TESTIMONY PRESENTED TO

SENATE SUBCOMMITTEE ON

RESEARCH, NUTRITION, AND GENERAL LEGISLATION

(subcommittee of Committee on Agriculture, Nutrition, and Forestry)

THE HONORABLE PETER G. FITZGERALD, CHAIR

AT

SPRINGFIELD, IL

April 18, 2000

BY

DONALD A. HOLT, SENIOR ASSOCIATE DEAN

COLLEGE OF

AGRICULTURAL, CONSUMER AND ENVIRONMENTAL SCIENCES

UNIVERSITY OF ILLINOIS

Chairman Fitzgerald and distinguished members of the subcommittee: I am Don Holt, Senior Associate Dean, College of Agricultural, Consumer and Environmental Sciences, University of Illinois. We greatly appreciate your invitation to provide testimony on issues facing ethanol and the biofuels industry.

You specifically requested to hear our views on the Clinton administration's recently released proposal to ban the use of methyl tertiary butyl ether (MTBE), rescind the oxygenate requirement of the Clean Air Act, and replace this oxygenate standard with a renewable fuels requirement. Likewise, you requested our views on your bill, S. 2233, described as "the MTBE elimination act" and other relevant legislation.

Needless to say, measures that encourage use of ethanol as a fuel, fuel additive, and for other purposes stand to benefit Illinois, which is a major producer of both ethanol and the most important raw material for ethanol production, namely corn. Likewise, measures that would reduce and eventually eliminate the use of MTBE as a fuel additive would have several benefits for Illinois.

MTBE and its metabolic byproducts are toxic and probably carcinogenic. Because MTBE is water-soluble and neither attaches to soil particles nor biodegrades, it finds its way into water supplies, where a very small amount causes water to be virtually undrinkable and dangerous. So far, no economically viable method of removing MTBE from water supplies has been devised. If MTBE use continues, the national cost of remediating MTBE contamination of water is likely to run into the billions of dollars. In addition, MTBE reduces the efficiency of efforts to remediate water contaminated by other petroleum hydrocarbons.

The logical substitute for MTBE in gasoline is ethanol. Ethanol is the nation's head start into the bio-based economy of the future. Ethanol provides oxygen to ensure complete oxidation of gasoline components in internal combustion engines, thus reducing emissions of toxic pollutants, including carbon monoxide. By reducing carbon monoxide, ethanol also reduces ozone pollution. Further, ethanol enhances octane levels, thus improving engine performance and fuel efficiency. We do not see a benefit to eliminating the oxygenate requirement, as some propose. Ethanol can provide the environmental benefits of oxygenate without the drawbacks and dangers of MTBE.

According to USDA, by 2004 ethanol could successfully replace MTBE in meeting oxygenate demands with negligible effects on gasoline prices or supplies. This would double the demand for ethanol, improve corn demand and price, and increase profits of corn producers. This situation looks particularly attractive to Illinois corn producers, who have endured a lengthy period of low corn prices.

The University of Illinois has a long history of interest and contributions in all facets of producing and utilizing corn-based ethanol. The Illinois Corn Marketing Board, which administers the checkoff funds, has been a key partner in ethanol-related research, along with other Illinois universities, neighboring state universities, the state and federal governments, and several private firms.

Major steps in ethanol production include corn production, corn harvest and drying, corn milling, ethanol production, and sidestream processing. In 1980, taking into account the energy used to produce corn, it required more energy to produce ethanol than was provided by the ethanol produced. Now ethanol production is an energy-efficient process, yielding net energy benefits and a number of other benefits to the US economy. The change was the result of improvements at all stages in the overall ethanol production process.

Decades of corn breeding and genetics research have increased the yield of corn and, consequently, of starch, contributing greatly to the efficiency of the overall process. In the mid-1980s, the energy required to produce corn was sharply reduced by introduction of no-till technology, originally pioneered by Professor George McKibben of the University's Dixon Springs Agricultural Center and later perfected by other crop and soil scientists.

Since the cost of corn is a large proportion of the cost of producing ethanol, it is important to increase the yield of ethanol per bushel of corn. This requires increasing the yield of starch in each bushel of corn and increasing the efficiency with which fermentation microorganisms convert starch to ethanol. Public and private advances in biotechnology have greatly improved the efficiency of fermentation microorganisms.

Recently, University of Illinois scientists, including Professor Marvin Paulsen and colleagues, developed a rapid, accurate test for extractable starch. They found that genetics, as well as natural and artificial drying conditions, influence the proportion of total starch that can be extracted from corn kernels. This, in turn, influences the yield of ethanol and other products for which starch is a feedstock. Further research, which is greatly facilitated by the quick test, is focused on genetic improvements, harvest protocols, and artificial drying equipment and procedures leading to higher levels of extractable starch.

University of Illinois scientists also made important contributions to the milling step in ethanol production. Until recently, relatively complex and expensive wet milling equipment was required for separating the germ, starch, fiber, and other valuable components of corn for further processing. This expensive separation process was necessary if valuable co-products and by-products were to be produced. Generating useful co-products and by-products is key to economically sound ethanol production and use.

Less expensive milling is practiced by so-called "dry-grind" ethanol producers. In that process, only ethanol and the fermentation residues, relatively low-value products known as distillers dried grains with solubles (DDGS), are produced. Recently, University of Illinois scientists Steve Eckhoff and colleagues pioneered the so-called "quick-germ" and "quick fiber" processes in which relatively inexpensive dry-milling equipment is used to separate the corn germ, starch, and fiber for further processing.

With this milling approach, which is very economical, relatively pure starch is available for fermentation, the germ is available for oil and protein extraction, and the fiber can be used make animal feeds, fiber supplements, gums, etc. Thus, corn processors can gain many of the benefits of wet milling while using a simpler, less expensive dry-milling process.

An especially exciting recent development is the finding that there are important cholesterol-lowering agents, known as stanol esters, in an oil fraction associated with the corn fiber produced by the quick fiber process. These are the same ingredients that give the special new spreads, e.g., benecol, their cholesterol-lowering capabilities. Currently one of these ingredients in the special margarine products comes from soy and the other from wood pulp. Both exist in corn fiber oil in about equal proportions. The effects of these two appear to be additive, so it is an advantage to have both ingredients in the same product. These ingredients are worth about $10 per pound and each bushel of corn has about 0.3 pounds. Thus these ingredients alone are worth about $3 per bushel, even though they make up a small fraction of each bushel of corn.

University of Illinois scientists pioneered important changes in the ethanol fermentation process. Through the 1980s and 1990s, Professor Munir Cheryan and colleagues developed and perfected continuous membrane bioreactors (CMB) for ethanol production. This continuous fermentation approach offers many advantages over batch processes. Throughput is much faster, ethanol yields are higher, down time is greatly reduced, purification and concentration are simplified, equipment is much smaller for a given output, less floorspace is required, capital costs are reduced, yeast costs are reduced, systems are modular for greater flexibility, and by-product and waste management are greatly simplified.

Successful, commercial-scale CMBs were first operated in Illinois, at the world's second largest ethanol producer, Pekin Energy (now Williams Energy). Continuous membrane bioreactors were also developed by University of Illinois scientists for production of dextrose (glucose), corn oil, zein (corn protein), and zanthophylls. Dextrose is made from corn starch and is the final feedstock for most industrial fermentation processes, including ethanol production.

The latter three components are not currently being separated in dry-grind ethanol production. Corn oil, of course, has many food and non-food uses. Zein likewise is the basis for several products, including high-quality, biodegradable plastic films now being perfected for commercial use at the University of Illinois. Xanthophylls are pigments known to reduce or prevent age-related eye problems. CMBs will be key components of corn processing in the future, and will be used to produce many diverse corn-based products safely, efficiently, and profitably.

University of Illinois scientists are also conducting research on the performance of ethanol as a fuel and fuel additive. Detailed work on aspirating ethanol into both gasoline and diesel engines continues to yield engine design criteria and specifications. In addition, literally hundreds of studies were conducted on the use of various co-products as food, feed, fiber, fuel, and chemical feedstocks. This work will continue and increase in the future.

Biotechnology has been and will continue to be a key tool in improving the ethanol industry and the biofuels industry in general. Functional genomics will continue to make corn a better raw material for manufacturing ethanol and many other products. Biotechnology will create totally new products, including pharmaceuticals and neutraceuticals, that can be produced in and manufactured from corn. Functional genomics will also improve the microorganisms and enzymes used in production and processing of the various fractions of the corn kernel, leading to even more diverse and useful products that can obtained from corn in profitable commercial operations.

I deliberately reported on all the major stages of ethanol production and use, because the overall viability of the ethanol industry is improved by advances in each of these dimensions. No one factor makes or breaks the strong case for ethanol. Ethanol is just part of a very complex bio-based production and utilization system. Anaylses of its strengths and weaknesses must reflect all of these dimensions.

Legislation that encourages public and private investment in research and development in support of a bio-based economy, including your MTBE Elimination Act (S2233) and Senator Lugar's National Sustainable Fuels and Chemicals Act (S935), will benefit the ethanol and biofuels industries and their customers. We applaud your efforts in that direction.

Thank you for this opportunity to provide information for the committee.