Tim Castleman

Thank you for allowing me to speak in favor of this bill. As you know, this bill addresses legislation originally created to stop abuses of incentives intended to promote the use of Alternative fuels in our transportation sector.

Soon after the original law took effect, it was discovered that frequently the Alternative Fueled Vehicles (AFV's) would be re-fueled with gasoline, due to the unavailability of alcohol fuels, thereby eliminating the clean air advantage of Flexible Fuel Vehicles.

Unfortunately, the amendment as passed, excluding only alcohol fuels, only serves to aggravate the situation, here is why;

• Fleet buyers could no longer consider Flexible Fuel Vehicles (FFV's) in their purchasing. Faced with EPACT, they were forced to buy Compressed Natural Gas (CNG) vehicles, which cost on average $3000 to $5000 more than the exact same vehicle as an FFV. The general public just quit buying AFV's altogether.
• Upon investigation it has been found that fleets of CNG vehicles are also being run on gasoline, due to the unavailability of CNG re-fueling stations.
• It does not make sense to ignore an existing fuel delivery system in order to promote a new fuel for transportation. Any serious but minimal research effort will disclose that liquid fuels are the only fuels that make sense considering the existing marketing, distribution and delivery infrastructure. The latest fuel cell technology relies on liquid fuels as a hydrogen carrier and, according to Epyx, the current leader in Fuel Cell technology, ethanol is a superior candidate for this use.
• Ethanol is organic and non-polluting, as compared to the other oxygenate, MTBE, which has been linked to cancer and found in 14% of cities ground water. Ethanol is superior to MTBE, having nearly twice the oxygen content it can provide greater emissions reductions on a per gallon basis than MTBE.
• There is no infrastructure in place to re-fuel large numbers of CNG vehicles. An E85 tank and delivery pump can be readily added to most modern retail fuel outlets. Most already handle 10% ethanol 5 months, and 15% MTBE the other 7 months out of a year.

I have personally spoken with three different fleet managers for state and private agencies. All indicated the same dilemma, namely that their budgets were severely restricted by this law, which in effect caused them to spend more money for vehicles that offer no advantage over FFV's.

This error has cost Arizona taxpayers between 1.8 and 3 million dollars. Based on the Maricopa Association of Governments Clean Cities Program goals in 1997, the number of FFV's purchased by December of 2000 should be 600, instead none will be bought. Since CNG vehicles are $3,000 to $5,000 more expensive, only about 500 alternative fuel vehicles will be added to inventory in this class. Thereby not only missing EPACT goals, but also providing fewer vehicles to accomplish agencies missions, and all this with no improvement in air quality, since CNG fleets are using the easy to get liquid fuel, gasoline, anyway!

This bill seeks no special treatment for ethanol, it only seeks a level playing field in the alternative fuels industry. The legislation, as written, unfairly excludes alcohol-based fuels. This bill will modify the language and correct a serious flaw in prior legislation. It will save Arizona taxpayers several million dollars by allowing fleet managers and the general public to make purchasing decisions based on value, rather than an obscure error in lawmaking.

Related to this issue is another bill introduced by Mr. Groscost which seeks to provide an incentive to small business owners who purchase CNG vehicles. Again, we would be subsidizing a fuel that has no infrastructure in place, at the expense of the equal but less expensive liquid fuel, ethanol. I wish to speak against such a measure and ask your support to not only pass this important piece of corrective work, but to also defeat any future measure which favors one technology over the other, unless it can be demonstrated that it is superior economically and environmentally.

Now, if I may, a few words about rural development and how it relates to our support of ethanol. Modern American life is impacted in 70,000 different ways by petroleum-based products. Only about half of our consumption is for motor fuels, a surprising 2.6 million barrels per day are used to make synthetic fibers, plastics and other chemicals. Many of us are wearing petroleum right now.

Most of these products will eventually end up in our landfills, degrading into toxic poisons that seep into our ground water and cause cancer, birth defects and innumerable other diseases.

The interesting thing about this is that most if not all, of these 70,000 products can be made using organic, biodegradable plant/crop based materials. We have the technology to do this, it has just been cheaper to use oil. When the true costs of petroleum-based products, including medical, defense, subsidies for clean-up, exploration etc. are considered, petroleum is already too expensive.

Our perception is now changing. Recognizing the threat to our national security of importing over 60% of our petroleum, Corporate America has joined with the US Departments of Energy and Agriculture to develop plant/crop-based renewable energy systems for our future industrial manufacturing and transportation needs.

Rural Arizona is comprised of three basic industries, mining, cattle &sheep ranching and agriculture. Right now there are over 400,000 acres of prime irrigated farmland available to grow cotton. I do not have to detail to this learned body the facts concerning the cotton industry today. Our rural farm communities have not benefited from the .com economic boom. For most of the agricultural community, times are about as bad as ever, family farms are being sold to corporate interests at an alarming rate.

In Arizona, cotton farming is a losing proposition at this time. Price supports are a finger in the dike and everyone knows that.

Developments in technology have created new methods of producing fuel and fiber renewable energy systems using alternative crops. One promising variety, Kenaf, has been locally researched for several years and it has been found ideally suited as an alternative crop for Arizona cotton farmlands.

Design and development of several systems to grow, process and market Kenaf products are underway now. One of these systems includes ethanol production in its plans. Discussions and planning have been taking place for 2 years for an ethanol production plant using landscape wastes to be built in the city of Phoenix. Localized production of ethanol to fuel our transportation sector is an eventuality that can't be ignored. There is a finite supply of petroleum, no one seriously disputes that. These plant/crop based renewable energy systems are ideally suited for rural development in our state.

As we stand at the brink of a new era, biotechnology should not be ignored as a viable industry for Arizona. There exists here an opportunity to revitalize our farm communities while at the same time reducing our dependence on imported oil as a feedstock for our industrial infrastructure and at the end of the day contribute a wide range of environmentally sound products to our marketplace.

I want to ask for your support for rural Arizona. We have a vision of 300,000 acres of Arizona farmland being used in a plant crop-based renewable energy system to replace the equivalent of one day's use of petroleum in America. Will you support this vision?

Thank you,

Tim Castleman