I would like to thank Chairman Inhofe, Ranking Minority Member Senator Graham, and the Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety (Subcommittee) for providing me with this opportunity to testify today. I would like to thank Senator Barbara Boxer for the continued leadership she has shown on this issue. I would also like to compliment the Subcommittee for the work that it has been doing to address the use of MTBE in gasoline and explore ethanol as an alternative.
This is a very exciting period for the biomass ethanol industry and BC International. We are currently closing financing for a 23 million-plus gallon commercial biomass ethanol manufacturing facility in Jennings, Louisiana that will use sugar cane residue as a feedstock. I expect our financing to close any day now, and for the plant to be fully operational in less than two years. BC International also has signed a letter of intent with the city of Gridley, California to develop a second facility that will use rice straw and wood chips as its feedstock. In addition, we are planning to develop a facility in Chester, California that will utilize wood waste from a sawmill to produce ethanol. We are also exploring the feasibility of developing plants in the Northeast. The potential capacity of our initial projects is over 150 million gallons of ethanol per year. We expect to double our capacity within 6 months after each plant is constructed. However, the biomass ethanol industry's ability to grow exponentially depends in part on the nation's commitment to providing renewable fuels with sustainable markets, such as the market for ethanol as a gasoline additive.
It is through recent technological advances, developed in 1987 by Dr. LonnieIngram, a microbiologist at the University of Florida's Institute of Food and Agriculture Sciences, that today we are able to efficiently and effectively produce ethanol from hemi-cellulose (mostly 5-carbon sugars), as well as cellulose (6-carbon sugars). The process works by replacing the yeast-based fermentation process with a genetically engineered bacterium that was awarded U.S. Patent 5,000,000 in a special Congressional ceremony.
The use of ethanol, particularly biomass ethanol, is a win-win environmental and economic solution to the MTBE problem. Ethanol use contributes to improved air quality and does not pose the same dangers to our water resources as does MTBE, proven by decades of ethanol fuel use in the Midwest. This is why gasoline suppliers in California and the Northeast, such as Tosco and Getty, feel confident enough to displace most of their MTBE with ethanol. For the same reasons, cities such as Chicago and Denver have relied upon ethanol to improve local air quality. Ethanol is also favorable because, unlike petroleum-based alternatives, such as alkylates, ethanol means increased use of renewable resources, and reduced reliance on imported oil and ensuing gasoline price spikes. Equally important, our technology enables us to turn regional waste problems, such as the air pollution caused from the open-field burning of rice straw in California, into economic growth opportunities for rural communities.
I would like to elaborate on some of the benefits of biomass ethanol. But first, I would like to address a misconception about the use of ethanol-blended gasoline --- that ethanol use is bad for air quality. This accusation is not supported by scientific community consensus, and has in fact been disproved by many scientists.
Real life examples and research show that ethanol is not bad for air quality, and that it in fact provides air quality benefits that are consistent with and extend beyond the goals of federal reformulated gasoline. The California Air Resources Board (CARB) report, "Air Quality Impacts of the Use of Ethanol in California Reformulated Gasoline," found that the use of ethanol in gasoline is entirely consistent with the clean air goals of the Clean Air Act. The report showed that the use of ethanol-blended gasoline (2.0%wt or 3.5%wt oxygen) in 2003 would provide for significant reductions in every emission of concern relative to 1997 baseline levels, when MTBE was the primary gasoline additive. In addition, the use of ethanol-based gasoline (2.0%wt oxygen) compared with 2003 MTBE and 2003 non-oxygenated fuel would provide for: 1) similar CO and NOx emissions; 2) reduced benzene, butadiene, and formaldehyde emissions; and 3) only a slight increase in acetaldehyde emissions, which unlike formaldehyde is non-carcinogenic. Also, ethanol- blended gasoline in 2003 would result in the same average ozone levels as 2003 MTBE and 2003 non-oxygenated fuel. In summary, the report said the substitution of ethanol for MTBE in California's fuel supply "will not have any significant air quality impacts." In addition, compared with conventional fuel, the use of biomass ethanol, such as agricultural waste, can reduce greenhouse gas emissions, specifically CO2, by 68% or more.
In addition, several projects demonstrate that the benefits of ethanol extend beyond the air quality improvements that can be achieved through its use in gasoline. In Gridley,
California, BC International's planned biomass ethanol plant will use agricultural waste from rice straw farms in the Sacramento Valley as feedstock. The use of rice straw waste will help reduce the need for the annual open-field burning of more than 500,000 tons of rice straw waste, resulting in significantly decreased local air pollution. Past comments by the American Lung Association (ALA) reflect the seriousness of this problem. According to Earl Withycombe, an air pollution engineer and a Director of the Sacramento chapter of the ALA, "We know that many residents of this area point to rice straw burning as the cause of significant health effects," including asthma. Jane Hagedorn, Executive Director of the Sacramento chapter of the ALA, added, "We take very seriously that we must get alternatives on line so we can use rice straw in commercially productive ways besides burning. The Lung Association is very supportive and appreciative ofthe people who are making this happen." This model can also be applied to other problematic crop residues that are currently burned. Later this summer, BC International plans to begin construction of a similar plant in Jennings, Louisiana that will use sugar cane waste as feedstock, helping to alleviate a waste disposal problem now faced by Gulf of Mexico states.
Waste problems also pervade other parts of the nation. For instance, in the Northeast, as long-term contracts for electricity from biomass energy facilities expire or are bought out, a number of sawmill waste facilities, which currently provide feedstock for biomass energy facilities, face the possibility of closure. Sawmills currently receive $7.1 million in revenue from wood sales to biomass energy plants. If sawmill operators were forced to dispose of their waste in landfills, potential annual costs between $46 million and $59 million per year would result, according to biomass industry consultant Lloyd Irland. In addition, the transport of biomass waste supports a number of jobs, which would also disappear with plant closure. BC International is currently exploring the development of facilities in the Northeast to address this problem.
The disposal of municipal solid waste is another growing problem across the country. Biomass ethanol provides a sustainable alternative to the burning or landfill disposal of municipal solid waste, such as urban yard waste, wood waste, and other paper waste. Arkenol is developing a plant in Southern California to convert municipal solid waste into ethanol. The Masada Resource Group is developing a facility in New York that will both serve as a recycling center and produce about 10 million gallons of ethanol per year.
I would also emphasize that there is more to biomass ethanol than environmental benefits. Both corn starch ethanol and biomass ethanol provide a positive net energy balance. This means that the amount of energy contained in a gallon of ethanol is greater than the amount of fossil fuel energy required to produce that gallon of ethanol. Cellulosic biomass ethanol provides more than four units of energy for every unit of fossil fuel energy used to produce it. Its 4.75 to 1 ratio is significantly higher than the 1.5 to 1 energy balance ratio for starch-based ethanol.2 The large positive net energy balance for biomass ethanol is due to the fact that relatively little fossil energy is used in the creation of cellulosic biomass and in the biomass to ethanol conversion process itself.
The economic potential of the biomass ethanol industry is also enormous. Without a doubt, the nation's corn ethanol industry will serve as the initial foundation for the further development of a domestic renewable fuels industry. However, starch-based crops, such as corn and barley, represent only a fraction of the total resources that can now be used to make ethanol. In addition, there is only a finite amount of starch from crops available in the U.S. for ethanol production, with estimates of maximum starch crop supply peaking at about double today's ethanol capacity.
With your support, the biomass ethanol industry's potential capacity can extend beyond the limits faced by the starch-based ethanol industry. Realizing this potential would have a huge impact on our nation's transportation fuels industry. According to the U.S. Department of Energy's National Renewable Energy Laboratory, over the long-term, an average of 2.45 billion metric tons of cellulosic biomass could be available annually for ethanol production in the U.S. This translates into enough biomass to produce over 270 billion gallons of ethanol -- approximately two times the level of current U.S. gasoline consumption. Two studies have further quantified readily available biomass resources in California and in the Northeast.
The California Energy Commission (CEC) found that California has more than enough biomass resources in the near term both to meet local demand for biomass ethanol as an alternative to MTBE and to become a national leader in the renewable fuels industry. Near term production potential is estimated at 2.5 billion gallons per year.3
Conservative estimates by the Coalition of Northeast Governors Policy Research Center (CONEG) find that there is enough readily available biomass in the region to produce over 1.3 billion gallons of ethanol each year.4 Similar to California, the Northeast region has more than enough biomass ethanol potential to replace MTBE in gasoline.
For the nation to achieve meaningful fuel independence, it will need to encourage development of a cellulosic biomass ethanol industry. For this reason, I would like to pledge my support for S.2503, "The Renewable Fuels Act of 2000," introduced on May 4, 2000 by Senators Daschle and Lugar. I firmly believe that the renewable fuels standard (RFS) contained in S.2503, specifically the provision that credits cellulosic biomass ethanol with 1.5 times as much value as starch-based ethanol for purposes of compliance with the standard, would help this country develop a meaningful domestic renewable fuels industry.
The provision to support cellulosic biomass ethanol would help provide developers and potential investors with the incentives and confidence necessary to develop a domestic biomass ethanol industry. Sound policies combined with continuing biomass ethanol technology improvements, can provide the framework for transforming the Midwest- based corn ethanol industry into a national renewable fuels industry with key production centers where biomass resources are located. These areas happen to be mostly on the periphery of the U.S., as opposed to in the Midwest where ethanol is primarily produced and used today. In turn, the biomass ethanol industry would provide jobs and economic prosperity in rural communities.
In consideration of job creation, operating a single, 15 million gallon per year biomass ethanol plant would create at least 28 permanent operational jobs, and an additional 63 to 100 feedstock-related jobs. These jobs would be augmented by an additional 93 to 122 indirect jobs. The payroll for direct jobs related to plant operations and feedstocksupply is estimated to be more than $2.6 million annually. Payroll for combined direct and indirect jobs is estimated to be more than $4.8 million annually. Facility construction itself would create an additional 88 jobs, with an estimated payroll of $2,000,000.5 Once the biomass ethanol industry capacity grows to just 1 percent of the gasoline market, or about 1.5 billion gallons per year, it would provide 26,000 jobs with an annual payroll of about $480 million in rural regions across the country. Consider the renewable fuels standard to be an investment in our nation's economic and environmental well-being and prosperity.
Having said all this, the question arises: What will these benefits cost gasoline customers? Simply stated, the use of ethanol in gasoline does not and will not significantly impact the price of gasoline. A 1999 study by the California Energy Commission compared the economic costs of replacing MTBE with ethanol to the cost of replacing MTBE with petroleum-based alkylates in California (which, like other states is seeking to phase out MTBE). The results showed that using ethanol would cost approximately the same, and potentially less over the long-term, as replacing MTBE with alkylates. Using ethanol to replace MTBE would cost approximately 1.9 to 2.5 center per gallon, while the cost of replacing MTBE with alkylates would cost up to 3.7 cents.fi In addition, we would be using an indigenous renewable fuel versus increasing our dependence of imported petroleum, which historically has led to gasoline price spikes.
In the Northeast, Getty is currently replacing MTBE with ethanol. Getty cites environmental issues and customer satisfaction as reasons for its commitment to use over 40 million gallons of ethanol each year. Vince DeLaurentis, President and COO of Getty, forecasts that the cost of replacing MTBE with ethanol-blended gasoline in the Northeast, and specifically in Maine, would cost no more than 1.5 to 2.0 cents per gallon more than using alkylates to replace MTBE. I should note that Mr. DeLaurentis said that this figure assumes that ethanol-blended gasoline would receive a waiver from the Reid Vapor Pressure requirement that recognizes the reduced carbon monoxide emissions and resulting decrease in ozone forming potential of ethanol-blended gasoline. Consistent with his point, S.2503 would require the U.S. Environmental Protection Agency to consider the development of a carbon monoxide credit program that would provide appropriate carbon monoxide credits to offset possible emissions increases due to increased volatility.7
Moving forward, through the development of local renewable fuels production centers across the country, we will see further reductions in the cost of producing and transporting ethanol. BC International recently announced the start up of its New Product and Process Development Laboratory at the University of Florida's Sid Martin - Biotechnology Lab. This Laboratory will serve as a critical component in the continuing drive to improve technology for the wide-scale production of ethanol from biomass. Due to technology advancements, the National Renewable Energy Laboratory projects cost reductions for biomass ethanol of about 50 cents per gallon by 2005, and about 60 cents per gallon by 2010.8 Biomass ethanol plants also produce a variety of saleable co- products, which in the long term, will help to reduce costs even further.
With the introduction of S.2503, Senators Daschle and Lugar are seeking to reduce reliance on imported fuel by growing a domestic renewable fuels industry and. The bill's provision to support biomass ethanol ensures that the industry will continue to expand beyond the limited capacity of the starch-based ethanol industry. The provision to support cellulosic biomass ethanol would help biomass ethanol companies secure the investments they need to establish local biomass ethanol industries and bring the benefits of renewable fuels to the nation as a whole. I firmly believe that this vision will make for a better, more sustainable economy and cleaner air and water for our children and our grandchildren.
Thank you for the privilege and opportunity of speaking before the Subcommittee.
1\ Argonne National Laboratory, Center for Transportation Research, U.S. Department of Energy. "Effects of Fuel Ethanol Use on Fuel-Cycle Energy and Greenhouse Gas Emissions." Argonne, IL. January 1999.
2\ Argonne National Laboratory, Center for Transportation Research, U.S. Department of Energy. "Effects of Fuel Ethanol Use on Fuel-Cycle Energy and Greenhouse Gas Emissions." Argonne, IL. January 1999.
3\ California Energy Commission. "Evaluation of Biomass-to-Ethanol Fuel Potential in California." December 1999.
4\ Donovan, CT, Lee Rybeck. (1994) . The Potential for Producing Ethanol From Biomass In the Northeast: A Resource Survey. Northeast Regional Biomass Program. CONEG Policy Research Center Washington, D.C.
5\ California Energy Commission, Quincy Library Group, California Institute of Food and Agricultural Research, Plumas Corporation, TSS Consultants & National Renewable Energy Laboratory. "Northeastern California Ethanol Manufacturing Feasibility Study."
6\ California Energy Commission. "Supply and Cost of Alternatives to MTBE in Gasoline." February 1999.
7\ Conversation with Vince DeLaurentis, President and COO, Getty Petroleum Marketing Company. May 2000. 8 NREL. "Bioethanol Multi-Year Technical Plan, FY 2000 and Beyond." July 6 1999 draft, 21.