nology changes that were required in Federal legislation. That involves burning 85 percent ethanol, E-85. That does require some technology changes in the vehicles. Unfortunately, the problem has not been with E-85, the problem has been with the access to E-85 and I think the public awareness that these vehicles in fact are able to consume that kind of fuel.

I think E-85 has great promise. But that is a separate issue. The fact is that vehicles manufactured today with no technology changes are capable of burning up to about 10 percent ethanol. Now, Senator Hagel and I are suggesting around a 5 percent use by the year 2016. I believe this is an achievable kind of level.

I would suggest that my friend from Alaska I think made a good point when he talked about CAFE standards, that perhaps we ought to be also focusing a bit on not only mileage, but on displacement of petroleum consumption, which is again a function of greater ethanol and alternative fuel usage. Now, I do not think it is an either/or situation. I think we need to be examining improved CAFE standards, but I think we also need to keep in mind the possibility of significant displacement of petroleum consumption through alternative fuels, particularly when this does not require, necessarily require the kind of major technology changes in the vehicle industry that the E-85 requires.

I think we ought to continue to pursue dual use fuel involving E-85, but clearly we have our work cut out for us in terms of the chicken and egg problem of availability of that fuel throughout the country. That is something that it seems to me that the Department of Transportation is going to have to work on, rather than simply giving up on dual use fuels technology, to keep in mind that the problem is not with the fuel, the problem is with the access to the fuel and the information needed.

The question I would suggest for Mr. Shelton in particular, I would guess, is do you agree that the displacement of petroleum usage is a key policy goal along with better gasoline mileage of American motor vehicles?

Mr. SHELTON. Yes. The idea is to reduce petroleum consumption. You can reduce petroleum consumption by raising fuel economy or you can reduce petroleum consumption by displacing it with alternative fuels.

Senator JOHNSON. Or you can do both.

Mr. SHELTON. Or you can do both.

Senator JOHNSON. That is what I would suggest maybe where we need to end up in this debate.

Mr. SHELTON. Yes. I was not trying to suggest it was an either/ or. Absolutely, you should do both.

Senator JOHNSON. One of the benefits, it would seem to me, of increased ramping up-and Senator Hagel and I are certainly looking at a long window of time. We are trying to be realistic about this. But it would seem to me that one of the benefits of increasing displacement of petroleum with alternative fuel is that it is a regime that can be begun now rather than later. It is not something that we have to wait ten years for in order to accomplish.

Would you share that view?

Mr. SHELTON. Yes, sir, it certainly can be achieved in a shorter duration, absolutely.

Senator JOHNSON. Is it your observation that existing automobile technology is very capable of burning blends up to 10 percent ethanol without significant changes?

Mr. SHELTON. I am not entirely current on that, Senator, but that was my understanding based on historical knowledge, that typically a vehicle can burn up to 10 percent ethanol without modification.

Senator JOHNSON. And blends of biodiesel as well, which is a soybean-based fuel?

Mr. SHELTON. I have to defer to Mr. McNutt on that.
Senator JOHNSON. Mr. McNutt.

Mr. MCNUTT. We have very little experience in the biodiesel side. The auto industry's view about ethanol is a proper blended ethanol, which is the language they use, at 10 percent has certainly been acceptable, and it is what we have in the marketplace now.

The question about biodiesel I think, clearly it can be used. At what levels, what kind of equipment modification, if any, I think is something we are learning about now. So it is not a technological obstacle. It is learning how to do it properly.

Senator JOHNSON. I would share with you the testimony from the supervisor of the Black Hills National Forest, of all people, who showed up for our hearing in Sioux Falls, who indicated that they have gone now to biodiesel in their Forest Service vehicles. It is a cleaner burning, easily used fuel, and this again is a technology that exists now, the potential for consumption is here now.

My time is up. I thank the chairman.

The CHAIRMAN. Thank you very much.
Senator Hagel.

STATEMENT OF HON. CHUCK HAGEL, U.S. SENATOR

FROM NEBRASKA

Senator HAGEL. Mr. Chairman, thank you. I too have a statement that I would like to ask to be included in the record. Included in that statement, Mr. Chairman, is a thank you to you and to our chairman emeritus for your continued commitment to working on this issue, which I believe energy in itself and the wholeness of it is I believe the most pressing issue facing the future of this country. So thank you.

[The prepared statement of Senator Hagel follows:]

PREPARED STATEMENT OF HON. CHUCK HAGEL, U.S. SENATOR FROM NEBRASKA

I want to thank Chairman Bingaman for continuing these important hearings on energy policy.

Someday, technology will deliver new and diverse sources of energy. But in today's world and for the near future, fossil fuels power America. The 180 million gasoline and diesel-powered vehicles on America's roads are not going to be replaced overnight. With that in mind, the increased use of alternative fuels, including ethanol and biodiesel, can have an immediate and significant impact on reducing our dependence on foreign oil.

The Renewable Fuels for Energy Security Act (S. 1006) that Senator Johnson and I introduced would ensure a one percent market share for fuels derived from renewable resources by 2008, a three percent market share by 2011, and a five percent market share by 2016-a ten-fold increase from today. A three percent market share for U.S. produced renewable fuel would replace between 500,000 to 600,000 barrels of crude oil a day, roughly the amount we now purchase from Iraq.

Renewable fuels like ethanol and biodiesel afford us the opportunity to develop energy, environmental and economic policies that work together. They can help us

improve air quality, strengthen our national security, reduce our trade deficit, and decrease U.S. dependence on foreign oil.

Our nation needs a broader, deeper and more diverse energy portfolio-one that ensures we have clean, reliable and affordable domestic sources of energy. Expanding the market for renewable fuels is only part of the solution, but it is an important part. We must push harder for renewable fuels as a significant addition to any new energy policy that comes out of this Committee.

Thank you, Mr. Chairman.

Senator HAGEL. Picking up on where Senator Johnson was going, his explanation and questions regarding our renewable fuels bill, which we think has some merit. Mr. McNutt, I understand yesterday that a senior representative from the White House, Mr. Melman, who you may or may not know, but just to inform you who he is, he is the Director of the Political Office at the White House, which you might want to get acquainted with him. He probably will have something to do with where all of this eventually winds up.

He told the National Corn Growers that the President was focusing on renewable sources of energy, and I believe that is a quote from Mr. Melman. What do you think he means by that?

Mr. MCNUTT. I will not be presumptuous. I do not know what his remarks were, but I can speak about what the Department is doing. Obviously, renewable energy includes what we are doing today with grain-based alcohols, soy-based diesel fuels, and longer term with cellulosic-based alcohol. All three of those fall into the category, in this light duty fuel context, motor fuel context, of renewables. Obviously, the renewable spectrum when you get to power production is much broader than that.

Senator HAGEL. Do you think he is talking about ethanol, biodiesel, some of the things that Senator Johnson talked about? Mr. MCNUTT. Again, I do not know

Senator HAGEL. Hard to tell, is it not?

Mr. MCNUTT [continuing]. What Mr. Melman was talking about, but in terms of when the Department speaks about renewables in the motor fuel area we certainly talk about ethanol from various sources and soy-based material for blending with diesel fuel.

Senator HAGEL. You think that is something we should continue to explore?

Mr. MCNUTT. Yes, we are. We have active programs in those areas. Ethanol use in gasoline is growing. I noticed a press release from the Renewable Fuel Association yesterday reporting the tenth consecutive month of growth in output of ethanol production in the United States to over 100,000 barrels a day. So it is a growing industry, a growing utilization, and we are all pursuing that.

Senator HAGEL. In your testimony as well as Mr. Shelton's, both of you recognized the obvious, that we have talked a bit about this morning, that is the growing dependence on foreign source oil, which I do not think anyone feels particularly comfortable about that. It is something that we do need to address. The President is addressing it. This panel is addressing it. The Congress will continue to address it.

We have not done a very good job with it over the last few years. Many of you remember, as I do, in the 1970's when we were about 36 percent dependent on foreign sources of oil at the height of the Arab oil embargo and we thought essentially our geopolitical, stra

tegic, economic, energy policy had come apart. Now we are getting close to double that number. So we all have to take some responsibility for deferring the tough decisions in this business.

But the question is, if that is a concern of all of us, how do you best believe we can deal with that? Renewable sources are a part of that. My numbers along with Senator Johnson's show rather conservatively from, as a matter of fact from your Department and others, that if you get to a 3 percent standard of renewable fuels in our transportation fuel inventory that you are now saving at the rate of about 600,000 barrels of foreign source oil a day. I believe that is somewhere in the range of what we import from Iraq.

Now, you may quibble with those numbers, but they are not mine. They are the Department of Energy's and others. But that is beside the point.

So do you believe renewable fuels play a role can play a more significant role if we do more than we are doing now to increase those uses and those standards versus other options?

Mr. MCNUTT. The National Energy Policy is looking at a variety of ways of reducing the foreign oil dependence, including obviously greater domestic production of oil. How the various things play against each other depends on your assessment of them. You talked about 3 percent of motor fuels pool, which on a direct calculation is like 300,000 barrels a day. I understand we do not need to quibble about whether it is 300,000 or 600,000 barrels a day.

I think renewables' real advantage does not lie in oil displacement per se, but lies in the very fact that, one, it is renewable and has benefits in other areas. More specifically, as I mentioned in my opening statement, we have had success, as Senator Johnson was noting, in bringing what I call blend stocks into the gasoline stream because we do not have an infrastructure limitation. So that is a second advantage of pursuing that route, which is you do not have to build infrastructure, you can use more of them tomorrow, as we are seeing.

So you have certain expanded environmental advantages for renewables as they are being used now in gasoline. You have blending advantages and the lack of infrastructure. You also add to the quality of the gasoline pool if they are blended correctly. So to me, I think we have to look at the full value of those renewables, not just their displacement value, because in the end game we are using, will be using in the time you are talking about, 20 million barrels a day of oil, and whether 300,000 or 500,000 is the important number, the important thing about renewables is their ultimate benefits.

Senator HAGEL. Thank you.

Mr. Chairman, thank you.
The CHAIRMAN. Thank you.

Senator Feinstein.

STATEMENT OF HON. DIANNE FEINSTEIN, U.S. SENATOR
FROM CALIFORNIA

Senator FEINSTEIN. Thanks very much, Mr. Chairman.

Mr. McNutt and Mr. Shelton, welcome. For the last three Congresses I have been trying to work on fuel efficiency standards. I joined Senator Dick Bryan of Nevada and Senator Gorton of Wash

ington to try to move fuel efficiency standards for SUV's and light trucks, and I saw how very difficult it was. We finally got the study from the National Academy of Sciences, which was a kind of big deal, if you will.

Well, to make a long story short, in this Congress Senator Olympia Snowe, Senator Schumer, Senator Collins and I have introduced legislation which over the next 6 years would bring the fuel efficiency standards for light trucks and SUV's in compliance with sedans. So it would be a third every 2 years for 6 years. This saves about a million barrels of oil a day. It prevents 240 million tons of carbon dioxide, the largest global warming gas, from entering the atmosphere a year, and it cuts down on oil imports about 10 percent.

Additionally, it would save the consumer anywhere from $300 to $600 a year buying gasoline. To me, it sounds like a no-brainer.

Now, the one question was is it really doable. I went and had the opportunity to speak to the National Academy of Sciences when they were meeting here and then afterwards some representatives from the automobile companies talked to me and said: Oh, we cannot do this, we are very resistant to it, etcetera, etcetera. Then I got very worried because I heard that the National Academy's panel had no environmentalists, was apt to be very pro-automobile company.

Well, this morning I saw the New York Times and my heart just jumped with delight, because what the draft report apparently said was that these standards are eminently doable, they are eminently meetable, and they probably can be done by different uses of existing technology. So I was just delighted. If that is the draft report, hopefully the Academy will back the draft report. I do not know whether they will or they will not.

As you know, the House has taken some minimum baby steps forward. So as I look at this issue and as I watch the administration and Secretary-excuse me Vice President Cheney's comments, I see the administration changing. As a matter of fact, I asked them whether they would support increased fuel efficiency standards-I do not mean to make you gentlemen uncomfortable increased fuel efficiency standards and the response I got was: Well, we want to see the Academy's report first.

Hopefully that report will be forthcoming very shortly, and hopefully we will be able to move this legislation. But what I wanted to ask you about was, as part of this legislation Federal fleets would have to reduce petroleum consumption and we would increase the fuel economy of new vehicles in the Federal fleet on the following schedule. Two years after the enactment of the bill, the average fuel economy of the new vehicles comprising the Federal fleet must be 3 miles higher than the baseline average fuel economy for that class, and 2 years after the enactment the average fuel economy after that must be 6 miles per gallon higher than the baseline.

My question to you is that, since the Federal Government purchases about 1 percent of all new vehicles, State vehicles make up another .65 percent and usually follow Federal standards, this can make a big difference. Would your Department be supportive of moving the Federal fleet in this direction?

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