American Geological Institute

Government Affairs Program


Senate Hearing on Energy Security and Agricultural Energy Issues

Senate Committee on Agriculture, Nutrition, and Forestry
July 16, 1997

Witnesses present for the first panel included:
Dr. Roger Conway, Director of the Office of Energy and New Uses, U.S. Department of Agriculture
Dr. Joseph Romm, Acting Assistant Secretary for Energy Efficiency and Renewables, U.S. Department of Energy
Dr. Henry Kelly, Acting Associate Director for Technology, White House Office of Science and Technology Policy
Mr. John Campbell, Vice President for Industrial Products, Ag Processing, Inc.

Senators present
Chairman Richard G. Lugar (R-IN)
Ranking member Tom Harkin (D-IA)
Sen. Charles E. Grassley (R-IA)
Sen. Pat Roberts (R-KS)
Sen. J. Robert Kerrey (D-NE)

To read the full testimony of the witnesses submitted to the Committee, visit the Senate Agriculture, Nutrition, and Forestry Committee website.

Introduction
This was the second hearing in one year (the first was in October of 1996) held by Chairman Lugar on the issue of energy security and the development of agricultural-based fuels. Lugar began by stating that the U.S. currently depends on foreign oil for more than 50% of our energy needs. Oil imports are expected to reach 61% of our total energy use by 2015. This foreign oil dependence comes at a tremendous cost in military operations and foreign policy initiatives. Foreign oil imports currently account for 35% of the nation's trade deficit. "Two-thirds of the world's oil reserves lie in the Persian Gulf region, where political, ethnic, and religious turbulence is the rule, rather than the exception." Lugar concluded that "it is reasonable to increase our use of fuels that are made from readily-available agricultural sources that are also less harmful to our environment." He stated his support for the continued development of agricultural fuels such as ethanol and biofuels as a less-costly and more Earth-friendly alternative to continued importation.

Lugar also stated his continued support for ethanol tax incentives. In terms of relative costs, Lugar noted that one third of our military forces are now positioned, directly or indirectly, to ensure the free flow of oil. He was recently joined by 68 other Senators in supporting an extension of the ethanol tax incentives into the next century. While the House Revenue Reconciliation Act, H.R. 2014 , precludes any tax incentives for ethanol use beyond the end of this decade, the Senate version, S. 949 , extends the incentives, at a lower rate, until 2007.

Sen. Grassley remarked that we are "watching our nation's dependence on foreign oil skyrocket," and suggested that "it makes us look foolish when there are alternatives." He noted that it is "time we get serious" about our energy dependence problems. Ranking member Harkin noted that we are "well on the way to significant ethanol production," and commented that ethanol production is not driven by large companies. Rather, 36.5% of the nation's ethanol comes from small producers, 29.1% is produced by medium-sized producers, and 34.4% is produced by large companies. "Ethanol production has jumped from 20 million gallons in 1979 to a high of 1.5 billion gallons produced in 1995." Harkin also referred to two other alternative energy strategies that appear to hold significant promise, biomass fuel production through a switchgrass project currently underway in Iowa, and "electrofarming," production of electricity on the farm by converting biomass to hydrogen. "I believe that agriculture has the potential to meet substantial energy needs by supplying clean-burning renewable fuels." Commenting on resource allocations, Harkin noted that "I think it makes much more sense to create wealth and generate economic opportunity for the farmers and rural communities of this nation than to continue to line the pockets of Middle Eastern oil sheiks."

Testimony
Dr. Conway, representative for the U.S. Department of Agriculture, spoke about agriculture's energy use and energy production. Conway noted that technological advances have greatly increased agricultural efficiency; farm production uses 2% of our total consumed energy. Pesticide production is the most prominent energy-consumer in agricultural processes. Recognizing the potential for energy crises, Conway stated that we need to look at contingency plans in preparation for energy shortages. He concluded his remarks by supporting continued ethanol tax incentives and noting that the Clinton administration and the USDA are "strongly committed to the continued growth and development of the ethanol industry."

Dr. Romm, representative for the Department of Energy, referred to U.S. oil importation patterns as "ominous trends," noting that the staggering demands to be made on the world oil supply in the coming decades are not sustainable. The Department of Energy has a broad-based strategy to reduce Persian Gulf oil dependence including the development of agricultural fuels and exploitation of resources in the Caspian Sea. Romm noted that incentives must be in place to promote the continued growth of agricultural fuel production. For example, those individuals who can generate "clean electricity" should be able to sell that electricity. And the switchgrass project that Sen. Harkin had referred to can be seen as an opportunity cash crop for Iowa farmers. Romm also mentioned additional energy alternatives that DOE is investigating including utilizing the non-edible parts of crops to generate energy, using rice straw, and also fast-growing hybrid poplars.

Since oil is principally used in the transportation sector, Romm spoke of the need to educate automakers and encourage them to adapt automobile designs to biofuel use. Since ethanol can be mixed into gasoline, it should be relatively easy to integrate into the marketplace. Romm concluded by stating that the DOE has a long-term strategy which includes establishing dedicated feedstocks, integrating ethanol-gasoline blends into the market, and eventually fully relying on ethanol for transportation.

Dr. Kelly, representative for the White House Office of Science and Technology Policy, emphasized that governmental agencies need to coordinate their efforts and establish cross-departmental jurisdictions in order to fully address our energy problems. Kelly also stressed the need for partnerships at the university and state level. He referred to our current oil importation patterns as "very clear national security problems," though these are not necessarily evident in the marketplace. Kelly focused on the additional benefits of alternative energy strategies, including enhanced environmental quality (since biofuels do not produce greenhouse gases), the potential to utilize environmentally sensitive areas or areas not suitable for significant crop production, the potential to use energy-producing agricultural growth to clean up environmentally contaminated sites, and an increased international market for developed U.S. technologies. He did emphasize one problem in particular for the realization of ethanol-fueled transportation. "In order to make a major contribution by 2010, we need to turn around the entire fuel and energy industry structure." Kelly suggested viewing the process as a continuum, and echoed the sentiments of Dr. Romm in developing short-term, mid-term, and long-term strategies.

Mr. Campbell testified as a representative of private sector interests. He stressed that anything that Congress can do to "bring more certainty" to ethanol production, including the previously mentioned tax incentives, would be welcomed. Campbell noted that Europe is already five to ten years ahead of the U.S., mixing fuel with agricultural additives. But, the persistent myth that there will be great cost to a fuel transfer is being dispelled, as we tally the dollars currently spent in military and foreign operations as well as the byproduct benefits of agricultural fuel production. Campbell listed some of these external benefits, including reduced greenhouse gas emissions, decreased foreign dependence, and a lowered trade deficit. In addition, Campbell asked Congress to "level the playing field," and provide equivalent incentives for the producers of renewables since "they are competing with an entrenched industry."

Questions and answers
Lugar began the discussion with a paradox. We could easily have an international catastrophe on our hands, yet our energy reliance problems have somehow evaded public attention and produced only a "subdued dialogue." He noted that with our current "massive energy infrastructure," the problem is in how to make even incremental changes. Lugar questioned how far along we really are in the process, and how long Congress should expect to provide subsidies and incentives for biofuel production. Specifically, Lugar pleaded for a "light at the end of the tunnel of subsidy." Dr. Romm responded that the subsidy is needed as an inducement to automakers to set up the needed infrastructure to make energy changes. He added that progress is definitely being made. By 2010-2015, we will produce two million barrels a day from biofuels, or 10% of our total supply. Plus, price differences are being leveled. Ethanol fuel now costs $1.20 a gallon, and it is hoped that prices will drop to $0.70 a gallon by the 2010-2015 year range. Romm spoke of an additional long-term plan from the DOE bringing ethanol prices to competitive levels. He admitted that "we are not going to become energy independent anytime soon," but noted that biofuels are not the only strategy in the works. Manufacturers are also working on triple-efficiency automobiles and natural gas vehicles.

Sen. Kerrey commented that "we need an international energy strategy." He added that we should be looking into cutting back our production and lowering our living standard, but added that there is "not much enthusiasm" for this solution among the American populace. For that reason, the potential for sustainable growth offered by biofuels deserves Congressional attention.

Mr. Campbell added that he is not so optimistic as his co-panelists, pointing out the significant externalities inherent in our current energy structure. "Tobacco externalities are now being charged...we haven't even begun that with oil." Campbell urged that we need a "more true accounting system," one that takes these externalities into account.

Witness present for the second panel:
Mr. Coote, representative of the Central Intelligence Agency (Note: the Senate Agriculture, Nutrition, and Forestry staff did not provide Mr. Coote's first name nor position within the CIA)

Testimony
Mr. Coote echoed many of the sentiments of the first panel, noting that our dependence on foreign oil reserves does constitute a national security problem. He testified on the major risks and uncertainties that affect the energy security of the U.S. According to Mr. Coote, the history of the world oil market is the history of disruptions. "The question is not whether we will experience another disruption, but when, where, and of what magnitude."


Please send any comments or requests for information to the AGI Government Affairs Program at govt@agiweb.org.

Contributed by Jenna Minicucci, AGI Government Affairs Intern

Last updated July 21, 1997

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