Release No. 002.99

Testimony

As Prepared for Delivery

of

Secretary of Agriculture Dan Glickman
Before the United States Senate Committee on Agriculture, Nutrition, and Forestry

May 27, 1999

Mr. Chairman and Members of the Committee, I am pleased to appear before you today to discuss the future of renewable fuels and bioproducts for American agriculture and for the American economy. The Clinton Administration shares the Chairman's and this Committee's strong commitment to this issue, and I applaud your leadership in continuing to advance these efforts during this Congress.

Mr. Chairman, as you noted in your recent Foreign Affairs article, coauthored with former Director Woolsey, biomass crops, such as poplar, willow, and switch grass, and agricultural waste streams could become important feedstocks of electric power, liquid fuel, and chemical production. In addition, biomass feedstocks can offer significant environmental benefits compared to fossil fuels. For example, energy produced from biomass crops does not add greenhouse gasses to the atmosphere during the life cycle of its production use relative to fossil fuels.

Advances in technology in farm production and processing offer enormous market opportunities for the Nation's farmers and hold the potential of transforming a significant portion of our fossil fuel based economy to a biobased economy. The Clinton Administration wants to help encourage that transformation.

In my testimony today, I will provide a brief overview of activities undertaken by the Clinton Administration that are helping to promote the research and development of a renewable fuels and biobased products industry. But I would first like to comment on S. 935, the National Sustainable Fuels and Chemicals Act of 1999.

The National Sustainable Fuels and Chemicals Act of 1999

The Administration strongly supports S.935, the National Sustainable Fuels and Chemicals Act of 1999, but would prefer to see less prescriptive language. While funding provided under the bill's authorization would have to compete with existing programs under discretionary budget ceilings, we do believe that the legislation, by formalizing cooperation and coordination between USDA, the Department of Energy (DOE) and other agencies in sustainable fuels and chemicals research, would help reinforce the commitment of the agencies, in concert with Congress, to match resources and realize the potential of biofuels and bioproducts. In addition to an advisory committee to help focus strategic planning, the development of a joint sustainable fuels and chemicals initiative to carry out research on biobased industrial products will ensure that funds from both departments are efficiently and effectively leveraged.

The Clinton Administration looks forward to working with Congress to enact S. 935. But we also believe we can begin the process of improving cooperation and coordination immediately. To that end, we have been discussing with your staff how we might accomplish a number of the goals of S. 935 through administrative action.

Current USDA Activities

USDA currently spends $9 million annually on biofuels research and $63 million annually on research on new industrial uses of biobased products. To better coordinate these activities within USDA, I established the Biobased Products Coordination Council, chaired by Under Secretary of Research, Education and Economics, Dr. Miley Gonzalez. The Council promotes biobased industrial product research, development, and commercialization through information sharing, implementation of strategic planning and providing policy advice for my office. It is currently working on a list of biobased products for use by Federal agencies and their procurement officials as encouraged under Executive Order 13101.

Ethanol research. One of the most promising roles biomass can play is strengthening our energy security. In 1995, USDA released a study on the net- energy balance of corn ethanol that showed that the energy in ethanol is 22 percent greater than the amount of energy used to produce the ethanol. Since then, technological innovations in corn production and ethanol conversion have substantially reduced the energy required to produce corn ethanol. Our most recent estimate is that the energy content of ethanol is 34 percent greater than the energy used to grow, harvest, and transport corn, produce the ethanol, and distribute the ethanol. In addition, a recent study conducted by Argonne National Laboratory with USDA collaboration showed both corn and cellulosic ethanol reduce greenhouse gas emissions considerably relative to petroleum.

Research directed at reducing ethanol production costs can improve the competitiveness of and expand the quality of ethanol demanded as a fuel or fuel additive. USDA analysis suggests that long-term technology improvement strictly devoted to ethanol production might reduce costs by 9 to 15 cents per gallon. Our researchers believe that additional savings of 13 to 18 cents per gallon may be possible by developing higher value products--called coproducts- -from raw material not used up in ethanol production.

To achieve these cost reductions, USDA research is targeting the development of organisms that will convert multiple, mixed substrates; superior product recovery and separation technology; high-value coproducts; more efficient technologies and processes for coproduct recovery and separation; and better fractionation of feedstocks. Developing new varieties of corn that would be easy to mill and provide optimum levels of fermentable substrate and coproducts are also a subject of scientific work.

Research on Biodiesel and Other Biobased Products. Biodiesel, as well as lubricants, chemicals, and solvents produced from agricultural fats and oils, offer another opportunity to supplant petroleum derivatives. In doing so, an expanded market for agricultural fats and oils may develop, providing farmers with high-volume markets for high-valued nonfood products.

Like ethanol, biodiesel has a positive net energy balance. This high- energy efficiency translates to a much lower emission of greenhouse gases compared with petroleum-based fuels. USDA conducted a study with the Department of Energy's (DOE) National Renewable Energy Laboratory that found the use of biodiesel reduces net carbon dioxide emissions by 78 percent relative to petroleum diesel.

Selected niche market opportunities for biodiesel are emerging now. As a result of legislation passed last year, Federal agencies can use biodiesel 20 percent blends as a credit against alternative fuel vehicle purchases.

The major obstacle to the widespread use of fats and oils for biodiesel manufacture is the relatively high cost of biodiesel from food-grade oils. The full production cost of biodiesel is $2 to $3 per gallon compared with 50 to 60 cents for petroleum diesel. Tallows, yellow and white greases, often termed waste vegetable oil, and true wastes, such as sewage trap grease, are cheaper to use than food-grade oils.

To create economically viable sustainable fuels and chemicals markets based on renewable fats and oils, a focused research program is critical. USDA's research is aimed at lowering the cost of production, optimizing the properties of biodiesel feedstocks, and developing conversion and utilization technologies which take advantage of the unique properties of the fats and oils.

We can further reduce our dependence on foreign oil if we can use agricultural materials that replace petrochemicals as a source of raw industrial materials. For example, until recently about 98 percent of all plastics were petroleum-based. They are not generally biodegradable either. USDA's biobased products program is designed to expand nonfood markets for agricultural products and provide biorenewable substitutes for petroleum-based plastics, printing inks, paints and other coating lubricants, and intermediate chemical products.

Biobased products from agricultural and forestry resources provide renewable raw materials for the processing and manufacturing of a broad range of nonfood and nonfeed products, such as chemicals, fibers, construction materials, and energy sources. Development and commercialization of such products provide new and expanded markets, accelerate successful market penetration, and diversify agriculture while fostering rural and sustainable development.

Biomass Initiatives. Farmers and processors need to see practical and successful demonstration projects on the ground before they could be expected to participate on a large scale. To that end, USDA is collaborating with DOE on a Biomass Power for Rural Development Initiative. USDA is leveraging its existing programs and authorities with DOE funding to cost share with the private sector the development of integrated biomass power projects that couple dedicated energy feedstock production with advanced power conversion technologies.

The first award under this solicitation was signed on May 6, 1996, with Niagara Mohawk Power Corporation of Syracuse, New York, representing the Salix Consortium. The Salix Consortium plans to integrate dedicated short- rotation woody crops such as willows with power conversion by cofiring them with coal. A gasification test will be conducted as well. In the initial phase, a total of up to 47 megawatts of biomass power capacity will be produced at the three project sites, with a total of 6,000 acres of land dedicated to supplying willow feedstocks to these applications by 2001.

In Chariton Valley, Iowa, USDA and DOE are working to explore the possibilities of switchgrass as a fuel to make electricity. The Chariton Valley Resource, Conservation and Development Council received a research project waiver to harvest 4,000 acres of switchgrass from land enrolled in the Conservation Reserve Program and supply it to the power plant for cofiring with coal. A small-scale gassifier will also be investigated in the project.

Last fall BC International broke ground in Jennings, Louisiana to become the first commercial cellulosic ethanol plant. This DOE-supported plant is also receiving help to further advance the cellulosic ethanol conversion technology from USDA through Cooperative State Research, Education, and Extension Service (CSREES) research grants.

Renewable Portfolio Standard. Recently, the Administration proposed the

Comprehensive Electricity Competition Act which featured a Renewable Portfolio Standard (RPS). The RPS would require that 7.5 percent of U.S. electricity be generated from renewable sources by 2010. Improvements in the technology of biomass for electricity could help make biomass an important means to meet the RPS or any similar standard that might be adopted.

Conclusion

The development and expansion of a renewable fuel and biobased products industry founded on a strong agricultural and forestry sector can play an increasingly important role in enhancing energy security, cleaning our environment, and promoting farm and rural economic growth. Petroleum and fossil fuel prices, feedstock costs, coproduct markets, energy and environmental policies, and advances in technology are all critical determinants of market growth for biofuels and biobased products. The Clinton Administration will work with Congress and others to advance the technology and improve the economics of producing and marketing biofuels and new biobased products from agricultural commodities.

That completes my testimony, Mr. Chairman. I am happy to respond to any questions.

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