[Senate Hearing 112-690]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 112-690
 
                       ENERGY AND ECONOMIC GROWTH
                           FOR RURAL AMERICA

=======================================================================


                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,

                         NUTRITION AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION


                               __________

                           FEBRUARY 15, 2012

                               __________

                       Printed for the use of the
            Committee on Agriculture, Nutrition and Forestry


        Available via the World Wide Web: http://www.fdsys.gov/




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            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

PATRICK J. LEAHY, Vermont            PAT ROBERTS, Kansas
TOM HARKIN, Iowa                     RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota            THAD COCHRAN, Mississippi
MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
SHERROD BROWN, Ohio                  MIKE JOHANNS, Nebraska
ROBERT P. CASEY, Jr., Pennsylvania   JOHN BOOZMAN, Arkansas
AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa
MICHAEL BENNET, Colorado             JOHN THUNE, South Dakota
KIRSTEN GILLIBRAND, New York         JOHN HOEVEN, North Dakota

             Christopher J. Adamo, Majority Staff Director

              Jonathan W. Coppess, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Michael J. Seyfert, Minority Staff Director

                Anne C. Hazlett, Minority Chief Counsel

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Energy and Economic Growth for Rural America.....................     1

                              ----------                              

                      Wednesday, February 15, 2012
                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, 
  Chairwoman, Committee on Agriculture, Nutrition and Forestry, 
  Washington, DC.................................................     1
Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........     2

                                Panel I

Vilsack, Hon. Tom, Secretary, United States Department of 
  Agriculture, Washington, DC....................................     4

                                Panel II

Fluharty, Charles, President and CEO, Rural Policy Research 
  Institute; Research Professor, Truman School of Public Affairs, 
  Columbia, MO...................................................    42
McCauley, Mathias J., Director of Regional Planning and Community 
  Development, Northwest Michigan Council of Governments, 
  Traverse City, MI..............................................    37
Raitano, Florine P., Immediate Past President, Rural Community 
  Assistance Corp., Dillon, CO...................................    39
Rembert, Mark, Executive Director, Energize Clinton County (and 
  Wilmington-Clinton County Chamber of Commerce), Wilmington, OH.    41

                               Panel III

Edwards, Lee, President and CEO, Virent, Inc., Madison, WI.......    52
Flick, Steve, Chairman of the Board, Show Me Energy Cooperative, 
  Centerview, MO.................................................    51
Greving, William, Sorghum Farmer, Prairie View, KS...............    49
Hutchins, Bennie, Energy Program Coordinator, Ag Energy 
  Resources, LLC, Brookhaven, MS.................................    54
                              ----------                              

                                APPENDIX

Prepared Statements:
    Grassley, Hon. Charles.......................................    62
    Lugar, Hon. Richard G........................................    63
    Thune, Hon. John.............................................    65
    Edwards, Lee.................................................    67
    Flick, Steve.................................................    73
    Fluharty, Charles............................................    86
    Greving, William.............................................    96
    Hutchins, Bennie.............................................   100
    McCauley, Mathias J..........................................   110
    Raitano, Florine P...........................................   118
    Rembert, Mark................................................   126
    Vilsack, Hon. Tom............................................   149
Document(s) Submitted for the Record:
Hon. Pat Roberts:
    Kansas Farm Bureau, prepared statement.......................   158
Hon. John Boozman:
    Various organizations representing the forestry and forest 
      products community, prepared statement.....................   159
Lugar, Hon. Richard G.:
    Title IV--Enery From Rural America, Sec.4001. Definitions....   165
Question and Answer:
Stabenow, Hon. Debbie:
    Written questions to Hon. Tom Vilsack........................   180
    Written questions to Mathias J. McCauley.....................   182
    Written questions to Florine P. Raitano......................   182
    Written questions to Mark Rembert............................   182
    Written questions to Charles Fluharty........................   182
    Written questions to Lee Edwards.............................   182
    Written questions to Steve Flick.............................   183
    Written questions to Bennie Hutchins.........................   183
Roberts, Hon. Pat:
    Written questions to Hon. Tom Vilsack........................   184
Bennet, Hon. Michael:
    Written questions to Florine P. Raitano......................   187
Boozman, Hon. John:
    Written questions to Hon. Tom Vilsack........................   188
Chambliss, Hon. Saxby:
    Written questions to Hon. Tom Vilsack........................   189
Gillibrand, Hon. Kirsten:
    Written questions to Hon. Tom Vilsack........................   190
Thune, Hon. John:
    Written questions to Hon. Tom Vilsack........................   192
    Written questions to Mathias J. McCauley.....................   194
    Written questions to Florine P. Raitano......................   194
    Written questions to Mark Rembert............................   194
    Written questions to Charles Fluharty........................   194
    Written questions to Lee Edwards.............................   194
    Written questions to Steve Flick.............................   194
    Written questions to Bennie Hutchins.........................   194
    Written questions to William Greving.........................   195
Edwards, Lee:
    Written response to questions from Hon. Debbie Stabenow......   196
    Written response to questions from Hon. John Thune...........   198
Flick, Steve:
    Written response to questions from Hon. Debbie Stabenow......   199
    Written response to questions from Hon. John Thune...........   199
Fluharty, Charles:
    Written response to questions from Hon. Debbie Stabenow......   203
    Written response to questions from Hon. John Thune...........   203
Greving, William:
    Written response to questions from Hon. John Thune...........   207
Hutchins, Bennie:
    Written response to questions from Hon. Debbie Stabenow......   208
    Written response to questions from Hon. John Thune...........   208
McCauley, Mathias J.:
    Written response to questions from Hon. Debbie Stabenow......   211
    Written response to questions from Hon. John Thune...........   212
Raitano, Florine P.:
    Written response to questions from Hon. Debbie Stabenow......   214
    Written response to questions from Hon. Michael Bennet.......   215
    Written response to questions from Hon. John Thune...........   219
Rembert, Mark:
    Written response to questions from Hon. Debbie Stabenow......   222
    Written response to questions from Hon. John Thune...........   223
Vilsack, Hon. Tom:
    Written response to questions from Hon. Debbie Stabenow......   226
    Written response to questions from Hon. Pat Roberts..........   234
    Written response to questions from Hon. Kirsten Gillibrand...   244
    Written response to questions from Hon. Saxby Chambliss......   246
    Written response to questions from Hon. John Thune...........   248
    Written response to questions from Hon. John Boozman.........   251



                       ENERGY AND ECONOMIC GROWTH



                           FOR RURAL AMERICA

                              ----------                              


                      Wednesday, February 15, 2012

                              United States Senate,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:36 a.m., in 
room SD-G50, Dirksen Senate Office Building, Hon. Debbie 
Stabenow, Chairwoman of the Committee, presiding.
    Present: Senators Stabenow, Harkin, Baucus, Nelson, 
Klobuchar, Bennet, Roberts, Cochran, Johanns, Boozman, 
Grassley, Thune, and Hoeven.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
 OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION 
                          AND FORESTRY

    Chairwoman Stabenow. Good morning. The Senate
    Committee on Agriculture, Nutrition and Forestry will come 
to order. We appreciate all of your attendance this morning. We 
certainly appreciate having Secretary Vilsack with us today.
    Today's hearing focuses on our efforts around rural 
development, bio manufacturing, and energy--all of which 
involve policies that help businesses create jobs in rural 
America and new markets for our farmers. As I have said many 
times before, the farm bill is a jobs bill; 16 million people 
in this country are employed related to agriculture, and we are 
very proud of that. It is very critical that we pass a farm 
bill this spring--a sentiment we heard this week from more than 
80 farm groups, and I could not agree more.
    I count myself lucky to have grown up in the small town of 
Clare, Michigan, in northern Lower Peninsula, and preserving 
our rural way of life is something that is very near and dear 
to me personally and to my family. This can mean helping small 
towns build a safe drinking water system or affordable 
broadband Internet access, or it can be in the form of 
streamlined programs that are more accessible for the people 
who use them. Cutting red tape and making programs work more 
efficiently will be a priority as we look at the titles of the 
farm bill, particularly so in rural development.
    Especially with our current budget pressures, we need to 
think strategically about the best way to achieve long-term 
economic growth in rural America. One of the most effective 
things we can do is to encourage leaders to work together on 
regional economic strategies--and we will hear about that 
today--allowing them to create job opportunities that are more 
likely to stay in their own home town and in their region.
    Bio-based manufacturing is a great example of new 
opportunities in rural America through innovative businesses 
that create good jobs. The economic benefit is twofold: new 
markets for our farmers and new jobs and opportunities in town. 
According to a recent Department of Agriculture study, the bio-
based plastic and chemical products industry could create over 
100,000 American jobs--and many of those in rural America. 
Biomass is another critical component of the bio-economy. These 
companies develop new uses for wood fiber and other forest 
products and clean, American-grown energy.
    Farm bill energy programs promote innovation by 
entrepreneurs and businesses small and large. Secretary Vilsack 
and I had a chance to see this firsthand last August at the 
Pure Michigan 400 NASCAR race, where all of the cars are 
powered using E15, American-made biofuel. But the energy title 
is not just about next generation of biofuels. The most popular 
program is the Rural Energy for America Program, which helps 
producers reduce their energy costs through renewable or 
efficiency measures. We know this has created or saved 14,000 
rural jobs to date.
    This weekend, we remembered the birthday of President 
Abraham Lincoln, who, 150 years ago this year, created the 
Department of Agriculture. He called it the ``People's 
Department.'' It is only fitting that today's hearing focuses 
on the millions of people whose livelihoods depend on the 
health of rural economies all across the country and all 
Americans who depend on what is done for a healthy and secure 
food supply in America.
    I want to thank all of our panelists for being here, and I 
would now like to turn to my friend and Ranking Member of the 
Committee, Senator Roberts, for his opening statement.

 STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF 
                             KANSAS

    Senator Roberts. Well, thank you. It is always helpful when 
you turn the microphone on.
    Thank you, Madam Chairwoman, and thank you to our witnesses 
for joining us today. I look forward to hearing from each of 
you as we talk about the next farm bill, how we should shape 
policy, specifically in the areas of rural development and 
energy.
    Unfortunately, our current budget situation leaves us with 
very little room for error, so when making policy decisions on 
what is best for rural Americans, we will rely heavily on our 
witnesses to tell us what programs are working, what programs 
are not working, and how we can make smarter decisions here in 
Washington that will provide our producers around the country 
with the tools they need to growth our rural economies in a 
smart, viable, and lasting way.
    I would just like to highlight for a moment, Madam 
Chairman, some achievements in my home State of Kansas. We have 
a solid group of leaders who are spending a lot of time, 
resources, and talent on solutions for growing our rural 
economies. I commend those leaders, like the Kansas Farm 
Bureau, the W.K. Kellogg Foundation, Kansas State's Advanced 
Manufacturing Institute, as well as the Rural Policy Research 
Institute, for the innovative thinking and commitments to this 
effort.
    I am glad we have Mr. Fluharty here from the Rural Policy 
Research Institute to tell us about these projects, how they 
are improving the lives and the economies of rural Kansans.
    With that in mind, Madam Chairwoman, I ask unanimous 
consent for the written testimony submitted by the Kansas Farm 
Bureau to be included in the official record at this point.
    Chairwoman Stabenow. Without objection.
    [The prepared statement of the Kansas Farm Bureau can be 
found on page 158 in the appendix.]
    Senator Roberts. I thank you.
    I am also pleased to welcome Mr. Bill Greving and his wife, 
Diana, from Prairie View, Kansas. Bill is a sorghum and wheat 
farmer and will share his experiences working with local 
ethanol facilities both on supplying sorghum and utilization of 
the distillers drain for his cattle.
    I look forward to hearing from our witnesses today about 
the results from these investments and what each of you sees as 
the future in renewable energy. I am concerned that after 4 
years some of these programs were just implemented within the 
last year. We need to make sure we are taking into 
consideration the complexity of these energy programs--and it 
is not just energy; we are discussing this issue in multiple 
titles--the complexity of programs and the ability of the 
Department to deliver the programs effectively and for 
producers to understand their options.
    We also have a responsibility to craft the right type of 
programs to facilitate new markets without adversely affecting 
the existing markets or duplicating actions of other Government 
agencies. Hopefully we can use all of this good insight from 
our panel of witnesses today as we move forward with farm bill 
discussions.
    I do appreciate very much our Secretary, Secretary Vilsack, 
for taking his valuable time to testify this morning. I know he 
has a plane to catch, and I appreciate him being here.
    While we are here to discuss other matters, I would be 
remiss if I did not comment about the President's budget 
announcement this week. I was very disappointed to see--yet 
again, I might add--a proposal that cuts nearly $8 billion out 
of the Crop Insurance Program. Madam Chairman, this is the 
number one issue that we have heard about in every hearing we 
have had in regards to what farmers need and what they rely on. 
This is on top of the $6 billion cut from the previous SRA.
    What baffles me is that instead of looking for new and 
innovative ways to protect producers as well as taxpayers, the 
President's budget simply dusted off old policy proposals that 
Congress simply has rejected.
    Furthermore, with roughly 80 percent of agriculture's 
budget tied to nutrition programs, his proposal cannot find $1 
of savings from increased efficiencies. Thankfully, this 
Committee is about to start a process where we will make the 
necessary policy decisions for the future as opposed to simply 
looking at numbers and dollars and cuts that have been there in 
the past.
    Madam Chairwoman, I appreciate the extra time for me to 
make this point. I look forward to today's hearing, and I thank 
you for your leadership.
    Chairwoman Stabenow. Well, thank you very much, and we will 
proceed with our first witness.
    First let me say we have excellent panelists today, and we 
appreciate everyone who has come to be with us. We will ask 
members of the Committee to please submit their opening 
statements for the record.
    Also, when we have a quorum of 11 members, we will be 
proceeding very briefly with reporting nominees from the 
Committee that we have held nomination hearings on, and so I 
would ask members to please remain until we can have 11 members 
to be able to do that.
    Let me also say we will be extending our time this morning 
to 7-minute rounds for Secretary Vilsack, and we very much 
appreciate, Mr. Secretary, your being here today.
    As everyone knows, Secretary Tom Vilsack is the current 
Secretary of Agriculture, and prior to his appointment, 
Secretary Vilsack served two terms as the Governor of Iowa. In 
that role and as a State Senator and the mayor of Mount 
Pleasant, Iowa, Secretary Vilsack has a remarkable record of 
making positive change in the lives of those he has served. We 
appreciate your bringing your talents to this job and welcome.

 STATEMENT OF THE HON. TOM VILSACK, SECRETARY, U.S. DEPARTMENT 
                         OF AGRICULTURE

    Secretary Vilsack. Madam Chair, thank you very much to you 
and to Senator Roberts and members of the Committee. Thank you 
for this opportunity.
    You have a copy of a written statement, which we would ask 
just simply be made part of the record, and if I might just 
spend a minute or two talking from the heart about the issues 
that you confront.
    I will never forget when I was campaigning for Governor 
going to a small town in southwest Iowa and sitting down in a 
coffee shop and having a conversation with a couple of 
community leaders. They talked about the importance of their 
school, of their hospital, of law enforcement, and then they 
stopped the conversation and just indicated to me that the 
concern that they had about their community was that there was 
a great dependence on Government-supported institutions for 
jobs, and that what they really wanted to do was to figure out 
ways in which the private sector could be more excited about 
their small community and small communities across the State.
    I think this Committee has an extraordinary opportunity, 
notwithstanding the difficult fiscal circumstances we find 
ourselves in, to make a very bold statement about the 
importance of rural America and small towns and to create a new 
opportunity. I think we started that conversation with biofuels 
and renewable energy. I think there is an extraordinary 
potential for a bio-based economy.
    We have put the pieces in place to do research, to provide 
assistance for small business development, to provide resources 
for manufacturing, to provide opportunities for producers to 
produce non-food feedstocks for this bio-based economy. I think 
as we craft the farm bill, working with the Senate and House 
Agriculture Committees, we are very interested in providing the 
technical assistance that you all need to be able to focus on 
this great opportunity. Not only is it an opportunity to 
increase farm income, and not only is it an opportunity for 
smaller producers to have additional markets which are local 
and regional in nature, but it is a job creator.
    You mentioned 100,000 jobs. Well, the reality is that as we 
move towards the 36 billion gallons of renewable fuel under the 
Renewable Fuel Standard, and as we fully integrate and 
coordinate our efforts in the bio-based economy, we are talking 
about millions of jobs.
    The very nature of biomass, the bulk of biomass, suggests 
that we will not have one large refinery servicing multiple 
States. We will have these refineries dotting the landscape 
across America in every part of America. This is not just a 
Midwestern idea. This is not just a Southeast idea. This is a 
national opportunity.
    So I am excited about the opportunity to visit with you 
today because I think for the first time in a long time, we 
have a vision of a rural America where moms and dads and 
granddads and grandmoms can be able to sit down and talk to 
their children and their grandchildren and explain to them that 
they have an extraordinary opportunity to create an economy in 
rural America that makes us less dependent on foreign oil, that 
makes us less dependent on moving to cities and suburbs to find 
real opportunity, that provides us a chance to fundamentally 
change the character of the economy of this country and get us 
back in the business of making, creating, and innovating. We do 
that better than anyone else in the world, and folks in rural 
communities have been waiting for this moment.
    As you consider the farm bill, I hope that you will 
recognize the importance of streamlining the number of programs 
we have, providing us the flexibility to be able to use these 
programs creatively and adjust them to regional differences, 
and to understand the significance and importance of regional 
economic development.
    These communities by themselves may have a difficult time 
finding the human capital or the financial resources, but as 
part of an economic unit, an economic region, they can join 
forces, they can leverage their resources both human and 
financial, and with the help and assistance of USDA, can build 
the platform and the foundation for an extraordinary economy.
    So I look forward to responding to questions today and to 
our team working with the Senate and House Agriculture 
Committees to take full advantage of this opportunity. And, 
again, I thank you for the chance to be here today.
    [The prepared statement of Secretary Vilsack can be found 
on page 149 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much, Mr. 
Secretary, and I share your view about the opportunities in the 
new biofuel, bio-manufacturing, and bio-economy and what the 
opportunities are for rural America and for the country as a 
whole.
    Before we get into specifics, though, I do want to spend a 
moment on the budget because it is very, very important as we 
go into this farm bill discussion. As you know, when the 
leadership of the House and Senate Agriculture Committees were 
asked to make recommendations last year on deficit reduction, 
we chose to do something a little different than ended up 
happening anywhere else, which was to sit down and develop 
something in a bipartisan, bicameral way. We are very proud 
that we were able to do that even though the full process did 
not come to a conclusion. We did recommend $23 billion in cuts.
    I would say that agriculture is about a little less than 2 
percent of Federal outlays, and the $23 billion was a little 
less than the amount in total that needed to be cut. We felt we 
recommended our fair share.
    But in all of that, we placed as a cornerstone crop 
insurance, and as Senator Roberts had mentioned, we have heard 
across the country from our field hearing in Michigan to Kansas 
to people coming in and speaking with us here how critical crop 
insurance is.
    So we need you to speak to the President's proposals on 
cuts in farm programs, and I am particularly concerned about 
crop insurance.
    Secretary Vilsack. Madam Chair, thank you for that 
question. You all have two great opportunities to impact the 
rural economy: the farm bill and the budget. We certainly 
respect the responsibilities of the House and the Senate with 
reference to both.
    Let me first of all say that I have publicly said this and 
will continue to say that you in your position as Chair of this 
Committee and Representative Lucas in his position as Chair of 
the House Committee did what most Americans want us to do, 
which is to work together to figure out compromise, to figure 
out middle ground, to give and take and get things done. I am 
deeply disappointed that your work was not fully accepted 
ultimately by the Committee of 12 and replicated by that 
committee so that we would be in a position to deal with 
deficit reductions.
    Having said that, we are now back to square one. We 
understand and appreciate the $23 billion proposal. We also 
understand that Representative Ryan's budget, which passed the 
House last year, called for $48 billion of reductions. We are 
not certain what will take place this year, but Representative 
Ryan's statements have indicated that the budget will look 
similar to what has been proposed in the past. So one has to 
assume that that number may be higher than the $23 billion that 
you all talked about.
    Budgets are difficult processes, and they involved, as you 
well know, choices and priorities. The President, when he 
looked at the agricultural budget, basically had to decide 
whether or not to focus on a balanced approach and an approach 
that basically took resources from farm programs, conservation 
programs, and nutrition assistance programs. He opted not to 
take money from nutrition assistance programs. With due respect 
to Senator Roberts, it is not about efficiencies. That 
efficiency issue is one that we are dealing with in our 
operating budget, which has been reduced and which we are 
currently working on.
    The crop insurance proposal basically focuses on four 
elements:
    First of all, a recrafting of the catastrophic coverage, a 
recalibration of the way in which those premiums are set. It 
will not impact or affect farmers in any way, but it will 
provide us some savings.
    Secondly, a look at the administrative and operating 
expense that is provided for the implementation and 
administration of the Crop Insurance Program and essentially 
placing a cap on the A&O, which would save several billion 
dollars over 10 years. That involves, obviously, agents, not 
necessarily farmers and ranchers and producers.
    A substantial piece of the President's proposal also takes 
a look at the return on investment that insurance companies 
generate from the sale of crop insurance. Historically, we 
believe, based on studies, that roughly a 12-percent return is 
sufficient to adequately support this industry. Today we are 
significantly above that 12-percent return on investment, and 
the President feels that 12 percent is an appropriate place to 
be. I suspect that a lot of Americans would love to have a 12-
percent return on their investments. That is several billion 
dollars.
    Then there is a premium adjustment for those farmers who 
are currently purchasing policies where the subsidy to them is 
more than 50 percent of the premium. This is obviously a 
partnership between the insurance industry, Government, and the 
farmers, and the President felt that something closer to a 50/
50 partnership was fair.
    That is essentially the proposal, and that allowed us not 
to take resources away from nutrition assistance programs, and 
that is basically a choice. So the question is: Who is in the 
best position to bear the difficult cuts and reductions that 
must be forthcoming? It is obviously an issue that we will talk 
about and debate, and everyone's position should be respected 
for their views. But in the President's view, these insurance 
companies are perhaps in a better position to withstand these 
difficult times than the folks who are currently struggling 
with tight budgets and cannot afford to put enough food on the 
table for their families.
    Chairwoman Stabenow. Well, thank you. I want to ask 
specifically about our topic today. I do want to also 
underscore, though, that I am equally concerned, actually more 
concerned about what the House budget showed last year and what 
we anticipate, if we are going to try to write a farm bill. So 
I want to underscore that as well and am very concerned about 
that.
    But let us talk also about particularly around energy. 
There are two kinds of things happening for us in Michigan. 
There was a groundbreaking in Fremont, Michigan, the 
international home of Gerber Baby Food, last year, the first 
commercial-scale digester project in the United States. It 
would take over 100,000 tons of agricultural waste and turn it 
into energy, and this was something supported by USDA. So we 
have those kinds of projects.
    Then we also have bio-based manufacturing where, in fact, 
we are using agricultural products to replace, as you know, 
petroleum in products, and we have our Big Three auto makers 
right now using, for instance, soy-based foam in the seats of 
their automobiles. So if you are buying an F-150 truck or a new 
Chevy Volt--I could go on advertising, but I will not--in fact, 
you are sitting on soybeans. So if you get hungry, you know you 
have got something you can munch on.
    But talk a bit about how we continue to expand on the 
opportunities there.
    Secretary Vilsack. Madam Chair, I think there are two 
significant proposals that you all ought to consider. The 
reality is that the energy programs in the 2008 farm bill were 
not funded through the length of the farm bill and, therefore, 
are not in the baseline that you all have to deal with. That 
creates the challenge of whether or not those programs are 
continued.
    In the event you make the decision that you cannot provide 
the resources in those programs, then what you need to consider 
is providing flexibility in the existing programs that will 
remain. The Business and Industry Loan Program is one that is 
very tightly structured to only provide resources for 
``commercially viable products.'' That limits the capacity to 
use that program that has billions of dollars of opportunity in 
it over the course of a farm bill life to be able to utilize 
for these bio-based manufacturing facilities, because some of 
this may not be ``commercially viable.'' So one thing you ought 
to look at is providing enough flexibility in the B&I Program 
to give us the capacity to further provide resources for these 
entities.
    The second program is the REAP program. You know, we are 
excited about the over 22,000 projects that were funded through 
REAP. Many of them included anaerobic digesters and other 
mechanisms on a much smaller scale on a farm-by-farm, small 
community scale. We think that this is a program that requires 
and needs attention from the Congress and provide us the 
resources because it can make a significant difference; 22,500 
projects have been funded through this program already, and 
there is enormous potential for it.
    Chairwoman Stabenow. Thank you very much. I am over my 
time. I will turn to Senator Roberts.
    Senator Roberts. Thank you, Madam Chairwoman.
    Let me just say something that I think we are going to 
agree to disagree on crop insurance, but I look forward to 
working with you. I think we have made some real progress on 
crop insurance. During our very unique deliberations, it was a 
situation that I do not think we have ever had to face before 
as a Committee. Four principals--the two Rankings, the two 
Chairpersons--trying to come up with something in regards to 
deficit reduction. We were the only Committee that submitted 
$23 billion to the process. The process broke down.
    This time around, we have scheduled four hearings--this is 
the first--and we have agreed to start over. We have agreed to 
build on the progress that we think we have made on 
conservation, on crop insurance, and on other titles. We still 
have some work to do without question.
    The point I would make is that all 21 members will be part 
of this. It will be an open process. I have visited with all of 
my side, on the Republican side, and I know the Chairwoman is 
doing the same thing on her side as well. It is our hope that 
we can get a bill out as soon as possible after the hearings, 
and we have to move in a very expeditious fashion. It is our 
hope that we can get unity on this Committee during that open 
process where everybody feels that they have an opportunity to 
participate. That is not in my prepared remarks, but I thought 
it would be very helpful.
    I am going to ask a parochial question, but it does have 
national security implications. Several years ago, Kansas was 
selected through a competitive process run by the Department of 
Homeland Security to be the site of the new National Bio and 
Agro-Defense Facility. The acronym for that is NBAF. The 
purpose was to replace the aging Plum Island facility, which, 
by the way, ranked sixth out of six finalists under 
consideration for the final site selection.
    To date, the Federal Government has spent over $100 million 
in design and preparations to build this facility. The State of 
Kansas is also designated a cost share as part of the proposal, 
is well over $206 million. In fact, the land where this 
facility is to be built at Kansas State University has already 
been cleared of all the buildings and structures.
    I know you support the construction of this new facility. I 
thank you so much for your time when we talked about this and 
the dangers to our country and our Nation's food supply and 
what that threat really poses. As a former member and Chairman 
of the Intelligence Committee, I can assure you that threat 
still exists. I know you understand the important need it would 
fill in our agriculture and food security.
    The Secretary of Health and Human Services, Kathleen 
Sebelius, our former Governor--she was Governor when this all 
went through--is supportive, and DHS Secretary Napolitano has 
previously toured the site and expressed her support for the 
project. So I and most Kansans were surprised--and I think all 
of agriculture was surprised, stunned actually--when the 
President's budget came out on Monday and proposed no 
construction funds in 2013, and it also proposed a task force 
to determine if a new facility is actually needed.
    Mr. Secretary, do you believe construction of this facility 
is vital to our Nation's food and agriculture security?
    Secretary Vilsack. Yes.
    [Laughter.]
    Senator Roberts. Thank you, Mr. Secretary.
    Mr. Secretary, since we both agree it is vital and the Plum 
Island facility is in a sense starting to fall apart, were you 
surprised at all to see the budget eliminate the construction 
funding and instead pump more money into research? I want to 
emphasize that research that the State of Kansas has already 
agreed to support is part of our share of that Kansas' cost 
share proposal.
    Secretary Vilsack. Senator, we are looking at 
opportunities, as you and I have discussed, to see if there are 
ways in which some of the activities or some of the work that 
is being done in Plum Island, that some of that work may 
transition, if you will, to the Kansas location, which I am 
committed to trying to make happen this year. So, obviously, we 
are going to continue to work with you and work with the 
Committee and work with the Congress to make sure that folks 
understand the significance of this facility, to make sure that 
they understand the concerns that we have with the Plum Island 
facility, and some of the needed repairs that would be required 
and the cost of those repairs over a period of 10, 15, 20 
years, and whether or not we would be better off as a country 
having a modern facility.
    This is critical for us. It is critical for us in terms of 
being able to identify problems and being able to accurately 
analyze the extent of the problem. As we become more engaged in 
global trade, and as agriculture becomes a great story for 
American exports, we obviously want to be able to maintain our 
good reputation around the world.
    So this facility is important. We will continue to work 
with Homeland Security, as we have, and we will continue to 
work with your office, as we have, to make sure that at some 
point in time this becomes a reality.
    There is still a lot of work that has to be done in terms 
of the design. We have to make sure that it is adequate to 
contain some very dangerous materials that they will have to 
deal with, but my hope is that we can find a way to get this 
thing built at some point.
    Senator Roberts. I certainly appreciate your answer.
    Let me change subjects with the minute I have left. Last 
summer, the President announced the creation of the White House 
Rural Council. It is chaired by you, sir, and it focuses on 
actions to better coordinate and streamline Federal program 
efforts in rural America. I was pleased to see such an effort 
to take down the stovepipes of bureaucracy on behalf of farm 
country. Oftentimes, actions taken by agencies other than the 
Department have a tremendous impact on the development of rural 
America.
    What role are our agriculture industries--farmers, 
ranchers, small businesses, State and local officials, and 
other rural stakeholders--what role are they playing to achieve 
the goals of the White House Rural Council?
    Secretary Vilsack. Senator, the first thing we are 
attempting to do with this Council, which is, as you have 
noted, the first time in the history of our country that such a 
committee has been put together by an Executive order, is to 
figure out ways in which initially the Federal Government can 
work more closely with each other. Let me give you a couple of 
examples of things we have already done that are in the 
pipeline.
    We recognized the need for more venture capital and more 
capital to be placed and invested in rural America. As a result 
of the Rural Council's work, the Small Business Administration 
has committed to doubling the amount of that type of credit 
going into rural communities over the next 5 years. It is 
roughly $3.5 billion of additional credit that is going to be 
made available.
    As a result of that coordination, USDA and SBA are now 
holding a series of venture capital conferences across the 
country where we are bringing people in from regional areas, 
bankers, agribusiness, institutional investors--and encouraging 
them to look at opportunities in rural communities. Again, this 
bio-based economy is one of those opportunities. We want to 
acquaint them with those opportunities as well as the 
infrastructure opportunities. We think that there are a number 
of pension plans and other entities that are looking for stable 
investments, and public infrastructure investments is a way of 
providing that stability and that appropriate return. Madam 
Chair referred to wastewater treatment facilities. That is an 
example.
    We are working with Health and Human Services to better 
coordinate rural health technology. We announced an opportunity 
for USDA and HHS to work together to create the workforce that 
will allow us to do electronic medical records more effectively 
in these small rural hospitals. So we are working with the 
medical community in terms of that proposal.
    The Department of Navy and the Department of Energy and 
USDA are working together in a first-time-ever proposal to help 
the commercial aviation industry create a drop-in aviation fuel 
which would be used by our Navy. That is obviously of great 
interest to agribusiness and to farmers and producers. It is 
also of interest to Boeing and United and Honeywell and other 
entities that are trying to build a commercial aviation 
industry in the United States that is prepared for the 21st 
century.
    So there is a whole series of proposals that are taking 
place. We meet monthly. I chair the meetings. I physically go 
to the meetings. We are demanding results from these agencies, 
and we are getting them. I think you will see over the next 
month or so a series of announcements coming out that will 
impress upon you that we are working in a collaborative 
fashion.
    Senator Roberts. Well, thank you for such a fine statement 
and for your leadership.
    My time has expired, Madam Chairwoman. I would like to 
submit several other questions for the record.
    Chairwoman Stabenow. Absolutely.
    [The questions of Hon. Pat Roberts can be found on page 184 
in the appendix.]
    Chairwoman Stabenow. Senator Harkin.
    Senator Harkin. Thank you very much, Madam Chair.
    Mr. Secretary, thank you very much for a very eloquent 
opening statement, and thank you for the great work that you 
are doing at the Department of Agriculture. Two things.
    First, thanks for what you said about the nutrition 
programs. I had my weekly breakfast this morning with Iowans. I 
had a big group there from the Diocese of Davenport, a Catholic 
diocese, and that is what they wanted to talk about, not 
backing off of our support for low-income people who are facing 
tough times now, with high rates of unemployment, that need the 
Supplemental Nutrition Assistance Program, or, as it is called, 
``food stamps.'' I thought one of the statements made there was 
kind of profound. They said, you know, ``If someone is accusing 
this President of being a food stamp President,'' one of them 
said, ``well, he ought to wear that as a badge of honor, that 
in this country because people face tough times or they are 
disabled or are unemployed for periods of time, that we do not 
force them out on the street to beg for food, that we keep 
their kids well fed and healthy in our country.''
    To me that is a source of pride for the United States of 
America, not something to be embarrassed by. So I congratulate 
you for your strong support of the nutrition assistance program 
and the President for his budget that also keeps that important 
safety net there.
    Secondly, on the biofuels, again, I hope that the President 
will get behind those of us here on both sides of the aisle who 
have been pushing for market access. I do not think it comes 
down to whether or not we need much financial support. The 
enzymes have been developed. We have a new plant being built in 
Nebraska now by Novozymes, producing the enzymes for the 
breakdown of certain cellulosic materials--wheat straw, corn 
stover, things like that, bagasse from sugar. What we need is 
market access, and that is three elements: we need more flex-
fuel cars, which Detroit must build; we need blender pumps at 
our gasoline stations so that at least half, 50 percent of our 
gasoline stations should have a blender pump by 2020; and we 
need a dedicated pipeline to take the biofuels from sources in 
the Midwest to the East.
    We have right-of-way. We got the Tax Code fixed for that. 
But there is a loan guarantee that should be granted by the 
Government to get that pipeline built. If you do those things, 
we do not have any worries. We have got the enzymes now. As you 
pointed out, these biofuel plants are going to be built all 
over. They will provide a lot of local jobs. But we need market 
access, and that is what the oil companies are clamping down 
on.
    I would just say this: I hope that you will take that back 
to the President and tell him to get behind what some of us are 
trying to do here in the Congress to open up those markets in 
those three areas.
    Lastly, I have to make a comment about NBAF, as it is 
called. We have looked at this for years. The National Research 
Council found serious problems in the Department of Homeland 
Security's risk analysis. Those issues have not yet been 
resolved. It is my judgment that NBAR, a billion dollars, with 
all of the problems it has got and with all the needs that we 
have in our country now--and I know, okay, we have put some 
money into it. I heard the same arguments bout the Clinch River 
breeder reactor when we had a Congressman--when I was in the 
House, we had a Congressman from Tennessee and later a Senator 
by the name of Al Gore, a big pusher of that. But, you know, we 
finally realized that even though we had put money into it, we 
should not chase bad money with good.
    Then later on there was something called the 
Superconducting Super Collider. Do we remember that? I remember 
a lot of people supporting that here. We had put money into it. 
We had already dug some tunnels in Texas. We killed that, too, 
because we decided that we were not going to chase bad money 
with good.
    I think this whole NBAF thing needs a whole fresh look from 
the beginning as to whether or not it is better economically 
and also for our national security to upgrade the Plum Island 
facilities, which are off the coast of America. There is no 
country that I know of that has a facility like this that is 
out in a farmland area, plus the fact that we have a neighbor 
to the north, Canada, that has one of these facilities that we 
can use at any time. We have very good relationships with 
Canada, by the way.
    So I think this whole--and I understand--I could be wrong, 
but I understand that the Governor of Kansas recently told the 
legislature that the State could not afford or would be putting 
that on hold because they were not going to be funding it. I 
will have to get the exact words of what Governor Brownback 
said, but that was sort of the intent of it.
    Lastly, the huge issue--the huge issue--of the possible 
escape of foot-and-mouth disease into cattle in cattle country, 
I came across one report--again, I do not know if it is true or 
not--that said that if this got out, they could not--if foot-
and-mouth disease got out of that facility--and there is a high 
probability it could from this risk analysis--that, in fact, 
they could not kill the cattle fast enough to stop the spread. 
They could not kill the cattle fast enough to stop the spread.
    I can understand my friend from Kansas. People want things 
built in their States and stuff. We all fight for our own 
States and things like that. I understand that. I have no 
problem with that whatsoever. But I do believe that on the 
basis of national security, the safety of our population, the 
safety of our livestock herds, and the probability that it 
would be cheaper and better to do this off the coast of America 
someplace--and a redesigned and rebuilt Plum Island might be 
better for our country, but these are things that we are going 
to have to discuss and debate.
    Mr. Secretary, thank you very much for being here.
    Senator Roberts. Madam Chairman, could I just say a few 
remarks?
    Chairwoman Stabenow. Yes, Senator Roberts. I do not want to 
debate this this morning, but I do understand it is important 
to you, so I will yield for a moment.
    Senator Roberts. Well, I have been in contact with the 
Governor of Kansas virtually every day on this project, and the 
Governor, quite the opposite, did not say that they were not 
committing funds. As a matter of fact, in talking with DHS, he 
is trying to work out a solution that, due to the budget 
restrictions, is there any way Kansas can step up? How can 
Kansas step up? It is because we have quite a bit of money 
dedicated to this project in addition to the commitment by the 
Federal Government, which now has not been forthcoming to the 
extent that we have. He is sending his top person to meet with 
Dr. Tara O'Toole as of tomorrow in regards to further 
negotiation on this. It is quite the opposite in regards to 
saying that we do not have the money. There were flaws in the 
National Academy of Science report. They did not take into 
account all the mitigation efforts that we have already put in 
place dating back even 10, 5, 3 years ago.
    So we do have strong statements on behalf of this facility 
from the Department of Homeland Security, from the USDA, and 
from the administration, and more especially from the 
intelligence community in regard to the secret cities of 
Russia, one of which I visited and have tremendous bio-weaponry 
capability that would endanger our food supply. Those secret 
cities are now closed because we have Mr. Putin in charge as 
opposed to Dick Lugar and myself running around Russia trying 
to achieve some degree of cooperation from the folks there, 
from the scientists in these secret cities. The threat is real. 
We have complete support, three Democrat Governors, one 
Republican Governor, the entire Kansas delegation, the entire 
Kansas State Legislature.
    I understand the gentleman's concern. I will be more than 
happy to talk with him individually. We have always gotten 
along. I think we can get along on this.
    Secretary Vilsack. Madam Chair, can I just make a comment 
about blender pumps?
    Chairwoman Stabenow. Yes, Mr. Secretary. Absolutely, you 
may do that, and then we will turn to Senator Cochran, who is 
next up.
    Secretary Vilsack. I just think it is important to 
emphasize the fact that, with some flexibility within the REAP 
program, we are in the process of trying to assist in the 
location and development of blender pump distribution. I think 
Senator Harkin's comment about market access is a good one, and 
we are trying to use the REAP program in a creative way to 
address that, at least in a small way.
    Chairwoman Stabenow. Thank you very much.
    Senator Cochran.
    Senator Cochran. Madam Chairman, thank you very much for 
convening this hearing, and I want to join with other members 
of the Committee in welcoming the Secretary of Agriculture to 
lead off a discussion of what our hopes are and what the 
realities are for assisting production agriculture and the 
programs that are administered by the Department of 
Agriculture.
    We come upon this period of time from occasionally where we 
review our farm bill to try to make sure that it is up to date, 
and that is one of the key reasons for the Department of 
Agriculture and this Committee to exist, in my opinion. It is a 
big challenge. We have a lot of people who depend upon programs 
administered by the Department for conservation practices which 
would be way too expensive for individual landowners to try to 
handle by themselves without the benefit of farm bill programs 
and other support they get from our Federal Government.
    So thank you for being here, and let me just ask you 
whether or not you see in the future of this farm bill that we 
will be writing and extending programs and reauthorizing 
programs whether programs like the Delta Regional Authority, 
the Delta Health Alliance, Rural Water Associations, will 
continue to be able to look to Washington for support and 
guidance as we try to provide health care, housing, and basic 
infrastructure needs in rural America.
    Secretary Vilsack. Senator, I think it is important for 
rural America to have programs that have enough flexibility to 
be able to address the multiple needs. We are, particularly in 
areas that are poverty stricken, working in a program called 
Strike Force where we are attempting to go deeper into these 
communities and to create a bond with USDA that had not existed 
so that they are comfortable in applying for programs and 
comfortable in knowing what the rules of the game are.
    So it is important for us to continue to figure out ways in 
which we can work with community-building organizations to make 
people in these small communities comfortable with the 
competitive processes that we have to make sure that we 
leverage our resources as effectively as possible.
    The most important thing we can do now, I think, is what 
this Committee is doing: try to get a farm bill as quickly as 
possible so that we have some degree of certainty. Recognizing 
the fiscal challenges that you all face, there may not be the 
capacity to specifically designate money for a particular 
organization or entity, but there is a process by which you can 
created a competitive circumstance in which the best programs 
will be funded and supported as they should be and giving us 
the flexibility to work carefully and closely with regions, 
economic regions, to make sure that their needs are well 
thought out.
    So a long way of answering your question. I think we are 
probably not going to see specific designations, but we are 
probably going to see more competitive opportunities and 
working with communities to make sure that they can be 
competitive. I think that is a key. So more flexibility, 
streamline the process, and recognizing the importance of these 
programs.
    Senator Cochran. Some of the Department offices in our 
State are given the responsibility of helping administer 
assistance programs not only for agricultural producers but 
rural communities, small towns, where the opportunities for 
education, health care, understanding how to comply with 
Federal programs that provide cost sharing for programs that 
you just mentioned are very important to be continued and 
reauthorized in the farm bill that we will be writing.
    As Secretary, you will be looked to for a lot of assistance 
in identifying our priorities. Is this administration going to 
support the reauthorization of agriculture production in rural 
community assistance programs so that we can continue to see 
quality-of-life issues addressed with the Federal Government's 
assistance?
    Secretary Vilsack. Senator, let me see if I can respond to 
that question. First of all, to the extent your question asks 
whether or not this administration will be supportive of an 
adequate safety net to ensure that producers stay in business, 
the answer to that is an unequivocal yes. We do recognize that 
part of that safety net is some process by which difficult 
times--revenues can be protected during difficult times, and we 
know the fiscal constraints that we are working under will 
require us to recraft and modify existing programs to provide 
that safety net.
    I would also say that part of the safety net in rural 
America is a good job. Many farm families are relying on off-
farm income as well as farm income to be able to meet the needs 
of their families. So I see the rural development component of 
our responsibility as part of that safety net.
    We need to make sure that we use every dollar as 
effectively as we can. I can talk to you about the 6,200 
community facilities that we have helped build in the last 3 
years, a record number of Business & Industry loans that we 
have made, worked with small entrepreneurial activities through 
a variety of smaller programs. At the end of the day, we have 
got 40 programs in rural development. Candidly, we do not need 
40 programs. We need fewer programs. But within those existing 
programs, you need to give us the flexibility to be able to 
craft them and use them creatively.
    Again, I think the potential here is unlimited in every 
part of the country for a bio-based economy--fuel, energy, 
chemicals, et cetera--and the job creation opportunities are 
enormous. But right now the stovepipe nature of what we have 
makes it difficult for us to be able to really spur that 
opportunity and that vision on.
    The last thing I would say on conservation, that is also an 
extraordinarily important component of economic activity. It is 
not just simply the economic and environmental benefits that 
come directly to the producer from our conservation programs, 
but it is also the outdoor recreation opportunities that are 
expanded and created when we have habitat for wildlife. More 
hunting and fishing opportunities are extremely important and 
an underutilized opportunity for us, I think, in terms of 
turning the rural economy around. So it is a broad approach.
    Senator Cochran. Thank you very much.
    Thank you, Madam Chairman.
    Chairwoman Stabenow. Thank you very much.
    We are very close to a quorum as well to be able to report 
out our nominees, so I would ask patience of the members. We 
hope to have a quorum in just a moment.
    Senator Nelson.
    Senator Nelson. Thank you, Madam Chair. Thank you, Mr. 
Secretary, for being here.
    I must say that I was relieved that my good friend from 
Iowa had more positive things to say about Nebraska's Novozymes 
than he had positive things to say about Kansas. So I am much 
more relieved, Senator. Thank you.
    [Laughter.]
    Senator Roberts. Much more promising in the future.
    Senator Nelson. I see.
    Secretary Vilsack, I know from all of your comments and 
everything that you have been doing on biofuels that you share 
the view that the future of our transportation needs and the 
fuel to run the engine of our economy will depend a great deal, 
to a great extent on biofuels. I think, you know, all of us 
have this commitment to producing 36 billion gallons of 
renewable fuel by 2022. We know that in order to do that, we 
are going to have to have a greater diversification of 
feedstocks.
    So my first question would be: Is the Department in support 
of adding a number of feedstocks to the RFS2, including some 
annual grains like sorghum?
    Secretary Vilsack. Senator, there is no question that we 
have to focus on non-food feedstocks. That is one of the 
reasons why with the BCAP program we have encouraged the 
development of camelina and miscanthus, hybrid poplars, and 
switchgrass as potential opportunities. So we are obviously 
looking for ways in which we can expand the feedstocks. We are 
doing research on trying to figure out how to more effectively 
and efficiently use those feedstocks. We are also providing 
assistance to bio-refineries in all parts of the country that 
use different feedstocks so we can determine what is 
commercially feasible. We are focusing on making sure that we 
play to the strengths of each region of the country.
    So all of that is important, and we will continue to work 
with industry. We met with the sorghum producers not long ago 
about this issue. We will continue to work with our friends at 
EPA to provide them the information, the technical information 
they need to make the determinations as to what should be or 
should not be included in the RFS2. But I will tell you we are 
very much for a broad-based approach.
    Senator Nelson. I think if we are able to achieve that 
goal, you will see more existing ethanol plants in the Great 
Plains retrofitted to take into account and be able to process 
feedstocks to move away from some of the other foodstocks that 
are currently being used. I think it would be in all of our 
interests to see this move as quickly as we possibly can, so if 
there is something we can do to be helpful as well as part of 
the budget, clearly we ought to be committed to do that.
    Secretary Vilsack. Well, let me make one comment on that. 
One of the things that we have determined is that the credit 
needs of these facilities are complicated, and they are 
complicated because Government is normally there at the 
beginning of an operation to provide credit. The private sector 
is there at the end after you have established commercial 
viability. But what we see is there is no one in the middle.
    Now, we have used the Biomass Research and Development 
Initiative as a way of trying to deal with this Valley of Death 
issue, but it is real, and it is significant, and part of what 
Congress can do is to look at ways in which that initiative or 
other initiatives can help us do a better job of bridging that 
credit gap that exists. I think if we get there, I think you 
are going to see a substantial increase in the amount of 
advanced biofuels that are being produced in this country. I 
know there has been frustration with the pace, but I think we 
are reaching a tipping point, and you are going to see much 
more of it come online here soon.
    Senator Nelson. Well, if we do not broaden the base for 
feedstocks, it is going to be nearly impossible to reach the 36 
billion gallons requirement by 2022. Is that fair to say?
    Secretary Vilsack. It is because we are pretty much almost 
at the corn-based ethanol cap of 15 billion, so it is 
absolutely essential for us to move beyond the overreliance on 
corn-based ethanol. I think we are seeing that. We are seeing 
algae plants. We are seeing agricultural waste being used in 
Florida. We are seeing switchgrass and woody biomass being used 
in other parts of the country. And, you know, there is a great 
deal of interest here. We just want to make sure we continue 
the commitment, that we hold firm on the RFS2 and keep that as 
part of our direction.
    Senator Nelson. Thank you.
    Switching a little bit now to micro entrepreneur 
assistance, I have been a supporter of the rural program, 
getting it in the last farm bill, and I really think that 
programs like RMAP are critical to rural America, small 
businesses that make up 90 percent of all rural businesses. 
More than 1 million rural businesses have 20 or fewer 
employees. So small businesses in the rural areas need capital 
to finance those start-up costs as well as for expansion, and 
the continued success of these entrepreneurs is essential to 
ensuring that rural communities survive.
    As you were talking, many of these jobs could be or are 
off-farm jobs, will help support agriculture. I recognize the 
problems that Congress created for the Department by not 
continuing funding for the program in fiscal year 2012. But I 
have heard concerns from constituents who have utilized the 
program that the Department has suspended activities on all 
RMAP loans and grants even though there is still some funding 
remaining from past fiscal years.
    What is the Department doing here? The reports that we are 
getting, are they accurate?
    Secretary Vilsack. Senator, to date, $51 million has been 
dedicated to 236 loans helping nearly 1,000 businesses. The 
problem comes from the language that was included in the 
appropriations bill and some concern that we have about 
precisely what the direction is from Congress, whether it is 
basically suggesting that no further resources are going to be 
available or whether it is suggesting that we ought not to 
administer the program at all. So we are working with our 
General Counsel's office to try to figure out precisely what 
that language will allow us to do.
    My personal preference would be that we make good on the 
commitments that we have made in the past. A lot of folks 
worked really hard to get to that point and I think are 
frustrated that they cannot get the resources that will allow 
them to create the business. We want to be able to do that. I 
hope we get there. I just want to make sure that when we do it, 
we do not disregard the intent and direction of Congress.
    Senator Nelson. Thank you, Mr. Secretary.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Before proceeding with Senator Johanns, we do have a 
quorum.
    [Whereupon, at 10:32 a.m., the Committee proceeded to other 
business and reconvened at 10:34 a.m.]
    Secretary Vilsack. Madam Chair.
    Chairwoman Stabenow. Mr. Secretary.
    Secretary Vilsack. First of all, thank you for getting Mr. 
Scuse through the Committee. But, Senator Nelson, in the time 
that you had this business hearing, I have learned that we have 
actually been given authority to proceed in funding the 2010 
and 2011 RMAP loans, so those are going to go through the 
process.
    Senator Nelson. Thank you.
    Chairwoman Stabenow. Senator Nelson, you are pretty 
powerful there.
    [Laughter.]
    Chairwoman Stabenow. Can we give you a couple other 
minutes? Maybe you can come up with some other--no.
    Senator Johanns.
    Senator Johanns. I have to say that was very impressive, 
Ben. That is remarkable. Well, let me offer a few thoughts, if 
I could.
    First of all, it is good to see you again. It is good to 
have you at the hearing. As you know, we are kicking off a farm 
bill process, although we have had some hearings already, and a 
fair amount of work has been done on the farm bill. I have been 
saying for a long time, thinking about this farm bill, that the 
unwritten story--now it is the written story--is that it is 
going to be all about budget. It is tough to get a multiyear 
program in place. You know, we are working on the 
transportation plan now. In a perfect world, that would be a 5-
year plan. We are working on a 2-year plan. That just seems to 
be, unfortunately, the way of the world these days. Like I 
said, in a perfect world we would have longer plans, but the 
world is less than perfect.
    So in thinking about the farm bill process, it has occurred 
to me that I think the more streamlined, the more efficient, 
the targeted we can make our various programs, the better 
chance we have of moving it through the Senate process and 
through the House process. So I am going to throw out a couple 
of things that I would like your reaction to.
    Let me just say, Mr. Secretary, I appreciate the challenge 
of being the Secretary. You know, you have got a boss, and that 
is a pretty powerful boss, to say the least-- the President of 
the United States. I do not expect you, nobody expects you to 
come in here and talk down a budget proposal that is made by 
the President of the United States. I get it. I understand it. 
Yet I also understand that there are probably some things that 
you look at and say, ``Boy, I am going to try to work through 
this and try to get some flexibility with OMB and the folks at 
the White House.'' So let me run these ideas by you and see 
what you think.
    I look at the risk management aspect, which essentially is 
crop insurance, and overwhelmingly producers are telling me--
not only from Nebraska but when I visit with producers around 
the country--that they think risk management is really the key 
issue of the next farm bill, and they, by and large, like crop 
insurance. They might argue about this feature or that feature, 
but, by and large, they have felt this to be a very useful tool 
in their risk management process.
    If anything, I would like to do some things to try to 
improve it, maybe fix some things. You know, a multiyear has--
or disasters are difficult and that sort of thing. But without 
going into the detail, I see our Crop Insurance Program. Then I 
see another program, SURE, and I have yet to have a producer 
come to me and say, ``Boy, I love that SURE program, Mike. Go 
up to Washington and make sure you fight to keep every dime and 
dollar of it.'' Quite the opposite. It just has not worked very 
well. People wait a long time to get anything out of it. I do 
not think it has done the job, just to be very honest about it. 
I am not a fan of it.
    We cut crop insurance $8 billion. Maybe you can make a 
strong case that, ``By golly, Mike, that is the right thing to 
do,'' while funding SURE for $8 billion. I think that is the 
number that keeps SURE going for another 5 years. I understand 
the politics of that but, quite honestly, it does not make any 
sense to me whatsoever.
    The second thing I wanted to mention--and then I had better 
quit talking or you will not have time to respond--is it does 
occur to me that direct payments, although they made a lot of 
sense maybe at one point--you know, when I became Secretary, I 
think corn was $1.95 or $1.96 a bushel, and I could go on and 
on through the commodities. It does not seem to make any sense 
anymore.
    I have said openly that direct payments need to disappear 
if we are going to make--if we are going to do something with 
those funds, let us focus on risk management. I can mention 
some other things, but like I said, we only have a couple 
minutes left here, and I would like your reaction to some of 
what I have said.
    Secretary Vilsack. Well, Senator, you, probably more than 
just about anybody else in Washington, have an appreciation for 
the position that I am in since you held it, with great 
distinction, for a number of years. Let me start where you 
ended with direct payments.
    When I first came into this job, I remember going to speak 
to the cotton producers and suggesting--this was very early in 
the administration--that there were going to have to be changes 
in the direct payment program, that it was not going to last. I 
did not get back to the office before I got calls from not only 
the cotton producers but also my staff going, ``You cannot say 
that.''
    Well, here we are today. You and I, I think, would agree 
that the direct payment system as it exists today is probably 
not going to survive these conversations, and probably with 
good reason. It is hard to justify to the 98 percent of America 
why farmers are receiving payments even in good years. So I 
think there is a consensus that that has to change.
    Now, the question is: How do you change it and what 
replaces it? Obviously, crop insurance is critical and 
important. We have expanded the number of crop insurance 
policies in this administration and will continue to look for 
ways to make the program better. You have mentioned a couple of 
issues which I think we do need to work on.
    The issue of SURE, I would agree with you, the concept is a 
good concept because crop insurance does not necessarily get 
you totally out of the woods if you are hit hard with disaster. 
We also have to understand that we have seen a significant 
increase in the input costs in putting a crop in the ground, 
and it used to be you had enough diversity in your operation 
that if you had a bad year in one crop, you could pretty much 
survive.
    With as little diversity as we have in terms of crop 
production on some of these farms and as high cost as it is to 
put a crop in the ground, one bad year may be enough to put a 
pretty good operator under.
    So I think in addition to crop insurance, you need some 
kind of mechanism to provide assistance and help when that 
producer really needs it. The problem with SURE is it is a 
dollar short and a day late. So whether you continue that 
program, clearly you are going to have to change the program so 
it is more relevant than it is today.
    Now, what does that look like? We will be happy to work 
with you on revenue protection processes and concepts on some 
kind of streamlined disaster program, whatever it might be. We 
see our role as working with you. You have identified issues 
and problems, and we ought to be about solutions.
    Senator Johanns. I appreciate your openness, and I am a 
little bit over, but I just wanted to make two last quick 
comments.
    I would love the opportunity to sit down with whatever of 
your staff would be appropriate to talk about this issue, 
because I think there is an opportunity to do something within 
the Crop Insurance Program that gets to what many members on 
both sides of the aisle were trying to get to with SURE. I 
would like their best thoughts on what might be the appropriate 
vehicle.
    Then the final thing, Madam Chair, that I just have to put 
in the record here, my good colleagues Senators Hoeven and 
Thune point out that corn prices are a lot higher now than when 
I was Secretary, so Secretary Vilsack must be a far improved 
Secretary than I was, so congratulations.
    [Laughter.]
    Secretary Vilsack. You could also make the point that what 
you and Secretary Schafer did set up the table for better 
prices.
    Senator Johanns. Thank you very much.
    Chairwoman Stabenow. Thank you very much.
    Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Madam Chairman. 
Thank you, Mr. Secretary. Thank you for visiting my State many 
times, given how close it is to your home State--it is not that 
far--and also for the great work that you have done. I just 
wanted to echo some of the comments from my colleagues about 
the concerns on crop insurance and also just to emphasize, 
which I think you know better than any member of the 
administration, what a huge success we have had in the rural 
areas and how important this has been to our recovery. I see it 
in our State. We have 5.7-percent unemployment, and a lot of it 
has to do with that stability that we have seen in our food 
production, that interrelationship with energy and the 
interrelationships with our food manufacturers as well. So I 
want to thank you for being such a steady hand and also voice 
my concerns. I thought we were working on a good idea here with 
the $23 billion in cuts, and I hope we can get closer in that 
neighborhood as opposed to some of the other proposals that we 
have seen.
    I was talking to Representative Peterson last night whom 
you know well, and he was saying the same thing, that this has 
been one of the positive apples of the eye of the country that 
we have been able to keep strong rural, and we want to keep 
that going with our economy.
    I thought of asking you about blender pumps and the blend 
wall, and then you announcing, like you did with Senator Nelson 
5 minutes later, that it was done. But I think you know how 
important those issues are. I thought I would ask first a 
question in another area. We are a big forest State, and what 
role do you think the USDA can play in encouraging other 
departments to make similar improvements that we have seen for 
the use of wood in the procurement of construction materials 
for green building designs, something USDA has been working on? 
What role do you think you can play in encouraging other 
departments to make those kinds of improvements? How can we 
improve the BioPreferred Markets Program to encourage the use 
of traditional bio-based forest products while encouraging the 
development of new bio-based products that replace oil-based 
products?
    Secretary Vilsack. Senator, thank you for that question. We 
have made a recent commitment to do a better job of restoring 
our forests and putting together a forest planning rule and a 
restoration concept that we think will lead to more 
opportunities for the timber industry in particular. We have 
made a commitment to get to 3 billion board feet within the 
next couple years, and we are well on our way to doing that.
    I wish you could have asked me that question about the 
BioPreferred Program in a week or so because I might be able to 
do for you what I did for Senator Nelson.
    Senator Klobuchar. This is sounding like a really good 
hearing. Thank you.
    Secretary Vilsack. We are very focused on our role at USDA 
in terms of increasing the number of products that qualify in 
that program. We are going to make a concerted effort to 
encourage Federal agencies and their procurement to be more 
supportive of that BioPreferred effort.
    Senator Klobuchar. Very good.
    Secretary Vilsack. We are going to do a better job and a 
faster job of labeling items so not only Federal agencies but 
also, more importantly, American consumers will have the 
opportunity to support bio-based products. There are literally 
thousands of products on the market today that could qualify 
for that labeling, and we need to work through the process and 
streamline the process.
    So I think you are going to continue--you are going to see 
some activity and action in this area in the very near future.
    Senator Klobuchar. Thank you.
    Secretary Vilsack. The last thing I would say on the green 
building is that the Forest Service has made a commitment to 
all of its new construction to be green and to use wood 
products more, which obviously makes sense for the Forest 
Service, and we would like to see other agencies do as well.
    Senator Klobuchar. Thank you.
    In your testimony you mentioned the Rural Energy for 
America Program, or the REAP program. That is the flagship 
program for renewable energy at USDA. The program has been a 
success with over 700 projects in my State alone, helping to 
support on-farm wind and solar and energy efficiency projects.
    Given this success, the growing demand for the program, can 
you talk about how this program leverages private investments 
and provides a long-term value for rural America?
    Secretary Vilsack. Well, in the last couple of years, we 
have invested roughly $300 million, $350 million, to finance 
several thousand loans which have helped almost 7,500 
businesses creating jobs, and these are opportunities to create 
greater energy efficiency and more focus on renewable energy. I 
have been to facilities where folks are taking methane 
producing enough electricity to power their own farm operation 
and put electricity on the grid. All of those types of 
opportunities are being helped by REAP.
    This is a really good program. You all structured it and 
created it with enough flexibility that it can deal with a 
number of different opportunities, and we are trying to utilize 
that flexibility. It obviously received significantly less 
support financially in the last budget, but we are going to do 
our very level best to leverage those resources most 
effectively.
    The key here is leverage, and if I might add, we are 
looking for partners. We are looking for partners not just in 
the private sector but also the nonprofit sector. We think that 
there are opportunities to work with foundations who are making 
investment decisions to generate income so that they can grant 
money. We want them to make those investment decisions, a 
portion of them, in rural communities. We want to acquaint them 
with rural projects. We need to do a better job of educating 
them about what is actually going on in rural America, and, 
frankly, you know, this hearing is a good opportunity to 
educate the public about what is happening in rural America.
    There is something significant. Record income levels and 
the unemployment rate, at least according to the last report I 
saw from the Bureau of labor Statistics, dropping more quickly 
in rural America than any other place in America. We obviously 
want to continue that.
    Senator Klobuchar. Very good. Then I think I will do my 
last question in writing. I have to go to a bulletproof vest 
hearing, and you do not need one here.
    Secretary Vilsack. There is nanotechnology using wood 
products that we are researching for that very issue.
    Senator Klobuchar. Okay, wow.
    Secretary Vilsack. You might want to look into that.
    Senator Klobuchar. Okay. Very good. But my last question, 
which I will do in writing, is just about kind of what you 
touched on at the end, these long-term projects and trying to 
get that financing for water, for infrastructure, electricity, 
all those things in rural areas that we have just heard a lot 
about because we have not had the kind of funding that we have 
had in the past in looking for creative solutions on how to 
deal with those rural development projects.
    Senator Klobuchar. Thank you very much.
    Chairwoman Stabenow. Thank you very much.
    We were kind of pondering over here a bulletproof vest 
hearing. Good luck with that.
    Senator Grassley is next. I believe he has left. Senator 
Hoeven.
    Senator Hoeven. Thank you, Madam Chairman.
    Secretary, good to see you. Thanks for being here today. I 
just want to start off with a couple comments regarding the 
President's budget relative to the farm bill.
    First I want to echo my concern, and you have heard it from 
the others here today, and that is crop insurance. Everybody, 
you know, throughout our State, all the producers are telling 
us that crop insurance is absolutely the number one priority. 
Number one. So I think the $8 billion reduction there does not 
work. I think that we are going to have to address that as we 
work on a farm bill, and I think really that goes to what we 
are trying to accomplish, which is the strongest possible 
safety net for our producers on a cost-effective basis. That is 
what we are shooting for with crop insurance. So, again, that 
is an absolute priority. Whether it is the commodity groups, 
whether it is producers throughout my State or throughout the 
country, that is what I am hearing; that is what all of us are 
hearing. So, again, I really want to emphasize that point, and 
so we have work to do there, and we look forward to doing it in 
this Committee.
    The other thing I want to mention right at the outset is 
university-based ag research. At North Dakota State University, 
we have just built, largely with State money, an ag research 
greenhouse, state of the art, incredible. NDSU and our other 
universities are doing amazing research in agriculture, which 
is bringing enormous productivity, not only dramatically 
increasing productivity on the farm and the ranch, creating 
jobs, creating exports of favorable balance of trade in 
agricultural forests. So incredible opportunity there. That is 
a real priority and a tremendous leveraging of the Federal 
investment through what the States provide on that university-
based research as well as the private dollars that are raised 
and go into university-based ag research. So I really want to 
emphasize that to you as well.
    Then picking up on something that Senator Johanns said and 
it is true, Senator Thune and I did tease him about corn prices 
being higher under your watch than his or Secretary Schafer's, 
but all three of you have done a fine job, and we appreciate 
the work you do. But we are working myself, Senator Thune, 
Senator Baucus, certainly Senator Conrad, and others--on the 
whole ACRE SURE program and how do we develop a commodity title 
package overall that works well, again, with crop insurance 
being the centerpiece.
    With that, I am going to switch to biofuels--unless you 
have some advice for us as we tackle this farm bill--and we 
really want to lead that effort here in the Senate--I believe 
we have a very strong Committee on a bipartisan basis with a 
lot of background in agriculture and really need to lead 
writing that farm bill. Any advice or input you have relative 
to any of those comments?
    Secretary Vilsack. Senator, just one comment. I think you 
have heard me talk about crop insurance and our view. We 
obviously recognize the importance of it and the significance 
of it. I think the question is, you know, how much of a profit 
margin do you need in order for it to be sustainable. That is 
obviously something we can talk about.
    But let me focus a comment that you made that is extremely 
important, in my view, and that is, the issue of ag research. 
Agricultural research has not received the attention that it 
deserves by the country. We have seen significant increases in 
a lot of other research areas within the Federal Government and 
in other areas, but ag research has been flat-lined for an 
extended period of time.
    The President's budget does propose an increase, a 
significant increase, in the competitive grant process of our 
ag research, our external opportunities, the opportunities that 
you alluded to working with universities and the private 
sector. I would strongly encourage this Committee to take a 
look at the historical data that suggests that productivity in 
agriculture is directly related to the investment in research 
and that we need to really do a good job of supporting that 
research opportunity.
    There are countless reasons why it is important, but I 
appreciate your bringing this up because it is something that 
is often not talked about enough, in my view.
    Senator Hoeven. I am glad you brought up that point on the 
competitive grant piece, and we will absolutely look at that. 
That may fit with exactly what I am talking about, so we will 
take a look at that, and I thank you for that.
    I do want to go back to--again, when we are talking ag 
research, it is about food, fuel, and fiber. I see this as an 
opportunity, I see this as a real job creator opportunity, just 
like you started your remarks with that comment, you know, 
about creating jobs in rural America. No question about it.
    Back to what do we do now with biofuels, I really feel 
like--in our State we started a program that we provided some 
assistance to get blender pumps out there, and it has really 
worked. We have, I think, more blender pumps than any State in 
the Nation now. We have got to somehow get blender pumps so 
that--we have got something like 10 million flex-fuel vehicles 
on the road. That is growing. That is a simple thing to make 
these vehicles flex-fuel. We have got to get EPA to simplify 
the rules and get the higher blend allowances. We have got to 
do more with blender pumps. We have got to do more with the 
liability laws. We have got to do more with the equipment, I 
think.
    How can you help us with legislation or other ideas to 
advance this thing? We are kind of stuck here. This is going to 
be important to get more ethanol in the fuel supply and 
particularly as we get into the cellulosic second-generation 
stuff. So what help can you give us in either moving some 
legislation or getting some things going here?
    Secretary Vilsack. Senator, I think the key here is for you 
to--given the fiscal constraints that we are operating under, 
whatever programs you decide to fund, making sure that they 
have enough flexibility for us to be able to use it creatively 
for the infrastructure that is necessary to get the fuel to the 
market more conveniently in all parts of the country, we are 
currently using the REAP program for blender pumps, but there 
has been some resistance to that in Congress, and we would 
encourage and work with you to sort of break down that 
resistance so that that flexibility in that program can be 
created and it can be adequately funded to reach our goal. We 
wanted to put 10,000 blender pumps out into the marketplace in 
a relatively short period of time. That is hard to do if there 
are restrictions on what we can do with the REAP dollars.
    Secondly, again, the flagship project or program in our 
rural development job creation toolkit is the B&I program, and 
to the extent that we can create flexibilities in that program, 
because that is the one that is going to be supported and 
funded probably more extensively than some of the other 
programs--more flexibility there would be helpful as well.
    Senator Hoeven. I could work with your staff to get some of 
that language that we should maybe look at?
    Secretary Vilsack. Yes, sir.
    Senator Hoeven. All right. Thank you very much.
    Chairwoman Stabenow. Thank you.
    Senator Bennet.
    Senator Bennet. Thank you, Madam Chair. Senator Hoeven's 
comments on crop insurance, I think we all share his view 
there, and I want to thank you for the work that you have 
done--when the Super Committee was supposed to be doing its 
work, and not doing its work terribly well--and the Ranking 
Member for your leadership, and my hope is that this Committee 
is going to be able to come together on this farm bill in a way 
that not only is good for agriculture and the country but sets 
an example for the Senate and for the House in these difficult 
fiscal times. So thank you for everything you have done.
    Mr. Secretary, thank you very much for your leadership. 
Sitting behind you is one of the smartest people in the State 
of Colorado, Flo Raitano, who is a constituent of mine, and it 
is not because she is there--but I am delighted that she is 
there--that I am going to ask you a question about the bark 
beetle. We, as you know, have had a terrible epidemic in our 
State. It has killed 3.3 million acres since we first saw the 
beetles in 1996. The Forest Service has a critical role to play 
in helping address the issue. You have worked hard on this, and 
I appreciate it, and Senator Udall appreciates it as well. But 
I am wondering if you could talk a little bit about the Forest 
Service's evolving approach to managing this epidemic in 
Colorado and throughout the Rocky Mountain West.
    Secretary Vilsack. Senator, let me----
    Senator Bennet. She was the mayor of Dillon, Colorado, I 
should tell you--twice. She lives in the middle of it.
    Secretary Vilsack. Specifically, the budget this year will 
allocate somewhere in the neighborhood of $100 million for the 
States that have been impacted and affected by the bark beetle 
epidemic. So we are targeting specific resources, and we are 
doing this in a priority way. First and foremost, it is about 
life and property protection. Where do we think the falling 
tree challenge is the greatest in terms of threats to people 
and property? Then, secondly, how do we mitigate the impact on 
fire hazard? So that is primarily the focus of where that $100 
million will be invested in terms of managing this issue.
    Secondly, on a larger scale, we think that there really 
does need to be a forest planning rule that really gives our 
foresters the capacity on a local level to do a better job of 
the multi-uses of forests and do a better job of restoring 
those forests and making them more resilient to pests and 
disease. So in the short term, we are addressing critical areas 
with $100 million. In the long term, the forest planning rule 
and a restoration focus we think over the long haul will 
mitigate future situations like the one we are dealing with in 
your State.
    The targeted resources are also part of a collaborative 
landscape approach. We are not just simply focusing on 
individual forested areas. We are looking at proper maintenance 
of those forests in relationship to the landscape and also 
better coordinating with private landowners. So it is a 
collaborative process. It is looking at whole-scale landscapes, 
it is focused on resilience, it is focused on water 
preservation and specific dollars targeted to trying to protect 
as best we can people and property.
    Senator Bennet. We have, as you know, an enormous sense of 
urgency about it because there are the safety issues that you 
mentioned; also, to the extent that there is any commercial 
value to this timber at all, that obviously over time is going 
to diminish, which means that we have got to get after this.
    Secretary Vilsack. Two things. One, our commitment to get 
to 3 billion board feet I think is an indication of our 
understanding of the need for this for us to get a more robust 
commitment to timber.
    Secondly, we have 57 biomass research projects and programs 
underway within the Forest Service property to take a look at 
ways in which we can use this as an energy and fuel source. We 
think there are, again, tremendous opportunities here with 
woody biomass to be able to provide electricity and power and 
heat as well as turning them into the fuel and the chemicals we 
have talked about throughout this morning. So we are very 
committed to this, and the Forest Service is very committed to 
it.
    Senator Bennet. Moving away into the Rural Council that you 
lead, Senator Roberts asked a great question of the panel about 
6 months ago or maybe it was even a year ago. he said, ``What 
keeps you up at night?'' There were several producers from 
around the country, and we went down the row, and the person in 
the middle said, ``What keeps me up at night is immigration.'' 
Everybody nodded their heads.
    I wondered whether that topic has been something that is 
being addressed in your Rural Council or someplace, what you 
are hearing from producers around the country. I am hearing 
from producers in our State that this broken immigration system 
is jeopardizing, seriously jeopardizing their farms and ranches 
and our businesses.
    Secretary Vilsack. Senator, this is one of the more 
frustrating issues that we deal with on a regular basis at 
USDA. There is no question that a substantial percentage of 
food that is picked and processed in this country is done so by 
immigrant hands. It is also true that there are certain parts 
of the country today where things are not being picked and 
packaged simply because there are not sufficient hands.
    It is frustrating for us to step back and understand that 
everyone--everyone--believes the system is broken. There is no 
disagreement about that. And, frankly, there is very little 
disagreement about the basic elements of what needs to be done. 
Clearly, border security needs to be front and center, and it 
has been in this administration and will continue to be. But 
there has to be a system and a process by which we solve this 
problem. But I think there are some who want to use it to 
separate this country and divide this country. What really 
needs to happen is that there needs to be the political courage 
to stand up and say we are not going to have this issue divide 
this Nation. We are going to do what this Nation needs done, 
which is we are going to solve this problem because we are 
Nation of immigrants. Our story has been written in large part 
because of the enormous diversity and power of immigration and 
welcoming people. We need a process by which we make sure that 
the workforce is adequate to do the jobs that need to be done 
to provide the extraordinary advantage we have in America.
    People take this for granted, and they should not. We are 
food secure in this country.
    Now, you travel all over the world, you are going to go to 
countries big and small. I am going to be spending time tonight 
in my home State with Chinese leaders. They need our soybeans 
to be able to feed their people. We do not really need 
anybody's food to feed our people.
    We also walk out of a grocery store with far more in our 
pockets as a percentage of our paycheck than virtually anybody 
on the face of this Earth. There are reasons for that, and one 
reason is that we are extraordinarily productive and our 
farmers do an extraordinary job and an underappreciated job; 
and, secondly, we have got a processing process and facilities 
that allow us to produce these things and put them in our 
grocery stores for pennies on the dollar. I mean, 10 percent of 
our paycheck goes to food, a maximum on average. In most other 
countries it is 15, 20 percent.
    So, you know, I am encouraging this Congress to basically 
say we have had enough of this divisive discussion; let us 
solve this problem. The country needs it, and certainly 
agriculture needs it.
    Senator Bennet. Well, I appreciate your leadership very 
much and agree completely with what you have just said, and I 
think if we do not solve this problem, what we are going to see 
is these farms moving south of the border to where the labor 
is, and that is not a good outcome for rural America.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Thune.
    Senator Thune. Thank you, Madam Chair, and, Mr. Secretary, 
thank you for being with us today.
    I would echo what has been said by most of my colleagues 
with regard to that the number one priority of South Dakotans 
in the farm bill is a strong Crop Insurance Program. Hands 
down, it is what people want to see maintained. It is the thing 
that they are most concerned with and, that is, that we have a 
good risk management tool available to them. That is not the 
only priority we have in the next farm bill, but that is 
certainly, I think, the most important one in terms of the 
people that I represent.
    Let me ask you, though, about the energy and rural 
development title of the next farm bill because that is 
critical in terms of the future of rural America as well. We 
have got forecasts of $4 gasoline now, perhaps by Memorial Day, 
and the full potential yet to be seen for rural America to 
contribute to our Nation's energy independence is going to be 
really important in terms of drafting the next farm bill energy 
title. We all know it creates jobs. It has been a tremendous 
economic boom for rural America, but it is really important 
that we get past corn-based ethanol and move on to next-
generation biofuels and get to cellulosic ethanol.
    I know that we have got a fiscal crisis here in Washington, 
D.C., that is going to impact the next farm bill. There is no 
spending baseline for rural energy programs in the next farm 
bill. We know we are going to have to do more with less. But I 
am interested, I guess, in knowing with regard to the energy 
title in the last farm bill, the Biomass Crop Assistance 
Program, which Senator Nelson and I included in that last farm 
bill, has two components for collection, harvest, storage, and 
transportation. I am interested in knowing kind of what your 
thoughts are with regard to that, whether that is an important 
part of the BCAP program.
    I met yesterday with the CEO of a major enzymes research 
and development company who told me that BCAP and that 
particular component of it--the collection, harvest, storage, 
and transportation component--is extremely important to the 
future of the biomass harvest and delivery to energy-producing 
facilities.
    So what are your thoughts on that? Do you believe that that 
particular component is important to furthering the development 
of cellulosic ethanol?
    Secretary Vilsack. Senator, first of all, American 
consumers, because we have a robust biofuel industry, are 
probably paying, it is estimated, somewhere 90 cents and $1.30 
less for their gas than they would otherwise be paying but for 
that industry, so we need to understand the importance that the 
industry does and provides in terms of consumer choice. And, 
obviously, the more that we do, the better those prices will 
be.
    As it relates to BCAP, as you well know, that program 
received a 96-percent reduction in funding last year, so we 
have $17 million to deal with a several hundred million dollar 
need.
    Two aspects of BCAP. You have mentioned one, the 
collection, storage, transport, and harvesting. Clearly 
important in order to be able to encourage producers to do what 
they have to do to accumulate the biomass necessary to fund 
these new ways of producing fuel. At the same time, we do have 
to diversify away from corn-based ethanol, so we have also 
focused on the second part of BCAP, which is the project area 
portion. With $17 million, there is not a whole lot you can do 
relative to the collection, storage, and harvesting. You really 
need more resource to be able to provide that assistance. 
Several hundred million dollars has been used in the past for 
that part of the program. We will continue to fund those 
contracts, but in terms of expansion of the number of 
contracts, it is going to be impossible with $17 million.
    So the question is: How do you use that limited resource 
for the biggest bang for the buck? I think you will probably 
see a majority of that being used in project areas. So I would 
encourage, if the Congress decides that BCAP is worth keeping--
and I think you ought to very seriously think about this. If 
you are going to have it, it needs to be adequately resourced. 
We need to basically decide whether or not it is pilot project 
areas or whether it is collection, storage, and harvest. 
Playing two masters makes it difficult, especially if resource 
are tight.
    Senator Thune. Let me go back to the issue that was raised 
by my colleague from Colorado, and that is the pine beetle 
issue. I guess what I would say, I think we have a request 
probably in to you right now to reprogram some funds to the 
Black Hills National Forest. We have an epidemic problem with 
the pine beetle in the Black Hills, and it is home to Mount 
Rushmore, a huge economic impact on the State of South Dakota 
every year with visitors who come to visit. And, you know, it 
is tragic to see what has happened. We have 350,000 to 400,000 
acres that are now impacted by the pine beetle, which had we 
been better on the front end of this, I think we could have 
really done a much better job of preventing this from 
spreading. There is a certain amount of this that you are going 
to be dealing with all the time, but it has really gotten out 
of control.
    So I would hope that to the degree that you can help with 
the Black Hills issue that you will do that. I just wanted to 
reiterate that for the record here today. It is something that 
we have a written request in on in terms of reprogramming some 
12 funds to the Black Hills. It is a very isolated area. It is 
one of our national treasures, and it has just been 
tremendously adversely impacted by the pine beetle.
    Let me ask just one other question in the time I have left. 
I am curious to know your thoughts on this and whether or not 
you have had any consultation with the Labor Secretary on this. 
But as you perhaps know, there are some new regulations that 
have been proposed by the Department of Labor that apply to 
young people working on farms and agricultural operations which 
would be very restrictive in terms of what young people can do, 
limiting them to working at levels--anything over 6 feet would 
be prohibited, which would eliminate a lot of farm activity; 
working with farm animals that are older than 6 months old; you 
know, working around grain elevators, stockyards, those sorts 
of things, certain types of equipment. They have said that they 
are going to modify this. We do not think they have modified it 
enough. They are going to modify, evidently, the definition of 
``farm,'' but there are still a lot of areas that would impact 
profoundly the way that farm operations function, particularly 
with regard to how young people contribute to the success of 
those operations.
    I am curious if you have conveyed concerns on the part of 
the agriculture community and the Department to the Department 
of Labor about these proposed regulations. It is insane to 
people in farm country.
    Secretary Vilsack. Senator, I think one of the reasons why 
a portion is going to be reprogrammed and the rest of the rules 
being looked at is because we worked well with the Department 
of Labor. I actually personally talked to Secretary Solis about 
this issue, so rest assured that we have been engaged in it, 
will continue to be engaged in it.
    You know, I think all of us care about child safety, as we 
should, and all of us recognize that there are certain 
circumstances and situations in a sophisticated farming 
operation, as sophisticated as agriculture is generally, that 
pose unusual risks. So we obviously want to deal with those.
    At the same time, what I explained to Secretary Solis and 
others in the Labor Department was that this is not just about 
safety. It is also about a values system that in many farm 
families the value of hard work, the importance of hard work, 
and the responsibility associated with pulling your weight and 
doing your share of the chores, that these lessons are taught 
in the very chores that they were discussing in this rule, and 
that they needed to be sensitive to the fact that this values 
system could be threatened by too restrictive a set of 
categories. I think to their credit they listened, and they now 
recognize that they have got a lot of work to do on this 
particular proposal, and we will continue to work with them.
    Senator Thune. I hope you will stay engaged. We really need 
a voice of reason, so thank you.
    Secretary Vilsack. Thank you.
    Senator Thune. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Senator Baucus.
    Senator Baucus. Thank you, Madam Chairman.
    Mr. Secretary, thanks so much for taking the time to come 
visit with us. I would like to talk to you a little bit about 
infrastructure needs. Montana is an agricultural State where 50 
percent of our economy is based in agriculture. We are spread 
out. There are six people per square mile, and we are very 
proud of the agricultural contribution we make to the country 
and to the world.
    We are also a diversified State. There is manufacturing, 
mining, coal, oil and gas, and so forth. As you well know, in 
the eastern part of Montana, there is a big boom in oil. It is 
called the Bakken formation. It is in eastern Montana as well 
as western North Dakota. The estimates are that the Bakken is 
one of the largest plays in U.S. history, estimated about 4 
billion barrels of oil with the new fracking technology that 
has developed not just in the Bakken formation, as I said, in 
eastern Montana and western North Dakota, but also the shale 
development in other parts of the country. But I am talking 
about Montana right now.
    The Bakken is a great blessing. Unemployment in eastern 
Montana is at rock bottom, as you might guess, and it is a 
great opportunity for businesses and all the ancillary 
companies that build up around the oil production.
    The trouble is it is coming too fast. There are just too 
many people coming too soon, putting incredible pressure on the 
communities there. Roads just cannot take the beating from all 
the trucks. Sewage cannot handle all these new people. There 
are man camps there, a lot of them developed, just these guys 
living in basically trailers, and people living in heated 
garages. There is a shortage of school teachers. There are all 
the pressures you might expect with a great influx of people in 
a very short period of time.
    So I am wondering if you could help us out a little bit. 
For example, the USDA has jurisdiction over lots of different 
agencies that have a lot of relevance here, including the Rural 
Development Office. I might say the nearest USDA Rural 
Development Office is 5 hours away from the main focus of all 
the pressures here. But what efforts can you take to address 
this situation?
    Last month, I sent a letter to the President asking him to 
coordinate his efforts to address the need here and develop 
some kind of a temporary multi-agency office in the area, if we 
could set an office up in the area physically in eastern 
Montana that people could go to and help coordinate Federal and 
State efforts. It would make a huge difference. Right now we 
are just--not to mix metaphors, we are at sea, just struggling, 
just doing our doggonedest to try to meet all these pressures. 
I met with the mayor, I met with the county commissioners, and 
law enforcement. It is a huge issue now. I talked to a sheriff 
nearby, not just in Richland County where Sidney, Montana, is 
located, but a sheriff from a nearby county and all the law 
enforcement problems they are facing, too. There was a recent 
murder in the area. They finally found this lady's body after 
it was gone for almost a month.
    So if you could tell us a little bit about what you might 
be able to do and what efforts you could pledge to undertake to 
help us and work together to solve this, it would make a big 
difference to us.
    Secretary Vilsack. Senator, I am not specifically familiar 
with whether or not that area of Montana has a Regional 
Planning Commission. Do you know if it does?
    Senator Baucus. I do not know.
    Secretary Vilsack. Well, I guess my first suggestion would 
be to consider, if they do not have a Regional Planning 
Commission, to work with the local officials that you have 
mentioned to form one because a Regional Planning Commission 
can essentially do much of what you are asking us to do, which 
is to coordinate efforts to ensure that you have a 
prioritization of assets and resources directed at trying to 
solve the problems that you have identified.
    The second thing I would suggest is that the folks in 
eastern Montana consider, if they are not already part of this, 
applying to USDA for what we refer to as a ``Great Regions 
Initiative.'' We are trying to encourage folks to think 
regionally, and obviously those folks in eastern Montana have 
an economic engine that impacts and affects the communities 
surrounding that engine, and we will be willing to work with 
them in creating sort of a strategic plan in how to address the 
needs that they have and where the resources can come from to 
address those needs. That regional process will basically bring 
in a lot of the Federal agencies that need to be brought in to 
consider how would you fund a highway or how would you fund a 
wastewater treatment facility or what grant is available from 
HUD or from Commerce or from EPA or from us. That is the 
process and vehicle through which I would suggest and encourage 
that it be done, and I would be happy to work with your office 
to facilitate the application process.
    Senator Baucus. I appreciate that very much, Mr. Secretary.
    North Dakota is in a little bit better situation because a 
little bit more of the production is in North Dakota as opposed 
to Montana. North Dakota was quite farsighted, actually, in 
putting together a fund, a trust fund, where a certain 
percentage of the revenue, royalties, are dedicated to the 
trust fund. The fund is then used to address needs such as 
this. That is something that maybe the State of Montana has to 
do as well.
    Secretary Vilsack. Senator, that is essentially what we 
attempted to do with the regional approach that we suggested 
for USDA. We have 40 different programs that are stovepiped. It 
makes it hard to coordinate multiple applications to meet 
multiple needs. So we suggested Congress giving us the capacity 
and the authority to essentially take 5 percent of those 
programs and put it into a pot and basically use that pot to 
help regions who are confronting the kinds of situations that 
you are talking about so that we would not have to worry about 
the stovepipes. We would be able to coordinate grants and 
applications and so forth within USDA.
    Now, what Congress has done is it has basically said you 
can do this, but--as we interpreted the language, you can do 
it, but you cannot do it until we authorize it. Well, you sort 
of authorized it but you did not. So we are a little bit 
confused about what our authorities are here.
    I would strongly encourage you, as you look at this farm 
bill, as you look at putting together programs in the future, 
that you give us the capacity to do this. If you are going to 
have 40 different programs, give us the capacity to put 
together a pot of money from all 40 that will encourage 
regional economic development, because at the end of the day 
you are going to be far better off and leverage those dollars 
more effectively if you do it that way.
    Senator Baucus. I totally agree, but I hear you saying you 
do not think you have sufficient authority today.
    Secretary Vilsack. We are confused. That is probably not 
the first time you have heard that from a Secretary, but we are 
a little uncertain as to precisely what the language was in the 
appropriations bill.
    Senator Baucus. Well, let us see if we can make you less 
confused in the right way.
    Secretary Vilsack. Thank you.
    Senator Baucus. Thank you very much. Thanks for your 
attention to this. It makes a big difference to a lot of us.
    Thank you.
    Chairwoman Stabenow. Thank you.
    Senator Boozman.
    Senator Boozman. Thank you, Madam Chairman.
    It is good to have you with us, Mr. Secretary, and I 
enjoyed getting to visit with you the other day at the prayer 
breakfast. That was a great event.
    A lot is being talked about about the safety nets, and that 
is so important for a variety of different reasons. I think our 
banks, you know, with the regulation that they are under now 
and just the situation with the economy, if our producers do 
not have a strong safety net, I think there is a real question 
as to whether or not they will actually get a loan to put the 
crops in.
    The other thing is the recognition that there really are 
real differences--and you know this better than anybody. I know 
I am preaching to the choir. But there are real differences in 
production and input costs, and it is difficult to come up 
with, you know, something, kind of a one-size-fits-all. Then we 
have the worries of making it WTO compliant. It is going to 
take the wisdom of Solomon to figure it out. There is real 
concern by producers that, you know, one safety net is going to 
go down and then reinforce another safety net, which we do not 
want. Then the other problem is that if this is not done right, 
you are going to incentivize certain crops too much, and then 
we will have this imbalance.
    As you said earlier--and the statistics that you gave are 
great, and we just need to hammer on that, you know, our 
producers are doing a tremendous job with low prices and 
things, and we are feeding the world. But if it is not done 
right, then food costs will rise, and our single moms or people 
on fixed incomes, those kind of folks really will suffer the 
most.
    So, again, I know it is a big job, and we are looking 
forward to working with you to try and figure that out.
    Secretary Vilsack. Senator, you obviously come from a State 
that represents that diversity. A lot of different crops are 
grown in the State of Arkansas, and the input costs for some 
are more and significant, the land needs are more and 
significant, and the risk is greater. It will be difficult but 
not impossible, and I think eventually working together we can 
create a safety net that utilizes crop insurance appropriately, 
that has some kind of revenue protection mechanism that will 
provide assistance and help to folks when they need it the 
most, and that we will begin to understand that part of the 
safety net is rural development, economic opportunity, and jobs 
for off-farm income, which for many producers and many families 
is very important.
    You know, I think there is enormous opportunity here. I 
really appreciate the Chair's willingness to take this on and 
get it through the process quickly because this uncertainty--
you know, we have got a good thing going here. We obviously 
want to continue the momentum, and the sooner we get certainty 
as to what the rules are going to be, the better it is going to 
be for the market, the better for producers, and better for us 
to plan for rural economic opportunity.
    So I certainly agree with you, and we look forward to 
working with you on trying to figure out precisely what that 
right balance is.
    Senator Boozman. Well, thank you. We appreciate that. I 
think the certainty, you know, as you brought up, really is a 
key to the whole thing.
    The other thing, I would like to echo the Senator from 
Minnesota about the BioPreferred Markets Program. As you know, 
our forest industry is really struggling right now. In fact, I 
would like, with your permission, Madam Chair, to put a 
statement in the record from a number of landowners and forest 
industry organizations that are expressing their concern with 
the program.
    Chairwoman Stabenow. Without objection, we will put that in 
the record.
    Senator Boozman. Thank you.
    [The information can be found on page 159 in the appendix.]
    Senator Boozman. It is difficult, you know, if you have a 
product, bamboo or something like that coming in from someplace 
else and then the mature markets, one is USDA certified in a 
sense or it appears that way, and the other is not, there is 
real concern that that will create a problem with consumers.
    Secretary Vilsack. Senator, what we are attempting to do, 
first of all, is to do a better job of restoring forests, which 
will create, in our view, more opportunity for the timber 
industry that we recognize has been dealing with some tough 
times. We think getting to 3 billion board feet is a good step 
in the right direction, number one.
    Number two, as far as the BioPreferred Program is 
concerned, we are looking for ways in which we can streamline 
our processes within USDA to identify more products that 
basically qualify, and I think you will see a significant 
increase both on the Federal procurement side and on the 
private sector labeling opportunities for consumers. We are 
going to focus on that this year. We think this is a way of 
underscoring the enormous potential that rural America has to 
produce virtually everything we need in an economy from what we 
grow in a renewable way. By doing that you create jobs and 
create new income opportunities for producers.
    Frankly, we are looking for creative opportunities here, 
and if I might say, one of the concerns that we have which we 
have not talked about today is whether or not we are going to 
have the next generation of producers to do all of this. We are 
very concerned about beginning farmers, as I know you are, and 
I would strongly urge this Committee to think creatively not 
just within the bounds of the farm bill, where you have fiscal 
constraints--I probably should have said this when Senator 
Baucus was here, but there are Finance Committee opportunities 
as well.
    As you well know, the way this works today, I own a farm. 
That farm has appreciated in value. I could not afford to sell 
it today to a young farmer. I would have to wait and my kids 
would have to wait for me to die, and hopefully the estate tax 
is where it needs to be so that I do not have too--you know, so 
they can sell it with a stepped-up basis and they do not incur 
tax.
    We ought to really be thinking about our tax structure and 
ways in which we can encourage more incentives for folks to 
sell to beginning farmers and socially disadvantaged folks. 
That may not cost a lot of money, but it may be an 
extraordinarily helpful thing as we look at the aging nature of 
our farm population and the fact that we have got to have young 
farmers.
    Senator Boozman. Right. Well, thank you. Another area--I 
mean, I understand as well as anybody and am very supportive of 
us reining in spending. We have a situation with the USDA 
office closures, and I guess the only thing I would say in that 
regard is that you would really look at those. You have a 
number of meetings, you know, with local input, and those were 
very well attended in Arkansas. I think the comments were very 
constructive, you know, in trying to give good guidance. So I 
would hope that you all will actually look at those, the 
results of those meetings, the comments. I know that you will. 
Then also really look at the 20-mile limit. I think that the 
intent was that that was actually 20 miles versus the crow 
flies. You know, again look at that, but I would say, just, you 
know, depending on the comments, use some common sense in 
regard to that. Certainly 20 miles in Kansas is different than 
20 miles in very rural Arkansas where it is really hilly, you 
know, where it might take 45 minutes to an hour to get 
someplace, with, as you mentioned earlier, a pretty elderly 
farm population now that we are facing as the ages go up.
    We had a great meeting--I want to compliment your staff. We 
had a great meeting with them. They were very--you know, they 
listened to us and made some good suggestions.
    Secretary Vilsack. Senator, these are tough decisions, and, 
candidly, if you were designing this system today, you probably 
would design it a little differently than it is. Despite the 
numbers of closings we have announced, we are still going to 
have several thousands offices open. Here is the problem: When 
your operating budget is reduced, as it was--and I am not 
complaining about this. I am just stating the fact that it was 
reduced. When you have an aging workforce, which we have at 
USDA, and we are seeing retirements accelerate, and in order to 
manage this, we encouraged some early separations so that it 
would be easier for us to do this without furloughs or layoffs. 
Basically we saw 7,100 folks retire in the last 15 months from 
USDA. So you have less money, and you have got fewer workers. 
But at the same time, we have actually more work. Commercial 
bank are not doing as much on the farm side, so that created a 
lot of concern in terms of loans, Rural Development doing 
record numbers of grants and loans, and I think with good 
results.
    So we had to do something, and the choice was either what 
we did or a furlough or a layoff, which basically would impact 
thousands of offices and farmers across the country, or taking 
money away from the investments that we are making in new 
technology. We have such an antiquated technology system 
servicing our farmers today, we really want to get to a point 
where maybe that visit to the office is infrequent because they 
can do stuff at home.
    So these are hard questions, tough choices, and tough 
calls, but that is basically what happens when budgets get 
reduced. And, you know, we tried to do it in a thoughtful way. 
We tried to do it as consistent with the direction of Congress. 
You know, how many offices are the right number? You all said 
those offices that have one employee or two employees. We found 
in this process that there were 35 offices that had no 
employees.
    So, you know, it is an ongoing process, and I want to 
assure you--and I know my time is up, but I want to assure you 
that we are also looking internally in terms of how we do 
business with ourselves, and we have 379 recommendations for 
better, more efficient operations within USDA, how we do 
property management, procurement, security, human resources, 
budget, and finance, et cetera. So we are really tasking our 
people with trying to figure out how to do better work, more 
work, with fewer dollars and fewer people.
    Chairwoman Stabenow. Thank you very much.
    I would ask unanimous consent that Senator Lugar be able to 
submit a written statement for the record. So ordered without 
objection.
    [The prepared statement of Senator Lugar can be found on 
page 63 in the appendix.]
    Chairwoman Stabenow. Secretary Vilsack, we very much 
appreciate your time this morning. We know that it is an 
extraordinarily busy week, and I would like to just underscore 
your desire to work with us to consolidate, reduce paperwork, 
create more flexibility. We are in a time where that is 
absolutely necessary, and it is a time that-- we should always 
be focused on that, but certainly we have great opportunities 
in rural development and in the areas of energy, both of which 
are absolutely critical to be able to develop ways that we can 
provide the opportunities to create jobs and opportunities for 
quality of life in rural America and do it in a way that is 
more flexible and more effective. That is really our goal as we 
write this farm bill.
    So we thank you very much for coming this morning, and at 
this point we will ask our second panel to come forward. Thank 
you.
    Secretary Vilsack. Madam Chair, thank you very much.
    Chairwoman Stabenow. Thank you.
    [Recess.]
    Chairwoman Stabenow. Well, good morning. We are so pleased 
to have all of you with us to continue a very important 
discussion this morning. We will ask each of you to limit your 
remarks to 5 minutes, but we certainly welcome any additional 
written testimony that you have this morning. We will be having 
5-minute rounds on questions as well.
    Let me first introduce each of our panelists and welcome 
you, and then we will ask each of you to make an opening 
statement and then go to questions.
    I am very pleased to introduce our first panelists, Mr. 
Matt McCauley. Mr. McCauley is director of regional planning 
and community development with Northwest Michigan Council of 
Governments in Traverse City. He assists communities with 
coordinating planning efforts through education, training, 
technical support, issue analysis, and guidance. This work 
supports the quality of life in northwest lower Michigan, which 
is one of the most beautiful places in the country. We welcome 
you to come and have the opportunity to visit one of the 
beautiful places in Michigan. Mr. McCauley holds a bachelor's 
degree in business administration and a master's degree in 
public administration, both from Grand Valley University. I am 
so pleased to have you with us today.
    I will now turn to Senator Bennet who I believe would like 
to make the introduce of our next panelist.
    Senator Bennet. Thank you, Madam Chair. We are fortunate 
indeed to have Dr. Florine P. Raitano here today. She is 
currently a member of the Board of Directors of the Rural 
Community Assistance Corporation. She is a third-generation 
Coloradan, the former mayor of Dillon, Colorado, having been 
elected I think twice and having served on more boards and 
commissions than anybody could ever imagine. She received her 
bachelor's degree from the University of Colorado, Boulder; her 
doctorate of veterinary medicine degree from Colorado State 
University in Fort Collins, Colorado. There could be no finer 
representative from the State of Colorado than Flo, so thank 
you very much for being here today.
    Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Next we have Mr. Mark Rembert. We are very pleased to have 
you here as the co-founder and co-director of Energize Clinton 
County. He co-founded the organization in November 2008 in 
response to the announced loss of nearly 9,000 jobs in his home 
town. The organization works to develop community-based 
initiatives that engage citizens in the process of economic 
development. He is also the director of the Wilmington-Clinton 
County Chamber of Commerce, and we welcome you as well. We are 
very, very pleased that you are here.
    I believe Senator Roberts would like to introduce the final 
witness on this panel.
    Senator Roberts. It is my privilege to introduce Mr. 
Charles Fluharty, who is president and CEO of the Rural Policy 
Research Institute. He is a research professor from the Truman 
School of Public Affairs--we have to be bipartisan here--at the 
University of Missouri--and that is really being bipartisan--in 
Columbia. It shows that we are able to work together, but his 
efforts are regional, and he has really been a leader for so 
many years in regards to rural development. He brings the 
experience necessary, hands-on experience, and I have several 
questions for him which I think will be good questions, and he 
will provide even better answers.
    I appreciate it. Thank you.
    Chairwoman Stabenow. Thank you very much.
    Mr. McCauley, welcome. Please proceed.

STATEMENT OF MATHIAS J. MCCAULEY, DIRECTOR OF REGIONAL PLANNING 
    & COMMUNITY DEVELOPMENT, NORTHWEST MICHIGAN COUNCIL OF 
              GOVERNMENTS, TRAVERSE CITY, MICHIGAN

    Mr. McCauley. Thank you, Chairman Stabenow, Ranking Member 
Roberts, and members of the committee, for the opportunity to 
testify today on the 2012 farm bill's rural development title 
and the important role it plays in helping regional and local 
organizations provide financial and technical assistance to 
rural communities, entrepreneurs, and businesses.
    My name is Mathias McCauley. I serve as the director of 
Regional Planning and Community Development for the Northwest 
Michigan Council of Governments, a multidisciplinary regional 
planning and workforce development organization serving the 
ten-county region of northwest lower Michigan. I am pleased to 
also be representing the National Association of Counties and 
the National Association of Development Organizations with my 
testimony this morning.
    Madam Chairman and members of the Committee, I will focus 
my remarks today on three key areas related to USDA rural 
development and the future of our rural communities.
    First, the mission area of USDA rural development is a 
critical piece to the overall competitiveness of rural regions 
as we work to foster job growth, regional innovation, and 
economic prosperity. This includes basic yet essential 
investments for infrastructure and utilities, housing and 
community facilities, and access to capital and entrepreneurial 
development. In today's era of intense budget pressures and 
growing local needs, we should be focusing on making more 
strategic investments, especially investments that strengthen 
regional and local competitive advantages and coordinate our 
public sector resources.
    Second, with rural regions facing increasingly global 
competition but also opportunities, we need to ensure USDA 
Rural Development has the tools, resources, and flexibility to 
assist rural communities and regions with cutting-edge, asset-
based regional innovation strategies and investments. To be 
successful in the modern economy, rural entrepreneurs and 
communities must be connected to global and domestic markets. 
This includes virtually, digitally, institutionally, and 
physically networked approaches. This will take a new level of 
sophistication and capacity within our rural regions and at 
USDA Rural Development. It will also mean improving Federal 
interagency collaboration, fostering stronger public-private-
nonprofit partnerships, and leveraging existing strategy 
processes, such as the U.S. Economic Development 
Administration's Comprehensive Economic Development Strategy, 
or CEDS, framework.
    My third and final point is that USDA Rural Development 
applications, policies, and reporting requirements should be 
streamlined and broadened to reflect the scale of rural 
investments, emerging needs and opportunities of rural regions, 
and capacity of local organizations. While retaining the 
necessary financial and performance accountability standards, 
Congress should ensure USDA Rural Development has a modern set 
of policies, programs, and incentives to help all rural 
communities pursue community and economic development growth. 
This should entail assisting rural communities with the 
fundamental building blocks of quality communities in addition 
to more advanced regional innovation and globally competitive 
development strategies.
    Let me use our region of northwest lower Michigan as an 
example of this vision. USDA has been a highly valuable partner 
for us and an essential source of capital as we embark on these 
strategies. In the last two fiscal years, the USDA Business & 
Industry Program guaranteed in excess of $27 million of loans 
within our region, helping create 165 jobs and retaining 
another 441. These include ``head-of-household'' type jobs at 
manufacturing facilities, lumber mills, food processors, and 
the like.
    We have also used the Rural Business Enterprise Grants, 
RBAG, and the Rural Energy Assistance Program, REAP, funding to 
assist with leveraging our agricultural, energy, and natural 
resource assets. These individual projects are important 
because they often flow from our region's EDA Comprehensive 
Economic Development Strategy, or CEDS, as well as our broader 
regional collaboration known as the ``Grand Vision,'' which 
includes the Grand Traverse County area.
    In recent years, our region has spent considerable time and 
resources engaging the public with more than 12,000 people--
that may not seem like a lot to many in this room, but that 
represents about 8.5 percent of our total population--being 
involved throughout a six-county area and about 98 units of 
Government. Governmental bodies are collaborating, business 
leaders are endorsing a focused vision for the future, 
community members are engaged, and projects are being 
conceptualized and implemented.
    The Grand Vision is succeeding by demonstrating the 
importance of regions working with existing assets as a means 
to focus efforts towards programs and projects that create 
conditions for job growth and ensure a high quality of life for 
all.
    In closing, I urge your continued support of rural 
development programs and funding in the 2012 farm bill, 
especially those built around regional, asset-based development 
strategies that create conditions for quality job growth. USDA 
Rural Development is an essential partner and funding source 
for rural people and places. That is why NADO and NACo are 
joined by a broad base of 30 other national organizations in 
advocating for USDA Rural Development through the Campaign for 
a Renewed Rural Development. The campaign's joint principles 
mirror much of this testimony and demonstrate the wide support 
for USDA Rural Development and consensus on the critical policy 
changes needed in the upcoming reauthorization of the farm 
bill.
    Thank you again, Madam Chairman, Ranking Member Roberts, 
and members of the committee, for the opportunity to testify 
today. I welcome any questions.
    [The prepared statement of Mr. McCauley can be found on 
page 110 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Dr. Raitano, welcome.

  STATEMENT OF FLORINE P. RAITANO, IMMEDIATE PAST PRESIDENT, 
    RURAL COMMUNITY ASSISTANCE CORPORATION, DILLON, COLORADO

    Ms. Raitano. Thank you, Chairman Stabenow, Ranking Member 
Roberts, members of this Committee, and my esteemed Senator 
from Colorado, for this opportunity to discuss the USDA RD 
programs and their importance to rural America.
    My name is Flo Raitano, and I served two terms as the mayor 
of Dillon. Dillon has a population of 904 individuals. We 
worked with USDA back in the days when it was known as Farmers 
Home Administration. We were able to secure a 515 multi-family 
loan to build some much-needed affordable housing in the 
community of Dillon. We could not have done it if we did not 
have an experienced development partner. There was no way that 
I as a 32-year-old mayor, absolutely brand-spanking-new to the 
job, would have been able to figure out the rules and 
regulations. I would have taken one look at the letter of 
conditions from USDA and run screaming from the room. So, you 
know, that is one thing that RCAC does, and I am on the Board 
of Directors of the Rural Community Assistance Corporation. We 
are the western RCAP, the Rural Community Assistance 
Partnership, and we serve the States of Colorado, Arizona, 
Alaska, California, Hawaii, Idaho, Montana, Nevada, New Mexico, 
Oregon, Utah, Washington, Wyoming, and the Pacific Territories, 
including the Mariana Islands. It is really important to 
understand the role of technical assistance providers as an 
asset and a way to extend the reach and the impact of the USDA 
rural development programs.
    Just down the road from my community of Dillon is Silver 
Plume. Silver Plume is a little community of 203 people, and 
that is if you count the dogs, the drop-ins, and the ground 
squirrels. A couple years ago, Silver Plume had a major rock 
slide in a relatively geologically unstable location, and it 
completely obliterated their water delivery system. I mean, it 
was squished flat. RCAC was able to step in within a week and 
to marshal the resources of the Colorado Department of Public 
Health and Environment, the Department of Local Affairs, and 
USDA Rural Development to put together a package to replace the 
water system for this community of 203 people. They had a part-
time town clerk. You can imagine what that town council must 
have been going through. So, again, it was the ability of an 
RCAP provider, Rural Community Assistance Corporation, to step 
into the breach and provide that bridge.
    Across the United States, Rural Development has over 18,000 
active loans through the water and environmental programs at 
the Rural Utilities Service. They serve more than 19 million 
rural residents with those programs, and with the help of 
technical assistance providers they have a delinquency rate, 
Madam Chairman, of less than 0.18 percent. Maybe you should put 
us in charge of Fannie and Freddie.
    [Laughter.]
    Ms. Raitano. It is really about the efficiency, and the 
work that we do to make sure that after the ribbon cutting and 
after the grand opening of the plants and the facilities that 
we stick around and do the heavy lifting and the harder work of 
building the human capacity and doing the board training and 
working with the water boards to really be able to manage and 
operate and sustain what we have just handed them. So we do a 
lot of the front-end loading for the analysis for rural 
development. So, again, it is a great partnership that we have.
    One of the emphases is on regionalization. I live in 
Colorado. That is one of the big-box States out West, and we 
have counties in Colorado that are bigger than some of the 
Eastern seaboard States. When we talk about regionalization, 
you have got to remember there is a lot of dirt between light 
bulbs in our communities, and it is not always feasible to 
build pipes to serve multiple communities off a single system. 
But we have had some success doing that. In New Mexico, we had 
the Lower Rio Grande Mutual Domestic Water Company, which is 
now serving five very small, very poor colonias near the Mexico 
border. Two of those communities, one of which was Desert 
Sands, had a high arsenic level and was actually issued an out-
of-compliance notice by EPA in 2008 because of arsenic. The 
community put together a compliance plan, but the annual cost 
of that plan was over $120,000 for 580 households.
    So as you can imagine, there are a lot of challenges out in 
rural America, and we appreciate the fact that Rural 
Development has programs in place to address those. Our role is 
to extend their efficacy.
    Thank you, Madam Chairman and Ranking Member Roberts.
    [The prepared statement of Ms. Raitano can be found on page 
118 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much.
    Mr. Rembert, welcome.

   STATEMENT OF MARK REMBERT, CO-DIRECTOR, ENERGIZE CLINTON 
                    COUNTY, WILMINGTON, OHIO

    Mr. Rembert. Chairwoman Stabenow, Ranking Member Roberts, 
Ohio Senator Brown, and members of the Committee, thank you for 
the opportunity to share the story of Energize Clinton County 
and our experiences rebuilding our community following the loss 
of our largest employer.
    I grew up in Wilmington, Ohio, a rural community of 12,000 
in the southwest part of the State. Like most young people who 
grow up in small towns, I left after graduating from high 
school and attended college in Philadelphia, where I studied 
economics. Like most of my generation, I had no plans to return 
home. The world changed for me--as it did for so many--in 2008. 
I had decided to put my training in economic development to 
work and join the Peace Corps. I was preparing for my departure 
when news from home reached me in Philadelphia. DHL, the 
region's largest single source of employment, was ending its 
operations at the Wilmington Air Park. Realizing that the 
community where I grew up would be changed forever by this 
crisis, I decided to return home for the final months before my 
departure to reconnect with the community.
    Not long after my arrival, I was joined by Taylor 
Stuckert--another Wilmington native--who had been prematurely 
evacuated from his Peace Corps service in Bolivia. As we 
witnessed the economic equivalent of a hurricane hitting our 
home town, we talked to people throughout the community and 
quickly recognized a new energy brewing. There was a desire to 
push for increased involvement and ownership in the 
redevelopment of our devastated local economy. By re-engaging 
with our home town, we realized that we could best serve our 
country by working in our own community rather than working 
overseas. We decided to stay home and contribute to the 
redevelopment of our region.
    As Taylor and I set out on our economic development 
project, our perspective was heavily influenced by the Peace 
Corps model, which approaches development at the community 
level and emphasizes the importance of grassroots analysis and 
action. We believed that the Peace Corps approach in our 
community could generate solutions that were more immediate, 
actionable, and sustainable than traditional solutions and 
would complement ongoing efforts by community leaders to 
acquire the DHL-owned airpark and leverage it as an asset to 
attract new employers.
    In late 2008, Taylor and I founded Energize Clinton County, 
a nonprofit community economic development organization. We 
quickly built a strong partnership with Chris Schock and the 
Clinton County Regional Planning Commission and began 
developing programs that invested in our local assets and 
transformed citizens into agents of economic change.
    While our work has primarily focused on Clinton County, we 
have recently begun working regionally with the six other rural 
counties impacted by the departure of DHL. With the assistance 
from Ohio USDA State Director Tony Logan, ECC received a 
$48,000 USDA Rural Business Opportunity Grant to transfer 
strategies and techniques developed by ECC to engage the 
community in supporting local businesses. This grant has given 
us the ability and the opportunity to build new regional 
partnerships, to coordinate strategies that strengthen local 
assets, and invest in our shared future.
    For many rural communities in our region, it can be 
challenging to understand how we fit into a globalized world. 
If our communities are to survive, it is critical that we 
establish a vision for rural places that inspires a new sense 
of ownership and investment in our future. Without a long-term 
vision and strategy, communities are at high risk of continued 
decline. When communities lack a clear plan and a clear sense 
of direction, citizens are less likely to invest in necessary 
changes that have large up-front costs, public officials are 
more likely to make reactionary rather than strategic 
decisions, and there are fewer mechanisms for a community to 
hold itself accountable.
    Given the economic challenges our communities face and our 
declining local resources, planning and long-term visioning are 
absolutely critical to the development of our communities. 
Unfortunately, many of us lack the resources or the capacity 
needed to do the planning required to move beyond a purely 
reactive economic development approach.
    Given the critical needs present in our communities, we 
encourage rural development to explore new ways to assist 
communities in rural regions and economic development planning 
and visioning.
    My thanks to you, Chairwoman Stabenow, Ranking Member 
Roberts, Senator Brown, and the Committee, for considering my 
testimony and for your focus on meeting the needs of America's 
rural communities and citizens.
    [The prepared statement of Mr. Rembert can be found on page 
126 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Fluharty, welcome.

STATEMENT OF CHARLES W. FLUHARTY, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, RURAL POLICY RESEARCH INSTITUTE, AND RESEARCH 
 PROFESSOR, TRUMAN SCHOOL OF PUBLIC AFFAIRS, COLUMBIA, MISSOURI

    Mr. Fluharty. Madam Chair, Ranking Member Roberts, it is a 
privilege to be with the Committee again. We live in a very 
egocentric domestic policy framework, and I would like to 
applaud you and the members of this Committee for your 
continued tenacity to assure that rural considerations make a 
difference in this town.
    I am also pleased to be joined by three practitioners who 
are making huge differences in the lives of rural people.
    I am also extremely pleased by the consensus today that 
appears to be evidence that, with less money, we have to first 
ask: Should the Federal Government do it? Second, should USDA 
do it? And, third, how should USDA do it leveraging resources? 
I commend you to stay on that track. I think it is very much 
the right one. I think your Committee's approach to ag policy 
in this farm bill gives us an apt analogy for what I would 
argue must occur in rural development.
    We are in a new commodity world, and risk management and a 
safety net for our ag producers is absolutely essential. This 
is exactly what is needed for our rural communities, our 
regions, and our counties. It is very important also that this 
Committee have both those obligations at this point in our 
history.
    Yesterday, ERS released their 2010 Farm Household Income 
Report which showed $49,500 of the $54,000 in median U.S. farm 
household income was generated off the farm. Most farm 
households earn the majority of their income from off-farm 
employment. For those with up to a quarter of a million dollars 
in farm sales, it is 75 percent of that family's income. For 
our very largest commercial farms, it is 20 percent.
    So vital rural economies are key not only for all rural 
Americans, but for agriculture. In the future, energy will be 
rural development. Bio futures in entrepreneurship for 
agriculture will be rural development. In the future, as 
everyone has said, this will align.
    So the very same risk management tools that you are 
approaching ag policy with--innovation, flexibility, 
streamlining, and leverageable safety net mechanisms--they are 
exactly the same ones we need for economic development and 
entrepreneurs as we are seeking for our ag producers. This is 
what this Committee is being asked to do: create risk 
management tools for public entrepreneurs, like the three at 
this table today.
    I would just urge three principles be thought about. You 
have to streamline, make more flexible, and leverage your 
existing programs, I would argue in a regional context wherever 
possible. You are going to need to think about asset-based 
innovation and entrepreneurship in everything from value chains 
to how the Federal, State, and local public sector responds, 
and we are going to have to figure out ways to give Secretary 
Vilsack what he asked for, which is indeed the ability to work 
across other Federal programs.
    Finally, and most importantly, and a thing that I think 
perhaps was not focused upon enough in the earlier hearings, we 
are going to have to expand, align, and leverage very, very 
scarce rural resources. We are going to have to assure debt 
equity and venture capital is still there. And, lastly, I would 
like this Committee to do all in its power to take a look at 
the rural giving by America's foundations. In this regard, as I 
close, I would like to suggest two numbers be seared in your 
mind, Madam Chairman: $28 billion and 1 percent.
    The $28 billion are additional rural community and economic 
development resources that would have been available in 2010 in 
rural counties if they received the same per capita funding as 
urban counties. Twenty-eight billion dollars.
    Secondly, with rural development budget authority 
continuing to reduce, the real question this Nation has is: 
Where does rural America go? Perhaps to America's foundations. 
Here in 2010, the same year, $46 billion was contributed by our 
Nation's foundations, and less than 1 percent went to rural 
programming. Less than 1 percent.
    The geographic inequity here is growing worse as rural 
capacity is threatened and as the safety net grows worse. For 
years our Nation's foundations have decried perceived redlining 
on the part of Government, and yet this de facto rural 
redlining by foundations is longstanding. The funding has never 
been more critical, and I urge this Committee to assess whether 
this ridiculously low rural payout may, in fact, call into 
question the very solemn public trust that our American 
foundations have in exchange for the loss of tax revenues that 
are received because of that public good.
    Thank you, Madam Chairman, and I look forward to questions.
    [The prepared statement of Mr. Fluharty can be found on 
page 86 in the appendix.]
    Chairwoman Stabenow. Well, thank you very much, and you 
certainly raise some very important questions with some 
startling statistics, so I appreciate that very much.
    I would like to ask each of you, because you are all 
talking about efforts to collaborate on economic development 
strategies and projects: From your perspective, as you look at 
current rural development programs, are there programs right 
now or are there barriers right now to doing what you believe 
you need to do? How do we have better regional collaboration? 
Are there specific things that we need to focus on that you run 
up against as barriers?
    Mr. McCauley.
    Mr. McCauley. I think a couple barriers come to mind. One, 
the very intensive nature of Federal programming can often be 
an impediment for local communities to apply for the resources 
that they dearly need. We have wonderful and very smart 
individuals in our region, but as Dr. Raitano said earlier, 
once they get that packet from USDA--or any other Federal 
agency, for that matter--that talks about the terms and 
conditions, they often run out of the room as well. So I would 
mention that, one.
    I would say that, two--and Secretary Vilsack mentioned this 
earlier--sometimes the inflexible nature of specific Federal 
programs. I believe he mentioned that there are 40 different 
USDA programs, and a stovepipe approach to rural development is 
not one that benefits rural America, that we need the 
flexibility to meet our needs, to meet our regional economic 
development strategies in such a way where they benefit our 
regions and the country as a whole.
    Chairwoman Stabenow. Thank you. Since the beginning of our 
process on the farm bill, I have suggested we focus on 
principles instead of programs, and the idea being let us look 
at the functions of what needs to be done. I really have a 
question about whether or not we need 40 different programs. 
Why can't we bring those together in a more flexible way?
    Dr. Raitano, could you speak to the question of barriers?
    Ms. Raitano. Thank you, Madam Chairman. I have to agree 
with my colleague Mr. McCauley that one of the challenges we 
have is the stovepiping of this. But as my colleague and mentor 
to my left, Dr. Fluharty, has pointed out many times, once you 
have seen one rural community, you have seen one rural 
community. So the flexibility and the adaptability of those 
Federal programs are absolutely key to being valuable and 
staying fresh and applicable to rural communities.
    One of the challenges we have is that there is not a 
comprehensive approach to technical assistance, and so one 
program facilitates technical assistance, another program has 
no provision at all for facilitating technical assistance. 
There is not a single silver bullet for solving the needs of 
rural communities. It is going to require the whole arsenal.
    So we really need to make sure that we have an integrated, 
holistic approach across all of the programs in RD.
    Chairwoman Stabenow. Thank you very much.
    I believe we are just discussing the fact that there is a 
vote that has been called. We are going to attempt to do this 
in a way where I can step away and vote, and then Senator 
Roberts can do that. We will take turns and keep going, but we 
apologize in advance if we are stepping away.
    Mr. Rembert, would you speak to the question of any 
barriers?
    Mr. Rembert. I think when it comes to especially leveraging 
regional collaboration to engage with USDA programs, one of the 
challenges that we continually face is that we do not have in 
our region a cross-county set of goals or strategies or vision 
for how multiple counties work together.
    Just to give you a sense, when DHL departed the Wilmington 
airpark, we realized that it was the largest employer for seven 
rural counties in southern Ohio. Those seven counties had never 
had a shared vision about how they interlock together as a 
region. So it has only been in the last 3 years that we have 
even realized what our region was.
    So until we have that established plan as a region to 
understand what we are trying to achieve and where our common 
goals lie, it is going to be difficult for us, I think, to 
really engage with USDA in a streamlined fashion and leverage 
our regional resources to take advantage of partnerships with 
USDA.
    Chairwoman Stabenow. Mr. Fluharty, I am going to ask you to 
speak while I ask you to excuse me, and I will be back in just 
a moment.
    Mr. Fluharty. Sure. Two or three quick points.
    First of all, RUPRI has been honored for now heading into 
our third decade to work with a number of different 
administrations and a number of different committees, and we 
have tried to take our nonpartisan external mandate and humble 
honor in a very, very serious way. So we have been able to look 
at a lot of programs over the last three decades. We have also 
worked extensively in most States in the United States and, 
frankly, all over the world.
    The first thing I would say is in Europe they automatically 
commit 3 percent right up front when they give a grant to 
technical assistance because they recognize capacity does not 
exist. We are not going to be in a world where we can do that 
any longer. But we have Federal programs that are doing it 
already in our sister agencies. And I would simply say that a 
comprehensive economic development strategy currently in EDA in 
Commerce, it is not something you do any longer to get a grant. 
It actually is turning into the vehicle that my colleague here 
mentioned. We need to figure out a way to align where this 
Committee takes very scarce resources with other functions in 
the Federal Government that will enable us to do risk 
management. And by ``risk management,'' I mean rigorously 
assessing: Is this the right thing for us to do? Most small 
county commissions have no research staff. Secondly, where can 
I go to get help? Thirdly, are there Federal, State, local, 
private, or philanthropic resources that might align?
    We need to think about a suite of services that can do 
this, frankly, in USDA. This is my fifth farm bill, and, 
Senator, you and I go way, way back to the other chamber. We 
have asked for five farm bills to actually move from silos to a 
vision. And I think the vision is private sector based, 
innovations in value chains and governance, entrepreneurship, 
and asset-based development, developed by local regions 
rigorously assessing their own future. That is what we lack 
right now.
    I think USDA is reaching out to try to do that. I know it 
is hard because there are programs that are essential that will 
not fit in this compendium, and they need to survive as well. 
But I hope you can move toward an integrated framework that 
finally says let us use all the resources of the Federal 
Government the way, frankly, cities do because they have CDBG 
and they have foundations with millions of dollars supporting 
program integration. And here is a 20-year-old county 
commissioner saying, ``What do I do?''
    I think it is time for this Committee to simply say, ``The 
people are way ahead of our policy development process. Let us 
catch up and let us work with this administration to do what 
these three fine practitioners are asking.'' I really believe 
that is the key, Senator.
    Senator Roberts. Mr. Fluharty, as usual, you are an 
effective voice, very articulate voice on behalf of rural 
development, and mixed in a big batch of common sense. Seven 
farm bills for me.
    Mr. Fluharty. Exactly, Senator.
    Senator Roberts. I hope I can get to eight this spring.
    Mr. Fluharty. I do indeed hope that.
    Senator Roberts. Can you talk just a little bit about 
Project 17, the economic development initiative which I think 
speaks to this?
    Mr. Fluharty. Absolutely, Senator. I would love to very 
quickly because I know the hearing has been long.
    I was honored a year and a half ago to go into Garden City 
and Dodge City to look at a regional development framework for 
southwest Kansas, and it got a lot of interest in southeast 
Kansas. So in the last year, with Governor Brownback's support 
and the commitment of four State Senators, we initiated a 17-
county project to build a 1-year dialogue which says, ``What 
are the major institutions that could change this region? How 
will we align our resources? How will we move forward in a 
public-private-philanthropic partnership to change southeast 
Kansas?''
    Now, that is very much an unnatural adult act in southeast 
Kansas. I recognize that, as do all of the other institutions, 
and the journey is just beginning. But all of the major players 
in Kansas have come to this agenda: Kansas Farm Bureau, Network 
Kansas, the Department of Commerce, the State legislature, the 
Governor, the philanthropic communities, the Advanced 
Manufacturing Institute at Kansas State that I think is one of 
the cutting-edge engineering schools for innovation value 
chains in rural America, and on and on and on. They are 
beginning a cadenced, deliberate set of regional dialogues to 
figure out a way to build a business plan that has a logical 
value statement within it, and, Senator, we are going to be 
honored to work with them.
    I will simply say this is going on at this level more and 
more in more and more areas, and if we could help it rather 
than have them do it in spite of the fact that it is kind of 
hard in USDA to get it going, it would truly matter, I think, 
for the businesses in this region. It is a wonderfully exciting 
Kansas venture. It is really exciting.
    Senator Roberts. Well, thank you for describing that. Count 
me in. Anybody that could get Liberal, Kansas, Garden City, 
Kansas, and Dodge City, Kansas, with the rivals that we have 
out there, to finally decide on one regional airport, you must 
be a miracle worker.
    I want to go to Mr. McCauley and your plea, is there some 
way that we can streamline the application process and 
reporting requirements. Basically are you saying when you get 
that packet of information on the criteria, all the 
regulations, I would think it would be so overwhelming that you 
would wonder whether you want to even apply or not? The good 
mayor sitting next to you said exactly the same thing. What on 
Earth do you do if you are 32 years old and a mayor and all of 
a sudden you are presented with all this information? Who do 
you go to? How do you wade through all of that?
    Mr. McCauley. Well, Senator, you are exactly right, and in 
the case of our region, and I am sure in the case of many other 
regions across the country, a lot of the people that are vested 
with the trust to handle this have day jobs. They are the 
hardware store owners, they are the farmers and so on and so 
forth.
    Senator Roberts. Exactly.
    Mr. McCauley. Again, these are smart, capable people, but 
this may be a volunteer opportunity for them, and simply put, 
as the rules and regulations and terms and conditions are put 
forth right now through many of these programs, they cannot 
handle it because there is just simply not enough time in the 
day.
    So how they handle it is oftentimes through organizations 
like ours, through regional planning commissions across the 
country. Also counties help the communities that are located 
within their boundaries. We can provide that technical 
assistance to communities, to individuals, and to businesses 
who are having a tough time with this. But similar to them, 
there is only so much staff that we can commit to this and so 
many hours in the day as well. For our case, it is ten 
counties----
    Senator Roberts. Well, let me interrupt.
    Mr. McCauley. Yes.
    Senator Roberts. There is only so much time in a vote, and 
I understand there is 1 minute left. It is going to be sort of 
a super-human effort for me to get over there. The Chairwoman 
will be right back, and the Committee will stand in a short 
recess, and I shall return as well. Thank you so much. Just 
stay put, enjoy yourself, talk to each other.
    [Recess.]
    Chairwoman Stabenow. Well, good afternoon. We very much 
appreciate all of you on our panel testifying. Senator Roberts 
has gone to vote. He indicated he will be submitting additional 
questions to you in writing, as will I. We care very much and 
very much appreciate your perspectives. I know you understand, 
but we are juggling votes on the floor and so on. So we will 
dismiss our panel, and thank you very much for your efforts on 
rural development. We look forward to working with you and take 
very seriously your recommendations regarding flexibility and 
how we might consolidate and streamline what we are doing so 
that the part-time mayor can have the opportunity to be able to 
weave through all the rules and be able to get things done, 
which is what we are all about.
    So thank you very much. We will ask our second panel to 
come forward. Thank you.
    [Pause.]
    Chairwoman Stabenow. Well, good afternoon. We very much 
appreciate your patience. We know you have traveled long 
distances to be able to be with us, and your experience and 
this panel particularly on energy is very, very important to 
us, very important to me personally. We have a number of 
challenges that relate to the budget, as you know, and how we 
are going to proceed to be as aggressive and supportive as we 
can be for energy. But this is, I think, a very important part 
of developing economic opportunities in rural America and for 
all of America, and we very much appreciate the work that you 
are doing and the fact that all of you are with us.
    I am going to proceed and introduce each of you. We will 
proceed with your testimony. Senator Roberts will be returning 
as soon as he votes, and, again, we appreciate your patience 
today.
    Our first witness--we do not quite have this in order, but 
I am going to proceed here--is Mr. Steve Flick, who is the 
current chairman of the board of Show Me Energy--I like that 
name--Show Me Energy Cooperative in Centerview, Missouri. Show 
Me Energy Cooperative is a cellulosic biomass facility owned by 
612 farmers. It was the first project supported by the Biomass 
Crop Assistance Program in 2011. Mr. Flick is participating 
with the Meridian Institute Council for Sustainable Biomass 
Production, Farm Bureau, and is a plenary speaker for bioenergy 
conferences throughout the United States, and we welcome you.
    Our next witness is Mr. Lee Edwards. Mr. Edwards is the 
president and CEO of Virent, Incorporated, a company in 
Madison, Wisconsin, and Virent creates chemicals and fuels from 
a wide range of naturally occurring renewable resources that 
can be used in products traditionally created with petroleum 
and chemicals. The company has received numerous honors, 
including the World Economic Forum Technology Pioneer Award and 
the EPA's Presidential Chemistry Award. Mr. Edwards is a 
graduate of the Wharton School at the University of 
Pennsylvania and holds a B.S. in chemical exchange from 
Bucknell University, and so we welcome you also.
    Our third panelist is Mr. Bennie Hutchins. Mr. Hutchins is 
the energy program coordinator at Ag Energy Resources, a 
consulting group in Brookhaven, Mississippi. In that capacity 
he assists agricultural producers and small businesses 
nationwide in applying for USDA programs such as Rural Energy 
for America, the REAP program. Prior to his work, Mr. Hutchins 
worked for 35-1/2 years for USDA's Natural Resources 
Conservation Service, and we welcome you as well.
    Our final witness is Mr. Bill Greving. Mr. Greving and his 
family have owned and operated their family farm for the past 
121 years--you look very good for 121 years.
    [Laughter.]
    Chairwoman Stabenow. --in Prairie View, Kansas, and I know 
that Senator Roberts will be back to welcome you as well. The 
Greving Farm produces sorghum and other crops and beef cattle. 
Bill and his wife, Diana, are shareholders in the nearby 
Prairie Horizon's ethanol plant. They sell sorghum to the plant 
for its use and purchase wet distillers grains to feed their 
livestock, and Mr. Greving is active in his community, his 
church, his school board, and retirement center board as well.
    We welcome all of you today and appreciate the work that 
you are doing. At this point we will go back to where I just 
ended with Mr. Greving, and we will ask you to proceed first 
this morning--or ``this afternoon,'' I guess we should say now.
    We need you just to push--there is a button there that will 
activate the microphone. Thank you.

 STATEMENT OF WILLIAM GREVING, SORGHUM FARMER, GREVING FARMS, 
                   INC., PRAIRIE VIEW, KANSAS

    Mr. Greving. Madam Chairwoman, Ranking Member Roberts, and 
members of the Committee, I would like to thank you on behalf 
of Kansas grain sorghum farmers for the opportunity to share my 
insights into sorghum, ethanol, and energy.
    Greving Farms is a diversified family farm located in north 
central Kansas. We produce grain and wheat on our dryland acres 
as well as corn and alfalfa on our limited irrigated acres. Our 
livestock operation consists of 500 mother cows as well as a 
thousand head feedlot where we finish our cattle for slaughter.
    Since inception of the ethanol plant in Phillipsburg, we 
have realized approximately a 30-cent-per-bushel increase in 
price for the sorghum delivered to the plant. In addition, we 
bring wet distillers grain back from the plant for use in our 
feedlot rations.
    Now for some facts about Kansas sorghum and its usage in 
Kansas ethanol plants. Last year, 51 percent of U.S. production 
in the sorghum crop was produced in Kansas. Of that, 40 percent 
was turned into ethanol in our Kansas plants.
    Grain sorghum is a unique crop in that it is drought and 
heat tolerant. It lends itself well to our western Kansas semi-
arid climate, and we believe in the future it will have more 
importance as the declining water table in the Ogallala aquifer 
occurs.
    My wife and I invested in the ethanol plant in Phillipsburg 
approximately 8 years ago. We had three reasons for doing so: 
one, we knew it would benefit our farming operation 
economically; the second reason as a retirement investment; and 
the third reason, we wanted to help promote the economic 
activity in our local area.
    Prairie Horizon Agri-Energy has accomplished that. It 
provides 33 good-paying jobs in the area, not to mention the 
jobs that are generated by the local trucking industries and 
other businesses that are associated with it.
    The jobs, the economic activity created, and the tax 
revenue generated by the plant have a large economic impact on 
Phillipsburg and the surrounding area. In addition, our plant 
is an active member of the community and sponsors many 
activities in our area.
    I have always felt that taking a raw product such as grain 
sorghum and corn and turning it into a high-value energy 
product which reduces our dependence on foreign oil is a win-
win situation. It also provides jobs and economic activity, as 
I have stated.
    I would like to touch on the 9005 portion of the farm bill 
energy title which provides payments to energy producers to 
support their expansion of advanced biofuels.
    Grain sorghum is an eligible feedstock for the production 
of advanced biofuels. Eight ethanol plants in Kansas benefitted 
last year from the payments under this program, which provided 
incentives to ethanol plants to use grain sorghum, thereby 
leading to more acres of a drought-and heat-tolerant crop being 
produced.
    I would also like to mention the potential for sweet 
sorghum and biomass forage sorghum to be used in ethanol 
production. Both crops qualify as feedstocks for advanced 
biofuel production. Much research and work has been done on 
these crops, and this year, the first commercial-scale sweet 
sorghum-to-ethanol plant is expected to break ground in 
Florida. Sweet sorghum is the next logical step for ethanol 
production in the United States, and the continuation of the 
9005 program is essential in supporting the development of 
commercial production of sweet sorghum ethanol. We believe that 
sweet sorghum can be successfully grown in Kansas, and we think 
it has a lot of potential if the juice from the sweet sorghum 
plant can be incorporated into the feedstock stream of our 
Kansas ethanol plants. This past year, in Arizona, a company 
demonstrated that this process is feasible.
    In conclusion, I would thank Chairwoman Stabenow and 
Ranking Member Roberts for inviting a farmer to appear before 
you today to talk about agriculture and energy. While those who 
have spoken before me are focused on policy, I am focused on 
the production of food, fuel, and feed in a synergistic system 
which I believe will make our operation and operations like 
ours profitable into the future.
    Again, thank you, and I would entertain any questions.
    [The prepared statement of Mr. Greving can be found on page 
96 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Flick, I understand there was a typo in your 
introduction. You are active with the Farmers Union, and I want 
to make sure that is clear. So thank you very much, Mr. Flick.

STATEMENT OF STEVE FLICK, CHAIRMAN OF THE BOARD, SHOW ME ENERGY 
   COOPERATIVE, CENTERVIEW, MISSOURI, ON BEHALF OF NATIONAL 
                         FARMERS UNION

    Mr. Flick. Chairwoman Stabenow, Ranking Member Roberts and 
members of the Committee, thank you for inviting me to testify 
today on the energy title of the 2012 farm bill and how we can 
continue to provide energy and economic growth in rural 
America. My name is Steve Flick, and I am a Missouri Farmers 
Union member and the board chairman of Show Me Energy 
Cooperative, a next-generation biorefinery owned by 612 farmers 
in western Missouri. Today I am testifying on behalf of NFU's 
approximately 200,000 members in support of a strong, 
bipartisan energy title in the 2012 farm bill.
    For years, renewable energy of all sorts has served as a 
significant boom for rural America. It provides well-paying 
jobs and helps support our local economies. The energy title is 
especially important in reaching the goal of energy 
independence and promoting rural economic development. 
Specifically, we support an energy title that includes robust 
funding for REAP, BCAP, and the Biorefinery Assistance Program, 
and other renewable energy programs.
    Show Me Energy Cooperative is a perfect example of how the 
farm bill renewable energy programs are successfully working to 
spur real economic development, create jobs, and reduce oil 
dependence. Show Me is in the business of growing, processing, 
and refining dedicated energy crops into fuels to provide 
energy security for the U.S. The cooperative provides numerous 
good-paying jobs for families in the region.
    In 1983, I purchased my own farm by saving money from 
hauling small square bales during and before college. Since 
then my operation has continued to expand and diversify. In 
2008, Show Me built its first biorefinery, creating 21 direct 
jobs and 516 indirect jobs. Our entire board consists of 
volunteer farmers and producers. From day one, farmer 
innovation was the mind-set, and this country was built on that 
mind-set. Our members were committed to accomplishing the same 
in building the first U.S. biorefinery owned by farmers.
    Show Me farmers succeeded. We built the plant which 
currently produces a biomass pellet that is used to heat homes, 
livestock barns, and produces power. In 2009, Show Me partnered 
with our local electric utility to test burn around 29,000 tons 
of biomass pellets with coal. From this experiment, we learned 
that biomass and coal can successfully be combined in old 
boilers and power plants. We are currently negotiating a PPA 
with that local utility to generate base-load power from our 
facility.
    BCAP is the program that led to the next phase of our 
cooperative's development. In May 2011, Show Me submitted to 
BCAP an ``energy hub'' area under the FSA guidelines to cover 
32 counties in western Missouri and 7 counties in eastern 
Kansas. The proposal was to grow native grasses on marginal 
land under a program called ``Plant, Baby, Plant.'' These 
native grass poly-cultures will harvest the power of the sun, 
developing through the typical growing seasons and will be 
harvested for their cellulose content by the farmers after a 
killing freeze, by either round or square bailing. Farmers in 
the project area seized on the opportunity and signed up their 
acres. On May 5, 2011, Secretary of Agriculture Tom Vilsack 
announced the approval of the first BCAP project area. By 
September, 26,000 acres were enrolled. Farmers will begin the 
process of planting these energy crops on these acres this 
year.
    Show Me Energy's BCAP project will be deployed over 39 
counties. In the process, it will lead to the creation of 
hundreds of direct jobs and thousands of indirect jobs. By 
planting these acres yielding an average of 5 tons per acre, we 
will produce 130,000 tons of material per year.
    Show Me's plant in Centerview currently pelletizes the 
crops into biomass fuel for heat and electric power. 
Eventually, our technology will provide liquid fuels that will 
replace petroleum based jet fuel. Thousands of farmers in the 
Midwest will be growing energy crops.
    We plan for our BCAP area to provide the necessary 
feedstock for our biorefinery's next phase, manufacturing jet 
fuel from butanol. Our goal is to produce 3 million gallons of 
high-quality fuel for the Department of Defense from dedicated 
energy crops produced in this decentralized feedstock area.
    BCAP helped our cooperative tremendously, and I am 
confident that with the continued implementation we will lead 
the proliferation of advanced biorefineries with American 
farmers, providing power, heat, and liquid fuels in commercial 
quantities. Yet even after a successful project, the 
President's budget zeroes out funding for BCAP.
    As it relates to Show Me Energy Cooperative, I believe that 
Congress needs to adequately fund BCAP and the rest of the 
energy title. These programs should not be seen as a handout 
but, rather, a handup that will change the way we live in rural 
America. It will change the way we produce energy, and it will 
change us as a country for the better.
    The United States is a country with unlimited potential to 
do great things. I believe that American farmers, ranchers, and 
rural residents have a bright future ahead of them with the 
right incentives. Renewable energy is the future of rural 
America. As such, I urge your Committee to pass a farm bill 
this year with a robust energy title to continue essential 
progress on these vital renewable energy programs while 
providing energy security for the U.S..
    On behalf of the members of the National Farmers Union and 
Show Me Energy Cooperative, thank you for the opportunity to 
outline our priorities. My written testimony goes into more 
details on these programs, and I would be happy to answer any 
questions you have.
    [The prepared statement of Mr. Flick can be found on page 
73 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Edwards, welcome.

    STATEMENT OF LEE EDWARDS, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, VIRENT, INC., MADISON, WISCONSIN

    Mr. Edwards. Thank you very much, Chairwoman Stabenow, 
Ranking Member Roberts, and distinguished members of the 
Committee. It is an honor and a privilege to be here today to 
speak to you about energy and economic growth for rural 
America.
    My name is Lee Edwards, and I am the CEO of Virent, now in 
my fourth year in this position. Prior to Virent, I was an 
energy executive at BP for 25 years.
    Virent is in the business of replacing crude oil. The 
company was founded in 2002, spun out from research at the 
University of Wisconsin. We have 117 proud employees, growing 
at about 20 percent per year.
    Virent has been able to attract global leaders like, Shell, 
and Honda as investors and partners. In December, we also 
announced a new strategic partnership with The Coca-Cola 
Company to develop and commercialize renewable, recyclable 
beverage packaging.
    Virent is commercializing technology that transforms 
renewable biomass into gasoline, diesel, jet fuel, and 
chemicals that are the same as those currently refined from 
crude oil.
    Because these products are chemically identical to those 
made from petroleum, they are ``drop-in,'' and by that I mean 
they can be seamlessly integrated into existing infrastructure 
and work in all engines that are used today.
    Virent has proven our scalability with a demonstration 
facility producing 10,000 gallons a year of renewable gasoline 
and chemicals. We also have 20 pilot-scale plants that convert 
a wide range of biomass into drop-in products.
    To date, Virent has attracted $75 million in private sector 
investment, and I have to say this would not be possible 
without R&D grants from the Federal Government, including the 
USDA Biomass Research and Development Initiative.
    Government grants facilitated early discoveries at the 
company and spurred investment from the private sector. In 
fact, for every dollar received from Government grants, we have 
matched that with more than $4 from the private sector.
    The deployment of first-generation biofuels has already 
created significant opportunities in rural communities. 
Deployment of the next generation of biorefineries has the 
potential to increase markets for cellulosic materials from 
every region of the country--from corn stover in Michigan, 
Iowa, and Kansas, to switchgrass in Georgia, to woody biomass 
in places as diverse as Arkansas and Vermont.
    Currently, Virent is working on our first commercial-scale 
plant to produce gasoline and chemicals from renewable biomass 
to open in 2015. This facility will create over 200 temporary 
construction jobs and 50 permanent jobs.
    However, like any innovative company, Virent faces 
obstacles. The capital required to build a biorefinery today is 
daunting, well beyond the investment limits of venture capital. 
Private lenders are unlikely to loan funds at reasonable cost 
to pioneer plants using new technologies. Equity investors 
raise concerns around the long-term stability of policy and tax 
initiatives.
    Compounding these issues are significant commodity price 
risks, volatile pricing and uncertainty in feedstock supply, as 
well as fluctuating prices for crude oil and petroleum 
products. Fortunately, several of the programs within the 
energy title have been well positioned to address these 
challenges.
    To start, the Biorefinery Assistance Program has been 
successful in bringing private lenders to the table. However, 
the program currently requires that biorefineries manufacture 
at least 51 percent fuels. Given private sector interest in 
renewable chemicals, USDA should allow the production of any 
mix of fuels and other products that the market demands.
    Further, the definition of ``advanced biofuel'' does not 
include the full array of technologies, feedstocks, and 
products that companies are seeking to develop today. On the 
feedstock side, the Biomass Crop Assistance Program has the 
potential to serve as an important tool for helping farmers and 
other feedstock developers produce and deliver cellulosic 
materials. And, finally, the Biomass Research and Development 
Initiative remains critical in seeding innovation and 
leveraging private dollars into these new technologies.
    In conclusion, it is possible to replace imported crude 
oil. Virent is using cost-competitive, domestic, renewable 
resources to create direct replacement drop-in products, 
providing our Nation with the opportunity to build energy 
security, long-lasting jobs, and a healthier world. American 
farmers and foresters will be essential in realizing this 
potential, and the farm bill has a significant role to play in 
this effort.
    I appreciate the opportunity to testify today and look
    forward to working with the Committee on these issues.
    [The prepared statement of Mr. Edwards can be found on page 
67 in the appendix.]
    Chairwoman Stabenow. Thank you very much.
    Mr. Hutchins, welcome.

 STATEMENT OF BENNIE HUTCHINS, ENERGY PROGRAM COORDINATOR, AG 
         ENERGY RESOURCES, LLC, BROOKHAVEN, MISSISSIPPI

    Mr. Hutchins. Thank you, Chairwoman Stabenow and Senator 
Roberts and members of the Committee. I do appreciate this 
opportunity to come before you today to give you my views about 
the Rural Energy for America Program, or REAP, that we have 
heard talked about and the critical role that REAP is playing 
across our country in helping our rural small businesses and ag 
producers implement energy efficiency and renewable energy 
projects.
    Three points I hope you take from my comments today: First, 
REAP has application in every State across this country; 
second, REAP has application in every agricultural sector and 
small business basically that you can imagine; and then, third, 
the REAP participants through this program are reducing their 
energy consumption, of course, or bringing in other additional 
income from renewable energy sources. Doing so, though, saves 
jobs and increases their financial stability, of course, 
creates jobs. But in my work as the energy program coordinator 
with Ag Energy Resources out of Brookhaven, Mississippi, I have 
worked with several hundred applicants, REAP applicants, 
participants from across the country, 12 or 15 different 
States. Most of these are agricultural producers. I am here 
today to put a face to those producers and those small 
businesses.
    A lot of them have been poultry producers, like Tara Adams, 
a single-mom poultry producer in Haleyville, Alabama; or David 
Craig, a poultry producer in Blackville, South Carolina; Billy 
Whiteley, a Native American poultry producer in Berryville, 
Arkansas; or Pakou Her and Kao Xiong, poultry producers in 
Ottawa County, Oklahoma. I wish I had time, but you can look at 
my written report to see all the data, the statistics as to how 
these people have benefitted.
    But just real quickly, we took a recent survey of 40 
participants, poultry producers from Mississippi that had 
participated in REAP, and we found that after the 
implementation of the REAP project, they are saving each year 6 
percent on their electricity consumption and 41 percent on 
their propane consumption in their poultry houses.
    Now, to put that in perspective, that is a $12,000 value, 
and that is in an agricultural enterprise with a net bottom 
line on their Schedule F in a typical year of $20,000 to 
$30,000. So a $12,000 increase in their net bottom line is a 
huge impact. So better financial stability and jobs saved, of 
course.
    I have worked with other agricultural sectors out there: 
the pork producers, Spring Hill Pork Farm in Virginia; and Gulf 
American Shrimp in Port St. Joe, Florida; and White Rock Fish 
Farm in North Carolina; and quite a few aquaculture catfish 
producers across the Mississippi Delta. These farms are all 
small family-owned farmers, two to three people employed, up to 
dozens, some of them, on the larger farms.
    But I am here to tell you today that REAP is much more than 
just a Midwest grain dryer program. It reaches every State and 
ag sector across the country.
    Then there are the renewable energy projects that we have 
heard talked about, the methane digesters and the solar PV 
systems like for pecan orchard drip irrigation system, or for 
broiler farms in Mississippi. Then there are biomass energy 
potentials with sawmills and dry kiln operations and so forth, 
like Beasley Forest Products in Georgia, Browder Veneer Mill in 
Alabama, that I have worked with. Then biomass heating systems 
in poultry houses across the country.
    So what is the future potential for REAP? Of course, ag 
producers primarily have been participating, but the rural 
small businesses can participate, too. So the story is still 
yet untold out there. There are thousands of rural small 
businesses in areas less than 50,000 population that could 
qualify to benefit from this program. Small businesses like a 
laundromat in Mississippi or South Alabama Grocers in Ozark, 
Alabama, or Mike's Supermarket in Rio Hondo, Texas--all of 
these employ up to two to three dozen people, and REAP is 
helping reduce their operating costs, increase sales, and save 
jobs.
    As far as the current trend of participation in REAP, last 
year, Rural Development received 3 times more requests than 
they had money for.
    Another point about REAP, REAP stimulates private 
investment. This is one Federal program that for every $1 in 
Federal funds, it mandates that $3 in private funds be 
invested. Usually it is the other way around. But this 25-
percent incentive is just enough to get people to install 
cutting-edge new technology in real-world situations so that 
others hopefully will follow suit. REAP creates jobs, REAP 
saves jobs. Think of just the confined-animal operations across 
the country, the pork, the poultry, the dairy, the aquaculture 
type operations. They are huge energy users, and just the 
confined-animal operations across this country, that 
agricultural sector, contribute over 1.8 million jobs across 
the Nation, and this is up more than 100,000 jobs from 10 years 
ago.
    So my testimony here today is just to encourage you to 
consider strong funding for REAP and for the other core energy 
title programs in the next farm bill.
    I thank you again for the opportunity to come before this 
Committee, and I welcome any questions.
    [The prepared statement of Mr. Hutchins can be found on 
page 100 in the appendix.]
    Chairwoman Stabenow. Well, I thank each of you very much, 
and I very much appreciate all the work that you are doing.
    First, I would have a question for each of you. Given the 
challenges that we have in the energy title with there not 
being baseline going forward and not having funding after 
September 30th of this year, which is a great concern to me, 
because what you are talking about are real opportunities, 
current investments we have made, opportunities to expand, it 
seems to me there are very important opportunities that we 
should not walk away from.
    But knowing the obstacles and with each of your areas of 
experience, what would you prioritize if you were in our shoes 
at this point, and why?
    Yes, Mr. Greving.
    Mr. Greving. Well, I think it was talked about earlier 
today. In production agriculture, a safety net is vitally 
important. Crop insurance is just vitally important to us. And, 
of course, we would also like to see the continuation in some 
form of the 9005 program that will help us to develop new 
sources of ethanol from forage sorghum and sweet sorghum.
    Chairwoman Stabenow. Mr. Flick.
    Mr. Flick. We believe at Show Me Energy that the BCAP 
program is the baseline for any type of project going forward. 
If we do not have the feedstocks, no matter what technology one 
has, those feedstocks themselves are the drivers of those 
technologies, and those producers that grow that feedstock are 
a key one. Because of that growing, there is actually no 
Federal crop insurance for them, either. They are taking that 
risk on themselves. So we believe that the idea of utilizing 
the Biomass Crop Assistance Program is first and foremost in 
order to develop the new technologies for advanced cellulosic 
refineries in the future.
    Chairwoman Stabenow. Thank you.
    Mr. Edwards.
    Mr. Edwards. Thank you for the question. From my 
perspective, to get through the Valley of Death that was 
referenced regarding new technologies, I spend a lot of my day 
trying to attract capital for the first plant. So when I look 
at the opportunity, we need to be able to compete against 
industries that have been in place for decades, and to do so we 
need affordable financing. So within the energy title of the 
farm bill, the Biorefinery Assistance Program has provided an 
instrumental tool to help leverage private sector funds with 
low-cost financing.
    I also think in the feedstock area a lot of investors get 
concerned around the overall commodity price volatility between 
agricultural-based feedstocks and crude oil-based feedstocks. 
So to the extent possible, I think BCAP provides a good tool to 
help mitigate some of those feedstock risks that are keeping 
large company capital on the sidelines waiting for some greater 
certainty between does the technology work, have you reduced 
and mitigated some of the commodity price uncertainty, and do 
we have policy certainty that we can invest hundreds of 
millions of dollars on and expect to get a return from.
    Chairwoman Stabenow. If I might just do a follow-up on 
that, you are suggesting that right now if we focused on BCAP 
in terms of commercialization, which I absolutely understand 
what you are saying in terms of where we lose these important 
projects, so rather than something new, you are saying focusing 
in this area would address it from your perspective?
    Mr. Edwards. Would help a great deal.
    Chairwoman Stabenow. Okay. Thank you.
    Mr. Hutchins.
    Mr. Hutchins. Yes, thank you. Of course, I am more familiar 
with the REAP program, having worked with it, but still, for 
the reasons I stated earlier, I would prefer obviously more 
funding for REAP because it makes a bigger bang for the Federal 
taxpayer dollar since it does require $3 for every $1 on 
Federal grant funds invested. Again, that 25-percent incentive 
is just enough to get those small farmers, small businesses to 
install this cutting-edge technology without a lot of R&D 
budgets and things like that. They are basically ready, see 
they have the need to save energy, but just need that little 
incentive, that 25 percent. So it is a great program from that 
respect.
    Chairwoman Stabenow. Well, I might just say on REAP that 
there has been some really excellent work done in Michigan, in 
my home State. I understand what you are saying, and I think it 
is impressive as you talk about the jobs that have been saved 
or created. I wonder if you might speak just a little bit more 
about the jobs, the impact really beyond the farm, and how REAP 
is having a broader impact in terms of saving or creating jobs.
    Mr. Hutchins. Right. Well, one study--and it is referenced 
in my written statements--indicates that there are 18 jobs 
created for every $1 million of REAP funds invested. Then, of 
course, if you quadruple that because of the private funds 
invested, the numbers come up to about $14,000 per job created. 
This is not only just saving the jobs on the farm, making them 
more financially viable, but for the industries, the 
contractors that are manufacturing the equipment, the 
technology to be installed on these farms, and installing them 
and that sort of thing, so it goes on up the line.
    Chairwoman Stabenow. Thank you very much.
    Senator Roberts.
    Senator Roberts. Bill, if I may call you that, I could not 
help but notice that in 1969 you graduated from Fort Hays State 
University.
    Mr. Greving. That is correct.
    Senator Roberts. About that time, I was climbing into a car 
with Kate Sebelius coming from Frank Carlson's office, Senator 
Frank Carlson, and we left north and headed for Colby on his 
big first listening tour, and 52 counties--and now, as you 
know, it is 69 or 72, or whatever it is. But it is certainly a 
big area. We ran into a blizzard. We were counting telephone 
poles to try to stay out of the ditch. Had we headed east, it 
would not have been so bad. We could have come to P'burg and 
gone to that cafe? sitting on the corner and just had a cup of 
coffee with you and Huck Boyd and solved the world's problems.
    But at any rate, I feel a certain identity with you in 
regards to how you started off. You have obviously found the 
right balance between crop production, ethanol, and distillers 
grain, and your livestock operation. How did you find the 
balance? How did you do that? Is it just by experience and 
trying it out? I mean, you know, how did you come to that? What 
can you share from your experience as a crop farmer and a 
livestock operator and an investor?
    Mr. Greving. I think it probably started 20-some years ago. 
We have a nutritionist that develops our rations, feed rations 
for our livestock. I think this was back in 1989, and he told 
us about dried distillers grain. At that time there were very 
few ethanol plants--there were none in Kansas, or maybe one. We 
hauled dried distillers grain 100 miles out of the Hasting 
ethanol plant. It did not take us long to find that this dried 
distillers product was a real benefit in our feeding rations.
    At this time we were not finishing our cattle. This was 
prior to my son graduating from Fort Hays and coming back to 
the farm in 1993. When he came back, we were looking for ways 
to expand our farming operation without taking on a lot of 
debt. We felt that finishing our cattle to slaughter weight was 
one way we could generate extra income.
    About the time we did this, U.S. Premium Beef program came 
along. We were an initial investor in U.S. premium beef. This 
has been a hugely successful program for our operation. So when 
you combine that with the fact that when the ethanol plant came 
in, we could see we could hold wet distillers grain, which is 
much improved over dried distillers grain in a feedlot ration. 
We could haul it out of our plant 15 miles away, and as I said 
in my testimony, we could gain 30 cents in the price of our 
grain.
    All of these things just kind of fit together, and we have 
been doing this now for the last 7, 8 years, and it has been 
very good for our operation.
    Senator Roberts. How can you share that experience with 
others? Or are others just sort of taking note of what you have 
done? I think that is a splendid story of being an 
entrepreneur, if I can apply that word to a farmer stockman. 
But at any rate, your experience, I think, you know, gives us 
hope in regards to--well, basically to make sure your son 
continues to have a successful farming operation. I thank you 
so much for coming.
    Let me ask Mr. Edwards: Virent, how many Federal Government 
departments or agencies did actually provide assistance? You 
mentioned a bunch.
    Mr. Edwards. Three, primarily. USDA, Department of Energy, 
and Department of Commerce have been the three primary funders.
    Senator Roberts. Now, were the processes different 
depending on which Department? Did you stay on the same trail, 
or did one of those departments sort of force you off your 
basic course? Or were they coordinated?
    Mr. Edwards. Different timelines, and, you know, I should 
also say we also received a grant from the Department of 
Defense through the Navy.
    As the technology emerged, we kind of discovered new 
opportunities and new uses for what the core catalytic 
conversion technology could provide. So starting out looking at 
hydrogen for fuel cells, the company then merged into liquid 
fuels and now into biochemicals as kind of our key success 
factors. So what we found important was that the nature of 
these grants gave us funding to help leverage our private 
sector dollars for research we wanted to do anyway, and it 
allowed us to do it faster with more focus to help broaden the 
feedstocks that are potentially available for us to convert and 
also broaden the products that we were making for customers.
    Senator Roberts. Mr. Hutchins, my first question is: How is 
your son doing in his baseball? Is he a pitcher or second base 
or what?
    Mr. Hutchins. Basically shortstop or wherever I decide he 
needs to play.
    [Laughter.]
    Senator Roberts. All right.
    Mr. Hutchins. Thank you.
    Senator Roberts. I have looked at the map, and the 
participation in regards to REAP is concentrated in the 
Midwest. But your testimony said that you have hippety-hopped 
all around the country sort of like a circle around where there 
is the most participation. Are people familiar with REAP, or is 
that part of your work basically simply presenting the 
information? Is it word of mouth or, you know, how do we get 
this word out?
    Mr. Hutchins. I think the first few years it was a lot of 
word of mouth, but primarily the way we promoted it was working 
with ag commodity groups, whether it be poultry associations, 
catfish growers, Farm Bureau, groups like that to get the 
information out, and their producer-grower meetings, and also 
working directly with the companies, the integrator companies, 
as far as the poultry producers.
    Senator Roberts. Well, I thank you all for your testimony. 
I see I am over time by a minute, and we have stretched on and 
on. Thank you for your patience. Thank you for contributing.
    Madam Chairman, I have no more questions.
    Chairwoman Stabenow. Thank you very much. This is a very, 
very interesting panel, and we look forward to working with you 
on the issues that you have raised.
    We would indicate for all of the members that additional 
questions for the record should be submitted to the Committee 
clerk 5 business days from today. That is 5 o'clock on 
Wednesday, February 22nd. We look forward to working with you. 
Thank you again, and the meeting is adjourned.
    [Whereupon, at 1:08 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                           FEBRUARY 15, 2012




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                   DOCUMENTS SUBMITTED FOR THE RECORD

                           FEBRUARY 15, 2012



      
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                         QUESTIONS AND ANSWERS

                           FEBRUARY 15, 2012



      
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