars. Also troubling is its
evisceration of EPA's authority to do the same. It is simply
unacceptable to undermine State leadership to combat global
warming.
That being said, we appreciate your efforts to look for new
ways to address transportation sector greenhouse gas emissions.
A low carbon fuel standard and a requirement that automakers
report their product's lifetime emissions are useful building
blocks for a policy that could ultimately drive deep emissions
cuts. But the draft falls short in limiting emissions to the
levels that leading U.S. businesses have called for and that
scientists say are necessary to avoid catastrophic climate
change. The U.S. Climate Action Partnership recommends a
specific path of emissions reductions for the United States.
Environmental Defense supports the stricter end of the U.S. CAP
range.
The graph I displayed compares what the discussion draft
might achieve, which is the blue curve, against climate-
protective auto emission levels proportional to the economy-
wide cap recommended by U.S. CAP. Those are the green lines. It
is clear that this draft does not go nearly far enough, and
that brings me to another concern. Such weak targets risk
creating expectations among other industries that they too can
get by with little need to limit emissions. Alternatively,
other industries might come to fear that they would be unfairly
saddled with a disproportionate burden. Either way, the
politics of building consensus for a truly comprehensive
climate policy will be that much more challenging.
Mr. Chairman, as you and Mr. Dingell have said, all
industries and sectors will need to chip in their fair share.
We can't let some parties leave the table early and stick
everyone else with the bill.
To sum up, Environmental Defense believes the current draft
would make it much more difficult to mitigate the dangers of
climate change. We oppose it based on four concerns. It
destroys California's ability to lead other States in the
Nation in climate protection through its path-breaking
greenhouse gas standards for cars. It restricts the
Environmental Protection Agency's authority to regulate
automotive greenhouse gases as air pollutants under the Clean
Air Act as recently clarified by the U.S. Supreme Court in
Massachusetts v. EPA. It sets stringency levels for fuels and
vehicle regulation that fall far short of what is needed to
ensure an appropriate sector contribution to climate
protection. And fourth, it may undermine the development of
climate legislation that is truly comprehensive and effective.
We are happy to do whatever we can, Mr. Chairman, to help
you improve this bill as it moves forward. In the meantime,
Environmental Defense will continue to emphasize that the most
effective solution to both energy security and climate change
is a comprehensive carbon cap, one that cuts emissions as much
as the scientific community tells us they must be cut, allows
permit trading to keep costs low and to spur innovation. We
look forward to working with you as you bring such a bill to
the floor in October as you have indicated that you intend to
do.
Thank you for the chance to share our views.
[The prepared statement of Mr. DeCicco follows:]
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Mr. Boucher. Thank you, Mr. DeCicco.
Mr. Reuther.
STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL
UNION OF UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL
IMPLEMENT WORKERS OF AMERICA, WASHINGTON, DC
Mr. Reuther. Thank you, Mr. Chairman. My name is Alan
Reuther. I am the legislative director for the UAW. We
appreciate the opportunity to testify before this subcommittee
on the discussion draft.
The UAW strongly supports this draft legislation. We
believe it would achieve significant reductions in oil
consumption and greenhouse gas emissions. At the same time,
this legislative would help to protect and expand jobs for
American workers. We believe the draft legislation contains a
number of very positive provisions relating to vehicle fuel
economy and carbon efficiency. First, it would amend the CAFE
program to mandate that all vehicle manufacturers must meet a
36 MPG standard for passenger cars by 2022 and a 30 MPG
standard for light trucks by 2025. This would represent a 31
percent improvement in fuel economy for passenger cars and a 35
percent improvement for light trucks. The UAW supports this
mandate because we believe it is technologically and
economically feasible for the auto manufacturers.
Second, the UAW supports the provision that would authorize
DOT to adopt an attribute-based CAFE system for passenger cars.
This would enable DOT to reform the CAFE structure for
passenger cars so it does not discriminate against particular
manufacturers based on their product mix.
Third, the UAW is particularly pleased the draft
legislation maintains the existing domestic-foreign fleet
distinction for passenger cars and also requires companies to
meet an anti-backsliding requirement. This critically important
provision will provide a strong incentive for companies to
continue small car production in the United States, thereby
protecting the jobs of 67,000 American workers who assemble or
make parts for these vehicles.
Fourth, the UAW applauds the provision that would require
DOT to publish the new CAFE standards both in a miles-per-
gallon format and a grams-of-CO\2\-per mile format as well as
the provision requiring auto manufacturers to report the
projected lifetime carbon emissions of their vehicles. We hope
these two provisions will facilitate the integration of the
CAFE program with an economy-wide cap and trade program that
may ultimately be developed to reduce greenhouse gas emissions.
Fifth, the UAW supports the provision in the draft
legislation reinforcing the longstanding policy that DOT has
the exclusive authority to regulate the fuel economy and carbon
efficiency of motor vehicles through the CAFE program. In order
for vehicle manufacturers to be able to retool factories and
redesign vehicles to meet the challenging new fuel economy
requirements, it is essential that they have the security of
knowing that they will only have to comply with a single
national standard and not be pulled in a variety of directions
by a multitude of State standards. We recognize that some
groups may advocate for much more stringent fuel economy
standards or for provisions giving States the ability to
establish such standards. However, the UAW is deeply concerned
that extreme fuel economy standards such as the CAFE proposal
in H.R. 1506 or the vehicle CO\2\ standard approved by
California are not economically feasible and could seriously
threaten the jobs and benefits of active and retired workers in
the auto industry.
The UAW believes the goals of reducing oil consumption and
greenhouse gas emissions can best be achieved by addressing the
fuels that go into vehicles as well as the efficiency of the
vehicles themselves. Thus, we support the provision in the
draft legislation that would require vehicle manufacturers to
make certain percentages of their fleets flex fuel capable by
specified dates. The technology needed to do this is readily
available and relatively inexpensive. All companies easily
should be able to meet this mandate. The UAW also supports the
provisions establishing an alternative-fuel standard and a low-
carbon-fuel standard. These provisions will assure that we
continue to expand the amount of alternative fuels that are
produced in our Nation while at the same time requiring
movement towards fuels that produce lower carbon emissions. The
UAW applauds the provision requiring DOE to mandate the
installation of alternative-fuel dispensers when the market
penetration of flex fuel vehicles reaches a certain level.
Expanding the distribution network for alternative fuels is
critically important if we are to make substantial progress in
increasing the actual use of alternative fuels by consumers.
To meet the challenge of higher fuel economy standards,
vehicle manufacturers will have to rapidly accelerate the
introduction of advanced technology vehicles including hybrids
and clean diesels. We therefore strongly support the provision
in the discussion draft that would create a grant program to
encourage domestic production of these advanced technology
vehicles and their key components. This will help to ensure
that these vehicles of the future and their key components are
built in this country, thereby creating jobs for tens of
thousands of American workers. As this draft legislation moves
forward, we would like to work with the subcommittee and House
leaders to refine and expand these provisions so there is a
reliable and substantial source of funds provided to support
this critically important program.
In conclusion, we appreciate the opportunity to testify on
the discussion draft and look forward to working with the
subcommittee as we move forward in considering it.
[The prepared statement of Mr. Reuther follows:]
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Mr. Boucher. Thank you very much, Mr. Reuther.
Mr. McCurdy.
STATEMENT OF HON. DAVE MCCURDY, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, ALLIANCE OF AUTOMOBILE MANUFACTURERS, WASHINGTON, DC
Mr. McCurdy. Thank you, Mr. Chairman. I want to commend the
chairman and Speaker Hastert for the spirit in which you are
working together to develop this landmark legislation. Having
been on that side of the table, I can assure you I understand
it is no small task.
The Alliance joins all Americans and the Congress in
considering the matters of increasing vehicle fuel economy and
reducing carbon dioxide emissions as among the most important
issues our country faces. A certain chairman that was alluded
to earlier in the hearing has recently said: ``Either work with
me and I will do everything I can to get you a bill that you
probably won't like but with which you can live, and if you
don't, you will have a bill that you won't like and you can't
live with.'' Well, Chairman Boucher, we are here to work with
you, and Chairman Dingell is right: this discussion draft is a
bill that the industry as a whole really doesn't like but
recognizes it is probably going to be forced to live with it,
and as Mr. Melancon so aptly said, a good deal is when both
parties either walk away happy or probably not so happy, and a
bad deal is when one seems overjoyed. I can assure that we will
be nursing a very bruised arm when we walk through this
process.
In simple terms, this proposal presents the largest
technology challenge automakers have ever encountered. Although
we remain committed to CAFE reform and support the increases in
CAFE, we do so with a great deal of pain and angst. You must
also understand that these changes would require unprecedented
levels of financial resources and engineering commitment, and
in the end we do not know the answer to the most fundamental
question in all of this: Will consumers respond? Our experience
has taught us that we cannot turn a blind eye to the factors
that must be considered if we are to produce automobiles that
consume less fuel but still appeal to the American consumers,
who demand a wide variety of features.
The Alliance supports preserving the car and light truck
distinction, and I think everyone on the panel currently
understands that distinction well. While Americans value fuel
economy, their buying habits have shown that they also want
room for passengers and cargo. They want performance. They want
towing ability and much more. In fact, in 2006, for the fifth
straight year, light trucks including pickups, minivans, vans
and SUVs outsold passenger cars. More than 53 percent of last
year's new vehicle purchases were light trucks. Mr. Hall, in
Texas that is 60 percent of the new registrations. Mr.
Melancon, in Louisiana it is 63 percent of new registrations.
In Utah, Mr. Matheson, who was here earlier, it was 59 percent.
Even in Massachusetts and California, it is 50/50, light trucks
versus passenger cars. The properties in light trucks that
business owners, trades people, farmers, families, sports
enthusiasts and others value are the very properties that
differentiate them from cars. These qualities make it
impossible to put all vehicles in a single category.
Alliance members also recognize the importance of
establishing a comprehensive and nationwide energy policy. It
needs to be done on the Federal level. A patchwork of
conflicting State fuel economy and carbon dioxide mandates
would surely create marketplace chaos for our consumers and
manufacturers who would have to sort problems, products and
parts based on complex systems of inconsistent standards and
regulations. A single comprehensive Federal policy must preempt
State laws because this is a national issue.
We support the National Highway Traffic Safety
Administration being granted authority to reform passenger car
standards using an attribute-based approach. This approach is
essential to preserving the diverse range of vehicles currently
on the market.
The Alliance also supports legislation funding the
advancement of promising technologies. More research and
development is needed for plug-in hybrids, fuel cells and
hydrogen internal combustion engines to truly provide us with
their full potential. We also value efforts to improve the
support technologies we have already brought to the market such
as alternative-fuel automobiles. Legislation should increase
alternative-fuel availability to keep pace with the
alternative-fuel autos we are working hard to build and sell.
Likewise, we support increasing consumer education and making
the public fully aware of the ever-increasing amount of
alternative-fuel options. We have increased the number of
alternative-fuel automobile models 500 percent in just the past
7 years. Just this week we were pleased to announce that 2007's
first quarter alternative-fuel automobile sales were our best
ever, a 27 percent increase over the same period last year.
Automakers understand that what our Nation truly requires
to address our energy needs is wider focus. Carbon reduction
depends on three intertwined factors: consumers, fuels and
vehicle technology. Focusing only on one component while
ignoring the others will not move our Nation closer to its
energy goals. Now, having said that, the Alliance is concerned
with the flexible-fuel mandates under consideration in section
302 of the bill. The ones under discussion today include an
unachievable target and a time frame that is just too
aggressive. Furthermore, the legislation allows no alternatives
should the E-85 fuel fail to make it to the market on time or
not be found in as many locations as needed. The Alliance must
also express concern over the doubling of the CAFE penalty.
This proposal discriminates against smaller manufacturers and
those with limited product lines. Ultimately, this provision
will cause consumers to pay more for certain vehicles while
similar and possibly less efficient vehicles will have not had
the same cost hike simply because the manufacturers of these
vehicles produce a wider product range.
Finally, Mr. Chairman, a complex change of massive
technical changes that must be repeatedly tested and fine-tuned
is required to adjust a car's fuel economy by just one tenth of
a mile.
Mr. Boucher. Mr. McCurdy, we are running a little bit over
on time, so if you could conclude, that would be great.
Mr. McCurdy. I will conclude with this, Mr. Chairman. The
targets we are talking about today would require that we do
that 900 fold. The proposed standards of 36 miles per gallon
for passenger cars and 30 for trucks represent a 30 or 31
percent increase and 35 percent increase in fuel efficiency.
That is an unprecedented reformulation that will again create
the largest challenge this industry has ever seen. Mr.
Chairman, it is a big challenge. We do have angst and concern
whether the American consumers will choose to buy these
products so we will continue to work with the subcommittee and
the full committee to try to move the bill forward.
[The prepared statement of Mr. McCurdy follows:]
Statement of Hon. Dave McCurdy
Mr. Chairman, good morning. My name is Dave McCurdy and I
am the president and CEO of the Alliance of Automobile
Manufacturers. The Alliance is the auto industry's leading
trade association representing nine manufacturers including
BMW, DaimlerChrysler, Ford Motor Company, General Motors,
Mazda, Mitsubishi, Porsche, Toyota and Volkswagen.
On behalf of our members, I'd like to thank you for giving
me an opportunity to be here today to comment on the draft
legislation before the Committee. Alliance members share the
interests and concerns of our customers, the Congress and the
American public about increasing vehicle fuel economy and
reducing carbon dioxide emissions.
At a March 14, House Energy Subcommittee hearing, CEOs
from DaimlerChrysler, Ford Motor Company, General Motors and
Toyota all committed to working with Congress to find ways to
address these issues. That is our focus today. Let me summarize
my main points:
<bullet> First, the Alliance of Automobile Manufacturers
supports several of the provisions in the proposed legislation,
and we want to work with policymakers to create a bill that is
effective, achievable and inclusive.
<bullet> That said, we urge the Congress to recognize that
automakers are investing significantly in advanced technology
vehicles powered by electricity, biofuels, clean diesel,
hydrogen and compressed natural gas.
<bullet> While many fuel-efficient and advanced
technologies are on sale today, more technology is being
developed for future introduction.
<bullet> Promising technologies, such as plug-in hybrids
and hydrogen-powered autos, need significant research and
development before they will be commercially available on an
even larger scale.
<bullet> Through the Corporate Average Fuel Economy (CAFE)
program, the light duty vehicle segment has been carbon-
constrained for more than 30 years. We recognize that fuel
economy requirements will continue to increase for our
products, but these regulations need to recognize the
competitive conditions of the automotive market, the vehicle
needs of American consumers, and the resource and economic
challenges involved in achieving future fuel economy levels.
Increasing Fuel Efficiency, Decreasing Carbon Dioxide
Auto engineers are working hard to include a diverse range
of highly fuel-efficient technologies in new vehicles, because
in the short term, this is the only feasible way to reduce the
amount of carbon-based fuel used by automobiles. At the same
time, it is equally important to start now to reduce the carbon
intensity of our fuel infrastructure.
I must stress one key point here:
Alliance members support the goal of improving fuel
economy to the maximum feasible level. Improving fuel economy
is a consumer issue, an economic issue, a climate change issue,
an energy security issue, and a high priority.
Automakers pursue the goal of increasing fuel economy as
they develop vehicles that meet the various needs of American
families in every segment. But while consumers value fuel
economy, they also want many other attributes in today's
vehicles, such as safety, passenger and cargo room,
performance, and towing and hauling capacity. In 2006, for the
fifth year in a row, light trucks, including pickups, minivans,
vans and SUVs, outsold passenger cars. More than 53 percent of
all new vehicles purchased last year were light trucks. Our
challenge is to develop automobiles that combine all the
vehicle attributes demanded by Americans' with improved fuel
efficiency--and at an affordable price.
Automakers are competing to bring these vehicles to market
as soon as the technology is feasible, affordable and meets
consumer expectations. We have made the investments, and we are
beginning to see results.
Alliance members are working now to offer more alternative
fuel and advanced technology autos, including vehicles that run
on hybrid-electric technology, clean diesel, and alternative
fuels like E-85 ethanol and hydrogen, because these autos will
help our country address the growing concerns about U.S.
gasoline consumption and oil imports, as well as carbon dioxide
emissions.
Just this week, the Alliance reported that sales of
alternative fuel autos continue to grow. According to R.L. Polk
& Company, the first quarter of 2007 showed record sales for
alternative fuel autos. In the first three months of this year,
more than 430,000 alternative fuel autos were sold nationwide,
an increase of more than 27 percent over the same period last
year.
Last October, government, auto industry and fuel suppliers
partnered to introduce the ultra-low-sulfur diesel needed for
clean diesel engines. Since the year 2000, sales of light-duty
diesel vehicles have almost doubled.
Today, more than 11 million alternative fuel autos that
run on hybrid technology or fuels like clean diesel, ethanol,
hydrogen and others are already on the road. Automakers are
offering 60 models of alternative fuel autos on sale today, up
from 12 in 2000, and many more models are planned for future
production. Guiding Principles
Automakers understand the desire of Congress to reduce
carbon dioxide, and we support that goal. Reducing carbon is
dependent on three intertwined factors: consumers, fuels, and
vehicle technology. Attempts to address concerns about energy
security and carbon dioxide emissions cannot succeed by
focusing only on one component.
There are many provisions in the proposed legislation that
treat fuels and autos as a system. In 1999, EPA finalized its
landmark regulations called Tier 2, which for the first time
regulated autos and fuels as a system. Future legislation needs
to consider fuels and autos together.
Today, I will limit my testimony to provisions that affect
autos, but I would like to recite several principles that have
guided automakers in responding to this legislative proposal.
A consumer-sensitive approach is needed. Many segments of
our economy depend on cars and light trucks. Farmers,
tradesmen, small businesses and others need vehicles,
especially larger cars and light trucks, for their livelihoods.
Any program that reduces the availability of these work
vehicles or significantly raises their costs represents a
burden on the U.S. economy, and especially a burden on
independent and small businesses.
A market-driven, market-responsive approach is needed. Any
effective program needs to consider the realities of the
marketplace. For example, incentives in place for the renewable
fuels program enable competitive pricing of ethanol, which is
resulting in increased consumer demand for this alternative
fuel.
Incentives are needed to encourage real reductions in
carbon dioxide. Incentives can encourage consumers to purchase
advanced technology autos on sale today and encourage energy
providers to increase availability of alternative fuels and to
reduce the overall carbon intensity of the fuels that power
them.
Consideration of effects on competitiveness is needed. Any
effective program to reduce carbon dioxide needs to allow for
companies to grow and thrive, without imposing provisions that
would result in job loss. Sufficient lead time is critical in
this industry, since auto manufacturing requires five years to
develop and introduce a new model, and seven years to make
significant changes to powertrains.
Finally, any effective approach needs to be comprehensive
and nationwide. The United States needs a consistent national
policy that avoids the marketplace chaos that would surely
arise from a patchwork of conflicting state fuel economy/carbon
dioxide mandates. Therefore, it is crucial that there be
Federal pre-emption of State laws.
Provisions in the Proposed Legislation
With these principles as a guide, let me address several
of the specific provisions in the proposed legislation.
The Alliance Supports Granting NHTSA Authority to Reform
Passenger Car CAFE Standards.
The Alliance supports providing authority to NHTSA to
reform the way it sets fuel economy requirements for passenger
cars. A rulemaking process that maximizes consumer choice and
avoids safety trade-offs, without injuring competition or--any
individual automaker is clearly desirable. Attribute-based
approaches, when properly designed, can help achieve these
objectives. But ultimately, success in meeting these objectives
depends on the--provisions of the program, such as the specific
attributes or set of attributes that are chosen, the level at
which standards are set, and the adequate provision of lead-
time. Whatever attributes are considered for cars must preserve
the diverse types of passenger cars.
The Alliance supports authorizing NHTSA to reform the CAFE
standard for cars into an attribute-based system, but NHTSA
should not prejudge the issue by assuming that the footprint-
based system used in the light truck reform rulemaking makes
the most sense for cars. When reforming light truck CAFE
standards, NHTSA used an attribute-based approach that
acknowledged consumers require different sized vehicles for
their business and family needs. NHTSA's attribute-based
approach addressed some of the previous concerns about safety
and about inequitable effects on different manufacturers
arising from the previous ``one size fits all'' standards.
The Alliance Supports Preserving the Distinction between Cars and
Light Trucks.
The proposed legislation preserves consumer choice by
maintaining the 30-year-old statutory distinction between cars
and light trucks. Americans value fuel economy, but they also
want passenger and cargo room, performance, towing ability and
more. The fuel economy of light trucks can and should increase,
but we need to acknowledge that light trucks and cars need
separate fuel economy standards. Existing Federal law
rightfully separates cars and light trucks in the CAFE program
by setting different fuel economy standards for each.
The Alliance Supports Setting CAFE at the Maximum Feasible Level.
The Energy Policy and Conservation Act directed NHTSA to
set national fuel economy standards at the ``maximum feasible''
level taking into account key elements such as the need of the
U.S. to reduce energy use, as well as technological
feasibility, affordability, safety, emissions controls,
consumer choice, disparate impacts on manufacturers and effects
on American jobs. This approach balances petroleum conservation
needs with technological feasibility, safety, affordability,
jobs and consumer choice.
By directing NHTSA to continue to set annual standards at
the maximum feasible level, this legislation acknowledges that
progress may be faster some years than others. While the draft
bill includes targets that must be ultimately achieved, this
approach acknowledges that progress and breakthroughs are not
always governed by the calendar. Fuel economy varies depending
on the introduction of models and technologies, along with
consumer purchases. For example, a new model may sell well in
its first few years, but then decline in popularity.
The dual approach of ultimate targets and standard-setting
year-by-year allows NHTSA to make adjustments based on
available technologies and manufacturers' product plans to
fine-tune progress toward the legislation's ultimate fuel
economy targets. The ultimate fuel economy targets, however,
remain extremely ambitious and challenging to our member
companies.
The Alliance Supports Funding the Development of Promising
Technologies.
While fuel-efficient technologies are on sale today, more
technology is being developed for future introduction.
Thousands of automotive engineers are working on innovative
technologies every day, but many emerging technologies, such as
plug-in hybrids, fuel cells and hydrogen internal combustion
engines, still need significant research and development before
they will be commercially ready. Moreover, the hydrogen fueling
infrastructure needs to be developed.
Setting aside funds collected from the automakers under
the CAFE program to speed up commercialization and production
of advanced technology vehicles and vehicle components in the
U.S. makes sense. Added to the billions of dollars automakers
are already investing in research and development each year,
this money can assist in getting more fuel efficient vehicles
to market less expensively and faster. Similarly, the advanced
battery loan guarantee program in Section 305 will help make
leap-ahead technology a reality.
The Alliance Supports Improving the Availability of Alternative Fuels
to Keep Pace with the Availability of Alternative Fuel Autos.
Autos and the alternative fuels to power them must be
developed in harmony. Automakers are putting millions of
alternative fuel autos on U.S. roads, but many consumers are
still searching for the alternative fuels to power them. Today,
there are 6 million E85 ethanol-capable vehicles on our roads.
In the first quarter of 2007, sales of E85 autos were up 40
percent over the same period last year. But only about 1,200 of
the 170,000 gas stations in the U.S. offer E85 and even fewer
offer alternative fuels like hydrogen and biodiesel. As a
general matter, the Alliance does not support mandates, but we
do support incentives that can help speed up the introduction
of biofuels and other fuels to the marketplace.
The Alliance Supports Increasing Consumer Information.
This proposed legislation would seek to raise consumer
awareness in three important areas.
First, a public campaign would be undertaken to inform
consumers of the availability of both Flexible Fuel Vehicles
and where alternative fuels can be purchased. Automakers have
been advertising their vehicles, and we support groups like the
National Ethanol Vehicle Coalition and the Clean Diesel Fuel
Alliance that provides a consumer Web site on fuels
availability at www.E85.com and www.clean-diesel.org.
Second, a Fuel Conservation Education Program would be
created to ensure consumers are given more information on how
to conserve fuel through proper use and maintenance of their
vehicles. The Alliance has already initiated this effort,
working with EPA, through the Web site,
www.MileageWillVary.com. On this site, consumers can test their
knowledge of fuel savings practices. We have been advertising
the Web site on consumer sites like www.Edmunds.com, and
certainly we support further education.
Third, this legislation proposes to educate consumers on
replacement tire fuel efficiency. The Alliance currently
educates the public about the influence that tires have on
vehicle fuel economy through its Web site,
www.CheckMyTires.com. According to the National Academy of
Sciences, a 10 percent reduction in average rolling resistance,
if achieved for the population of passenger vehicles using
replacement tires, promises a 1 to 2 percent increase in the
fuel economy of these vehicles. About 80 percent of passenger
cars and light trucks are equipped with replacement tires.
Assuming that the number of miles traveled does not change, a 1
to 2 percent increase in the fuel economy of these vehicles
would save about 1 billion to 2 billion gallons of fuel per
year. This fuel savings is equivalent to the fuel saved by
taking 2 million to 4 million cars and light trucks off the
road \1\
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1 Tires and Passenger Vehicle Fuel Economy: Informing Consumers,
Improving Performance, Transportation Research Board Special Report
286, National Academy of Sciences, Washington, DC, 2006.
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We support the tire manufacturers' providing additional
information about the contribution of tires to vehicle fuel
consumption, either at the point of sale or through other means
like advertising.
The Alliance Supports the Focus on Carbon Emissions.
For more than 30 years, corporate average fuel economy has
been focused on reducing oil consumption, but CAFE alone cannot
address the broader problem of climate change. To affect
climate change, the Congress must address carbon dioxide
emissions through a comprehensive program that touches fuel
producers, vehicle manufacturers and consumers.
This proposed legislation expands the policy focus to
carbon dioxide (CO\2\) emissions in several ways. For example,
the Department of Transportation would be required to issue
fuel economy standards in both ``grams per mile of CO\2\'' and
miles per gallon. In addition, EPA would be directed to develop
a Low Carbon Fuels Standard.
These are good initial efforts that focus on carbon
dioxide and climate change while maintaining the options to
develop a broader climate change policy.
Provisions for Further Discussion
The CAFE Targets Are Very Aggressive and Will Be Difficult
for Manufacturers to Achieve.
Under the proposed legislation, car CAFE standards would
increase by more than 30 percent while light truck standards
would increase by 35 percent. The legislation's proposed
standards of 36 mpg for passenger cars by 2022 and 30 mpg for
light trucks by 2025 represent significant increases over the
current standards. Indeed, the proposed increases in fuel
economy requirements would present major technology challenges
for automakers, requiring tremendous investments over a
sustained period of time. An automaker can spend well over $1
billion to develop a brand new engine or transmission or a new
vehicle that is not based on an existing platform. If passed
into law, this legislation would result in the largest increase
in CAFE standards to cars and light trucks. Automakers
traditionally have supported standard-setting by NHTSA, the
expert agency with long experience with CAFE. The NHTSA notice
and comment rulemaking process is based on thorough development
of a factual record regarding technical feasibility,
affordability, effects on safety or jobs, and environmental
benefits, that is built with input from all interested parties.
While the 2002 NAS Committee on CAFE \2\
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2 Effectiveness and Impact of Corporate Average Fuel Economy (CAFE)
Standards, Transportation Research Board, National Academy of Sciences,
Washington, DC, 2002. believes that the identification of trade-offs
should reside with elected officials, the consideration of these trade-
offs in the selection of fuel economy targets and levels is appropriate
for the expert Federal Government agency to set.
---------------------------------------------------------------------------
Automakers are deeply committed to working with Congress
and NHTSA to develop standards that achieve the fuel savings
and CO2 reductions desired, while at the same time maintaining
jobs, a sound economy and a vibrant automotive industry.
In May, Standard and Poor's issued a report stating that
stringent fuel economy and vehicle emissions legislation would
``pose a real risk to global automakers'' financial
performance, particularly as some are already under pressure
from razor-thin margins.''
As a result, overly aggressive fuel economy standards
could undermine the economic health and stability of
automakers, and they could raise costs to consumers and result
in restrictions on certain models.
The Flexible Fuel Mandates Offer No Flexibility if
Circumstances Change.
As a general matter, the Alliance does not support
technology mandates, and we are extremely concerned about the
technology mandate for flex fuel vehicles proposed in the
discussion draft. This mandate proposes targets that may be
unachievable, as well as a time frame that is very aggressive,
and it allows no alternatives should E85 fail to make it to the
market in the anticipated volumes and needed locations. Company
product plans for 2012 are firming-up now and legislating a 45
percent mandate by that date would impose an enormous resource
burden on some companies. This mandate would compete with
engineering resources needed to improve vehicle fuel economy.
Moreover, 2012 provides insufficient lead time for small-to
intermediate-size automakers that are not already producing
those types of vehicles.
Doubling the CAFE Penalty Unfairly Hurts Small-Line
Manufacturers.
The Alliance does not support the doubling of the CAFE
penalty. This proposal discriminates against smaller
manufacturers and those with limited product lines. Ultimately,
it will cause consumers to pay more for certain vehicles, while
similar, possibly less efficient, vehicles from manufacturers
with a wider product range will not carry the additional costs.
Extending Flex Fuel Credits Will Incentivize Production
and Reduce the Cost of Compliance.
The Alliance does support two provisions that are not
currently in the proposed legislation. First, the Alliance
supports extending CAFE credits for flexible fuel vehicles. An
incentive-based approach such as this will continue the growth
in numbers of Flexible Fuel Vehicles without harming
manufacturers. Second, the Alliance supports extending the
carry-forward, carry-back credits to five years from three
years for additional flexibility in adjusting to constantly
varying market conditions.
There are also many provisions in the proposed legislation
that require further review and analysis, and we want to
continue constructive discussions with policymakers to move
this bill forward.
Again, thank you for the opportunity to comment on this
legislation. We look forward to working with you and all
members of the House of Representatives as this legislation
moves forward. We want to ensure that the important priorities
of climate change and energy security are addressed in a
meaningful way without disproportionately harming consumers or
an industry that provides jobs to millions of Americans.
I welcome any questions you may have regarding the
Alliance's positions on improving fuel economy and reducing
carbon dioxide.
[GRAPHIC] [TIFF OMITTED] 42440.165
[GRAPHIC] [TIFF OMITTED] 42440.166
Mr. Boucher. Thank you very much, Mr. McCurdy, and the
Chair thanks all of the witnesses for your extremely helpful
testimony here today.
Mr. Lampert, let me begin my questioning with you. And
first, I want to compliment something that you have done. I was
just handed a compelling graph. This is about my congressional
district. I represent a very rural area, 27 counties and
cities, literally hundreds of very small municipalities, and
you have prepared for my district, and I understand for the
districts of every member of this subcommittee on both sides of
the aisle, a similar graph. And what this graph shows in the
case of my congressional district is that we have, in our area,
10,583 flexible fueled vehicles, by your estimate, and in my
district, across these 27 counties and cities, and hundreds of
small municipalities, we have zero service stations with a
flexible fuel pump.
Mr. Lampert. That is correct.
Mr. Boucher. So, not a single E-85 pump in 27 counties or
cities, that potentially could be servicing, even today, more
than 10,000 flexible fuel vehicles. Do I read that correctly?
Mr. Lampert. That is exactly right, Mr. Chairman. What we
tried to do here is designate by ZIP Code the concentration of
flexible fuel vehicles, as is registered and reported to the
automakers, and that is a matter of public record.
Mr. Boucher. Well, it is certainly a compelling chart. It
is startling in what it demonstrates. It says to me that we
have got to do something to stimulate the introduction of
flexible fuel pumps at service stations, and I want to thank
you for preparing this.
Let me ask if you would make available to the committee the
chart you have prepared for all of the members of the
subcommittee. I would personally like to make sure that each of
them gets the chart that is designed for their particular
district.
Mr. Lampert. That has been made available to staff already,
Mr. Chairman.
Mr. Boucher. Thank you. Thank you very much, Mr. Lampert.
Mr. Lampert. You are very welcome.
Mr. Boucher. For Mr. Reuther and Mr. McCurdy, I want to say
first, thank you for your support of the discussion draft,
which you have announced in your testimony here today.
It is designed, as I think I indicated in my statement, and
Chairman Dingell has indicated in his other statements, to be a
down payment on the later action that this committee will take
in October, and at that time, in the September-October
timeframe, we intend to construct a mandatory greenhouse gas
control program. And what we are doing in this draft is a
bridge to that, the first step in that direction.
I appreciate the support you have expressed for the
discussion draft. My question to both of you is should our
discussion draft, in major part, be adopted into law? Will you
continue to work with us in fashioning a mandatory greenhouse
gas control measure that we can present to the House in
October? Mr. McCurdy.
Mr. McCurdy. Mr. Chairman, on March 14 in this very room,
four CEOs from the Alliance of Automobile Manufacturers said
yes, they would continue to work with the subcommittee. We
understand this is a bridge. It is a difficult bridge, but it
is a bridge, and we will continue to try to work to reach that
ultimate goal.
Mr. Boucher. Thank you very much, Mr. McCurdy. Mr. Reuther.
Mr. Reuther. At that same hearing, the president of the UAW
indicated that we strongly support an economy-wide cap and
trade program, and we look forward very much to working with
you to help develop that.
Mr. Boucher. Thank you very much, Mr. Reuther.
Mr. Drevna, in your testimony, you indicated that there
might have been some miscalculation in the numbers that you
used in the testimony you provided regarding the percentage
reductions that would be required under our Low Carbon Fuel
Standard. You have acknowledged that perhaps that was in error.
I also think that your numbers are.
I am going to ask Mr. DeCicco, who I think has some
information with regard to what the actual effect of that Low
Carbon Fuel Standard to be is, and would you, Mr. DeCicco, care
to respond? What Mr. Drevna said in his written testimony is
that if our Low Carbon Fuel Standard were adopted, that it
would require a 26 percent reduction in the carbon content of
automotive fuels the first year, and that would lead eventually
to a 38 percent reduction by 2020, and that if those numbers
are accurate, that we would actually have a far more stringent
Low Carbon Fuel Standard than what California has proposed,
which is a 10 percent reduction in the carbon content by 2020.
So, Mr. DeCicco, how do you interpret our Low Carbon Fuel
Standard, in terms of the percentage reductions that in fact it
would require?
Mr. DeCicco. Mr. Chairman, we do interpret it differently
than Mr. Drevna's calculations. In our written submission, we
have a table, table 3 on page 12, in which we provide
preliminary estimates of the overall covered motor fuel pool
carbon intensity reduction implied by the discussion draft. Our
estimate, and we emphasize that these are preliminary, we have
not done a full calculation in the short term, but we estimate
that by 2020, the implied reduction is 3.3 percent, and again,
as you pointed out, that is actually much less, a third of what
has been proposed in California's Low Carbon Fuel Standard.
Mr. Boucher. Thank you very much, Mr. DeCicco. Mr. Drevna,
would you concede that perhaps his calculations are accurate?
Mr. Drevna. Mr. Chairman, based upon how we read the draft,
and I think there is a lot of confusion about as to exactly
what is and what isn't covered under the calculations, and to
be quite candid, in very recent conversations we had with
staff, they tried to explain to us what the intent was, our
numbers are based upon what we thought the draft had said and
does say, so I think that is the confusion with the draft that
we want to work with staff and you on, to make sure we are at
least speaking from the same hymnal here.
Mr. Boucher. Well, thank you, Mr. Drevna, and we will all
endeavor to come to a common understanding about precisely what
the effect is. I personally think Mr. DeCicco has it right.
My time has expired. The gentleman from Illinois, Mr.
Hastert, for 5 minutes.
Mr. Hastert. I thank the chairman. Just to follow up on the
comment. I have some questions, too, about what goes into these
things. I come from a stretch of about 120 miles that is all
cornfields and beanfields, it starts on the very western edge
of the Chicago suburbs, and goes all the way to the Mississippi
River. Those fields are going to be producing soybeans and
corn, regardless of those, if it is going to be soy diesel or
if it is going to be ethanol.
And so, if you are going to start to add in what the cost
of corn is, and the fuels that go to produce corn, and the dry
corn, and those things, and add them into the cost of fuel, I
don't know if you are also going to add that into the cost of
bacon when it gets to the market. Because there are two ways
that that corn can go. It can go to be making fuels that reduce
our emissions, or we could be making bacon. So, there are two
cost dispersions out there, and I am not sure how we add all
these things in.
That being said, Mr. Lampert, I appreciate that map,
because it does show my district, that has got the I-80
corridor there, with most of those stations, because there is a
lot of traffic down there, and actually, I did a little
calculation. I have about 7,200 square miles, and if you take
out the I-80 stations that are right on the edge of my
district, I have only got seven stations in there, and I bought
an E-85 truck last year. That was a good thing to do; a kind of
symbolism of what we are trying to do. The trouble is, I have
to drive 25 miles to fill it up. If I have to drive 25 miles to
find a gas station to fill it up, and then 25 miles back home,
you kind of shoot all the economy and savings that are already
there.
So, contrary to what Ms. Hubbard said, we need to be able
to make sure that those pumps are available to people, because
I am sure we have, in my district, almost 24,000 flex fuel
vehicles with approximately seven stations, if you take out the
I-80 stations. It just doesn't calculate.
But one of the things that we have to think about is what
really causes the problems that prohibit E-85 availability, and
one of the things that really, when you talk about all the new
fuels that may come along stream, whether it be cellulosic, or
ethanol, or soy diesel, and when you talk about the coal to
liquid, what are the mix of low emission fuels with the
traditional old petroleum fuels that we have to find? What is
the ideal out there where you get the maximum fuel efficiency
and the least emissions. I am not sure that we have found that
number yet. I am not sure if the true number is E-85 or E-45 or
E-50 or E-28. I don't know that yet. We are going to have to
do, probably ought to do a couple studies, and I think maybe
the private sector might be able, best thing to do that may be
the Government. But I think that is something you need to think
about.
But in your mind, you have been very helpful in trying to
bring along and find ways to implement E-85 distributors. What
has been one of the biggest prohibitions that you have found?
Mr. Lampert. Well, the continued prohibition that we see of
placing E-85 under a canopy, testimony has been made here that
if the owner of a station or a vendor did not own the facility,
there may be some liability issues. I clearly understand that.
I think to your question, if I would own a station, and I was a
branded operator, in many cases, we could not put E-85 under
the canopy. I have a recent statement from ConocoPhillips where
they are now allowing that in four States in the country. So,
apparently, 46 States in the Nation, ConocoPhillips does not
allow alternative fuel under the canopy.
That has certainly been an issue. We have, today, Mr.
Speaker, about one gas station for every 1,500 motor vehicles
in the United States. We have one E-85 station for every 5,000
flexible fuel vehicles. So, clearly, we have a long way to go.
But this is a very infant industry. E-85 has only been around
for 12, 15 years, where obviously, the gasoline business is 110
years old. So, we have made progress, but certainly have a long
way to go.
Mr. Hastert. I have just a short period of time left, but
one of the things we are trying to do is make sure that the
liability for an E-85 station isn't any different from the
liability of somebody that is doing 100 percent petroleum. I
think that is fair, and that may expedite the placement of
pumps. We have found that the whole issue of certification has
become a slow walk through this process, and we are seeing, I
don't know how, why that has happened with Underwriters
Laboratories, but we need to expedite that process as well.
And one thing, if the chairman will allow me to say, that I
don't necessarily think the mandating of pumps and stations is
the right thing to do, until I heard Mrs. Hubbard's testimony,
and the stalling tactics of vertically owned retail
distributors, I think has certainly been on the record, and
maybe we have to mandate that part. I heard her testimony, and
I think maybe she has tilted me over the other way, a tipping
point, I guess is the term that we have today.
So, I appreciate your testimony, and I think we have a lot
of things that we really need to mull over before we get this
whole thing to move. Thank you.
Mr. Boucher. Thank you very much, Mr. Hastert. The
gentleman from Georgia, Mr. Barrow, is recognized for 8
minutes.
Mr. Barrow. Thank you, Mr. Chairman.
At the outset, this is how I see the problem. As I see the
problem, we have got a three legged stool. One leg is the
infrastructure that is going to be tasked with providing us
with a clean alternative fuel in the future. The second leg is
an industry that is going to be tasked to provide the
infrastructure to deliver that fuel to the customers. And the
other leg of the tool is an industry that is going to be tasked
with providing the fleet that can run on it.
And the problem is both between legs and within legs,
because nobody wants to go first, and nobody can afford to go
first, because anybody is going first, they are going to get
whipped. If this whole industry on one leg is going to be
moving forward to be reaching the goals we want in the future,
it is going to be an economic train wreck for the rest of us,
and we are trying to avoid, trying to get all this moving at
the same time. And that is the problem, as I see it.
Mr. Dinneen, I want to begin with you. Asking, this
business about the supply of the clean fuel, just how in regard
to that, that one of the legs of the stool, OK. Right now, our
policy is to require that a certain percentage of the fuel in
this country, a certain percentage of the fuel, have a certain
percent of ethanol in it, but not requiring all the fuel in the
country to have that percentage means that some areas of the
country end up sucking up all the E-10 that we have got in
order to meet environmental standards or constraints imposed as
a result of nonattainment in certain areas.
What I want to ask you is, and apparently, the working
draft is going to continue, that is going to build on that
model. We are not going to require all the fuel to have a
certain percentage. We are just going to require a certain
percentage of the fuel to have a certain percentage. And the
question I want to ask is, can your industry, does it have the
capacity to provide a certain minimum percentage of alternative
fuels in every gallon of gas sold in the entire country? Can we
produce enough ethanol to have E-10 everywhere in the country,
and still provide enough for those folks who have got to have
it in order to meet their local constraints?
Mr. Dinneen. Congressman, absolutely we can. Quite frankly,
we are probably going to get there even without legislation. We
have got 12 million gallons of ethanol production, either in
service today or under construction. We have 140 billion gallon
gasoline market. So, we are already getting to the point where
we are going to reach the saturation point, in terms of the
existing blend market, which is why this legislation is really
important, because it envisions other markets of E-85, flexible
fuel vehicles, and it addresses the other two legs of that
stool.
But in terms of the production, our own single leg, I would
also suggest to you that while we see the opportunity to get
the 10 percent blends, and I think we are going to get there,
the flexible fuel market may not be developing quite as fast as
our industry is building, and you may have a situation very
soon, Congressman, where we have more than enough ethanol to
satisfy the 10 percent market across the country.
Mr. Barrow. Will that market address the other legs of the
stool, because if there was an infrastructure to deliver it,
and there was a fleet to run on it, I think you all's problem
would be solved.
Let me turn to Ms. Hubbard with that thought in mind. Ms.
Hubbard, you and your colleagues, and your associates probably,
the folks I represent depend on you all for a whole lot more
than they get from this Congress, it seems to me from time to
time, so I want to turn to you with a great deal of concern and
interest, because you all are going to be tasked with trying to
deliver this, and I share your concerns about not being forced
to do something you can't do, and meet a demand that ain't
there.
The question I want to ask you is what can we do to help
you all do that? If we get these other two legs of the stool
moving, so you get the supply of the fuel coming, we get the
fleet ramping up more or less, what can we do to help
facilitate it? First of all, to make sure that your entire leg
of the stool ain't out of line with everybody else, but also to
make sure that folks within that leg, folks who are competing
with the, for the business that is done by you and your
colleagues and your competitors, that nobody is put at a
disproportionate disadvantage in trying to get on board.
What can we do to help you all?
Ms. Hubbard. Obviously, if the demand exists, our industry
has historically been early adopters of new products, and we
also are pretty significant risk-takers. So, as the demand was
there, we have talked about some of these vehicles within the
marketplace, 10,000 or 7,500 vehicles in a widespread area
could not be serviced by one or two locations, and if we don't
have the volume, the rate of return would take decades.
Mr. Barrow. How do you evaluate the working draft's
approach to this problem, by trying to make sure that mandates
don't kick in until you have got a 15 percent penetration in
the market? I am not sure if I can get the 15 percent, but how
do you all assess that?
Ms. Hubbard. Well, the problem even with the 15 percent, if
that was determined to be a justifiable amount, how do you
determine, then, who becomes that either sacrificial lamb or
the risk-taker? How do these retailers pick out in their force
to, as kind of the Field of Dreams, build it and they will
come, but it is almost a nightmare, because we don't know that
they will come, and we don't know how do you choose which is
the retailer that unfortunately has to take that risk?
Mr. Barrow. Let me turn to the other leg. So, Mr. McCurdy,
in terms of the ability to deliver the fleet of vehicles that
can run on this, provided we get this supply, and we get the
infrastructure to deliver it, I got to tell you, in my part of
the country, the folks depend upon their vehicles to work. I
just completed an 11 city town hall tour of the rural areas of
my district, and the truck, the pickup truck is the all-purpose
vehicle, and a pickup's got to have pickup. We just can't
afford to have little itty-bitty pickup trucks that may look
big on the outside, but they can't carry any load, or they
can't pull off from a dead stop. We have got to have pickups
that can really pick up and go.
What is the future? What can you tell us is coming, in
terms of strike a balance, because we don't want to sacrifice,
we want to get fuel economy, and we want to get low emissions,
but we have got to have working trucks that can do real work.
They have got to be, and we have to have lots of them. So, what
is the future on that? What can you all tell us?
Mr. McCurdy. Congressman, it is a great question, and you
are exactly right, as far as the consumer demand and need for
the types of vehicles that provide work throughout most of the
country. And there is a chicken and egg problem here, but from
a technology standpoint, we already manufacture over 60
different models that are alternative fuel available, or
capable.
Mr. Barrow. I think we got the fuel. I think you have got
the fuel part, it is the economy standards that I am concerned
about.
Mr. McCurdy. We have talked some about E-85, we have talked
about other types, but there is also diesel, biodiesel, and
other things that are there, as well. We see in Europe and
other places that diesel provides a lot of torque.
Mr. Barrow. Indeed.
Mr. McCurdy. And diesels, I think, are quite capable for
large vehicles, including trucks. And flex fuel vehicles can,
again, have internal combustion engines that use other forms of
fuel. So, as I said, there are 10.5 million of those vehicles
out there. The challenge is there isn't the infrastructure,
there is not the fuel available, and that is exactly what the
committee is attempting to address.
So, we can produce it, and it really does address one of
the major concerns of this committee, and I think the Congress,
and that is energy dependence, dependence on foreign oil, and
there can be major reduction there. On the flip side of that
the movement towards a lower carbon intense society. And you
don't have to have a complete tradeoff of lower carbon for, as
you said, itty-bitty trucks or small vehicles.
Mr. Barrow. Well, big trucks with itty-bitty engines.
Mr. McCurdy. That is right. Well, you can have workhorse
vehicles with high technology, provided the infrastructure is
there and the fuel is there.
Mr. Barrow. Well, you are right. That describes a chicken
and egg problem of the hearing, I said this is not just a
chicken and egg problem, it is a chicken, chickenfeed, chicken
coop, and rooster problem, not to mention the chickenhawks that
are out there.
Thank you, Mr. Chairman. Yield back.
Mr. Boucher. Thank you very much, Mr. Barrow. The gentleman
from Illinois, Mr. Shimkus, is recognized for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman. And I appreciate the
map. Of course, my district is doing well, I think. In my
district line, there are about 22 E-85 stations. I think in the
ZIP Code area, you have got 36. I have 30 counties. They say
here, in the ZIP Code calculations, 22,000, so comparable, we
have done well.
And, but I know 4 years ago, we had zero. So, this
promotion of flexible fuel retail locations has come about
based upon our work here, and I can guarantee my colleagues
that their districts will--I do not have a single ethanol
refinery in my district. So, it is not because I have one in my
district. It is because the public demanded it, and I like Mr.
Barrow's comments, too. I have 30 counties in southern
Illinois. We want working trucks. Now, I have a little itty-
bitty truck. I am a politician, I really don't work, but a lot
of my folks do. I had the bean producers in. We have got the
pork producers. We have got farmers. We have got to have trucks
that work, and they got to be big trucks, and that is part of
this debate.
Mr. DeCicco, has the Earth climate ever, in the history--I
am a creationist--in the world's history, has it ever been in
balance?
Mr. DeCicco. Balance is a question of time, and it has
changed slowly through time. What we are seeing now are changes
of an unprecedented nature, in terms of their danger and
rapidity.
Mr. Shimkus. Thank you. I would submit to you that the
Earth has never been in balance, and to assume that human
beings can balance the climate is very arrogant on our part.
And it is interesting how this has now taken a worldwide
application based upon one election in which I would guess not
a single congressional election was won on climate change, and
now we are going to affect manufacturing and the world
environment, the whole economy of our country, and maybe the
world, based upon this debate, and it is very frustrating for
those of us who do believe, of the arrogance of the human being
thinking that we will control the world's climate.
Mr. Dinneen, where is the ethanol industry on a Low Carbon
Fuel Standard?
Mr. Dinneen. We generally support the effort to try to use
carbon emissions, and we are supportive of the effort in the
discussion draft, that moves us forward.
Mr. Shimkus. I am going to get to my question, because my
time is running pretty quick, would this Low Carbon Fuel
Standard limit the use of certain renewable fuels?
Mr. Dinneen. They may limit it. I think there are a lot of
questions about how it would be imposed, because how you do the
lifecycle analysis.
Mr. Shimkus. And that is the point I want to highlight to
the chairman is the lifecycle debate on this, is where we need
to, I need to move quicker. What about compliance values in
this bill?
Mr. Dinneen. As I said in my testimony, I think it does
undermine the potential petroleum displacement in the act, in
the program.
Mr. Shimkus. Would it be helpful, on the Alternative Fuel
Standard, if we apportion percentages and goals to be achieved
by the different fuel mixes? Would that be helpful? Because the
issue is, we have got the corn ethanol debate, and then we have
the cellulosic debate. We are putting great hope in cellulosic.
We had great testimony here in this committee, but that is
still further down the line for permitting and application than
the coal-to-liquid debate, since we know we can do it, all we
have to do is start building them. Does a percentage debate
help or hurt in this discussion?
Mr. Dinneen. I haven't really given a great deal of thought
to it. I would want to analyze it a little bit better. I do
think that there are ways to make the program more effective,
though.
Mr. Shimkus. And if I could, Mr. McCurdy, let us talk about
this other blend. The reality is, in my district, when we have
E-85 pumps, there are folks, they self-mix, when gas prices are
high. So they are doing that experimentation, of course, the
retailers have a little concern on the debate, but I do want to
highlight, all these 22 stations, maybe 20 of them now are all
independent retailers, and I have great, Ms. Hubbard, I have
great relations with the folks in my district. They are the
ones who took the risk, and they are getting the benefit now.
But Mr. McCurdy, can you talk about this whole E-15, E-20
debate, and where we should head?
Mr. McCurdy. Well, that is a good question, and one that we
have had internally as well. E-10, obviously, is the current
plan. E-85 is a standard, that I think the industry supports.
There is a debate about what happens when you start blending in
between. The key here is to have harmonization of those
standards, and I think that the committee is going the right
direction to look at those, too, and at least develop that
standard.
Mr. Shimkus. Thank you, Mr. Chairman, and I think I have
found one issue that I think the autoworkers might rally in
support behind Congressman Shimkus on this bill, and I look
forward to working with you all.
Mr. Boucher. Thank you very much, Mr. Shimkus. The
gentleman from Massachusetts, Mr. Markey, is recognized for 5
minutes.
Mr. Markey. Thank you, Mr. Chairman, very much.
We have a huge national security issue that is looming in
our country, and that is this dramatic increase in our
dependence upon imported oil, from 27 percent in 1986 to 60
percent of our oil imported last year, and it is all. And much
of it is related to the fact that, the doubling of our fuel
economy standards from 1975 to 1986 reduced dramatically our
dependence upon foreign oil, and once that standard was allowed
to erode, we now see this dramatic increase.
The consequences, of course, are that we wind up as
Americans more dependent upon Middle Eastern oil, and we also
wind up funding countries and, unfortunately, radical elements
in those countries, that have come back to haunt our country,
in the form of al-Qaeda. And it is critical for us to reduce
dramatically our dependence upon oil from these countries.
Now, in Europe, I just returned from a visit to Europe with
the Speaker, we found that Europe is going to increase, by
2012, their CAFE standards to 43.4 miles per gallon. That is by
2012. And in its reflection of this critical issue, not only of
climate change, but of national security interests. They
already meet a 35 mile per gallon standard, but they are saying
over the next 5 years, they want to dramatically increase it.
That is my feeling as well. This is a national security
crisis for our country, and we cannot allow this to continue,
not with 170,000 young men and women over there, and 1.6
million young men and women who have already gone over there to
the Middle East for Iraq. The higher that goes is the more
likely other young men and women will have to go over there.
So, Mr. McCurdy, it is very difficult for me to understand
why General Motors, Ford, for example, can meet a standard of
43.4 miles per gallon by 2012. They are already meeting the 35
mile per gallon standard. Ford and General Motors are the top
of the list of European auto sellers right now. They outsell
Toyota and Honda in Europe. My question is, the laws of physics
are the same in the EU and here in the United States. I am
asking that 10 years from now, in my amendment that I will be
making next week, that the United States meet a standard which
the EU meets today.
Can you tell me why that is unreasonable, given one, what
is going on in Europe, and how the American automotive industry
is going to meet that challenge in 2012, and this incredible
threat to our national security, which is represented by the
importation of oil, and how much of that oil money is used to
then come back to haunt our country?
Mr. McCurdy. I thank my friend of 27 years for asking the
question, and since I was in your office recently, and you
showed me that chart, I thought I would bring you a chart as
well.
And with regard to the question of autos in Europe, I
think it is actually pretty clear, Mr. Chairman, and when you
look at the difference, the first one as being fuel, in the
United States, we are 99.8 percent gasoline fueled or driven
automobiles. In Europe, it is 51 percent diesel and 49 percent
gasoline. That is a huge difference.
Second, look at the issue of transmissions. Mr. Barrow
mentioned he likes trucks, and Mr. Shimkus said they need
trucks that work. In the United States, 92 percent of our
vehicles are automatic. In Europe, they are 80 percent stick
shift, all right? Let us look at the real question here. In the
United States, 23 percent are 8 cylinders, 47 percent are 6
cylinders, while only 28 percent are 4 cylinders. In Europe, 84
percent of the vehicles are 4 cylinder engines, and only 1
percent is an 8 cylinder. So, there is a difference. You are
right, this is a big change, but when you are looking at the
size of the cars, the weight of the cars, the classification,
the requirements of the automobiles, they are not as heavily
penetrated with pickups.
Mr. Markey. My time is going to run out. All I am saying to
you is you are telling us that it can be done, and that it is
being done already, and let me add this, a Ford Escape hybrid
SUV today gets 36 miles per gallon, and a Ford Escape does not
with equal safety, so Ford is already doing it in the United
States today. It is being done in Europe, it is being done in
the United States for SUVs or these light trucks by Ford.
We are saying 10 years from now.
Mr. McCurdy. You are mixing apples and oranges.
Mr. Markey. Not at all.
Mr. McCurdy. Yes, it can be done, Mr. Markey, if you want
smaller vehicles, if you want 4 cylinder engines, if you want
stick shifts.
Mr. Markey. No, I am talking about a Ford Escape SUV hybrid
getting--I am talking a large----
Mr. McCurdy. The Ford Escape is a great hybrid. They are
hybrid technologies, it is an important technology. It is being
introduced. I have a hybrid. There are hybrids, and we want to
see that expand, but that is not the only answer to this
question.
Mr. Markey. But you don't have to do it the same way, my
only point is that Ford is already doing it with their Ford
Escape hybrid. It can be done. It must be done. The national
security of our country remains in jeopardy.
Mr. McCurdy [continuing]. hybrids, but I think it is last,
because of the penetration in Europe is diesel. And why have
they had more diesel penetration? Because there is almost a $4
gasoline tax, and there is a dollar cheaper tax for diesel.
Mr. Markey. They are mandating this 43.4. This is not a
gasoline tax increase. It is an absolute mandate.
Mr. McCurdy. They don't have a CAFE requirement. They have
not had a CAFE requirement.
Mr. Markey. They are going to--they are mandating----
Mr. McCurdy. We are going to see----
Mr. Boucher. Mr. Markey, some of us are actually interested
in hearing the answers to these questions. They are such good
questions, but the gentleman's time is expired, in any event.
The gentleman from Oregon, Mr. Walden, is recognized for 5
minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
I would like to follow up on this line of questioning. Mr.
McCurdy, do the European countries have the same clean air
standards as the United States?
Mr. McCurdy. No. Actually, on particulates and oxides of
nitrogen, NOx, we have a three times more stringent standard on
diesel than there currently is in Europe, and that is the
challenge for the introduction of diesel and biodiesel, clean
diesel in the United States. Now, that is the bad news. The
good news is that we are making improvements there. There is
new technology available. There is branded technology, such as
BlueTech and others, that will now be capable of meeting the
stringent U.S. requirements on diesel for the NOx.
Mr. Walden. And my understanding is, and I was over in
Europe last week with Mr. Boucher and Mr. Hastert, and others,
that in Europe, there are 370,000 premature deaths in Europe
due to poor air quality, a lot of which is coming out of the
tailpipes of diesel burning, dirty burning cars. In the United
States, it is about 20,000 premature deaths due to air quality
problems.
So, there is a tradeoff here that has occurred in Europe
where people just die earlier, but they get better gas mileage.
Isn't that almost what is being said? Now, what we are doing,
and what you are doing, and what we are going to push you to
do, as your industry, is give us other fuel alternatives under
our clean air standards, so that we can have both, clean
emissions or reduced emissions, or as minimal emissions as
possible, cleanest air as possible, and get us better gas
mileage, or diesel mileage.
And my understanding is there are automakers who are going
to come out with diesels in the next year that will do both. Do
you know what kind of mileage they are going to achieve?
Mr. McCurdy. Generally, the diesels get 20 to 25, maybe 30
percent more efficiency than the gasoline equivalent.
Mr. Walden. So, what will that get them to? Because we are
going to argue here about this notion of trying to increase the
fuel economy standards.
Mr. McCurdy. Right. Well, Congressman, that is one of the
challenges that this committee and the Congress and the public
faces. What is the improvement in gas mileage? It depends on
the vehicle, it depends on how the vehicle is used. But there
are percentage improvements. But many of the diesels, again,
can be applied to trucks, to pickups, and you will see
significant increases in fuel efficiency.
Mr. Walden. All right.
Mr. McCurdy. And as you said, cleaner.
Mr. Walden. I am going to have to cut you off, just because
I only have about 2 minutes here.
Mr. Karsner, is he still--no. Sorry?
Mr. Boucher. Next panel.
Mr. Walden. Next panel, I should leave these on when I
read. All right. Well, then, I want to go to who can talk to me
about ethanol and the renewable fuels? Now, I come from the
West, and when I was out touring around my district, we
actually have a couple ethanol plants that are under
construction or in the design phase, and yet, the concern I
consistently hear is that we are driving up the cost of corn,
which we don't raise a lot of out on the west coast. In fact,
these ethanol plants are going to have to truck it in,
hopefully, from Mr. Hastert's district. That is the only place
I would really like to see it come from. That is important to
his economy and mine.
But I get cattle ranchers and dairy lots that are saying
this is driving us to the drink here with higher finishing
costs. Now, I don't think on the west coast, and this is where
I hope somebody can answer this, and I don't know who is best
to do that, but what are we going to see in terms of E-85
outlets on the west coasts? I understand it in the Midwest, but
what are the odds we are going to actually get E-85 on the west
coast, and benefit from all the ethanol portfolio requirements
we are contemplating here?
Mr. Dinneen. Well, let me first try to address some of the
issues with respect to the rising price of corn, because it is
indeed true that the increased demand for ethanol in this
country has indeed created new markets for farmers, and they
are seeing a better price for their product today.
Mr. Walden. Right.
Mr. Dinneen. And the days of cheap corn are probably,
indeed, over, but I believe that the marketplace will
absolutely respond, and I believe that we are going to see a
great deal more corn being grown across the country. Indeed,
the crop intention report that was just released a couple of
months ago suggested that the marketplace is working, because
farmers are going to plant as much as 90 million acres, 15
percent more acres than they did just a year ago, so farmers
are absolutely responding.
What this bill is about is trying to, however, motivate the
marketplace, so that we are able to move beyond grain, because
there are going to be limitations to what you are going to be
able to produce from grain, and as with the grant program for
cellulose, and most importantly, by creating a marketplace for
greater volumes of ethanol in the form of E-85 for flexible
fuel vehicles. You are going to be incentivizing more cellulose
ethanol to get out there.
What it is going to take to get more flexible fuel vehicles
and more E-85 is sort of the three legs of the stool that
Congressman Barrow talked about. It is going to take more
ethanol, it is going to take more vehicles, and it is going to
take greater infrastructure. Those three legs of the stool are
addressed in this bill in one fashion or another.
Mr. Walden. All right. And I know my time has expired.
Thank you all for your testimony and your answers.
Mr. Boucher. Thank you very much, Mr. Walden. The gentleman
from Pennsylvania, Mr. Doyle, is recognized for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman.
I got this graph. I am just curious. Is three stations for
11,000 flex fuel vehicles enough, too little?
Mr. Lampert. Well, as I had mentioned earlier, on a
national average, there is approximately one gasoline outlet
per 1,500 vehicles. So, to answer your question, there is
approximately one E-85 outlet in your district for every 3,500
or 4,000 vehicles. So, obviously, that is not meeting the
national average of gasoline outlets.
Mr. Doyle. And Ms. Hubbard, you said your industry is quick
responders and risk-takers, so why aren't there more----
Ms. Hubbard. Well, the problem, of course, is the
concentration of those vehicles, and if there are enough of
those vehicles within a serviceable market area, as you know,
probably within your own community, you don't drive the whole
city to shop at a convenience store. It is close to where
either you live or you work. And so, the demand, if there were
20 gallons per vehicle every single week, that still doesn't
put the volume of fuel that goes through there. It doesn't make
it adequate to justify the investment.
Mr. Doyle. Thank you.
Mr. DeCicco, you said that one of the things that concerned
you about the bill is that the levels that are set for the
vehicles fall far short of what is needed, and when you look at
the draft, section 301 that starts on page 41, as I understand
it, the draft directs NHTSA Administrator to set CAFE standards
at the maximum feasible level every year, beginning in model
year 2012, with the express requirement that under no
circumstances are CAFE standards to be lower than 36 miles per
gallon for cars in model year 2022, and 30 miles per gallon for
trucks in model year 2025.
So, I would like to ask you some questions. Is there any
language in the draft, as you read it, that would prohibit
NHTSA, provided the agency deems it feasible, from setting the
CAFE standards for model year 2025 at 40 miles per gallon?
Mr. DeCicco. No.
Mr. Doyle. 50 miles per gallon?
Mr. DeCicco. No.
Mr. Doyle. 150 miles per gallon?
Mr. DeCicco. No.
Mr. Doyle. So, the draft would, in effect, give future
administrations the ability to meet or exceed the CAFE targets
set out by this proposal or any others, regardless of the
specific number in the draft, and I think that is an important
point to keep in mind. These are floors, not ceilings.
Mr. Reuther or Mr. McCurdy, perhaps you both might respond,
too. Given what you are seeing in the technology in hybrid
vehicles and other types of vehicles that are being developed,
is it reasonable to expect that by the year 2025, that there is
a high probability that we could probably exceed what this
floor is?
Mr. McCurdy. Alan is punting here.
Well, first of all, the targets that are in the bill are
extremely aggressive. And the average efficiency in cars are
far more efficient today than they were in the '70's. There has
been roughly 1 percent a year. To get that level of advancement
takes incredible investment of time, money, and engineering,
and some potential breakthroughs.
I am not discounting the potential for breakthroughs. If we
have breakthroughs in plug-in hybrids, if we have breakthroughs
in hydrogen, and some of the other capabilities, fuel cells,
then in fact you might be able to see miles per gallon
achievement in excess of those targets that you see. But the
other critical factor here is availability of fuels, and the
third and most important is whether or not the consumer
supports it.
I don't know if you saw the announcement this week, that
Honda announced it was canceling, terminating its hybrid
Accord. That is a decision they make based on the model. That
doesn't mean it is a technology failure. That was, perhaps, a
model failure that didn't catch on with the public. That is
always the risk that manufacturers face, is that we can build
it, but if they don't buy it, then we haven't accomplished
their goals, and we----
Mr. Doyle. Isn't that basically the argument you were
making with Mr. Markey about European culture and American
culture, that basically, that it isn't a technology issue. You
are obviously making cars in Europe that meet these fuel
economy standards. It is just that Americans, from the chart
that I saw, they don't drive stick shift, diesel, four cylinder
cars, or they do, but in much smaller percentages than the
Europeans do. So, it is not that you don't know how to make the
car, it is that, will Americans start to drive those kinds of
cars that get that kind of mileage, and that is a culture
change that has to take place in the country, too.
I have a Ford Escape hybrid. I want to tell you, it is a
great vehicle. I just by choice buy American cars only, and I
have been railing at Detroit for years about you know, why
doesn't an American car manufacturer make a hybrid. I have
never had a lick of trouble with that car. It says it gets 36
miles to a gallon. I am getting more like about 29, but I am
very happy that when I fill the tank up, it is still under $30,
even with the price of gasoline now.
And I don't know what it would take to wake up Detroit that
Americans want these kinds of cars, and they should be gearing
up for it. This CAFE standard battle really shouldn't be a
battle much longer, once Detroit starts to get it, and once
technology helps us to get there.
Mr. McCurdy. Well, Congressman, if I could respond just
quickly.
Mr. Boucher. Well, Mr. McCurdy, I am afraid the time for
that questioning has expired.
Mr. Doyle. Thank you, Mr. Chairman. I am sorry for taking
so much time.
Mr. Boucher. Thank you very much, Mr. Doyle. The gentleman
from California, Mr. Waxman, is recognized for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman.
I would like to start by seeking unanimous consent to put
in the record a letter from a dozen members of this committee
to you and Chairman Dingell, expressing our concerns about and
opposition to this discussion draft. We are also going to
release this letter to the public.
Mr. Boucher. Without objection.
Mr. Waxman. And second, I would like to request unanimous
consent to put six additional letters in the record. These
letters express the concerns and opposition of eight Governors,
15 members of the National Association of Attorneys General,
the National Association of Clean Air Agencies, the Clean Air
Association of the Northeast States, and leading environmental
and consumer groups.
Mr. Boucher. Mr. Waxman, we have agreed that unanimous
consent requests for submitting materials for the record will
be granted as a group at the end of the hearing, and we would
ask that the material be submitted to the staff on both sides,
so we can evaluate it in advance of that.
Mr. Waxman. That is fine, if you will put them all
together.
Mr. Boucher. Thank you.
Mr. Waxman. We will certainly make them available.
Mr. DeCicco, the subcommittee has developed the legislation
we are discussing today to address two of the Nation's most
important issues, the Nation's threatened energy security and
global climate change. If we are careful, we can address both
issues simultaneously, and leave a planet for our children and
grandchildren, that is clean, sustainable, and more secure.
I am concerned, however, that the draft before us will lead
the Nation in a dangerous and wrong direction. Earlier this
year, the Supreme Court issued a landmark ruling on global
warming. This case came to the Supreme Court when EPA rejected
a petition from the States and others for EPA to regulate
greenhouse gas emissions from automobiles. Is that right?
Mr. DeCicco. That is right.
Mr. Waxman. And the States had petitioned EPA, because
global warming is a critically important issue, and they read
the Clean Air Act to provide EPA with the necessary authority
to regulate automobile emissions.
EPA argued they didn't have that authority, and denied the
State petition. The Court found that EPA was wrong. Congress
had given EPA authority to regulate motor vehicles under the
Clean Air Act, and EPA must do so unless greenhouse gases don't
contribute to climate change. Is that an accurate description
of the case?
Mr. DeCicco. That is my best understanding of it.
Mr. Waxman. The legislation we are examining today
addresses this precise issue. It amends the Clean Air Act to
rescind EPA's authority to regulate greenhouse gas emissions
from motor vehicles. Am I correct in that reading?
Mr. DeCicco. Yes.
Mr. Waxman. It seems like we are heading in exactly the
wrong direction. Is there anything you would add to that? It
just seems to me that we are removing EPA's ability to regulate
in this area, and we are also denying the States the ability to
regulate in this area.
Mr. DeCicco. That is right, Mr. Waxman, and those are very
serious concerns, as we pointed out in our testimony. Just when
the Nation needs to act quickly on climate change, just as
California and now 11 other States, with others pending, have
stepped up to the plate with some breakthrough proposals to
lead in that direction, and just as the Supreme Court has found
that greenhouse gases can be considered pollutants under the
Clean Air Act, to take that leadership away, to take that
authority away from EPA is a huge step backward, in our view.
Mr. Waxman. It seems to me we have a global problem, and we
ought to have a global solution to it. If we can't do that, we
ought to at least have a national one. If we can't get a good
national one, we ought to at least let the States do what they
want, even the cities, because oftentimes, whoever takes action
will become the leader, and I have always regretted the fact
that we are becoming less of a leader in some of the technology
that would be developed if we actually got started to do the
regulations as necessary.
EPA has regulated pollution from motor vehicles for almost
40 years. Vehicles today are dramatically cleaner than they
were in 1970, thanks to EPA and State efforts, and we all
breathe cleaner air as a result. EPA has the authority and the
responsibility to produce the same strong results for global
warming pollution. In my view, the last thing that the Congress
should be doing is to stop EPA from beginning to address this
problem.
I thank you for your testimony, and yield back the time,
Mr. Chairman.
Mr. Doyle [presiding]. Thank you, Mr. Waxman. The Chair now
recognizes the gentleman from Utah, Mr. Matheson, for 5
minutes.
Mr. Matheson. Thank you, Mr. Chairman. As I mentioned in my
opening statement, I would like to just flesh out this issue a
little bit.
When it comes to the automobile industry, and the nature of
how you develop new product lines, and the timeframes and the
capital required to do that, I would like to get a sense if my
concern is valid or not, about uncertainty created by the
potential of two different Federal agencies offering different
standards, plus potentially various States also offering
different standards, and how does, how will our auto industry
respond to that level of uncertainty?
Mr. McCurdy, maybe you could start.
Mr. McCurdy. Thank you, Congressman. It is a shame Mr.
Waxman has to leave, because I wanted to respond to his point,
but I think we can build on it with your question.
The industry would like to----
Mr. Matheson. I don't want to be in the position of
opposing Mr.----
Mr. McCurdy. No, no, that is all right. I think it is
important. One thing that manufacturing needs is some
transparency and certainty and predictability.
Mr. Matheson. Right.
Mr. McCurdy. And the challenge is that NHTSA today has 30
years of experience in addressing the technology for primary
information, having the models to actually develop fuel
efficiency requirements for the auto industry. That is an
experience base that States do not have. That is an experience
base in technology that EPA currently does not have.
And as I understand Massachusetts v. EPA, the Court did not
say EPA, you must go regulate that. They have to do a
determination of whether or not it is a pollutant, but they
also can work, it encouraged, the Supreme Court actually
encouraged the agencies to work together, the Department of
Transportation, and the EPA, and probably, in the future, the
Department of Energy.
So California can still provide leadership. It is just that
they can't, they should not, in our opinion, be able to develop
regulation that is contrary to what NHTSA and the expertise
existing within that agency, and create different standards.
This industry cannot survive with 50 different standards, or a
dozen different standards, or five different standards.
Congressman, you are exactly right. It is a global problem.
It is a national problem. There is a potential for a national
solution. You are now in the majority. Let us have a national
resolution. Let us not have local. One of the keys, again, even
with California or other States, they can continue to provide
significant leadership on this front. Look at the incentives
for HOV lanes. Look at dealing with congestion. There are a
number of things they can do to incentivize, alert, educate
consumers about the alternatives out there, and the technology
available.
But please don't strap an industry that is already highly
competitive with additional regulation, and if you look at the
testimony of some of the cases, the experts even at CARB, which
is the Air Resources Board in California, did not take into
consideration the very important questions of technology, cost,
economic feasibility, impact on jobs and the economy, and those
are all critical for having reasonable, balanced, livable
regulation.
Mr. Matheson. It seems to me that there are two issues we
ought to be talking about here. One is what is the appropriate
set of standards we want to meet, in terms of fuel economy. And
the second issue is should we have one set of standards, or
should we have a basket of standards of 2, 3, 10, whatever. And
as I said, I have expressed concern about that second issue,
about what it should----
Mr. Waxman. Will the gentleman yield?
Mr. Matheson. May I get one more question here?
Mr. Waxman. Sure.
Mr. Matheson. In terms of what this committee has indicated
it is going to be looking at in the fall, and ideally, maybe,
we would have not bifurcated this process, because these are
related issues, and we are kind of dealing with them on
different schedules. In the fall, the chairman of our
subcommittee, the chairman of the full committee has indicated
that we are going to pursue a mandatory economy-wide greenhouse
gas control regimen. Is this the circumstance under which, when
we do that in the fall, where we are going to create, if you
will, the standards that are really going to drive where this
industry goes, how do those play with each other? I guess that
is what I am trying to ascertain, is how do you see those two
dynamics working with each other?
Mr. McCurdy. Well, CAFE is a 1970's regulation, and it is a
challenge. Our industry has stepped up to the plate, and said
it will work with this committee to explore climate change
legislation, and do so in a constructive way. A number of our
companies have joined groups, such as USCAP and others, that
are considering this. It is a challenge, but if, we agreed that
using industry terms, there is a key sequencing problem with
the schedule. I realize this committee didn't dictate the
schedule, and so, you have to move the legislation. I think the
preferable approach would be to take more time within this
Congress, and we want it to be done in this Congress, and
develop more comprehensive legislation, and a solution that
addresses the national issue.
Our industry is prepared to be part of the solution. We are
part of the challenge. We have a responsibility. But it needs
to be a shared responsibility, and it should include all
sectors of the economy, not just the one that has been--the
only carbon constrained sector of the economy for the last 30
years has been the automotive industry. Let us expand it.
Mr. Doyle. The gentleman's time has expired.
Mr. Matheson. Thank you.
Mr. Doyle. The Chair now recognizes the gentleman from
Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, for the opportunity to
participate in the subcommittee's legislative hearing, and on
the discussion draft on alternative fuels infrastructure. While
I am not a member of the Energy and Air Quality Subcommittee,
this draft is of great importance in the district I represent
in Texas, and where refineries, chemical plants, and pipelines
play an important role in our economy. And I have just a few
questions within the 5-minute timeframe.
Mr. Drevna, you state that it would be difficult to be
obligated party to comply with simultaneous with an increasing
Alternative Fuel Program, AFP, and a decrease in low carbon
standard, the LCF, because the compliance strategies would have
to change frequently. The LCF would change every year,
potentially.
Can you further elaborate on your statement that, how could
this hinder actually being able to sell alternative fuels?
Mr. Drevna. Well, Congressman, it is a problem that, again,
there is tension, as we see it, in the draft, between the
Alternative Fuel Standard and the Low Carbon Fuel Standard.
There may be, at times, it may be year 1, 2, how man you want
to assign, that a particular fuel may meet the standard, but
once, as Mr. Dinneen has spoken earlier, once the lifecycle
question gets thrown into these fuels, and the amount of carbon
intensity that it is allowed, it may eliminate those particular
fuels from being used.
So we are stuck with the dilemma of what kind of
investments do we make, what kind of fuels do we make, on a
going forward basis? We can't, we don't want to be switching
fuels every other year.
Mr. Green. Well, and I know there is concern now, because
of the price run-up in fuels, because of the number of fuels we
have in different markets that if you don't have a refinery in
Texas, for example, our product typically doesn't go to
California, because the pipeline system, but also, but if they
have to produce a fuel for California, then it continues to
limit it. The supply issue would be even more of a problem on a
basis it seems like.
If the EPA on a yearly basis were to issue an LCFS that
reduces the average carbon intensity allowed for fuels, how
does that affect the economics of the fuels used in the FEP,
and how would it affect the FEP mandates?
Mr. Drevna. Well, Congressman, one of the concerns we have
with the draft as of right now, is we are getting mixed
signals. We are getting the signal that we want, we want
capacity expansion to go forward, on a refinery by refinery
basis, but yet, we are trying to add more and more renewables.
Now, and we understand renewables are going to play a very
vital role on a going forward basis, in the Nation's
transportation fuel mix. Again, one of the concerns, we have,
is that, and in our written testimony, we did say we are
putting the cart before the horse on this one, we are assuming
the advent of technology, and we are hopeful that the
appropriate technology, especially for cellulosic, will be
forthcoming.
Our concern is, and the way the bill is written now, the
waiver process, it is not the same as a waiver, as if we had a
pipeline outage or a refinery outage, where a certain area
can't get the fuel. We are talking a waiver where we would have
already put the capital in to make a certain kind of fuel, with
the renewable, that may or may not exist at the time we have to
deliver that product.
What we are suggesting is that the staff, the draft
legislation, allow the EPA Administrator to actually say within
a given timeframe, say, 2 years, there will be the quantity of
fuels needed on a commercial basis.
Mr. Green. OK. So, you don't think the EPA Administrator
has the ability, under this draft, to adjust either AFP or the
LCFS mandates if necessary?
Mr. Drevna. We don't see it under this draft. We see that
those numbers have to be implemented, and the waiver would take
place after the fact, whether or not they are available.
Mr. Green. Would you feel more comfortable, for a certainty
of investment, if the LCFS reductions, instead of using it on a
yearly basis, would be over a group of years, so that there
would be time to recoup investments, or even tool up to do?
Mr. Drevna. Well, Congressman, what we are suggesting is
that before these, what I think, whatever you would consider
these huge volumes of renewables be implemented, that the
Administrator make a determination that they actually are
commercially available. That is what we are asking for.
Mr. Green. Thank you, Mr. Chairman. As a guest, I won't
wear out my welcome.
Mr. Doyle. Thank you, Mr. Green.
We have two votes coming up on the House floor, but we
still have about 13 minutes, so I am going to recognize the
chairman of the full committee, Mr. Dingell, for his questions.
Mr. Dingell. Mr. Chairman, you are most gracious. Thank
you.
These questions are for Mr. DeCicco. Would the staff please
see to it that the flow sheet on fuel economy regulations is
put up on the screen, so that we can all have an understanding
of what it does. It is a delightful piece of work.
Mr. DeCicco, I hope that you and the rest of the panel will
take a look at this. Now, let us take a look, and I ask
unanimous consent, Mr. Chairman, that this be put in the record
of the committee.
Mr. Doyle. Without objection.
Mr. Dingell. Now, Mr. DeCicco, these questions will require
only a yes or no answer. When we started out on this business,
we had the Federal Government regulating fuel efficiency
through CAFE at Department of Transportation, and we had the
air pollution questions regulated by the Federal EPA.
Then, because of the California experience, they asked for
and got authority to have their own regulation of air
pollution, and that went on for a long time, until the recent
decision by the Supreme Court. Now, we have the potential, is
my statement that correct?
Mr. DeCicco. Yes.
Mr. Dingell. All right. Now, I want you to look at this
flow sheet. It tells you what a wonderful experience that we
are going to have, in terms of getting regulation under the
situation as we are looking at it, with the most recent Supreme
Court decision. And in that, you now have the Federal EPA
regulating air pollution. You have California and 10 other
States regulating air pollution. You have the Department of
Transportation regulating fuel efficiency. You will then have
the States regulating fuel efficiency by regulating carbon
dioxide emissions. Is that a fair statement?
Mr. DeCicco. I would like to check with counsel.
Mr. Dingell. No, no, yes or no. Is that a fair statement?
We are going to have all these wonderful folks regulating all
these things, and I am trying to figure out how we are going to
sort out this confusion, and whether you folks at EDF favor
that or not?
Now, please answer the question, because the clock is
running, and we have a vote coming up. Is the answer to that
question yes or no?
Mr. DeCicco. Yes, we favor this approach.
Mr. Dingell. OK. So, you favor it. Do you agree with me
that factually, the statement that I have made, with regard to
all these goodhearted folks regulating different things, is a
factual statement?
Mr. DeCicco. No.
Mr. Dingell. You don't. What is wrong with my statement?
Tell me in just a brief bit.
Mr. DeCicco. Under the Clean Air Act----
Mr. Dingell. No. Please tell me who regulates what, under
this, and what is wrong with the statement that I have made.
Let me give it to you again. DOT regulates fuel efficiency
under CAFE, and EPA regulates air pollutants. California and 10
States regulate air pollutants under their law. Now, under the
new change that the Supreme Court has brought forward, the EPA
will continue to do what it is doing, the States will continue
doing what they are doing, and DOT will continue doing what it
is doing. But the States and EPA will now get in and regulate
fuel efficiency, too, by regulating CO\2\, which is essentially
a substitute regulatory program for CAFE. Isn't that a true
statement? Yes or no.
Mr. DeCicco. No.
Mr. Dingell. Why is that statement not true?
Mr. DeCicco. Greenhouse gases are a much broader category--
--
Mr. Dingell. Is my statement about who is going to regulate
true or false? I hope you were listening. If you were not,
please tell us so.
Mr. DeCicco. In terms of the regulatory pathways, yes.
Mr. Dingell. Regulatory structure, I am not going by who is
going to, what is right or wrong. Is my statement factual?
Mr. DeCicco. Yes.
Mr. Dingell. I don't know how many regulators are getting
in there to regulate, but you have got a lot of people
regulating.
Now, please tell me how this regulatory system is going to
give expedited, sensible, balanced regulation that will
consider the whole problem of fuel efficiency, pollutants,
global warming, in an intelligent way? How do we set up a
structure which does that? I will ask you to submit that for
the record.
Mr. DeCicco. We will do that.
Mr. Dingell. I had hoped for better answers from you, Mr.
DeCicco. Maybe if you get a chance to submit in writing
something, we will have something we can deal with.
Mr. DeCicco. We will do that.
Mr. Dingell. Mr. McCurdy, what are your comments on this
matter?
Mr. McCurdy. Well, Mr. Chairman, there is no one in this
room, or probably in this building, that knows more about the
Clean Air Act and EPCA than you do, and you were there in 1963.
Mr. Dingell. Though is my statement with regard to all
these regulatory----
Mr. McCurdy. The structure is correct.
Mr. Dingell. Now the law, as it is interpreted by the
Supreme Court, going to be diligently administered?
Mr. McCurdy. Absolutely. There is going to be multiple----
Mr. Dingell. Dealing with all of this wonderful confusion
this is going to create, because you are going to have EPA
coming forward with one set of regulations, you are going to
have DOT coming forward with one set of regulations. You are
going to have the States coming forward with one set of
regulations. Each State is going to regulate both fuel
efficiency, and they are going to also regulate pollutants.
Now, with how many different regulators are we going to be
confronted with, and what is industry, and what are the
environmentalists going to do to get some kind of a rational
decision, where everybody isn't standing there quarreling with
everybody else about what is going to happen?
What we are going to have is going to be a magnificent
situation where nothing is going to happen, we are going to
have vast gridlock, and an enormous mess on our hands. Isn't
that right?
Mr. McCurdy. Yes, sir. This could be marketplace chaos, and
certainly, a lack of predictability for the industry, which
takes 3 years to develop a model, and 7 to 8 years to develop a
power train. How in the world can they develop these
technologies with all these multiplicity of regulatory agencies
involved?
Mr. Dingell. I would like to welcome my old friend, Mr.
Reuther. Mr. Reuther, you are a dear friend, tell us what this
says to you, please.
Mr. Reuther. What it says to us is that the industry will
have a much more difficult time economically trying to meet the
challenges of the new fuel economy standards.
Mr. Dingell. It will also afflict, will it not, the
environmentalists, who are going to have the same problems that
the industry has?
Mr. Reuther. That is true, and our concern, though, is that
if the industry has these difficulties economically, that is
going to translate into more job loss, more benefit loss, for
the workers and retirees in the industry.
Mr. Dingell. This regimen is going to create a tremendous
number of jobs. It is going to be in the legal profession,
because we are going to have a magnificent proliferation of
litigation.
Mr. Chairman, you have been very patient. Thank you.
Mr. Doyle. Thank you, Mr. Dingell.
We want to thank the first panel for your participation
today, and we are going to take a recess while we do these two
votes. We will come back and start the second panel.
Thank you very much.
[Recess.]
Mr. Matheson [presiding]. For our second panel for the day,
we have Mr. Alexander Karsner, who is the Assistant Secretary
for Energy Efficiency and Renewable Energy with the U.S.
Department of Energy, and we have Mr. Robert Meyers. He is the
Acting Assistant Administrator with the Office of Air and
Radiation, with the Environmental Protection Agency.
And gentlemen, we welcome you both. If you could summarize
your testimony in about 5 minutes, we would appreciate that,
and Mr. Karsner, we will start with you.
STATEMENT OF ALEXANDER A. KARSNER, ASSISTANT SECRETARY, ENERGY
EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY,
WASHINGTON, DC
Mr. Karsner. Thank you, sir. I would like to thank you, Mr.
Chairman, and members of the committee for the opportunity to
present the Department's views on the discussion draft
concerning alternative fuels infrastructure and vehicles.
While the administration has not had sufficient time to
evaluate or coordinate our agency views on the discussion
draft, I am happy to provide some preliminary comments.
This subcommittee conducted an oversight hearing on
alternative fuels on May 8, in which I testified on the
President's 20 in 10 plan. The President has called for a very
robust Alternative Fuel Standard, requiring the equivalent of
35 billion gallons of renewable and alternative fuel in 2017.
Many of the provisions of the discussion draft appear
consistent with the administration's policies, and may also
benefit from further review and discussion.
First, the discussion draft expands on the Renewable Fuels
Standard established by the Energy Policy Act of 2005 to
include alternative fuels, which is consistent with the
President's proposal. Encouraging the broadest range of fuel
technologies is critical to the type of transformational change
necessary to improve our Nation's energy security. We urge the
committee to adopt a more ambitious timeframe of substantially
decreasing projected gasoline consumption within the next
decade. The administration believes that we must have a
manageable timeframe for fuels and infrastructure deployment,
and that a 10-year goal is an ambitious and appropriate metric.
I would also urge the committee to consider an economic safety
valve, like the one included in the President's AFS proposal,
to provide obligated parties additional means to comply with
the Alternative Fuel Standard requirements.
Title 2 of the discussion draft, suggests a number of
possible steps towards building the infrastructure necessary to
support the domestic alternative fuels industry. Section 201
proposes a $200 million infrastructure development program. It
is not clear that Government grants and regulation alone can
sufficiently ensure the supply chain viability of the
production and delivery of alternative fuels. Creating a clear
major incentive to supply fuels, like the AFS, will be amongst
the most important tools to stimulate the necessary investment
in infrastructure.
The Federal Government's greatest contribution to energy
security is the enactment of durable policy that signals to
private investors in a predictable way our long-term commitment
to alternative and renewable sources of energy. If we are
serious about changing our Nation's energy portfolio, we must
unleash and enable the vast potential of our capital markets.
Government funding and regulation alone will be insufficient to
bring about the magnitude of change at the rate required to
address our critical security, economic, and environmental
concerns.
The challenge for large-scale, upfront investments in clean
energy is that the potential for outstanding returns must be
realized over extended period of time, or what is called the
lifecycle of the technologies used. This is true in the case of
alternative fuel biorefineries, solar rooftops, large wind
farms, nuclear power plants, energy efficient products, like
compact fluorescent lights, or transmission linking our clean
energy sources to our urban loads.
Though clean energy sources are domestically available and
generate little to no greenhouse gases, uncertainty over the
necessary technologies' lifecycle risks and capital costs
severely retards the amount and type of private capital being
deployed. Effective capital formation requires the Federal
Government to provide the necessary policy predictability and
economic climate that enables massive investments at an
accelerated rate.
Additionally, on the issue of infrastructure development,
the Department believes that an E-85 delivery system is an
important goal of an alternative fuels infrastructure, that
intermediate blends may also be a necessary and important goal.
Intermediate blends may provide for more rapid absorption of
renewable fuels into the consumer markets, and extend our
capacity to utilize alternative and renewable fuels.
As the Department begins to assess the impact of higher
blends of ethanol, and study their viability and potential, we
recommend that the committee consider a balanced approach for
all potential higher blends of biofuels deployment, especially
in any provisions related to retail, technical, and marketing
assistance.
Because flexible fuel vehicles can easily consume ethanol
blends up to E-85, it is important and essential to maximize
the availability of options, to scale clean biofuels deployment
as expeditiously as possible. This flexibility also ensures
that Government does not force the economy to over-commit to a
specific fuel class, given the many other potential alternative
fuels and technological pathways that may become available. In
addition, both the President and Secretary Bodman have
emphasized their concern over any potential artificial
impediments to biofuels infrastructure.
Finally, on the vehicles provisions, while the Department
believes that it is important to encourage domestic
manufacturing of advanced energy technologies, section 305,
which establishes a new Loan Guarantee Program for advanced
battery manufacturing facilities, may in fact duplicate
existing authority under EPCA title 17.
Mr. Chairman, the President has called for legislation that
he can sign on this issue with urgency, and there is clear
consensus that legislative action is needed to substantially
reduce our dependence on oil and deploy clean energy
technologies into the marketplace at an unprecedented scale and
rate.
The administration looks forward to working constructively
with the Congress and this committee to achieve the 20 in 10
goal, and deliver legislation that the President can sign this
summer.
This concludes my prepared remarks, and I would be pleased
to answer any questions the committee may have.
[The prepared statement of Mr. Karsner follows:]
Statement of Alexander Karsner
Mr. Chairman, members of the committee, thank you for the
opportunity to present the Department's views on the Discussion
Draft Concerning Alternative Fuels, Infrastructure, and
Vehicles, and to discuss programs under way in the Office of
Energy Efficiency and Renewable Energy (EERE) at the Department
of Energy (DOE) to accelerate the development and deployment of
renewable fuels and other alternative fuels that will reduce
our Nation's dependence on oil and enhance our energy security.
While the administration has not had sufficient time to
coordinate interagency views on the Discussion Draft, I am
happy to provide some preliminary comments.
This Subcommittee conducted an oversight hearing on
alternative fuels on May 8, 2007, at which I testified on the
President's ``Twenty in Ten'' plan. The President has called
for a robust Alternative Fuel Standard (AFS), requiring the
equivalent of 35 billion gallons of renewable and alternative
fuel in 2017. Many of the provisions in the Discussion Draft
appear consistent with the Administration's policies, and may
also benefit from further review and discussion.
First, the Discussion Draft expands on the Renewable Fuels
Standard established by the Energy Policy Act of 2005 to
include alternative fuels, which is consistent with the
President's proposal. Encouraging the broadest range of fuels
technologies is critical to the type of transformational change
necessary to improve our nation's energy security. However, I
would urge the Committee to adopt a timeframe of substantially
decreasing projected gasoline use within the next decade. The
Administration believes that we must have a manageable
timeframe for fuels and infrastructure deployment, and that a
10-year goal is an ambitious and appropriate metric.
I would also urge the Committee to adopt an economic safety
valve like the one included in the President's AFS proposal to
provide obligated parties additional means to comply with the
alternative fuel standard requirements. The economic safety
valve would allow obligated parties to purchase credits (priced
at $1 gasoline-equivalent) from the Federal Government. This is
intended to guard against ``price spikes'' where an
insufficient supply of alternative fuel or alternative fuel
credits drives up the prices.
Turning to title II, the Discussion Draft suggests a number
of possible steps toward building the infrastructure necessary
to support a domestic alternative fuels industry. Sec. 201
proposes a $200 million infrastructure development program. It
is not clear that government grants will ensure the supply
chain viability of the production and delivery of alternative
fuels. Creating a clear, major incentive, like the AFS will be
the most important tool to stimulate investment in
infrastructure.
If we are serious about changing our Nation's energy
portfolio, we must unleash the vast potential of capital
markets. The Federal Government's greatest contribution to
energy security is the enactment of durable policy that signals
to private investors our long-term commitment to alternative
sources of energy. Government funding alone will not be enough
to bring about the magnitude of change at the rate required to
address our critical security, economic, and environmental
concerns.
The challenge for large scale, up front investments in
clean energy is that the potential for outstanding returns must
be realized over an extended period of time, or the
``lifecycle'' of the technology's use. This is true whether
dealing with a solar rooftop, cellulosic biorefineries, large
wind farms, nuclear power plants, energy efficient products
like the compact fluorescent lamp, or transmission linking our
clean energy sources with urban loads. Though clean energy
sources are domestically available and generate little to no
greenhouse gases, uncertainty over the necessary technologies'
``lifecycle'' risks and costs severely retards the amount and
types of private capital being deployed. Rapid
commercialization of clean energy technologies requires
sophisticated capital risk management to facilitate complex
financial transactions. That risk assessment is what the
private sector does best. Effective capital formation requires
the Federal Government to provide the necessary policy
predictability and economic climate that enables massive
investments at an accelerated pace.
Additionally, as I have previously testified to this
Committee, the Department believes that an E85 delivery system
is an important goal of an alternative fuels infrastructure,
but that intermediate blends may be a necessary short-term
goal. Intermediate blends may provide for more rapid absorption
of renewable fuels into consumer markets in the near-term. As
the Department begins to assess the impact of higher blends of
ethanol, and study their viability and potential, we recommend
that the Committee consider a balanced approach for
intermediate blends and E85 deployment, especially in
provisions related to retail technical and marketing
assistance. Because flexible fuel vehicles can easily consume
any biofuel blend up to E85, it is important to maximize the
availability of options to scale clean biofuel deployment as
expeditiously as possible. This flexibility also ensures
government does not force the economy to over-commit to a
specific fuel class (e.g., E85) given the many other potential
alternative fuels that become available (e.g., bio-butanol or
other fuels that work in existing infrastructure). In addition
both the President and Secretary Bodman have emphasized their
concern over any potential artificial impediments to biofuels
infrastructure; however, our shared interest must be balanced
with a respect for freely negotiated private party
arrangements.
Finally, on the vehicles provisions, while the Department
believes that it is important to encourage domestic
manufacturing of advanced energy technologies, Sec. 305,
establishing a new loan guarantee program for advanced battery
manufacturing facilities, but duplicates existing authority
under EPACT Title XVII.
There is clear consensus that legislative action is needed
to substantially reduce our dependence on oil and deploy new
energy technologies into the marketplace at an unprecedented
scale and rate. The administration looks forward to working
constructively with the Congress to achieve the ``Twenty in
Ten'' goal, and deliver legislation for the President's
signature this summer.
Supporting the ``Twenty in Ten'' and longer term clean
energy goals is the Department's portfolio of research,
development, and commercialization activities. The Department
is particularly focused on solving technical problems to
overcome barriers to biofuels growth, including infrastructure,
through forging strategic cost-shared partnerships with private
industry, collaborating with other agencies, and working with
the different regions of our country to bring the promise of
biofuels to fruition. We believe that a multi-pronged effort
will expand the role of alternative fuels in our Nation's
energy supply and economic future.
Bioenergy Research and Development
EERE's Biomass Program and Vehicle Technologies Program, as
well as other Department programs such as those within the
Office of Science, are working closely together to overcome
barriers to advancing technology pathways to help support
achievement of the ``Twenty in Ten'' goal. The Office of
Science is conducting basic research for breakthroughs in
understanding the systems biology of biofuel-producing
organisms and bioenergy crops that could lead to cost
reductions for cellulosic ethanol and other biofuels. To
accelerate the transformational scientific breakthroughs
necessary for cost-effective production of biofuels and
bioenergy, including cellulosic ethanol, the Office of Science
is investing $375 million over five years to support the
establishment and operation of three Bioenergy Research
Centers. These centers, selected by competitive, merit-based
scientific review, will conduct comprehensive,
multidisciplinary research programs on microbes and plants to
develop innovative biotechnology solutions to energy
production.
EERE and various U.S. Department of Agriculture (USDA)
agencies conduct the applied research for advancing biomass
feedstocks and conversion technologies for biorefineries.
Currently, ethanol is the renewable fuel with greatest market
penetration and potential for both near and long-term
displacement of gasoline. EERE's Biomass Program is focused on
making cellulosic ethanol cost-competitive by 2012, a target
put forth in the President's 2006 Advanced Energy Initiative
(AEI).
Recently, Secretary Bodman announced the availability of up
to $200 million for cellulosic biorefineries at 10 percent of
commercial scale, subject to appropriations. This effort will
help enable industry to resolve remaining technical and process
integration uncertainties and allow for more predictable, less
costly scale up of ``next generation'' biorefinery process
technologies. The 10 percent- scale demonstrations have the
potential to help reduce the overall cost and risk to industry
and contribute to the quicker commercialization of larger-scale
facilities. Additionally, DOE will invest up to $385 million
for as many as six commercial-scale biorefinery projects over
the next four years, subject to appropriations. The EERE
Biomass Program will continue in FY 2007 to support its cost-
shared efforts with industry to develop and demonstrate
technologies to enable cellulosic biorefineries for the
production of transportation fuels and co-products.
Ethanol and Biofuels Infrastructure Development
The Department is working with other public and private
sector partners to encourage development and deployment of a
biofuels distribution infrastructure in the United States to
provide for displacement of gasoline and increased consumer
choice. To support this effort and help promote growth of the
biofuels industry, the Department has developed a biofuels
infrastructure team. This team works to promote convergence
between Vehicle Technologies and the Biomass Programs to
promote a biofuels industry and commercially competitive
alternative fuels and vehicles. Currently, there are more than
six million flexible-fuel vehicles (FFVs) on the road in this
country, a significant number, but still a relatively small
percentage of the approximately 225 million light duty vehicles
in the U.S. One goal is to expand the use of biofuels. Another
goal is to encourage all automobile manufacturers serving the
U.S. market to meet and exceed state voluntary targets for
increasing sales of FFVs? and significantly increase production
of FFVs.
In support of these goals the Department is pursuing a
number of infrastructure activities, including analyses of
pipelines, water issues, and advanced vehicle technologies. The
biofuels infrastructure team is also assessing the impacts of
higher-level intermediate blends of ethanol (e.g., E-15 and E-
20), renewable fuels pipeline feasibility and materials
research, and optimization of E85 alternative fuel vehicles.
This work is being coordinated with the Department of
Transportation, which has responsibility for setting integrity
management standards for pipeline transportation and ensuring
that these products can be safely handled, and with the
Environmental Protection Agency, which has responsibility for
testing the emissions impacts of fuels and vehicles, and
registering and certifying fuels and fuel additives before they
can be used in the transportation system. Such research,
analysis, standards and safety regulation is an appropriate
role of government in supporting infrastructure deployment.
The Vehicle Technologies Program has embarked on several
new efforts to address vehicle efficiency, beyond ongoing
combustion and fuels research. These new efforts include
evaluation of the Biowagon produced by SAAB, a manufacturing
subsidiary of GM, which is sold exclusively in Europe and has
been reported to use ethanol-based fuels much more efficiently
than current U.S. FFVs. Another new effort is focused
specifically on optimizing engine efficiency with biofuels.
These projects are aimed at mitigating the lower energy content
of biofuels. The program is also evaluating other biofuels such
as biodiesel that may contribute to future gasoline
displacement. And, Vehicle Technologies has initiated an effort
to engage international collaborations to address fuel
standards, data sharing, and other common interests.
Interagency Energy Partnerships
In addition to infrastructure and fuels research within the
Department, there are important collaborations with other
Federal agencies and entities, including the Interagency
Biomass Research and Development Board, which I co-chair with
USDA. The Board is the governing body that coordinates biomass
R&D activities across the Federal Government. In November 2006,
DOE hosted the National Biofuels Action Plan workshop in
Washington DC, where representatives from multiple Federal
agencies came together to identify agency roles and activities,
assess gaps and synergies, and begin developing agency budgets
in the area of biofuels. The Federal participants also made
recommendations for improved coordination and collaboration
across Federal agencies. Input from the workshop is currently
being collected into the National Biofuels Action Plan workshop
report. Ultimately, the goal is to improve the Board's ability
to provide coordinated Federal support for biofuels production
and use.
DOE is also working with the Regional Biomass Energy
Feedstock Partnerships with USDA and the Sun Grant Initiative
universities, which are funded through the Department of
Transportation. These partnerships will help to identify the
regional biomass supply, growth, and biorefinery development
opportunities. We believe that using regionally available
feedstocks, produced and processed locally, promotes a
``distributed'' transportation fuels approach that may reduce
shipping and transportation issues. These regional partnerships
are designed to collect and store data on a publicly available
Web site.
Financial Incentives
To provide increased incentives for financing a multitude
of innovative energy technologies, including biofuels, EPACT
2005 included a provision in Title XVII for a DOE Loan
Guarantee Program. With its central focus on innovative
technologies to avoid, reduce, or sequester air pollutants or
anthropogenic greenhouse gas emissions, the Loan Guarantee
Program provides broad authority for DOE to guarantee loans
that support early commercial use of advanced technologies,
including potentially cellulosic biorefineries that employ new
or significantly improved energy technologies.
I am pleased to report that the funding contained in the FY
2007 Continuing Resolution is allowing the Department to move
forward in implementing the Loan Guarantee Program. We have
published for public comment a Notice of Proposed Rulemaking to
implement the program; the public comment period closes July 2.
Secretary Bodman has said that our goal is to have a high-
quality program, and the Department is working to do just that.
As you know, the Department undertook a process in FY 2006 to
solicit pre-applications for the first round of loan guarantees
and those pre-applications are currently undergoing technical
and financial reviews.
The President's ``Twenty in Ten'' goal holds the promise of
accelerating penetration of cellulosic ethanol and other
alternative fuels into the marketplace and bringing the
benefits of a clean renewable and alternative energy source
more quickly to our Nation. To meet these challenges, cutting
edge research, development, deployment, and commercialization
must be supported by transformational policy changes--the types
of proposals that the President articulated in the State of the
Union. The Administration looks forward to working with
Congress to shape policies and legislation that will make this
happen. This concludes my prepared statement, and I would be
happy to answer any questions the committee members may have.
----------
Mr. Matheson. OK. Thank you, Mr. Karsner. And now, Mr.
Meyers, we will hear from you.
STATEMENT OF ROBERT J. MEYERS, ACTING ASSISTANT SECRETARY,
OFFICE OF AIR AND RADIATION, ENVIRONMENTAL PROTECTION AGENCY,
WASHINGTON, DC
Mr. Meyers. Mr. Chairman and members of the subcommittee, I
appreciate the opportunity to appear before you today, and to
provide testimony regarding your June 1 discussion draft.
As you know, the June 1 discussion draft contains many
provisions affecting motor vehicle and fuel programs,
alternative fuel infrastructure, and Corporate Average Fuel
Economy standards for passenger vehicles and light trucks.
The discussion draft also extends and expands certain
programs established by the Energy Policy Act of 2005, and
imposes new requirements respecting biodiesel standards,
flexible fuel vehicle production, and tire efficiency. EPA has
experience and expertise in many of the areas addressed by the
legislation.
As noted in my prepared testimony, there has not been
sufficient time for interagency review of the legislation, and
therefore, the administration does not have a statement of
position. However, a few initial observations can be made.
First, the Alternative Fuel Program established in the
draft is similar to the administration's Alternative Fuel
Standard legislation in several important respects. The
discussion draft would expand the existing RFS definition to
include many alternative fuels contained in the AFS, and in the
Energy Policy Act definition of alternative fuels.
The discussion draft also incorporates many of the
implementation measures specified in the AFS, including use of
identification numbers and compliance values to demonstrate
compliance. Some of these measures were pioneered in EPA's
recent rulemaking implementing the Renewable Fuels Standard.
The draft also provides for a similar enforcement of fuel
requirements, and for a transition between the current RFS
credit system, and credits used in the new program.
The discussion draft, however, also differs in important
respects from the AFS legislation. The legislation would not
require 35 billion gallons of renewable and alternative fuel
use until 8 years after the schedule provided in the AFS. As
you know, setting an aggressive schedule for alternative fuel
use was an important part of the AFS and the President's 20 in
10 initiative.
The discussion draft also incorporates a Low Carbon Fuel
Standard as part of the Alternative Fuel Program, starting in
2013. The standard is additive to other requirements, and
assumes or sets a standard for average carbon intensity, based
on assumptions about volumes associated with three different
levels of carbon intensity. The draft also does not incorporate
the temporary annual waiver structures contained in the
President's proposal, or incorporate an economic safety valve,
to guard against price fights for alternative fuels and
alternative fuel components.
The discussion draft additionally adds a new title to the
Clean Air Act for the first time in 17 years. The title
contains the aforementioned Low Carbon Fuel Standard plus
greenhouse gas reporting requirements for motor vehicles. It
also amends sections 202 and 211 of the current Clean Air Act
to effect EPA regulatory authority concerning fuel and new
motor vehicle standards. It additionally adds new criteria to
section 209 in the Clean Air Act concerning waivers of
preemption for State standards on new motor vehicles and new
motor vehicle engines.
The President provided a bold plan for decreasing our
Nation's dependence on oil in his State of the Union speech,
and in his subsequent calls for action on his 20 in 10
legislation. EPA stands ready to draw upon its considerable
analytical and technical expertise, and work with this
subcommittee and the full committee as you move forward to
consider the discussion draft or other related legislation.
Again, I appreciate the opportunity to testify, and stand
ready to answer your questions.
[The prepared statement of Mr. Meyers follows:]
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Mr. Matheson. Well, thank you, Mr. Meyers. We will start
with our questions. I guess the Chair will recognize himself
for 5 minutes.
Both of you mention the 20 in 10 proposal that the
President made, I believe in the State of the Union address
when we first heard about it. The discussion draft that we are
talking about today pursues a comparable amount of gallon
savings, I believe, over a longer period of time.
Is there, can you help me out, what was the data, or is
there an analysis that shows how to achieve the 20 in 10, and
that that is the right timeframe for doing that, or can you
share with us how that number was arrived at, and that
timeframe?
Mr. Karsner. Well, sir, it is not a central plan, in the
sense that the Government is going to plan out how 20 in 10
will happen. What we do is actually assess the state of the
technology--and our most recent data validating that
technology--and in terms of when we believe it will be
available to enter into the marketplace. Then, the question is,
if the technology is available, and capital is not a
constraint, what will be the policies necessary to enable the
outcome?
And so, 20 in 10 does not say well, here is 16 percent
electricity, and 23 percent biofuels, and everything else. We
basically look at all the tools that we have in the tool chest
to displace gasoline consumption, including efficiency, and
then make a calculated guess. If the President were to get a
mandate for alternative fuels, what would be the most
aggressive and ambitious timeframe that could be pursued? That
was the task.
Mr. Matheson. Recognizing you haven't had a lot of time to
review the discussion draft, does the administration have a
position on the fact that this discussion draft has a longer
period of time to achieve the 20 percent savings, if you will?
Mr. Karsner. I think in general, as I say, we commend the
spirit and intent, that we are happy to see in both chambers,
that legislation is moving. But the administration's position
generally is that a sense of urgency requires more and faster.
Mr. Matheson. To the extent that there was an analysis of
the existing technology in your projection of where the
technology is going to be, I think it would be helpful to have
that provided to the committee, because that was an open item,
if you will, as I understand it, at discussions among members
of the committee about the data that was the basis for the 20
in 10 proposal.
And I think this committee discussion draft made a
decision, based on its estimate of where technology was going
to go. That is why it is the longer period. So, it would be
good to have that discussion, and figure out the data to help
us find what is a good, aggressive, but also achievable goal.
Next question. In terms of the provisions in the discussion
draft about trying to roll out an ethanol or E-85
infrastructure, we have had a lot of discussion we did with the
first panel about it. It is the chicken and egg challenge that
we have to face. Are you comfortable with the approach the
discussion draft has taken? Do you have suggestions for
amendments for that, or additions that we ought to be looking
at? What are your thoughts on that issue?
Mr. Karsner. We really don't have any sort of formal policy
position, because of the short timeframe to look over the
precise texts in the discussion draft, but knowing what that
issue is, dealing with the regularity, thematically, our
thoughts are chronically the same, that we need as much as
possible as early as possible. I know, and of course, we would
be happy to offer technical assistance--but the truth is, when
you talk about incrementalism, and year by year buildups, when
you tend to think of these things, as well, we are taking the
whole fleet, so that if we get 70 percent in year X of flex
fuel vehicles, we have taken care of 70 percent of the fleet.
But in the meantime, doing it incrementally, we are still
putting out many more cars that are non-flex fuel. In effect,
we are foreclosing on the options for vehicles when in fact,
the flex-fuel that option is available at a very incremental
and marginal cost.
Mr. Matheson. Do you think, in terms of, since you are
involved in the renewable energy side of things, in terms of
the development of cellulosic ethanol, and creating an
infrastructure where we actually produce that, are there policy
issues we have not addressed in this legislation? Is there a
research and development component we ought to be looking at?
What public policy decisions should we be making to help
encourage that industry to become actually viable in this
country?
Mr. Karsner. I think you all, I think the Congress
discussed right now, in real time, the most important issues.
How does that market have some degree of predictability and
foresight, as to allow people to invest in it? As I said, the
technology, there is no need for a super technology
breakthrough. It is process integration. It is standing up a
commercial facility that is replicable. The Department has now
funded at least six that are meant to be commercial scale and
operable by 2012, and so, to replicate that, to proliferate
that, to have confidence in the capital markets to continue
into biofuels and other technologies, Congress needs to act on
this durable timeframe.
Mr. Matheson. OK. I appreciate your response. My time has
expired. We will recognize Mr. Walden now for 5 minutes.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Karsner, I would like to know, one of the issues that
we are dealing with is this dispute over whether we are doing
anything on global greenhouse emissions in the United States
versus other countries, and whether we are lagging or not.
Can you talk to me a little bit, having just gotten back
from Europe, it seems like when it comes to air quality,
certainly, we are ahead of the Europeans by a long measure, and
when it comes to us lagging versus them, what are the sorts of
things we have done, what do we need to do to deal with this?
Mr. Karsner. Well, with all due respect, sir, I don't
accept the predicate of the question, which is that we are
lagging at all when it comes to greenhouse gas emissions. I
know rhetorically that seems to be the discussion at hand, but
if you measure this country's progress, not by the rhetoric,
but by the reality of the record, we are doing those things
that are necessary to reduce greenhouse gas emissions in
practice faster. That is to say, we are deploying low emission
and zero emission generating sources faster and more abundantly
than anyone else in the world last year. So, it is very
difficult to say what do we need to do to get on par.
Mr. Walden. The President announced last week a plan to
bring together the biggest emitters in the world, including
China and India, and some of the other countries that are not
part of the G8. Can you tell us how that proposal may work to
actually get everybody in the same room, that are not now under
Kyoto, in the Kyoto Accords?
Mr. Karsner. Right. Well, I think that is quite important,
because some of those people that haven't been in the same room
that you have just named, China and India, for example, are
amongst the fastest growing economies on Earth. It is predicted
that next year, China will have more greenhouse gases than this
country, be the largest greenhouse gas emitter on Earth, and
so, it is very difficult to have a substantive discussion
without all the parties, the serious emitters, if you are
serious about the end goal. We have been doing that through the
Presidential Initiative, the Asia Pacific Partnership, which
accounts for about 53 percent of the greenhouse gas emissions,
including India and China. We are now wanting to expand that,
to include our European allies and friends in the other
industrialized nations of the world, to have a much more
practical bottom up approach about deploying the technologies
that will make a difference.
Mr. Walden. And isn't that really the issue, is getting the
technologies that work, and then making them available to the
developing world?
Mr. Karsner. To my knowledge, sir, there are only three
means to deal with greenhouse gas emissions. There is an
increase in efficiency, there is an increase in alternative
carbon displacing sources of supply, and there is curtailment
of economic growth. This country prefers doing the former and
not the latter, and so, we are seeing continued robust growth
at the same time that we are, in fact, deploying technologies
very fast.
Mr. Walden. Now, are either of you familiar with the
various attempts to get at carbon sequestration in coal plants,
for example? We went out to visit one, in theory, to watch, in
Germany, the sequestration of the carbon dioxide of the coal
plant. We never quite got, we got to the plant, we never quite
saw the technology at work. They are still under construction.
Can you speak to me about where technology stands when it
comes to reducing carbon emissions from coal plants?
Mr. Karsner. Regrettably, the fossil fuel is actually
outside of my domain, but what I can say from the experience I
have had with carbon-based fuels and in the Department, is that
the entire program, the Federal program that the Department of
Energy dedicated to coal, is dedicated to clean coal technology
and deployment, including carbon capture and storage. And so,
this Nation invests substantially in that, and I think is
working collaboratively with the Europeans to that end.
Mr. Walden. And Mr. Meyers.
Mr. Meyers. Yes and EPA has also been working in this area.
One they are working with regard to is the underground
injection standards that, and guidance at this point in time.
And then, also, we have been working with advanced coal
technology. We would be happy to provide the information.
Mr. Walden. I would really like to get that, because as we
try to put standards in place, we need to know the technology
is there. It was there when we put the cap and trade provisions
in place to get sulfur dioxide emissions out of coal plants. It
was a known technology, the scrubbers you could put on, and I
am not sure we have the same technology available to us, so
that would be helpful.
Additionally, there are issues that were raised to us about
legal implications. Apparently, in Europe, carbon is treated as
a waste, and it is illegal to dispose of a waste underground.
And I am wondering about those sort of legal issues that may
accompany any activity here, to put what would be a waste
underground.
Mr. Meyers. There could be legal issues. Again, we will
provide more for the record. There could be issues under
statutory law, both, and common to----
Mr. Walden. I would appreciate some followup on that. That
would be helpful. And also, what happens if it comes back up
after you inject it and all of that.
Finally, there are those who have said that this
legislation would overturn the recent Supreme Court decision,
Massachusetts v. EPA. Do either of you, in your reading of this
bill, believe that to be the case?
Mr. Meyers. The bill does have provisions with respect to
amending parts of the Clean Air Act. The effect of these
provisions is really to say that the authority in the new title
7 regarding motor vehicles and fuels, regarding greenhouse gas
emissions from motor vehicles and fuels, is limited to the
authority in the new title 7. So, it is sort of, it is not a
legal term, but it is a sort of a dependency clause, is that
within the Clean Air Act, we will put a new title, and here is
where we will locate EPA's authority for greenhouse gas and
motor vehicles.
The Supreme Court decision had a number of holdings. One of
them, which was that EPA had the authority under the Clean Air
Act to regulate greenhouse gas emissions from new motor
vehicles. So, certainly, the legislation could be read to
effect that opinion. I would be happy to provide more for the
record, in terms of whether, from our general counsel's
perspective, et cetera, we thought it would overturn the
decision.
Mr. Walden. All right. I appreciate that. Thank you, Mr.
Chairman.
Mr. Matheson. Thank you. The Chair would now like to
recognize the ranking member of the full committee, Mr. Barton,
if he has questions.
Mr. Barton. I thought it was the Democrats turn.
Mr. Matheson. Well, we are going to let you go now.
Mr. Barton. OK. Walk in the room, get recognized. OK. Good
deal.
Well, let me preface what I am about to say. The question
is that I am really trying to find a way to be supportive of
the process and of the draft, but I have some really tough
concerns about it.
My first question, I guess, would be to the gentleman from
the EPA, Mr. Meyers. The current ethanol mandate that we have
in law, that we put in the Energy Policy Act 2 years ago, is, I
want to say about 7?
Mr. Karsner. 7.5 in 2012.
Mr. Barton. And we are already past that, right?
Mr. Karsner. We are not past it actual use. We project that
we will pass it well before 2012.
Mr. Barton. OK.
Mr. Meyers. The actual use, I think, in the last year was
somewhere around 5, but we would project, and EIA does project
that we will far exceed 7.5 by the----
Mr. Barton. Now, the discussion draft sets, increases that
mandate for corn, I think for corn-based ethanol, to 12 billion
gallons. Is that correct?
Mr. Meyers. Well, the discussion draft is a little complex
in the way it addresses these issues. It creates a new mandate,
like the AFS, and it is ramped up to 35 billion gallons by the
year 2022 or 2025. But then, it also has a Low Carbon Fuel
Standard. If you read the provision in the Low Carbon Fuel
Standard added to the requirement, and it effectively says the
levels would be 12 billion gallons from carbon fuels of 80
percent or less. What that means, sort of, in translation is
our current estimate of GHG offset for a fuel like ethanol is a
little bit over 20 percent, so fuels would seem, it would seem
to be 12 percent, or 12 billion gallons for corn-based ethanol
and there are other fuels that are in that range.
Mr. Barton. Well, let me ask a little bit different
question a little bit different way. Would it be possible to
fence off the current ethanol mandate for corn-based ethanol,
then create a new mandate for cellulosic ethanol, and then a
different mandate for other alternative fuels that are not
corn-based or cellulosic ethanol? Is that technically possible?
Mr. Meyers. It is technically possible. I would just say
that the current mandate is for renewable fuel, and not
specifically for corn-based ethanol, so there are a number of
fuels which qualify for the current Renewable Fuels Standard.
Mr. Barton. Well, I am told that we are about to max out
the amount of ethanol we can get from corn grown in the United
States. So I don't see a lot of sense, and this is as much for
Mr. Dingell and Mr. Boucher as it is for the witnesses, I don't
see a lot of sense in increasing a mandate on something that
the market is going to take care of and max out.
Now, I will buy the approach that for the cellulosic
ethanol, we may need to create a mandate to jumpstart that. In
the discussion draft, it says they get, cellulosic ethanol
gets, each gallon is worth, I think, 2.5 gallons, so I
understand that. So, what I am trying to begin to think about
is let us fence off the current mandate, let us create,
perhaps, some new mandates, and then grow those.
If we were to do that, and I haven't talked to either
Boucher or Dingell, is that something the administration might
want to look at, too?
Mr. Meyers. We would be happy to work with the ranking
minority member, and we would be happy to work with the
committee on any ideas that the committee would want to put
forward. We haven't taken a position on the discussion draft,
and we have our bill, which we are, of course, in favor of. We
could get back to you on the specifics, though.
Mr. Barton. OK. Let me ask Mr. Karsner, are you aware of
how much gasoline is currently consumed in the United States
today on an annual basis?
Mr. Karsner. I believe it is approximately 140 billion
gallons.
Mr. Barton. Our number is 160, but if you say 140, we
will----
Mr. Karsner. We will check with EIA.
Mr. Barton. That is only 20 billion off. That is pretty
good.
Mr. Karsner. Well, thank you. It is a billion here and
there.
[Mr. Karsner responded for the record:]
EIA's monthly supply surveys indicate that the total U.S.
gasoline consumption in 2006 was approximately 141.5 billion
gallons.
Mr. Barton. Do you know how much ethanol it will take to
make E-10 penetrate the gasoline market as it exists today?
Mr. Karsner. We thank that is going to be in the
neighborhood, because you probably won't have a 10 percent
displacement all across the country, Texas in the summers, and
Florida, et cetera, probably going to be closer to the
neighborhood of 12 to 13 billion gallons.
Mr. Barton. So, if you use 140, 10 percent of 140 is 14, if
it is 160, 10 percent of 160 is 16.
Mr. Karsner. Certainly.
Mr. Barton. Do you agree or disagree that the ability to
create ethanol from corn is about 12 billion gallons?
Mr. Karsner. That comports with current estimates from
Department of Agriculture.
Mr. Barton. From corn. Now, what if we repeal the current
ethanol tariffs? How much ethanol could we import, if we didn't
have the tariffs and the quotas?
Mr. Karsner. We are not seeing anything that suggests that
there is a surplus of ethanol on global markets that would make
a substantial difference right now. There is a potential for
that growth, particularly in Brazil and in the Western
hemisphere, but----
Mr. Barton. So, we can't really import much. We can't grow
much. So, this new mandate in the discussion draft is really a
cellulosic ethanol mandate, logically.
Mr. Meyers. Well, Mr. Chairman, I would say there are
provisions in the bill, with regard to the Low Carbon Fuel
Standard, that require that 50 percent of the remaining volume
of AFS have a carbon intensity equal to 25 percent of the
carbon intensity of gasoline. Right now, according to our
figures, I think the only fuel that would qualify would be
cellulosic, under that figure of 25 percent.
Mr. Barton. And again, I haven't had a detailed
conversation with Mr. Boucher or Mr. Dingell, but this, and my
time expired a minute and 28 seconds ago, but it really looks
like the discussion draft is more about creating a new mandate
for cellulosic ethanol.
Mr. Meyers. It would depend on how you read the language of
the bill. We are in the process of doing that. The bill says
that one should assume the Alternative Fuel Standard is met as
follows, and then, indicates that the 25 percent carbon
intensity figure, which as I indicated, at this point in time,
cellulosic.
Mr. Barton. Now, I got those answers when you used to sit
behind me. I yield back, Mr. Chairman, and I hope I am given
another 5 minutes after everybody else is given their first 5
minutes. Thank you, sir.
Mr. Matheson. OK. Thank you. The Chair recognizes Mr.
Stupak from Michigan for 5 minutes.
Mr. Stupak. Well, thank you, Mr. Chairman.
Mr. Meyers, if I may, I have a number of questions I would
like to ask you about the court case Massachusetts v. EPA.
Congress clearly intended the Department of Transportation to
regulate motor vehicle fuel economy when it established the
CAFE, Corporate Average Fuel Economy Program in 1975, which has
really served as the only effective constraint on greenhouse
gas emissions throughout the economy for over 30 years. In
establishing these standards, DOT must consider economic
practicability, technological feasibility, and the effect of
other motor vehicle standards on fuel economy. Congress also
set out many specific provisions related to these standards in
statute, and exactly how rulemaking should be conducted.
When the Supreme Court interpreted the Clean Air Act to
authorize the EPA, and by proxy, California, if you will, to
regulate the vehicle fuel economy through tailpipe emissions of
CO\2\, it did not set out any specific criteria for setting
these new standards, did it?
Mr. Meyers. Congressman, we are still assessing the Supreme
Court case and its implications for the Clean Air Act. However,
you would be correct that, or it is my review of the case, that
there would be nothing that said exactly how----
Mr. Stupak. Right. The Court didn't lay out any
specifications there, or criteria, I should say. Other than one
sentence, then, and I am quote now from the ruling: ``The two
obligations may overlap, but there is no reason to think that
two agencies cannot both administer their obligations, and yet
avoid inconsistency.'' But yet, the Supreme Court did not
explain how EPA should reconcile its new authority and
resulting regulations with that of DOT's specific statutory
mandate, did it?
Mr. Meyers. I am unaware of anything in the Court opinion
which would do that.
Mr. Stupak. So, the answer to that would be no, then,
right? Because the Court did not explain how EPA should
reconcile its authority.
Mr. Meyers. I have read the case, and I caution that it is
the legal opinions that are difficult to render, but I am not
aware of anything in the case that would tell, instruct that.
Mr. Stupak. Well, I agree when the Supreme Court made its
decision, it is directing EPA and DOT to do certain things. In
the court case, and not necessarily attorneys would be
administering this, so that is why I was trying to look for
some specific criteria.
Mr. Meyers. Sure.
Mr. Stupak. The Supreme Court did not instruct the EPA to
reconcile its new authority under the Clean Air Act with that
of the Department of Transportation, as set out by Congress,
did it?
Mr. Meyers. No.
Mr. Stupak. OK. Let me ask you this question. If EPA and
California both issued different standards, without regard for
the requirement Congress placed on DOT, it is possible that
there could be three separate conflicting standards which
vehicle manufacturers would have to comply with, then, right,
DOE, EPA, and California?
Mr. Meyers. If the California standards met the waiver
criteria under 209 in the Act, and EPA essentially granted a
waiver, the California standard, EPA could. We have made no
decisions on how we are responding to establish a standard.
Mr. Stupak. Right.
Mr. Meyers. And then, my presumption is you are referring
to a third standard being CAFE standards.
Mr. Stupak. Correct.
Mr. Meyers. Yes, that is----
Mr. Stupak. You have three different standards.
Mr. Meyers. Yes.
Mr. Stupak. The conflicts that I am referring to are not
really just about numbers and stringency. There could well be
different standards applying to different types of vehicles,
for each of these category regimes, with no requirement how
they are going to be harmonized. Isn't that correct?
Mr. Meyers. It is at least theoretically possible, yes.
Mr. Stupak. OK. So, for example, DOT is required to
establish standards for passenger cars separately from light
trucks, and manufacturers are required to comply with DOT
passenger car standards for both their foreign and domestic
fleet. Neither of these requirements would be placed on the EPA
or California under the Supreme Court's interpretation of the
Clean Air Act, would it?
Mr. Meyers. Those requirements are not contained in the
Clean Air Act. They are only contained in the CAFE statute.
Mr. Stupak. So, it would not apply, then, to California or
EPA, underneath the Supreme Court's interpretation?
Mr. Meyers. The EPA would not be restricted by those
provisions.
Mr. Stupak. OK. In fact, the Clean Air Act, as interpreted
by the Supreme Court, does not require the EPA or California to
set standards as a fleet-wide average, and certainly, no
requirement that they utilize the complex averaging system
undertaken by the DOT. Isn't that correct?
Mr. Meyers. There is nothing in section 202 of the Clean
Air Act which requires a fleet-wide standard.
Mr. Stupak. Well, then, it is possible that even under the
best of circumstances, that vehicle manufacturers would have
difficulty complying with these conflicting standards, and in
the worst case scenario, it could be impossible for a vehicle
manufacturer to comply with these conflicting regulations, if
you get three different standards put forth by three different
entities. Correct?
Mr. Meyers. I wouldn't be able to predict how these
authorities will be exercised or not exercised by DOT or EPA
with any degree of certainty at this point in time, so I can't
predict the outcome. I think my responses have accurately, or
to the best of my ability, provided accuracy in terms of the
authority, that your question goes to, what would the net
result of exerting that authority be, and I am not in a
position to be able to predict that.
Mr. Stupak. If we have three different regimes, three
different standards, depending on some cars, if it was
domestic, foreign, light truck, small truck, passenger,
correct?
Mr. Meyers. These are, yes, possible, yes.
Mr. Stupak. And the requirement that would be made, or
placed on the manufacturers of vehicles in this country,
correct?
Mr. Meyers. Well, the EPA's authority goes to new motor
vehicles in this country, and those vehicles and engines
imported for use in this country. I am not sure about CAFE
authority for DOT. You would have to let them respond.
Mr. Stupak. Thank you.
Mr. Meyers. Thanks.
Mr. Stupak. Thanks for your time.
Mr. Matheson. The Chair recognizes Mr. Hall from Texas for
5 minutes.
Mr. Hall. I thank the Chair. I really didn't intend to ask
any questions. I wanted to be sure the API energy statement
made it in. And in sense of my being here, will be allowed to
put in the usual questions later?
Mr. Matheson. Absolutely. Written questions, absolutely.
Mr. Hall. Questions later.
Mr. Matheson. Right.
Mr. Hall. Then I will ask just one question, for fear that
Sonja Hubbard did get into it, and I will ask, I guess, Mr.
Karsner.
Section 203 would require retailers to install very
expensive E-85 facilities to serve customers that they say may
or may not exist. Does DOE agree that the 15 percent threshold
is appropriate?
Mr. Karsner. Well, sir, I would begin by saying the
customer exists in every citizen. The question is whether the
value proposition for the customer to buy it is the right value
proposition, and so then, the question becomes if you have the
right value proposition, how much is enough? And what we would
like to do is have as much as possible as early as possible,
priced correctly for the market. So, we are more ambitious in
the amount than 15 percent.
Mr. Hall. What is appropriate?
Mr. Karsner. You are asking----
Mr. Hall. Just give me your best educated guess or your----
Mr. Karsner. Well, we think there is a minimum threshold to
begin with, that about a third of the stations need to have
infrastructure for E-85 to become viable, so that is already
50,000 to 70,000 stations, and that is a third. There are
reports and laboratory analysis that would say it would have to
be much higher in order to reduce the amount of drive time and
search time by your average user, to know that they could
reliably go to the gas station and use it. So, it shouldn't
have to be a chore to go find a station, and we think that at a
minimum, that is about a third of the stations out there.
Mr. Hall. Should the Federal Government be making these
decisions?
Mr. Karsner. Well, the President's policy is certainly that
we should be putting in place a mandate that guarantees a
sufficient amount of supply for the market to allocate that
through retail outlets appropriately. I think the challenge for
Congress right now is to try to understand what the state of
the markets, can we extrapolate whether the market will, in
fact, take those actions. We have incremental Government
programs that do this today, both through tax credits, tax
policies, and through our Clean Cities Programs for deploying
infrastructure, but clearly, those are insufficient to get to
the numbers you are inquiring about.
Mr. Hall. Well, I really thank you, and I may have some
followup questions on that, but if I do, I will submit them.
Mr. Karsner. Yes, sir.
Mr. Hall. And I thank both of you. Good to see Mr. Meyers
again.
Mr. Karsner. Thank you, sir.
Mr. Matheson. Thank you, Mr. Hall. The Chair recognizes the
chairman of the full committee, Mr. Dingell, for 5 minutes.
Chairman Dingell. Mr. Chairman, I thank you for that
courtesy.
I would like to welcome our panel here. Mr. Karsner,
welcome.
Mr. Karsner. Thank you, sir.
Chairman Dingell. Mr. Meyers, welcome back. We have seen
you on the other side of that table on many occasions, and
delighted to see you back. I hope you are doing well in your
new appointment.
Mr. Meyers. Thank you, Mr. Chairman.
Chairman Dingell. Gentlemen, I am going to ask that the
staff show on the screen again that wonderful flow sheet which
we had. And I am going to ask the staff to make a copy
available for each of you. I would appreciate your comments,
gentlemen, as to whether you find that to be a factual
representation of the situation as it is with regard to
enforcement by the different agencies, Federal and State, that
will have to take place for fuel efficiency, carbon dioxide
releases, and also, releases of the different statutory
pollutants covered under the Federal Clean Air Act.
And I don't want you to feel that we are taking advantage
of you. If you want to comment later, I will be happy to have
additional comments from you. But just quick and dirty, looking
at that, do you find that to be a factual statement of how it
will work under current law, or rather under the law as set
forth by the Supreme Court in the recent case?
Mr. Meyers. Similar to the questions asked by Congressman
Stupak, I think it is clear, and we will provide further detail
for the record, that EPAct is one stream of authority, the
Clean Air Act is a second stream of authority, and the third
column, my assumption here is that we are talking about
California's unique status in the Clean Air Act, and
California's ability under the Clean Air Act to set separate
standards, subject to EPA review.
Chairman Dingell. So now, let us try and look and see what
happens. We have 11 States which have decided that they want to
have a separate standard fixed by the State of California.
Under old law, that could only relate to the requirements of
meeting the Clean Air Act, is that correct?
Mr. Meyers. By old law, if you mean pre Massachusetts v.
EPA, correct.
Chairman Dingell. OK.
Mr. Meyers. It is still the case that that----
Chairman Dingell. Under the law as it was, EPA fixed
standards under Clean Air, the Department of Transportation
fixed the standards on fuel efficiency. Is that right?
Mr. Meyers. Yes.
Chairman Dingell. Now, under the new law, we find, or
rather, under the Supreme Court case, we find now that the
States will fix standards along with the State of California,
under the California exemption, for both clean air requirements
and carbon dioxide emissions. Is that correct?
Mr. Meyers. Well, the Supreme Court case went to greenhouse
gas emissions generally, not specifically carbon dioxide. We
are looking at how that impacts our authority. California has
already established the greenhouse gas emission requirements
under its State law, and we are currently looking at that.
Chairman Dingell. Right. I don't want to overcomplicate
this.
Mr. Meyers. Sure.
Chairman Dingell. I am just trying to understand, and you
will help me mightily if we stay to it, so I can get this
picture understood. So, now, let us say under the old law, when
a company wanted to market an automobile, they had to go in and
get either approval from the State under the clean air
requirements, or under EPA, if the EPA had not given the State
authority to act on its own, and also, then, they had to go to
DOT to get the OK with regard to meeting the CAFE standards. Is
that right? Yes or no.
Mr. Meyers. Yes.
Chairman Dingell. OK. Now, let us go to the next step, if
you please. Under new law, if the State chooses to be a part of
what, of the California exemption, they go to the State of
California, and the State of California is able to regulate,
first of all, the clean air emissions requirements, and also to
address CO\2\ emissions. Is that right? Yes or no.
Mr. Meyers. The State of California has issued regulations
on greenhouse gas emissions from motor vehicles.
Chairman Dingell. OK. Now, those greenhouse gas emissions
are not only CO\2\. They can be releases also from the air
conditioner, and things of that kind.
Mr. Meyers. That is correct.
Chairman Dingell. Now, that leaves us, then, in this
wonderful position where they have two agencies that they have
to choose from, where they are going to go to the Federal
agencies or the States. Now, there is a strong possibility of
having conflict between DOT and EPA with regard to the levels
that are going to be committed, and we are going to have a
major problem of coordinating between them, are we not?
Mr. Meyers. We have not decided our reaction on----
Chairman Dingell. No, but there is a potential here. Let us
not complicate our business here. There is a potential for
significant conflict between two agencies at the Federal level.
Mr. Meyers. There is a potential, if EPA acted under the
Clean Air Act.
Chairman Dingell. All right. Now, we have also the problem
that there will be conflicts between the Federal Government and
the States, and inside the States, there is the possibility of
conflict between at least two State agencies, the State Clean
Air Agency and the State Energy Agency. Is that not so? Yes or
no.
Mr. Meyers. I would have to get back for the record. I am
not sure a State Clean Air----
Chairman Dingell. It is not illogical to expect that,
though, is it? Just yes or no.
Mr. Meyers. I would like to submit that for the record. I
am not sure I fully understand the question.
Chairman Dingell. All right. Well, apparently, you are
having as much trouble understanding this as I am, perhaps even
a little more. I am happy I am on this side of the witness
table.
Now, having said that, so we have a potential, then, for as
many as 36 agencies regulating the levels of emissions of
pollutants and CO\2\, and we have also the fuel efficiency
requirements that would have to be met. Can either of you good
gentlemen tell me how your agencies, EPA, or the Department of
Transportation, or the Department of Energy, are going to
address this problem?
Would you like to submit a monograph on that for the
record?
Mr. Meyers. Sir, I think----
Chairman Dingell. My time is expired 2 minutes ago.
Gentlemen, please submit to us, for the record, a statement
about how you folks are going to do the job of administering
this wonderful array of conflicts that this Supreme Court
decision has placed in your lap.
And I will ask, Mr. Chairman, also that the Department of
Transportation be requested to make a similar submission. I ask
that they be included in the record, and I thank you, Mr.
Chairman.
Mr. Matheson. Thank you. We have gone through a round of
questioning for everyone. I ask unanimous consent that the
ranking member, Mr. Barton, be recognized for another 4
minutes.
Mr. Barton. And I will try to be very quick. And I want you
to give quick answers, if you can. I am going to follow up in a
similar vein of what Chairman Dingell just asked about, this
Supreme Court decision in Massachusetts v. EPA.
What that decision said was, is that the Court ruled 5-4
that the EPA does have the authority to regulate CO\2\ in
automobile tailpipe emissions, where previously, EPA had said
that they weren't sure they had the authority. Isn't that
correct?
Mr. Meyers. Yes, sir. Our legal position prior to the case
was we did not have the authority.
Mr. Barton. So, now we know, on a 5-4 decision, that the
EPA does have the authority. It could decide not to do
anything, but it definitely has the authority to do something
if it chooses to do so. Is that correct?
Mr. Meyers. I think you have accurately said the holding of
the case, yes.
Mr. Barton. All right. Now, if we are going to regulate
CO\2\ out of tailpipes, and I am not sold that that needs to be
done, but if we are going to do it, surely, we should agree
with Mr. Dingell and Mr. Boucher and the discussion draft that
it ought to be done at the Federal level, so that you have one
standard. Isn't that correct? We don't want 50 standards. We
want, if we are going to do it, let us have one standard. That
is the whole purpose of the Clean Air Act. We preempt State
law.
Mr. Meyers. Well----
Mr. Barton. Now, don't tell me the Bush administration
wants 50 State standards.
Mr. Meyers. We are currently assessing that question in an
interagency process.
Mr. Barton. Bullcorn. I sat in on some of those meetings.
Unless the Bush administration has changed its position, we
want one--if we decide to set a standard, Congress has the
ability to do it, and it should be one standard. We don't want
to give the great State of California, as great as it is, or
the great State of Massachusetts, the Commonwealth of
Massachusetts, as great as it is, or Vermont, or even Texas the
right to unilaterally set different standards. Almost everybody
who testifies at that panel routinely says if you are going to
regulate us, do it with one uniform standard.
Now, if you all need to go through your interagency
process, God bless you, but I would hope before we move to
markup that we can get an administration position, you don't
have to take the position on whether there should be a
standard, but if it is going to be one, let us let there be one
national standard.
With that, I yield back, Mr. Chairman.
Mr. Matheson. Thank you. A number of unanimous consent
requests were made during the course of the hearing for items
to be included in the record.
All of those will be included in the record.
With that, we thank the witnesses for their participation
today, and this hearing is adjourned.
[Whereupon, at 3:15 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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