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+<html>
+<title> - [H.A.S.C. No. 111-1]COMMITTEE ORGANIZATION</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+                          [H.A.S.C. No. 111-1]
+                         COMMITTEE ORGANIZATION
+                               __________
+                      COMMITTEE ON ARMED SERVICES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED ELEVENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                            JANUARY 14, 2009
+[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
+                   HOUSE COMMITTEE ON ARMED SERVICES
+                   U.S. GOVERNMENT PRINTING OFFICE
+46-617 PDF                  WASHINGTON : 2009
+----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free(866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC,
+Washington, DC 20402-0001
+                     One Hundred Eleventh Congress
+                    IKE SKELTON, Missouri, Chairman
+JOHN SPRATT, South Carolina          JOHN M. McHUGH, New York
+SOLOMON P. ORTIZ, Texas              ROSCOE G. BARTLETT, Maryland
+GENE TAYLOR, Mississippi             HOWARD P. ``BUCK'' McKEON,
+NEIL ABERCROMBIE, Hawaii                 California
+SILVESTRE REYES, Texas               MAC THORNBERRY, Texas
+VIC SNYDER, Arkansas                 WALTER B. JONES, North Carolina
+ADAM SMITH, Washington               W. TODD AKIN, Missouri
+LORETTA SANCHEZ, California          J. RANDY FORBES, Virginia
+MIKE McINTYRE, North Carolina        JEFF MILLER, Florida
+ELLEN O. TAUSCHER, California        JOE WILSON, South Carolina
+ROBERT A. BRADY, Pennsylvania        FRANK A. LoBIONDO, New Jersey
+ROBERT ANDREWS, New Jersey           ROB BISHOP, Utah
+SUSAN A. DAVIS, California           MICHAEL TURNER, Ohio
+JAMES R. LANGEVIN, Rhode Island      JOHN KLINE, Minnesota
+RICK LARSEN, Washington              MIKE ROGERS, Alabama
+JIM COOPER, Tennessee                TRENT FRANKS, Arizona
+JIM MARSHALL, Georgia                BILL SHUSTER, Pennsylvania
+MADELEINE Z. BORDALLO, Guam          CATHY McMORRIS RODGERS, Washington
+DAN BOREN, Oklahoma                  K. MICHAEL CONAWAY, Texas
+BRAD ELLSWORTH, Indiana              DOUG LAMBORN, Colorado
+PATRICK J. MURPHY, Pennsylvania      ROB WITTMAN, Virginia
+HANK JOHNSON, Georgia                MARY FALLIN, Oklahoma
+CAROL SHEA-PORTER, New Hampshire     DUNCAN HUNTER, California
+JOE COURTNEY, Connecticut            JOHN C. FLEMING, Louisiana
+DAVID LOEBSACK, Iowa                 MIKE COFFMAN, Colorado
+KIRSTEN E. GILLIBRAND, New York      THOMAS J. ROONEY, Florida
+JOE SESTAK, Pennsylvania
+GABRIELLE GIFFORDS, Arizona
+NIKI TSONGAS, Massachusetts
+GLENN NYE, Virginia
+CHELLIE PINGREE, Maine
+LARRY KISSELL, North Carolina
+MARTIN HEINRICH, New Mexico
+FRANK M. KRATOVIL, Jr., Maryland
+ERIC J.J. MASSA, New York
+BOBBY BRIGHT, Alabama
+                    Erin C. Conaton, Staff Director
+           Joseph Hicken, Director of Legislative Operations
+                         COMMITTEE ORGANIZATION
+                              ----------
+                          House of Representatives,
+                               Committee on Armed Services,
+                       Washington, DC, Wednesday, January 14, 2009.
+    The committee met, pursuant to call, at 10:00 a.m., in room
+2118, Rayburn House Office Building, Hon. Ike Skelton (chairman
+of the committee) presiding.
+    The Chairman. The committee will come to order.
+    This is our organizational meeting for our members. The
+senior members, the previous members of earlier sessions, know
+that we start on time, and if you don't come on time, you will
+find yourself at the bottom of the totem pole when it comes to
+the questions to ask the witnesses.
+    We will do our best to live by the five-minute rule so
+everybody has an opportunity to ask questions. We ask that you
+be here on time and that we conduct our official business as
+rapidly as possible.
+    Thank you for being with us today. We have four items of
+official business to consider: the adoption of the committee
+rules; the approval of the committee's oversight plan; the
+approval of the committee's protocol for the handling of
+classified material; and last, but highly important, is the
+appointment of our fantastic committee staff.
+    We have 12 new members joining, 1 returning member. Ranking
+Member McHugh and I will welcome each of you individually a bit
+later. But let me begin by complimenting our Republican
+Conference for choosing such an excellent Ranking Member as
+John McHugh. I am absolutely thrilled. John has been an
+outstanding advocate on behalf of his constituents, the Army at
+Fort Drum, and the entire United States military for nearly two
+decades, and, beyond that, John has been a great friend. I look
+forward to our partnership in leading this committee and
+continuing its excellent bipartisan tradition that we have. I
+ask all of you to officially welcome and congratulate John
+McHugh.
+    [Applause.]
+    The Chairman. John, we will call on you just a bit later.
+Thank you.
+    Our committee continues to be in strong demand among new
+members. When I first came a good number of years ago, there
+were a good number of temporary members that had to be talked
+into taking a slot on this committee to fill it out. That is
+not the case today; it is in high demand. It is not only
+because of the enormous national security challenges, but due
+to the excellent work that we have accomplished in recent
+years.
+    We have continued to pass important, substantive, annual
+defense authorization bills--that is our job--even when many
+questioned the fact that it couldn't be done. I know we will
+continue the tradition of consistent, high-quality legislation
+with a bipartisan commitment.
+    One of our tasks here today is, adopt our oversight plan
+for the next two years. There is a plaque in front that states
+what our job is. It quotes the Constitution, Article I, Section
+8, ``The Congress shall have the power to raise and support
+armies . . . to provide and maintain a navy . . . and to make
+rules for the government and regulation for the land and naval
+forces.''
+    We do that. We changed the culture, for instance, under the
+rules and regulations part of that constitutional provision
+back when we passed the, now well-known, Goldwater-Nichols
+jointness legislation, which, by the way, took us a little over
+four years to get done.
+    With a new Administration taking office, we remain engaged
+in two wars. Afghanistan clearly needs additional resources and
+a new strategic approach. We must ensure we eliminate the
+threat to the American homeland from the Afghan-Pakistan
+border. We must do what we can, carefully and responsibly, in
+drawing down forces in Iraq. At the same time, we must guard
+against future threats to this Nation by developing a solid
+national security system and a security strategy providing for
+the strength and readiness for our military and resetting its
+equipment and training capabilities. We must maintain the
+vitality of the all-volunteer force and ensure that we retain
+high-quality troops and their families. We must do all of this,
+and many other things, at a time when our Nation faces severe
+economic constraints. None of this, ladies and gentlemen, will
+be easy, but we are going to have to pull together to make it
+happen.
+    I truly hope--and I speak to our new members especially--I
+hope you enjoy the experience of this committee. I think it is
+the best committee in the House of Representatives. National
+security is of the highest importance. Be an active member. I
+want you to do more than just attend the hearings, though I
+want you to attend the hearings. Do your homework. Study for
+the upcoming hearing. Be ready to ask questions. Attend the
+subcommittee hearings. Educate yourself with readings and
+briefings, visits to military installations, whether they be
+domestic or abroad.
+    I found that we have at our fingertips, literally, the
+opportunity to have briefings on any subject we wish from our
+excellent staff. I have been the recipient of many staff
+briefings. The Library of Congress, CRS, Congressional Research
+Service, are tickled to death to give you a briefing on any
+subject. Give them a few days' notice, and they will come over
+and do it. The military itself will give you briefings. The
+Central Intelligence Agency (CIA) gives briefings--the State
+Department. It is up to us to educate ourselves, to continually
+do that as a never-ending process.
+    I cannot say enough about our excellent staff. In a few
+moments, we will be officially hiring and rehiring them. I
+think they are the best in the House of Representatives, just
+real professionals.
+    Visit with our troops overseas when you can. They like to
+see you. They like to tell you what they are doing and why they
+think it is important as to why they are there.
+    Last, share your thoughts with your subcommittee chairmen,
+with your ranking members, and be as active as you possibly
+can. I know how my history professors and my law school
+professors felt when they addressed their students, because I
+think they had the attitude that this is the only course you
+are taking. I know you have other subcommittees, but I expect
+you to do your homework for this committee, and I guess my
+syndrome is like the professor that says, ``You don't have
+anything else to worry about except this committee.''
+    Well, thank you for being with us, and we look forward to
+working with you. On top of it, you will find through the years
+that you will make close friendships on both sides of the aisle
+in this committee, and, as a result, it makes your work all the
+more enjoyable and easy.
+    Let me introduce the members that we have. I will ask John
+McHugh to follow me with his opening remarks and introduction
+of others, if I may. But let me start with a member, and here
+he is, a member who is no stranger to our committee, Jim
+Langevin. We welcome him back from his leave of absence from
+our committee. Jim served on our committee during the 107th
+through the 109th Congresses and for a couple of months during
+the 110th, and we are thrilled to have him back.
+    Jim, welcome back. You are official now.
+    [Applause.]
+    The Chairman. Glenn Nye, representing the Second District
+of Virginia. Glenn, raise your hand.
+    Glenn represents one of the largest military populations in
+our country. His district includes numerous military
+installations, the world's largest naval station in Norfolk.
+Glenn is a former Foreign Service officer, who served in
+Kosovo, served in the West Bank, Afghanistan, most recently in
+Iraq.
+    Glenn, we are certainly pleased to have you with us, and we
+welcome you.
+    [Applause.]
+    The Chairman. From the First District of Maine, Chellie
+Pingree. Chellie's district is home to the Naval Air Station at
+Brunswick, the Portsmouth Naval Shipyard. Chellie previously
+served as the senate majority leader in the Maine Senate,
+representing her island community of North Haven, Maine.
+    We are delighted, Chellie, to have you, and welcome you to
+our committee.
+    Chellie, raise your hand.
+    [Applause.]
+    The Chairman. Larry Kissell from the Eighth District of
+North Carolina. Larry's district includes part of Fort Bragg,
+home to the 18th Airborne, 82nd Airborne Division, Army Special
+Operations Command, and, of course, the Golden Knights, which
+we all know. Larry was a high school social studies teacher
+before joining us. We welcome him.
+    Larry, raise your hand so we can see you.
+    [Applause.]
+    The Chairman. This next gentleman got his start in the
+Fourth Congressional District of Missouri, so a special welcome
+to him. Martin Heinrich represents the First District of New
+Mexico. It has a sizable defense industry, including Kirtland
+Air Force Base, as well as the Department of Energy's Sandia
+National Laboratory. Prior to winning his congressional race,
+Martin served as the president of the Albuquerque City Council
+and, most important, born in Cole Camp, Missouri, in my
+district.
+    Raise your hand.
+    [Applause.]
+    The Chairman. If you think he has a Missouri drawl, it is
+real.
+    Frank Kratovil. Did I pronounce it correctly Frank? Frank
+comes from the First District in Maryland, a district home to a
+significant military and civilian population who work at nearby
+military installations, including the Aberdeen Proving Grounds,
+Fort Meade, Wallops Island and, of course, the Naval Academy.
+Frank previously served six years as the state's attorney of
+Queen Anne's County on Maryland's Eastern Shore.
+    Frank, would you raise your hand?
+    We welcome you, sir.
+    [Applause.]
+    The Chairman. From the 29th District of New York, Eric J.J.
+Massa. Some of us know Eric from his service as a staffer on
+our committee here. Eric is also a retired Navy commander and a
+former staffer to retired General Wes Clark. He brings a long
+resume in military policy; the Foreign Affairs Committee.
+    Officially, Eric, we welcome you back. Raise your hand.
+    [Applause.]
+    The Chairman. Finally, from the great State of Alabama let
+me introduce Bobby Bright from the Second District of Alabama,
+the home of Fort Rucker, Maxwell-Gunter Air Force Base. Bobby
+is the former mayor of Montgomery, Alabama, for nine years. We
+are very excited to have a good Alabama friend with us.
+    Bobby Bright, raise your hand. Welcome.
+    [Applause.]
+    The Chairman. We hope you enjoy your experience and plan on
+working hard. We are fortunate to have such talented folks join
+our committee.
+    Now, let me recognize my friend, the gentleman from New
+York, for remarks and his introductions.
+    Mr. McHugh. Thank you very much, Mr. Chairman.
+    Just a couple of observations. It is amazing to me; I moved
+about, what, four and one half feet to the right, two chairs,
+and from over here there are so many more of you than there was
+just a couple of months ago. I am surprised by that
+perspective.
+    Let me join you, Mr. Chairman, in welcoming your new
+members. Let me say at the outset, I couldn't agree more with
+the Chairman of this distinguished committee. I share the view
+you are serving on the most important, the most bipartisan, and
+the most relevant committee in the House of Representatives,
+indeed, in the United States Congress. I salute you for having
+the wisdom, the intelligence, and the ability to be placed on
+it.
+    I would also say just as observation, I hope by the time I
+leave this Congress, I have as many reunion tours as Jim
+Langevin. He rivals the Rolling Stones in entrances and exits.
+But I am absolutely thrilled that Jim is back with us. He and I
+served on the House Permanent Select Committee on Intelligence
+(HPSCI) together.
+    Jim, it is great to see you here again. Thanks so much.
+    Mr. Chairman, I am going to start off my staff with the
+high blood pressure rate they have to get used to, and that is
+to ask you to submit my opening remarks in their entirety.
+    [The prepared statement of Mr. McHugh can be found in the
+Appendix on page 81.]
+    Let me make a few comments off-the-cuff, if I may. First of
+all, Mr. Chairman, thank you so much for your gracious
+comments. There is any number of reasons I am honored by this
+opportunity, the first of which, of course, is the faith and
+trust that my Conference, the Steering Committee and, most of
+all, the members on our side of the aisle have placed in me.
+But not far behind is the fact that I now have the opportunity
+to work with the gentleman in whom I have such great respect
+and admiration and affection.
+    One of the first trips I ever took as a Member of the
+United States House of Representatives, more particularly a
+House Armed Services Committee (HASC) member, was with Ike
+Skelton. He is a gentleman, he is a leader, he is an intellect.
+I pledge to you, Mr. Chairman, we are going to stand with you
+in the greatest traditions of this committee where we are
+provided the opportunity to work together hand in hand to
+advance the interests of the absolutely tremendous men and
+women in uniform who serve this Nation, who serve the interest
+of freedom, liberty, and democracy across this globe. I am
+looking forward to that, Ike, and I feel blessed for that
+chance, although I will look to you for leadership and
+guidance.
+    I would also say I was surprised to find under the dais
+here this morning a pile of very large and empty shoes. They
+represent the folks who have taken the position that I now have
+the high honor to hold on our side of the aisle; people like
+Duncan Hunter, our former full committee chairman, our most
+recent ranking member. People like Jim Saxton and folks who,
+frankly, I felt I would be still sitting on the left and
+learning from, who have done such a great job.
+    I pledge to my members particularly, but to the full
+committee, I will do everything I can not to fill those shoes,
+that is beyond my capabilities, but rather to try to uphold the
+traditions of caring, concern, and high regard that they
+brought to this committee room and to the responsibilities they
+held each and every day.
+    Mr. Chairman, as to our new members, you had a great draft
+class. We are all involved in sports right now. You have got
+National Football League (NFL) playoffs and basketball, and et
+cetera, et cetera. But I think we had a pretty good draft
+class, as well. I hope you will join me in welcoming our five
+new members.
+    First of all, Representative Mary Fallin. Mary is no
+stranger to this House. She was elected in 2006 from the Fifth
+District of Oklahoma. Prior to being elected to Congress, Mary
+held numerous elected offices in Oklahoma, including two terms
+as state representative, and certainly worth noting, she was
+the first woman and the first Republican Lieutenant Governor
+for Oklahoma, elected in 1995.
+    I can tell you, no one on this committee worked harder,
+made more phone calls to me, and made a better argument than
+Mary in coming here, and her sole motivation was to try to
+advance the position, the welfare, and the interests of men and
+women in uniform. As well, of course, her presence on this
+committee will allow her to work with Congressman Boren to
+represent the significant military interests in Oklahoma,
+including Fort Sill, Vance Air Force Base, and Tinker Air Force
+Base, and we are just thrilled Mary is here with us this
+morning.
+    [Applause.]
+    Mr. McHugh. I should say, Mr. Chairman, that these are
+seated in order of rank. Seniority has nothing to do with age,
+has nothing to do with experience.
+    Next in line, Representative Duncan Hunter. You may have
+heard that name. You may not recognize the package. But much
+more handsome, much more attractive than the other Duncan
+Hunter, and we are hoping he will be just as effective. He
+doesn't need much more of an introduction than that.
+    Duncan was elected, ``Little Dunc,'' to California's 52nd
+Congressional District, the district that his dad held for so
+many years in such distinction, last November. Following
+September 11th, like thousands upon thousands of other young
+Americans, Duncan volunteered to join the United States Marine
+Corps and has since served three combat tours; two in Iraq with
+the 1st Marine Division, and one in Afghanistan. We are looking
+forward to Duncan living up to that family name.
+    Duncan, welcome to you, sir.
+    [Applause.]
+    Mr. McHugh. Representative Mike Coffman was elected, as all
+our freshman class was, in 2008 to represent the fine and
+distinguished people of Colorado's Sixth District. As a former
+soldier and Marine, Mike served in the Gulf Wars as an infantry
+officer in Operation Iraqi Freedom, where he worked with the
+Independent Electoral Commission of Iraq on two national
+elections, among other duties.
+    It is worth noting that Mike took a leave of absence from
+his elected positions in Colorado when he twice volunteered to
+serve his country in combat. We are so proud to have a warrior
+like Mike with us.
+    Welcome, sir, to this committee.
+    [Applause.]
+    Mr. McHugh. Representative Tom Rooney, representing
+Florida's 16th Congressional District. Tom served in the United
+States Army Judge Advocate General (JAG) Corps, including a
+stint as a special assistant U.S. attorney at Fort Hood, and
+taught constitutional and criminal law at the United States
+Military Academy at West Point. I would be remiss if I didn't
+congratulate Tom, who holds a master's degree from the
+University of Florida, for that great institution's second
+national football championship in three years. We expect Tom to
+be a champion as well.
+    Tom, thanks much for joining us.
+    [Applause.]
+    Mr. McHugh. I jumped Mr. Fleming. Why did I do that? I have
+no idea, other than I missed it. Representative John Fleming
+was elected in November to represent Louisiana's Fourth
+Congressional District, the home of Fort Polk and Barksdale Air
+Force Base. John is a family physician and served as a medical
+officer in the United States Navy. As someone who most
+immediately comes from the Personnel Subcommittee, I can tell
+you we not only look forward to, but need his contributions to
+the committee, especially as we grapple with the increasing
+costs of providing our military men and women and their
+families with world-class health care.
+    John, welcome. I apologize. It won't happen again.
+    [Applause.]
+    Mr. McHugh. Mr. Chairman, I would now yield back to you,
+and I thank you for your courtesy.
+    The Chairman. Thank you very much, John, for your comments,
+and we are off to a great start. The longest distance in the
+world is the distance between the front row and the top row. I
+remember so well when I sat on the front row.
+    I must tell you an experience I had when I was a freshman
+on this committee when I joined it in late 1980. The Army came
+to me and asked me to offer a noncontroversial amendment at the
+time of a markup for a three million dollar United States Army
+Museum here in Washington, D.C. ``Yeah, be glad to do it.
+Noncontroversial.'' So, the markup came, the time came. In the
+military construction portion I offered my amendment for the
+noncontroversial United States Army Museum. Every member,
+Democrat and Republican, on the top row, took off on this
+amendment, telling me what a horrible, and telling the whole
+audience what a horrible idea this was. I got three votes from
+my committee.
+    Mr. McHugh. I was one.
+    The Chairman. That's fantastic!
+    Mr. McHugh. I was proud to go down in flames with you.
+    The Chairman. Isn't that wonderful? So we hope that----
+    [Laughter.]
+    Mr. Spratt. Ike, tell them about the time you proposed
+admirals be called commodores before they advanced to the rank
+of admiral.
+    The Chairman. John, thank you.
+    [Laughter.]
+    The Chairman. You will learn that if you really work on a
+narrow subject, you will own it. And no one is going to try and
+take it away from you.
+    We passed the Defense Officer Personnel Management Act
+(DOPMA) legislation that created a one-star rank in the United
+States military. They called it ``commodore admiral.'' But it
+didn't go into effect for a year. And knowing a little bit of
+naval history, I offered an amendment, got it through, to
+change the rank from commodore admiral to commodore. It stuck
+for three years. And those who were most upset about it were
+the spouses of those who became commodores, because they had
+stuck it out with their Navy spouse, and they thought they were
+going to be admirals, and all of a sudden this guy Skelton
+makes commodores out of them. After three years of being
+badgered by commodores and admirals and the Secretary of the
+Navy, I relented, and it is now ``rear admiral (lower half).''
+You have to have a little fun along the way. So if you pick up
+a subject like that, sail on and go get it.
+    [Laughter.]
+    The Chairman. Enough of our stories. John, it is great to
+have you.
+    Before you is a copy of the Committee Resolution No. 1
+concerning the Committee Rules for the 111th Congress. The
+rules package was coordinated with Mr. McHugh and subsequently
+provided to all members on Monday, the 12th. Most of the
+changes in the rules are intended to either make our committee
+practice and rules to be consistent, or they are intended to
+conform to the Rules of the House. There are also a handful of
+miscellaneous and technical changes.
+    [The following information was submitted for the record.]
+    [GRAPHIC] [TIFF OMITTED] 46617.001
+    [GRAPHIC] [TIFF OMITTED] 46617.002
+    [GRAPHIC] [TIFF OMITTED] 46617.003
+    [GRAPHIC] [TIFF OMITTED] 46617.004
+    [GRAPHIC] [TIFF OMITTED] 46617.005
+    [GRAPHIC] [TIFF OMITTED] 46617.006
+    [GRAPHIC] [TIFF OMITTED] 46617.007
+    [GRAPHIC] [TIFF OMITTED] 46617.008
+    [GRAPHIC] [TIFF OMITTED] 46617.009
+    [GRAPHIC] [TIFF OMITTED] 46617.010
+    [GRAPHIC] [TIFF OMITTED] 46617.011
+    [GRAPHIC] [TIFF OMITTED] 46617.012
+    [GRAPHIC] [TIFF OMITTED] 46617.013
+    The Chairman. At this time I ask our Staff Director, Erin
+Conaton, to summarize in 25 words or less the key differences
+between the Rules of the last Congress and those set before you
+in Resolution No. 1.
+    Ms. Conaton. Thank you, Mr. Chairman. I will be very brief.
+And if people have questions, we can certainly entertain these
+from the witness table.
+    As the Chairman indicated, the changes from the 110th
+Congress Rules are very minimal. They are done in order to
+conform the Committee Rules either with longtime committee
+practice or with the Rules of the House. There are a couple of
+small changes to the jurisdictions listed in rule 4, basically
+to acknowledge the fact that the full committee for some time
+now has been working on security assistance in the form of
+authorities like 1206, 1207, things you have come to know over
+time. So we have explicitly put that in the Rules. Also,
+interagency reform, to the extent that it relates to the
+Department of Defense's role in that interagency reform. We
+have also acknowledged explicitly that the Readiness
+Subcommittee has been working on energy policy issues,
+particularly in the last Congress and going forward in the
+111th.
+    In terms of conforming the Committee Rules to our actual
+practice, the Rules reflect an ability for members who do not
+serve on a particular subcommittee to attend a subcommittee
+meeting and to ask questions, not to vote on markups, but to
+take part in hearings, which we have done for some time. It
+also allows the Chairman, with the Ranking Member, to recommend
+guidelines for how suspension bills are reported for
+consideration on the House floor. It also conforms our Rules
+with House Rules that says that the Chairman or a majority of
+the committee members can convene a committee meeting to
+consider a measure. The previous committee rule permitted the
+Chairman or a majority of members present and voting. It is a
+small change just to conform with House Rules.
+    It also explicitly acknowledges that Mr. Skelton and Mr.
+McHugh, as Chairman and Ranking Member, will hold ex officio
+status on all subcommittees of the committee, and allows the
+Chairman, in consultation with Mr. McHugh, to lay out
+guidelines for proprietary information that may come into the
+committee's possession.
+    Other than small technical changes, those are the main
+items in the Committee Rules. I don't know if I got under 25
+words, but I tried.
+    The Chairman. You are close.
+    Any discussion?
+    Any amendments?
+    If there are no amendments, the Chair recognizes the
+gentleman from South Carolina, Mr. Spratt, for the purpose of
+offering a motion regarding Resolution No. 1.
+    Mr. Spratt. Mr. Chairman, I move to adopt Committee
+Resolution No. 1 concerning the Committee Rules for the 111th
+Congress.
+    The Chairman. The question occurs on the motion of the
+gentleman from South Carolina, Mr. Spratt. So many as in favor,
+say aye.
+    Opposed, no.
+    The ayes have it. Committee Resolution No. 1 is agreed to,
+and, without objection, a motion to reconsider is laid upon the
+table.
+    Of course, without objection, committee staff is authorized
+to make technical and conforming changes to reflect the actions
+of this committee.
+    The next order of business, adoption of the committee's
+oversight plan. House Rules require all House committees to
+adopt an oversight plan no later than February 15. Members have
+before them a copy of the proposed oversight plan for the 111th
+Congress. As was the case with the Rules package, the oversight
+plan was provided to all members on the 12th of January. It
+includes the broad range of issues that the committee will be
+considering, and has been developed in consultation with our
+anticipated subcommittee chairs, as well as coordinated with
+Mr. McHugh and his staff.
+    [The following information was submitted for the record.]
+    [GRAPHIC] [TIFF OMITTED] 46617.014
+    [GRAPHIC] [TIFF OMITTED] 46617.015
+    [GRAPHIC] [TIFF OMITTED] 46617.016
+    [GRAPHIC] [TIFF OMITTED] 46617.017
+    [GRAPHIC] [TIFF OMITTED] 46617.018
+    [GRAPHIC] [TIFF OMITTED] 46617.019
+    [GRAPHIC] [TIFF OMITTED] 46617.020
+    [GRAPHIC] [TIFF OMITTED] 46617.021
+    [GRAPHIC] [TIFF OMITTED] 46617.022
+    [GRAPHIC] [TIFF OMITTED] 46617.023
+    [GRAPHIC] [TIFF OMITTED] 46617.024
+    [GRAPHIC] [TIFF OMITTED] 46617.025
+    [GRAPHIC] [TIFF OMITTED] 46617.026
+    [GRAPHIC] [TIFF OMITTED] 46617.027
+    [GRAPHIC] [TIFF OMITTED] 46617.028
+    [GRAPHIC] [TIFF OMITTED] 46617.029
+    [GRAPHIC] [TIFF OMITTED] 46617.030
+    [GRAPHIC] [TIFF OMITTED] 46617.031
+    [GRAPHIC] [TIFF OMITTED] 46617.032
+    [GRAPHIC] [TIFF OMITTED] 46617.033
+    [GRAPHIC] [TIFF OMITTED] 46617.034
+    [GRAPHIC] [TIFF OMITTED] 46617.035
+    [GRAPHIC] [TIFF OMITTED] 46617.036
+    [GRAPHIC] [TIFF OMITTED] 46617.037
+    [GRAPHIC] [TIFF OMITTED] 46617.038
+    [GRAPHIC] [TIFF OMITTED] 46617.039
+    [GRAPHIC] [TIFF OMITTED] 46617.040
+    [GRAPHIC] [TIFF OMITTED] 46617.041
+    [GRAPHIC] [TIFF OMITTED] 46617.042
+    [GRAPHIC] [TIFF OMITTED] 46617.043
+    [GRAPHIC] [TIFF OMITTED] 46617.044
+    [GRAPHIC] [TIFF OMITTED] 46617.045
+    [GRAPHIC] [TIFF OMITTED] 46617.046
+    [GRAPHIC] [TIFF OMITTED] 46617.047
+    [GRAPHIC] [TIFF OMITTED] 46617.048
+    [GRAPHIC] [TIFF OMITTED] 46617.049
+    [GRAPHIC] [TIFF OMITTED] 46617.050
+    [GRAPHIC] [TIFF OMITTED] 46617.051
+    [GRAPHIC] [TIFF OMITTED] 46617.052
+    The Chairman. Any discussion thereon?
+    Mr. McHugh. Mr. Chairman.
+    Thank you, Mr. Chairman. Very briefly, and it is in my
+formal statement, so it will be entered into the record, I want
+to say, to begin stating the obvious, we have a constitutional
+duty to carefully scrutinize the Department of Defense, the
+armed services, in all areas that are relevant to their
+operations. I think this oversight plan does it.
+    To those who may not have bothered to, or have had the
+opportunity to look at the oversight plan before, there are
+some areas in the oversight plan that may cause some concern;
+things about ``Don't Ask, Don't Tell,'' and the piracy threat,
+et cetera, et cetera. It is our absolute responsibility to look
+at these areas, and I trust you will agree with me, Mr.
+Chairman, that the oversight plan has no presuppositions as to
+outcomes, as to final determinations.
+    I just want to put that on the record for those who suggest
+that by merely looking at controversial issues, we are adopting
+controversial issues. We are not. It is this committee's
+responsibility to look at all issues, controversial and
+otherwise.
+    I commend, as you did, Mr. Chairman, I would be remiss if I
+didn't add my words of absolute admiration to this staff, this
+fine conglomeration of professional individuals who come to
+work each day and try to do the best they can, and the best
+they can do is absolutely amazing, on behalf of this committee
+but, more importantly, the men and women in uniform of the
+United States military.
+    With that, I yield back.
+    The Chairman. Excellent. Thank you so much.
+    Mr. Abercrombie. Mr. Chairman.
+    The Chairman. Yes, Mr. Abercrombie.
+    Mr. Abercrombie. Mr. Chairman, just a comment on the
+question here about--not a question rather, but especially
+because we have so many new members, I think it is important in
+an atmosphere in which the fundamental requirement and
+obligation of Members of Congress, particularly when it comes
+to providing for the military, seems to be at question with
+regard to what is commonly known as earmarks. If you read
+carefully through the oversight plan here, I think you will see
+that this committee has a special responsibility to translate
+or transpose its oversight obligations into making specific
+recommendations, hopefully in concert with the Appropriations
+Committee, to make certain that we don't leave the defense of
+this country exclusively to political appointees of an
+executive, regardless of party.
+    I think, Mr. Chairman, that it needs to be said with some
+emphasis that the defense of this country, particularly when it
+comes to readiness issues, as manifest in base construction,
+technology, et cetera, acquisition systems, defense systems and
+platforms of all kinds, the defense of this Nation originates
+with this committee. The membership here, I think, should not
+be intimidated in the least by those who purport to speak on
+behalf of the Nation's interests by trying to minimize not only
+the input, but the sovereignty of this committee with respect
+to making those recommendations to the Congress as a whole and
+to the Nation.
+    The Chairman. Thank you very much for your comments, Mr.
+Abercrombie.
+    Any further discussion on the oversight plan?
+    Any amendments to the oversight plan?
+    If not, the gentleman from South Carolina is recognized for
+the purpose of offering a motion.
+    Mr. Spratt. Mr. Chairman, I move to adopt Committee
+Resolution No. 2 concerning the committee's oversight plan for
+the 111th Congress.
+    The Chairman. The question now occurs on the motion of the
+gentleman from South Carolina, Mr. Spratt. So many as in favor,
+say aye.
+    Opposed, no.
+    The ayes have it, and Committee Resolution No. 2 is agreed
+to. Without objection, a motion to reconsider is laid upon the
+table. Of course, without objection, the committee staff is
+authorized to make technical and conforming changes.
+    The next order of business is the adoption of the
+committee's security procedures. Members should have before
+them a copy of the proposed security procedures. A copy was
+delivered to them on Monday, January 12th.
+    [The following information was submitted for the record.]
+    [GRAPHIC] [TIFF OMITTED] 46617.053
+    [GRAPHIC] [TIFF OMITTED] 46617.054
+    [GRAPHIC] [TIFF OMITTED] 46617.055
+    [GRAPHIC] [TIFF OMITTED] 46617.056
+    [GRAPHIC] [TIFF OMITTED] 46617.057
+    [GRAPHIC] [TIFF OMITTED] 46617.058
+    [GRAPHIC] [TIFF OMITTED] 46617.059
+    [GRAPHIC] [TIFF OMITTED] 46617.060
+    [GRAPHIC] [TIFF OMITTED] 46617.061
+    The Chairman. At this time is there any discussion on the
+security procedures?
+    Any amendments to the security procedure proposal?
+    If not, I recognize Mr. Spratt from South Carolina.
+    Mr. Spratt. Mr. Chairman, I move to adopt the Committee
+Resolution No. 3 concerning the committee's security plans for
+the 111th Congress.
+    The Chairman. Thank you.
+    The question now occurs on the motion of the gentleman from
+South Carolina, Mr. Spratt. Those in favor, say aye.
+    Opposed, no.
+    The ayes have it. Committee Resolution No. 3 is agreed to.
+Without objection, a motion to reconsider is laid upon the
+table. Of course, without objection, committee staff is
+authorized to make technical and conforming changes.
+    The final item of business for today is the committee's
+staffing resolution. Members should have before them Resolution
+No. 4, which is a resolution appointing the committee staff for
+this Congress, as well as a copy of the list of committee
+staff. Note that the list of committee staff before you differs
+slightly from the list distributed Monday. We corrected an
+administrative error which omitted one staffer.
+    [The following information was submitted for the record.]
+    [GRAPHIC] [TIFF OMITTED] 46617.062
+    [GRAPHIC] [TIFF OMITTED] 46617.063
+    The Chairman. As many of you know, our committee is unique
+in that its staff is integrated without distinction between
+Majority and Minority staffs. They are here to provide advice
+and counsel to each one of us, Democrats, Republicans. Feel
+free to avail yourself of their services. They are an
+absolutely talented group of folks. They are all professionals.
+We hope you use them to their fullest.
+    At this time is there any discussion of the resolution
+regarding the staff members?
+    Mr. Spratt. Mr. Chairman, I move to adopt Committee
+Resolution No. 4 concerning committee staffing for the 111th
+Congress.
+    The Chairman. The question now occurs on the motion of the
+gentleman from South Carolina, Mr. Spratt. So many as in favor,
+say aye.
+    Opposed, no.
+    The ayes have it. The Committee Resolution No. 4 is agreed
+to. Without objection, a motion to reconsider is laid upon the
+table. Without objection, committee staff is authorized to make
+technical and conforming changes.
+    Let me raise a few administrative matters very quickly. As
+returning members--and I mentioned this earlier--as returning
+members know, we have a five-minute rule. That doesn't mean 5
+minutes and 30 seconds, it means 5 minutes. I remember very
+well when I came and I was sitting on the front row, we had a
+member on the top row that would ask a question; one time I
+counted 22 questions that he asked in his 5 minutes. Of course,
+the witnesses went on and on and on. That is not a good idea.
+    One or two well-thought-out questions will usually get the
+job done. We will have second rounds. But we want to do our
+best so that the very last person sitting on the front row will
+have the opportunity to ask questions. So we need everyone's
+cooperation to do that.
+    The Majority members will meet today in 2212 at 2:00 p.m.
+to select subcommittee assignments. Be there. If you really,
+really can't be there, send a letter with a staffer. But I
+strongly suggest you be there if at all possible.
+    Minority members will hold subcommittee selections
+tomorrow, as I understand it, John, at 11:00 a.m. Let me say
+the same to my Minority friends. Be there. You hate to be left
+somewhere out in the cold and your only excuse is, ``I just
+didn't make it to the meeting.''
+    Mr. McHugh. Mr. Chairman, if I may? We also have a dry run-
+through tonight at 5:00 p.m. We Republicans need to do things a
+couple of times.
+    [Laughter.]
+    The Chairman. We are going to get it right the first time.
+    [Laughter.]
+    Thank you, John.
+    Let me recognize Mr. McHugh for any closing comments you
+might have.
+    Mr. McHugh. Mr. Chairman, I don't have any prepared
+remarks, but let me just, with my Irish optimism, say I hope
+our future meetings are as accommodating as this meeting has
+been. This is my 17th year on this committee, and the only
+reason I raise that is I truly recall from the first moment
+when I was way down there, as you recall you were, Mr.
+Chairman, this has been an amazing opportunity and an amazing
+responsibility.
+    I pledge to you, on behalf of all of our members, we will
+do everything we can to continue the tradition of this great
+committee, and that is working to provide to those brave men
+and women in uniform who go out every day to defend our freedom
+and freedom across the planet, everything they need. And you
+are a leader in that effort, Mr. Chairman, and I am honored and
+looking forward to the opportunity to working with you.
+    The Chairman. John, thank you very much. We certainly look
+forward to working with you and all members of this committee.
+This is a great committee, and we have great challenges ahead
+of us.
+    Let me close, if I may. We are getting ready for an
+inauguration, and I remember so well, my father in January 1949
+brought me to Washington, D.C., I was a senior in high school,
+to witness the inauguration of his friend from Independence,
+just 30 miles up the road from my home of Lexington, a fellow
+by the name of Truman. Of course, there are a lot of Truman
+quotes that have been passed down through the years, but I
+remember one very well that he liked to tell about the grave
+marker at Tombstone, Arizona, that says, ``Here lies Jack
+Williams. He done his damnedest.'' I hope at the end of this
+year and the end of next year they can say that about our
+committee, that we have done our damnedest.
+    So thanks so much. God bless. The committee is adjourned.
+    [Whereupon, at 10:44 a.m., the committee was adjourned.]
+=======================================================================
+                            A P P E N D I X
+                            January 14, 2009
+=======================================================================
+    [GRAPHIC] [TIFF OMITTED] 46617.064
+    [GRAPHIC] [TIFF OMITTED] 46617.065
+    [GRAPHIC] [TIFF OMITTED] 46617.066
+    [GRAPHIC] [TIFF OMITTED] 46617.067
+    [GRAPHIC] [TIFF OMITTED] 46617.068
+                                  <all>
+</pre></body></html>

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+<html>
+<title> - ORGANIZATIONAL MEETING</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+                         ORGANIZATIONAL MEETING
+=======================================================================
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED ELEVENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              MEETING HELD
+                      WEDNESDAY, JANUARY 28, 2009
+                               __________
+                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
+            Small Business Committee Document Number 111-002
+Available via the GPO Website: http://www.access.gpo.gov/congress/house
+                     U.S. GOVERNMENT PRINTING OFFICE
+46-818 PDF                 WASHINGTON DC:  2009
+---------------------------------------------------------------------
+For Sale by the Superintendent of Documents, U.S. Government Printing Office
+Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
+Fax: (202) 512�092104 Mail: Stop IDCC, Washington, DC 20402�090001
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                NYDIA M. VELAZQUEZ, New York, Chairwoman
+                          DENNIS MOORE, Kansas
+                      HEATH SHULER, North Carolina
+                     KATHY DAHLKEMPER, Pennsylvania
+                         KURT SCHRADER, Oregon
+                        ANN KIRKPATRICK, Arizona
+                          GLENN NYE, Virginia
+                         MICHAEL MICHAUD, Maine
+                         MELISSA BEAN, Illinois
+                         DAN LIPINSKI, Illinois
+                      JASON ALTMIRE, Pennsylvania
+                        YVETTE CLARKE, New York
+                        BRAD ELLSWORTH, Indiana
+                        JOE SESTAK, Pennsylvania
+                         BOBBY BRIGHT, Alabama
+                        PARKER GRIFFITH, Alabama
+                      DEBORAH HALVORSON, Illinois
+                  SAM GRAVES, Missouri, Ranking Member
+                      ROSCOE G. BARTLETT, Maryland
+                         W. TODD AKIN, Missouri
+                            STEVE KING, Iowa
+                     LYNN A. WESTMORELAND, Georgia
+                          LOUIE GOHMERT, Texas
+                         MARY FALLIN, Oklahoma
+                         VERN BUCHANAN, Florida
+                      BLAINE LUETKEMEYER, Missouri
+                         AARON SCHOCK, Illinois
+                      GLENN THOMPSON, Pennsylvania
+                         MIKE COFFMAN, Colorado
+                  Michael Day, Majority Staff Director
+                 Adam Minehardt, Deputy Staff Director
+                      Tim Slattery, Chief Counsel
+                  Karen Haas, Minority Staff Director
+                                 ______
+                                  (ii)
+?
+                            C O N T E N T S
+                              ----------
+                           OPENING STATEMENTS
+                                                                   Page
+Velazquez, Hon. Nydia M..........................................     1
+Graves, Hon. Sam.................................................     2
+                                APPENDIX
+Documents for the Record:
+Rules and Procedures Adopted by the Committee on Small Business,
+  U.S. House of Representatives, 111th Congress, 2009-2010.......     7
+Oversight Plan of the Committee On Small Business for the One
+  Hundred Eleventh Congress......................................    19
+                                 (iii)
+                         ORGANIZATIONAL MEETING
+                              ----------
+                      WEDNESDAY, JANUARY 28, 2009
+                     U.S. House of Representatives,
+                               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 1:07 p.m., in Room
+2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
+[Chair of the Committee] Presiding.
+    Present: Representatives Velazquez, Moore, Shuler,
+Dahlkemper, Schrader, Kirkpatrick, Nye, Michaud, Bean,
+Lipinski, Altmire, Sestak, Bright, Griffith, Halvorson, Graves,
+Bartlett, Akin, Buchanan, Luetkemeyer, Schock, Thompson and
+Coffman.
+    Chairwoman Velazquez. I call the Small Business Committee
+organizational meeting to order.
+    I want to first welcome all returning and new members, and
+I want to also recognize Ranking Member Graves in his new role
+with the committee. We all look forward to working with you.
+    Let me take this opportunity to introduce the members on my
+side.
+    We have Kathy Dahlkemper from Pennsylvania. Ms. Kathy
+Dahlkemper is serving her first time, representing
+Pennsylvania's 3rd District. She is the new Chair of the
+Subcommittee on Regulations and Health Care. After facing
+challenges running her own small business, she is committed to
+creating policy that provides a positive environment for job
+retention and growth.
+    Kurt Schrader, Oregon 5. Mr. Kurt Schrader is serving his
+first term as a representative of Oregon's 5th District. He has
+been a public servant to the citizens of Oregon for over 35
+years. He will Chair the Subcommittee on Finance and Tax during
+this Congress.
+    Mr. Heath Shuler, an old member returning, represents the
+11th District of North Carolina. He will Chair the Subcommittee
+on Rural Development, Entrepreneurship and Trade in the 111th
+Congress. In the last Congress, Mr. Shuler was the sponsor of
+the Small Energy Efficient Business Act, which was signed into
+law.
+    Mrs. Ann Kirkpatrick, Arizona 1st. Mrs. Ann Kirkpatrick is
+serving her first term representing Arizona's 1st District. She
+served in the House of Representatives of Arizona prior to
+coming to Congress. She was her county's first female Deputy
+Attorney and went on to serve as District Attorney for the City
+of Sedona.
+    Michael Michaud, Maine's 2nd District. He is currently
+serving his fourth term representing the people of the 2nd
+District of Maine in Congress. He has been active on the
+committee since coming to Congress and is also a leader on
+veterans' issues. He also has continued to be a vocal voice on
+behalf of economic development programs since coming to
+Congress.
+    Mr. Jason Altmire, Pennsylvania's 4th District; he will
+continue to Chair the Subcommittee on Investigation and
+Oversight. He was the lead sponsor of the Small Business
+Investment Expansion Act of 2007, which updates the SBA's
+investment programs and encourages more venture capital
+opportunities for small businesses. Prior to coming to
+Congress, he worked as a hospital executive.
+    Mr. Joe Sestak, Pennsylvania's 7th District. He was elected
+in 2006. He will continue to serve as the Vice Chair of the
+Small Business Committee in the new Congress. He was lead
+sponsor on the SBA Entrepreneurial Development Programs Act of
+2007, which provides technical assistance for entrepreneurs.
+Prior to coming to Congress, he served in the Navy as a Vice
+Admiral.
+    Mrs. Deborah Halvorson, Illinois' 11th. She is serving her
+first term representing the constituents of the 11th District
+of Illinois. She served as the first female State senate
+majority leader in Illinois' history. She has been an advocate
+to promote local businesses around the globe.
+    Mr. Glenn Nye, Virginia's 2nd. Mr. Nye is serving his first
+term representing Virginia's 2nd District. He was previously a
+Foreign Service Officer for the U.S. State Department, where he
+served in Eastern Europe and received the Superior Honor Award.
+As a freshman, he has been named Chair of the Subcommittee on
+Contracting and Technology.
+    Mr. Bobby Bright, Alabama's 2nd. He is serving his first
+term representing Alabama's 2nd District. Prior to coming to
+Congress, he was the Mayor of Montgomery, Alabama. As Mayor,
+Mr. Bright was able to lift Montgomery from 70th to 30th in a
+ranking of cities experiencing business success.
+    The Honorable Parker Griffith, Alabama's 5th, serving his
+first term. He is a retired oncologist, as well as a
+businessman and teacher. While serving in the Alabama State
+senate, he championed legislation promoting research in
+biofuels and advancing health care.
+    And now I yield to Mr. Graves for him to introduce his
+members.
+    Mr. Graves. Thank you, Madam Chair; and I look forward to
+our working relationship in the committee.
+    We have three new members on our side. First of all, I
+would like to introduce Representative Blaine Luetkemeyer, who
+is a fellow Missourian. He worked as a banker and an insurance
+agent prior to coming to Congress. Representative Aaron Schock
+from Illinois, who had a career in real estate management and
+served in the Illinois General Assembly. And Representative
+Glenn Thompson of Pennsylvania, who was a health care executive
+before coming to Congress.
+    Also, I welcome back our returning members: Roscoe Bartlett
+from Maryland; Todd Akin, another fellow Missourian; Steve King
+of Iowa; Lynn Westmoreland of Georgia; Louie Gohmert of Texas;
+Mary Fallin of Oklahoma; and Vern Buchanan of Florida. They
+bring a lot of collective experience.
+    I think if you just look at the experience level on the
+entire committee, I think we are going to have a real good
+committee and a lot of broad ideas and bring in a lot of good
+experience here. So thank you.
+    Chairwoman Velazquez. My colleagues, our Nation's small
+businesses are facing difficulties on numerous fronts; and it
+is important to address these issues in a constructive and
+inclusive manner. My beliefs have always been that there is not
+a Republican or a Democratic approach to small business issues.
+That is why I have made it a priority for this committee to
+work in a bipartisan fashion. During the last 2 years, we did
+just that; and nearly every legislative and oversight matter
+was approached in this way. All members, regardless of party
+affiliation, bring worthy ideas to the table; and this
+committee will continue to be an open forum. With the adoption
+of today's rules package and oversight plan, I believe we are
+making it clear to the small business community that we are
+committed to working together and advocating on their behalf.
+    Last Congress, this committee was one of the busiest on all
+of Capitol Hill; and we passed a record number of bills and
+also a record number of bills for minority members as well.
+This year, with the economic challenges facing small
+businesses, we expect to be even busier. I look forward to the
+discussions and debates that I know will transpire over the
+next 2 years.
+    At this point, I now yield to Ranking Member, Mr. Graves,
+for his opening statement.
+    Mr. Graves. Thank you, Madam Chair.
+    As we begin, I do want to say I look forward to continuing
+the tradition of bipartisanship that the Small Business
+Committee has had, particularly on behalf of our Nation's
+entrepreneurs; and I would echo all of your statements. Small
+businesses employ over half of America's workers and create 7
+of 10 jobs in this country. Small firms represent approximately
+99 percent of all the firms in the nation and make up 45
+percent of the Nation's private-sector payroll. They produce 50
+percent of our private and nonfarm gross domestic product.
+    It is clear that small businesses are the key to economic
+recovery, and we have to ensure that small businesses remain
+healthy so they can reinvigorate our economy. Policies that
+create tax incentives, spur investment and create jobs will
+jump-start small businesses and get our economy moving again.
+    I look forward to working with you, Madam Chair, and the
+members of the committee on both sides of the aisle over the
+next 2 years on these issues that are so important and so
+critical to our recovery.
+    Chairwoman Velazquez. I also would like to recognize Ms.
+Melissa Bean from Illinois who has joined the committee.
+    Today's first order of business is to adopt the committee
+rules. The adoption of the rules is central to the work we do
+and the tone we set in this body. Perhaps most importantly,
+they must ensure that all points of view are considered and
+that the minority retains their full rights to be heard. In
+this context, the rules adopted at the beginning of the 110th
+Congress were a critical departure from the past. This included
+providing the minority with proportional representation among
+witnesses and allocating the ranking member with full control
+over budget and travel decisions. This makes our committee's
+rule among the most equitable in Congress.
+    This year, we are making two substantive changes to improve
+the committee's structure and transparency. The first change is
+to vest each subcommittee with a specific legislative
+jurisdiction. This is important, given the amount of work
+before us and will help allocate our committee's resources and
+members' time more efficiently.
+    The second change we are making is to post the committee's
+votes within 48 hours after they were taken. We are not aware
+of any difficulties regarding our votes, and they are all
+available in the committee reports filed with the bills.
+However, I am glad to accept this change because it is
+important to Ranking Member Graves; and it starts the new year
+off in a bipartisan spirit.
+    This committee needs to run in a cooperative matter, and I
+believe the best way to do this is to make sure both sides have
+an equal voice and are treated in a way that is fair. Through
+adoption of these rules, we will continue this practice.
+    At this point, I would like to yield to Ranking Member
+Graves for any comments he may have on the rules.
+    Mr. Graves. Thank you, Madam Chair; And I want to thank you
+and your staff. Your staff, I know, put a lot of work into this
+and worked collaboratively with our staff.
+    This package does provide continued protection for the
+rights of the minority and the opportunity for the minority's
+input in the operation of the committee. I want to highlight
+four of those rules.
+    First, the rules provide the subcommittee with its
+legislative jurisdiction so that, for the first time, they will
+have the ability to mark up legislation. This means that the
+minority will have increased opportunities to consult with the
+majority about the overall tone and specific provisions of
+legislative initiatives. This is a very important development
+for the committee.
+    Second, the chairwoman has also allowed the minority to
+continue to call up to one-third of the nongovernment witnesses
+testifying at the committee hearing. This is going to enhance
+the dialogue presented by the committee with greater diversity
+on opinion as we consider policies to grow America's small
+businesses.
+    Third, except in unusual circumstances, the rules provide
+that subpoenas may not be issued unilaterally. Any subpoena
+issued by the chairwoman generally will require a majority vote
+of the committee. This ensures that the minority will continue
+to be consulted on this very important congressional oversight
+function.
+    And, fourth, the minority is going to continue to have
+control over one-third of the committee's budget. I thank you
+for that. That shows a lot about how you are going to run the
+committee. This rule goes a long way towards maintaining that
+collegial tone of the committee.
+    As a final thought, and the chairwoman pointed it out, I
+want to thank you for graciously accepting our recommendations
+from the minority; and, again, I appreciate you and your
+staff's hard work on this package.
+    I yield back.
+    Chairwoman Velazquez. Thank you.
+    Are there any members that wish to be recognized on the
+rules?
+    If no other members wish to be recognized, I will yield to
+the Vice Chair, Mr. Sestak, for a motion.
+    Mr. Sestak. I say that we adopt the rules for the 111th
+Congress.
+    Chairwoman Velazquez. Does anyone second the motion?
+    The question is on the adoption of the rules. All those in
+favor, say aye. All those opposed, say no.
+    In the opinion of the Chair, the ayes have it. The rules
+for the Small Business Committee in the United States House of
+Representatives for the 111th Congress are hereby adopted.
+    Today's second order of business is to consider the
+committee's oversight plan. This represents our agenda for the
+next 2 years both in terms of oversight and also in terms of
+actions that we will take. I want to thank Ranking Member
+Graves for his input in constructing this plan and for helping
+improve this plan in such key areas such as transportation,
+broadband employment and the economy stimulus.
+    The oversight plan provides small businesses and this
+committee's members and staff with a policy framework to work
+within. Ideally, we have incorporated all matters that could
+arise in the next 2 years. But, as history has shown us, this
+is nearly impossible, especially without a magical crystal
+ball.
+    The oversight plan prioritizes several items for the
+committee's attention. It includes oversight of Federal actions
+taken in response to the financial crisis. In addition, the
+committee will examine tax proposals, rising health care costs
+and burdensome regulations.
+    This plan will provide members with a sense of our
+legislative agenda, including reauthorizing the Small Business
+Administration. I will note that the House fully passed this
+last year, but the other body did not act on it. Through the
+adoption of this plan, we are establishing a framework on how
+we intend to proceed to meet the needs of small businesses.
+    I look forward to working with each of you as we begin the
+new Congress.
+    At this point, I would like to yield to Ranking Member
+Graves for any comments he may have on the oversight plan.
+    Mr. Graves. Thank you, Madam Chair.
+    Congressional oversight is vitally important to ensure that
+the functions of government are being properly administered and
+managed. With a growing deficit as well as increasingly complex
+and costly government programs, it is critical to keep a
+watchful eye on expenditures' efficiency and effectiveness.
+    This committee has oversight authority over the programs
+and policies of the Small Business Administration, as well as
+issues of importance to America's small businesses like taxes,
+health care, government regulation, energy and access to
+credit.
+    Madam Chair, I look forward to working with you over the
+next 2 years to see that the provisions in this oversight plan
+are carried out through the appropriate hearings, studies,
+legislation and correspondence; and I want to thank your for
+incorporating our suggestions into the oversight plan. And my
+favorite part about the chairwoman is she is direct, quick, to
+the point and we get this done quickly; and I appreciate that.
+    Chairwoman Velazquez. At this point, I would like to--
+    Are there any other members that wish to be recognized on
+the oversight plan?
+    If no other members wish to be recognized, I yield to the
+Vice Chair, Mr. Sestak, for a motion.
+    Mr. Sestak. Madam Chair, I move that we adopt the plans of
+the 111th Congress.
+    Chairwoman Velazquez. Does anyone second the motion?
+    Ms. Bean. I second it.
+    Chairwoman Velazquez. The question is on the adoption of
+the oversight plan. All those in favor, say aye. All those
+opposed, say no.
+    In the opinion of the Chair, the ayes have it. The
+oversight plan for the Small Business Committee in the United
+States House of Representatives for the 111th Congress is
+hereby adopted.
+    With that, the Small Business Committee organizational
+meeting is concluded; and the committee is now adjourned.
+    But before we adjourn, I just would like to recognize Mr.
+Dennis Moore from Kansas, who has joined us, and Dan Lipinski
+from Illinois.
+    Any other new member here, Mr. Graves?
+    Mr. Graves. I actually introduced them.
+    Chairwoman Velazquez. Okay. Very good.
+    Well, the committee is now adjourned. Thank you.
+    [Whereupon, at 1:23 p.m., the committee was adjourned.]
+    [GRAPHIC] [TIFF OMITTED] T6818.001
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+                                 <all>
+</pre></body></html>

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+<html>
+<title> - FULL COMMITTEE HEARING ON: THE STATE OF SBA'S ENTREPRENEURIAL DEVELOPMENT PROGRAMS AND THEIR ROLE IN PROMOTING AN ECONOMIC RECOVERY</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+                       FULL COMMITTEE HEARING ON
+                THE STATE OF THE SBA'S ENTREPRENEURIAL
+                DEVELOPMENT PROGRAMS AND THEIR ROLE
+                   IN PROMOTING AN ECONOMIC RECOVERY
+=======================================================================
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED ELEVENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                           FEBRUARY 11, 2009
+                               __________
+                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 111-005
+Available via the GPO Website: http://www.access.gpo.gov/congress/house
+                                 ------
+                   U.S. GOVERNMENT PRINTING OFFICE
+47-055 PDF                  WASHINGTON : 2009
+----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2205  Mail: Stop SSOP,
+Washington, DC 20402-0001
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                NYDIA M. VELAZQUEZ, New York, Chairwoman
+                          DENNIS MOORE, Kansas
+                      HEATH SHULER, North Carolina
+                     KATHY DAHLKEMPER, Pennsylvania
+                         KURT SCHRADER, Oregon
+                        ANN KIRKPATRICK, Arizona
+                          GLENN NYE, Virginia
+                         MICHAEL MICHAUD, Maine
+                         MELISSA BEAN, Illinois
+                         DAN LIPINSKI, Illinois
+                      JASON ALTMIRE, Pennsylvania
+                        YVETTE CLARKE, New York
+                        BRAD ELLSWORTH, Indiana
+                        JOE SESTAK, Pennsylvania
+                         BOBBY BRIGHT, Alabama
+                        PARKER GRIFFITH, Alabama
+                      DEBORAH HALVORSON, Illinois
+                  SAM GRAVES, Missouri, Ranking Member
+                      ROSCOE G. BARTLETT, Maryland
+                         W. TODD AKIN, Missouri
+                            STEVE KING, Iowa
+                     LYNN A. WESTMORELAND, Georgia
+                          LOUIE GOHMERT, Texas
+                         MARY FALLIN, Oklahoma
+                         VERN BUCHANAN, Florida
+                      BLAINE LUETKEMEYER, Missouri
+                         AARON SCHOCK, Illinois
+                      GLENN THOMPSON, Pennsylvania
+                         MIKE COFFMAN, Colorado
+                  Michael Day, Majority Staff Director
+                 Adam Minehardt, Deputy Staff Director
+                      Tim Slattery, Chief Counsel
+                  Karen Haas, Minority Staff Director
+        .........................................................
+                                  (ii)
+                         STANDING SUBCOMMITTEES
+                                 ______
+               Subcommittee on Contracting and Technology
+                     GLENN NYE, Virginia, Chairman
+YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
+BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
+KURT SCHRADER, Oregon                TODD AKIN, Missouri
+DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
+MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
+JOE SESTAK, Pennsylvania
+PARKER GRIFFITH, Alabama
+                                 ______
+                    Subcommittee on Finance and Tax
+                    KURT SCHRADER, Oregon, Chairman
+DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
+ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
+MELISSA BEAN, Illinois               TODD AKIN, Missouri
+JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
+DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
+GLENN NYE, Virginia
+MICHAEL MICHAUD, Maine
+                                 ______
+              Subcommittee on Investigations and Oversight
+                 JASON ALTMIRE, Pennsylvania, Chairman
+HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
+BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
+PARKER GRIFFITH, Alabama
+                                 (iii)
+               Subcommittee on Regulations and Healthcare
+               KATHY DAHLKEMPER, Pennsylvania, Chairwoman
+DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia,
+PARKER GRIFFITH, Alabama             Ranking
+MELISSA BEAN, Illinois               STEVE KING, Iowa
+JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
+JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
+BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado
+                                 ______
+     Subcommittee on Rural Development, Entrepreneurship and Trade
+                  HEATH SHULER, Pennsylvania, Chairman
+MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri,
+BOBBY BRIGHT, Alabama                Ranking
+KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
+ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
+YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania
+                                  (iv)
+                            C O N T E N T S
+                              ----------
+                           OPENING STATEMENTS
+                                                                   Page
+Velazquez, Hon. Nydia M..........................................     1
+Graves, Hon. Sam.................................................     2
+                               WITNESSES
+Dorfman, Ms. Margot, CEO, U.S. Women's Chamber Of Commerce.......     3
+Wolfe, Mr. Chuck, President, Claggett Wolfe Associates, Auburn,
+  CA.............................................................     5
+Cartwright, Mr. Jerry, State Director, Florida SBDC, University
+  Of West Florida, Pensacola, FL.................................     7
+Gregg, Ms. Carol A., President & Owner, Flexible Staffing,
+  Chillicothe, MO................................................     9
+Wrigley, Ms. Barbara, Executive Director, Association Of Women's
+  Business Centers, Springfield, VA..............................    11
+Blackburn, Mr. Ron , President, Aspira...........................    13
+                                APPENDIX
+Prepared Statements:
+Dorfman, Ms. Margot, CEO, U.S. Women's Chamber Of Commerce.......    24
+Wolfe, Mr. Chuck, President, Claggett Wolfe Associates, Auburn,
+  CA.............................................................    29
+Cartwright, Mr. Jerry, State Director, Florida SBDC, University
+  Of West Florida, Pensacola, FL.................................    34
+Gregg, Ms. Carol A., President & Owner, Flexible Staffing,
+  Chillicothe, MO................................................    41
+Wrigley, Ms. Barbara, Executive Director, Association Of Women's
+  Business Centers, Springfield, VA..............................    44
+Blackburn, Mr. Ron , President, Aspira...........................    50
+                                  (v)
+                       FULL COMMITTEE HEARING ON:
+                   THE STATE OF SBA'S ENTREPRENEURIAL
+                          DEVELOPMENT PROGRAMS
+                      AND THEIR ROLE IN PROMOTING
+                          AN ECONOMIC RECOVERY
+                              ----------
+                      Wednesday, February 11, 2009
+                     U.S. House of Representatives,
+                               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 1:00 p.m., in Room
+2360, Rayburn House Office Building, Hon. Nydia Velazquez
+[chairman of the Committee] presiding.
+    Present: Representatives Velazquez, Dahlkemper, Schrader,
+Ellsworth, Sestak, Bright, Halvorson, Graves, Buchanan,
+Luetkemeyer, and Coffman.
+    Chairwoman Velazquez. I call this hearing of the House
+Small Business Committee to order.
+    Even during times of prosperity, starting and running a
+small business is an enormous undertaking. From drafting their
+first business plan to learning how to navigate the Tax Code,
+entrepreneurs are on a perpetual learning curve. Historically,
+SBA has helped simplify the process through its entrepreneurial
+development programs, or ED. Today those initiatives have the
+potential to play an even more critical role by encouraging
+small business growth and creating new jobs for American
+workers.
+    Much of the debate surrounding the new stimulus hinges on
+the importance of creating jobs. Once enacted, the bill will
+help entrepreneurs do exactly that. But even after restoring
+stability, challenges will remain. With a renewed emphasis on
+SBA's entrepreneurial development programs, small firms will be
+able to take full advantage of the Recovery Act.
+    In today's hearing, we will explore the role that these
+programs play in advancing economic recovery. Entrepreneurial
+development is critical to small business success. In fact,
+firms that receive this kind of assistance are twice as likely
+to succeed as those that don't. From executive mentoring to
+veterans' business initiatives, they help new and experienced
+entrepreneurs gain access to the tools they need to flourish.
+But perhaps, most importantly, this program fosters job
+creation and economic growth. That is exactly what we need
+today--job creation--so that we can get this economy growing
+again.
+    Following the recession of the mid-1990s, small firms
+created 3.8 million new jobs. Not surprisingly, that era was
+marked by an enormous uptake in entrepreneurship. In fact, 25
+percent of laid-off managers over the age of 40 went on to
+start their own small businesses. Fortunately, there is no
+shortage of that same entrepreneurial spirit today. Each month,
+400,000 new companies crop up across the country. That is
+400,000 entrepreneurs looking to create new industry here in
+the United States.
+    Imagine if each and every one of those businesses had
+advisors to help them draft viable business plans. That is the
+kind of guidance that small firms could really use, and that is
+the kind of support that entrepreneurial development programs
+provide.
+    The challenges facing small firms are different today than
+they were in the past. In order for entrepreneurs to have the
+same catalyzing effect they had in the 1990s, they will need
+all the tools available. This is particularly true for
+businesses in low income communities. Those are the areas that
+have been hardest hit by the recession and are most in need of
+economic development.
+    ED programs provide small firms with the resources they
+need to expand. Just last year, entrepreneurial development
+helped generate 73,000 new jobs and drove $7.2 billion into the
+economy.
+    Through programs like Mentorship and Distance Learning, SBA
+has helped countless small firms get off the ground. At the
+same time, it has counseled thousands of experienced
+entrepreneurs looking to expand. And at the end of the day,
+every one dollar spent on these programs puts another $2.87
+back into the economy. That is a 287 percent return on
+investment--doing much better than Wall Street, believe me.
+    [Laughter]
+    And just the kind of economic stimulus we need right now.
+    It is no secret that times are tough. In January alone,
+600,000 Americans were laid off. That figure tops off the 3.6
+million positions shed since the recession began. The writing
+is on the wall. We need to stop the losses, and we need to
+replace the jobs that are already gone.
+    While there is no silver bullet solution to our economic
+troubles, small businesses promise the surest path to recovery.
+Entrepreneurial development programs can help jumpstart that
+recovery.
+    So let me take this opportunity to thank all of the
+witnesses for taking time, especially now when small businesses
+need you to be out there providing the technical assistance and
+the kind of business planning guidance that they need, to be
+with us to offer your insights as to how these programs are
+doing and what type--given the times that we are in, what type
+of changes or modifications we need to make to get these
+programs to be more effective, cost effective, and efficient.
+    So I look forward to hearing from you today, and now I
+yield to the Ranking Member, Mr. Graves, for his opening
+statement.
+    Mr. Graves. Thank you, Madam Chair, and thank you for
+holding this hearing examining the SBA's entrepreneurial
+development programs and the challenges that entrepreneurs face
+in this volatile economic climate. And I, too, would like to
+thank all the witnesses for being here. I know some of you
+traveled a long way. We do appreciate your input and appreciate
+your being here today.
+    I think everyone can agree that a good business plan is the
+cornerstone of any successful small business. Creating and
+executing a business plan requires extensive business knowledge
+and ingenuity, including the ability to predict potential
+obstacles to success that may unfold at just about any time.
+    The entrepreneurial development programs of the Small
+Business Administration provide new and existing entrepreneurs
+with solid business knowledge to provide continued guidance to
+aid their growth. Entrepreneurial development programs have
+become a critical tool for many small businesses across
+America. Whether it is helping a small business owner export a
+product, develop a marketing scheme, or obtain financing, that
+entrepreneur is almost always more successful after working
+with a small business development center, SCORE, or a women's
+business center.
+    Today's current economic climate provides an even more
+difficult path to success than it has before. Small businesses
+are finding it increasingly difficult to meet their bottom
+line, much less become a thriving business. Creative methods
+are being employed by entrepreneurs throughout the country as
+they try to figure out for themselves how to survive in this
+new economic climate.
+    As small businesses work to survive, the entrepreneurial
+development programs of the SBA need to be reassessed in order
+to ensure that they are providing the most effective assistance
+to small businesses. As we begin to look at the current state
+of the SBA's entrepreneurial development programs, I believe it
+is important to retool programs to meet the demands of today's
+environment. We also must examine the entrepreneurial programs
+outside the SBA and look for ways to consolidate efforts in
+order to provide the best service for all small business
+owners.
+    Again, I want to thank the Chairwoman for having this
+hearing today, and look forward to hearing what our witnesses
+have to say.
+    Chairwoman Velazquez. Thank you, Mr. Graves.
+    And now it is my pleasure to welcome back Ms. Margot
+Dorfman. She is the CEO and founder of U.S. Women's Chamber of
+Commerce. Ms. Dorfman has championed opportunities to increase
+women's business growth, career, and leadership advancement.
+She is here to testify on behalf of the U.S. Women's Chamber of
+Commerce, which was founded in 2001 to increase economic growth
+opportunities for women.
+    Welcome.
+                  STATEMENT OF MARGOT DORFMAN
+    Ms. Dorfman. Thank you. Chairwoman Velazquez, Ranking
+Member Graves, members of the Committee, I thank you once again
+for this opportunity.
+    I am here today on behalf of the U.S. Women's Chamber of
+Commerce, representing over 500,000 members and the millions of
+small businesses who are in need of assistance as they seek to
+grow profitable businesses to provide income for themselves,
+their families, and their communities. America needs
+entrepreneurial development programs that match our challenging
+economic times. We cannot afford to simply rubber-stamp
+existing programs and add increases to an old budget.
+    We are in a fragile economic crossroad that demands our
+government focus every taxpayer dollar towards productivity and
+assisting that entrepreneurs receive quality expedient
+education and financial assistance. Over the last 50 years, the
+SBA entrepreneurial development system has grown into a
+fragmented array of programs, which has resulted in a
+disorganized overlapping and efficient delivery of service
+through a system that is ill-prepared to effectively address
+the challenges of our economy.
+    Looking to the past, the evidence of failure is profound.
+During the last decade, the most impressive new spirit of
+entrepreneurship came from our new minority and women
+entrepreneurs. But while the number of new minority and women-
+owned firms grew dramatically, the average revenues generated
+by these firms actually declined.
+    Even though the number of women-owned firms grew 42.3
+percent between 1997 and 2006, their combined annual sales grew
+only by 4.4 percent. The average annual sales for a women-owned
+firm dropped 36 percent.
+    Minority business owners have seen the same lackluster
+results. Over the last decade, the number of minority-owned
+firms increased 35 percent, but their gross receipts only
+increased 13 percent. The average annual sales for a minority-
+owned firm dropped 16 percent.
+    Another disturbing statistic should be noted. While
+entrepreneurship has long been considered a pathway to
+increased wealth in America, the marked decline in the
+fulfillment of this promise has shown in the period of 1984 and
+2004. A 2007 SBA report finds that families owning businesses
+are significantly less likely to be high-income earners in 2004
+than in 1989.
+    The collapse of the U.S. manufacturing base, Katrina, and
+9/11 have shown us that our entrepreneurial needs are
+experiencing regional shifts, and tragedy can strike at an
+instant, creating the need for urgent responses. For the first
+time, women now exceed men in the labor force, because many of
+the manufacturing and higher paying jobs have vanished. Many
+men may now turn to entrepreneurship to help feed their
+businesses and small families.
+    If we are to serve the needs of American entrepreneurs, we
+must commit to a top to bottom restructuring of the delivery of
+the entrepreneurial services of the SBA. The myriad of
+entrepreneurial development programs should be unified into one
+centrally managed organization that has the flexibility to
+provide services when and where they are needed.
+    With one unified system, the SBA can provide a much
+stronger, coordinated response than the current patchwork
+system. One example is the Women's Business Center Program. It
+is clear women business owners are among those emerging market
+businesses that have not been well served, and it is paramount
+that these firms work side by side with male business owners
+for a number of important reasons.
+    Studies have shown that there are real differences in the
+backgrounds and resources available to male business owners.
+Male business owners have a greater history of entrepreneurial
+experience than women, better business networks, and greater
+access to capital. These are attributes to which women should
+be exposed instead of segregated.
+    The SBDC network should be used as the foundation for a new
+unified delivery platform that includes women and minority
+entrepreneurs, along with broad community accountability for
+the effectiveness of their outreach and delivery of value. This
+network should be transformed into a broad-based system of
+flexible entrepreneurial centers, which include consistent
+quality education, counseling, incubators, and access to
+capital, and the implementation of a top-tier e-learning
+system.
+    And Congress should define an external process to measure
+the results of SBA entrepreneurial programs, looking at both
+micro and macro views. It is vitally important for Congress to
+act now to unify, streamline, modernize, and right-size the SBA
+entrepreneurial development programs.
+    Thank you.
+    [The prepared statement of Ms. Dorfman is included in the
+appendix at page 24.]
+    Chairwoman Velazquez. Thank you.
+    Our next witness is Mr. Chuck Wolfe. Mr. Wolfe is the
+President of Claggett Wolfe Associates in Auburn, California.
+Mr. Wolfe founded two technology startups and has worked with
+numerous small businesses in planning, marketing, and capital
+acquisition. Claggett Wolfe Associates provides management and
+economic development consulting to small and medium-sized
+businesses, academic institutions, and domestic and foreign
+public officials.
+    Welcome, and you will have five minutes.
+                    STATEMENT OF CHUCK WOLFE
+    Mr. Wolfe. Thank you, Madam Chairwoman, and honored members
+of the Small Business Committee. As you said, my name is Chuck
+Wolfe, and I am the President of Claggett Wolfe Associates, an
+economic development consulting firm specializing in working
+with public, private, and academic clients around the world to
+basically develop strategies and programs to support small and
+medium enterprise development. I am also a serial entrepreneur
+and have started and operated five businesses over the last 25
+years.
+    To put things in context, my perspective comes from having
+worked with or evaluated 30 SBDCs and SCORE chapters in 14
+states over the last 18 years, also serving as a small business
+counselor and instructor, running a nonprofit business
+assistance organization, and co- authoring a book on best
+practices in business incubation.
+    As to the state of SBA's entrepreneurial development
+programs, I see that the SBA has a wide range of existing
+programs and resources to assist small businesses. If someone
+from the outside were to review each program's mission,
+objectives, and offerings, they would conclude that this is an
+ideal setup for helping our entrepreneurs and small business
+owners.
+    Unfortunately, only 20 to 25 percent of the programs I have
+encountered meet this standard. In addition, I have found
+valuable information and online courses on program-affiliated
+websites. However, most are inconsistent in their offering,
+general in their content, and difficult to navigate. In general
+terms, we have found that the SBA's entrepreneurial development
+programs have a top- down, one-size-fits-all approach that is
+reactive versus proactive.
+    In addition, most programs are not fully integrated into
+the broader economic development efforts or customized to meet
+the needs of specific industry segments. There are many causes
+for these conditions, ranging from lack of funding, the methods
+used to allocate funding and track performance, the inefficient
+use of resources, and the organizational structure of SBA
+itself.
+    But what I wanted to talk about was the role, as I see it,
+for the SBA entrepreneurial development programs in promoting
+an economic recovery. There are many areas that need
+improvement, but there are also many tools already in the
+toolbox. To maximize the impact of SBA's programs, I would
+recommend the following actions.
+    First, align the programs more effectively with local,
+regional, and state economic development efforts in the
+industries they have targeted for economic stabilization and
+growth. Second, establish a more proactive program delivery
+structure involving client filtering, customization of service
+offerings and defined milestones, and active outreach by
+program staff who serve more as facilitators and coaches rather
+than as technical service providers.
+    Third, build an extensive topic and industry-specific
+provider network that can be accessed by any SBA program
+provider to meet a business' needs regardless of their
+location. Fourth, develop and implement a system to train and/
+or certify SBA program staff, volunteers, and outside service
+providers, by skill area, industry specialization, and
+experience in small business.
+    Fifth was develop a more comprehensive and integrated web
+platform that supports all SBA programs. This would utilize
+technology such as video conferencing, e-mail, blogs, to link
+network providers to client businesses regardless of location.
+Another part would be to provide relevant web content
+aggravated by industry segment, stage of business development,
+and level of need. Another component would be to provide a more
+consistent home page format for the SBDC and WBC websites that
+allows for state and local content and imagery but conveys a
+consistent brand.
+    Next would be to design all websites to promote solutions,
+such as marketing, finance, and human resources, not programs,
+in a familiar fashion, the way that the Kaufman Foundation has
+developed with its eVenturing website, and Inc Magazine has
+developed with its inc.com website.
+    The sixth point was to develop and implement a centralized
+customer rating and usage system for all program resources and
+services similar to the star rating system used by YouTube and
+eBay. The system should have both public and private reporting
+areas designed to collect user input and improved program
+performance while protecting individual counselors, service
+providers, and program staff.
+    We are living in the age of Google, Facebook, Wikipedia,
+and other web-based platforms that have changed the way people
+interact and do business. And we need to refresh SBA's
+programs, services, and delivery, in line with those changes.
+    Our need is now, and it will be important to respond
+quickly to support the startups and existing small businesses
+that will play an important part in our economic recovery.
+Madam Chairwoman, I commend you and the members of the Small
+Business Committee on your efforts to support our economic
+recovery, and I thank you for the opportunity you have given me
+to present my testimony.
+    [The prepared statement of Mr. Wolfe is included in the
+appendix at page 29.]
+    Chairwoman Velazquez. Thank you, Mr. Wolfe.
+    Our next witness is Mr. Jerry Cartwright. Mr. Cartwright is
+the State Director for the Florida Small Business Development
+Center Network in Pensacola, Florida. Mr. Cartwright has been
+with the SBDC program for 25 years and serves on the
+Association of SBDC's Board of Directors.
+    The Florida network is the only statewide economic
+development technical assistance provider. The program focuses
+on enhancing trade opportunities for small- scale enterprises.
+    Welcome, sir.
+                 STATEMENT OF JERRY CARTWRIGHT
+    Mr. Cartwright. Thank you, Madam Chair. I currently serve
+as the Chairman of the Board of the Association of Small
+Business Development Centers, and I am very honored to be here
+today to have you hear our views.
+    Some 900 individual SBDC service centers and approximately
+5,000 professionals are in place providing expert counsel in
+management and technical areas critical to--
+    Chairwoman Velazquez. Excuse me, sir. Do you have the mic
+on? Is it?
+    Mr. Cartwright. Yes, I did. How is that? Small businesses
+are adjusting to survive in a historic decline in spending,
+which means potentially greater layoffs and closures. Madam
+Chair, your efforts to increase funding for the SBDCs has
+increased assistance to small businesses. However, state
+revenues have declined sharply, and SBDC budgets are being cut
+to help balance budgets.
+    Compared to 2001, SBDC national counseling is down by some
+60,000 businesses, directly due to declining capacity. Training
+programs are down by 109,000, also due to a decline in capacity
+and a shift in priorities to long-term counseling. During this
+same period, many states have closed operations and/or
+eliminated business consultants.
+    Some have seen host institutions leave the program at a
+time when small business assistance is critically needed, and
+SBDCs are being inundated with unemployed, and existing small
+businesses seeking greater assistance. Management and technical
+assistance can make the difference for potentially millions of
+small businesses.
+    Key management and fundamental principles and practices can
+assist many businesses to survive what would otherwise be
+failure in difficult times. The critical issue is the
+management decisions these small business owners and aspiring
+entrepreneurs will make in an economic and business environment
+in which they are unfamiliar. Small business owners know their
+business. However, they have little training or experience in
+how to manage a business in times like these.
+    Many are not prepared to take advantage of the significant
+opportunities of the stimulus package. Many of the small
+business owners who face the most difficult decisions in this
+economy are women and minority business owners. SBDCs across
+the country are successfully engaged in outreach to these
+segments of the community, with counseling exceeding the
+national percentage of business owners.
+    More can be done, and with enhanced resources new and more
+innovative approaches will be developed to address these needs
+by the SBDC network. SBDCs have a proven track record of
+responding to crises--9/11, hurricanes in the Gulf Coast and
+south, floods in the Midwest, and fires in California. We view
+this economic crisis similarly.
+    As policymakers, you decide the priority of small business
+management assistance. SBDCs facilitate the access to capital,
+securing government contracts, and services to the underserved
+or minority community, the three major priorities of the
+national SBDC program. We propose to allocate 75 to 80 percent
+of all incremental funding to these urgent needs of the small
+business community.
+    Madam Chair, you are acutely aware of the impact of the
+national SBDC program. A return on investment of over $2.26 for
+every federal dollar invested, over 73,000 jobs created last
+year, and a local leverage of federal dollars of 2 to 3 to 1
+for every federal dollar.
+    We appreciate the confidence that you gave--showed in the
+SBDC program by indicating that $140 million in funding was
+appropriate for FY09. The approved appropriations level of $110
+million, if Congress approves, will greatly aid in rebuilding
+our national capacity. A funding level corresponding to the
+current authorized level would allow SBDCs to increase the
+level and scope of assistance that we believe is required to
+meet the needs of small businesses during this critical
+economic crisis.
+    This is an investment in the small businesses of the
+future. By expanding SBDC's network capacity, essential
+information, analysis, and decision making tools will be more
+readily available to small businesses to improve survivability,
+efficiency, and growth. We are poised, once again, to rapidly
+respond in the economic crisis.
+    I want to thank you for the opportunity to share our views,
+and I would be happy to answer any questions.
+    [The prepared statement of Mr. Cartwright is included in
+the appendix at page 34.]
+    Chairwoman Velazquez. Thank you, Mr. Cartwright.
+    And I now recognize the Ranking Member, Mr. Graves.
+    Mr. Graves. Thank you, Madam Chair. I wanted to introduce
+our next witness. It is Carol Gregg from Chillicothe, Missouri.
+Ms. Gregg holds a Bachelor's Degree from Central Missouri State
+University and is the founder, owner, and president of Flexible
+Staffing, with locations in Chillicothe, Sedalia, and
+Warrensburg, Missouri.
+    As a successful small business, Flexible Staffing has
+placed more than 800 Missourians in positions throughout the
+state. And like so many of our small businesses, she is the CEO
+and president and also sweeps at night.
+    [Laughter.]
+    So I want to thank her for being here, and appreciate her
+coming.
+                  STATEMENT OF CAROL A. GREGG
+    Ms. Gregg. Madam Chair, and members of the Committee, thank
+you for inviting me. I am president and owner of Flexible
+Staffing. I have offices in Chillicothe, Warrensburg, and
+Sedalia. I also have an onsite office in Kingsville, Missouri.
+I have been an SBTDC client since January 2000, and I have
+worked continuously with the Northwest Missouri State
+University and Chillicothe, Missouri office ever since.
+    The SBTDC office provided me with the assistance to develop
+cash flow charts and create a business plan to start my
+business. I started Flexible Staffing in May 2003 and reached
+the tipping point of success in 2007. I set the goal of growing
+to $10 million in sales from my 2007 sales high of about $3
+million. In 2008, we had sales of almost $5 million. The focus
+of our growth objective has reinforced my positive outlook,
+caused me to be able to identify opportunities, even in
+difficult times, and highlighted the need for continuous
+improvement in procedures and personnel.
+    Having a plan with growth focus has mentally prepared me to
+adjust to the changing circumstances while maintaining an
+opportunity-driven approach to running my business. Because we
+are located in the rural areas of Missouri, this approach plays
+out in adding experienced, capable professionals to my staff as
+they become available, and being able to replace the parting
+expertise with a minimum of disruption.
+    Finding people with talents where I have weaknesses is the
+key to my success. This approach plays out in soaking up advice
+from expanding networks of expertise and experience. These
+networks come from state and national trade associations, local
+and state SHRM organizations, and two local entrepreneurial
+groups.
+    In Chillicothe, we have 20 to 30 businesses that meet every
+six weeks to share ideas, discuss issues, and receive updates
+on what is affecting small businesses in our area. Both groups
+have bank support and support from the NWMSU SBTDC office. In
+addition, I have been able to rely on networking relationships
+within cooperating businesses within my industry.
+    When I realized that I had reached the point where I could
+stop worrying about survival of my business, and focus on
+growth, I scheduled a meeting with Mr. Jim Houseworth, my
+mentor, banker, and entrepreneurial, and Mr. Steve Holt, the
+Director of the NWMSU SBTDC Chillicothe office. They helped me
+to review my 2007 financials, they recommended a new CPA that
+would better serve my needs, and listened to my growth plans
+identifying new action steps.
+    Mr. Holt later ran and delivered market comparison reports
+and allowed me to better gauge the market opportunity for the
+new markets that I was considering. He also provided background
+information on the competition already serving those new
+markets and generated business-to-business new customer market
+contact lists.
+    My plan for growth has changed slightly in the last six
+months due to the downturn in manufacturing and light
+industrial industries in Missouri. I have needed to think
+outside the box. I believe that going through diversifying my
+business is my best option, and to do it very quickly. In
+September 2008, I started a new division in my Sedalia office
+called Flexible Consulting, which contracts mechanical,
+electrical, and chemical and industrial engineers.
+    We now have three recruiters in that office. In my
+Warrensburg office, I am hopeful to soon begin Flexible Medical
+Staffing. There is an opportunity that has been knocking on my
+door for the last two years to do medical staffing within the
+rural areas of Missouri. Again, due to the economy, my belief
+is growing through diversification. I am currently moving
+forward to take advantage of these opportunities at an
+accelerated pace.
+    This past week I have moved to a new location, which gives
+me room to house five medical recruiters, and we will be
+serving hospitals and clinics throughout Missouri. With this
+being said, all three of my offices will still do light
+industrial and clerical staffing. I have used the SBDC for
+market research, and I have plans to work with them on updating
+financial analysis and market analysis within the new medical
+staffing facility.
+    I view the medical industry as being somewhat recession-
+proof with a constant skilled labor shortage. I need to hire an
+experienced medical professional to manage this new venture,
+and hopefully Flexible Medical Staffing will be up and running
+soon.
+    The economic downturn has provided the motivation and the
+opportunity to address this new business opportunity.
+Anticipating an extended downturn will require new cash
+resources, and I have negotiated an expanded line of credit in
+advance to meet my potential needs. Expecting to emerge from
+the downturn stronger than the recession started, I am having
+my staff concentrating on getting our house in order by
+documenting our policies and procedures and providing extensive
+training to shorten our learning curve.
+    I am also positioning myself to eliminate weaknesses in my
+management staff when opportunities arise. We have not laid off
+any staff yet, but we are retraining for these new
+opportunities.
+    To provide my staff with the highest expertise and training
+in our industry, I have negotiated with our other businesses to
+share their talented employees in our company. For instance, I
+needed a trainer supervisor for the Flexible Consulting side of
+our business. By sharing in the expenses of that individual,
+this will enable both companies to have a quality, high-paid
+employee that can meet the needs at half the cost.
+    Chairwoman Velazquez. Ms. Gregg, time has expired.
+    Ms. Gregg. Sorry.
+    Chairwoman Velazquez. But during the question and answer
+period you could expand on--
+    Ms. Gregg. Okay.
+    Chairwoman Velazquez. --because I am really interested in
+listening to your story, and I just must congratulate you for
+your expansion and the insight to go and get the support, the
+technical assistance, that led you to grow your business.
+    Ms. Gregg. Thank you.
+    [The prepared statement of Ms. Gregg is included in the
+appendix at page 41.]
+    Chairwoman Velazquez. Our next witness is Barbara Wrigley.
+She is the Executive Director to the Association of Women's
+Business Centers in Northern Virginia. Ms. Wrigley has more
+than 20 years' experience as a manager and advisor to women
+entrepreneurs. The Women's Business Center of Northern Virginia
+was founded to provide training and support to women seeking to
+start or grow their own businesses.
+    Welcome.
+                  STATEMENT OF BARBARA WRIGLEY
+    Ms. Wrigley. Thank you so much. Good afternoon, Chairwoman,
+Ranking Member Graves, members of the Committee. Thank you for
+the opportunity to speak with you today. I do have the
+privilege of serving as the Executive Director of the Women's
+Business Center of Northern Virginia, as well as Vice Chairman
+of the Board of Directors for the Association of Women's
+Business Centers.
+    The AWBC is a not-for-profit organization representing
+women's business centers and those that we serve. It was
+founded 10 years ago to support entrepreneurial development
+among women as a means to achieve self-sufficiency and to
+create wealth through education, training, counseling,
+mentoring, technical assistance, and financing opportunities.
+    My remarks today will summarize our more complete written
+testimony, which I understand will be entered into the official
+record, and I will focus on three main points. Point one,
+recognition of the significant improvement in the WBC program
+in the past 18 months.
+    We are grateful for the wisdom and support of leaders in
+the House and the Senate for securing our permanent funding in
+2007. Now that WBC directors no longer have to worry about the
+very existence of their centers, they are concentrating on
+better serving their clients and growing their programs.
+    WBCs have had a remarkable record of achievement over the
+past 20 years. Across the country, we annually provide
+entrepreneurial training, technical assistance, and counseling
+to over 150,000 clients, including a significant number that
+are minority and socially disadvantaged. For example, here in
+Northern Virginia, fully 25 percent of my client base is low-
+income women.
+    How have we done with the SBA's annual $13.5 million
+investment in the WBC program? Research from the National
+Women's Business Council found that there has been an
+extraordinary 14 to 1 return on investment. There has been
+significant improvement in our relationship with the SBA, in
+particular with the Office of Women's Business Ownership. We
+are now working on issues as partners and continue to address
+in a much more communicative and much less adversarial manner
+the ongoing management of the program.
+    Point two, planning for the future and the need to improve
+current operational challenges. We look forward to establishing
+relationships with the newly-appointed SBA personnel to deal
+with some of our current operational challenges and to plan for
+future improvements. At present, we are having a difficult time
+fulfilling the growing demand for our services in the face of
+significant cuts in the per center program budget.
+    Annual allocations have fallen from an average of $150,000
+per center per year to between $80,000 and $100,000. For
+example, my center has a total budget of less than $300,000. We
+are dealing with a 25 percent cut from the SBA this year, yet
+we have trained and counseled over a thousand clients in the
+last three months, a 14 percent increase from a year ago.
+    We are concerned that there has not been consistency in the
+way funding allocations have been made to WBCs nationwide, nor
+has there been sufficient transparency. We believe that all
+awards should be made public, and we recommend that the funding
+level should consistently average $150,000 per center per year.
+We, therefore, request a full appropriation of $17,100,000 to
+fund our centers.
+    Secondly, the AWBC feels that a comprehensive system to
+evaluate, improve, and actually certify women's business
+centers should be developed. This would include training for
+new and underperforming centers, benchmarking, and sharing best
+practices. We recommend an additional appropriation of a half a
+million dollars, so that such a certification model could be
+developed and tested.
+    And, third, while there has been significant improvement in
+the speed with which grant monies are disbursed through
+automated drawdowns, the overall administrative burden remains
+high and continues to need further review.
+    Point three, the current economic crisis and the vital role
+of WBCs in our nation's economic recovery. Women's business
+centers are on the frontline of the economic crisis. We are
+seeing more and more clients coming through our doors who have
+been downsized, pink-slipped, or who are underemployed and
+looking for ways to put their economic futures in their own
+hands.
+    WBC directors are also reporting greater desperation among
+our clients. We are ready, willing, able, and are already
+serving as a source of information and inspiration to these
+clients. One of my award-winning clients reports to me, ``The
+current economic situation is having a significant negative
+impact on my business. From 2004 to '06, my company saw 125
+percent plus sales growth from year to year. In 2008, however,
+total sales revenue dropped 40 percent. The significant decline
+in sales puts a lot of pressure on my company to implement
+severe cost-cutting measures, delay introduction of new
+products, and resist the introduction of new technologies.''
+    The director of the women's business center in Indiana
+wrote to me, ``Some folks seem simply desperate, and they just
+don't know what else to do, so they are looking at creating
+their own jobs.`` Several people expect to put a business plan
+together over the weekend. When I tell them to expect more like
+six months, they seem to get more depressed.
+    And the director of the women's business center in San
+Francisco echoed many when she wrote to me, ``We are seeing
+more and more people who are already in business coming to us
+to help them find ways to survive.''
+    Many women's business centers have responded with
+innovative strategies, such as providing incubator offices,
+day-to-day work spaces, low-cost meeting room and conference
+room rentals, and increasing access to our computer labs,
+responding to increased interest in peer support and networking
+gatherings, providing more skill-specific, just-in-time, and
+distance learning training, designing and offering new classes
+such as how to recession- proof your business, marketing on a
+shoestring budget, building alliances and partnerships to stay
+ahead in tough times.
+    Another innovative example is the women's business center
+in West Virginia, which has been working with partners to hold
+events in shopping malls, where up to 30,000 visitors per
+weekend learn low-cost ways to make money through direct sales
+businesses.
+    While we are being innovative and responsive, the key
+challenge at the present time is to increase the flow of
+capital to our clients, not just those seeking to start a
+business but especially to our clients who are already in
+business. Capital has dried up, and our clients are suffering.
+    Within my own parent company, the Community Business
+Partnership, our business finance center has gotten only one
+SOHO loan approved since October 1st, whereas a year ago 16
+loans were approved in the same four- month cycle.
+    Chairwoman Velazquez. Ms. Wrigley, time is up. But, again,
+during the period of question and answers--
+    Ms. Wrigley. Thank you.
+    Chairwoman Velazquez. --you can expand. Thank you.
+    [The prepared statement of Ms. Wrigley is included in the
+appendix at page 44.]
+    Chairwoman Velazquez. Our next witness is Mr. Ronald
+Blackburn. He is the President and CEO to ASPIRA Association,
+Inc. Under his leadership, ASPIRA has opened more than 20
+community technology centers across the country, providing
+internet access to thousands of Latinos in low-income areas.
+Also, he has helped shape federal education legislation, most
+recently the Higher Education Act.
+    ASPIRA is a national nonprofit organization devoted solely
+to the education and leadership development of Latino youth.
+    Welcome.
+                   STATEMENT OF RON BLACKBURN
+    Mr. Blackburn. Thank you so much, Madam Chair. I am
+President and CEO of ASPIRA, as you mentioned, the largest
+national Hispanic organization in the country, and the only one
+dedicated exclusively to education. And we are also well-known
+for the use of technology in education, which is what I am
+going to talk about.
+    But, first, I have to say how proud I am as a Puerto Rican
+to have Congresswoman Velazquez not only to be chair of this
+Committee, but to be the newly-elected chair of a congressional
+Hispanic caucus. Congratulations.
+    I want to thank the Committee for the opportunity to
+present some ideas regarding a topic that has become critical
+in these very uncertain times. How can we use technology,
+especially distance learning, to enhance the effectiveness of
+the SBA in providing training and support to entrepreneurs and
+small businesses around the country?
+    We know the enormous potential of technology, and the
+Internet is a tool to deliver training and technical
+assistance. And I believe that a robust, well-designed,
+comprehensive, and nimble online distance learning program at
+the SBA has the potential to reach thousands of business owners
+and potential business owners and reduce the burden on the SBA
+assistance centers.
+    It is important to note, however, that there is a major
+issue that potential entrepreneurs and small businesses face,
+and it is the cost of broadband, especially in low- income
+communities. Without assessing--because broadband hasn't been
+employed in their communities or because the cost of broadband
+is too high, online training programs have little value.
+    To address this issue, I would like to propose and
+recommend to the Committee the creation of an eRate type
+program, specifically for small businesses to access and cover
+part of the cost of broadband. We already have this subsidy for
+schools and libraries, and the Telecommunications Industry
+Association advanced this notion before this Committee in
+January.
+    There are two major issues in developing a distance
+learning program the SBA must address. One is the quality of
+the courses offered online, including the depth of each course
+and the teaching methods used to deliver the course. And,
+second, the number and relevance of the courses that are
+actually available.
+    Now, effective online training programs have several key
+characteristics. One, the content of the courses is
+interesting, relevant to the learner's needs, is of sufficient
+depth of the learner to master the subject matter. I will just
+give you an example. You cannot learn how to develop a business
+plan or the intricacies of securing a business loan in 35
+minutes.
+    They progress from the basics of the subject matter to more
+advanced topics in several well thought out steps or modules.
+They are interactive, where the learner becomes a participant
+in his own learning using tools that engage the learner in
+learning activities in practice. This requires a learning
+management system, which the SBA does not have.
+    They use a variety of teaching methods, including a
+combination of video, webcast, webinars, audio, and text. They
+are asynchronous, which means that the learner can access the
+program at--the courses at any time from anywhere and complete
+it at their own pace.
+    The learner is provided ongoing support through a learning
+process where the learners can ask questions as they go through
+the course, with access to a tutor as well as other learners,
+where learning is assessed, and usually feedback is provided to
+the learner throughout the learning process. Usually, the
+learner ends up with a product.
+    Regarding the variety of courses, the SBA courses should be
+extensive, and the program should be capable of deploying
+coursework quickly to meet the emerging challenges to business.
+The distance learning program should also be able to move
+quickly with the times, creating and offering courses that
+direct emerging needs, such as the current economic downturn.
+Of course, given the demographics and the fact that the SBA
+serves Puerto Rico as well, the coursework should be available
+at least in Spanish, if not in other languages.
+    Distance learning is very cost effective. Developing
+courses and having them online today is actually quite cheap,
+especially with all of the open source, free, and secure
+network platforms that are available.
+    The second major issue is deployment. How do you reach
+potential entrepreneurs especially in lower income communities?
+A tried and true strategy for reaching local communities is
+through its community-based organizations. This is especially
+true in the Latino community. As you mentioned, Madam Chair,
+ASPIRA has 150 community technology centers across the country,
+with computer labs connected to high- speed Internet lines.
+    These centers can serve as entry points for potential
+entrepreneurs in small business where they can learn to use a
+computer, the Internet, have access to the courses, have local
+coaches that can help them and refer them, all in an
+environment that is familiar, comfortable, and which they
+trust. Extensive national partnerships between the SBA and
+community organizations would go a long way in providing the
+SBA access to communities, and this would be mostly at little
+or no cost to the SBA.
+    The SBA is going to be an effective promoter of new
+business and an effective partner in sustaining and growing
+existing small businesses. It is essential that it take
+advantage of the power of technology as a training and
+assistance tool, that it invest the resources it needs to
+create a robust, comprehensive, online education program, and
+that it partner with communities to reach thousands who have
+the potential to start or grow businesses, and, hence, create
+jobs.
+    Thank you very much. I will be glad to answer any questions
+you have.
+    [The prepared statement of Mr. Blackburn is included in the
+appendix at page 50.]
+    Chairwoman Velazquez. Thank you, Mr. Blackburn.
+    I would like to address my first question to Mr.
+Cartwright. As we all know, SBA lending has declined
+significantly in the past year. The credit crunch is posing
+tremendous challenges to small businesses in this nation. We
+read the papers, we listen to the news, and all we hear is the
+credit crunch that small businesses have. The secondary market
+is frozen.
+    What role can SBDCs play in assisting businesses as they
+seek capital in this difficult economy?
+    Mr. Cartwright. Madam Chairwoman, that is a very good
+question. You are absolutely correct that access to capital is
+at the worst level we have ever seen. I think the national
+figures are SBA loans are off by 57 percent. I would believe
+that in the two districts that we have in Florida--Jacksonville
+and Miami--they are at least at that level.
+    SBDCs across the country rely on SBA tools, they rely on
+SBA loan programs, to present those to small businesses. I
+think the reality is that there are--what we see now is a lot
+of other non-bank lenders, credit unions, savings and loans,
+also getting into that market. And SBDCs, as I would guess all
+of the other SBA entrepreneurial development programs, try to
+do what is best for the small business owner or entrepreneur
+who is starting a business. They shop the best deal possible
+for businesses.
+    I believe that with the--in terms of the SBDC's case, with
+the rebuilding of the capacity of SBDCs, you would see a higher
+level of marketing of SBA programs, as long as there is an
+increased funding of those critical SBA loan programs.
+    Chairwoman Velazquez. Let me ask, Mr. Wolfe, how can
+entrepreneurial development services be designed to ensure that
+new firms can access capital at a time when credit is so tight?
+    Mr. Wolfe. Madam Chairwoman, the credit issue right now is
+not a matter of people always being aware of the money. Many
+people are aware of SBA funding at this point. The challenge
+is, internally, they don't know how or what types of funding
+they need. They don't have properly-structured financials. They
+don't have insights in terms of, why are they declining in
+sales? How might they recover those declines? And, as a result,
+they present to a lender a very high-risk credit.
+    And if you are looking at adapting, I think the focus is to
+reach out with the programs, actively go out to the businesses.
+They are not going to tell you that they are having trouble
+until you actually develop a level of trust with them. And
+then, work with them to look at what is happening within their
+operation, what types of capital or debt they currently have,
+is it appropriate for what they are using it for, which what we
+are finding is it is not. They are using lines of credit to
+make capital purchases, which is a very bad thing to be doing.
+    And then, look at what other sources there are--community
+development block grant funds, EDA funds, SBA funds. Private
+lenders are looking for ways to mitigate risk, but they need
+someone who can validate the strength of a business, the
+strength of a business model, the strength of an adjustment to
+the economy, and then how are they going to move forward, since
+most of them now no longer have collateral.
+    Chairwoman Velazquez. Mr. Blackburn, the needs of small
+businesses are constantly changing, and SBA programs must be
+flexible to adapt to those changes.
+    Mr. Blackburn. Certainly.
+    Chairwoman Velazquez. For example, last year energy costs
+were crippling small business owners, and today it is the lack
+of credit. So, in your opinion, does the small business
+training network have the ability to adapt and meet the new
+needs of small entrepreneurs?
+    Mr. Blackburn. Well, basically, the platform that you have
+now is a very static platform. There are some courses that can
+easily be put up, but they are really not as intense as they
+should be. As I mentioned before, you can't really develop a
+business plan in a 35- minute course, a PowerPoint course. I
+mean, there are 22 courses in there, but they really don't have
+the depth to assist a small business owner or a potential
+entrepreneur to either develop a business plan or a marketing
+plan or how to survive in these times.
+    I think that some of the investment that would be put into
+distance learning would be a tremendous savings in terms of not
+having to provide those same--that same guidance counseling to
+entrepreneurs in the centers. So, right now, it is not
+adaptable. It could be much more adaptable if it had a learning
+management--based on a learning management platform. And I
+think that the SBA should have the vision to be able to harness
+the technology.
+    I mean, distance learning is a $31 billion business in this
+country. And every university, every college and university in
+the country, has a sound distance learning program. There is no
+reason why the SBA cannot have that.
+    Chairwoman Velazquez. Thank you. Mr. Graves.
+    Mr. Graves. Thank you, Madam Chair.
+    My first question is for Ms. Wrigley. You said that you
+helped businesses recession- proof. How do you recession--I
+mean, I am just curious. That sounds like a great tool to be
+able to offer small businesses.
+    Ms. Wrigley. Well, what I was talking about was that a
+number of women's business centers have developed classes to
+help their clients be recession-proof. So right now one of the
+main things that my clients have been asking for is
+information, for example, on social networking. They have been
+asking for more immediate, quick, real-time training in
+Quickbooks Pro and other things like that.
+    I think, you know, as these clients come in, the most
+immediate way that we can be of assistance to them is just to
+know that we are there to talk to them, that we can help them
+with their cashflow, that we can help them in understanding
+some of the steps that they need to take to better market their
+services, to form some alliances for example.
+    So it is really--you know, taking these existing clients,
+having them come in and say, ``Yes, we are really here for
+you.''
+    Mr. Graves. Ms. Gregg, you are kind of in a unique
+situation I guess because not only are you a small business,
+but you also provide staffing to other businesses. And you said
+you are going to come through this downturn stronger than ever.
+And I would like to kind of have you explain that, because that
+is kind of exciting, given a lot of the, you know, horror
+stories that we have heard.
+    And you might also expand on some of the businesses you
+work with providing staffing, how they are going to do as a--
+you know, do you think they can come through this thing
+stronger than ever? Or are we going to lose a lot of businesses
+out there?
+    Ms. Gregg. Well, Ranking Member Graves, you know, I am a
+pretty positive person, and I refuse to think negative. I am
+going forward as quickly as I can. Like I said, I am expanding
+on opportunities, so that I can survive. Right now, our focus,
+since we are in rural Missouri, has been light industrial and
+clerical. Light industrial is hurting tremendously out in the
+rural areas, as I know they are hurting everywhere.
+    As far as if they are going to make it, I don't know. Most
+of my clients right now still are optimistic that they are
+going to start up. They might have started up hard and heavy
+after the first of the year. They are looking at March, second
+quarter, with startups, and we are all hopeful.
+    I am just trying to expand my business as quickly as I can
+in order to survive, because I don't believe light industrial
+is going to feed us well anymore. And that is why we started
+the Engineering Department, and we are hoping to start Flexible
+Medical Staffing soon.
+    So did that answer your question?
+    Chairwoman Velazquez. Would you yield for a second?
+    Mr. Graves. Yes, Madam Chair.
+    Chairwoman Velazquez. When did you make the decision to get
+into medical services staffing? And did you do--did you do some
+research that led you to make that determination?
+    Ms. Gregg. Yes.
+    Chairwoman Velazquez. That that is an area where you can
+grow your business?
+    Ms. Gregg. Yes. I have had opportunities that have come to
+me, because I am the local person who is doing staffing. I have
+had hospital CEOs come to me. I have been researching for two
+years. The SBDC has--small business development center has been
+helping me. They have been doing market analysis for me.
+    They have also looked at the competitors within my field.
+In rural areas, there is not a lot of people doing staffing in
+the medical field, so that is an opportunity.
+    Chairwoman Velazquez. Thank you.
+    Thank you for yielding. Any other questions?
+    Mr. Schrader.
+    Mr. Schrader. Thank you, Madam Chair. Ms. Dorfman, you had
+talked about the somewhat fragmented nature potentially of some
+of the small business development services, and, you know, a
+lot of overlapping regulation and opportunities. It makes
+sense, certainly. You know, everyone wants to be efficient and
+pool resources where possible.
+    How do you juxtapose that with a lot of communities, this
+body, and state legislators, wanting to focus on making sure
+women and minorities get special access, or at least are aware?
+Veterans? How do you--how do we juxtapose those two, the
+efficiency versus making sure different groups really get
+access?
+    Ms. Dorfman. Well, again, I think it is in the best
+interest of a woman-owned firm to get the highest quality and
+consistency of the education and the resources that are out
+there. And to be able to provide that, you really do need to
+unify. The e- learning that has come up here, that is
+paramount.
+    If we can streamline some of the more I would say
+fundamentals, that can be done from e-learning and then have
+very specific focuses on those areas where there are--it is a
+little bit more complex and there needs to be some specialized
+assistance. For instance, women-owned firms typically find it
+very difficult to get access to capital.
+    Well, so that is one area we are going to have to have a
+specialist in there to walk them through that process to make
+sure that, first of all, there is funding available, but,
+second of all, making sure that their financials are prepared
+the proper way to get in there. And then, have somebody
+actually at the bank to hold the bank accountable for lending
+to women as well.
+    And I really believe, again, that we need as a unified
+system to really look at the demographics within the community
+and see what the needs for the community are. Right now, we are
+hearing that some communities are faring better than others,
+because there is not that consistency. But if we can come from
+a macro level, and really provide good, consistent, quality
+interface for the business owners, I think you are going to
+really--the investment that we are making is going to just grow
+exponentially.
+    Mr. Schrader. Along the same lines, both you and Mr.
+Cartwright, and it was referenced in the Speaker's memorandum
+about performance measures, you know, a lot of times we measure
+outputs as opposed to outcomes. And I was fairly involved in
+that in my home State of Oregon, trying to shift our budgeting
+to, you know, performance-based rather than just measuring
+widgets that were produced.
+    So to that extent, one of the basic questions I would
+always ask, particularly the SBDCs, was, you know, how do we
+know you are doing a better job than a business that does not
+start up with SBDC assistance? And is there a way we can
+measure this, among many other measures that might be
+appropriate? Could you comment on where we are in that
+development, what role this body may have in assisting you in
+developing appropriate actual outcomes?
+    Ms. Dorfman. Sure. One reference that was stated here was
+we saw a thousand clients in the last three months. We hear
+that from the SBDCs and our interface, that that is part of how
+they have to measure, how many bodies got through their doors.
+Well, we want to know what percentage was the growth of
+revenues for those companies, and how many new employees have
+been hired? That is going to really measure their growth.
+    And, again, when you take a look from a macro level, you
+can really see the communities across the board, where there is
+success versus where there is challenges, and where we need to
+get in and maybe get more assistance to them.
+    Mr. Schrader. Mr. Cartwright, could you comment on that and
+how, again, we might--is that rule-driven? Are we the culprits?
+Who is to be responsible perhaps for that interpretation?
+    Mr. Cartwright. Actually, I don't know if there is a
+culprit or not, but I can tell you--you make a very good point,
+and I will tell you that the SBDCs actually do measure those
+kinds of things that are critically important. We conduct--each
+SBDC conducts their own state economic impact analysis, where
+we do get down to what was the revenue increase by business and
+number of jobs that they created, or the number of jobs that
+they retained due to assistance. That is reported by the small
+business owner.
+    We also have a national impact study that is done by Dr.
+James Chrisman at the University of Mississippi that, as an
+association, we encourage every SBDC state and regional program
+to participate in. That study compares the Oregon SBDC and its
+outputs to the average Oregon business. Dr. Chrisman--
+    Mr. Schrader. Is that outcomes or outputs, sir?
+    Mr. Cartwright. Both.
+    Mr. Schrader. Okay.
+    Mr. Cartwright. Both. And that research is done by Dr.
+Chrisman, so it is not the SBDC that is taking a look at those
+figures. It is Dr. Chrisman. So we--that information is readily
+available.
+    Mr. Schrader. We had trouble getting--just as a comment--I
+apologize for going slightly over--we had a little trouble
+getting that information in Oregon, so I would be interested in
+that data, if that is available.
+    Mr. Cartwright. Okay.
+    Mr. Schrader. Thank you, Madam Chair.
+    Chairwoman Velazquez. Mr. Coffman.
+    Mr. Coffman. Thank you, Madam Chairwoman. There was some
+discussion about e-learning, putting information out, and as a
+former small business owner, where time was a premium, and I
+didn't necessarily have time during the day to attend
+something, but maybe I could look at information online at
+nights, such as writing a business plan, which was my downfall,
+but I survived somehow. I wonder if some of the members could
+comment on that.
+    Mr. Blackburn. Well, I can certainly comment on the
+importance of the program to be interesting, to be in depth, to
+be able to show you step by step how to develop a business
+plan. And it is something you can't do during the day, it can't
+be live. You have to be able to access it whenever you have the
+opportunity to access it.
+    And it should be able to walk you through the steps of
+developing a good business plan, so that when they get to the
+center you already have a product that you can take to the
+center for review. And just--and mentioning how to be updated,
+how to change with the times, I can see, for instance, the SBA
+having webinars and webcasts on the impact of the stimulus
+package on small business.
+    And this is something that is being discussed today, and
+that could be on tonight, for a small business person to know,
+if they approve X, Y, and Z, will I have more access to credit?
+Those are the important topics. And others as well. I mean,
+there are hundreds of potential courses that can be provided
+for business owners, for people who are thinking of starting a
+business, for people who are already there but haven't gotten
+the credit yet to start their own business.
+    So I think it is a critical tool that almost everybody else
+is using, and it is very simple to use. Just ask our children.
+I mean, they are doing very, very well. And to exchange with
+other business people.
+    You can mention chatrooms, you can mention groups, you can
+mention all sorts of means of communicating with other small
+business people in your same field, or in others. Those are
+important for learning.
+    Mr. Coffman. Madam Chairwoman, if I could continue.
+    Chairwoman Velazquez. Yes.
+    Mr. Coffman. Ms. Gregg, you had talked about relocating
+your business from Missouri to Colorado.
+    (Laughter.)
+    Out of all of the services that were provided to you, if
+you had to identify one as being the most significant, what
+would that be?
+    Ms. Gregg. I had started businesses in the past. However, I
+had never done cashflows before, and actually had something to
+take to the bank when I went to borrow money. And so I would
+say learning how to do cashflow charts was the top of my line.
+I have had--I have done lots of conferences on how to grow, but
+I think learning how to do cashflows would be the thing that I
+lacked and I needed help with.
+    Mr. Coffman. Madam Chairwoman, one more question.
+    What are you seeing out there, any of the panelists, in
+terms of the credit crisis right now? And from the grass roots
+of our financial system, are, in your view, small businesses
+locked out of it that wouldn't otherwise qualify for credit
+during normal economic times?
+    Mr. Wolfe. I will touch that. Actually, right now, there
+are very viable businesses that are being locked out, because
+the local and regional banks have just basically tightened up.
+Even with SBA lending, I interviewed five lenders in the last
+two months, and they indicated that there has been some
+restrictions, and basically SBA has been looking at the
+documentation and not always honoring the guarantee.
+    So the banks are running scared right now as to whether or
+not they can even utilize the guarantee. So they are tightening
+up their own credit, they are pulling lines of credit from
+existing businesses that are very solid, because they don't
+know what kind of reserves they need to have in place, because
+they are not sure how their portfolio is going to go, they
+don't know if their collateral is upside down.
+    So there is a really--everyone is tightening up. Everyone
+is pulling back. And what has to happen is we have to rebuild
+confidence. And that is what I think the opportunity is, to go
+out and rebuild confidence in sound business, with information,
+with the whole concept--I mean, education is great, but someone
+has got to get out there and reach out to the businesses, not
+wait for them to walk in the door. They are not going to walk
+in the door.
+    And when I teach lending, I tell them, the good deals are
+going to--you are not going to find the good deals unless you
+get out on the street and knock on doors, because those
+business people are too busy running their business.
+    Chairwoman Velazquez. Well, Mr. Coffman, just for one
+second. If SBA is not honoring the guarantee, I want to know,
+because they cannot do that.
+    Mr. Coffman. Yes. Okay.
+    Chairwoman Velazquez. And time is up, since we have votes
+on the floor. Ms. Dahlkemper.
+    Ms. Dahlkemper. Thank you, Madam Chair.
+    I just have a quick question to any of you who would like
+to answer this. Is there any regional issues that we should be
+looking at as we look at this entire, you know, picture here?
+We certainly have different issues in the northeast versus the
+southwest and some of those areas. Are there any regional
+issues that we should be looking at as we look at these
+programs that we are not identifying at this point as we look
+at economic recovery?
+    Mr. Blackburn. I can think of not regional issues, but
+community issues.
+    Ms. Dahlkemper. Okay.
+    Mr. Blackburn. In other words, where is the diversity of
+the country? And where are small businesses suffering the most?
+And if you look at the country that way, it is sort of
+different from looking at the geographical regions, the small
+businesses that are in inner cities versus those that are in
+rural areas or in suburbs, how can you better support
+businesses that I am sure are suffering in low income
+communities, whether they are urban, rural, or suburban?
+    So I would try to look at it more in terms of the
+particular community that they are in rather than their region.
+There may be some regional issues, but I would look at those
+first.
+    Ms. Dahlkemper. Would anyone else like to comment on that?
+    Mr. Wolfe. I would like to say also I think, really, there
+needs to be a focus on industry, specific industry segments,
+because a lot of the retailers and the service businesses
+aren't going to survive if the people don't have money. So you
+have got to look at where people are targeting recovery, and
+that is a national issue.
+    So if it is in clean technology, it could be in tourism, it
+could be in manufacturing, but it has to be tailored to those
+industries where there is the chance and opportunity for
+recovery, and that support them and can go across. And that is
+where all of the programs tie in. And it doesn't matter where
+they are located; it just matters on having resources for the
+industry.
+    Ms. Dahlkemper. Thank you.
+    Chairwoman Velazquez. I have another question, and I
+believe--well, probably we are going to pass the stimulus
+package by the end of this week, hopefully. And there is going
+to be a lot of money for IT-related initiatives, and a lot of
+money for infrastructure. And so small firms are expected to
+play a big role in all of these projects.
+    And it is likely that many companies forego--these
+opportunities due to the complexity of the federal procurement
+process. And I hear back in my district, and every member here,
+they hear from small businesses who are having problems
+accessing the federal procurement marketplace.
+    So my question to the SBDCs that are represented here:
+would you think that it would be useful to establish a
+specialized program so that SBDCs can hire experts in federal
+procurement and provide that type of assistance?
+    Mr. Cartwright. Madam Chair, I totally agree with you.
+SBDCs are--under their scope of work currently provide
+procurement assistance, government contracting. That is not the
+primary focus, however, of our programs. And with that enhanced
+capacity, I would say, yes, you could see much more contracting
+take place throughout the country.
+    Chairwoman Velazquez. Yes. And the women's business
+centers?
+    Mr. Wolfe. Absolutely.
+    Chairwoman Velazquez. Okay.
+    Ms. Wrigley. I happen to be fortunate to be in a location
+where we have a small business development center adjacent to
+our women's business center, as well as a finance center and an
+incubator, all under one roof. And so we are sending more
+people--more of our women, once they grow up their businesses
+to be ready to do federal contracting, particularly here in the
+Washington area, to our SBDC and to the procurement technical
+assistance program.
+    But I think you are exactly right. Women are confused about
+this, and it is a wonderful marketplace right now. Those that
+have gotten in are doing work.
+    Chairwoman Velazquez. Last year, we spent $400 billion--
+    Ms. Wrigley. That is right.
+    Chairwoman Velazquez. --yet small firms lost out when they
+were not able to get the 23 percent contracting goal.
+    Anyway, I want to thank all of you for your testimony and
+your presence here today.
+    I ask unanimous consent that members will have five days to
+submit a statement and supporting materials for the record.
+Without objection, so ordered.
+    And this hearing is now adjourned. Thank you. [Whereupon,
+at 2:19 p.m., the Committee was adjourned.]
+[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - RULES OF THE COMMITTEE ON HOMELAND SECURITY</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+==================================================================
+                           RULES
+                           of the
+                Committee on Homeland Security
+                 U.S. House of Representatives
+                       111th Congress
+                   Adopted February 4, 2009
+                   Printed for the use of the
+                 Committee on Homeland Security
+                   U.S. GOVERNMENT PRINTING OFFICE
+47-350 PDF                  WASHINGTON : 2009
+----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC,
+Washington, DC 20402-0001
+<TEXT NOT AVAILABLE>
+</pre></body></html>

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+<html>
+<title> - FULL COMMITTEE HEARING ON THE STATE OF THE RENEWABLE FUELS INDUSTRY IN THE CURRENT ECONOMY</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+                       FULL COMMITTEE HEARING ON
+               THE STATE OF THE RENEWABLE FUELS INDUSTRY
+                         IN THE CURRENT ECONOMY
+=======================================================================
+                                HEARING
+                               before the
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED ELEVENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 4, 2009
+                               __________
+          [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 111-007
+Available via the GPO Website: http://www.access.gpo.gov/congress/house
+                                 -----
+                   U.S. GOVERNMENT PRINTING OFFICE
+47-778 PDF                  WASHINGTON : 2009
+----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC,
+Washington, DC 20402-0001
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                NYDIA M. VELAZQUEZ, New York, Chairwoman
+                          DENNIS MOORE, Kansas
+                      HEATH SHULER, North Carolina
+                     KATHY DAHLKEMPER, Pennsylvania
+                         KURT SCHRADER, Oregon
+                        ANN KIRKPATRICK, Arizona
+                          GLENN NYE, Virginia
+                         MICHAEL MICHAUD, Maine
+                         MELISSA BEAN, Illinois
+                         DAN LIPINSKI, Illinois
+                      JASON ALTMIRE, Pennsylvania
+                        YVETTE CLARKE, New York
+                        BRAD ELLSWORTH, Indiana
+                        JOE SESTAK, Pennsylvania
+                         BOBBY BRIGHT, Alabama
+                        PARKER GRIFFITH, Alabama
+                      DEBORAH HALVORSON, Illinois
+                  SAM GRAVES, Missouri, Ranking Member
+                      ROSCOE G. BARTLETT, Maryland
+                         W. TODD AKIN, Missouri
+                            STEVE KING, Iowa
+                     LYNN A. WESTMORELAND, Georgia
+                          LOUIE GOHMERT, Texas
+                         MARY FALLIN, Oklahoma
+                         VERN BUCHANAN, Florida
+                      BLAINE LUETKEMEYER, Missouri
+                         AARON SCHOCK, Illinois
+                      GLENN THOMPSON, Pennsylvania
+                         MIKE COFFMAN, Colorado
+                  Michael Day, Majority Staff Director
+                 Adam Minehardt, Deputy Staff Director
+                      Tim Slattery, Chief Counsel
+                  Karen Haas, Minority Staff Director
+        .........................................................
+                                  (ii)
+                         STANDING SUBCOMMITTEES
+                                 ______
+               Subcommittee on Contracting and Technology
+                     GLENN NYE, Virginia, Chairman
+YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
+BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
+KURT SCHRADER, Oregon                TODD AKIN, Missouri
+DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
+MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
+JOE SESTAK, Pennsylvania
+PARKER GRIFFITH, Alabama
+                                 ______
+                    Subcommittee on Finance and Tax
+                    KURT SCHRADER, Oregon, Chairman
+DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
+ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
+MELISSA BEAN, Illinois               TODD AKIN, Missouri
+JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
+DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
+GLENN NYE, Virginia
+MICHAEL MICHAUD, Maine
+                                 ______
+              Subcommittee on Investigations and Oversight
+                 JASON ALTMIRE, Pennsylvania, Chairman
+HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
+BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
+PARKER GRIFFITH, Alabama
+                                 (iii)
+               Subcommittee on Regulations and Healthcare
+               KATHY DAHLKEMPER, Pennsylvania, Chairwoman
+DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia,
+PARKER GRIFFITH, Alabama             Ranking
+MELISSA BEAN, Illinois               STEVE KING, Iowa
+JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
+JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
+BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado
+                                 ______
+     Subcommittee on Rural Development, Entrepreneurship and Trade
+                  HEATH SHULER, Pennsylvania, Chairman
+MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri,
+BOBBY BRIGHT, Alabama                Ranking
+KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
+ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
+YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania
+                                  (iv)
+                            C O N T E N T S
+                              ----------
+                           OPENING STATEMENTS
+                                                                   Page
+Velazquez, Hon. Nydia M..........................................     1
+Graves, Hon. Sam.................................................     2
+                               WITNESSES
+Kimpel, Mr. Nathan, President, New Energy Corp., South Bend, IN..     3
+Howe, Mr. John,Vice President of Public Affairs, Verenium
+  Corporation, Cambridge, MA.....................................     5
+Feraci, Mr. Manning, Vice President of Federal Affairs, National
+  Biodiesel Board................................................     7
+Litterer, Mr. Ron, Chairman, National Corn Growers Association...     9
+Hurst, Mr. Brooks, Member of Board of Directors, The Paseo-Cargil
+  Biofuels Plant, Tarkio, MO, On behalf of the Missouri Soybean
+  Association....................................................    11
+                                APPENDIX
+Prepared Statements:
+Velazquez, Hon. Nydia M..........................................    29
+Graves, Hon. Sam.................................................    31
+Kimpel, Mr. Nathan, President, New Energy Corp., South Bend, IN..    33
+Howe, Mr. John,Vice President of Public Affairs, Verenium
+  Corporation, Cambridge, MA.....................................    37
+Feraci, Mr. Manning, Vice President of Federal Affairs, National
+  Biodiesel Board................................................    44
+Litterer, Mr. Ron, Chairman, National Corn Growers Association...    49
+Hurst, Mr. Brooks, Member of Board of Directors, The Paseo-Cargil
+  Biofuels Plant, Tarkio, MO, On behalf of the Missouri Soybean
+  Association....................................................    54
+Statements for the Record:
+Environmental Working Group......................................    58
+Society of Independent Gasoline Marketers of America.............    64
+Patrinos, Ph.D., Mr. Aristides A.N., President, Synthetic
+  Genomics Inc...................................................    66
+                                  (v)
+                       FULL COMMITTEE HEARING ON
+    THE STATE OF THE RENEWABLE FUELS INDUSTRY IN THE CURRENT ECONOMY
+                              ----------
+                        Wednesday, March 4, 2009
+                     U.S. House of Representatives,
+                               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 1:00 p.m., in Room
+2360 Rayburn House Office Building, Hon. Nydia Velazquez
+[chairman of the Committee] presiding.
+    Present: Representatives Velazquez, Moore, Dahlkemper,
+Schrader, Kilpatrick, Clarke, Ellsworth, Sestak, Griffith,
+Halvorson, Graves, Luetkemeyer, Schock and Thompson.
+    Chairwoman Velazquez. Good morning. I now call this hearing
+of the Small Business Committee to order.
+    In his joint address to Congress last week, President Obama
+made it clear that there can be no economic recovery without
+energy independence. Entrepreneurs are already leading that
+charge. Small biofuels producers are not only addressing
+climate change, but are helping to end our reliance on foreign
+oil. Just as importantly, they are creating new jobs and
+ushering in a stronger, greener economy.
+    The U.S. is now home to 176 biodiesel plants, up from just
+9 in 2001. Ethanol facilities are also on the rise. Thirty-one
+new plants opened in the last year, with facilities spanning 26
+states across the country. These businesses are generating jobs
+for thousands of Americans and breathing new life into rural
+economies. On top of that, they are making serious strides in
+developing cleaner, sustainable oil alter natives. Last year,
+production for biodiesel alone reached 690 million gallons.
+    But despite their recent progress and enormous potential,
+many of these businesses are now struggling to survive. With
+the price of oil relatively low, the country has been lulled
+into a false state of complacency. The call for renewable
+fuels-which once rang loud and clear-has since died down.
+Meanwhile, the growing recession has also taken its toll. For
+biofuels entrepreneurs, the effects have been nothing short of
+devastating.
+    Perhaps the greatest problem plaguing the renewable fuels
+industry is the diminished focus on energy prices. With oil
+hovering around $40 a barrel, demand for renewable fuels has
+fallen off considerably. Profits are down and, to make matters
+worse, so are investments. Most of us know it is only a matter
+of time before gas prices go up again. Unfortunately, many
+venture capitalists now view renewable energy as a long-term
+investment-one that few are willing to make in this uncertain
+economy.
+    For the biofuels industry, dwindling investor interest has
+been compounded by the recession. Credit is drying up, and
+banks are not making loans. Even lending through the USDA's
+Farms Service Agency-traditionally a lender of last resort-has
+been jeopardized. Applications for FSA lending have shot up 200
+percent since last year. The agency is now worried about
+meeting demand in the coming fiscal year.
+    The results of these drop-offs will be dire. Already, new
+construction for ethanol plants has slowed dramatically. At the
+same time, more than 25 facilities have closed nationwide,
+idling almost 2 billion gallons of fuel capacity. Businesses
+that have managed to survive are straining to meet even basic
+obligations like feedstock expenses.
+    Many biodiesel and ethanol providers committed to these
+contracts when grain and vegetable costs were at a premium.
+Though prices have plummeted, businesses are still locked in at
+record rates.
+    Two weeks ago, President Obama signed the American Recovery
+and Reinvestment Act into law. That bill includes more than $70
+billion in energy measures. But while provisions within the
+stimulus will encourage greater use of renewable fuels, they
+will not address every challenge. That is why we are here
+today-to discuss viable fixes to the problem. Already, a number
+of potential solutions have been raised, from increasing the
+blend wall for ethanol to extending targeted tax incentives. In
+this afternoon's hearing, we will examine a few of those
+suggestions.
+    When oil hit $147 a barrel last summer, biofuels looked
+like the best way out of a full blown energy crisis. Today,
+they are the best way out of a dormant energy crisis. These
+businesses are not only creating new jobs, but they are working
+to ensure we are not caught in the crosshairs when gas prices
+go up again. That's more than energy independence-that's
+economic independence, and that's the new energy plan this
+country needs.
+    I would like to take this opportunity to thank all of
+today's distinguished witnesses in advance for their testimony
+and, with that, I yield to Ranking Member Graves for his
+opening statement.
+    Mr. Graves. Thank you, Madame Chair, and I want to thank
+you again for holding a fantastic hearing as far as I'm
+concerned because this is an issue that affects, very much
+affects, rural America as well as every citizen in America and
+you've always shown a very strong interest in small businesses
+both in our urban areas and in our rural areas.
+    Energy is the life blood of our economy. U.S. economic
+prosperity is closely tied to the availability of reliable and
+affordable supplies of energy. This is not a new issue.
+However, with technology improving exponentially, the energy
+independence discussion has changed greatly over the past few
+years.
+    The stark reality is that we import about 60% of the
+petroleum we currently need. To make our petroleum problem
+worse, we have not built a new refinery in the United States in
+over 30 years. It is stretching our refining capacity to the
+limit and affecting the volatility of energy prices.
+    Efforts to open up the Arctic National Wildlife Refuge and
+the Outer Continental Shelf to oil and natural gas exploration
+should and must continue, but we cannot ignore the fact that we
+need renewable fuels to help take the strain off of our need
+for imported fossil fuel energy.
+    It is not just the United States that is going to need more
+energy in the coming years. Our traditional energy supplies
+will be increasingly strained by dramatic growth in global
+demand. We need to focus on both short-term and long-term
+goals. Most certainly, investing in renewable fuels technology
+is a positive step toward energy independence. We must be
+forward thinking in our approach to meet our current needs and
+future requirements. These sources of energy could hold the key
+to energy independence in the future.
+    Over the past few years of substantial growth in the
+renewable fuels industry, many policymakers who might have had
+legitimate concerns about the industry are beginning to see the
+value and positive outcomes that can be associated with
+renewable fuel sources. These positive results are found most
+immediately in rural America where the difficulty in attracting
+jobs, investments, and maintaining the infrastructure can be
+more complex.
+    This hearing presents an excellent opportunity to learn
+more about the renewable fuels industry. Many of these
+producers are classified as small businesses by the Small
+Business Administration. Not unlike other industries, biofuels
+producers are facing difficult economic times with little
+available capital necessary for expansion and job creation.
+This is especially critical for small producers who do not have
+the available equity to leverage loans. The volatile economic
+conditions are also having a negative effect on this industry
+and today we hope to detail what, specifically, are the biggest
+impediments to growth, and offer policy options that could help
+the industry continue to grow.
+    Again, Madam Chair, I appreciate you having this hearing.
+It's an issue that I'm intimately familiar with and thank you.
+    Chairwoman Velazquez. Thank you and I welcome our first
+witness, Mr. Nathan Kimpel. He's the President and Chief
+Operating Officer of New Energy Corp. in South Bend, Indiana.
+New Energy Corp. was the first large scaled green field ethanol
+plant built in the United States. It started in 1984. It is
+scheduled to produce its two billionth gallon of fuel this
+year. Welcome sir. You have five minutes to present your
+testimony.
+    STATEMENT OF NATHAN KIMPEL, PRESIDENT, CEO, NEW ENERGY
+                CORPORATION, SOUTH BEND, INDIANA
+    Mr. Kimpel. Good afternoon, Madam Chairwoman, and Ranking
+Member Graves and Members of the Committee. My name is Nathan
+Kimpel and as the Chairwoman said, I'm President and Chief
+Operating Officer of New Energy Corp. New Energy is located in
+South Bend, Indiana and became operational in 1984 and we are,
+in fact, getting ready this year to produce our two billionth
+gallon.
+    In 2008, New Energy purchased over $180 million worth of
+corn from local farmers, cooperative elevators and commercial
+grain companies. As you've already said, this is an important
+and timely hearing and I'm pleased to be here to discuss the
+unique challenges and economic difficulties currently facing
+New Energy Corp. and the U.S. renewable fuels industry. Today's
+renewable fuels industry consists of 170 bio-refineries located
+in 26 different states with the capacity to produce 12.4
+billion gallons of high octane clean-burning motor fuel. In
+2008, the renewable fuels industry's operating capacity
+increased by 2.7 billion gallons, a 34 percent increase.
+    The U.S. renewal fuels industry is a dynamic and growing
+industry that is revitalizing rural America, reducing emission
+in our nation's cities and lowering our dependence on imported
+petroleum. Ethanol is becoming an essential component of the
+U.S. motor fuels market. Today ethanol is blended in
+approximately 70 percent of our nation's fuel and is sold
+virtually from coast to coast and border to border. Last year
+the U.S. renewable fuels industry produced and sold a record
+9.2 billion gallons, contributing significantly to the nation's
+economic and environmental energy security.
+    The U.S. ethanol industry continues to have a positive
+impact on our nation's economy. U.S. ethanol producers have
+long been on the cutting edge of the green economy helping
+support more than 494,000 well-paying jobs in 2008 alone.
+Importantly, ethanol production provides a critical stimulus
+for struggling rural economies providing farmers the most
+important value added market for grains in more than a
+generation.
+    The economic crisis is significantly impacting sustained,
+continued growth and development in our industry. Recently, the
+U.S. renewable fuels industry have been devastated by the
+scarcity of both short-term credit to finance on-going
+operations much less the long-term capital to finance expansion
+and new construction. The renewable fuels industry along with
+all of our small business partners, the American corn farmer,
+have fallen victim to many of the same problems that have
+affected other industries including high raw material costs,
+but in our case, collapsing oil and gasoline prices.
+    Ethanol prices are partly driven by gasoline prices which
+are in turn driven by crude oil prices. Many input costs for
+producing corn are as well driven by crude oil prices. Both
+gasoline and crude oil reached record levels in 2008. Crude oil
+prices skyrocketed to $147 per barrel before sinking to below
+$40. According to the Energy Information Agency, gasoline use
+fell an estimated 3.3 percent in 2008, the sharpest decline
+since 1992 as prices hit record levels.
+    Oil led the 2008 commodity boom and corn prices followed.
+Oil prices have fallen due in large and part to a weak demand
+from a slowing world economy. Falling gasoline prices have
+pulled ethanol down as well putting severe pressure on revenue.
+However, gasoline and ethanol prices have fallen much more than
+corn prices over the last year.
+    In our company, we look at a concept called The Commodity
+Price Spread. This is essentially the difference between the
+daily market replacement prices of ethanol and corn expressed
+in a dollar per gallon basis.
+    In January of 2008, the Commodity Price Spread was enough
+to cover all production and debt service cost plus make a
+reasonable contribution to return on investment. However, by
+July the Commodity Price Spread had narrowed to a point where
+an average or model plant was perhaps covering all variable
+cost and making a contribution to semi-variable cost but likely
+not covering the fixed cost of operation much less debt
+service. Since July, the Commodity Price Spread has vacillated
+between not even covering variable cost to making a
+contribution to fixed cost but rarely if ever making any
+contribution to debt service.
+    Our projection for the balance of the year solely based on
+futures market for corn and ethanol show little improvement.
+Corn input costs are established as much as a year before cash
+sales by the farmer actually takes place. Our suppliers tell us
+at today's market price they are well below their production
+price. Unless agriculture production costs drop substantially
+this year, the price squeeze between corn and ethanol may well
+continue into next crop year.
+    The RFS for 2009 which is effectively 9.5 billion gallons
+after imports and prior year credits are taken off is now not
+only the floor of demand but also the ceiling of demand. Today
+more than 25 ethanol plants have closed nationwide idling
+nearly two billion gallons of capacity.
+    The outlook for New Energy Corp. and the U.S. ethanol
+industry will depend on several factors including economic
+growth which is consumer spending and gasoline demand, credit
+availability, oil and gasoline prices. We need to assure the
+continued viability of the industry as it stands today as well
+as provide for future evolution and innovation while
+stimulating thousands of green jobs. To do this, access to
+immediate and necessary operating capital is critically
+important to help weather the current economic conditions
+facing the industry.
+    U.S. ethanol producers have answered the challenge to put
+forth in the RFS and are producing enough ethanol to fill the
+requirements and I might add for both this year and next year.
+    Chairwoman Velazquez. Mr. Kimpel, time has expired.
+    Mr. Kimpel. Okay.
+    [The statement of Mr. Kimpel is included in the appendix at
+page 33.]
+    Chairwoman Velazquez. So you will have an opportunity
+during the question and answer period to add any comments that
+you might want to make.
+    Mr. Kimpel. Very good. Thank you.
+    Chairwoman Velazquez. Our next witness is Mr. John Howe.
+He's Vice President of Public Affairs for Verenium Corporation
+in Cambridge, Massachusetts. Mr. Howe has held leadership roles
+in several organizations including the Coalition for the
+Commercial Application of Super Conductors and the National
+Association of Regulatory Utility Commissioners. Verenium
+Corporation is a leader in the development and
+commercialization of cellulosic ethanol. Welcome sir.
+    STATEMENT OF JOHN HOWE, VICE-PRESIDENT, PUBLIC AFFAIRS,
+         VERENIUM CORPORATION, CAMBRIDGE MASSACHUSETTS
+    Mr. Howe. Thank you very much, Madam Chair and Ranking
+Member Graves. I greatly appreciate your welcoming me here
+today for a critical hearing at a critical time. I'm going to
+summarize my pre-filed statement with seven fairly brief
+points.
+    First of all, curbing our use of imported fuels is a
+massive challenge, but it is imperative that we meet it because
+of a convergence of three huge factors. Our country's monthly
+outlays for oil imports are sapping our economic and
+competitive strength. We're coming to grips with the reality
+that a global peak in oil production will arrive in a
+comparatively short time. And we've awaken to the fact that
+uncontrolled carbon emissions have thrown our climate into a
+disequilibrium that could threaten much of human civilization
+in the future if we don't address it soon.
+    Low carbon advanced biofuels can help on all of these
+fronts. This is why they've turned in a fairly short time from
+being a nice-to-have option to a must have solution. Looking
+beyond today's anomalous short-term collapse of oil prices, we
+will need clean liquid fuels for the long haul. Once these new
+sources are commercially available, it will take years to scale
+them up to have a meaningful impact. We have no time to lose.
+    Second, advanced biofuels will be tremendous engine for
+small business formation and growth. This industry by its
+nature will rely on small scale, geographically diverse
+production and regionally adapted feedstolks and processes.
+That means that large numbers of good, non exportable jobs in
+small businesses all over the country will be created as
+suggested by the map in my prepared statement.
+    Third, there is solid technical progress to report. Just
+last month my own company, Verenium, finished commissioning one
+of the nation's first and indeed one of the world's largest
+true demonstration scale cellulose-to-ethanol plants. It's in
+southwest Louisiana. In January, we announced our first
+commercial plant in Florida that will generate hundreds of good
+jobs. Several competitors are likewise making good progress.
+    The naysayers claim that advanced biofuels are a decade
+away and always will be. But it's simply not true. The
+ambitious production goals in the RFS can be met if we marshal
+the sense of urgency that our national situation requires. If
+we stick to the commitment and don't turn back, this is truly a
+case where we hold destiny in our own hands.
+    Fourth, we must not downplay the obstacles and challenges
+facing advanced biofuels. Chief among these is financing. Even
+big established companies selling mature products find it hard
+to get credit in today's environment. For us, it's basically
+impossible. In the best of times, private lenders won't take
+technology risk on energy projects.
+    So we have reached a financing logjam. First of a kind,
+commercial scale projects are essential to establish the track
+record upon which private capital can lend in the future. There
+is basically no other place to go for funding today except to
+the government for the loans, grants and loan guarantees to
+make such projects possible.
+    Fifth, there are other complex risks in making advanced
+biofuels a commercial reality, the typical challenges of
+developing complex technological processes. We're having to
+work with the Ag sector to put together a fairly complex new
+supply chains to plant produce harvest and collect new kinds of
+feedstocks.
+    There's the off-take market. You hear a lot today about the
+ten percent blend wall. Between legislation and regulation, our
+industry needs to get clarity on just how the ramp-up of
+biofuels to 36 billion gallons under the RFS squares with a
+quota under EPA regulations that will max out at about 12
+billion gallons of ethanol. Lifting the blend limit to 13 or 15
+percent will help, but it will merely postpone the issue for a
+couple of years. It offers no certainty at all for advanced
+biofuels producers who are expected to produce the lion's share
+of future new capacity.
+    And then let's face it. Global oil markets are not exactly
+textbook Economics 101. They feature extreme volatility,
+strategic behavior and outright manipulation of price and
+quantity by large actors like OPEC whose agenda is to prevent
+biofuels from being established as a viable alternative source.
+As an American, I can think of few better reasons why we should
+move aggressively to increase our use of biofuels than the fact
+that OPEC wants us to think it's a bad idea.
+    Sixth, let's not let this long list of challenges deter us.
+Let's focus on the vast potential inherent in advanced biofuels
+to renew our economy, create jobs, protect our environment,
+improve domestic security and global security for as these
+technologies go global they will democratize the balance of
+power in energy production and use around the world. That
+potential is real. I've included the summary of an excellent
+new report by Sandia and GM that finds that a large scale
+cellulose/ethanol industry meeting about one-third to about
+one-half of our liquid fuel needs is feasible and affordable
+within in a surprisingly compact geographic footprint. The key
+is a sustained, consistent policy commitment. A halfhearted
+approach won't do.
+    If I may ask you for just a moment to close with a seventh
+point and personal observation, our economic calamity arose
+from many complex factors, but I believe the surge in world oil
+prices over the last four years is what triggered the
+avalanche. It drained our economy of $1 trillion of our
+families' accumulated wealth. It showed us that if we don't
+bring our dependency on oil imports under control, we will
+remain weakened for a long time.
+    Given the realities of climate change and impending peak
+oil, there is no path to a truly sustainable recovery for our
+country that does not include commercially viable, scalable,
+environmentally sustainable technologies to produce liquid
+fuels from domestic feedstocks, in other words, advanced
+biofuels.
+    The challenges in getting there are severe, but failure is
+not an option. Thank you very much.
+    [The statement of Mr. Howe is included in the appendix at
+page 37.]
+    Chairwoman Velazquez. Thank you, Mr. Howe.
+    And our next witness is Mr. Manford Feraci. He's the Vice
+President of Federal First for the National Biodiesel Board.
+Mr. Feraci runs the Washington, D.C. office spearheading the
+organization federal regulatory efforts. The National Biodiesel
+Board is national trade association representing the biodiesel
+industry for research and development in the United States.
+    Welcome.
+STATEMENT OF MANFORD FERACI, VICE PRESIDENT, FEDERAL FIRST FOR
+                  THE NATIONAL BIODIESEL BOARD
+    Mr. Feraci. Madam Chair, Ranking Member Graves, Members of
+the Committee, thank you for holding this important hearing
+today and I appreciate having the opportunity to testify on
+behalf of the National Biodiesel Board.
+    As you said in your opening statement, the National
+Biodiesel Board is the national trade association for the U.S.
+biodiesel industry and we represent everything from biodiesel
+producers to feedstock providers to fuel marketers to
+technology providers. So we really do represent the whole
+waterfront, as you would say, of the entire industry.
+    Biodiesel itself is a diesel replacement fuel. It's made
+typically from agricultural oils, waste greases such as yellow
+grease, also more commonly known as restaurant grease, and
+animal fats. It is refined to hit an ASTM D67 fuel
+specification. We comply with Tier 1 and Tier 2 emission
+requirements of the Clean Air Act.
+    In the marketplace, the fuel is typically used in five
+percent blends in with conventional diesel fuel. But it can be
+used to the levels up to 20 percent. It's distributed through
+the mainstream existing petroleum infrastructure that we have
+right now. We're in about a little over 40 distribution
+terminals across the country and we're really excited that
+there's two major pipeline companies so far that have actually
+run biodiesel through a pipeline and we think that this holds a
+lot of potential to get our fuel distributed in the mainstream
+infrastructure which ultimately is in the nation's overall
+policy goals.
+    There are significant public policy benefits associated
+with the use of biodiesel, the first being let's talk about
+energy security and reducing our dependence on foreign oil.
+With biodiesel production what you're getting is you're getting
+additional fuel production capacity and new fuel that's being
+added to our overall infrastructure. The 690 million gallons
+that we produced in 2008 displaced 38.1 million barrels of
+petroleum. In addition, it's also worthwhile to mention that
+biodiesel is an extremely efficient fuel and that you get 3.2
+units of energy for every one unit of energy it takes to
+produce the fuel.
+    We're good for the environment. We've reduced direct carbon
+emissions by 78 percent compared to conventional diesel fuel.
+That's the equivalent in 2008 of removing 980,000 cars from the
+roadways.
+    We have literally no sulfur emissions and if you talk about
+water use the water that was used to produce biodiesel in the
+United States last year was the equivalent that was used to
+maintain two large golf courses. So we are very efficient when
+it comes to that.
+    We're creating jobs and economic opportunity in rural
+America. In 2008 alone, we supported over 51,000 jobs, added
+over $4.2 billion to the nation's economy, generated $866
+million in tax revenue for state, local and federal government.
+If we hit our potential which we estimate to be about 1.77
+billion gallons of production we'll support over 78,000 jobs
+and add over $6.6 billion to the overall economy.
+    The other thing that I always thing is worthwhile to
+mention is that the existence of the U.S. biodiesel industry
+right now is really the driver that is encouraging this
+investment in some of the next generation feedstocks that
+people have heard about, for example, algae which we think
+holds great potential as a lipid source. There's a lot of
+research that's going on in it right now to make that
+commercial.
+    Right now, in the advanced biofuels component when you're
+talking about biomass based diesels, we're really the only
+industry out there that is at commercial scale and we are the
+ones that are the ones that are the ones that are driving that
+research.
+    All that said and all the success that we've had though is
+really in danger right now because our industry is facing some
+pretty severe economic hardship right now and it's a perfect
+storm of factors, lack of access to capital which is not unique
+to our industry, volatility in commodity markets, and lastly
+we've had uncertainty relating to federal policy which signals
+that the support for biodiesel going forward is tenuous at
+best.
+    Now we're not asking for new programs. We're not asking for
+huge new initiatives. What we're asking for moving forward is
+the maintenance of what we have now because it's been working.
+    The first thing that's vital to our industry is the
+biodiesel tax initiative. It achieves the goal of making our
+fuel price competitive with diesel fuel in the marketplace.
+It's a dollar per gallon tax incentive. So by making us price
+competitive, it makes it easier for us to market our fuel and
+get greater infrastructure and I think greater penetration in
+the fuel stream. Unfortunately we were pleased that the tax
+incentive was extended for one year through 2009, but the very
+short-term duration of these extensions are really drawing into
+question whether the commitment to biofuels.
+    The second thing to mention real quick is we need a
+workable, renewable fuel standard. The 2007 Energy Bill put in
+for the first time a diesel replacement. It requires the
+replacement of diesel fuel in the marketplace with low carbon
+fuel. We're ready to meet that requirement. Unfortunately, the
+process that EPA is going through right now could have the
+effect of making it nearly impossible to meet those standards
+and I'd love to answer a question about that. I know my time is
+almost up here, but I would love to get more into that if we
+have the opportunity during questions.
+    Thank you very much for the time.
+    [The statement of Mr. Feraci is included in the appendix at
+page 44.]
+    Chairwoman Velazquez. Thank you, Mr. Feraci.
+    Our next witness is Mr. Ron Litterer. He's the Chairman and
+past President of the National Corn Growers Association. As a
+representative of NCGA, Mr. Litterer has advocated development
+of biotechnology, emphasizing the importance of responsible and
+accountable management. The NCGA is a producer directorate
+trade association headquartered in St. Louis that represents
+the interests of more than 30,000 farmers.
+  STATEMENT OF RON LITTERER, CHAIRMAN, NATIONAL CORN GROWERS
+                          ASSOCIATION
+    Mr. Litterer. Thank you, Madam Chair, and distinguished
+Members of the Committee. Thank you for the opportunity to
+testify today on behalf of the National Corn Growers
+Association regarding the state of the renewal fuels industry
+and the current economy.
+    My name is Ron Litterer. I'm a farmer from Greene, Iowa
+where I grown corn and soy beans and I also have a hog
+finishing operation. I appear before you today as a grower and
+Chairman of the NCGA Board representing more than 32,000
+growers from across the country.
+    For more than 20 years, NCGA has worked side by side with
+farmers, industry and government to build the ethanol industry
+from the ground up. Through our efforts corn growers across the
+country and the ethanol industry have helped America move
+closer to energy independence.
+    Our industry has been and is currently a major force in the
+revitalization of rural American by creating green jobs and by
+stimulating economic activity in our communities. However, the
+corn ethanol industry along with many others is feeling
+pressure from the current economic downturn in the U.S. and
+world economies. It is imperative that at a time when our
+country is facing a worsening economic crisis we recognize the
+significant role of the existing grain-based ethanol industry
+has in promoting not only energy independence but a more stable
+and prosperous U.S. economy.
+    During these uncertain economic times, corn growers and
+other Ag producers continue to face a number of serious
+challenges. We along with many industries continue to face a
+very volatile marketplace. Over the past three years, the price
+of corn has seen dramatic fluctuation. The decrease from record
+highs in 2008 have been dramatic with prices falling by more
+than 48 percent over the past eight months.
+    Despite tough economic times, corn production is becoming
+increasingly more efficient. Today biotechnology enables
+farmers to apply fewer inputs to produce larger crops on the
+same land. Currently, it takes about 40 percent less land to
+grow a bushel of corn than in 1987 and energy use to produce a
+bushel of corn has fallen by an average of 50 percent.
+    According to Keystone Center's Field to Market Report
+released January 2009, the production of corn in the U.S. has
+made significant measurable improvements and reducing energy,
+water, land use, and carbon emissions. In order to maintain our
+sustainability, improvements at that production level is
+imperative that the corn ethanol industry continue to grown and
+prosper.
+    There is no doubt that rural America along with the rest of
+the country is undergoing a time of tremendous economic
+challenge. It is for this reason we would like to highlight the
+important impact that farmer-owned, homegrown fuel production
+has in bringing opportunity to the main streets of rural
+America.
+    The role of the American farmer is changing, growing to
+encompass providing food, fiber, feed and fuel for our country.
+With the help of the U.S. biofuels industry our nation's rural
+economy is providing more opportunities for farmers through
+homegrown, renewable energy development.
+    However, the well-being of our industry is threatened today
+by the declining state of our national economy. NCGA feels
+strongly that the continued economic vitality of the U.S.
+renewable fuels industry is crucial for attracting the
+investment in research and development of second generation,
+renewable feedstocks. For that reason, it is imperative that
+the existing grain-based ethanol industry and the accompanying
+infrastructure that has been built around that industry
+continue to prosper and remain viable in order to serve as a
+bridge for the next generation of biofuels.
+    In conclusion, NCGA sees the grain-based ethanol industry
+as a critical part of the domestic energy security. It's
+inclusion as part of the nation's energy policy has
+strengthened and further diversified our nation's fuel supply
+in a time of global volatility and increasing demand for
+energy. Finally, despite these trying times, corn growers will
+continue to meet the growing demands of food, feed and fuel in
+an economical and environmentally responsible manner.
+    I would like to thank the Committee for its time and look
+forward to any questions you may have.
+    [The statement of Mr. Litterer is included in the appendix
+at page 49.]
+    Chairwoman Velazquez. Thank you, Mr. Litterer.
+    And now I recognize a gentleman, Mr. Graves, for the
+purpose of introducing our next witness.
+    Mr. Graves. Thank you, Madam Chair. Our next witness is and
+by the way you have a very distinguished group of witnesses
+today.
+    Our next witness is Brooks Hurst. Brooks and his family
+farm in northwest Missouri, 3,000 acres and their family is
+very active in biodiesel and ethanol production. Brooks himself
+serves on the board of directors for the Missouri Soy Bean
+Association and also on the board of directors of the Paseo-
+Cargill Biofuels Plant which produces 30 million gallons of
+biodiesel a year and 40 million pounds of edible food grade
+glycerin.
+    So, Brooks, thanks for being here.
+  STATEMENT OF BROOKS HURST, BOARD MEMBER, MISSOURI SOY BEAN
+          ASSOCIATION AND PASEO-CARGILL BIOFUELS PLANT
+    Mr. Brooks. Thank you, Mr. Graves, and I would also like to
+thank Madam Chair and Ranking Member Graves and all the other
+distinguished Members of the Committee for allowing me this
+opportunity to talk to you today about the biofuels industry.
+    As Mr. Graves stated, I'm a farmer from northwest Missouri
+and I am a board member of a biodiesel production facility in
+Kansas City, Missouri and then I'm also a member and investor
+in a small ethanol plant in the town of Craig. So I've seen the
+great benefits that it brings to the small rural communities,
+close to home. The Craig ethanol facility, for instance, is
+about a 20 million gallon plant. So it's a really small plant.
+It has 300 farmer investors and so it's very important to the
+farmers around their markets.
+    I also want to thank Madam Chair and Ranking Member Graves
+for your opening statements, the depth and understanding that
+you have of the situation that we're facing and so I will kind
+of just hit a few highlights of my written testimony since you
+obviously understand a lot of the problems we're facing.
+    One of the things that I would like to say is that we would
+like to extend as Mr. Feraci pointed out the biodiesel fuels
+blenders credit. One of the issues that is facing us right now
+is in a volatile market which we've all heard about the
+volatile markets. It really helps to be able to lock in prices.
+As we go forward into the uncertainty of not knowing whether
+there's going to be a blenders credit in the year 2010 it makes
+it really hard in order for our facilities to lock in contracts
+that we can lock in at a profit.
+    Another advantage I would like to point out the renewal
+fuels industry is that it is small producer owned plants
+scattered out across the country and one of the benefits this
+gets you is a catastrophic weather event like Hurricane Katrina
+doesn't affect biodiesel or ethanol production. We still go on
+producing renewable fuels for our country to use.
+    I would also like to reiterate Mr. Feraci an issue or urge
+the speedy implementation of the Renewal Fuel Standard that
+Congress passed in the latest energy bill. I realize there are
+a lot of details to be worked out, but I think it's very
+crucial that we have a domestic impetus for demand. As everyone
+is well aware right now, the EU has embargoed biofuels,
+biodiesel, going into the European Union and we're working on
+trade talks to get that resolved, but there were several
+shiploads of biofuel sitting in the coast not being able to be
+exported. So not only do we need to work that trade issue out,
+but the renewal fuel standard would really help increase our
+demand domestically and making that important.
+    I would also like to say that we have a byproduct of
+biodiesel which is glycerin and Mr. Graves mentioned that we
+have refining capacity in the Paseo-Cargill facility in Kansas
+City, but there are a lot of biodiesel production facilities
+that do not have the capability to refine glycerin. But it can
+be used as a fuel. In fact, there's been tests that it's a very
+effective fuel additive in No. 4 diesel and if we could
+establish, get the Energy Department to establish it as a fuel
+eligible for the biodiesel fuel credit I believe that would
+help set a floor for one of the critical byproducts of the
+biodiesel production.
+    And with that, I'd like to say that we as a nation stand at
+a crossroads. The decisions that are made today will impact the
+country for years to come. It's my hope that my testimony will
+help demonstrate the importance of the biofuels industry and
+your Committee will consider my recommendations. It's crucial
+that we work together to ensure the U.S. biofuels industry
+continues to play an important role in rural development and
+growing our fuel supply.
+    And with that, I'd again like to thank you, Madam Chair,
+Ranking Member Graves and all the other Members of the
+Committee for this opportunity to testify before you today and
+if you have questions, I'd be glad to answer.
+    [The statement of Mr. Hurst is included in the appendix at
+page 54.]
+    Chairwoman Velazquez. Thank you. Thank you, Mr. Hurst.
+    I would like to address my first question if I may to Mr.
+Howe. President Obama reaffirmed his commitment to renewable
+fuels and energy security in his address to Congress last week
+and while there is tremendous opportunity from ethanol
+production from biomass we are not there yet. So can you talk
+to us about given the present economic situation that we're in,
+what will it take to get cellulosic ethanol to the marketplace?
+    Mr. Howe. Madam Chair, I believe the key step that we have
+to take is to achieve some successful I would call proto-
+commercial facilities. That is full commercial scale, first of
+a kind. These projects have not been built at commercial scale
+yet in this country. Our company has undertaken a significant
+private investment of $80 million to demonstrate a
+demonstration scale that's about on a log chart halfway from
+pilot to commercial. That was a major commitment that we made
+with our own shareholder funds.
+    But to get to full commercial scale which we believe is in
+the range of 30-40 million gallons per year, we're talking
+investments of $200-$300 million if we can achieve success. I
+think we can't have a halfhearted approach. We need to decided
+we're going to make a full commitment to a handful of proto-
+commercial facilities, establish the track record of
+reliability, identify what the problems are and then I'm
+confident as the economy returns private lenders will be able
+to step in and help the scale up.
+    Chairwoman Velazquez. With the new provisions that are in
+place in the Farm Bill, how long will it take before we can
+achieve full scale commercialization?
+    Mr. Howe. Well, as I think about the Farm Bill, I think of
+three provisions that were especially important. There is a
+cellulosic-ethanol producer tax credit of $1.01 per gallon,
+very helpful. Unfortunately it expires in 2012 and given the
+time frame that's really not going to be an effective
+inducement for new capital investment. So I would recommend
+that expiration date be extended for five-six years for example
+to really provide an incentive to attract some new investment.
+    A second program that I think offers tremendous promise is
+the Biomass Crop Assistance Program. This will provide an
+inducement for agricultural producers, growers, landowners, who
+are by and large a fairly conservative lot. They may not want
+to move away from existing growing programs where they have
+subsidies, insurance programs, into a brave new world where
+those programs don't exist.
+    So we need to get the BCAP program up and moving. I know
+there has been some concern about it, requests for an
+environmental impact statement that could delay it. Again, I
+think we need to make a commitment to do this at some
+significant scale.
+    The third is the Loan Guarantee Program which the USDA is
+putting in place and that program needs to be funded robustly
+and the rules need to be looked at in order to make it feasible
+for private lenders to get behind projects.
+    Chairwoman Velazquez. Thank you, Mr. Howe.
+    Mr. Kimpel, you mentioned the immediate need for financing
+to cover daily operating expenses. As part of the Economic
+Recovery Bill, this Committee created a stabilization program
+to address those challenges and that initiative will allow
+small firms to take interest-free loans, those helping the
+businesses that you talk about whether the recession and pay
+down existing debt. Would you agree that this kind of program
+will be useful for the ethanol industry?
+    Mr. Kimpel. Yes. Absolutely, it would. But while we are
+still considered small business, the scale of our business is
+mammoth. To build a 100 million gallon ethanol plant today, if
+anyone would build an ethanol plant today, is probably
+someplace in the neighborhood of $200 to $250 million.
+Operating cost today in our industry is probably someplace
+between $300 to $400 million. So the numbers are absolutely
+massive.
+    We also have as John had referred to here the availability
+of loan guarantees. One of the interesting things about loan
+guarantees at 65 or 75 or 80 percent is that you can't even get
+a bank to look at you unless you have somehow a 100 percent. So
+even areas that have the capacity to take advantage of loan
+guarantees are going untapped simply because nobody will loan
+anybody anything.
+    Chairwoman Velazquez. I guess that we need to talk to some
+of the banks who are taking TARP money and see if they will be
+willing.
+    Mr. Kimpel. Yes.
+    Chairwoman Velazquez. Since those loans are guaranteed by
+65 to 70 percent in the case of USDA and up to 85-90 percent
+under SBA. I guess that we need to bring the banks to talk to
+us and see what else it will take.
+    Mr. Litterer, less than two years ago, this Committee held
+a hearing on renewable fuels. At that time, we learned about
+the small business boom in ethanol and biodiesel production. We
+also learned about the rural rejuvenation taking place as a
+result of that boom. Clearly, the picture has changed
+dramatically. What will it take for small producers to overcome
+these challenges and do you believe that the result build-up in
+capacity was too rapid?
+    Mr. Litterer. First of all, I think we have to recognize
+that right now the most limiting factor to small producers is
+access to capital. That is an overriding issue and it's not
+just this industry. It's a lot of industries in our country. So
+if we could get that problem fixed, I think that would help a
+lot of producers.
+    The other part of that is the pricing between gasoline and
+ethanol. If that would change, that would dramatically change
+the outcome for ethanol producers.
+    As far as the build-up of capacity, I don't think any of us
+had a crystal ball to see what was going to happen with our
+economy. There's no question we were trying to meet a demand
+for phasing our MTBE. We met the challenges. We expanded. We
+believe we have a product that needs to be here long term for
+replacing imported crude oil and I think if we all had a
+crystal ball maybe we would have done some things differently,
+but looking at it at the time we think we did the right thing
+and I think the industry can rebound from this if we can get
+our credit situation solved.
+    Chairwoman Velazquez. Okay. Thank you.
+    Mr. Feraci, I know that your board has been supportive of
+the renewal fuel standard two and we all know that they are
+still in its regulatory phase and the good thing about it is
+that it will recognize biodiesel fuel for the first time. In
+the context of the recession, what will be the proper
+implementation of RFS 2? What will that mean for your industry?
+    Mr. Feraci. Thanks for the question. The Renewal Fuel
+Standard, proper implementation of this, to have a program that
+is going to be workable, is absolutely vital to our industry.
+It really could be a make or break for us right now and given
+the way things are out in the economy and the way the market
+conditions are.
+    RFS 2 the thing about it that was--From our industry's
+perspective, it was so groundbreaking. For the first time you
+have a renewal requirement in U.S. diesel fuel that you didn't
+have before and it's a component of the advanced biofuel
+schedule and you ramp up from 500 million gallons in 2009 to
+one billion gallons in 2012 and one of the requirements of that
+fuel is that fuel to qualify for that component of the program
+it has to reduce greenhouse gas emission by 50 percent.
+    Now we have well-founded data that's over a decade old and
+has been refined consistently that shows when you look at
+direct emissions associated with biodiesel you get a 78 percent
+reduction.
+    What our concern is right now is that the entire advanced
+biofuel schedule, the first component of it to roll out which
+is this biomass based diesel component, could be in jeopardy if
+the EPA doesn't implement this in a correct way. What we're
+concerned about is that due to some of the additions that
+they're throwing in with the calculation of greenhouse gas
+emissions you could have the effect of essentially
+disqualifying all vegetable oil from being used as a feedstock
+to meet what is the very first component of the biomass based
+diesel schedule and if you do that just quite frankly you
+simply don't have the feedstock to meet the program and the
+first component of the advanced biofuel schedule that rolls out
+is a failure. So it's imperative to us that this be done
+correctly.
+    Chairwoman Velazquez. Do you have an ideas as to when EPA
+will implement it?
+    Mr. Feraci. By statute, they were supposed to have a final
+rule in place by January 1 of this year. Now they clearly
+haven't done that. Based on conversations, we assume that we're
+going to see the NOPR here maybe within the next couple weeks
+and we certainly want to see that process move forward because
+getting a program up and running and that's workable is
+absolutely vital to us. But it has to be done in a correct way.
+    Chairwoman Velazquez. Thank you.
+    Mr. Graves.
+    Mr. Graves. Thank you, Madam Chair.
+    I want to kind of-I guess for everyone's interest-point out
+that the nice thing about biofuels whether it's ethanol or
+biodiesel, they're products that work and we have them right
+now. These are products that have to be further developed.
+These aren't products that have to be dreamed up or come up
+with. These are products that work right now and every gallon
+of biodiesel or ethanol that we use is a gallon of petroleum we
+don't have to find somewhere else.
+    Ethanol can be produced from anything. It can be produced
+from corn. It can be produced from sugar. It can be produced
+from cellulose, anything that ferments. If it ferments, you can
+make ethanol out of it. And biodiesel is vegetable oil. That's
+what it is which kind of brings me to the environmental impact
+of biofuels.
+    If you crack open a shipload of petroleum in the ocean some
+place you have a major environmental problem. If you crack open
+a shipload of ethanol, it's completely water soluble because
+it's alcohol or vegetable oil. You have a much, much different
+issue on your hands. That's the reason these products are so
+good.
+    But we have an industry that is struggling and we have a
+lot of small plants out there. The vast majority of them as of
+recently we've had private investment in them, but for the most
+part they're farmer owned cooperatives. It's just a bunch of
+farmers getting together to raise capital and now they're
+caught up in the credit crunch because there's not a lot of
+credit available out there.
+    So now I've made my soapbox pitch. But I do want to ask
+about the blenders wall that we have out there because right
+now it's ten percent of an ethanol blend and in our farm I know
+we run about 30 percent ethanol blend. What we do is go out and
+buy E85 which is an 85 percent blend. We bring it back. We
+blend it out in our own fuel tanks and get about a 30 percent
+blend which my mother uses in her car all the way to the trucks
+on the farm that we use. Biodiesel we've used as much as a 50
+percent blend in our tractors with no horse power loss
+whatsoever. So you can go much, much higher without any
+modifications to the system.
+    But my question is how much impact is it going to have if
+we can make that jump to say 15 percent and I just think, Mr.
+Litterer, you may have mentioned it or somebody mentioned it
+but the question is actually for all of you. How much impact is
+that going to make when it comes to demand and helping out if
+we make the jump, say, to 15 percent ethanol blend and why
+can't do that? What is the reason for the 10 percent wall that
+we have?
+    The same thing in biodiesel. If we set the bar higher.
+There is no reason why we shouldn't be able to do that. And
+again every gallon of biofuels that we use is a gallon of
+petroleum we don't have to find and I would rather be dependent
+on U.S. farmers than I would Saudi Arabia for our fuel any day.
+My question is what can we do and how big a challenge is that
+going to be to move that blenders wall up the scale for all
+those products and I'll start with you, Mr. Kimpel.
+    Mr. Kimpel. Mr. Graves, we need to take you along on our
+next visit to see the automobile companies.
+    There are obviously regulatory issues, but one of the
+issues that has been brought up to us every time that we talk
+to the automobile companies is exactly what you have talked
+about and that's the warranty issues and perhaps there are some
+legitimate issues there.
+    But it is critical, absolutely critical, that we solve the
+blend wall and perhaps we're going to do it in steps. Perhaps
+it's going to be 12 percent and then 15 percent and then 20
+percent and whatever it takes to get us to the 35 to 36 billion
+gallons that we so desperately need to solve these issues that
+we've been talking about here today.
+    But there are a number of initiatives that are going on as
+we speak. We have our partners in the industry, the Ag
+community, the Department of Energy, Environmental Protection
+Agency, USDA, all are actively involved in this. But taking
+that first leap and getting off the arbitrary limit that was
+established years ago at ten percent is critical.
+    Several years ago, we had 140 billion gallons of spark
+ignition motor fuel in the United States. Ten percent of that
+if you get 100 percent market penetration doesn't even get us
+to where we need to be at the end of the conventional renewal
+standard much less get into the cellulosic and advanced
+biofuels. It is critical and it's critical also in the sense
+that we don't have to rail the stuff to every single corner of
+the country.
+    Mr. Graves. Mr. Howe.
+    Mr. Howe. Thank you very much, Mr. Graves.
+    I'll pick up where Mr. Kimpel was just speaking about. We
+absolutely should go forward. We should push this limit as far
+as the science will justify. I know there have been concerns
+expressed by auto manufacturers about warranty on legacy
+vehicles, small engine manufacturers, boat operators and so
+forth. Those considerations need to be taken into account, but
+I'm not sure that they should dominate the issue. If there's a
+way that we can provide fuel that is a higher fraction of
+gasoline for the lawnmowers and weedwackers of the country most
+of the auto fleet will be able to use richer blends I think
+over time or can be designed to use richer blends.
+    But ultimately down the road we can get a few more
+percentage points that will accommodate growth in grain ethanol
+in the next five, six, seven years. The RFS schedule calls for
+much higher use which is to be from cellulosic sources. So I
+believe that that fix does not really address the long-term
+challenge that we face.
+    As I see it, there are only two other options. One is a
+complete change of chemistry to other kinds of molecules such
+as biobutanol, the problem being that the chemists have not
+determined that we can produced biobutanol that has as
+favorable an energy balance or a carbon balance as ethanol
+does. And the other alternative is E85. If we can make the kind
+of commitment to E85 that Brazil has made to all ethanol
+vehicles we can have essentially limitless growth or dramatic
+growth in the use of biofuels in the future of this country.
+    I see this as an issue of standards. This is Windows and
+Mac. You can't say that Mac is inferior to Windows. In fact, a
+lot of people think it's a better operating system. But the
+problem is one of compatibility. So we need to look at how we
+can accommodate this new fuel for the future rather than
+necessarily adjust to the legacy fuel.
+    Mr. Graves. Mr. Feraci.
+    Mr. Feraci. From the biodiesel perspective, the issue is a
+little bit different because they're different fuels and
+different spaces in the economy. But overall as an industry our
+overall goal is to try to get five percent displacement in the
+overall U.S. diesel pool and from the macro sense the first
+real tangible step we can take is get the RFS 2 implemented in
+a successful way.
+    But as an industry and this has been going on for some time
+we work pretty closely with engine manufacturers to try to get
+these higher level blends that you're talking approved for
+engine warranties. Right now, B5, everyone warranties B5 now
+and as a matter of fact we went through the process as an
+industry at ASTM to have a change in the D975 diesel fuel spec
+which is just conventional diesel fuel that if you have spec
+biodiesel up to B5 blend that's blended in with conventional
+diesel fuel it's just deemed to be D975. It's not some other
+sort of designation. So if you pair that with pipelines and
+other sorts of fuel infrastructure that's going to give you a
+significant amount of penetration into the fuel infrastructure.
+    But getting up to B20, some manufacturers warranty. Some
+don't. We're constantly working with them to try to get them to
+do it because like you we agree. We think you can do it and
+have no detrimental impact on engines at all.
+    Mr. Graves. Mr. Litterer.
+    Mr. Litterer. I am not going to repeat what our first
+participants have said, but just to add to, I think that we
+have to address this very shortly and EPA is going to be key in
+this because that's where the science is going to be researched
+and they need to prove it. It's going to take maybe up to two
+years to get it implemented once the decision is made. So it's
+something that we need to work on immediately. It's one that if
+we're ever going to go to second stage ethanol production, the
+cellulosics, we have to get this issue resolved.
+    Mr. Graves. Mr. Hurst.
+    Mr. Hurst. Thank you, Mr. Graves.
+    I also wanted to state the Underwriters Laboratory came out
+two weeks ago and basically said that they, which is an
+independent third party verification, could see no problem with
+12, 15 percent blend in any of the pipelines, in any of the
+infrastructure we have currently in introducing a 15 percent
+blend. So I thought that was important factor.
+    And I also wanted to touch a little bit on biodiesel. One
+of the attributes of biodiesel is since we have eliminated
+sulfur, even a two percent blend increased the lubricity for
+your engine. So actually biodiesel, if you put a little bit of
+biodiesel, it's better than petroleum diesel right now for the
+lubricity.
+    Mr. Graves. Thank you, Madam Chair.
+    Chairwoman Velazquez. Thank you.
+    I would just like to ask you a question. What will be the
+maximum amount and you are suggesting to increase it from 10 to
+12, 15, that will make it compatible with today's cars and
+infrastructure?
+    Mr. Howe. We need to defer to testing to determine that
+number. I don't--We don't have expertise.
+    Chairwoman Velazquez. Okay. Mr. Sestak.
+    Mr. Graves. It's 30 percent on our farm. We know that.
+    Mr. Sestak. Thanks, Madam Chairwoman.
+    Could I ask you, sir? Go back to RFS. What do you see as
+the purpose of RFS? Its policy purpose?
+    Mr. Feraci. I would say it's multi-faceted. From our
+perspective, you obviously get the energy security goal of
+displacing petroleum with renewable fuel. In our case, that
+would be biodiesel and increasing the amounts that you're
+getting on that side as well. Another stated goal of it is to
+have not only you're displacing petroleum but you're addressing
+the whole issue of climate change as well.
+    Mr. Sestak. With that in mind, with what you said in your
+concerns, are you all right with a life cycle cost approach of
+it? I mean, was that what your problem was with the life cycle
+cost or is it the discount rate that they're trying to use?
+    Mr. Feraci. It relates more to the whole idea of indirect
+land use changes and here's what our specific concern is.
+    Mr. Sestak. In short, you don't do soybeans. Somebody else
+is going to soybeans and you have to take that cost in.
+    Mr. Feraci. Yes, the idea that U.S. agricultural in
+particular has been pretty stable and it's extremely
+sustainable. It's somehow attributed with having deforestation
+in South America for example.
+    Mr. Sestak. But if the goal as you said is climate,
+shouldn't we take that into account?
+    Mr. Feraci. We should take it.
+    Mr. Sestak. Up until now, ethanol has by and large not been
+performance-based criteria. The more you build the more subsidy
+you get. I was taken with RFS because it's the first time we've
+have a performance-based criteria. But part of that
+performance-based criteria is climate change.
+    Mr. Feraci. Right.
+    Mr. Sestak. So why not take an indirect land use?
+    Mr. Feraci. We don't have an issues with taking into
+consideration indirect. By statute, you have to. In the RFS, it
+says that you have to account for significant indirect land use
+changes.
+    Mr. Sestak. But your problem is that-
+    Mr. Feraci. Our issue relates to the science of it. Right
+now, we know how to measure direct emissions.
+    Mr. Sestak. Right.
+    Mr. Feraci. We have a great model that's been out there for
+10 years now and that model has been refined over time to show
+a pretty definitive result across the board. The science of
+indirect land use change is so inexact right now that you could
+really put some false attributes on some fuels that aren't
+accurate. As a matter of fact, the Europeans in their
+renewables directive took a close look at this issue and they
+decided just to push it down the road in terms of having to do
+the indirect land use change calculations.
+    We have no problems with that because we think at the end
+of the day that you're going to have a positive attribute and
+we're not going to have a negative impact on it. But what we do
+have an issue with is a science that's very undefined,
+unreliable and inexact at this moment attributing something
+negative to a biofuel that's really not there.
+    Mr. Sestak. We had looked at the RFS. It's not a cap in
+trade. It's more of a floor in trade. But my question I guess
+then is what did you think about the discount rate and trying
+to trade off bad action today for bad action in the future.
+    Mr. Feraci. We're not sure. I mean we haven't seen the rule
+yet in terms of what we're talking. They had a stakeholder
+briefing, EPA, with various groups. We haven't seen what
+they're going to do on the discount rate. By statute you're
+going to have to be compared to, our fuel is going to be
+compared to, 2005 emissions associated with diesel fuel and
+we're going to have to just play in the statute.
+    Mr. Sestak. I agree that-Yes sir.
+    Mr. Litterer. Could I just add a comment about the land use
+issue?
+    Mr. Sestak. She's real tough on my time. No, go ahead.
+    Mr. Litterer. That's all right.
+    Mr. Sestak. I'm only kidding.
+    Mr. Litterer. Just simply that in corn production our
+production is not static and it never has been. If you go back
+historically, we've about a two percent growth rate in corn
+production per acre per year. So in other words we can meet the
+growing demand for corn without adding a lot of additional
+acres and that is a key that I think a lot of fundamental of
+this research that is being left out of the picture and the
+equation that needs to be really considered. In fact, if you
+look at the tech providers in producing seed corn today, they
+say that we're even going to accelerate the rate of that growth
+because of the technology going into seed. So that goes to the
+science and the accuracy of the formulas they use in land use.
+    Mr. Sestak. That's a good point. The reason I asked is I've
+always kind of felt that as valuable as ethanol and
+particularly now as we get into advanced fuels are that the
+lack of having a performance-based criteria although it helped
+economically it was about you billed more, you get more. It
+wasn't about does one of your plants use coal or natural gas. I
+mean there's a difference and you get the same tax subsidies
+for both. I'm not sure we-So that's why I was taken with RFS.
+But I understand it's the science of the ones that you have,
+not the concept.
+    Chairwoman Velazquez. Time expired.
+    Mr. Sestak. Thank you.
+    Chairwoman Velazquez. Mr. Luetkemeyer.
+    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
+    I just have one quick question for Mr. Howe. You made a
+comment awhile ago with regards to you had some suggestions
+with regards to SBA lending that you think would be able to
+help facilitate some of the loans to some of the plants. Could
+you elaborate on it just a little bit?
+    Mr. Howe. I did mention the USDA loan guarantee program.
+The concern I was alluding to is there are restrictions in the
+terms of that program that limit the rate at which a lender for
+the balance of the non guaranteed portion that limits the rate
+that the lender can charge and also, of course, that balance is
+unguaranteed. The results of those conditions in the rule is we
+have found, and we've extensively tested the market, that
+there's very little appetite to participate in this program
+right now, certainly under today's conditions. So we believe
+there either needs to be a guarantee of a higher fraction or
+100 percent of the loan and some relaxation on the conditions
+on what the lender can charge for the balance of the loan.
+Because right now, it's a program that it's like we're 200 feet
+offshore and we're getting thrown a 100 foot rope. It's just
+not going to do the job.
+    Mr. Luetkemeyer. Okay. So what you're saying is if the
+lender had the ability to have a higher rate of guarantee or
+could receive a higher rate of guarantee he would more inclined
+to lend. Is that what you're saying?
+    Mr. Howe. That would help. However, I think it's the fact,
+the notion, of having to bear risk for projects for which
+there's not a technology track record. That itself is
+problematic. This is why our community has been saying that for
+the first projects of a kind the highest possible fraction of
+guaranteed loan is essential.
+    We're only talking a handful of projects here so that we
+can establish that track record and then get off to the races.
+Private lenders have financed tremendous expansion of proven
+technologies like independent power, wind power, solar
+installations. But we have to get that fire started. We've got
+to do the first few projects. I think it's a good public
+investment for the government to get behind these first
+projects.
+    Mr. Luetkemeyer. Okay. Which first projects are you
+referring to? Are you referring to cellulosic or are you
+referring to some other technology?
+    Mr. Howe. This program is for biorefineries, advanced fuel
+biorefineries. So I think we are talking certainly about
+cellulosic, ethanol and other technologies that qualify under
+the RFS, in other words, that achieve significantly higher
+carbon reductions. So that's certainly our interest in it.
+    Mr. Luetkemeyer. Very good. Thank you, sir.
+    Thank you, Madam Chairwoman. I'm give you back my time.
+    Chairwoman Velazquez. Mr. Griffith.
+    Mr. Griffith. Thank you, Madam Chair. I am taken number one
+by the technology and the information and the expertise of the
+panel and thank you for being here.
+    As a business man, there's something wrong here when we are
+not attracting private capital. Cargill, the largest privately
+owned company in the world should be a source of capital. Exxon
+should be a source of capital. Microsoft and many, many others
+and hedge funds and venture capital funds that look for
+opportunities that they see with great potential in the future
+and would love to invest in. Why do you think they are
+reluctant to invest in this area of energy production?
+    Mr. Howe. I believe we are confronting a problem of public
+good. This is a classic public good problem that warrants
+government intervention. If we look at the benefit that the
+ethanol program has created for the country here was an
+excellent analysis done by Merrill Lynch about eight or nine
+months ago showing that the mere presence of the nine or ten
+billion gallons of ethanol in the nation's fuel mix helped to
+keep fuel prices, gasoline prices, about 15 percent lower than
+they would otherwise have been last year when we had that
+shocking episode of nearly $150 oil. What DOE has found is the
+American consumers saved $20 to $40 billion which I think is a
+tremendous payback on the $5 billion or whatever that was paid
+to the oil companies as subsidy for using ethanol.
+    This is one of these instances. It's a tragedy of the
+commons problem where the benefit cannot be captured by the
+private investor. There is a critical need for the government
+to participate to facilitate these new technologies.
+    Mr. Griffith. If the CAFE standards were raised to 47 to 50
+miles per gallon per average for a manufacturer, would you have
+a viable industry?
+    Mr. Howe. I think we need to do everything we can looking
+out into the future. This is not either or. This is a both and
+situation. We need to conserve. We need to become efficient. We
+need to electrify. We need to do everything, you know,
+reconfigure our communities. But at the end of the day there
+will be a significant residual demand for liquid fuel that
+today is provided by petroleum that in the future needs to be
+provided by cleaner fuels as our petroleum supplies play out
+and as we come to grips with the necessity to reduce carbon
+emissions.
+    Mr. Griffith. And if we have a two year drought that
+reduces the baseline product, what would we be looking at as
+far as our industry is concerned if we became dependent for 20
+percent of our fuel on biofuel or biodiesel?
+    Mr. Litterer. You know, we haven't had a major drought in
+this country since-
+    Mr. Griffith. Last year.
+    Mr. Litterer. No, we really haven't. If you go back in
+history, we have not really had a major drought affecting crop
+production. We've had isolated regional droughts. But we have
+not had a major drought that has impacted production. We had
+problems a couple years ago but we have still produced in the
+last two years 13 billion and 12 billion respectively, the two
+highest corn production years in history and, sure, there are
+going to be some ups and downs.
+    But to say we're going to have two years back to back major
+drought, if you look back historically, that just has not
+happened.
+    Mr. Griffith. I see.
+    Mr. Litterer. It hasn't.
+    Mr. Griffith. I guess my question to you is what are the
+objections of private capital investing in this. I see such
+great potential for it and I'm sure there are people a lot
+smarter than I am that you're pitching this to in the private
+markets and they're not coming forward.
+    Mr. Feraci. If you-there are a variety of things right now.
+I'm speaking from biodiesel perspective. There are a variety of
+things right now that are causing harm to the industry and
+making it difficult to attract that capital. The one thing that
+we-some of that we can control. Some of that we can't. I mean
+the one that would be helpful is that you have to have this
+stable policy framework that is reliable, that sends a signal
+that biofuels are not just a flash in the pan, that it's
+something that's going to be there for a while to draw this
+sort of investment in the terminal infrastructure and things
+like that that you really need to get infrastructure.
+    Mr. Griffith. That makes perfect sense. Thank you all.
+    Chairwoman Velazquez. Time has expired.
+    Mr. Schock.
+    Mr. Schock. Thank you, Madam Chairwoman. First, let me say
+I agree with the comments that have just been made and that is
+that we have to provide some level of consistency to the
+biofuel markets so that investors will want to continue to
+invest. Lenders, banks, financial institutions, venture capital
+firms will feel safe about making an investment in these plants
+and we as policymakers I think need to do what we can to shore
+up the market so that there is some consistency for those that
+are doing what it is we've asked them to do which is provide an
+alternative fuel for our country.
+    Specifically, I'm concerned with our ethanol industry right
+now as they have taken a hit and I think it's extremely
+important not only for that industry but every other industry
+thereafter whether it be cellulosic or others that we hope to
+have that industry be successful not only for the jobs that
+they've created but also for the psychological benefit that it
+has as we mentioned with the investors and entrepreneurs
+wanting to invest in the next greatest, latest invention, if
+you will, when it comes to biofuels.
+    With that said, I'm pleased that in my area, a group called
+Biofuels Manufacturers of Illinois, BMI, is in the process of
+starting a biodiesel plant right in my district. Currently,
+they've obtained all the necessary permitting, the land rights
+and are ready to build the plant. They actually have contracted
+already with an enduser for their products. So it's not pie in
+the sky, trust us if we build it, if we produce it, someone
+will buy it. But actually the Farmer Cooperative GrowMart has
+agreed to buy their biofuel once it is produced.
+    I'm equally pleased that unlike some of the others that
+have come and gone in terms of the new biofuels they have
+partnered with the USDA lab in Peoria. Peoria, Illinois is home
+to one of four USDA Agricultural Utilization Centers and the
+researchers there have discovered a new crop which is currently
+termed a weed, pennycress, which has 36 percent oil in it,
+nearly twice as much of soybean, which is very exciting.
+Equally exciting I think is the fact that it's a winter crop
+which means it can be grown right now when the land is dormant
+and not being used, thus adding a second shift if you will to
+crop production into the agriculture industry.
+    With all that being, they've had their hurdles if you will
+in getting that plant online and getting this idea to be not
+just an idea or a dream but actual reality and I'm just
+interested in hearing from Mr. Feraci what your organization
+specifically with biodiesels can do for a group of
+entrepreneurs and individuals who have gone a long way in terms
+of the work and the investment to help make that a reality.
+    Mr. Feraci. Congressman, I know you've expressed a lot of
+interest in that project and we applaud your leadership on
+that. The National Biodiesel Board, we're a feedstock-neutral
+organization and the sort of research that you're talking about
+where they're looking at pennycrest as a potential oil seed
+crop is something that we're excited about. We encourage that
+going on.
+    And as you look at the industry has it has grown to
+commercial scale, with each passing year, you're seeing
+increased diversity in the feedstock that we're using to
+produce fuel. Yes, soybean oil is still a very important
+feedstock to us, but you're seeing more restaurant grease and
+animal fat and now you're seeing things like camelina and
+pennycrest that are coming on list as viable feedstocks that
+you can use to produce a spec biodiesel that will be accepted
+in the marketplace. So we're extremely excited about that.
+    Our organization with some of the things that you're, among
+some of the these that these enterprising individuals are
+probably going to run into is eventually at some point they're
+going to run into an issue with crop insurance and our
+organization does outreach with that to help them so that they
+get covered underneath that program.
+    There is also going to be a grower outreach component to it
+as well because like you said they're rotating and I believe
+those will be acres competing with winter wheat. So again we do
+grower outreach. We talk about the benefits of it and there is
+clearly going to be a demand for this feedstock out there if
+the price is competitive and going forward we would be more
+than happy to work with you to make this project a success.
+    Mr. Schock. Great. Thank you. What kind of help do you
+provide in helping? I know the other issue, of course, is our
+loan guarantees.
+    Mr. Feraci. Right. In terms of just pointing them, we'd be
+more than happy to visit with them, see exactly what they're
+doing, what their needs are and see if we can't point them in
+the right direction in terms of programs they should be
+applying for.
+    Mr. Schock. Okay. Great. Thank you.
+    Chairwoman Velazquez. Ms. Halvorson.
+    Ms. Halvorson. Thank you, Madam Chairman, and thank you,
+panel.
+    It's great to see you and this is an issue that's near and
+dear to my heart. First of all, let me tell you I drive a
+flexfuel vehicle. I buy E85 everywhere I go because I believe
+if each and every one of us takes responsibility for ourselves
+and talk about it that's a big help because we need to buy
+American wherever we go and we should be doing this not only
+when gas is $4 a gallon, but even when it's lower.
+    I just want to tell a story. I'm sure that everybody has a
+story to tell and you hear many of them. But I have a company
+in my district called Nova Biosource Fuels. It's in Seneca,
+Illinois and it's a renewable fuels business that's having
+financial trouble due to the economic crisis that we're in and
+it's probably no different than anybody else and it's a
+producer of biodiesel. It buys leftover grease from the fast
+food restaurants and turns that waste product into useable
+energy.
+    Now I toured it a couple of weeks ago and now last Thursday
+they have announced that they will be ceasing production
+because they're unable to identify a lender to give them credit
+while they're waiting for money to come in. They need to buy
+their feedstock so that they can turn it around. They have the
+capacity to annually produce 230 million gallons of biodiesel
+which is equal to 55 million fewer barrels of crude oil if only
+they had the funds to be available to them. When oil is valued
+at $40 a barrel, it means over $2 trillion of U.S. wealth
+transfers out of this country.
+    Now this is probably no different than anybody else and
+I've heard for the last hour and a half some of the different
+challenges and what's going on. We've heard about loan
+guarantees. We've heard about different challenges. They need
+$20 million. Now that's not something that's easily gotten and
+they've talked to several creditors.
+    Now as a panel and whoever wants to answer this, if there
+was one thing you as a group would ask Congress, how would you
+ask Congress right now to help with this credit crisis because
+that is the problem? Simple, one thing and I shouldn't use the
+word ``simple.'' Nothing is simple when it comes to Congress,
+but everybody's having trouble getting credit and it's a
+vicious cycle and this is our problem. If they can get credit,
+they could keep their employees or their people employed and go
+out and get their product. What would you say to Congress on
+what you would need to get help for to keep these businesses
+going?
+    Mr. Feraci. I'll take a stab at it.
+    Ms. Halvorson. Thank you, Mr. Feraci.
+    Mr. Feraci. You know, Nova Biosources are one of our
+members. They produce a quality fuel. They're a great company.
+I mean you've really put a face on what is a larger issue in
+our overall industry right. I know I'm sounding like a broken
+record here, but I would go back to you're talking about
+drawing in capital and having people have faith that there's
+going to be a long-term commitment to displacing petroleum with
+domestic renewable fuels.
+    So I would give you two answers and you've heard me say
+them previously. You have to have a long-term extension of the
+tax incentive and you have to have a workable RFS 2 that's
+going to create a domestic market for these fuels. That sends a
+signal to creditors and investors that these industries are
+going to be around, these companies are going to be around, and
+there's going to be a marketplace for them to meet a demand in.
+I think that would go further than anything in terms of keeping
+companies like Nova Biosource around and we should.
+    Ms. Halvorson. And how soon could we do that? I mean how
+quickly then could we help them stay in business, turn things
+around, so that they could do what they do best and that we
+could send the message and educate people out there that we're
+going to do everything we can here in Congress to help them
+because what we've done in the stimulus package is to help
+those who haven't gotten to this point. You know they're
+already up and running. They don't need that feed money or that
+seed money to get started.
+    Mr. Feraci. If you look at the stimulus bill and there are
+some parallels to be drawn from it the idea of doing multi-year
+extensions on Section 45 on the renewable energy electricity
+production side is going to have the effect that you're talking
+about. The idea was that you're going to draw that capital in.
+The sooner that you can move on a longer term extension of
+biodiesel the better off we're going to be. The same thing on
+the renewable fuel side.
+    I mean Congress has acted. The program was supposed to be
+up and running on January 1 of this year. The sooner that's
+implemented in a workable fashion the better off that they're
+going to be.
+    Ms. Halvorson. Great. Thank you so much.
+    Chairwoman Velazquez. Time expired.
+    Ms. Halvorson. I guess we have to go vote. Thank you so
+much.
+    Chairwoman Velazquez. Mr. Schrader.
+    Mr. Schrader. Thank you, Madam Chair. We're competing with
+votes I guess here pretty shortly. I come from Oregon and very
+interested in the woody biomass. We're experimenting with other
+alternative, canola and other more convenient, if you will,
+alternatives to corn and biofuels. But I'm interested in the
+woody biomass, in particular, in the advance. So while a lot of
+the questions I know some of the answers will be similar. But
+how in particular can we help or what are the first steps for
+making woody biomass? And by that I mean particularly the
+forest woody mass. Over 50 percent of my state is Federal
+forest and I would like to use that to advantage.
+    Mr. Howe. If I may take a crack at that, Mr. Schrader.
+    With the stroke of the pen, Congress could alter the
+definition of eligible woody biomass which as you'll recall in
+the Energy Independence and Security Act something like 24
+percent of the available biomass was ruled ineligible for
+conversion to cellulosic biofuel and I think we have come to
+recognize that that needs to be changed in order to open up the
+kinds of feedstocks that you're talking about.
+    We see tremendous potential for the conversion of woody
+biomass, the pulp and paper mills, residues. We can make our
+remaining paper industry and lumber industry more viable
+enabling them to produce co-products. So I would say that is
+probably the most important thing you could do. I think the
+technology would come along to meet that need fairly quickly.
+    Mr. Schrader. Very good. Brazil has been very successful in
+promoting ethanol and biodiesel production. What have they done
+that's so different? Why is their circumstance, I'm not talking
+about the current economic crisis we're facing, but what's been
+their approach and why have they gone that route and we have
+not?
+    Mr. Litterer. Well, I think they, of course, got started
+much sooner than we have. They've also made their automobiles
+so they can all use ethanol. I mean they've made that decision
+a long time ago. They can burn all levels of ethanol. They have
+capability with their automotive fleet and that's probably the
+biggest difference.
+    Mr. Schrader. I go a different route than some of the other
+members here. I also have some small independent gasoline
+dealers in my district and there's a lot of concern and there
+was a point at which they had trouble getting ethanol this past
+winter. Some of the larger brand name oil companies are frankly
+hoarding it to make sure that their stations had opportunity.
+    So how do I juxtapose that against the discussion there's
+plenty of ethanol out there in this crisis and stuff? How do we
+make sure the independents are guaranteed access to ethanol at
+five, ten, fifteen, pick a number, blend?
+    Mr. Howe. Over time, we need to develop the infrastructure.
+We need to disabuse ourselves of the falsehood that ethanol
+can't be moved by pipeline. It can. It is. It's just that we're
+not doing it yet. In fact, it has started in Florida, pipeline
+infrastructure development. We need to maintain a good rail
+network obviously. But I think what we're talking about is not
+a shortage of production capacity. It really is distribution
+bottlenecks that have created those problems.
+    Mr. Schrader. Okay. That's probably the area. The last
+quick question and I don't know if you can answer it. What's
+the price point for oil or barrel of oil or gallon of gas where
+it becomes optimum for investment in biofuel/biodiesel
+technology?
+    Mr. Litterer. I'm not sure there's one price point that you
+can point to because you have crude oil, you have corn price,
+you have all these input that go into it. So I don't know that
+you could come up with one price.
+    Mr. Schrader. What's the range? I guess I'll refine.
+    Mr. Litterer. Body, I don't know. I think if we were at
+today's corn price probably and a $60 to $70 oil, we probably
+could be pretty competitive. But I really hesitate to throw too
+many numbers around here because it's a moving target.
+    Mr. Howe. I think one important idea to throw in here is
+the long-term replacement cost for oil is probably in the range
+of $70. When prices went below $70, we saw oil companies,
+state-owned oil companies, and private developers worldwide
+start to pull back on development. So we are no longer
+replacing the oil that we are using up.
+    Remember last year when oil was $80-$100 and rising and
+there was polling of American consumers. Would you be willing
+to live with an oil price that doesn't go below $70 if that
+provides the assurance for a renewable fuels industry to take
+root and develop, a lot of the Americans at that time would
+have been very happy to say, ``I'll sign up for $70 if I know
+that's my hedge.'' Now that oil went down to $36 to $40, where
+is that commitment? That's what we need.
+    Mr. Schrader. Thank you.
+    Chairwoman Velazquez. Ms. Dahlkemper.
+    Ms. Dahlkemper. Thank you, Madam Chairwoman. I thank you
+for bringing forward to us this timely and critical meeting. I
+think there are few of us who are not concerned about our
+dependence on foreign oil and know the implications certainly
+on our domestic economy and our foreign policy.
+    In my district, we have Lake Erie Biofuels and, Mr. Feraci,
+I guess I wanted to address you on a couple questions here,
+having sat down and talked to them a number of times about
+what's going on in that industry and Pennsylvania, I'm from
+Pennsylvania, and I think we're the fourth state I believe now
+that is going to be working towards a two percent blend. Is
+that correct? Four states?
+    Mr. Feraci. Yes, you're definitely towards the front end.
+    Ms. Dahlkemper. Yes. So obviously we're a long way. We have
+46 other states out there.
+    But I guess my question is, first of all, I wanted to ask
+how many plants have closed recently because my understanding
+is there's a number of biodiesel that have closed or are very
+close to closing at this point.
+    Mr. Feraci. Right. As well as we can-I mean the last survey
+of our members that we did there is 176 plants out there right
+now. Again, doing these surveys, we estimate that about one-
+third, maybe even less, are actually operating and producing
+fuel right now.
+    Ms. Dahlkemper. The others were all producing fuel at some
+point.
+    Mr. Feraci. At some point, yes. It's still in the ground.
+They're operating biodiesel plants. They're just not running
+right now.
+    Ms. Dahlkemper. And these are all over the country.
+    Mr. Feraci. These are all over the country, yes.
+    Ms. Dahlkemper. Okay. So my question is I guess because
+Lake Erie Biofuels, 80 percent of their production goes to
+Europe. Right now, they're in just kind of temporary issue with
+Europe stockpiling thinking they were going to go to a ten
+percent blend I believe, but they're still at 5.75 because of
+the economy. But they would like to sell domestically.
+    Is the issue more of a blend requirement issue, you know,
+having a customer base here within our country or a capital
+issue in terms of why two-thirds of these plants have closed
+down?
+    Mr. Feraci. We kind of tern it a ``perfect storm'' of a
+confluence of events that have come together that are all to
+the detriment of the industry, be it you have an unfavorable
+feedstock pricing versus the price of petroleum. You mentioned
+Europe. That's the world's premium diesel market that the
+Europeans are taking protection steps in our opinion to close
+that market down.
+    But long term what we want to do and what we think is
+important and what was envisioned in the RFS2 is to create a
+domestic marketplace and a domestic draw to get fuel used in
+here in the U.S. so that Lake Erie Biofuel can sell their fuel
+here and that's what the RFS2 is all about.
+    We're behind schedule on implementation of that. It has to
+be implemented in a workable way so that they're going to have
+a demand, a built-in demand, in this marketplace to replace
+petroleum diesel fuel with their product.
+    Ms. Dahlkemper. So I guess that goes back to Mr. Griffith's
+question regarding investment and this all needs to come
+together to make this happen.
+    Mr. Feraci. Absolutely and the one, a stable policy
+framework, something that's reliable that the private sector
+knows is going to be there for the long term is what you need
+to draw in this investment capital and provide the certainty
+that these guys need. If you look around the world where
+they've had successful implementation of renewables policy,
+Europe, we talked about Brazil. The one commonality is that
+they made a commitment and it was a long-term commitment and it
+was reliable and people knew that it was going to be there and
+we need to have the same thing here.
+    Ms. Dahlkemper. Okay. Thank you very much. Appreciate it. I
+yield back my time, Madam Chair.
+    Chairwoman Velazquez. Thank you. Let me just thank all the
+witnesses for your incredible contribution in the discussion of
+this important issue and, Mr. Feraci, regarding EPA and RFS2,
+I'm going to be looking into that issue and we're going to see
+as a committee what can we do to make sure that it is done and
+it is done properly without jeopardizing any of the industries.
+    With that, I ask unanimous consent that Members will have
+five days to submit a statement on supporting materials without
+objections. So ordered.
+    This hearing is now adjourned. Thank you. Off the record.
+    [Whereupon the Committee adjourned.]
+          [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - FULL COMMITTEE MARKUP ON VIEWS AND ESTIMATES OF THE SBA BUDGET FOR FISCAL YEAR 2010</title>
+<body><pre>
+[House Hearing, 111 Congress]
+[From the U.S. Government Publishing Office]
+                        FULL COMMITTEE MARKUP ON
+                 VIEWS AND ESTIMATES OF THE SBA BUDGET
+                          FOR FISCAL YEAR 2010
+=======================================================================
+                                HEARING
+                               before the
+                      COMMITTEE ON SMALL BUSINESS
+                             UNITED STATES
+                        HOUSE OF REPRESENTATIVES
+                     ONE HUNDRED ELEVENTH CONGRESS
+                             FIRST SESSION
+                               __________
+                              HEARING HELD
+                             MARCH 11, 2009
+                               __________
+                    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+            Small Business Committee Document Number 111-009
+Available via the GPO Website: http://www.access.gpo.gov/congress/house
+                               ----------
+                         U.S. GOVERNMENT PRINTING OFFICE
+47-796 PDF                       WASHINGTON : 2009
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
+DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
+Washington, DC 20402-0001
+                   HOUSE COMMITTEE ON SMALL BUSINESS
+                NYDIA M. VELAZQUEZ, New York, Chairwoman
+                          DENNIS MOORE, Kansas
+                      HEATH SHULER, North Carolina
+                     KATHY DAHLKEMPER, Pennsylvania
+                         KURT SCHRADER, Oregon
+                        ANN KIRKPATRICK, Arizona
+                          GLENN NYE, Virginia
+                         MICHAEL MICHAUD, Maine
+                         MELISSA BEAN, Illinois
+                         DAN LIPINSKI, Illinois
+                      JASON ALTMIRE, Pennsylvania
+                        YVETTE CLARKE, New York
+                        BRAD ELLSWORTH, Indiana
+                        JOE SESTAK, Pennsylvania
+                         BOBBY BRIGHT, Alabama
+                        PARKER GRIFFITH, Alabama
+                      DEBORAH HALVORSON, Illinois
+                  SAM GRAVES, Missouri, Ranking Member
+                      ROSCOE G. BARTLETT, Maryland
+                         W. TODD AKIN, Missouri
+                            STEVE KING, Iowa
+                     LYNN A. WESTMORELAND, Georgia
+                          LOUIE GOHMERT, Texas
+                         MARY FALLIN, Oklahoma
+                         VERN BUCHANAN, Florida
+                      BLAINE LUETKEMEYER, Missouri
+                         AARON SCHOCK, Illinois
+                      GLENN THOMPSON, Pennsylvania
+                         MIKE COFFMAN, Colorado
+                  Michael Day, Majority Staff Director
+                 Adam Minehardt, Deputy Staff Director
+                      Tim Slattery, Chief Counsel
+                  Karen Haas, Minority Staff Director
+                                  (ii)
+                         STANDING SUBCOMMITTEES
+                                 ______
+               Subcommittee on Contracting and Technology
+                     GLENN NYE, Virginia, Chairman
+YVETTE CLARKE, New York              AARON SCHOCK, Illinois, Ranking
+BRAD ELLSWORTH, Indiana              ROSCOE BARTLETT, Maryland
+KURT SCHRADER, Oregon                TODD AKIN, Missouri
+DEBORAH HALVORSON, Illinois          MARY FALLIN, Oklahoma
+MELISSA BEAN, Illinois               GLENN THOMPSON, Pennsylvania
+JOE SESTAK, Pennsylvania
+PARKER GRIFFITH, Alabama
+                                 ______
+                    Subcommittee on Finance and Tax
+                    KURT SCHRADER, Oregon, Chairman
+DENNIS MOORE, Kansas                 VERN BUCHANAN, Florida, Ranking
+ANN KIRKPATRICK, Arizona             STEVE KING, Iowa
+MELISSA BEAN, Illinois               TODD AKIN, Missouri
+JOE SESTAK, Pennsylvania             BLAINE LUETKEMEYER, Missouri
+DEBORAH HALVORSON, Illinois          MIKE COFFMAN, Colorado
+GLENN NYE, Virginia
+MICHAEL MICHAUD, Maine
+                                 ______
+              Subcommittee on Investigations and Oversight
+                 JASON ALTMIRE, Pennsylvania, Chairman
+HEATH SHULER, North Carolina         MARY FALLIN, Oklahoma, Ranking
+BRAD ELLSWORTH, Indiana              LOUIE GOHMERT, Texas
+PARKER GRIFFITH, Alabama
+                                 (iii)
+               Subcommittee on Regulations and Healthcare
+               KATHY DAHLKEMPER, Pennsylvania, Chairwoman
+DAN LIPINSKI, Illinois               LYNN WESTMORELAND, Georgia,
+PARKER GRIFFITH, Alabama             Ranking
+MELISSA BEAN, Illinois               STEVE KING, Iowa
+JASON ALTMIRE, Pennsylvania          VERN BUCHANAN, Florida
+JOE SESTAK, Pennsylvania             GLENN THOMPSON, Pennsylvania
+BOBBY BRIGHT, Alabama                MIKE COFFMAN, Colorado
+                                 ______
+     Subcommittee on Rural Development, Entrepreneurship and Trade
+                  HEATH SHULER, Pennsylvania, Chairman
+MICHAEL MICHAUD, Maine               BLAINE LUETKEMEYER, Missouri,
+BOBBY BRIGHT, Alabama                Ranking
+KATHY DAHLKEMPER, Pennsylvania       STEVE KING, Iowa
+ANN KIRKPATRICK, Arizona             AARON SCHOCK, Illinois
+YVETTE CLARKE, New York              GLENN THOMPSON, Pennsylvania
+                                  (iv)
+                            C O N T E N T S
+                              ----------
+                           OPENING STATEMENTS
+                                                                   Page
+Velazquez, Hon. Nydia M..........................................     1
+Graves, Hon. Sam.................................................     2
+                                APPENDIX
+Prepared Statements:
+Velazquez, Hon. Nydia M..........................................     4
+Graves, Hon. Sam.................................................     6
+Statements for the Record:
+A letter to the Honorable John M. Spratt, Chairman of the Budget.
+Committee, expressing the views and estimates of the Small
+  Business.......................................................
+Committee with regards to the fiscal year 2010 budget for the
+  Small Business Administration..................................     8
+                                  (v)
+                        FULL COMMITTEE MARKUP ON
+       VIEWS AND ESTIMATES OF THE SBA BUDGET FOR FISCAL YEAR 2010
+                              ----------
+                       Wednesday, March 11, 2009
+                     U.S. House of Representatives,
+                               Committee on Small Business,
+                                                    Washington, DC.
+    The Committee met, pursuant to call, at 1:02 p.m., in Room
+2360, Rayburn House Office Building, Hon. Nydia M. Velazquez
+[Chair of the Committee] presiding.
+    Present: Representatives Velazquez, Moore, Schrader,
+Lipinski, Sestak, Halvorson, Graves, Bartlett, Westmoreland,
+Luetkemeyer, and Coffman.
+    Chairwoman Velazquez. I am pleased to call this morning's
+markup to order.
+    Today, the Committee will consider its views and estimates
+of the Small Business Administration's fiscal year 2010 budget.
+These resources mark a critical first step in helping
+entrepreneurs weather the recession and strengthen our weakened
+economy.
+    Recognizing the vital role that small businesses play in
+economic recovery, the Committee proposes a budget of $1.43
+billion, which is approximately what it was for the agency at
+the end of the Clinton administration.
+    In the interest of being fiscally responsible, we are
+recommending that six underperforming programs be discontinued.
+Doing so will free up funds for more cost-effective, results-
+driven initiatives. It would also allow us to make the most of
+our budget, which will accomplish a great deal, not only by
+funding SBA's core programs but by continuing the fee
+reductions contained within the Recovery Act.
+    Entrepreneurs everywhere have been affected by restricted
+lending and tightening credit. Our budget will soften those
+blows by leveraging more than $29 billion in loans and
+investment to small firms. It will also mark $1.1 billion in
+disaster assistance resources.
+    Under the new Recovery Act, the Federal marketplace is more
+vibrant than ever before. It is critical that small businesses
+have a fair shot at winning stimulus contracts, and our budget
+will ensure that that happens. We will do this by directing
+nearly $70 million in funding for targeted contracting
+programs. A large part of that money will go towards bolstering
+procurement center representatives and commercial marketing
+representatives, both of which promote small business
+participation in the Federal marketplace.
+    It is no secret that our economy is struggling. But with a
+renewed emphasis on entrepreneurial development, contracting
+initiatives, and small business lending, we can start turning
+it around.
+    This is vital because entrepreneurs have a proven record of
+creating jobs and stemming recessions. Following the downturn
+of the mid-1990s, an overwhelming number of laid-off workers
+went on to start their own firms. This wave of entrepreneurship
+pumped billions of dollars into the economy. We can replicate
+that kind of growth today but not without increased resources
+for small business programs.
+    The budget we are proposing will breathe new life into the
+SBA. More importantly, it will fully fund SBA's ED programs,
+providing entrepreneurs with the resources they need to not
+only survive the recession but to get our economy moving again.
+I urge support of the Committee's views and estimates.
+    And I will now yield to Mr. Graves for any comments that he
+may have on them.
+    Mr. Graves. Thank you, Madam Chair. And I want to thank you
+for holding this markup today on the Committee's views and
+estimates of the President's proposed Small Business
+Administration budget for fiscal year 2010.
+    Normally this markup involves an assessment of the proposed
+budget for the Small Business Administration for the upcoming
+fiscal year. However, the information supplied to this
+Committee amounts to a page and a half of analysis, laying out
+the levels of loan guarantees that will be available in the
+2010 fiscal year.
+    This submission makes it impossible for this Committee to
+exercise its responsibility to advise the Budget Committee on
+the adequacy of the SBA's budget. I am sure that all members of
+the Committee are displeased at the lack of information
+provided in the budget submission.
+    Even the data provided isn't useful. It simply adopts for
+the next fiscal year the overall guarantee levels for loans
+that the SBA will provide. Given the significant decrease in
+SBA lending activities, I find it difficult to believe that the
+goals set forth in the budget will be achieved. Nor does the
+submission explain how the agency will achieve the goals it has
+set forth for providing capital to America's small businesses.
+    Finally, the budget submission fails to explain how the SBA
+will provide assistance to small businesses that want to enter
+the Federal procurement arena, a component of the economy that
+appears to be set to continue to grow.
+    In a time when small businesses are starved for capital,
+the proposed budget will increase the deficit and make small
+businesses compete against the Federal Government and larger
+businesses to obtain that capital. No business can compete with
+the ability of the Federal Government to obtain capital, and
+this will raise interest rates, effectively increasing costs
+for small businesses at just the wrong time.
+    Compounding that problem is that, to sustain the increased
+Federal spending in the budget, revenue will have to rise, and
+that means tax increases on small businesses. While some of
+these may be cleverly hidden, such as caps on carbon emissions,
+they nevertheless represent additional costs to small
+businesses and revenue diverted from business growth.
+    Furthermore, the budget document misses an opportunity to
+directly address the needs of affordable health care for small
+businesses. Without affordable health care, businesses face the
+choice of not providing it or providing it and possibly
+bankrupting the firm because of cost of insurance.
+    In conclusion, the little information provided in the
+budget submission raises troubling questions about the ability
+of small businesses to do their part to help America through
+the economic turmoil. And while I certainly respect the
+Chairwoman's passion and devotion--incredible devotion to small
+businesses--I cannot concur with the proposed budget views. And
+I will be filing some separate estimates and views with the
+Budget Committee.
+    Thank you.
+    Chairwoman Velazquez. Thank you.
+    Are there any other members that wish to go recognized on
+the views and estimates?
+    The Committee now moves to consideration of the views and
+estimates of the Small Business Administration's fiscal year
+2010 budget.
+    The Clerk will report the title of the document.
+    The Clerk. "A letter to the Honorable John M. Spratt,
+Chairman of the Budget Committee, expressing the views and
+estimates of the Small Business Committee with regards to the
+fiscal year 2010 budget."
+    [The information is included in the appendix.]
+    Chairwoman Velazquez. I ask unanimous consent that the
+views and estimates document, in its entirety, be open for
+amendments at this time. Does any member seek recognition for
+the purpose of offering an amendment?
+    Seeing no amendments, the question is on agreeing to views
+and estimates.
+    All those in favor, say, "Aye."
+    All those opposed, "No."
+    The ayes have it, and the views and estimates are agreed
+to.
+    At this point, I would like to yield to Mr. Graves for a
+motion.
+    Mr. Graves. Thanks, Madam Chair.
+    I would move to allow the minority to file their own
+separate views.
+    Chairwoman Velazquez. Without objection, so ordered.
+    I ask unanimous consent that the Committee be authorized to
+correct punctuation and to make other necessary technical
+corrections on the document considered today.
+    Without objection, so ordered.
+    This markup is now adjourned.
+    [Whereupon, at 1:10 p.m., the Committee was adjourned.]
+    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+                                 <all>
+</pre></body></html>

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