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Subcommittee Hearing on Impacts of Outstanding Regulatory Policy on Small Biofuels Producers and Family Farmers

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Subcommittee Hearing on Impacts of Outstanding Regulatory Policy on Small Biofuels Producers and Family Farmers SUBCOMMITTEE HEARING ON IMPACTS OF OUTSTANDING REGULATORY POLICY ON SMALL BIOFUELS PRODUCERS AND FAMILY FARMERS HEARING BEFORE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION HEARING HELD May 20, 2009 Small Business Committee Document Number 111-025 Available via the GPO Website: http://www.access.gpo.gov/congress/house U.S. GOVERNMENT PRINTING OFFICE 49–620 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN Congress.#13 HOUSE COMMITTEE ON SMALL BUSINESS NYDIA M. VELA´ ZQUEZ, New York, Chairwoman DENNIS MOORE, Kansas HEATH SHULER, North Carolina KATHY DAHLKEMPER, Pennsylvania KURT SCHRADER, Oregon ANN KIRKPATRICK, Arizona GLENN NYE, Virginia MICHAEL MICHAUD, Maine MELISSA BEAN, Illinois DAN LIPINSKI, Illinois JASON ALTMIRE, Pennsylvania YVETTE CLARKE, New York BRAD ELLSWORTH, Indiana JOE SESTAK, Pennsylvania BOBBY BRIGHT, Alabama PARKER GRIFFITH, Alabama DEBORAH HALVORSON, Illinois SAM GRAVES, Missouri, Ranking Member ROSCOE G. BARTLETT, Maryland W. TODD AKIN, Missouri STEVE KING, Iowa LYNN A. WESTMORELAND, Georgia LOUIE GOHMERT, Texas MARY FALLIN, Oklahoma VERN BUCHANAN, Florida BLAINE LUETKEMEYER, Missouri AARON SCHOCK, Illinois GLENN THOMPSON, Pennsylvania MIKE COFFMAN, Colorado MICHAEL DAY, Majority Staff Director ADAM MINEHARDT, Deputy Staff Director TIM SLATTERY, Chief Counsel KAREN HAAS, Minority Staff Director (II) VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN STANDING SUBCOMMITTEE Subcommittee on Regulations and Healthcare KATHY DAHLKEMPER, Pennsylvania, Chairwoman DAN LIPINSKI, Illinois LYNN WESTMORELAND, Georgia, Ranking PARKER GRIFFITH, Alabama STEVE KING, Iowa MELISSA BEAN, Illinois VERN BUCHANAN, Florida JASON ALTMIRE, Pennsylvania GLENN THOMPSON, Pennsylvania JOE SESTAK, Pennsylvania MIKE COFFMAN, Colorado BOBBY BRIGHT, Alabama (III) VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00003 Fmt 0486 Sfmt 0486 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN C O N T E N T S OPENING STATEMENTS Page Dahlkemper, Hon. Kathy ........................................................................................ 1 Westmoreland, Hon. Lynn ...................................................................................... 2 WITNESSES Cook, Ms. Cheryl, Deputy Under Secretary of Rural Development, U.S. De- partment of Agriculture ....................................................................................... 3 Oge, Ms. Margo, Director, Office of Transportation and Air Quality, U.S. Environmental Protection Agency ...................................................................... 5 Noble, Mr. Mike, President, Lake Erie Biofuels, LLC, Erie, PA ......................... 18 Wootton, Mr. Ben, President, Keystone Biofuels, Inc., Shiremanstown, PA ...... 20 Bafalis, Mr. Gregory, President & CEO, Green Earth Fuels, LLC, Houston, TX .......................................................................................................................... 22 Gaesser, Mr. Ray, Executive Committee Member, American Soybean Associa- tion, Corning, IA .................................................................................................. 24 Duvall, Mr. Zippy, President, Georgia Farm Bureau Federation, Greene Coun- ty, GA .................................................................................................................... 25 Das, Dr. K. C., Associate Professor, Director, Biorefining and Carbon Cycling Program, Driftmier Engineering Center, University of Georgia, Athens, GA 27 APPENDIX Prepared Statements: Dahlkemper, Hon. Kathy ........................................................................................ 36 Cook, Ms. Cheryl, Deputy Under Secretary of Rural Development, U.S. De- partment of Agriculture ....................................................................................... 38 Oge, Ms. Margo, Director, Office of Transportation and Air Quality, U.S. Environmental Protection Agency ...................................................................... 47 Noble, Mr. Mike, President, Lake Erie Biofuels, LLC, Erie, PA ......................... 54 Wootton, Mr. Ben, President, Keystone Biofuels, Inc., Shiremanstown, PA ...... 61 Bafalis, Mr. Gregory, President & CEO, Green Earth Fuels, LLC, Houston, TX .......................................................................................................................... 64 Gaesser, Mr. Ray, Executive Committee Member, American Soybean Associa- tion, Corning, IA .................................................................................................. 69 Duvall, Mr. Zippy, President, Georgia Farm Bureau Federation, Greene Coun- ty, GA .................................................................................................................... 75 Das, Dr. K. C., Associate Professor, Director, Biorefining and Carbon Cycling Program, Driftmier Engineering Center, University of Georgia, Athens, GA 79 Statements for the Record: Addendum to the Record, U.S. Environmental Protection Agency ..................... 85 (V) VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00005 Fmt 0486 Sfmt 0486 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00006 Fmt 0486 Sfmt 0486 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN SUBCOMMITTEE ON REGULATIONS AND HEALTHCARE HEARING ON IMPACTS OF OUTSTANDING REGULATORY POLICY ON SMALL BIOFUELS PRODUCERSAND FAMILY FARMERS Thursday, May 21, 2009 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, Washington, DC. The Committee met, pursuant to call, at 10:00 a.m., in Room 2360 Rayburn House Office Building, Hon. Kathy Dahlkemper [chairwoman of the Subcommittee] presiding. Present: Representatives Dahlkemper, Ellsworth, Griffith, King, Westmoreland and Schock. Chairwoman DAHLKEMPER. I now call this hearing to order. Thank you for joining us. Good morning. As we move towards creating an environmentally sustainable fu- ture, we must ensure that the renewable fuels industry remains an important part of that future. Growth within this sector has been explosive. The biofuels industry, which is largely comprised of small firms and family farmers, is a multi-billion dollar business. It sustains tens of thousands of high-wage jobs and is giving new life to rural economies. Just as importantly, it’s paving the way for clean, sustainable en- ergy. Last year alone, production for biodiesel reached 690 million gallons. In recent months, however, the industry has faced a num- ber of challenges that threatened to weaken it considerably in the long term. In today’s hearing, we are going to examine these setbacks and discuss ways to ensure that this important industry is not irrevers- ibly damaged. Biofuels producers are already struggling with fall- ing demand, as one third of biodiesel fuel remains idle. With the price of oil hovering around $60 a barrel, the enthusiasm for alter- native energy has dampened. As a result, many investors already skittish about the economy are backing away. With investment down and credit tightening, biofuel businesses are losing access to operating capital at a very critical moment in this young industry’s history. In a February hearing, this Committee examined those obstacles. Today, we will look at the draft regulations with the EPA that have the potential to pose difficult challenges for the biodiesel in- dustry. According to the Energy Independence and Security Act of 2007, all biofuels much achieve a 20 percent reduction in lifecycle (1) VerDate Aug 31 2005 19:06 Aug 12, 2009 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\49620.TXT DARIEN 2 greenhouse gas emissions, while advancing biofuels must have a 50 percent reduction. Lifecycle emissions include direct and indirect land-use charges. Measuring these charges is complex, and there is no consensus over how to calculate these charges. As a result, measurement is driven largely by assumptions and perhaps by some speculation as well. Another potential problem with this law is that the EPA Admin- istrator is only allowed to reduce the lifecycle greenhouse gas emis- sions standard by 10 percent, even if the current target is found not to be commercially viable. Moreover, if a specific feedstock or agriculture practice is found to produce too much greenhouse gas, it could be permanently prohibited by the EPA. This might endan- ger industries that rely on this type of feedstock or practice. Fortunately, the EPA has the ability to be flexible in drafting emissions profiles, and it is critical that the Agency use that flexi- bility. To begin, it could accomplish a great deal by drafting a clear, workable framework for small firms to follow. As part of that proc- ess, biodiesel entrepreneurs should be consulted. In moving forward, it’s important that the EPA accounts for the needs of small firms and family farmers who are on the front lines offering solutions that work for our environment and
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